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FIRST NATIONAL BANK MOUNT CARMEL v. REICHNEDER (ET AL. (10/03/52)

October 3, 1952

FIRST NATIONAL BANK OF MOUNT CARMEL
v.
REICHNEDER (ET AL., APPELLANT)



Appeal, No. 151, Jan. T., 1952, from order of Court of Common Pleas of Northumberland County, May T., 1951, No. 26, in case of The First National Bank of Mount Carmel v. George F. Reichneder, with notice to Joseph R. Aimetti. Record remanded for further proceedings.

COUNSEL

Sanford S. Marateck, with him Robert E. Bull and John L. Pipa, Jr., for appellant.

Russell S. Machmer, with him H. O. Moser, for appellee.

Before Drew, C.j., Stern, Stearne, Jones, Bell, Chidsey and Musmanno, JJ.

Author: Stern

[ 371 Pa. Page 464]

OPINION BY MR. JUSTICE HORACE STERN

The question is whether the principle which generally governs the coverage of an industrial plant mortgage applies where the mortgaged property is described

[ 371 Pa. Page 465]

    in the mortgage instrument merely as a certain piece of land of specified dimensions and boundaries.

George F. Reichneder, in December, 1947, purchased a brewery property from Mount Carmel Brewery, Inc., and on the same day executed and delivered to the First National Bank of Mount Carmel a mortgage securing his bond in the principal sum of $30,000, the mortgaged property being described therein as "All the surface of all that certain piece or parcel of land, situate in the Township of Mount Carmel, County of Northumberland and State of Pennsylvania, bounded and described as follows, to wit: [here followed a description of the land by metes and bounds]... Together with all and singular the hereditaments and appurtenances whatsoever unto the hereby granted premises belonging or in anywise appertaining,...". On these premises were a one-story brick bottling shop and a four-story brick brewery building.

In June, 1950 Reichneder deeded the property to Joseph R. Aimetti, subject to this mortgage. A month later Aimetti borrowed $6000 from the Berwick National Bank and delivered to it a chattel mortgage in that sum covering the machinery, equipment and chattels contained in and about the brewery; this chattel mortgage was subsequently assigned by Berwick National Bank to Dale C. Andres. In March, 1951 Aimetti executed and delivered to Andres, as security for the repayment of money borrowed from him, a chattel mortgage in the sum of $25,300 encumbering the same machinery, equipment and chattels as were covered by the chattel mortgage to Berwick National Bank. The real estate mortgage to the First National Bank of Mount Carmel and the two chattel mortgages were all duly recorded.

In April, 1951, the First National Bank of Mount Carmel caused a judgment to be entered in the Court

[ 371 Pa. Page 466]

    of Common Pleas of Northumberland County on the mortgage bond of Reichneder, with notice to Aimetti as terre-tenant; the real debt due thereon was at that time $21,000 together with interest and attorney's commission. The Bank caused a writ of fieri facias to be issued on this judgment under which the sheriff levied upon and sold the brewery and all the equipment, machinery and chattels used in connection therewith; the Bank became the purchaser on its high bid of $2400. Andres, having, at the time of the sale, filed an objection to the sale of the machinery, equipment and chattels and having given notice of his claim to a lien thereon by virtue of the two chattel mortgages held by him, filed a petition to have the sale set aside; the Bank filed an answer, testimony was taken, and the court below dismissed the petition and discharged the rule to show cause which had been granted thereon. From the order thus made Andres now appeals.

The integrated industrial plant doctrine was apparently first proclaimed in Pennsylvania in Voorhis v. Freeman, 2 W. & S. 116, where Chief Justice GIBSON said (pp. 118, 119): "... nothing but a passive regard for old notions could have led them [the courts] to treat machinery as personal property when it was palpably an integrant part of a manufactory or a mill, merely because it might be unscrewed or unstrapped, taken to pieces, and removed without injury to the building.... Whether fast or loose... all the machinery of a manufactory which is necessary to constitute it, and without which it would not be a manufactory at all, must pass for a part of the freehold." The principle thus enunciated has been followed, in various applications, by a multitude of subsequent cases, among which may be noted Christian v. Dripps, 28 Pa. 271, where it was said (pp. 278, 279): "... the question is not whether these lathes were bolted and strapped to

[ 371 Pa. Page 467]

    the floor and ceiling; for if they were a necessary part of the machinery for carrying on the business of the machine shop, they belonged to the manufactory, whether bolted to the floor or not."; Ege v. Kille, 84 Pa. 333, where it was said (p. 340): "The criterion of a fixture depends on the business for which the premises are used. A fixture in a manufactory, mill or colliery may have no adaptation to many other kinds of business. Although not attached, yet, if it be designed for the convenience of trade on the premises, and be so used, or subject to be called into use at any time, it becomes a fixture. If the article is indispensable in carrying on the specific business, it becomes a part of the realty."; Morris's Appeal, 88 Pa. 368, 383; Titus v. Poland Coal Co., 275 431, 119 A. 540, where it was said (pp. 436, 437, A. p. 542): "The Pennsylvania rule is that a chattel placed in an industrial establishment for permanent use, and necessary to the operation of the plant, becomes a fixture and as such a part of the real estate, although not physically attached thereto;... Whatever is a necessary part of the machinery for carrying on the business is a fixture irrespective of the manner of its attachment."; Commonwealth Trust Company of Pittsburgh v. Harkins, 312 Pa. 402, 167 A. 278, where it was said (p. 407, A. p. 280): "Appellants concede that, if a mortgage is placed on an industrial plant, the personal property, such as machinery which is necessary to carry on the business of the plant will be subject to the lien of the mortgage, but they argue that, to have this effect, the machinery must be specifically mortgaged. We think such a principle cannot be deduced from our decisions."; Pennsylvania Chocolate Company, for use, v. Hershey Brothers, (No. 1), 316 Pa. 292, 175 A. 694, where it was said (p. 299, A. p. 696): "... if the machinery and appliances are necessary to the functioning of a complete

[ 371 Pa. Page 468]

    plant, they are fixtures and bound by the lien of the mortgage."; Central Lithograph Co. v. Eatmor Chocolate Co., (No. 1), 316 Pa. 300, 175 A. 697; Roos v. Fairy Silk Mills, 334 Pa. 305, 5 A.2d 569, where it was said (pp. 308, 309, A. p. 571): "Due to the demands and requirements of our changing economic order, we early developed in this State the principle of an 'industrial mortgage' which included, as part of the freehold, personal property in and about a manufactory. This principle became more important as our industrial life expanded, so that the necessary credits to sustain and finance manufactories and other like industries could be obtained with some degree of certainty that the security offered would be continued. Therefore, it was held that where premises were used in manufacturing or a similar industry, the real estate and personal property necessary to the plant as a going concern were subject to the lien of an industrial mortgage. This opened the way for persons interested in such industries to assure investors in a manufactory not only of a stable security for money loaned on the plant, but one that could not be broken down and destroyed by selling it piecemeal."; McClure v. Atlantic Rock Co., Inc., 339 Pa. 296, 14 A.2d 124, where it was said (p. 301, A. p. 126): "The question here is not whether any of the machinery can be removed from the mortgaged premises without physical injury to the realty, but whether it forms an integral part of a 'complete going concern.' The court below ...


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