FIRST NAT. BK. OF MT. CARMEL v. Reichneder
FIRST NAT. BK. OF MT. CARMEL v. Reichneder
Dissenting Opinion
Dissenting Opinion by
Does the single word “appurtenances” in a mortgage of real estate include not only a brewery located thereon, but also more particularly the machinery necessary for the operation, of .the. brewery.? . This is the
On December 26, 1947, George F. Reichneder borrowed $30,000 from the First National Bank of Mt. Carmel, Pennsylvania, and tendered for security a mortgage on a certain piece of land described by metes and bounds with the accompanying phraseology: “Together with all and singular the hereditaments and appurtenances whatsoever unto the hereby granted premises belonging and in any wise appertaining, and the reversion and remainder, rents and issues, and profits thereto.”
Three years later Reichneder conveyed the property to Joseph R. Aimetti and on the same day, by bill of sale, sold separately to him the machinery, equipment and other chattels on the mortgaged premises.
Aimetti, who now became the terre-tenant, borrowed, on July 20, 1950, $6,000 from the Berwick National Bank and $25,300 from Dale C. Andres, giving them separate chattel mortgages on the brewery, in security for the loans.''
On April 9,1951, the First National Bank of Mount Carmel entered a judgment on the mortgage bond executed by Reichneder and issued a fieri facias thereon. The sheriff of Northumberland County levied on and sold at public sale the real estate and the machinery, equipment and other chattels, making up the brewery. Andres who had in the meantime become also the owner of the chattel mortgage held by the Berwick National Bank, objected to the sale of the brewery and when his objections were ignored and the sheriff’s sale consummated, filed a' petition for a rule to show cause why the sheriff’s sale: should not be set aside. After hearing on the petition and the answer, which was filed in behalf of the First National Bank of Mount Carmel, the lower court discharged the rule.
The learned court below called the Reiehneder an industrial mortgage but the record does not support such a designation. The court also excluded the relevancy of the Chattel Mortgage Act of June 1, 1945, P. L. 1358, 21 PS 940, by saying: “While the Act may make some change in the mortgaging of chattels where the chattel mortgage is placed on machinery and equipment of an industrial plant in cases where there is no plant mortgage, nevertheless, where a real estate mortgage is already on an industrial plant, as a going concern, none of the ingredients of the plant necessary to make it a going industrial concern, may be mortgaged as a chattel.” (Italics supplied).
But this language presupposes what is not in the case at all, namely, that the Reiehneder mortgage is a plant mortgage. If a real estate mortgage is to cover everything on the land, the efficiency of the Chattel Mortgage Act is drastically reduced because it would then exclude from its provisions an undetermined per
The majority of this Court approves the fallacious reasoning of the court below and by so doing, practically makes every mortgage of real estate an industrial mortgage, so long as it has a business upon it, no matter of what character. Thus, a peanut roaster modestly whistling its fragrant wares on an otherwise bare tract of land converts that land into industrial property and subjects everything else coming onto the land to the designation of industrial equipment.
The Majority Opinion quotes confidently from the classic opinion written by the celebrated Chief Justice Gibson in Voorhis v. Freeman, 2 W. & S. 116, but, unfortunately for the Majority Opinion, the Voorhis case is entirely different from the one at bar. The. mortgage in the Voorhis case specifically mentioned: “A lot or piece of ground with one iron rolling mill establishment situate thereon, with the buildings/apparatus, steam engine, boilers, bellows, etc., attached to the said establishment.” (Italics supplied)
The mortgage in the case before us makes, we repeat, no mention at all of a brewery, or even a building.
