Commonwealth Trust Company of Pittsburgh v. Harkins

• Decision Date: 30 June 1933
• Docket Number: 117
• Citation: 167 A. 278,312 Pa. 402
• Parties: Commonwealth Trust Company of Pittsburgh v. Harkins (et al., Appellants)
• Court: Pennsylvania Supreme Court

167 A. 278

312 Pa. 402

Commonwealth Trust Company of Pittsburgh v. Harkins (et al., Appellants)

No. 117

Supreme Court of Pennsylvania

June 30, 1933

Argued May 25, 1933

Appeal, No. 117, March T., 1933, by defendants, from decree of C.P. Allegheny Co., execution docket, Oct. T., 1932, No 727, in case of Commonwealth Trust Company of Pittsburgh v Hubert E. Harkins et al., and receivers of the Miller Printing Machinery Co. Order affirmed.

Petition and rule to set aside sheriff's sale. Before MARSHALL, DITHRICH and SMITH, JJ.

The opinion of the Supreme Court states the facts.

Rule discharged. The receivers of the Miller Printing Machinery Co., a defendant, appealed.

Error assigned, inter alia, was discharge of rule, quoting record.

The order of the court below is affirmed at the cost of appellants.

A. M. Thompson, with him Roy Rose, of Rose & Eichenauer and J. W. Madden, for appellants.

John M. Freeman, of Watson & Freeman, with him Albert C. Hirsch and Ralph H. Demmler, for appellee.

Before FRAZER, C.J., SIMPSON, KEPHART, SCHAFFER, MAXEY, DREW and LINN, JJ.

OPINION

MR. JUSTICE SCHAFFER:

This is an application to set aside a sheriff's sale growing out of the foreclosure of a second mortgage on the plant of the Miller Printing Machinery Company. The court below discharged the rule to show cause why the sale should not be set aside. The receivers of the printing machinery company appeal.

The second mortgage was for $100,000 given by Hubert E. Harkins, a straw man, to the appellee trust company. It held also a first mortgage for $250,000 likewise given. Three-fourths of the property is covered by these two mortgages and the other fourth by a mortgage to another trust company. The facts are thus accurately summed up by the learned judge of the court below who filed the OPINION in banc: At the time of the giving of the first mortgage the property was vacant. Title was held in the name of Harkins, a clerk in the office of F. F. Nicola, president of the mortgagor company and its principal stockholder. Plans and specifications for a building to be erected on the site were submitted to and approved by the trust company. It was admitted that, while Harkins was the nominal mortgagor, the loan was made for the printing company and the building was to be used to house its manufacturing plant. The mortgagee was so informed at the time the loan was made. When the building was almost completed, the mortgagor began moving its machinery from a former location to the new building. While the moving was in progress, the second mortgage was placed. The machine company executed two bonds, one at the time the first mortgage was given and the other when the second was executed. The first bond was for $250,000. This obligation recited that the company had agreed to purchase the property bound by the mortgage made by Harkins "and as part consideration therefor will, in the deed from Harkins to it, expressly assume and agree to pay the sum of $250,000 secured by the mortgage." It was further set forth that the trust company mortgagee had agreed to lend the sum named partly in consideration of the assumption of payment by the Miller Company and partly in consideration of the latter's undertaking to erect a building on the property. The condition of the bond was that the Miller Company, within one year from its date, should begin the erection and proceed to the completion of a building upon the property in accordance with plans and specifications submitted to the trust company. The second bond for $350,000 was of the same tenor as to assumption of payment of the two mortgages. The court below found that the expedient of having Harkins appear as the mortgagor was resorted to solely for the purpose of relieving the corporation from the necessity of increasing its indebtedness and reporting the same to the State.

Receivers were appointed for the corporation by the federal court, and default having occurred under the terms of the second mortgage, authority was granted by that court to proceed by foreclosure. The receivers of the company made no defense and judgment was entered. Following the sheriff's advertisement, the receivers petitioned the federal court to withdraw the permission to foreclose the mortgage, claiming that the machinery advertised for sale was personal property and was not subject to the lien of the mortgage. The court declined to withdraw the permission to foreclose and the sheriff sold the property to the mortgagee, the only bidder at the sale. Exceptions and a petition to set aside the sale were filed by the receivers and a rule to show cause was granted, which was disposed of in the way above indicated.

Before us the appellants raise the following points: (1) That the lien of the mortgage does not cover certain machinery claimed by appellants to be personal property. (2) That the lien of the mortgage does not extend to jigs, dies, patterns, etc. (3) That the advertisement of the sheriff's sale was insufficient because it did not give the public information that the chattels claimed to be personal were to be sold. (4) That the price realized was inadequate.

The main contest is over the question whether the machinery, etc., in the mill is personalty, and, therefore, not bound by the lien of the mortgage. The position of appellants is that the mortgage was a lien only upon the ground, the building erected thereon and such water and gas pipes and conduits as were essentially a part of the building structure. Appellants argue that because all the articles in litigation, even the heaviest of the machines, are readily removable and were so installed that they could be removed without injury to themselves or the building, and because all the patterns, jigs, and dies were made solely for the purpose of manufacturing patented machinery and the patents necessary in such manufacture are still owned and controlled by the printing company, they are not bound by the lien of the mortgage. So far as the patterns, jigs and dies are concerned, it is also contended that they would be worthless to anyone not owning or being licensed to use the patented rights which remain in the receivers.

We think the facts that the machines are removable without injury to the property, and that the patterns, jigs and dies were made solely for the purpose of manufacturing patented machinery and the patents are owned and controlled by the printing company, if admitted, do not take them out from under the lien of the mortgage in view of the rules which have been laid down by us in a number of cases and which accordingly have become rules of property. What was written by Chief Justice GIBSON in Voorhis v. Freeman, 2 W. & S. 116, continues to be the law in this great industrial State. Speaking for the court, he said (pages 118-19): ". . . nothing but a passive regard for old notions could have led them to treat machinery as personal property when it was palpably an integrant part of a manufactory or mill, merely because it might be unscrewed or unstrapped, taken to pieces and removed without injury to the building. . . . Whether fast or loose, therefore, all the machinery of a manufactory which is necessary to constitute it, and without which it would not be a manufactory at all, must pass for a part of the freehold." The doctrine laid down in that case was reaffirmed at the very next term of the court in Pyle v. Pennock, 2 W. & S. 390, and has received its latest confirmation in Titus v. Poland Coal Co., 275 Pa. 431, where we said, speaking through Mr. Justice WALLING (page 436): "The Pennsylvania rule is that a chattel placed in an industrial establishment for permanent use, and necessary to the operation of the plant, becomes a fixture and as such a part of the real estate, although not physically attached thereto; in other words, if the article, whether fast or loose, be indispensable in carrying on the specific business, it becomes a part of the realty. . . . Whatever is a necessary part of the machinery for carrying on the business is a fixture irrespective of the manner of its attachment." Appellants concede that, if a mortgage is placed on an industrial plant, the personal property, such as machinery which is necessary to carry on the business of the plant will be subject to the lien of the mortgage, but they argue that, to have this effect, the machinery must be specifically mortgaged. We think such a principle cannot be deduced from our decisions. Cases from other states, such as Hubbell v. East Cambridge Saving Bank, 132 Mass. 437, much relied on by appellants, have no bearing on the controversy. We have...