First National Bank of Waterloo v. Elmore , 52 Iowa 541 ( 1879 )

Day, J.

i. mortgage: tiónai Sank. — I. Is the plaintiff’s mortgage ultra vires, and void under section 5136, Rev. Statutes U. S. This question has recently been determined by the Supreme Court of the United States, in The Union National Bank of St. Louis v. Matthews, 8 Otto (98 U. S.) 621.

In that case an injunction was obtained in the state court of Missouri, restraining the bank from proceeding to sell under a deed of trust executed to the bank in security for a loan of $15,000. Upon writ of error to the Supreme Court of the United States the judgment of the state court was reversed. In the course of the opinion, respecting the defense that the trust deed was taken in violation of the banking act, and was void, the court say; “We cannot believe it was meant that stockholders, and perhaps depositors, and other creditors should be punished, and the borrower rewarded, by giving success to this defense whenever the offensive fact shall occur. The impending danger of a judgment of ouster and dissolution was, we think, the check, and none other, contemplated by Congress. That has been always the punishment prescribed for the wanton violation of a charter, and it may be made to follow, whenever the proper public authority shall see fit to make its application. A private person cannot, directly or indirectly, usurp this function of the government.”

As the question under consideration arises under a statute of the United States, this decision of the United States Supreme Court is authoritative and binding upon us, and is conclusive of the validity of the mortgage in question, as between the parties thereto.

II. As to the relation .of the plaintiff’s mortgage to the liens of the other defendants:

1. The mortgage to N. B. Lord bears date June 16, 1871, the mortgage to Charles H. Williams bears date February 24, 1872; the judgment in favor of James Leffel & Co. was recovered June 21, 1875, but the action was commenced September 2,1874, to enforce a mechanic’s lien theretofore filed. These claims all have precedence to the plaintiff’s mortgage, which was executed December 1, 1874. The note for $500 secured bv the mortgage bears the same date as the mortgage. The note for $213.80 is dated May 3, 1875, but the debt for which it was given was created December 10, 1874. This mortgage, for the amount of both notes, attaches as the junior lien upon the real estate.

2. It is conceded by the plaintiff that if the mechanic’s liens have not become merged in the superior estates of the defendants Pray and Holt, and the mill is found to be such independent structure as can be removed, the three claims above named, as well as the four mechanic’s liens mentioned in the sixth, seventh, eighth and ninth paragraphs of the court’s findings, are prior to the lien of plaintiff’s judgment on the mill. These questions are hereinafter considered.

III. The mill structure upon which these mechanic’s liens are claimed was erected in the summer of 1875, subsequent to the date of the mortgage to plaintiff. It is claimed by the plaintiff that the mill building is not such an independent structure as is susceptible of removal, under the doctrine of Getchel v. Allen, 34 Iowa, 559, and the cases following it, and that, therefore, the mortgage attaches to the building and takes precedence of the mechanic’s liens thereon, and is the fourth lien upon the mill building, as well as upon the balance of the realty. We think, however, the evidence shows the mill building to be such independent structure as may be removed. It is a frame building, and may, we think, as appears from the weight of the evidence, be removed without material detriment to the realty.

2 __. mER. chase of'legal tttie. IV. The defendant Holt is the owner of the claims set forth in the twelfth paragraph of the court’s finding of facts. One H. A. Wilson, having procured a conveyance from Elmore and wife of an undivided half of the property set forth in the petition, on the 24th day of October, 1876, conveyed it to Holt, and on tbe 27tb. day of the same month ITolt conveyed said interest to Pray. On the 17th day of October, 1876, Elmore and wife quit-claimed the property described in the petition to Pray, and on the 27tli of June, 1877, they executed to him a deed of special warranty for an undivided half thereof. It is now urged by the plaintiff, that the liens, or some of them, now held by the defendant Holt have become merged in the legal titles conveyed to Pray and Holt, and cannot be enforced. It is claimed further by the defendant, the Union Bank of Cedar Eapids, that the defendant Holt is not entitled to a prior lien upon the machinery by virtue of the chattel mortgage executed to Pray, November 24th, 1875, and by Pray assigned to Holt. It is insisted that the purchase by Pray of the real property and the conveyances to him caused a merger of the chattel mortgage on machinery with the legal title to the real estate, and that the mortgage cannot now be enforced. In Wilhelmi v. Leonard, 13 Iowa, 330 (338), it was held that when a mortgagee purchases the equity of redemption the whole estate is vested in him and the mortgage is extinguished, unless intention or interest in the mortgagee intervenes to prevent the merger. See, also, to the same effect, Wickersham v. Reeves & Miller, 1 Iowa, 413; Gibson v. Cushon, 3 Pick., 475. It was clearly not to the interest of either. Pray or Holt that their liens should become merged in the legal title. A merger of these liens in the legal title won Id postpone the claims of Pray and Ilolt to the prior mortgages upon the realty. It cannot be supposed that they intended such a result. It is urged further, in the argument on behalf of the'Union Bank of Cedar Eapids, that when Holt sold Pray an undivided half of the property he conveyed by warranty in the usual form, and cannot now be allowed to enforce these liens against his grantee. That is a matter solely between Holt and Pray, and one with which the Union Bank of Cedar Eapids has no concern.

