Breese v. Bange

By the Court. Daly, J. The agreement executed by Hunt, upon the back of the lease, cannot be regarded as a surrender of the lease and a merger of the term, so as to work a dissolution of the relation of landlord and tenant; for the transfer was not absolute, but conditional, subject tobe defeated, before the expiration of the term, by the performance of the condition. It was an assignment of all Hunt’s right, title and interest in the previous agreement or lease, as collateral security for the payment of the two notes, or of any demand which Bange might thereafter have against Hunt for goods, wares and merchandise, or otherwise. The payment, before the expiration of the term, of any demand for advances subsequently made, or obligation incurred by Bange, with the paymént of the notes, would have fulfilled this condition; and the right to the possession, for the residue of the term, would have been exclusively in Hunt, subject only to the conditions contained in the lease. This subsequent agreement on the part of Hunt was, in my opinion, a mortgage, which superadded, to the relation of landlord and tenant already existing between the parties, the additional relation of mortgagor and mortgagee. The quality or attribute which distinguishes a mortgage from another and different kind of security is the condition, that if the debt, which it is given to secure, be paid at a day specified, the conveyance is to be void, or if not, that it becomes, as a conveyance, absolute at law, though subject in equity to the right of redemption. (2 Bl. Com. 157; 1 Powell on Mortgages, by Coventry, 4, note B., and 109, note D.; Coke Litt. §§ 332, 205, a.) This is implied in the term itself, compounded of two French words, mort, dead, and gage, pledging; dead pledge, contradistinguished from the viwum vadium of Littleton, or living pledge; as where a debtor, who hath borrowed money, transfers an estate to his — 487 — creditor, to be held by the creditor until he has repaid himself out of the issues and profits of the land ; in which case the estate is never lost or dead to the debtor. (Coke Litt. 205, a.) In the mortuum vadium, however, which is our modern mortgage, the estate rests at once in the creditor, subject to be defeated only by the discharge of the debt at the day limited for payment. “ It seemeth,” says Littleton, “that the reason why it is called mortgage is, that it is doubtful whether the feoffer will pay, at the day limited, such sum or not; and if he doth not pay, then the land, which is put in pledge upon condition, for the payment of the money, is taken from him forever, and so dead to him upon condition.” (Litt. § 332, lib. 3, chap. 5.) “ And it is called mortgage, or mortuum vadium,” says Coke, “both for the reason expressed by Littleton, and to distinguish it from that which is called vi/oum vadvam” (Coke Litt. 205, a.) This instrument transfers a leasehold estate, as a security for the payment of money by a day specified, for it states the day when the notes, the payment whereof it is intended to secure, are due and payable, which brings it strictly within the definition of a legal mortgage. And in equity, with very few exceptions, any conveyance, assignment, or instrument, transferring an estate, originally intended by the parties as a security for money, or for any other incumbrance, whether this intention appear from the same instrument or from any other, is a mortgage redeemable upon the performance of the condition or stipulation. (2 Story’s Eq. Jur. 1,018, 6th ed.) This instrument was also intended as a security for future advances or demands which Bange might subsequently have against Hunt, and such advances, both of money and goods, it appears were made. But that would not alter its character, for to the extent of such advances, it would be regarded- and treated in equity as an equitable security, in the nature of a mortgage. (Ex parte Oaks v. Watson, 2 M. D. & De G. 234; Ex parte Smith v. Gye, Ib. 314; Ex parte Wills, 1 Ves. Jr. 163; Waters v. Mynn, 14 Jur. 341; Abbot v. Stratton, 3 Jones & Lat. 609.) — 488 — Regarding it as a mortgage, it becomes necessary to determine what was conveyed by it to the defendant. I think the transfer of Hunt’s right, title and interest in the previous agreement or lease, carried with it his right to the unexpired term, and to the buildings, fixtures and machinery erected upon the premises. An assignment, by way of mortgage, of a household interest, would necessarily include all erections upon the land, unless it was apparent, from the terms of the instrument, or from the nature of the erections, that such was not the intention of the parties. (Colegrave v. Dios Santos, 2 B. & C. 76; Ward v. Smith, 11 Price, 19 ; Stewart v. Loombe, 4 Moo. 218; Hare v. Horton, 5 B. & A. 715; Winslow v. Merchants’ Insurance Company, 4 Met. 306; Trappes v. Harter, 2 Cromp. & Mee. 153.) That it was not the intention to transfer the un expired term, divested of any right to the possession of the buildings, fixtures and machinery, is manifest from the instrument, when taken in connection with the original agreement or lease, and the erections put upon the land by means of the advances made for that purpose by Bange, in pursuance of that agreement. The land was demised to Hunt for the period of ten years, at an annual rent, Bange agreeing to advance him, within four months from the date of the agreement, $2,500, to be expended in buildings and improvements upon the land, which Hunt agreed to repay. That is, he agreed