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General Electric Co. v. Transit Equipment Co.

Now let us see how the principles alluded to apply to this

case.

The building in which the machines were erected and are at present found is a large barn-like structure, which comprises under one roof a car-barn and a power-house, including steam-boilers and engines for power and the machines in question. The place was prepared for the machines without touching the structure proper by simply building up solid brick piers from the earth to the proper level, of a size sufficient to bear the weight of the machines, which is about fifteen tons each. Upon those brick piers was fastened to each a wooden platform. This was all done by the Union Traction Company, and the same forms no part of either the building or the machines, but simply a foundation and bed upon which the latter rest. The removal of the machines will leave those foundations uninjured and undisturbed and ready at once for the reception of other machines of the same size and character. The actual annexation is effected by simply placing upon the wooden platform certain iron rails and fastening them thereto with ordinary screw-bolts penetrating the wood. On those rails, which are called "shears," the machines are placed and so arranged that they may be moved slightly in a direction corresponding with the direction of the belts by which they are driven, so that when the machines are not in motion certain set-screws may be loosened and the machines moved along on these iron rails or shears in such a manner as to tighten the belts and thus save the labor and expense of cutting them and shortening them every time they become a little too loose to be efficient. The door of the building is large enough to permit their removal without injury to the structure. So much for the three machines.

With regard to the switchboard, that is a large metallic plate set up on one side of the building and affixed by bolts or spikes driven into the brick wall, and upon it are placed all the apparatus by which the electric current is distributed. That, too, may be removed without any serious injury to the building; is in itself a complete instrument and may be set up in another building and used for the same purpose as it is used there.

General Electric Co. v. Transit Equipment Co.

There is nothing, then, in the annexation which would make these articles fixtures against the will and intention of the parties. As between landlord and tenant, no respectable argument could be made in favor of the position that the tenant would not have the right to remove them. The general right of removal on the part of a tenant includes many objects much more securely fixed to and thoroughly incorporated with the real estate than those here in question.

In respect to annexation the case resembles that of Lee v. Hubschmidt, supra, and the cases there cited, and upon the question of intention there can be no doubt but that, as in Lee v. Hubschmidt, the machines were placed as they were with the intention of making them a part of the freehold, and, moreover, they come in under the second element above mentioned, viz., their application to the use or purpose to which the realty with which they are connected is appropriated. The building was designed for the purpose of receiving these various machines or others similar thereto, and the whole purpose and object was to establish an electric power plant for the purpose of propelling the cars of the traction company, thereby making one system.

But that adaptability and that purpose and intention, it seems to me, must be held subject to the lack of right and power of the party to make the application and carry out the intention to make an addition to the freehold. It seems to me that it is an essential part of an efficient annexation of a chattel of this character and its resultant conversion, that the chattel shall be the property of the person who performs the act of annexation, or that the purpose of annexation shall be acquiesced in by the owner of the property. The intent and purpose of the mortgagor in the act of annexation must be accompanied with the power to do it, arising out of either the ownership of the chattel or the consent of the owner thereof. And here we encounter the element of the hardship and injustice of taking one man's property, without his consent, to advance the pecuniary interests of another. It was the hardship and injustice in this respect of the old law of fixtures which led to its modification in favor of the tenant against his landlord.

General Electric Co. v. Transit Equipment Co.

If the case were res nova, I should be of opinion, on general principles, that the right of the owner of the chattel, under present circumstances, should prevail. It is impossible, under the evidence, to charge the owner with having consented that the chattels should become a part of the freehold. The contract itself, which contains not only a reservation of the title but also a right to remove them from the premises, forbids the idea of such consent. In fact, as it appears to me, the maker's right in this case is quite as perfect as it would have been if there had been no provision for a sale and a passing of the title on payment, but that instead of a sale the machines had been rented and delivered on a bailment of hire to the traction company. Upon such a bailment it seems to me that it would be contrary to fundamental principles to say that the owner had consented that the chattel should be converted into freehold and subjected to a mortgage upon the premises. Nor does the case present any features requiring such a forced inference from the contract and the action of the parties. The fact that equipments of all sorts are let out on a bailment of hire is so common and so well known that no one can be misled by it.

But I think that the question is res adjudicata in New Jersey, and is covered by the case of Campbell v. Roddy, 17 Stew. Eq. 244, which is a decision of the court of errors and appeals. The syllabus of that case is this:

"A vendor of an engine, boiler and machinery, knowing that they were to be annexed to real estate, took a chattel mortgage upon them for a part of the price, but failed to register it. The mortgagor of the chattels afterwards annexed them to real estate upon which he had already given a mortgage.Held, that the lien of the chattel mortz ge should be protected, so far as it would not diminish the security which the real estate mortgagee would have had if the annexation had not been made."

