Russ Distributing Corp. v. Lichtman , 111 N.J.L. 21 ( 1933 )

The plaintiff, the conditional vendor, by replevin sought to recover a certain electric refrigeration system installed in an apartment house in Newark. The building was built and mortgaged before the refrigeration system was installed. The contrivance was sold under the usual recorded conditional sales agreement, specifying that title remained in the vendor until payment. The installation was in such manner that the compressors and boxes, making up the system, could be removed by uncoupling from the connecting pipes which still remained in the building. There was, as the proofs showed, no material injury to the freehold. Since the apparatus was installed in a completed building, it was not indispensable to the building as an apartment house. DomesticElectric Co. v. Mezzaluna, 109 N.J.L. 574; ReliableBuilding and Loan Association v. Purifoy, 111 N.J. Eq. 575. The direction of a verdict in favor of the plaintiff in a suit against a purchaser at a sheriff's sale on the foreclosure of a mortgage prior to the conditional sales agreement is challenged on this appeal.

Section 7 of the Conditional Sales act (2 Cum. Supp. Comp.Stat., p. 3131), in part, provides: "If the goods are so affixed to realty at the time of a conditional sale or subsequently as to become part thereof, but to be severable without material injury to the freehold, the reservation of property shall be void after the goods are so affixed as against subsequent purchasers of the realty for value and without notice of the conditional seller's title, unless the conditional sale contract, or a copy thereof, together with a statement signed by the seller briefly describing the realty and stating that the goods are or are to be affixed thereto, shall be filed before such purchase in the office where a deed of the realty could be recorded or registered to affect such realty."

In Campbell v. Roddy, 44 N.J. Eq. 244, when an engine boiler and machinery, subject to a chattel mortgage, were annexed to mortgaged realty, it was held: "That the lien of the chattel mortgage 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."

In the present case, the mortgagee could not have relied upon the subsequently annexed refrigeration system, nor was the same essential to the apartment house since the same was originally not equipped with such devices. Further for all that appears, the uncoupling did not materially injure the freehold.

Mr. Justice Holmes, in Holt v. Henley, 232 U.S. 637, speaking of a sprinkler system installed in a completed mortgaged building said: "Removal would not affect the integrity of the structure on which the mortgagees advanced. To hold that the mere fact of annexing the system to the freehold overrode the agreement that it should remain personalty and still belong to Holt would be to give a mystic importance to attachment by bolts and screws."

In a later case, Detroit Steel Cooperage Co. v. SistersvilleBrewing Co., 233 U.S. 712, 716, he said respecting tanks in a brewery: "The tanks were essential to the working of the brewery, and after they were installed the opening into the recess in which they stood was bricked up. It may be assumed that they became part of the realty as between mortgagor and mortgagee, but that is immaterial in equity, however, it may have been at the old common law. The question is not whether they were attached to the soil, but we repeat, whether the fact that they were necessary to the working of the brewery gives a preference to the mortgagee. We see no sufficient ground for that result. This class of need to use property belonging to another is not yet recognized by the law as a sufficient ground for authority to appropriate it. If the owner of the tanks had lent them it would be an extraordinary proposition that it lost title when they were bricked in. That it contemplated the ultimate passing of title upon an event that did not happen makes its case no worse except so far as by statute recording is made necessary to save its rights. The common law knows no objection to what commonly is called a conditional sale."

The recording act protected the conditional vendor's property and preserved the right to recover the chattel as against a subsequent purchaser. Gas ranges were held, in Madfes v.Beverly Development Corporation, 251 N.Y. 12; 166 N.E. Rep. 787, to retain their character as chattels even after attachment and without the recordation of the agreement. It is enough, however, for a decision of this case to hold that a refrigeration system installed in a completed building may, by virtue of a recorded conditional sales agreement, preserve its identity as a chattel when removable without material injury to the freehold as against a purchaser with constructive notice of the agreement.

For affirmance — BODINE, HEHER, VAN BUSKIRK, DEAR, WELLS, DILL, JJ. 6.

For reversal — THE CHANCELLOR, CHIEF JUSTICE, TRENCHARD, PARKER, CASE, DONGES, KAYS, HETFIELD, JJ. 8.