Triumph Elec. Co. v. Patterson

• Decision Date: 07 January 1914
• Docket Number: 3941,3973.
• Citation: 211 F. 244
• Parties: TRIUMPH ELECTRIC CO. v. PATTERSON (two cases). In re W. O. CRAIG MFG. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

211 F. 244

TRIUMPH ELECTRIC CO. v. PATTERSON (two cases).

In re W. O. CRAIG MFG. CO.

Nos. 3941, 3973.

United States Court of Appeals, Eighth Circuit.

January 7, 1914

[Copyrighted Material Omitted]

John I Worthington, of Harrison, Ark., and Joseph M. Hill, James Brizzolara, and Henry L. Fitzhugh, all of Ft. Smith, Ark for appellant.

E. H. Gamble and James F. Read, both of Ft. Smith, Ark., for appellee.

Before HOOK and CARLAND, Circuit Judges, and VAN VALKENBURGH, District judge.

VAN VALKENBURGH, District Judge.

The W O. Craig Manufacturing Company, a corporation, was adjudicated a bankrupt on the 27th of July, 1912. This concern was formerly the Siloam Springs Cold Storage & Ice Company, and under the latter name the bankrupt bought from the Triumph Electric Company certain machinery for an ice manufacturing plant at Siloam Springs, Ark. This machinery consisted in general of five sections of double-pipe ammonia condenser complete, hand hoist and crane, with can filler and hose; also, a 28-ton ice tank 25 feet wide, 43 feet and 10 inches long, and 47 inches deep, made of 1/4-inch steel; a 28-ton shell type brine cooler; 380 ice cans; 18-inch propellor; one 3 1/2 horse power motor; a traveling crane with hand hoisting attachments of a substantial construction; one automatic ice can dump of 300 pounds capacity; and various other articles appurtenant to this machinery and necessary for its installation. The machinery was sold under two contracts, dated respectively January 28 and February 25, 1911. The aggregate purchase price was $4,312.80, for which notes were given. Of this the sum of $3,026.98 is alleged to be unpaid. The contract between the bankrupt and the vendor contained the following provisions:

'The title to all material furnished by the company shall remain in it until full purchase price has been paid in cash, with full right of repossession by the company upon purchaser's default of any act or payment due under this contract; and purchaser agrees that company shall have the right to retain all the moneys, that may have been paid by the purchaser, as liquidated damages for purchaser's default. Purchaser agrees to do all acts necessary to protect such retention of title in the company, and the taking of any security whatsoever shall not operate as a waiver nor as otherwise affecting this retention of title.

'The company, at its election, shall be entitled to a conveyance of said material by way of mortgage, in order to secure the payment of the purchase price.

'Should the purchaser become insolvent or default in the performance of or payment of any part of this contract, including any obligation given for any part of it or failure to execute notes as agreed upon, the whole purchase price shall forthwith become due.'

This contract was one of conditional sale. Under the law of Arkansas it was not required to be recorded, and was not recorded. The machinery was installed not later than May, 1911, in a building constructed for that express purpose, on a piece of land adjacent to a railroad for convenience of shipping. This land was put to no other use. The building was especially built and adapted to receive the machinery; it was intended exclusively for the manufacture of ice; the apparatus purchased was essential to the business of the plant, and was installed for permanent use therein.

June 3, 1911, to secure the repayment of a loan of $30,000, made on that date, the bankrupt executed to the Commerce Trust Company of Kansas City, Mo., a mortgage on its entire plant and all personal property used in connection therewith. This mortgage, and the notes secured thereby, were afterwards assigned to the objector Patterson. Before the adjudication in bankruptcy, Patterson, in the bankruptcy proceeding, claimed all the property described in the mortgage and sought to have the same sold and the proceeds applied to the payment of the mortgage debt. The Triumph Electric Company filed its intervening petition, claiming the machinery sold by it to the bankrupt by virtue of the retention of title in its contract of sale. To this petition Patterson filed answer asserting the superior lien of his mortgage. The property was by the referee ordered sold free from liens, and out of the proceeds of the sale an amount sufficient to pay the intervener's claim was retained by the trustee to await the decision on the issues thus framed. Upon hearing the trial court found in favor of the objector and dismissed intervener's petition.