The machinery there, as appears by the report below, in 15 Stew. Eq. 218, was one large steam crane, one jack, one steam engine and boiler, one large lathe, one small lathe, one planer, one drill press, one drill upright, one Mackenzie blower, two small pumps; shafting, belting, &c.; one large truck scale, one wire rope and drum, one jig-saw and stand, one pair of bellows,

General Electric Co. v. Transit Equipment Co.

two anvils, one large anvil, one iron hoisting-block and chain, &c., machinery for operating an iron foundry and pipe factory. The description, in 15 Stew. Eq. 223, of the mode in which they were attached to the land shows that they were annexed with much greater thoroughness than the machines here in question. In that case the sale was absolute, and a chattel mortgage was taken back, so that there was a passing of the title with a retention of a lien only. Here there is a retention of the title itself, so that the argument from that case to this is a fortiori.

The reasoning of the learned judge who spoke for the court of errors and appeals is exhaustive of the whole subject, leaving nothing to be said, and I should have simply referred to that case as authority but for a recent decision of the federal court, relied upon by the receiver. I refer to the case of Phœnix Iron Works Co. v. New York Security and Trust Co., decided December 7th, 1897, in the circuit court of appeals, sixth circuit, and reported in 54 U. S. Cir. Ct. App. 408 (West Publishing Company), and in 83 Fed. Rep. 757 (reported below in 77 Fed. Rep. 529). It is not exactly in point, but nearly so, the machinery there being an engine, stack, boiler, pump, &c., constituting the steam plant and furnishing the power which created the electricity for the railroad. It is manifest at once that the annexation of a steam-power plant is much more thorough and extensive than that of the machines in this case. But the reasoning of the court would, I think, include this case.

In the opinion the court put itself upon the authority of the following cases: Dunham v. Railway Co., 1 Wall. 254; Railroad Co. v. Cowdrey, 11 Wall. 459; United States v. New Orleans Railway Co., 12 Wall. 362; Dillon v. Barnard, 21 Wall. 430; Fosdick v. Schall, 99 U. S. 235; Porter v. Steel Co., 120 U. S. 649, and again in 122 U. S. 283; Thompson v. Railroad Co., 132 U. S. 68, and Railroad Co. v. Hamilton, 134 U. S. 296.

Before examining those cases, which I propose to do presently, I will notice the ground outside of authority upon which the court put itself, which is that announced in the case of Porter v. Steel Co., 122 U. S. 283, to wit: "It is well settled, in the decisions of this court, that rails and other articles which become

General Electric Co. v. Transit Equipment Co.

affixed to, and a part of, a railroad covered by a prior mortgage, will be held by the lien of such mortgage in favor of bona fide creditors, as against any contract, between the furnisher of the property and the railroad company, containing stipulations like those in the contracts in the present case [reserving title]." And the circurt court of appeals held that there was no distinction between the kind of property there mentiond and stationary machinery such as a steam engine and boiler there in controversy.

In the report of the case in 77 Fed. Rep. 529, it appears that the judge below put the decision on the ground that the furnisher of the boiler and engine had consented to the conversion of those machines from personalty to realty, and this was approved by the court of appeals, and both courts gave the furnisher a lien upon the articles furnished, subject, however, to the superior lien of the mortgage. How that result could have been effected consistently with the well-settled principles upon which courts act in such cases I am unable to perceive. It was distinctly held in some of the federal cases on which the court in Phoenix Iron Works v. Trust Co. relied, as well as in the case of Campbell v. Roddy, that a mortgagee of after-acquired property takes that property subject to all liens that were upon it, and when the circuit court of appeals, in the case just cited, held that the furnisher of the boiler and engine had a lien upon them, but failed to give that lien preference over the first mortgage, it seems to me that it went directly counter to the decisions of the supreme court of the United States.

But let us examine the cases above cited.

The case in 1 Wall. (Dunham v. Railway Co.) was that of a contractor for a particular part of a railway, where the company defaulted in making its payments and contracted with him that he should finish the part and hold possession of and operate it until his debt was paid, the property being subject to a prior mortgage which covered after-acquired property, and the court held that the contract between the company and the contractor was not sufficient to divest the title of the mortgagee. The difference between that case and this is apparent.

The case in 11 Wall. (Railroad Co. v. Cowdry) was between

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