U.S. Supreme Court Detroit Steel Cooperage Co. v. Sistersville Brewing Co., 233 U.S. 712 (1914)
Detroit Steel Cooperage Company v.
Sistersville Brewing Company
Argued May 8, 1914
Decided May 25, 1914
233 U.S. 712
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE FOURTH CIRCUIT
The common law knows no objection to what is commonly called a conditional sale.
Chattels, such as tanks, furnished for a brewery under a contract of conditional sale duly recorded, although indispensable as part of the completed structure and attached to the real estate as between the mortgagor and the mortgagee, are not so attached to the realty as to become a part thereof and subject to the lien of a prior mortgage as between the vendor of the tanks and the mortgagee, if, as in this case, they can be removed without the physical disintegration of the building. Holt v. Henley, 232 U. S. 637 .
An owner of a chattel may lose title thereto without his consent by its incorporation into a structure in such manner that its removal would destroy the structure.
The mere knowledge that a chattel, delivered under a contract of conditional sale, will be attached to the freehold is of no importance, except as against innocent purchasers for value before the sale is recorded.
195 F. 447, 1023, reversed.
The facts, which involve claims of the vendor and the holder of a mortgage bond to certain tanks and fixtures delivered to the owner of brewery under a conditional sale, are stated in the opinion.
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a bill in equity for an injunction against the sale of certain tanks, fixtures, and fittings supplied by the petitioner to the defendant brewing company, and for a return of the same. The bill was dismissed by the circuit court, and the decree was affirmed by the circuit court of
appeals. 195 F. 447, 1023, where Pritchard, J., dissented from the refusal of a rehearing.
The contract under which the tanks were furnished provided that the title should remain in the petitioner until they were fully paid for, and that the petitioner might remove them on default. It was made on August 8, 1908, and duly recorded on December 7 of the same year. Before those dates, the brewing company had made a mortgage of its land, brewery, "and all the buildings, machinery, and appliances thereon erected or to be erected," and the mortgage had been recorded. There were subsequent mortgages, judgment liens, etc., but they do not need special mention. A bill was brought to foreclose the first mortgage, to which the petitioner was not made a party. A receiver was appointed and a sale ordered and advertised. The petitioner then brought this bill against the various adverse claimants, joining the receiver by leave of court. The statute of West Virginia makes a reservation of title such as the petitioner's "void as to creditors of, and purchasers without notice from, such buyer" unless a notice of the reservation is recorded as therein required. Code (1906) § 3101.
In Holt v. Henley, 232 U. S. 637 , the Court had to consider a similar question of priority in view of a Virginia statute like that of West Virginia upon which the petitioner relies, and, although in that case the conditional sale had not been recorded, it was held that the vendor was to be preferred. The main question now before us is whether this case is to be decided differently on the ground that the tanks were "an essential, indispensable part of the completed structure contemplated by the mortgage," a question left open in the former decision. 232 U. S. 232 U.S. 641. 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. William W. Bierce, Ltd. v. Hutchins, 205 U. S. 340 , 205 U. S. 347 -348.
The cases to which the possible exception left open in Holt v. Henley applies are principally those in which the property claimed has become so intimately connected with or embodied in that which is subject to the mortgage that to reclaim it would more or less physically disintegrate the property held by the mortgagee -- e.g., Porter v. Pittsburg Bessemer Steel Co., 122 U. S. 267 . A man sometimes may lose title without his consent, and it has been held that he loses it even to an innocent converter who has added labor of a value far in excess of that of the original chattel. Wetherbee v. Green, 22 Mich. 311. When the obvious destination of an article is to be incorporated into a structure in such a way that to remove it would destroy the other work, like bricks or beams in a building, there is still stronger ground for not giving to title an absolute right of way. But unless we give a mystic importance to bolts and screws, the mere knowledge that the chattel will be attached to the freehold is of no importance,
except, perhaps, as against innocent purchasers for value before the sale was recorded, which the mortgagees were not. Holt v. Henley, 232 U. S. 637 , 232 U. S. 640 -641. The damage that will be done by removal in this case is trifling and the petitioner offers to make it good.
The West Virginia decisions that had been rendered before the petitioner's contract, was made, like those of Virginia, favored the petitioner's right, Hurxthal v. Hurxthal, 45 W.Va. 584. We do not understand Lazear v. Ohio Valley Steel Foundry Co., 65 W.Va. 105, to lay down a different doctrine. We take it, rather, as turning on the special effect of a sale to receivers whose certificates it was thought were backed by a promise of the court that they should constitute a first lien. Therefore, we find it unnecessary to consider whether otherwise the doctrine of Burgess v. Seligman, 107 U. S. 20 , coupled with our own opinion that the rule applied in the earlier decision is correct, would require us to follow that, rather than the later case.
MR. JUSTICE LURTON dissents.