The case is here both upon writ of error and by appeal. Appeal being the appropriate remedy upon the record as presented, we take jurisdiction thus, and the writ of error is accordingly dismissed.

As stated by the trial judge, the real question in the case is whether the property in controversy became a part of the realty and passed under the mortgage, or remained personal property, subject to the terms of the contract between the bankrupt and the intervener. This question necessarily subdivides itself thus:

1. Is the property of such a character, and were the circumstances of its annexation such, that in the absence of the special reservation it would ordinarily become a part of the realty and pass under the mortgage?

2. If so, did that special reservation of title preserve its character as personal property, and withdraw it from the subsequent mortgage lien?

With respect to this first branch of the question involved, the court below, after considering the facts and rules laid down by the Supreme Court of Arkansas for determining whether a given article is a chattel or an irremovable fixture (Choate v. Kimball, 56 Ark. 55, 19 S.W. 108; Ozark v. Adams, 73 Ark. 232, 83 S.W. 920), found that this machinery was such a fixture and constituted an integral part of the realty. We agree with this conclusion. The rules referred to are the following:

'1. Real or constructive annexation of the article in question to the realty.

'2. Appropriation or adaptation to the use or purpose of that part of the realty with which it is connected.

'3. The intention of the party making the annexation to make the article a permanent accession to the freehold, this intention being inferred from the nature of the article affixed; the relation and situation of the party making the annexation, and the policy of the law in relation thereto; structure and mode of the annexation and the purpose and use for which the annexation has been made.'

Mr. Ewell, in his treatise on the Law of Fixtures (chapter 9, p. 293), after reciting the three tests quoted, says:

'The general course of decision is in favor of viewing everything as a fixture and as passing by a conveyance of the land, which has been attached to the realty with a view to the purpose for which it is employed or held, however slight or temporary the connection between them, provided, of course, that such attachment be intended as a permanent or habitual one, which in the absence of evidence to the contrary will in this relation ordinarily be presumed.'

Mr. Jones states the rule as follows:

'The intention with which an article of personal property is attached to the realty, whether for temporary use or for permanent improvement, has within certain limits quite as much to do with the determination of the question, whether it has thereby become a permanent fixture, as has the way and manner in which it is attached . In the modern cases the intention with which a chattel is attached to the realty has become more and more the decisive test whether or not the chattel has become a part of the realty. The mode of annexation is of consequence chiefly as bearing upon the intention.

'The intention which controls is, 'not the secret design which may dwell in a party's mind, and as to whose existence he alone can speak, but that 'intention- ' which was either expressly declared by the parties competent to make it the governing rule, or which flows, patent to all, from the nature and character of the act, the clear purpose to be served, the manifest relation which the articles bear to the realty, and the visible consequences of their severance upon the proper and obvious use of it.' ' Jones on Law of Real Property, vol. 2, §§ 1668, 1669.

The principles announced have received general recognition (William Firth Co. et al. v. South Carolina Loan & Trust Co., 122 F. 569-578, 59 C.C.A. 73; Giddings et al. v. Freedley et al., 128 F. 355, 63 C.C.A. 85, 65 L.R.A. 327); and particularly in the decisions of this court (Hooven, Owens & Rentschler Co. v. John Featherstone's Sons et al., 111 F. 81-83, 49 C.C.A. 229; Armstrong Cork Co. v. Merchants' Refrigerating Co. et al., 184 F. 199-201, 107 C.C.A. 93, 95). In the latter case Judge Sanborn said:

'The true test of the character of an improvement is the intent of the owner of the real estate to incorporate, or not to incorporate, it permanently in his realty as a part thereof.'

The machinery in controversy was installed in such manner and under such circumstances as to satisfy all the tests prescribed for the determination of an irremovable fixture to land.

We have next to consider whether the reservation of title in the contract of sale operated to preserve to this property its original character as personalty to such extent as to render the vendor's title superior to the lien of appellee's mortgage.

This case must, of course, be determined in accordance with the law of the state of Arkansas, if that can be ascertained with sufficient clearness from the decisions of its courts of last resort; otherwise, it will be our duty to form our independent opinion and decision upon the principles and doctrines of general jurisprudence. In all cases between vendor and vendee, and, with respect to property...