3.-: iixcjVinery.ma V. It is further claimed that the machinery, upon beiug placed in the-mill, became a part of the realty, and that the right to enforce the chattel mortgage against it was thereby lost. The plaintiff cites Bringholff v. Munzenmaier, 20 Iowa, 513; Winslow v. Insurance Company, 4 Met., 306; Richardson v. Copeland, 6 Gray, 536, and Cross v. Marston, 6 Gray, 536.

Tbe case of Bringholff v. Munzenmaier holds that fixtures so attached to the realty by the owner as to become a part of it, between vendor and vendee, pass to the vendee free of the lien of a prior mortgage thereon of which the vendee had no notice. The case of Winslow v. The Merchant's Insurance Company holds that fixtures, and additions in the nature of fixtures, which are placed in a building by a mortgagor, after lie has mortgaged it, become part of the realty as between him and the mortgagee, and cannot be removed or otherwise disposed of by him while the mortgage is in force. In Richardson v. Copeland it is held that a steam engine set upon a granite block, and a boiler set in bricks in such manner that it cannot be removed without taking down the brick, and both used for running machinery in an adjoining shop, became a part of the realty, and a mortgage thereof as personal property, executed contemporaneously with the bill of sale from the vendor, but after the engine and boiler have been put in operation, passes no title in them as against a subsequent purchaser of the real estate, though willi notice of the mortgage. The principle upon which this case is decided is, that a mortgage of the engine and boiler as personal property, after they had been attached to and had become a part of the realty, is void. In Cross v. Marston, 17 Vt., 533, it was held simply that a case of drawers and the sash of a show case placed in the building of another and fastened in their places with nails, did not, under the circumstances of the case, become part of the realty so as to pass to a subsequent purchaser of the building. We regard all these cases as essentially different from the case at bar. No question of notice between mortgagee and vendee is involved. The chattel mortgage upon this machinery was executed before it was placed in the mill, and hence the right to mortgage it as personal projierty is clear. The evidence shows that there is but one place where tbe machinery is connected with tbe main frame in the building, and that is in tbe basement, where a box is bolted to one of the frame timbers for the shafting to run in. The machinery can be removed without material injury to the main building. The case falls more nearly within the principle of Evans v. Estes, 10 Kansas, 314, than within the doctrine of the cases cited by plaintiff. In our opinion the chattel mortgage upon the machinery in the mill is valid and may be enforced.

4. Muon uric’s ne?Sof en-1' forcing. YI. All the mechanic’s liens except that of Farnham & Lovejoy were filed prior to the taking effect of chapter 100, ^aws °*' ^ie Sixteenth General Assembly. The coi;u't erred in decreeing that the property be sold as an entirety, and that the proceeds be apportioned to the mill building and to the realty in proportion to their respective values and the liens upon each interest. See Brodt v. Rohkar, 48 Iowa, 36; Conrad & Ewinger v. Starr, 50 Iowa, 470. These liens can be enforced only in the manner provided in the Revision, which is a sale and removal of the building to satisfy the liens upon it, unless the holders of mortgages upon the real estate shall prevent the removal by buying in the liens upon the building.

The several liens are confirmed in the order of precedence named by the court, except that the mortgage to plaintiff shall be established as the fourth lien upon the real estate, subject to the liens specified on the mill and machinery. The chattel mortgage will be enforced against the machinery in the mill, the mechanic’s liens against the mill structure, and the mortgages against the whole property subject to the chattel' mortgage and the several mechanic’s liens, each lien being satisfied in the order of its priority. The cause will be remanded to the court beloiv for a decree in harmony with these views.

Reversed.