to* pay $2,710 in two instalments, one of $1,675, in sixteen months, and one of $1,035, in twenty months from the date of .the agreement; and Hunt bound himself to keep the buildings, fixtures and machinery, which might be erected upon the premises, insured to the extent of $2,700, as collateral security to Bange for the payment of the money advanced by him. And it was further agreed, that if this money should not be punctually paid, or if default should be made in the payment of the yearly rent, or any part of it, for thirty days, that Bange might proceed by ejectment or re-entry, and recover possession of the premises, with a further stipulation that Hunt, at the expiration of the ten years, might remove and dispose of all the build — 489 — ing, fixtures and machinery erected by him upon the premises. Bange advanced the $2,500 within the time limited, and the erections were completed by Hunt in Hay, 1848. It will be seen, that by the terms of this agreement, Bange was to have an insurable interest in-the buildings, fixtures and machinery, by way of security for the payment of the money he had advanced towards their erection. But he made a further advance of $1,551 69, for which Hunt had given two notes, payable in four and six months, and it was to secure the payment of this sum, as well as prospective advances, that this additional agreement or mortgage was entered into. I think it is obvious from these facts, that it was not the intention to mortgage the unexpired term, excluding the buildings, fixtures and machinery, which must have constituted, in fact, the principal security for the large sum of money advanced by Bange, a sum exceeding $4,000 when the last instrument was executed, and which, by subsequent advances, was increased to more than $7,000. That it was intended that Bange should have an interest in the buildings, fixtures and machinery, is evident from the original agreement or lease. As before remarked, they were to be insured and kept insured, for his security, until the money he had advanced should be repaid. If default should be made in the payment of the $2,700, he was entitled to a re-entry or to maintain ejectment, to repossess himself of the premises, and in that action would have recovered back the land, including whatever erections had been put upon it. The reservation in the lease, that Hunt might remove or dispose of the buildings, fixtures and machinery, at the end of the term, is a concession that but for that provision, they would belong to Bange. It is with a proviso that they shall be removed within ten days after the expiration of the term, hut not otherwise. It was a privilege he found it necessary to secure by the lease, and when he transferred all his interest in the lease to Bange, he transferred that right or privilege also. If the condition had remained unperformed until the expiration of the term, there could be no doubt of Bange’s right, either — 490 — to remove or to dispose of them. Having acquired all Hunt’s interest in the lease, he undoubtedly acquired Hunt’s right of disposing of them at the expiration of the lease; and as soon as Hunt, as mortgagee, was in default, the right of Bange to enter, to take and retain possession of them until the mortgage was redeemed, follows as a consequence of the transfer that had been made to him. To show that the defendant, Bange, had an interest in the buildings, fixtures and machinery, under the lease, that would be recognized and protected, let us view this case in another aspect. Suppose, now, that $2,700 is due; that Hunt, or rather, that the plaintiffs, as his assignees and as the assignees of Bishop, should apply to redeem under this mortgage, would not a court of equity require the payment of this $2,700 ? The lease makes provision for the recovery of the land in the event of its non-payment; but notwithstanding that, the court would recognize the $2,700 as an equitable charge upon the buildings, fixtures and machinery, and would, require that it should be paid, before it would direct that the unexpired term, with the improvements upon the land, should be transferred to the plaintiffs. In respect to fixtures, the rule is more strict between mortgagor and mortgagee, than as between landlord and tenant. The right of a tenant to remove fixtures, which he has erected upon the land for the purpose of trade or manufacture, is strongly favored, but there is no reason for giving it an equally extensive application in the case of a mortgagor. With no show of justice could a landlord, who leases his land at a stipulated rent, thus receiving an equivalent for its use, insist upon his right to erections put up by the tenant, at his own expense, to carry on his trade or business, which the tenant can remove without leaving the land in any worse condition than he found it. But the case of a mortgagor is different. He conveys the land, by way of security, for the repayment of money, and whatever is attached to the land, to be habitually used and enjoyed with' it, whether for the purpose of trade and manufacture or not, goes with it, as a part of the — 491 — mortgage security. Whatever may be fairly regarded as a part of the freehold, passes. It may often be, as appears to have been the case here, that the erection or improvement constitutes the essential part of the security, and that they have been added to the land by means, in whole or in part, of the very money, the repayment of which the mortgage is intended to secure. From the description given by the various