Ozark v. Adams

Hill, C. J. These cases, one at law, the other in chancery, were tried before the circuit judge upon the same evidence, and the town has appealed from the judgments. The Reporter will set out the findings of fact and conclusions of law of the trial judge. As there is no cross-appeal, the sole question for determination is the correctness of the second declaration of law, on the facts found, as to the machinery being a removable trade fixture. The rules for ascertaining whether an article is a chattel or an irremovable fixture are thus summarized in Choate v. Kimball, 56 Ark. 55: “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, the structure and mode of the annexation and the purpose or use for which the annexation has been made.” This rule has been followed' and applied in these cases. Bemis v. First Nat. Bank, 63 Ark. 625; Monticello Bank v. Sweet, 64 Ark. 500; Markle v. Stackhouse, 65 Ark. 23; Tenniswood v. Smith, 72 Ark. 500. Before the aforesaid rules can be applied the primary question is “the relation of the parties.” The machinery in question was bought with the title reserved to the manufacturing company to secure balance of the unpaid purchase money. This form of security gave wajr to a mortgage on the machinery, the leasehold and other property situate without the county. The giving of a chattel mortgage, reservation of title, conditional sale, or other form of security, is usually equivalent to an express agreement between the parties thereto that the machinery shall be personalty. 13 Am. & Eng. Enc. Law (2d Ed.), 624, 626, and authorities in notes. This effect is necessary to secure the debt. Had this mortgage, or, as it originally stood, reserved title, been foreclosed as to the machinery alone, and it alone bought, there could be no question but that Adams could detach.it from the realty; succeeding to the rights of both parties who had contracted that it was a chattel, not real estate. But such was not the case. It was sold with the leasehold as part of the assets covered by the mortgage, bought in by the plaintiff, and sold to Adams as bought, an entirety. There is high authority for holding that where a chattel annexed to the soil is sold to the owner of the realty, that fact changes its prior personal character into an irremovable fixture. Curtis v. Riddle, 7 Allen (Mass.), 185. Passing that, and going to the question broadly: the purchaser at the foreclosure sale (to whose rights Adams succeeded) acquired the rights of all parties to the suit, that of the manufacturing company and of the lessees. Sand. & H. Dig., § 5943; 2 Jones on Mort. § 1654; Wiltsie on Mort. Foreclosures, § 577. The sale under foreclosure necessarily wiped out the debt against the machinery, and the right to treat it as personalty by virtue of the original character between the parties ended with the accomplishment of the purpose thereof; and of course a merging of interests of those contracting parties into the same person ended that contract. The effect of the purchase of the leasehold was an assignment thereof to the purchaser. Wiltsie, Mort. Foreclosures,^ 577. Adams succeeded to the rights and limitations of Shults, the original lessee, and was the owner of his leasehold and the machinery thereupon annexed, freed of the mortgage lien, and freed of the colitract in that mortgage treating the machinery as personal property. Therefore the relation of Adams to the town was that of the original lessee, Shults; and his rights and liabilities are to be measured as if he were Shults, instead of Adams, for he stands in Shults’ shoes. Adams ran the mill in conformity to the Shults lease for over two years, then attempted to remove the machinery as a trade fixture not annexed to the realty. Viewing the facts from the standpoint of the original lessee, and applying the rules aforesaid, the solution is plain. The value of the two first rules is evidentiary, to ascertain the intention of the annexation from the manner thereof and purpose of the article used. In regard to the machinery, there are well defined rules to determine the character of the annexation which are thus summarized by Mr. Wiltsie: “Where the chattel, as attached to the realty, is useful and necessary to its enjoyment, and adds value thereto, and when detached loses its character and usefulness, the chattel becomes a fixture, and passes with the freehold.” Wiltsie, Mort. Foreclosures, § 428. The ponderous character of the machinery, its special construction for the purpose for which the lease was given, the difficulty of detachment and necessity of reconstruction and readaptation when refitted to another mill, are all indicia of the intention to become permanent. Passing to the most important, the third rule — the intention — the lease was for a period of ninety-one years, and the sole consideration therefor was that a mill be run thereon “reasonably regular,” of a certain daily capacity; a building was indirectly donated, and a bonus given by the public-spirited citizens to. found this enterprise, which it was thought would be of benefit to the community and profit to the miller. The enterprise came into being impressed with the intention to be run “reasonably regular” in return for thqse public gifts; and the machinery was installed into the house, reconstructed and adapted to suit it and the business, on a leasehold the term of which ran for a period beyond the life of any machinery. This is totally unlike sawmills, which are placed to cut lumber for a season and then be moved on to another stand, and totally unlike a tenant putting in machinery to be run during a year or a few years (periods much shorter than the life of the machinery), and who is compensating with rent the owner for the use of the leasehold. These are indicia of intention to remove after a season. The facts here show a clear intention to respond in good faith to the generosity extended, and establish a mill as permanent as such things can be, and to run it “reasonably regular,” not for a day nor a year, but continuously. Without such intention having been manifested to the satisfaction of this municipality and these donors, the mill would never have been established. This intention of permanency in the installation of the machinery is what fixes its character as irremovable fixture. The subsequent failure of the enterprise can not change the status fixed at the time the machinery became part of the realty. Therefore the trial court erred in the second declaration of law, to the effect that the machinery was a trade fixture and removable. Reversed and remanded.