National Manufacturing & Engineering Company v. Farmers Trust & Savings Bank of Kokomo

• Decision Date: 05 April 1933
• Docket Number: 25,805
• Citation: 185 N.E. 146,204 Ind. 535
• Parties: National Manufacturing & Engineering Company et al. v. Farmers Trust & Savings Bank of Kokomo et al
• Court: Indiana Supreme Court

185 N.E. 146

204 Ind. 535

National Manufacturing & Engineering Company et al. v. Farmers Trust & Savings Bank of Kokomo et al

No. 25,805

Supreme Court of Indiana

April 5, 1933

1. FIXTURES---Sufficiency of Annexation.---When permanent structures are erected on land, ordinarily they are considered part of the real estate. p. 541.

2. FIXTURES---Actions Relating to---Remedy.---In a mortgage foreclosure action, it was held that a defendant was entitled to a determination, under its cross-complaint, whether coal bunkers placed on the real estate were part of the real estate or subject to removal. p. 541.

3. LANDLORD AND TENANT---Lease---Validity of Terms.---Where a company erected coal bunkers on the land of another and leased the same to the owner of the land, an option in favor of the lessor to lease the real estate and operate the coal business thereon in case of default of the land owner was held a valuable right for which the parties had right to contract. p. 541.

4. LANDLORD AND TENANT---Leases---Requisites.---No special or precise words are necessary to create a lease, any instrument expressing the agreement of the parties by which a right of possession as tenant is given and acted upon being sufficient. p. 542.

5. LANDLORD AND TENANT---Leases---Description of Premises---Where Lessee has Taken Possession.---The rule that a lease must describe the real estate with such particularity that it can be designated will not defeat a contract where the parties have put a particular construction thereon and the premises are taken possession of and occupied under the lease. p. 542.

6. LANDLORD AND TENANT---Leases---Description of Premises---Sufficiency.---Where a lease contract stated the dimensions of the real estate and referred to a sketch thereof annexed to the lease as schedule "A", and the lessee was in possession of the land and certain coal bunker equipment erected thereon as provided in the lease such description was held sufficient, since, considering the description and occupation together, the particular land was easily ascertainable. p. 542.

7. COVENANTS---Running With Land---Privity of Estate---Construction.---A lease contract necessarily to be performed on the land, so understood by the parties, and expressly providing that it shall run with the land, creates a privity of estate and runs with the land. p. 543.

From Howard Circuit Court; J. Marshall, Judge.

Action by the Farmers Trust & Savings Bank of Kokomo, trustee against National Manufacturing and Engineering Company and others to foreclose a mortgage. From a judgment for plaintiff on demurrer to defendant's cross-complaint, the named defendant and others appealed.

Reversed.

Conrad Wolf, Earl B. Barnes, C. W. Roll and George P. Shenk, for appellants.

Bell Kirkpatrick, McClure & Elliott, for appellees.

Fansler, J. Roll, J., not participating.

OPINION

Transferred from Appellate Court under § 1351 Burns 1926, Acts 1901, p. 565.

Fansler J.--

The appellee, Farmers Trust & Savings Bank of Kokomo, Indiana, trustee, began this action to foreclose a mortgage on certain real estate of Herman O. Finch located at Kokomo, Indiana, and used in part, at least, as a coal yard. The appellee, Farmers Trust & Savings Bank of Kokomo, Indiana, filed a cross-complaint to foreclose a junior mortgage on the same real estate. Appellants, with others, were made defendants to both actions. The appellants, National Conveyor Company and The Phillips Company, filed answers and a cross-complaint. The appellees, Farmers Trust & Savings Bank of Kokomo, Indiana, trustee, and Farmers Trust & Savings Bank of Kokomo, Indiana, demurred to the latter cross-complaint. The demurrer was sustained, and this ruling is assigned as the only error complained of.

The cross-complaint in question alleges that on the 18th day of May, 1923, the appellant, National Manufacturing & Engineering Company, entered into a contract with the appellee, Herman O. Finch, for the building, erection and leasing of a coal bunker system upon the real estate described in the mortgages which are sought to be foreclosed. The contract is made an exhibit to the complaint. The National Manufacturing & Engineering Company is named as the lessor, and the appellee, Herman O. Finch, owner of the real estate in question, is designated as the lessee in the contract.

The contract provides that the lessor leases to the lessee certain coal bunkers and equipment, specifically described, to be erected and installed upon lessee's real estate. The first section is as follows:

"1. The lessee warrants that he holds the fee simple title of a tract of ground approximately 115 by 268 feet, owned by H. O. Finch, located in the City or Town of Kokomo, County of Howard and State of Indiana, and described as follows: A sketch of said ground showing its railroad connections, the proposed location of the coal bunkers and equipment herein referred to, and other matters, is as set forth in the annexed schedule A'."

Section 2 provides that the lessee shall install a foundation for the bunker plant. Sections 3 to 6 provide that within thirty days after completing the foundation the lessor shall deliver the bunkers on the premises and that they shall be ready for operation within three months. Section 7 provides that the lessee shall furnish a competent man to operate the machinery. Sections 8 to 11 provide for the acceptance of the bunkers by the lessee, the operation of the same, and the payment of the sum of twenty-five cents per ton of coal handled for rental during the term of the contract. The contract continues:

"12. Title to all of said coal bunkers and all equipment and machinery and any additional thereto made by the lessor (other than the pit and foundations) shall be and remain in the absolute property of the lessor, free and clear of all claims of the lessee or others.

"13. In no event or under any circumstances shall said bunkers and equipment, or any part thereof, be severable or removable from said real estate until the expiration of this contract, this contract shall run with said real estate.

"Neither the lessee nor others shall have the right to incur any mechanic's or other liens in connection with the repair or maintenance of any part of the leased property, and the lessee further agrees that he or they will not attempt to convey or mortgage or create any lien of any kind or character against the same or do anything or take any action that might hereinafter mature into a lien.

"14. In the event of a sale of the premises on which said bunkers and equipment stand, such sale shall be subject to all rights of the lessor as set forth herein."

Sections 15 and 16 provide that the contract shall continue for a period of five years from the date on which the equipment is ready for operation. At the expiration of said five years the lessee is given an option to purchase the bunkers and equipment at a price fixed. In the event the option to purchase is not exercised, the contract shall be automatically extended for three additional periods of five years each, with the right to purchase on the same terms at the end of any five-year period. The contract continues:

"17. In view of the fact that the bunkers and equipment are of such nature that it is wholly impracticable to remove the same from the leased premises on a violation of the terms hereof, although the lessor reserves the right to do so at any time, it is agreed that in the event of a violation of the terms hereof the lessor shall be entitled to an action for all damages actually suffered by it together with reasonable attorney's fees in recovering the same and seven per cent interest on all such sums from the date such damages was incurred to the date of payment.

"18. The lessee agrees as a further consideration for the execution of this lease that in the event he or they shall become insolvent, or for any other reason to operate the National Coal Bunkers System and continue the payments provided for, that the lessor may at its option take possession of the plant and operate the same, provided the lessor shall pay to the lessee, his or their successors or assigns, a reasonable sum

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