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OTIS ELEVATOR CO. v. AREY-HAUSER CO.

January 26, 1938

OTIS ELEVATOR CO.
v.
AREY-HAUSER CO. et al.



The opinion of the court was delivered by: DICKINSON

Leave was given to file briefs. Pending their submission, we were asked to grant an imparlance to afford parties an opportunity to reach an agreement. This has had no result and the withheld briefs have now been submitted with a request for a ruling.

The action, although in form replevin, is really an amicable action to have determined the right of the plaintiff to recover a set of elevators which it had installed in an apartment house belonging to the defendant, and subject to a mortgage held by the Pennsylvania Company, trustee for bondholders. The installation was made under an agreement with the general contractor who built the apartment house. The general fact situation is that of the usual project of the owner of land erecting an apartment house building which here passed to one of the defendants as operating owner. The project was made the subject of an agreement with a general contractor for the construction of the building, including installed elevators. Incidentally, the general contractor here agreed that nothing which went into the building should be the subject of a conditional sales contract. In order to finance the project, a mortgage was executed to the Pennsylvania Company to secure an issue of bonds, the sale of which would provide funds to pay in part for the cost of construction. The mortgage moneys were to be advanced as the construction progressed. The general contractor contracted with the plaintiff to install the elevators. This was done under a conditional sales contract, reserving title to the elevators in the plaintiff if the purchase price was not paid. The purchase price was $79,922. Of this $24,927.81 was not paid. Thereupon the plaintiff asserted its right to reclaim and remove the elevators as its property. This right is denied by the defendant as owner of the property and by the mortgagee. We limit the discussion to this one somewhat narrow question.

 Discussion.

 We think it will have a clarifying effect to consider the rights of the parties, first, as unaffected by the Conditional Sales Act, and, second, as created by that act.

 1. The Rights of the Parties at What is Called Common Law.

 There would be no doubt that without the Conditional Sales Act the plaintiff could not assert its claimed right. This would be for two reasons. In the first place, the plaintiff sold these elevators to the general contractor and delivered possession. As against an innocent purchaser for value, as the owner of the premises and the mortgagee might be held to be, the plaintiff could not retain title as security for the unpaid purchase price, except possibly under a so-called bailment lease contract. In the second place, the law of Pennsylvania has been held to be, at least in the case of so-called "Plants," that if personal property is brought upon the premises with the intention of incorporating it with the real estate, it thereby becomes a real fixture part of the real estate and cannot be removed therefrom to the prejudice of a mortgagee.

 Viewing this apartment house as a "Plant" or what is called "an operating unit," no one would deny that the elevator system was part of it or that the elevators were installed with the intention to make them, in this sense, a part of the real estate.

 Without further discussion, we assume that under the law of Pennsylvania the plaintiff could not, without the Conditional Sales Act, assert title to these elevators.

 2. The Conditional Sales Act.

 In discussing this, we are assuming that there has been compliance with all the requirements of the act. It may be here noted that the transaction with which this case concerns itself was before the passage of the amendment of 1935. The contract for the construction of the building bears date October 17, 1929. The installation of the elevators was under a contract dated February 18, 1931. We are in consequence limited to the provisions of the Act of May 12, 1925, P.L. 603, as amended in 1927, Act May 12, 1927, P.L. 979, 69 P.S.Pa. § 361 et seq.The fact that a second act was passed in 1925 on this subject, Act May 14, 1925, P.L. 722, indicates some confusion in the legislative mind, but as this latter act was repealed in 1927, we are not directly concerned with it, except in so far as it may throw light on the legislative intent.

 Let us be reminded that the question upon which we are passing is a very narrow question. Without the Conditional Sales Act, the plaintiff has no case. That act has two main objectives. One is to repeal the Statute of Elizabeth and to change the otherwise law so as to permit a vendor to retain title until the purchase price is paid. The other is to provide exceptions to the new rule. Among the latter are (1) vendors who fail to comply with the act; (2) property intended to be resold; and (3) fixtures of chattels intended to be made part of real estate.

 The present case clearly comes within the fixtures class. The act provided for purchasers and mortgagees and cases (1) in which the conditional sale was before, and (2) for those cases in which it was after the purchase or mortgage.

 This case concerns itself with the latter class. The applicable provision is that of the second subdivision of section 7, as amended, 69 P.S.Pa. § 404, subd. 2. This provided that the reservation of title shall be void as to any goods "so attached to the realty as not to be ...


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