East Ohio Building & Loan Co. v. Holland Furnace Co.

This cause was submitted to the court below upon an agreed statement of facts, and is submitted to this court upon the same agreed statement of facts, which is as follows:

1. Plaintiff and defendant are corporations, as in the petition alleged.

2. James O. McMillen and Ruth E. McMillen, being the owners of the premises described in the petition, did on the twenty-ninth day of November, 1927, make, execute, and deliver to the plaintiff their promissory note for four thousand dollars, and at the same time executed and delivered to plaintiff their mortgage to secure the repayment of said note, principal and interest, copies of which note and mortgage, marked respectively Exhibit "A" and Exhibit "B", are hereto attached, which mortgage was duly filed for record in the recorder's office of Tuscarawas county on the ninth day of December, 1927, and recorded in Volume 131, page 477, of the Record of Mortgages of said county.

3. The officers of plaintiff will testify that at the time of the execution, delivery and record of said mortgage the said McMillens were making extensive repairs and improvements on the dwelling house appurtenant to the said premises, such repairs and improvements constituting substantially a rebuilding of said house, which house constituted and constitutes a very large part of the value of said real estate, the real estate being suburban to the city of Uhrichsville and being used almost exclusively for residence purposes in connection with said dwelling; and which improvements included a furnace and heating plant, with the necessary fixtures, flues, ducts and appliances for the heating of said dwelling, which fixtures, flues, ducts and appliances were constructed in said house at the time of making of said improvements, and which furnace was installed also in connection with the making of the said improvements, and said loan was made by plaintiff for the purpose of making such repairs and improvements, including the furnace, the completion of the installation of the furnace being not later than May 1, 1928; but defendant claims that the same is irrelevant and incompetent, and disclaims any knowledge thereof.

4. Said furnace, fixtures, flues, ducts and appliances constituted the only method provided for the heating of said dwelling.

5. At the time of the filing of this suit none of the principal of said indebtedness had been paid, and certain unpaid interest had accrued, so that at the time of the bringing of this suit, and at the present time, the indebtedness on the said premises was and is greater than the said original indebtedness of four thousand dollars, and on the seventeenth day of February, 1931, amounted to the sum of $4,446.48.

6. The officers of plaintiff will testify that on or before about the seventeenth day of February, 1931, said McMillens, to prevent foreclosure of said mortgage, made, executed, and delivered to plaintiff a deed for said premises, so that plaintiff became, remained, was and now is the owner of the said premises, and except for said conveyance of the said premises the said indebtedness and the said mortgage remain wholly unpaid and unsatisfied, and the reasonable market value of said premises was at the time of said conveyance and is now much less than the said amount of the said indebtedness, but defendant claims that the same is irrelevant and incompetent, and disclaims any knowledge thereof.

7. On the fifteenth day of February, 1928, the defendant and the said James O. McMillen and Ruth E. McMillen entered into a contract in writing for the installation of a No. 50 Holland Warm Air Heater in said dwelling, a copy of which contract is hereto attached, marked Exhibit "C".

8. Pursuant to said contract and as therein specified, the defendant installed said Holland Warm Air Heater in said dwelling with the necessary connections to heat said dwelling. Said furnace was of iron and galvanized sheeting construction, and was set up in the basement of said dwelling. Because of its size and weight it was brought to said premises piecemeal, set up in the basement as aforesaid, and was dismantled at the time of its subsequent removal. It was not fastened to the floor in the basement, but was held in place by its own weight. Registers, boxing, and ducts were first installed in said dwelling by the defendant, after which the furnace was set up and connected to said boxing and ducts in the basement, with hot and cold air pipes of galvanized sheeting covered with asbestos. Said connections were made with screws and collars and could be detached. The smoke and gases in said furnace were conducted therefrom to a brick chimney in said dwelling by galvanized piping similarly connected. Said pipes and smoke flue in the basement were otherwise free.

