McCrillis v. Cole

• Decision Date: 27 April 1903
• Citation: 26 R.I. 156,55 A. 196
• Parties: McCRILLIS v. COLE.
• Court: Rhode Island Supreme Court

55 A. 196

26 R.I. 156

McCRILLIS

v. COLE.

Supreme Court of Rhode Island.

April 27, 1903.

Suit by J. Wilson McCrillis against John W. Cole. Heard on bill, answer, and proof. Decree for complainant.

Argued before STINESS, C. J., and TILLINGHAST and DOUGLAS, JJ.

Littlefield & Barrows, for complainant.

Edwards & Angell, for respondent.

STINESS, C. J. The complainant, McCrillis, entered into a contract by which he was to build a mill for Smith, and to sell to him the land and mill at an agreed price. Smith agreed to buy the land and mill within ten years, paying, after two years, $500 a year on account of the purchase price, and paying as rental, until the purchase was completed, interest on the price of the land and the money expended by the complainant in erecting the mill. Smith also agreed to furnish a part of the material for the mill and $000 in cash, labor, or materials, without cost to McCrillis, and to furnish an engine and boiler, with shafting and pulleys, without cost to the complainant, "to be considered a part of the real estate." McCrillis built the mill, and Smith furnished the engine and placed it in the mill on a foundation built by McCrillis. Smith bought the engine of the respondent, Cole, giving a receipt therefor, stating that the engine was "borrowed and received" of Cole, "the same to remain the property of said John W. Cole until such time as the price set against them shall be paid as per memorandum in the margin, when they are to become the property of the borrower, E. E. Smith & Co." Smith was doing business under the above firm name. Smith further agreed with Cole "in the meantime to keep property in good repair and sufficiently insured for the benefit of the said John W. Cole, and to permit him to enter and remove the same" if payment should not be made as agreed. The agreement between Smith and McCrillis was unknown to Cole, and McCrillis was ignorant of the agreement between Smith and Cole. Smith became bankrupt, and, upon Cole's threat to take the engine, the complainant brings this bill for an injunction against its removal. The complainant claims that the engine became a part of the real estate, and that the respondent has no right to remove it. This is the controlling question in the case.

The complainant's first point is that by the agreement between him and Smith the engine was to be a fixture. Undoubtedly, as between themselves, landlord and tenant and vendor and vendee may say whether a thing shall be regarded as a fixture or not, but such an agreement cannot bind other par tier having rights in the property. The effect of the agreement, therefore, between McCrillis and Smith is not controlling as to Cole, who was not a party to it. Kaestner v. Day, 65 Ill. App. 623. The question, then, is whether the agreement between Cole and Smith was such as to make the engine a fixture, so that title passed to McCrillis when the engine was placed in the mill. The complainant argues that he cannot be bound by a secret agreement between Smith and a third party, as it would work a fraud upon him. This depends upon the question whether the engine did or did not become a fixture as between the parties. If it did, the complainant holds it. If it did not, it was a chattel, and the rule of caveat emptor applies to the complainant if he is to be regarded as a purchaser under his agreement with Smith. The general rule in regard to fixtures, as now established, was so fully considered by Mr. Justice Tillinghast in Canning v. Owen, 22 R. I. 624, 48 Atl. 1033, 84 Am. St. Rep. 858, that it is needless to review it The opinion in that case clearly pointed out the distinction in applying the rule between landlord and tenant and vendor and vendee, the former being broader and more liberal than the latter. Thus he cited from McConnell v. Blood, 123 Mass. 47, 25 Am. Rep. 12, as follows: "Many things which, as between landlord and tenant, would be removable as chattels, are regarded as a part of the realty in favor of a mortgagee." In this case the relation of the parties is not clear. McCrillis did not sell and Smith did not buy. They were not actually vendor and vendee. While Smith was to pay a rental pending his agreement to buy, the sum be was to pay was interest on the price of the land and money expended in building, not a sum based on the rental value of the property. From this fact, coupled with the agreement to buy under which Smith entered, we are of opinion that they did not stand strictly in the relation of landlord and tenant. The obvious effect of the agreement between McCrillis and Smith, under which McCrillis was to advance his money, was that the contributions of Smith would be security to him for money he should expend in erecting the mill for Smith's benefit and on his agreement. We therefore think that, as to Smith, he stood equitably as a mortgagee. The general rule between vendor and vendee is substantially the same between mortgagor and mortgagee, because the relation is substantially the same; the mortgage being a form of sale. A mortgagee gets a conditional, instead of an absolute, title, but it becomes absolute on default. In this case a mortgage was not given, but McCrillis held the title to the property conditionally, and upon default held it absolutely, without the need of a sale or deed. As to the rule between vendor and vendee, it was said in Canning v. Owen, quoting Field, J., in Sands v. Pfeiffer, 10 Cal. 204: "'As against him [the vendor] all fixtures pass to his vendee, even though erected for the purposes of trade and manufacture, or for ornament or domestic use, unless specially reserved in the conveyance.' And the same strict rule which applies between heir and executor applies equally between vendor and vendee, and between mortgagor and mortgagee. 2 Kent's Com. *345." Under this relation of Smith and McCrillis there can be no question that, if Smith had put in the engine with clear title in himself, McCrillis would have taken it, by the agreement between them, upon Smith's default.

What effect, then, is to be given to Cole's claim of title under the circumstances? Has he title as against the complainant under an agreement in the nature of a mortgage? Upon equitable grounds the complainant has the stronger position. Under his contract he retained the title to the land, giving Smith no apparent ownership, as security for his expenditure in building the mill, upon the chance that it might be left on his hands, the parties agreeing that the engine and boiler should be considered as real estate. He could have done no more. The agreement, as between him and Smith, was valid and reasonable. He was taking a large chance, for which he was entitled to adequate security. Cole, on the other hand, was selling chattels of no use unless affixed to land, knowing the use to which they were to be put, without inquiry as to the ownership of the mill. There is some conflict of testimony as to his knowledge, but it is not material. If he demanded or was shown any evidence of Smith's ownership of the mill, there could be none except the agreement, which showed at once that McCrillis was to hold the property as real estate. If he made no inquiry, then he knew that the engine and boilers were liable to be put into another's mill, where ownership was liable to be brought in question. He was intrusting Smith with possession and apparent ownership of that which was liable to become realty. If we ask which of two innocent persons must suffer loss, the answer is obvious that it must be the one most at fault; and these facts show that the defendant was at fault in not making an inquiry which it was his duty to make. This is the underlying principle upon which decisions upon this point rest, and we think...