Blake-McFall Co. v. Wilson , 98 Or. 626 ( 1920 )

HARRIS, J.

What was the character of the elevator in June, 1912, when the plaintiff agreed to sell and Wilson agreed to buy the premises at Fourth and Ankeny Streets? Was the elevator personalty, or was it realty? If the elevator, notwithstanding its installation in the building, had never lost its character as personal property, then it may be assumed that it was competent for the plaintiff and Wilson to agree, either by parol or in writing, that the elevator should continue to remain personalty and beyond the grasp of the deed. If such was the quality of the elevator, then Wilson and the plaintiff contracted to except from the deed an article which always had been and was then in truth personal property; and, hence, in that situation the contract would be binding at least as against Wilson, although it might not be binding as against Dudley if he purchased without knowledge of the actual character of the elevator and without notice of the agreement. If, however, the elevator lost its character as personalty and was transformed into realty when it was placed in the building, then we have to deal with a problem which is not easy of solution.

1, 2. In this, as in most jurisdictions, the rnle for determining whether personalty has been transformed into realty requires the united application of three tests: (1) Annexation; (2) adaptation; and (3) intention: Johnson v. Pacific Land Co., 84 Or. 356, 361 (164 Pac. 564); Roseburg Nat. Bank v. Camp, 89 Or. 67, 74 (173 Pac. 313); Ewell on Fixtures (2 ed.), 439. And after applying these tests it will be difficult to avoid the conclusion that the elevator lost its character as personalty and was transmuted into realty. The president of the Blake-McFall Company testified that the elevator “was pnt in in the usual manner that elevators are installed.” The superintendent of the Otis Elevator Company, who had charge of the installation of the elevator, explained that the elevator in question was installed in the same manner as the other two freight elevators which had been placed in the building at the time of its construction, and that it “was bolted” and attached “thoroughly permanent,” and that “to tear the thing out, it would leave the building in a somewhat dilapidated condition,” because “the floors would have to be recovered; the hatchway would have to be refloored over where the well-hole had been put in, and the timbers. would all have to be taken out, of course, that had been placed in there to support the machine. ’ ’

The elevator was used by the plaintiff and it was adapted to the purpose 'for which it was designed.

3, 4. The intention of the party making the annexation is, under modern authorities, the most important element. The intention is to be inferred from the nature of the article affixed, the relation and situation of the party making the annexation, the construction and mode of annexation, and the purposes and use for which the annexation has been made; and one of the most important and influential of these factors which must be considered when seeking to ascertain the intention is the relation and situation of the party making the annexation. A more liberal rule is applied when the annexation is made by a tenant than when made by the owner of the land; and, consequently, a given article annexed to the land or to a building on the land may, on the one hand, be regarded as a trade or domestic fixture, and therefore as personalty, if annexed by a tenant, and, on the other hand, be treated as realty if made by the owner.

Subject to certain recognized limitations, an annexation not intended to be permanent will not transform an article of personal property into realty; but, in order to discover whether the annexation was intended to be permanent, the mode of annexation may be considered and also whether the annexation is to make the chattel on the land more useful. Here the elevator was installed for the sole purpose of serving the building; and although the elevator in controversy, if installed by a tenant, might in some circumstances be treated as a trade fixture, yet, since it was installed by the owner of the land, it must, in the circumstances thus far narrated, be treated as having been converted into realty the moment it was placed in the building; and therefore as between the grantor, Blake-McFall Company, and the grantees, Wilson and Dudley, the deed operated to convey the elevator to the grantees, unless it was legally kept from the embrace of the deed.

In addition to the facts already related there is another circumstance which must be noticed, although it does not affect the result. The president of the plaintiff corporation testified as follows:

“When we decided to sell that building, we decided to sell it because we realized that it was not suitable as a permanent home for our business, and inasmuch as we had expected to take these chutes with us if we ever moved, when we substituted the elevator for one of the chutes we also expected to take the elevator with us.”

