Liddell Co. v. Cork

• Decision Date: 25 July 1922
• Docket Number: 10967.
• Parties: LIDDELL CO. v. CORK ET AL.
• Court: South Carolina Supreme Court

113 S.E. 327

120 S.C. 481

LIDDELL CO. v. CORK ET AL.

No. 10967.

Supreme Court of South Carolina

July 25, 1922

Appeal from Common Pleas Circuit Court of Darlington County; J. E Peurifoy, Judge.

Action by the Liddell Company against T. C. Cork and others. From judgment of the circuit court reversing a report of the master in favor of defendants, plaintiff appeals. Reversed and report of master affirmed.

D. W Robinson, of Columbia, for appellant.

T. C. Cork and L. M. Lawson, both of Darlington, for respondents.

MARION J.

During the months of August and October, 1917, the plaintiff, Liddell Company, sold to A. T. Baird, Jr., the owner of a plantation of land in Darlington county, certain machinery, consisting of engines, boilers, sawmill, and a cotton ginning outfit. Baird paid a portion of the purchase price in cash and gave his notes for the balance, no part of which balance was ever paid. Each of the notes contained this provision:

"That the title in and to said property shall remain in said Liddell Company until this note, with all others for the purchase money of said property is paid, and the said Liddell Company, * * * if said sum is not paid at maturity, may * * * take possession of said property wherever found, as theirs," etc.

The notes were duly recorded in the chattel mortgage book in the office of the clerk of court of Darlington county within 10 days after the execution thereof and before the machinery was installed. The machinery was purchased by Baird for domestic use on his own farm, was installed in buildings on his own land in the usual manner, and was used and operated for his own farm purposes. On September 6, 1919, the real estate upon which this machinery had been placed and erected was sold at public auction on the premises to the defendants T. C. Cork and J. S. McInnes, to whom a deed of conveyance therefor was executed and delivered in March, 1920, which deed was thereafter duly recorded on April 3, 1920. It is admitted that the defendants Cork and McInnes had no actual notice of the lien claimed by the plaintiff on the machinery at the time of the purchase by them of the premises on which it was situated, or at the time of the execution and recording of their deed; that they paid a portion of the purchase price of the land in cash and gave a mortgage on the land to secure payment of the balance, which mortgage debt, amounting to some $13,000, was transferred for value by Baird to A. L. Flowers about two days after the execution of the mortgage; and that the value of the machinery in controversy is $2,500.

In July, 1921, the plaintiff, Liddell Company, commenced this action against A. T. Baird, Jr., T. C. Cork, and J. S. McInnes, seeking to recover judgment against Baird for the balance due on the notes and to recover possession of the machinery in the hands of Cork and McInnes, who claimed the machinery as fixtures constituting a part of the real estate of which they were purchasers for value without notice. The case was heard upon an agreed statement of facts by the master, Hon. Robert Macfarlan, who found that the plaintiff was entitled to judgment against Baird for the balance due on the notes and to the immediate possession of the machinery, or to judgment for its value and for damages on account of its detention. On appeal by the defendants Cork and McInnes, Hon. J. E. Peurifoy, circuit judge, reversed the report of the master in so far as it affected the said defendants and adjudged that Cork and McInnes were the "owners of the machinery in question, free and clear of any lien or claim of the plaintiff whatsoever." From this decree the plaintiff has appealed upon exceptions which raise substantially the one question of whether the circuit judge erred in so holding.

Placed in houses upon the land, installed in the usual manner, and used and operated for plantation purposes, as between Baird, the owner of the land, and his grantees, Cork and McInnes, the articles of machinery were clearly fixtures, and consequently realty. Had Baird, after selling his improved farm to purchasers who attended his auction sale upon the premises, attempted to dismantle his ginhouse and sawmill and remove this machinery, annexed in the usual manner to the freehold, we apprehend that no court would have hesitated to enjoin him. Fairis v. Walker, 1 Bailey, 540; McKenna v. Hammond, 3 Hill, 331, 30 Am. Dec. 366; Hughes v. Shingle Co., 51 S.C. 1, 28 S.E. 2; Richardson v. Borden, 42 Miss. 71, 2 Am. Rep. 595; Degraffenreid v. Scruggs, 4 Humph. (Tenn.) 451, 40 Am. Dec. 658; Fulp & Linville v. Kernersville L. & P. Co., 157 N.C. 157, 72 S.E. 867. It is equally clear that as between Baird and the plaintiff Liddell Co., by virtue of the agreement between the parties and the retention of the title, the machinery remained personalty, 26 C.J. 676-680; Dominick v. Farr, 22 S.C. 585. And see, generally, Evans v. McLucas, 15 S.C. 67; Sullivan v. Jones, 14 S.C. 362; Reid v. Kirk, 12 Rich. 54; Padgett v. Cleveland, 33 S.C. 339, 11 S.E. 1069; Saye v. Hill, 100 S.C. 21, 84 S.E. 307. The serious question is as to the effect of the conditional sale agreement upon the rights of the defendants Cork and McInnes, who subsequently purchased the machinery for value as a part and parcel of the Baird real estate.

By the great weight of authority, a subsequent purchaser of the land without notice of such an agreement is not affected thereby. 26 C.J. 681, § 47; Ewell on Fixtures (2d Ed.) p. 485; note 49 L. R. A. (N. S.) 396, collating decisions. The view that "a conditional seller of property which has become a fixture should not be permitted to assert his claim thereto against an innocent purchaser of the realty" would seem to be soundly grounded upon the principle that, where one of two innocent persons must suffer, that one should bear the loss whose conduct placed it in the power of a third party to impose upon or deceive another. Union Bank v. Fred W. Wolf Co., 114 Tenn. 255, 86 S.W. 310, 108 Am. St. Rep. 903, 4 Ann. Cas. 1070. That principle is peculiarly applicable where the seller of the property agrees, or where the nature of the property is such that he is presumed to know, that the articles sold are to become fixtures and to all outward appearances a part of the real estate of the buyer. Knowlton v. Johnson, 37 Mich. 47; Allis-Chalmers Co. v. Atlantic, 164 Iowa, 8, 144 N.W. 346, 52 L. R. A. (N. S.) 561, Ann. Cas. 1916D, 910; 26 C.J. 681, § 47, and cases cited. On the other hand, where the grantee of the realty takes with notice of the agreement for the retention of the title in the seller of the fixtures, "the authorities are in unison to the effect that such an agreement will prevail as against a subsequent purchaser" of the realty who has notice, actual or constructive, of the agreement. 26 C.J. p. 681, § 46, and cases cited; note 49 L. R. A. (N. S.) p. 399, collating authorities. Obviously, therefore, the appeal in the case at bar turns upon whether the registry or recording of the Liddell-Baird agreement in the chattel mortgage book in the office of the clerk of the court of Darlington county was constructive notice to the defendants Cork and McInnes of the rights of the plaintiff, Liddell Company.

The point seems to be one of novel impression in this state, and presents a question upon which the authorities in other jurisdictions appear to be nearly evenly divided. The view of Judge Peurifoy that the recording of the conditional sale agreement as a chattel mortgage was not constructive notice to the purchasers of the real estate is perhaps supported by somewhat the greater weight of authority. 26 C.J. 683, § 48 and Ewell on Fixtures (2d Ed.) p. 486, citing cases from California, New Hampshire, Ohio, Texas,...