The Majority Opinion also quotes from Commonwealth Trust Company of Pittsburgh v. Harkins, 312 Pa. 402, but that ease is likewise clearly distinguishable, since the mortgage there involved contained the clause: “Together with all. and singular the buildings, improvements . . . hereditaments, and: appurtenances whatsoever thereunto', belonging.” . “Appurtenances” there obviously referred'to the'buildings and not the land alone. ' This was emphasized by this Court: “The mortgage, itself by its very, terms'.shows that it bound more than, "buildings and. land. - After 'describing the
The mortgage in the case of Roos et al. v. Fairy Silk Mills, 334 Pa. 305, also cited by the Majority Opinion with approval, contained this description: “ ‘. . . all that certain two-story factory building and lot or lots of ground upon which the same is erected . . . Together with all and singular the buildings, rights, liberties, privileges, hereditaments and appurtenances to the same belonging, or in anywise appertaining, and the reversions, remainders, rents, issues and proñts thereof’.” In that case the Supreme Court said: “The words of the descriptive clause in the mortgage before us convey ‘all that two-story factory building and lot.’ This of itself gives notice of an ‘industrial mortgage.’ ”
Practically all the cases mentioned by the Majority Opinion are contradistinguished from the case at bar where the word “appurtenances” cannot possibly refer to any industrial establishment. The lower court goes so far as to say: “While there is no mention in the mortgage itself that the said mortgage is placed upon an industrial plant and while there is no mention of the machinery and equipment as such, nevertheless we conclude that the mortgage in this case is an industrial mortgage, the ordinary appurtenance clause of the said mortgage being sufficient to cover the machinery and equipment and supplies necessary to carry on the brewery in this case, as a going concern.” That this overreaches itself is demonstrated by the fact that within the word “appurtenances” the court below, as
The Majority Opinion excludes the office furniture and the trucks from the operation of the mortgage, but does not exclude the bottles, kegs, soakers and crowners. The majority say that the trucks should be excluded because they travel outside the mortgaged premises, but so also do the bottles and the kegs. Once the principle of industrial mortgage is established in the sense intended by the majority, everything on the premises must be included. Who is to draw the line between the personalty that is mortgaged and the personalty that is not? If bottles are needed to contain the beer, and thus form an integral part of the manufacture of the beer, the trucks are equally needed to distribute the beer because without distribution the beer factory is of no consequence whatsoever. This arbitrary division between beer kegs and beer trucks is bound to cause much perplexity in future disputes of this kind. All of it unnecessary. The requirement that a mortgage, (in order for it to be regarded an industrial mortgage) must make some mention of the industry upon it, is not an unreasonable requirement.
Where real estate is involved the world has the right to rely on the documentary record which here in no way hinted, much less clearly revealed, that the real estate-mortgage covered a brewery with all its machinery, bottles and kegs.
Permitting parol evidence as to the intent of the original parties to a mortgage may radically alter a mortgage whose language is clear and thus impart
Here there was no question of culpable deception or undue influence. The mortgage in question was prepared by counsel for the mortgagee. If the parties intended to include machinery, equipment and other personal property within the scope of the mortgagee’s security, it would have been a simple matter to so indicate. If it was the intention to make of this mortgage an industrial mortgage the most fundamental prudence would have dictated the inclusion, after description of the real estate, of some such phrase as “having erected thereon a brewery”. In that event it would not be necessary to place “appurtenances” on a Procrustean bed in order to stretch it to cover the meaning advanced by the appellee, and adopted by this Court.
The court below heard considerable testimony as to the circumstances surrounding the execution of the real estate mortgage and the chattel mortgages. The differences and contradictions as to what was really said were as marked as the different views expressed
If the principle enunciated in the majority opinion becomes law, and it will be law unless modified by statute or other decisions of this Court, this will mean that no title searcher can be certain of the nature of a mortgage unless he physically inspects the land involved. And, even after the inspection, he will still not be certain, because the mortgagor and mortgagee may have had an unrecorded oral agreement, which agreement in itself will be subject to all the interpretations, conclusions and nuances of meaning attendant upon rival appraisals of contested questions of fact. And all this is an invitation to uncertainty, costly litigation and disorganization in the world of real estate supposedly mapped out precisely with the latitude of reason and the longitude of pragmatic thought.
Opinion of the Court
Opinion by
The question is whether the principle which generally governs the coverage of an industrial plant mortgage applies where the mortgaged property is described
George F. Reichneder, in December, 1947, purchased a brewery property from Mount Carmel Brewery, Inc., and on the same day executed and delivered to the First National Bank of Mount Carmel a mortgage securing his bond in the principal sum of $30,-000, the mortgaged property being described therein as “All the surface of all that certain piece or parcel of land, situate in the Township of Mount Carmel, County of Northumberland and State of Pennsylvania, bounded and described as follows, to wit: [here followed a description of the land by metes and bounds] . . . Together with all and singular the hereditaments and appurtenances whatsoever unto the hereby granted premises belonging or in anywise appertaining, . . .”. On these premises were a one-story brick bottling shop and a four-story brick brewery building.