9. The said McMillens failed to make certain payments on the purchase price of said furnace and the installation thereof as in defendant's answer alleged, but did pay thereon and therefor the sum of $112.94, leaving a balance under said contract of $310.31, which latter amount said McMillens wholly refused and neglected to pay.

10. Plaintiff had no actual notice whatever of any contract between defendant and the said McMillens regarding said furnace and the installation of the same.

11. On the twenty-ninth day of May, 1930, after said default of the McMillens in payments to defendant, defendant brought an action in the Court of Common Pleas of Tuscarawas county, Ohio, against said McMillens, being cause numbered 20,089, to the record of which cause reference is hereby made, and wherein this defendant recovered a judgment against said McMillens for possession of said furnace, as to which suit and the orders of the court made thereunder this plaintiff had no notice or information whatever until long after the furnace had been in fact removed.

12. On or about the fourth day of June, 1930, in pursuance of an order of possession made in said cause numbered 20,089, at the instance of defendant herein, the sheriff of Tuscarawas county disconnected, dismantled, and removed said furnace and the piping in the basement and delivered the same to this defendant, but did not remove the registers, boxing, or ducts in the building.

13. Plaintiff had no knowledge whatever of the act of removing said furnace until long after the removal of the same had been completed.

14. The principal question to be determined in this cause is as to whether under the circumstances the said furnace was real estate or personal property.

From a careful examination of the agreed statement of facts submitted in this case, we have to say that the one and only question involved herein is whether or not at the time stipulated and complained of the furnace in question was real estate or personal property.

Exhaustive briefs have been furnished the court by counsel, which we believe are determinative of the question involved, and this question has been so well and frequently decided by the courts of Ohio, and of other jurisdictions, that we need not grope in the dark for a proper decision.

We are of the opinion, first, that when an article is so annexed to a building that it can be detached without material damage to the building, the intention of the annexor ordinarily determines whether the article becomes a fixture.

The furnace in question in this case was constructed of iron and galvanized sheeting, and was set up in the basement of the dwelling. Because of its size and weight it was brought to said premises piecemeal, set up in the basement, as aforesaid, and dismantled piecemeal, and at the time of its removal it was not fastened to the floor in the basement but was held in place by its own weight.

Registers, boxing and ducts were first installed in said dwelling, after which the furnace was set up and connected to said boxes and ducts in the basement with hot and cold air pipes and galvanized sheeting covered with asbestos. Said connections were made with screws and collars and could be detached.

The furnace in question in this case was connected in such a manner that it could be detached without damage to the building. The intention of the parties when it was installed becomes the controlling factor as to whether or not it was a fixture. That intention, as stated in the sales contract, was that the furnace should remain personal property until paid for, with the right of removal in case of default in payments.

The great weight of modern authorities upholds such a contract as against a prior secured creditor; particularly when he advanced nothing on the faith of the annexation and the chattel annexed may be detached without impairing the creditor's original security.

At the time the plaintiff in this action took its mortgage upon the real estate the furnace was not in the house, and plaintiff never at any time had any mortgage or other lien upon the furnace.

Under the agreed statement of facts the evidence affords no reason, legal or equitable, why the property of the defendant should be awarded the plaintiff.

We believe it to be a well-settled principle of law that personal property annexed to real still retains its character, if the parties so intend in annexing it, unless it has become so absorbed or merged into the realty that its identity as personalty is lost: or it cannot be removed without practically destroying it.

In the sale of personal property that is to be affixed to realty the contracting parties at the time of the sale have the power, as between themselves, at least, to affix the status of such property and to say whether when affixed to the realty it shall remain personal property or become a part of such realty.

When the ownership of land is in one person and the ownership of the thing affixed to it in another, and in its nature is capable of severance without injury to the former, the latter cannot in contemplation of law become a part of the former, but must necessarily remain distinct property to be used and dealt with as personal estate only; and in determining whether such property remains personal property or is a fixture, the intention of the party making annexation is held by some to be the controlling consideration, and generally it is held to be the chief test. 11 Ruling Case Law, 1062.