witnesses of the buildings, fixtures and machinery, it is impossible to come to any other conclusion, but that they fall within the description of property that would pass to a mortgagee. (Bulkley v. Bulkley, 11 Barb. 63 ; Vanderpool v. Van Allen, 10 Ib. 157; Walker v. Sherman, 20 Wend. 636; Stewart v. Lombe, 1 B. & B. 506.) The building and fixtures were put up for and adapted to the machinery, which was to be moved by water power, flowing over the land, the right to the use of which formed a part of the grant in the lease. This fact alone, the erection of a building for machinery to be moved by water power existing upon the land, is sufficient to render the whole structure a part of the freehold, at least, as between mortgagor and mortgagee. It is no stronger than the case of the windmill, in Stewart v. Lombe, 1 B. & B. 506, which, it was held, would pass to the mortgagee, as a part of his security, though it might be otherwise as between landlord and tenant; and a building put up with machinery adapted to the use of a water power existing upon the land has been recognized as a very just criterion to distinguish what belongs to the freehold as between vendor and vendee. (Farrar v. Chauffetete, 5 Denio, 527.) In this case, the whole structure was designed for one pimpose. The building, fixtures and machinery were adapted for use in the place where they were erected and not elsewhere, for, in the opinion of the great majority of the witnesses, the fixtures and machinery could not be removed -without entirely losing their distinctive character. To sever them, would, in their judgment, render them of no value thereafter, except as old iron, or as wood to burn. The — 492 — entire structure, building, fixtures and machinery were put up by Hunt, to be used and enjoyed by him, during his term; and when he mortgaged that term to the defendant, the erections which he intended should be enjoyed with it, necessarily passed to the mortgagee. The referee appears to have attached some importance to the circumstance, that neither the lease nor the instrument endorsed upon it, which I have treated throughout as a mortgage, were filed in a county clerk’s office; and the counsel for the plaintiffs has argued, that if the latter instrument be valid as a mortgage against Hunt, it is void as to judgment creditors, not having been filed, j The statute providing for the filing of mortgages, (2 R. S. 196; §§ 9, 10, 3d ed.,) relates only to mortgages of personal property, and has no application to this instrument, which is a mortgage of an interest in real estate.! It was not necessary even to record it or the original lease; for leases in Ulster county need not be recorded—the recording of them, in that county, being specially excepted from the operation of the general provision in the recording act. (2 R. S. 47, § 49, 3d ed.) But both instruments appear to have been recorded a few days before the sheriff’s sale, which would have been sufficient, had recording been necessary to give Bange a title, as against a purchaser at the sheriff’s sale. (2 R. S. 40, § 1, 3d ed.) The subsequent mortgage, given by Hunt to Bishop, could not affect the prior mortgage existing in favor of Bange; nor could Bange’s interest be affected in any way by the levy and sale, under the judgments subsequently recovered by the plaintiffs. When Bishop took possession under his mortgage, he held subject to the prior mortgage of Bange ; and when the plaintiffs purchased, at the sheriff’s sale, “ Hunt’s interest in the lease, fixtures and machinery,” they acquired nothing more, as against Bange, than Hunt’s right to redeem. It is even doubtful whether, under such a sale, they could acquire that. It was a sale of a leasehold term for more than five years, which could only be sold in the same manner as real estate. (Laws of 1837, p. 540; 2 R. S. 722, § 5; — 493 — 454, § 6; 466, §§ 36, 37, 3d ed.) It appears, by the sheriff’s testimony, that it was sold like personal property, upon a notice of six days, which was irregular and void. Even if the fixtures and machinery were not part of the freehold, and were capable of being sold as personal property, the sale was not the less irregular and void, the sheriff having sold the whole lease, fixtures and machinery in one lot, without discrimination. (Cresson v. Stout, 17 Johns. 116.) As a general rule, an irregularity in the judgment or in the issuing of the execution, will not affect the title of a bona fide purchaser at a sheriff’s sale, without notice. (Jackson v. Roosevelt, 13 Johns. 98 ; Jackson v. Davis, 18 Ib. 7; Doe v. Thorn, 1 M. & S. 425.) But a neglect on the part of the sheriff to comply with the requirements of the statute, such as omitting to give the requisite notice of the sale, or to have the property within view of those attending the sale, or to offer it in lots and parcels as required by the statute, or selling real and personal estate together in one lot, renders the sale irregular and void. (Sheldon v. Soper, 14 Johns. 