Standard Motors Finance Co. v. Weaver

BeogdeN, J. Does a sprinkler system, sold under a conditional sales contract or retained title agreement duly recorded in a chattel mortgage book, and said system being thereafter attached to realty, covered by a mortgage or deed of trust, become the property of a purchaser of the realty at public sale of the mortgaged premises under power contained in such mortgage? C. S., 3312, provides that conditional sales of personal property shall be reduced to writing and registered in the county where the purchaser resides. Such registration has the same legal effect as the registration of chattel mortgages. This Court has held uniformly and without a *180 break in the line of precedent that one holding a mortgage on real estate has no equitable claim to personal property subsequently annexed to the mortgaged premises, if title to the chattel has been retained by the seller. For instance, in Cox v. Lighting Co., 151 N. C., 62, 65 S. E., 648, it was written: “One holding a mortgage of the realty has no equitable claim to chattels subsequently annexed to it. He has parted with nothing on the faith of such chattels. Therefore the title of a conditional vendor of such chattels, or of a mortgage of them, before or at the time they were attached to the realty, is just as good against the mortgagee of the realty as it is against the mortgagor.” In the same opinion the Court quoted with approval a ruling of the Indiana Court as follows: “Accordingly, the proposition is well sustained that one who purchases machinery with a view that it shall be annexed to or placed in a building, of which he is the owner, and who executes a chattel mortgage on the property so purchased, thereby evinces his intention that the property shall retain its character as personalty, regardless of the manner in which it may be annexed to the freehold. The same principle is adhered to in Dry-Kiln Co. v. Ellington, 172 N. C., 481, 90 S. E., 564. Moreover, in Lancaster v. Insurance Co., 153 N. C., 285, 69 S. E., 214, the Court said: “Under our decisions, where a vendor, as here, has sold goods, taking notes for the purchase money and delivered possession, retaining title as security, and the contract has been properly registered according to the statute, Revisal 983 (now O. S., 3312), the property, the subject-matter of the contract retains its character as personalty, both as between the parties and others claiming adversely to the lien.” Other jurisdictions have adopted the interpretation of the law given by this Court. In Holt v. Henley, 232 U. S., 637, a sprinkler system was the subject of the controversy. The system was bolted to the concrete foundation of a cotton mill. The plaintiff undertook to secure possession of the property, but the action was resisted by the trustee in bankruptcy of the cotton mill. Holmes, J., writing the.opinion, says: “To hold that the mere fact of annexing the system to the freehold over-rode the agreement that it should remain personalty and still belong to Holt would be to give a mystic importance to attachment by bolts and screws.” The opinion cites Cox v. Lighting Co., supra, as authority for the position taken by the Supreme Court of the United States. Likewise in the case of Detroit Steel Cooperage Co. v. Sisterville Brewery Co., 233 U. S., 712, the Court upheld the right of the seller to remove tanks from a brewery which has been placed subsequently to the execution of a mortgage upon-the plant. *181 Assuming then, that the law is well settled that personal property attached to the freehold retains its character as personalty as between the immediate parties, the question arises: Is the purchaser of real property for value and without notice precluded from acquiring title to the chattel so annexed to the freehold? If it be conceded that the registration of the conditional sale irrevocably impresses upon the property the character of personalty, it would seem apparent that the character of the property is not changed simply by reason of the fact that the land was sold. The mere advertisement and sale of the land under a mortgage could not perform a legal miracle by turning personal property into real estate. The essential question involved, therefore, is not whether the conditional sale was recorded in a chattel mortgage book or a real estate mortgage book, but whether the property remained personalty or was transformed into realty upon the execution of the power of sale in the real estate mortgage. Consequently the character of the property and title thereto determines the controversy rather than notice derived from the kind of book the paper was recorded in. This Court held in Causey v. Plaid Mills, 119 N. C., 180, that the owner of an “inspecting machine” placed in a mill could show as against a purchaser for value that the machine was put in the mill for temporary use and removable at the pleasure of the owner. The theory upon which the decision rests is that the title did not pass, and hence the property became no part of the freehold. The authorities bearing upon various aspects of the question of law involved are assembled in 13 A. L. R., 461. We therefore hold that the property in controversy retained its character as personalty and under the facts disclosed, did not become a part of the realty. Hence the defendants are not entitled to hold the property. Reversed.