Borland v. Hahn 53 N.Y. St. Rptr. 887

William C. Borland, App’lt, v. John Hahn, Impl’d, Resp’t.

(Supreme Court, General Term, Fifth Department,

Filed June 23, 1893.)

Mortgage—Machinery subsequently placed on premises.

One W. was the owner of three-fourths of certain premises, and with one M. leased the remainder. A partnership was formed between W. and M., the former furnishing the capital, which purchased new machinery for the building, to which it was attached by cleats. Subsequently W. made a mortgage of his interest in the premises to plaintiff’s assignor, which also stated that it was intended to include his right, title and interest in and to the mill machinery, etc., “considering the same for the purposes of this conveyance as part and parcel of the real estate hereby conveyed.” Feld, that this provision of the mortgage had no effect upon the machinery, but it still continued to be chattel, and belonged to the firm, and that plaintiff under the mortgage had no lien thereon, the mortgage not having been filed as a chattel mortgage.

Appeal from judgment confirming the report of a referee on foreclosure, and excepting from a sale of the premises of certain machinery described in the report.

Action to foreclose a mortgage given by the defendant Willey and wife to the Niagara County National Bank, and by said bank assigned to plaintiff, covering the undivided three-fourth part of certain lands situated in the city of Lockport.

The following is the opinion of the referee:

A. K. Potter, Referee.—The only question in controversy in this action is the right of defendant Hahn in certain of the mill machinery located in the mill which stands upon the mortgaged premises. The defendant Hahn obtained judgment against defendants Willey and Moore and levied an execution upon certain of the mill machinery within said mill prior to the commencement of this action. The question to be determined is, whether the levy of said execution was effectual for the purpose of securing the proceeds of such machinery to be applied upon said judgment. This involves the question whether said machinery is to be deemed real estate and covered by the mortgage now sought to be foreclosed.

On the 11th day of August, 1879, the defendant John H. Willey and Anna Maria B. Moore, by an instrument in writing, became lessees of one undivided fourth part of the mortgaged premises, under a lease executed to them by Frank L. Allen, who was then the owner of said undivided fourth part. By the terms of said lease it was provided that,

“All additions and improvements made to said mill on the premises hereby leased shall be paid by the said parties of the second part,” being said tenants. At about the same time said Willey and Moore entered into a partnership agreement whereby, as co-partners, they entered upon the business of manufacturing and vending flour and other products of corn and grain, and in the prosecution of said business entered upon the mortgaged premises and continued in such .occupation and use for ten years, pursuant to the provisions of said lease. The machinery in said mill, when they so entered, was only adapted to the making of flour by the old process of stone grinding. It became necessary very shortly *888after, in order to successfully conduct the said business, to change the machinery and put in that which should manufacture flour by an entirely different process, known commonly as the roller process.

Willey and Moore became equal partners in the business, it being agreed that Willey should substantially furnish the capital and that the husband of Mrs. Moore should furnish his experience to the business The firm of Willey & Moore contracted for the putting in of the new machinery and paid for the same, part thereof being paid by the notes of the firm. The money actually employed was that which the defendant Willey contributed to the business pursuant to the partnership agreement. The machinery was for the most part fastened to the realty by cleats and screws, and in some instances by braces, but no part of it was built into the building in any such way that the removal thereof would interfere with the structure to any considerable extent. This machinery was put in from time to time and was thereafter used by them so long as the firm continued its business, and still remains upon the premises.

Upon the 7th day of February, 1888, the defendant John H. Willey was the owner of three undivided fourths of the real estate as made up of the land and the building thereon. On the-last named day said Willey executed and delivered, with his wife, to the Niagara County National Bank, a mortgage to secure the payment of forty-four hundred and ninety-six dollars and eighteen cents ($4496.18) as therein provided, which mortgage by its terms was made to cover “ the equal undivided three-fourths parts of the hereinafter-described lands- and premises,” and then followed a description of the lands. The mortgage also contained this provision “ The first party hereto also intends to and does hereby include and convey with the above land and mill property, all his right, title and interest in and to ail mill machinery, fixtures, tools, furniture and other mill appliances and apparatus now in or about said mill, considering the same for the purposes of this conveyance as part and parcel of the real estate hereby conveyed.”

On the 16th day of March, 1892, this mortgage was duly assigned, with the bond secured thereby, to this plaintiff.

On the 18th day of March, 1892, the defendant Hahn recovered a judgment in this court against Willey and Moore, in their individual names, for ten hundred ninety-three dollars and sixty-seven cents, ($1093.67) damages and costs, and thereupon issued an execution to the sheriff of the county in which said property was situated, and such execution was levied by the sheriff upon, said mill machinery on the 18th day of March, 1892.