352; Cres son v. Stout, 17 Ib. 116 ; Waring v. Loomis, 4 Barb. 484.) I very much doubt whether the plaintiffs, as purchasers, at an irregular sale, made under their own judgment, could acquire any title. It would be a question, however, between Hunt and them, (Stevens v. Baird, 9 Cowen, 274,) had they not, in addition, become the assignees of all his interest by a subsequent assignment. It was, perhaps, unnecessary to touch upon this point here, though discussed upon the argument, it being wholly immaterial in the view I have taken of this case. The plaintiffs, by the assignments made to them by Hunt & Bishop, have acquired whatever interest remained in Hunt, which was simply a right to redeem, and which is all the interest they now have in the fixtures and machinery. They have brought their action, claiming to recover the building, fixtures, machinery, tools and other articles, as owners; that is, all the articles described in the schedule annexed to their complaint. The referee has found that — 494 — Hunt went into possession of the premises, and placed and built thereon various tools and machinery for the manufacture of iron and anchors, and that the property in the tools and machinery became vested in the plaintiffs. He fixes their value at $1,500, and reports, as his conclusion, that judgment for the plaintiffs should be entered for that sum. In addition to the fixtures and machinery, the sheriff sold a lot of loose articles, consisting of tools, iron ore, timber, old castings, charcoal, rope, &c., which brought something over $300. In looking over the schedule annexed to the complaint,! find but three articles that the referee would be justified in assuming as embraced in this lot. The sheriff’s inventory specifies twenty-five pairs of tongs, that brought $50. In the schedule there is an item, “fifteen pairs of large and small tongs.” In the inventory, “fifteen sledges,” that brought $35 ; and in the schedule, “ sixteen large and small sledge hammersand again, in the inventory, “ two shovels,” which, with other articles, brought $5; and in the schedule, “ eight long-handled shovels, iron and wood.” In the schedule there are many other loose articles that would not come under the denomination of fixtures or machinery ; but nothing in the evidence to show that they were ever in the defendant’s possession. Some of them are embraced in Bishop’s mortgage; but it does not appear that they were on the premises at the time of the sale; and the presumption from the sheriff’s inventory would be, that they were not. The schedule attached to the complaint, which enumerates what the plaintiffs claim to recover, is occupied principally with a description of the fixtures and machinery, embracing even the building as “ one office, one barn, one building called the foi’ge and anchor shop, about one hundred and fifty feet in length, by forty-five feet wide, or thereabouts.” The only tools or loose articles, then, essential to inquire about, as embraced in the schedule, are those already mentioned—■ twenty-five pairs of tongs, sixteen large and small sledges, and eight long-handled shovels of iron and wood. A portion of these articles, as has been stated, were included in the lot — 495 — sold by the sheriff as loose articles. The title to them passed to the plaintiffs, as assignees of Hunt and Bishop, and if they had established by the evidence that they were in the possession of Bange, and proved a demand, they could maintain this action to recover their value. It appears, by the testimony, that all the loose articles, which were sold by the sheriff separately, were purchased by Bishop for the plaintiffs, and placed by him in the charge of one Melson Mitchell, with instructions from the sheriff, at the request of Bishop, that Mitchell should take charge of them for the sheriff, who gathered them up and put them in the office building, nailed up the window and put a lock upon the door, where they remained until April, 1849, after the plaintiffs made the demand. Mitchell says that Bange knew nothing about it, and had no connection with the matter. He became thereafter the agent for Bange in the manufacture of iron, and says that the defendant’s workmen did not use the tools; that they were rough and unhandy and unfit for use, and that after his return from California, he looked in the office and saw a portion of the tools and the iron and bells, in the same office where he left them. Bange, who was present at the sheriff’s sale, told the sheriff that he had no claim to these loose articles; that his claim was confined to the machinery and fixtures fastened to the freehold, and embraced in what the sheriff sold as Hunt’s interest in the lease, fixtures and machinery, and there is nothing in the evidence to show that he ever exercised any dominion over them, or made any claim to them thereafter. If the plaintiffs supposed them to remain upon the premises after Bange went into possession, it was no affair of his. He is not liable to an action for the value, unless it appear that they were specially demanded and he refused to allow, the plaintiffs to take them. The demand was a general one, of every thing included in the schedule annexed to the complaint, which the witness held in his hand at the time. It was made in this city. Bange asked the person who made it, if it was the property at Maponock, and was told it was; whereupon he declined to give any answer — 496 — until he should consider the matter; and he ashed for a copy of the schedule or inventory, which the witness said should be furnished. Whether it was furnished or not, does not appear. This was not a demand and refusal of the articles that Mitchell had taken charge of, and would furnish no ground for maintaining an action against Bange, to recover their value. The report of the referee must be set aside. Woodrtjee, J., concurred. Ingraham, First J., not being present at the argument, took no part in the decision. Judgment set aside and case referred bach, with liberty to introduce further testimony; costs to abide the event.