This is one way of saying that if they did not move they did not intend to detach the elevator. There is nothing to indicate when it was decided to sell. There is nothing to show the time when the plaintiff’s officers realized that the building “was not suitable as a permanent home; ’ ’ and there is nothing to indicate when the officers of the corporation formed the intention or. entertained the expectation of taking the chntes with them if they ever moved; and while it is true that according to the president’s testimony the representatives of the plaintiff did, when they caused the installation of the elevator, expect to take the elevator with them “if” they “ever moved,” there is nothing to show that they had then concluded to'move. Indeed, the inferences fairly to be drawn from the record are that the company had not yet decided to move, for it must be remembered that the plaintiff had constructed this building for its own use and had moved into it immediately upon its completion in 1910; and the elevator was installed in 1911, a year afterwards. At the most, the intention, whenever formed by the corporation through its officers, was contingent, unexecuted, and inchoate, and hence it cannot control the result. In Snedeker v. Warring, 12 N. Y. 170, 178, the New York Court of Appeals held:

“The destination which gives to movable objects an immovable character results from facts and circumstances determined by law itself, and could neither be established nor taken away by the simple declarations of the proprietor, whether oral or written.”

This rule was approved in Wadleigh v. Janvrin, 41 N. H. 503 (77 Am. Dec. 780). To the same effect are Horne v. Smith, 105 N. C. 322 (11 S. E. 373, 18 Am. St. Rep. 903); Enterprise M. & M. Co. v. Cunningham, 84 Or. 319, 323 (165 Pac. 224). Indeed, the plaintiff concedes in its printed brief that the secret intention with which chattels are attached does not govern, but that the controlling intention is that “which the law deduces from all the circumstances of the annexation.” As between Blake-McFall Company, the grantor, and Wilson and Dudley, the grantees, the elevator having been placed in the building by the owner and being in it at the time of the conveyance, it passed to the grantees as a part of the realty, unless it was legally excepted from the operation of the deed.

The plaintiff contends that even though it be decided that the elevator must be treated as realty because of the circumstances in which it was installed by the owner of the building, nevertheless it was legally excepted from the deed; and to support its contention the plaintiff relies upon the stipulation found in the written contract of June, 1912, between the plaintiff and Wilson, the letter written to Blake-MeFall Company by Wilson under date of April 29,1915, and parol evidence to the effect that when the deed was delivered it was understood by the parties that the elevator was excepted from the operation of the deed. The defendants attack the position taken by the plaintiff by arguing that the parol evidence was incompetent and must be excluded from consideration; and that the stipulations in the contract of June, 1912, were merged in the deed which was subsequently made in pursuance of the contract, and that, consequently, the deed is the only writing by which the rights of the parties can be measured.

Appellate courts disagree upon the question as to whether parol evidence is competent. There is an abundance of highly respectable authority for saying that the grantor may avail himself of parol evidence to show an oral agreement between himself and the grantee reimpressing the character of personalty upon a given article, where by annexation it had previously become a fixture and a part of the realty, and excepting it from the operation of the deed: Foster v. Mabe, 4 Ala. 402 (37 Am. Dec. 749); Russell v. Meyer, 7 N. D 335, 342 (75 N. W. 262, 47 L. R. A. 637); Harlan v. Harlan, 20 Pa. 303; Shell v. Haywood, 16 Pa. 523; 19 Cyc. 1050. See, also: Tyson v. Post, 108 N. Y. 217 (15 N. E. 316, 2 Am. St. Rep. 409); Fuller v. Tabor, 39 Me. 519; 11 R. C. L. 1064; notes in 84 Am. St. Rep. 878; 13 Am. St. Rep. 153 and 572.