This mortgage was entered for record in the office of the clerk of Niagara county, where the property was situated, on the 13th day of February, 1888, and was there duly recorded. It was not-filed as a chattel mortgage.

Upon the foregoing facts the plaintiff contends that his mortgage is a lien upon the aforesaid mill machinery and has priority over defendant’s judgment His contention is, that the defendabt, *889Willey in fact paid for the machinery, and that by express provision in the mortgage he has made it, for all purposes of this case, real estate, and, by express provisions, subject to the conditions of the mortgage.

I am compelled, however, to find against this claim. The money which paid for the machinery was in fact contributed by the defendant Willey, but it was contributed to the firm pursuant to the partnership agreement, and the testimony is undisputed that the firm contracted for the machinery and paid for it, and it must therefore be treated, for the purpose of this case, as having been, at the time it was put in, the property of Willey & Moore as partnership assets. Being firm property and put in and used for firm purposes it was chattel for several reasons.

First. Because they were tenants and the ordinary rule governing machinery put in by tenants would apply. Holmes v. Tremper, 20 Johns., 29; King v. Whitcomb, 7 Bur., 263.

Second. For all partnership purposes even lands owned and used for the business of the firm are chattel. Fairchild v. Fair-child, 64 M. Y., 471; Greenwood v. Marvin, 111 id., 423; 19 St. Rep., 612; Menagh v. Whitwell, 52 N. Y., 146; Tarbell v. West, 86 id., 280.

The question still remains as to the effect of the mortgage upon this machinery. Was its nature changed by the execution and delivery of the mortgage with the provisions therein above recited ?

It is well established by authority in this state that the means, by which machinery is fastened to real estate has but little to do with its becoming a fixture. The intent of the party who attaches personal to real estate is of more importance in determining whether by such attachment the personal property has become real. McRea v. Central National Banh, 66 1ST. Y., 489 ; Potter v. Cromwell, 40 id., 296.

Ho act of the parties has been proved which would change the property from personal to real unless it is the giving of this mortgage.

This brings us to the question how far the intent of defendant. Willey, together with the express provision of the mortgage executed by him, by which he sought to make the mill machinery subject to the mortgage as real estate, have become effectual for that purpose. At this time he was the owner of three-fourths of the realty and the owner of one-half interest in the mill machinery. As owner of the realty he was tenant in common with Borland, who had at that time become the owner of the other undivided fourth thereof. As a member of the firm of Willey & Moore, he owned one-half interest in the mill machinery, and Mrs. Moore the other one-half, subject to the rights of creditors. The firm was then occupying the premises under the lease and using this machinery. Most undoubtedly his intent and stipulation or agreement could affect no more than his individual interest in the machinery. This was all he attempted to do by the terms used in the mortgage. It was only “ all his right, title and interest ” he *890sought to mortgage, and he signed only his individual name. This was an undivided interest and was subject to the rights of creditors, if any.' It is difficult to see how any act or intent of his could change these partnership chattels into real estate. As has been suggested, it would be an undivided interest in each piece of machinery that could be affected by his act or intent so long as the property remained undivided. If this could be done we should have the anomaly of a given machine being, say one-half real estate and one-half chattel. This would not only seem to be out of the question as a legal proposition, but it would lead to serious difficulty if it was sought to enforce the lien of the mortgage upon the undivided half of the mill machinery. The ordinary process of foreclosure provides no way by which the value of the undivided half belonging to other parties could be ascertained and realized. To sell it separately would imply its severance from the realty by which it would become personal, and if sold with the realty this action affords no way of determining its value.

I think it is plain that the provisions of the mortgage had no effect upon the mill machinery, but that it still continued to be chattel and belonged to the firm of Willey & Moore.

Being assets of the firm it was personal property, and to make the mortgage valid against defendant Hahn, it should have been filed as a chattel mortgage.

It is sufficient to say that plaintiff makes no claim under this mortgage if it be found that the property was chattel, and the mortgage in respect to it only a chattel mortgage, because it is conceded that it was not duly filed.

My conclusion, therefore, is, that the plaintiff by his mortgage has no lien upon the mill machinery which was levied upon by the sheriff by virtue of the execution above named, being the mill machinery put upon said premises by, and belonging to, the firm of Willey & Moore, and that judgment should be had accordingly.

Joshua Gaskill (Richard Crowley, of counsel), for app’lt; Millar <£ Moyer, for resp’l