DETROIT STEEL COOPERAGE CO. v. SISTERSVILLE BREWING CO. et al., 195 F. 447

BOYD, District Judge (after stating the facts as above). [1] There are two questions presented by the record which become necessary for us to determine. The first is whether the tanks referred to are fixtures; and the second, if they are held to be fixtures, does the reservation of title in the contract between the Cooperage Company and the Brewing Company as security for the purchase, money entitle the vendor to retake the tanks or to have a preference over the lien of the bondholders for the unpaid balance of the purchase price in the distribution of the proceeds of thé sale of the brewery?

Considering the first question, we are readily of the opinion that the tanks were fixtures. They were adapted to the purposes of the freehold, were essential' to the successful operation of the brewery, and were placed within the structure with the intention of making them a part of the operating machinery of the plant. The physical annexation of the tanks to the plant was complete, for they were put in place in the brewery and attached to the other machinery used in the production of malt liquors.

They were carried to the proper position in.- the building through an opening in the wall, which had been left for that purpose, and which opening was closed up with brick and mortar, and it appears that, in order to remove them from the building, it would be necessary to tear this filling away. As will be seen, the tanks were made of steel, lined with glass enamel, were about 8 feet in diameter, 12 feet 10 inches high, and had a holding capacity of about 4,000 gallons each. Their gravity was sufficient to hold them in place without fastenings.

We think that by the well-settled principles of the law of fixtures in this country these tanks became, and were, a part of the realty. Undoubtedly under the law of the state of West Virginia, as laid down by the Court of Appeals of that state in Patton v. Moore, 16 W. Va. 428, 37 Am.

Rep. 789, the tanks were fixtures, for the court says in that case: “The true rule in determining wliat are fixtures in a manufacturing establishment, where the land and buildings are owned by the manufacturer, is that where the machinery is permanent in its■ character, and essential to, the ourposes for which the building is occupied, it must be regarded as realty' and passes with the building; and whatever is essential to the purposes for which the building is used will be considered as a fixture, although the connection between them be such that it may be severed without physical or lasting injury to either,” However, we will not discuss this proposition further, nor do we deem it necessary to cite authorities in support of our view because it seems to us too clear for argument.

This question disposed of, we come to the second. The deed of trust for the security of the bonds, not only covered the real estate as it existeci at the time of the execution of the deed, but provided, as will be seen from the statement of facts, that after-acquired property was also subject to the lien.

The Cooperage Company entered into the transaction with the Brewing Company for the sale to the latter of the chip tanks, as we gather from the record, with both actual and constructive notice of tibe existence of the deed of trust, and with this knowledge Furnished the tanks, and permitted them to become a part of the freehold. The money derived from the sale of the bonds was used, as appears, in the construction and equipment of the brewery. The principle involved here is discussed at length in the case of Tippett & Wood v. Barham, decided by this court, and to be found in 180 Fed. 76, 103 C. C. A. 430.

The court said in that case: “There is a line of cases which, with more or less unanimity, holds that where a mortgage exists on real estate, and an accession is subsequently made of property agreed between vendor and the mortgagor to he treated as personalty and a reservation of title nntil paid for agreed upon between vendor and mortgagor purchaser, such accession, if it can be severed from the realty without Injury to the latter or to the value of the security for the mortgage debt as it stood before the improvement was made, will be impressed with the same character as between the vendor and mortgagee as between the vendor and mortgagor; in other words, lhat it does not become real estate, and may be removed without invading the rights of the mortgagee. * * * “Upon the other hand, there are many cases (some of which will hereinafter be referred to) which hold that personal property incorporated into or affixed to real estate in such maimer that it would be subject to the lien of an existing mortgage thereon as between the mortgagor and mortgagee will be so subject to the lion of the mortgage, notwithstanding the existence of an agreement between the vendor and the mortgagor that it shall retain its character as personal property, unless the mortgagee be also a party to such agreement.

This is what is generally known as the ‘Massachusetts rule,’ and it has been affirmed by many other courts of last resort, and particularly by the Supreme Court of the United States iu several cases hereinafter separately referred to. “We think this latter doctrine announces the correct principle, especially where the application is, as in the present case, confined to a case wherein the mortgage (containing an after-acquired property clause) has been drawn for the purpose of embracing the entire working plant of the corporation, including its franchises, as in such «sises it is usually true that the mortgage is giv«m at a time when the real estate is but very insufficient security for the debt, and the subsequent accessions are very generally made by the expenditure of the funds derived by reason of the negotiation of the bonds secured by such a mortgage, and the mortgage is made and received in contemplation of such accessions.

In such cases the equities of the beneficiaries under the mortgage should and must attach to such accessions as, under the description contained in the mortgage, are included within it, unless some higher equity or a legal‘title intervenes.” In view of our conclusion upon the first question, we think this case decisive of the second, and the decree of the Circuit Court is therefore affirmed. Affirmed.