5. There is likewise an abundance of respectable authority for the view that a fixture which has taken on the character of realty, by reason of annexation by the owner of the land, cannot by parol be excepted from the operation of a deed conveying the land upon which the fixture is located: Noble v. Bosworth, 19 Pick. (Mass.) 314; Leonard v. Clough, 133 N. Y. 292 (31 N. E. 93, 16 L. R. A. 305); Laird v. Railroad, 62 N. H. 254 (13 Am. St. Rep. 564, 565); Wadleigh v. Janvrin, 41 N. H. 503 (77 Am. Dec. 780); Horne v. Smith, 105 N. C. 322 (11 S. E. 373, 18 Am. St. Rep. 903); 2 Devlin on Real Estate (3 ed.), 2300; 11 R. C. L. 1092. See, also: 19 Cyc. 1050; 11 R. C. L. 1064, 1066; 8 R. C. L. 1093; Johnston v. Philadelphia Mtg. etc. Co., 129 Ala. 515 (30 South. 15, 87 Am. St. Rep. 75); Beeler v. C. C. Mercantile Co., 8 Idaho, 644 (70 Pac. 943, 1 Ann. Cas. 310, 60 L. R. A. 283). Some authorities which exclude the admission of evidence of a parol agreement do so upon the ground that the agreement must be in writing in order to satisfy the statute of frauds; others say that a parol exception has the effect of varying the terms of the written deed; and still others rest this conclusion upon both grounds, and hold that a parol exception violates the statute of frauds and also varies the terms of the written deed. We quite agree with Dr. Ewell that:

“The better opinion seems clearly to be that a sale and conveyance of the real estate will (there being no exception in the deed of conveyance) pass the fixtures thereto annexed, notwithstanding a parol exception thereof at the time of such sale”: Ewell on Fixtures (2 ed.), 515.

If personalty has been transformed into realty, then logically it ought to be governed by the rules which control realty. The precedents which reach the conclusion that a fixture may by a parol agreement be constructively reconverted from realty into personalty do so only by adopting artificial and arbitrary premises. Moreover, the universal rule is that, in the absence of an agreement, a fixture which has taken on the character of realty passes with a conveyance of the land and that it passes by force of the writing. If, then, the writing enforces a transfer of the fixture, the force of the writing is opposed and the terms/ of it are necessarily contradicted by any agreement which purports to withdraw such fixture from the operation of the deed; and therefore, if that agreement rests in parol, it inevitably results in an attempt by parol to vary the terms of the written deed.

The plaintiff points to Muir v. Jones, 23 Or. 332, (31 Pac. 646, 19 L. R. A. 441), and argues that this court has at least impliedly given assent to the parol exception doctrine. The syllabus which precedes the reported opinion probably carries the implication suggested by the plaintiff; but a careful analysis of the opinion will disclose that the question involved here was there expressly excluded from consideration. In Muir v. Jones, the appeal involved an instruction given to the jury. This instruction consisted of two parts. In the first part the court told the jury th^t if, when the owner sold the land, she by parol reserved to herself the sawmill, engine and boiler and the right to remove the same, and if defendant had notice of such reservation, the owner could recover. In the second part of the instruction the court charged the jury that if the owner suffered the sawmill, engine, and boiler to remain on the premises and the defendant had no notice of a reservation, then the defendant would not be bound by such reservation, and the mill, engine, and boiler, would pass to the defendant with the conveyance of the real property. In. the opinion attention is expressly called to the fact that—

“No exception was taken to the first part of this instruction, hut only to that portion of it which declares that the engine and boiler, when so attached to the soil as to become a part of the realty, pass to the grantee with the conveyance, unless he had notice of the intention to preserve them as personal property and reserve them from the operation of the conveyance.”

Judgment for the defendant was affirmed on the ground that he was a bona fide purchaser without notice. Thus it is seen that the controversy in Muir v. Jones did not require a decision of the point presented here; and, moreover, the court there took the precaution of saying that the point was not saved by an exception.

It must he remembered that we are not now dealing with an article which by reason of an agreement or by force of attending circumstances has always been personal property and never changed from personalty into realty. If the elevator had never be.en caused to take on the quality of realty, quite a different situation would be presented. But we are dealing with a subject which, as we have determined, took on the character of- realty when the owner annexed it to the building on its land. We are unable to concur with counsel for the plaintiff. We think that the parol exception doctrine is, in the end, fraught with danger to property owners; for under that doctrine every ordinary warranty deed would be subject to attack by parol exceptions. The very purpose of a written conveyance is to secure safety and security in ownership. "We think that it is better to hold fast to safe and tried moorings than to adopt a rule which will set adrift upon an uncharted sea every ordinary warranty deed and abandon every one of them to the hazard of collision with uncertain and unknown but always possible parol exception derelicts: Bronson on Fixtures, § 65c.

