Abramson v. Penn

Offutt, J., delivered the opinion of the Court. On or about November 24th, 1926, Walter W. Penn, trad-_._ ing as WT. W. Penn & Co., entered into a conditional contract of sale with the Redwood Garage, Inc., under which it furnished and installed, in a garage building on lot No. 619 Redwood Street in Baltimore City, ten Glow gas steam radiators for $1,150, of which $200 was paid in cash. The garage property at that time was owned by the Redwood Garage, Inc., which on November 1st, 1927, sold it to Harry Abram-son.

The Redwood Garage, Inc., after paying $350 in addition to- the initial cash payment on account of the purchase price of the radiators, defaulted on its contract, and the appellee in this case, after the property had been conveyed to Abramson, asserted title to the radiators, and threatened to enforce his claim by an action of replevin. Abramson thereupon filed a bill of complaint in Circuit Court No. 2 of Baltimore City against the appellee, in which he prayed that he be enjoined (1) from removing “said heating plant” from the property, and (2) from instituting or prosecuting any action at law which might result in its removal therefrom. On that hill a “show cause” order was passed, hut before the case was heard appellee caused a writ of replevin to issue for the seizure of the radiators, hut prosecution of that proceeding was restrained pending this litigation. The defendant then answered, testimony was taken, the case heard, and at the con ¹⁸⁸ elusion of the hearing the court dissolved the injunction and dismissed the bill.

Erom that decree Abramson appealed. In addition to what has been stated, it may be inferred from the pleadings, admissions, and evidence in the case, that the radiators weigh about six hundred pounds each, and rest upon brackets which are screwed to the wall of the building; they are all connected with a single gas supply pipe, but aside from that appear to be independent units, as the water for the generation of steam is supplied separately to each radiator through a filling cap on the side. The whole system, pipes, brackets, and radiators, was installed by the appellee, and may be removed without any material damage to the property. It was also admitted that the conditional sales “agreement provided that the title to said radiators should remain in the defendant until the whole of said purchase price should be paid; * * * that in the event of default by said Redwood Garage in the payment of the balance of said purchase price, the defendant should have the right to repossess said radiators; * * * that said conditional contract of sale was duly recorded by the defendant on December 22nd, 1926; * * * that the plaintiff at the time it purchased said property had not actual knowledge of said conditional contract of sale and was neither aware of the existence of said contract of sale nor the fact that it had been recorded.” The record in this case is meagre and fails to disclose the precise terms of the conditional sales contract, the use to which the garage property was adapted, whether there was any method of heating it except by the radiators, or whether they were essential to the ordinary and convenient use of the property, but taking the ease as we find it, the appeal does submit these questions: (1) Does a conditional sales contract duly recorded under Code, art. 21, sec. 55, afford to the purchaser of real property constructive notice that the title to articles described in such sales contract, which at the time it was made were chattels, but which at the time said real estate was purchased were so incorporated therewith as to become an integral part thereof, is reserved to the conditional vendor (a) when the character of the chattels is such that the conditional vendor ¹⁸⁹ must have known that they would in ordinary course be so used and converted, (b) where they were not of that character ?

(2) Were the radiators involved in this proceeding, in fact, at the time appellant took title to the property in which they were located, so annexed to the realty as to become a permanent and integral part thereof ? (3) If the purchaser' of the realty at the time of his purchase had constructive notice of the conditional sales agreement, will he be permitted to assert title to the chattels against the conditional sales vendor whether the chattels were at that time integrated with the real estate or whether they were not % The proposition first stated is novel in this court, and while the question has not infrequently arisen in other jurisdictions, the decisions in respect to it are too conflicting to establish any rule which can b© said to he generally accepted. Many courts of high standing have taken the view that the recordation of a chattel mortgage or a conditional sales contract, under a statute making such recordation constructive notice to third persons, is sufficient to charge a bona fide purchaser for value of real estate to which chattels are annexed with notice of any lien ox title reserved in such mortgage or conditional sales contract to or against such chattels. Sword v. Low, 122 Ill. 487 ; Eaves v. Estes, 10 Kan. 314 ; Keeler v. Keeler, 31 N. J. Eq. 181; Ford v. Cobb, 20 N. Y. 344 ; Kribbs v. Alford, 120 N. Y. 519 ; Monarch Laundry v. Westbrook, 109 Va. 382 .

