San Antonio Brewing Ass'n v. Arctic Ice MacHine Manufacturing Co. , 81 Tex. 99 ( 1891 )

September 12, 1883, appellee, the Arctic Ice Machine Manufacturing Company, entered into a contract with one J. B. Belohradsky, the original defendant below, to construct and deliver to him certain apparatus or machinery for the cooling of beer and the manufacture of ice, upon the express condition set forth in the contract of sale that the vendor should not part with the title and ownership of the same until fully paid for.

Belohradsky made default in the payment of the notes, as they matured, which he had executed to secure the payment of the balance due on the ice machine. After a correspondence extending through several months in 1884 and 1885 by the appellee with Belohradsky, urging the payment of the amount due, on May 29, 1886, the appellee instituted its suit against said Belohradsky on three notes, amounting to $6502.56, besides interest, given for the balance due on the purchase of said machinery, alleging that the same was a lien thereon under said contract, and prayed judgment accordingly. On September 11, 1886, Belohradsky made an assignment of all his property for the benefit of his creditors to R. P. Tendick, as assignee, and February 1, 1887, said assignee sold the property in question to appellant.

Belohradsky answered, alleging specially that the ice machine and attachments were purchased for and intended to be erected in a brewery plant then being constructed by him, and that the same had become a fixture, and that since the machine had been so erected he had made an assignment for the benefit of his creditors to R. P. Tendick, as assignee, and therefore had no further interest in the property. The appellant, the San Antonio Brewing Association, intervened, setting up the fact that the machine and attachments had become part of the realty, and that appellant had become the purchaser of the property and brewery plant from R. P. Tendick, the assignee of J. B. Belohradsky, and that the plaintiff had never fixed any lien thereon as provided by law which could be binding upon said property as against the defendant or any of his creditors or any purchaser; and that the intervenor had no notice, actual or constructive, of any such claim or lien, and prayed for judgment freeing the property from any lien or claim of the plaintiff. The cause was tried on April 14, 1888, and verdict and judgment rendered in favor of the appellee, the Arctic Ice Machine Manufacturing Company, against appellant J. B. Belohradsky for the sum of $6435, with a foreclosure of the lien on the machinery and attachments.

The first ground relied on for a reversal is the refusal of the court to give the special instruction requested by appellant, to the effect that if Belohradsky held possession of the machinery for two years or more, and during that time the appellee failed to record the contract and make demand and prosecute suit for the possession of the property, and appellant did purchase from Belohradsky or his assignee Tendick, the appellee had lost his lien, and appellants were entitled to recover.

The statute (article 2468, Revised Statutes) invoked in support of this position is substantially, that where any reservation or limitation is pretended to have been made of a use of property, by way of condition, reversion, etc., or otherwise in chattels, the possession whereof shall have remained in another for the space of two years, the same shall be as to the purchaser of the person remaining in possession fraudulent, etc., and the absolute property is with the possession unless the reservation or limitation is declared by instrument in writing duly acknowledged and recorded. This statute applies to the case under consideration, an executory contract of sale, by the terms of which the title remained with the seller, but the purchaser is placed in possession of the chattel, and, upon condition of payment in full, the further right to hold and own the same depends; and there is no record of the instrument in writing showing the real character of the transaction. But it does not make the reservation or condition fraudulent as between the mortgagor and mortgagee or parties to the instrument. A chattel mortgage under the Act of 1879 (article 3190b, section 1, Revised Statutes) if not registered is not void as between the parties to it. Keller v. Smalley Harris, 63 Tex. 519.

In this case it is claimed that as to the purchaser from Tendick, the assignee of Belohradsky, of the property the instrument reserving the title in appellee is fraudulent, because the possession remained in Belohradsky for more than two years without registry of the contract or demand made and prosecution of the suit. The rights of the purchaser (the appellant) could not attach before its title to the property was acquired, and this, it is not controverted, occurred on February 1, 1887, when the sale was made by the assignee. In May, 1886, about nine months prior to this sale, suit was brought by the Arctic Ice Company against Belohradsky to foreclose the lien. This, it is true, was after he had been in possession for more than two years, but as that possession, under the statute, clearly could not have been fraudulent as between the parties themselves and could not have affected injuriously the rights of the ice company, it becomes unimportant and can not be available to appellant for any purpose. No purchaser's right, then, having attached prior to the institution of the suit in May, 1886, there is no one to assert any right arising from the two years' possession, except the purchaser or mortgagee Belohradsky himself. The statute giving him no such right, appellee's lien was not lost. The assignment by Belohradsky to Tendick three months after the institution by the ice company of the suit to foreclose the lien would not defeat its rights acquired thereby. The facts do not show that this is a case where there was possession by Belohradsky or the assignee for two years or more when appellants purchased indicating that he was the owner, when there was nothing to show he was not such owner. Such was the class of cases the statute was intended to cover and prevent frauds in. On the contrary, neither of these features existed. There was no such possession, and a suit was being prosecuted by appellee to foreclose its lien, when the assignment was made and appellant bought. The charge, we think, should not have been given.

The error next assigned is the refusal of the court to instruct the jury, as requested by appellant, to the effect that the machinery — the property in question — was essential to carry on the brewery in which it was used, and was intended to be a permanent addition to the same, and for that reason appellee had no lien thereon.

It is expressly declared in the contract of sale that it is understood and agreed that the appellee shall not part with "the title and ownership" of the property until each of the payments have been fully made.

The rule settled in a number of cases upon this question raised by the assignment is that where personal property is sold and the title is reserved in the vendor, as in this case, until the payments are made and the purchaser, with the consent of the seller, attaches it to the former's real property, as between the parties its character as personal property is not changed. Harkey v. Cain, 69 Tex. 150. The same rule applies where a mortgagor in possession annexes the mortgaged chattel with the consent of the mortgagee to his land, the mortgagee's rights are not affected, and he may treat it as personal property. Id., and cases. In this case the consent of the appellee was not obtained, and with stronger reason would the principle apply.

We think there is no error in the judgment and that it should be affirmed.

Affirmed.

Adopted May 19, 1891.