As between grantor and grantee the strict rule of the common law prevails, and all fixtures annexed to the realty pass by a conveyance of the freehold, unless they have been excepted from the conveyance in some manner sanctioned by the law: Noble v. Bosworth, 19 Pick. (Mass.) 314; Wolff v. Sampson, 123 Ga. 400 ( 51 S. E. 335); 11 R. C. L. 1067, 1068. Since, as we hold, the law does not sanction a parol agreement, it follows that the elevator was not legally excepted from the deed, unless the written contract of June, 1912, had that effect.

The contention of the defendants is that the contract of June, 1912, together with all its stipulations, was merged in the subsequent deed which was executed in performance of the contract; that by reason of such merger the contract was extinguished so that it is not now existent; and that, therefore, the deed is now the only writing by which the rights of the parties can be determined. The defendants are not without authority for their position, for the following precedents support their contention: Bond v. Coke, 71 N. C. 97, 99; Clifton v. Jackson Iron Co., 74 Mich, 183 (41 N. W. 891, 16 Am. St. Rep. 621); Noble v. Bosworth, 19 Pick. (Mass.) 314.

6, 7. Stated broadly, the general rule is that a contract to convey land is merged in a deed executed in performance of such contract and the deed operates as a satisfaction and discharge of the executory contract: 2 Devlin on Real Estate (3 ed.), § 850a; 27 R. C. L. 529. There is a class of cases, however, where it is held that, if the preliminary contract contains a stipulation of which the conveyance is not a performance, such stipulation survives and is not merged in the deed: 27 R. C. L. 532; 2 Devlin on Real Estate (3 ed.), § 850b. In other words, the deed effects a merger to the extent that it is contemplated that a deed shall be a performance of the contract. Concrete illustration of this doctrine is found in Brunswick Const. Co. v. Burden, 116 App. Div. 468, (101 N. Y. Supp. 716), where the facts, in all essential particulars, were like those here. However, we do not decide whether this rule is applicable to the present controversy; for in our view the written contract signed by the plaintiff and "Wilson operated, as between them, to reimpress the elevator with the character of personalty.

8. The established rule is that before annexation, interested parties can agree that a chattel shall continue to retain its character as personalty, and, although such chattel is attached to the realty in such manner that without such agreement it would lose its character as a chattel, the agreement will be given effect, as between the parties at least, and the chattel will be deemed to retain its character as personalty, if it can be removed without material injury to the' article itself or to the freehold: Henkle v. Dillon, 15 Or. 610, 615 (17 Pac. 148); Landigan v. Mayer, 32 Or. 245, 250 (51 Pac. 649, 67 Am. St. Rep. 521); Alberson v. Elk Creek Gold Min. Co., 39 Or. 552, 559 (65 Pac. 978); Johnson v. Pacific Land Co., 84 Or. 356, 361 (164 Pac. 564); Roseberg Nat. Bank v. Camp, 89 Or. 67, 75 (173 Pac. 313); 1 Tiffany on Real Property, 542; Fuller-Warren Co. v. Harter, 110 Wis. 80 (85 N. W. 698, 84 Am. St. Rep. 867, 53 L. R. A. 603). Under the finding of fact made by the trial court to the effect that the elevator could have been removed without substantial injury, it would have been competent, for example, for a landlord and a tenant to agree that an elevator similarly installed and used by the tenant should preserve its character as personalty.

So, too, the parties interested can accomplish after annexation what they could have accomplished before annexation.