In June, 1950 Reichneder deeded the property to Joseph R. Aimetti, subject to this mortgage. A month later Aimetti borrowed $6000 from the Berwick National Bank and delivered to it a chattel mortgage in that sum covering the machinery, equipment and chattels contained in and about the brewery; this chattel mortgage was subsequently assigned by Berwick National Bank to Dale C. Andres. In March, 1951 Aimetti executed and delivered to Andres, as security for the repayment of money borrowed from him, a chattel mortgage in the sum of $25,300 encumbering the same machinery, equipment and chattels as were covered by the chattel mortgage to Berwick National Bank. The real estate mortgage to the First National Bank of Mount Carmel and the two chattel mortgages were all duly recorded.
In April, 1951, the First National Bank of Mount Carmel caused a judgment to be entered in the Court
The integrated industrial plant doctrine was apparently first proclaimed in Pennsylvania in Voorhis v. Freeman, 2 W. & S. 116, where Chief Justice Gibson said (pp. 118, 119) : “. . . nothing but a passive regard for old notions could have led them [the courts] to treat machinery as personal property when it was palpably an integrant part of a manufactory or a mill, merely because it might be unscrewed or unstrapped, taken to pieces, and removed without injury to the building. . . . Whether fast or loose ... all the machinery of a manufactory which is necessary to constitute it, and without which it would not be a manufactory at all, must pass for a part of the freehold.” The principle thus enunciated has been followed, in various applications, by a multitude of subsequent cases, among which may be noted Christian v. Dripps, 28 Pa. 271, where it was said (pp. 278, 279) : “. . . the question is not whether these lathes were bolted and strapped to
Thus it will be seen that by overwhelming authority over the course of more than a century the principle that all the essential parts of an industrial plant are to be regarded as real estate, — that the machinery and equipment indispensable to the functioning of such a plant are deemed fixtures passing to a mortgagee of the realty even though not specifically mentioned in the descriptive clause of the mortgage, — is firmly established in the law of this Commonwealth.
Appellant concedes that if, as in the case of Commonwealth Trust Company of Pittsburgh v. Harkins, 312 Pa. 402, 167 A. 278, the description in the instrument of mortgage had included the buildings on the land, the added term “appurtenances” would then have covered all the machinery and fixtures going to make up the establishment as a complete plant. In our opinion the fact that merely the land is here described and the word “building” is omitted is not sufficient to preclude the application of the doctrine. Of course a mortgage of land carries with it any structure erected thereon and all fixtures attached thereto even though not expressly mentioned (16 Am. Jur. 606, §296), and since, if such structure be in fact a manufactory the
It being established, then, that as between the parties to the mortgage, the machinery and equipment were covered thereby with the same force and effect as if it had been expressly so stated therein, was Andres, the subsequent chattel mortgagee, bound to recognize that fact when he accepted the chattel mortgages? Whether the real estate mortgage itself, of which he had both record and actual notice, was sufficient to put him upon investigation as to the nature of the structure erected on the land and the consequent coverage of the mortgage need not here be considered, because admittedly he was fully cognizant of all the pertinent facts and circumstances. He not only had visited the brewery and was fully familiar with its makeup and its operations, but he knew when he accepted the chattel mortgages that they covered the machinery, equipment and chattels which were used in and about the brewery. Having such actual notice, his chattel mortgages thereby became, from every possible point of view, subordinate as liens to that of the real estate mortgage so far as there was any overlapping. The Act of June 1, 1945, P. L. 1358, section 5, provides that “. . . any real estate mortgage covering the realty and chattels attached to realty shall remain a prior lien to a chattel mortgage placed subsequently thereon, . . .
It will be noted from the quotations hereinbefore made from the various cases referred to, that the machinery, equipment and chattels which pass under an industrial mortgage are those only which form essen
Either the Bank which became the purchaser at the sheriff’s sale must surrender these enumerated articles, or, in the event of its failure or refusal to do so, the sheriff’s sale must be set aside and another sale had in which these specified chattels will be omitted.
The record is remanded to the court below for further proceedings in accordance with this opinion. Each party to bear his or its own costs.
Reference
- Full Case Name
- First National Bank of Mount Carmel v. Reichneder (Et Al., Appellant)
- Cited By
- 17 cases
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- Published