National Bank of the Republic v. Wells-Jackson Corp. , 358 Ill. 356 ( 1934 )

I find it impossible to concur in the view of the majority of the court and think it necessary to briefly state my reasons.

The trial court in this case by its decree found that the sprinkler system was an integral part of the building, was required by the plans and specifications, and also necessary by ordinance of the city of Chicago. That court also found that the contractors who installed the sprinkler system had notice of the provisions of the ninety-nine year lease and of the plans and specifications laid down by the owner of the property. It was also found as a fact that there had been no demand for, and therefore no conversion of, the sprinkler system; also, that McKinlock had no notice or knowledge of the attempt to reserve title, and further, that such reservation of title or secret lien amounted to a fraud on McKinlock.

The ninety-nine year lease provided that as security for the rent, and in consideration of being given permission to destroy the existing building on the premises, the lessee should build the garage here in question at a cost of not less than $600,000, which building should be in accordance with plans and specifications approved by the parties. It further appears that these plans and specifications did include the sprinkler system in question, were submitted to the lessor and approved by him. Phillips, of the Phillips Company, admitted in his testimony that he knew McKinlock had a bond protecting him against mechanics' liens and guaranteeing completion of the building in accordance with the specifications and plans.

My disagreements with the result arrived at in this case do not arise from attaching any mystic significance to bolts and screws but solely from a consideration of the relationship of the parties. I can see no objection to allowing the intention of the contracting parties to control the question of whether or not a movable article becomes a fixture so long as the rights of others are not involved. On the other hand, when the rights of others are involved, I think we must consider not only the method of attachment of the movable article to the real estate but also its character, usefulness and purpose. In a transaction such as this, where there are three parties, the intention of two of them should not be allowed to control to the detriment or damage of the third party; and this is especially true where that intention is secret, and actually does, as in this case, or may if put into general use, result in fraud.

In most, if not all, of the cases relied upon in the majority opinion the holding is based on two principles: (1) That no hardship resulted to the owner of the fee; and (2) that the contract between the parties showed on its face that the owner of the fee in some way acquiesced. It is quite obvious that when a mortgagee takes property as security he is presumed to be satisfied with the security as taken, and that there is no particular hardship in allowing the withdrawal of subsequently attached movables if that be in accordance with the intention of the second and third parties. The same is true as to those cases which are cited involving the annexation of chattels subsequent to the execution of an ordinary lease or an installment sale contract.

If the sprinkler system here in question had merely been added to the building on the premises when McKinlock made his lease, as a pure gratuity, I would have no great difficulty in concurring with the majority. This, however, is not the fact. The situation here is, that McKinlock consented to the tearing down of a building on the premises when he leased it, upon consideration that in place of it, and as security for his rent, the lessee would erect a new building according to certain specifications, including a sprinkler system. This, to my mind, completely changes the relationship of the parties and places them in an entirely different one. In my opinion the parties to this litigation stand in the relation to each other of owner, general contractor and sub-contractor. McKinlock is the owner of the fee, the Wells-Jackson Corporation by the provisions of the lease becomes a general contractor to erect the building, and the Phillips Company becomes a sub-contractor for the sprinkler system. For the sub-contractor and the general contractor to attempt to reserve a secret lien of any kind, contrary to the plain provisions of the Mechanics' Lien law, is, in my opinion, fraudulent, and was so found by the trial and Appellate Courts. The record discloses that the owner required waivers of a mechanic's lien and took a personal bond protecting him against any such liability. This was all he could do and certainly all he was required to do. It is my opinion that if we adopt any other view of the situation we are laying ourselves open to serious possibilities.

As an illustration, if we hold that a sprinkler system under these circumstances remains personal property under a secret lien and fail to attach any "mystic significance to bolts and screws," it is hard to see any point at which the line may be drawn. If a sprinkler contractor can retain a secret lien merely because his system can be readily removed by taking out a few bolts and screws, there is no logical reason why the same rule should not apply to other sub-contractors. The marble contractor might come in and by the removal of a few bolts and screws take out all the wainscoting, all the stair treads and all of the partitions and wash-rooms. The plumber might come in and remove the wash-stands, the bath tubs, the toilets and all exposed pipes. The electrical contractor might remove all electrical fixtures and pull out all such wires as were enclosed in conduits. The elevator contractor might remove the cages from the shafts, the dynamos from their foundations, the cables, and all removable control equipment. The heating contractor might remove the radiators, the boilers, the vacuum pumps, and whatsoever else might be detached by the removal of bolts and screws. In this way the various sub-contractors might completely strip a building of everything but its bare walls, and all of this might happen through secret liens, disregarding the Mechanics' Lien laws, and thereby leave an owner who had contracted for the improvement of his property entirely unprotected.

Although it is lawful for an owner to contract that an improvement shall be completed free from liens and that no mechanics' liens shall attach, and although it has been held that such an agreement is binding not only upon the contractor but upon his sub-contractors, the necessary effect of this opinion will be to leave the way open for the imposition of such liens secretly and over an indefinite period of time far beyond the limits for making claim imposed by Mechanics' Lien laws for the protection of an owner. It is conceivable that many contractors would prefer this secret form of lien if it is validated by this court. It might even be conceived that a heating contractor would prefer a secret lien on the boilers to any security given him by the Mechanics' Lien laws. If he could come in and replevin the boilers in the middle of a cold winter in case of failure to pay his bill, it is apparent he would have a much more powerful remedy than by a mechanic's lien suit. It is not necessary to multiply such illustrations, because the point is obvious.

It is also to be noted that the trial and Appellate Courts found as a matter of fact that there had been no demand made for this property, and therefore no conversion of it if it is held to be personal in its nature.

I think this opinion overlooks the entire line of authorities applicable to the relation of owner, contractor and subcontractor. It would unnecessarily extend this dissent to cite those cases, but one of them in point isAllis-Chalmers Manf. Co. v. City of Atlantic, 164 Iowa, 8, Ann. Cas. 1916-D, p. 910, 144 N.W. 346.

DEYOUNG and FARTHING, JJ., also dissenting.