When the plaintiff and Wilson agreed that the elevator should not be “included in the equipment of the building” and “that no shelving, counters or fixtures belong to the building,”' they at that moment agreed to treat the elevator as personal property; and, consequently, although not physically detached, it was thereupon constructively detached, and thenceforth it was, as between Wilson and the plaintiff, personal property. It was competent for the parties to make a collateral agreement respecting the elevator. The law did not require all the stipulations to be in a single writing. "When the deed was executed, it operated only upon realty; personal property was beyond its grasp. The deed conveyed the land, and every annexed article which at the time of the delivery of the deed possessed the quality of realty; it did not transfer personalty; and therefore, since the preliminary written agreement had already reconverted the elevator from realty and reimpressed it with the character of personalty, at least as between the plaintiff and Wilson it was personal property and as such was not transferred by the deed: Brunswick Const. Co. v. Burden, 116 App. Div. 468 (101 N. Y. Supp. 716); Power v. Garrison, 141 Ga. 429 (81 S. E. 225); Richards v. Gilbert, 116 Ga. 382 (42 S. E. 715); Ewell on Fixtures (2 ed.), 470; Bronson on Fixtures, § 55b; 1 Jones on Mortgages (6 ed.), §431a; 11 R. C. L. 1064, 1066; Robinson Codfish Co. v. Porter Fish Co., 75 Wash. 181 (134 Pac. 811); Foster v. Mabe, 4 Ala. 402 (37 Am. Dec. 749); Tyson v. Post, 108 N. Y. 217 (15 N. E. 316, 2 Am. St. Rep. 409); Johnston v. Philadelphia Mtg. etc. Co., 129 Ala. 515 (30 South. 15, 87 Am. St. Rep. 75).

The plaintiff relies upon the conveyance from Wilson and the Dudleys to the Hughes Investment Company to prove a conversion of the elevator by the defendants. The defendants assert that this conveyance did not amount to a conversion, and in support of their position cite Walsh v. Sichler, 20 Mo. App. 374. The fácts reported in that precedent are dissimilar to the facts here. That case involved trade fixtures installed by a tenant during his tenancy. The purchasers and subsequent lándlords were advised of the lease and knew of the tenancy; and the original owner and landlord neither knew that these fixtures had been placed in the building nor intended to convey anything that belonged to the tenant. The purchasers informed the tenant that they had bought the premises and forbade him from removing the fixtures as they claimed that the fixtures passed with the deed. “After this, the plaintiff voluntarily quit the premises, leaving the fixtures in the house.” Manifestly, the conveyance by the original owner did not operate as a conveyance of the trade fixtures which had been installed by the tenant.

9. In the instant case, however, the elevator became personal property only by force of an express agreement; and, moreover, as to all persons without knowledge of that agreement the elevator was indubitably realty. When, therefore, Wilson and the Dudleys made a deed to purchasers without notice of the agreement, the inevitable effect of the .deed was to transfer the elevator to such purchasers, and it was then beyond the power of the plaintiff to avoid the effect of that deed. Since, in the circumstances, the deed irresistibly operated to convey the elevator, Wilson as a maker of the deed in reason and on authority must be deemed to have treated the elevator as his property and hence converted it to his own use: 19 Cyc. 1074; Smyth v. Stoddard, 203 Ill. 424 (67 N. E. 980, 96 Am. St. Rep. 314); Bircher v. Parker, 43 Mo. 443. See, also: Rosenau v. Spring, 25 Or. 386, 390 (35 Pac. 844); Eldridge v. Hoefer, 45 Or. 239, 244 (77 Pac. 874); Bronson on Fixtures, § 378; Ewell on Fixtures (2 ed.), 650.

10. It is next argued by the defendants that, by entering into a new lease with the Hughes Investment Company after it had purchased the premises, the plaintiff lost its right to move the elevator, even though it be decided that such right previously existed. The general rule is that a term tenant cannot remove fixtures after the expiration of his term; and the prevailing doctrine is, too, that the landlord becomes the absolute owner of fixtures if the tenant surrenders the premises without removing the fixtures. The right to remove a fixture may, like many other rights, be abandoned or waived; and, consequently, when the tenant’s term ends and his right to possession terminates and he leaves fixtures on the premises, he is deemed to have waived his right and abandoned the fixtures: 11 R. C. L. 1071. As a supposed outgrowth of this general rule, the doctrine has arisen in many, and indeed in most, jurisdictions that, if a new lease is taken without reserving the right to remove fixtures installed- during the term of the old lease, such fixtures cannot be removed by the tenant during or at the end of the new lease, notwithstanding the new lease began contemporaneously with the end of the old lease and the tenant has had actual and continuous possession of the premises from the beginning of the old lease until the expiration of the new lease: Wadman v. Burke, 147 Cal. 351 (81 Pac. 1012, 3 Ann. Cas. 330, 1 L. R. A. (N. S.) 1192); 11 R. C. L. 1072.