A very well considered Michigan case, Schellenberg v. DetroitHeating Lighting Co., 130 Mich. 439, 90 N.W. 47, 57 L.R.A., 632, 97 Am. St. Rep., 489, holds that "heating apparatus bought under contract reserving title in the seller, and permanently placed in the building by himself and his wife, * * * does not become a fixture so as to prevent its removal for nonpayment of the purchase money, since there is no unity of title in it and the real estate."

In Section 133-A of the 5th Edition of Jones on Chattel Mortgages, it is stated:

"One already holding a mortgage of the realty has no equitable claim to chattels subsequently annexed to it. He has parted with nothing on the faith of such chattels. Therefore the title of a conditional vendor of such chattels, or of a mortgagee of them before or at the time they were attached to the realty, is just as good against the mortgagee of the realty as it is against the mortgagor."

The rule as to prior mortgages, that annexations made to the realty, to which the mortgagor and owner never acquires title and which may be removed without material injury to the realty, do not become part of the realty, and may be removed by the one owning them, is well settled. 26 Corpus Juris, 684 et seq.

The same rule applies as to property annexed under chattel mortgage or a conditional sales contract. Northwestern Mutl. LifeIns. Co. v. George, 77 Minn. 319, 79 N.W. 1028.

As to whether the holder of a chattel mortgage on an article annexed to the freehold is entitled to such article as against the owner of the real estate, or the holder of a mortgage or other liens thereof, has been answered in favor of the holder of the chattel mortgage by many courts. We cite a few:

Edwards Bradford Lumber Co. v. Rank, 57 Neb. 323,77 N.W. 765, 73 Am. St. Rep., 514; Ames v. Trenton Brewing Co.,56 N.J. Eq. 309, 38 A. 858; Sisson v. Hibbard, 75 N.Y. 542; Manwaring v. Jenison, 61 Mich. 117, 27 N.W. 899; Sword v. Low, 122 Ill. 487,

13 N.E. 826; Hewitt v. General Electric Co., 164 Ill. 420,45 N.E. 725; Belvin v. Raleigh Paper Co., 123 N.C. 138,31 S.E. 655.

If the contention of the plaintiff in error in this case is to be upheld, then the rights of the mortgagee under the chattel mortgage or conditional sales contract will amount to absolutely nothing.

In a large percentage of the homes of this state and country, if not in a majority, chattels are purchased under such conditional sales contract as is involved in this case. The seller puts the purchaser in possession; the purchaser desires more conveniences; the installation of a furnace is desired. This he is enabled to do by purchasing under a contract such as the one in this case. Otherwise such improvements oft times could not be made. A furnace company could not be expected to extend such credit if plaintiff in error's contentions are upheld.

Reckless installment buying should not be encouraged, but the making of homes comfortable and convenient by the installation of modern conveniences should be looked upon with favor, and the vendor who makes such a convenience possible should be protected and not made to suffer loss.

It is a matter of common knowledge, and courts will take judicial notice of the fact, that the proper workmanlike installation of registers, boxing, hot and cold air pipes, in a house, does not in any manner injure it but is a benefit and a permanent enhancement of the value.

No claim is made in this case of faulty or unworkmanlike installation, no damage to the buildings is claimed; defendant in error made no claim for the parts installed in the floor or walls of the building; defendant in error removed only the furnace and the pipes in the basement as provided for by the contract.

The plaintiff in error took its mortgage before the furnace was installed; it paid out nothing in its acquisition; no unlawful act was done by defendant in error; it was given the right under the terms of the contract to remove the furnace in default of payments.

Plaintiff in error suffered no loss, detriment or injury either to property or rights. It is an attempt to recover damages for the loss of something which cost it nothing and to which it never had any right, title or interest, no loss or damages to the building being alleged or claimed.

Under the pleadings and agreed statement of facts in this case, and the great weight of authorities, the judgment of the trial court should be and the same is hereby affirmed.

Judgment affirmed.

SHERICK, P.J., and MONTGOMERY, J., concur.