Other courts have taken the opposite view, Elliott v. Hudson 18 Cal. App. 642 ; Tibbetts v. Horne, 65 N. H. 242; Brennan v. Whitaker, 15 Ohio St. 446 ; Phillips v. Newsome (Tex. Civ. App.) 179 S. W. 1123 .

But such cases as Sword v. Low, supra, Eaves v. Estes, supra, Ford v. Cobb, supra, limit the application of the rule that recordation of the chattel mortgage or conditional sales contract is constructive notice to a purchaser or subsequent mortgagee of realty, to which the chattels described in the chattel mortgage or sales contract are annexed, to cases where the- chattels are of such a character that they may he removed without ¹⁹⁰ damage to the freehold, and where their essential utility does not require that they should be so annexed to the freehold as to become a part thereof. So- that they are consistent with the theory that where the nature of the chattels is such that if used for the purpose for which they were made- they would naturally and necessarily be- annexed to and become a part of some freehold, such recordation would not be constructive notice to the- purchaser of such real estate. That limitation is very precisely illustrated by the case of Keeler v. Keeler, supra, where a chattel mortgage duly recorded was held to afford constructive notice to a subsequent mortgagee of the mortgagee’s lien against such chattels, as spinning frames, etc., but no notice at all to- such mortgagee of a lien reserved against a steam boiler which had been so annexed to the realty a.s to become incorporated therewith. The weakness of that position seems to be that it rests upon no surer foundation than casual and subjective opinion as to the character of a given article, and affords little security either to the vendor of the chattel or the purchaser of the realty, nor has it any logical basis in reason or technical law.

On the other hand Elliott v. Hudson, supra, Tibbetts v. Horne, supra, Brennan v. Whitaker, supra, Phillips v. Newsome, supra, take the position that if the chattel has, with the knowledge of the vendor, been sold to be annexed to real estate and has been so annexed, that the purchaser of such real estate is not affected by the recordation -of a chattel mortgage or conditional sales contract reserving to the conditional vendor or the mortgagee of the chattel, any title or lien to or against it, on the ground that if in fact the property has become a part of the freehold, it has ceased to- be a chattel, and that the record of the chattel mortgage or conditional sales agreement ceased to afford constructive notice of the creation of the lien or the reservation o-f title at the time when the article ceased to-be a chattel and became real property. And that seems to- us the sounder conclusion, and -one more- consistent with the legislative policy of this state. The statute under which such conditional contracts of sale may be recorded is in these words: ¹⁹¹ “Every note, sale or contract for the sale of goods and chattels, wherein the title thereto, or a lien thereon is reserved until the same be paid in whole or in part, or the transfer of title is made to depend upon any condition therein expressed, and possession is to be delivered to the vendee, shall, in respect to such reservation and condition, be void as to third persons without notice until such note, sale or contract be in writing, signed by the vendee, and be recorded in the clerk’s office of Baltimore City, or the counties, as the case may be, where bills of sale are now recorded; and such recording shall be sufficient to give actual or constructive notice to third persons when a memorandum of the paper writing, setting forth the date thereof, the amount due thereon, when and how payable and a brief description of the goods and chattels therein mentioned shall have been recorded, but it shall not be necessary that said paper writing be acknowledged or an affidavit- made to the consideration therein expressed as in the case of hills of sale.” (Code, art. 21, sec. 55.) It- will bo observed that, not only does it omit such safeguards as are thrown about- the execution and recordation of deeds and mortgages of real estate, and chattel mortgages and bills of sale, such as acknowledgment and in the case of mortgages an affidavit to- the