Under this doctrine, if the new lease is silent upon the subject of fixtures installed during the old lease, the tenant loses the fixtures, unless he moves them out of the building before the end of the old lease, notwithstanding the fixtures are his property at the very moment the new lease is executed and in spite of the fact that he not only does not intend to abandon them but supposes that they continue to be his property when the new lease begins, and in despite of the fact that not a single moment of time intervenes giving the landlord the right of possession; but if, however, an hour before the end of the old lease the tenant loads his fixtures on a truck and one minute before the expiration of his old term carries them around the block and then one minute after the beginning of the new term returns with them and re-installs them, they continue to be his property with the accompanying right of removal. Judge Cooley, whose uncommon fund of common sense has so greatly enriched American jurisprudence, has pertinently said:

“What could possibly be more absurd than a rule of law which should in effect say to the tenant who is about to obtain a renewal: ‘If you will be at the expense and trouble, and incur the loss, of removing your erections during the term, and of afterward bringing them back again, they shall be yours; otherwise you will be deemed to abandon them to your landlord’ '' Kerr v. Kingsbury, 39 Mich. 150 (33 Am. Rep. 362).

11. There may, of course, be circumstances attending the execution of a new lease showing an intention to abandon the right to remove fixtures; but, it seems to us, a rule which declares that a new lease of its own force operates as an abandonment of fixtures installed under an old lease is without the support of any substantial or persuasive reason. In practice this rule is a trap and a snare for the unwary tenant, for in the every-day affairs of life most tenants making a new lease would assume, and indeed so would most landlords, that fixtures which were the property of the tenant during the old lease would continue to be the property of the tenant under the new lease. In our view, the reasons which give support to the rule that the failure of a term tenant to remove his fixtures before the expiration of his term and the ex-tinguishment of his right of possession are not present when the lease is immediately followed by a new lease and the tenant’s possession, actually and rightfully, has been continuous and without interruption; and, since the reasons for the rule do not exist, the rule itself ought not to exist. We hold that a new lease does not per se extinguish the right of the tenant to remove fixtures installed by him under an immediately preceding lease. This view is supported by the following precedents: Kerr v. Kingsbury, 39 Mich. 150 (33 Am. Rep. 362); Bergh v. Herring-Hall Marvin Safe Co., 136 Fed. 368 (69 C. C. A. 212, 70 L. R. A. 756); Thomas v. Gayle, 134 Ky. 330 (120 S. W. 290, 135 Am. St. Rep. 412, 20 Ann. Cas. 766, 28 L. R. A. (N. S.) 767); Sassen v. Haegle, 125 Minn. 441 (147 N. W. 445, 52 L. R. A. (N. S.) 1176); Radey v. McCurdy, 209 Pa. 306 (58 Atl. 558, 103 Am. St. Rep. 1009, 67 L. R. A. 359).

The judgment was against the three defendants. The facts as disclosed by the record are not sufficient to- sustain a judgment against Eugene A. Dudley or his wife. However/' Wilson cannot escape liability.

When Wilson converted the elevator it was annexed to the building. When the elevator was sold to the Hughes Investment Company, it was disposed of as a part of the building and presumably was paid for as a part of the building; and, hence, Wilson became liable for the value of the elevator as it then was, — ’“not its value as torn down for removal”: Smyth v. Stoddard, 203 Ill. 424, 430 (67 N. E. 980, 982, 96 Am. St. Rep. 314).

As against' Dudley and his wife, the judgment is reversed; hut, as against Wilson, the judgment is affirmed.

Aeeirmed in Part, Beversed in Part.

Beheading Denied.

McBride, C. J., and Benson and Burnett, JJ., concur.