Washburn v. Inter-Mountain Mining Co.

Mr. Justice Eakin

delivered the opinion of the court.

1. The first question for determination is whether the agreement between Flack and Vinson is a conditional sale or a chattel mortgage, and this must be ascertained from the intention of the parties as gathered from the language of the agreement. It recites that the first party “does hereby sell, assign, transfer, and set over unto the said party of the second part,” etc. But it provides that, “until the entire purchase price shall have been paid, the title to the said mill and all machinery hereinbefore described shall be and remain in the party of the first part,” clearly indicating a conditional sale. Such has been the holding of this court in several cases: Singer M. Co. v. Graham, 8 Or. 17: 34 Am. Rep. 572; Herring-Marvin Co. v. Smith, 43 Or. 315 (72 Pac. 704: 73 Pac. 340.) The further stipulation in the agreement that “the said party of the first part may, at his option, enter upon and take possession of the aforesaid mill, machinery, tools, and appurtenances, together with all improvements made thereon, either with or without process of law, and to sell the same either at private or public sale * * and to endorse upon said note after the payment of all expenses the money remaining from the sale thereof” does not constitute it a chattel mortgage, as the plain intention of the parties was that the vendor shall retain the title. Freed Furniture & Carpet Company v. Sorensen, 28 Utah 419 (79 Pac. 564: 107 Am. St. Rep. 731.) Also, see note to this case in 3 Am. & Eng. Ann. Cas. 639.

2. And as the mill was purchased by Vinson for the defendant corporation, for the operation of these mines, the title thereto remained in Flack, as against both Vinson and the defendant company. And this is the result, even though the chattel be permanently affixed to the freehold, the agreement being permitted to control. It is held in Alberson v. Elk Creek Mining Company, 39 Or. 552 (65 Pac. 978), that,

“Latterly, the strict rule that whatsoever is affixed to the soil partakes of the nature and becomes a part of the realty itself has been much relaxed to meet the requirements of manufacturing industries and trade relations, so that now the question whether an article of personalty, in its original state, has become a part of the freehold, depends upon three conditions: Annexation, real or constructive; adaptability to the use or purpose of the realty to which it is attached; and the intention of the party making the annexation to make it a permanent accession to the freehold.”

3. No doubt it was the intention of both Vinson and the defendant company to make the building and mill a permanent accession to the freehold. But the agreement amounts to a stipulation that, as between the parties to the agreement, it should remain personalty until the price was fully paid. Landigan v. Mayer, 32 Or. 245 (51 Pac. 649: 67 Am. St. Rep. 521); Hershberger v. Johnson, 37 Or. 109 (60 Pac. 838.) However, when the mill is affixed to the soil, the situation is changed as to the rights of third parties who are without notice of the terms of the agreement. When the chattel, which was sold for that purpose, has been affixed to the soil, a party dealing with reference to the realty upon which the mill is situated, without notice of the reservation in the agreement, will not be affected thereby; but, as to him, the mill will be treated as a fixture. The reason for this rule is that to hold otherwise would render uncertain land titles, endanger the rights of purchasers, and afford opportunities for fraud. The condition of the agreement, being unrecorded, is in the nature of a secret lien, which is contrary to the policy of our law. This rule is laid down by this court in Muir v. Jones, 23 Or. 332 (31 Pac. 646: 19 L. R. A. 441), where it was urged, as here, that the vendee of the chattel could invest the plaintiff with no better title than he himself had. Mr. Chief Justice Lord says: “We are unable to subscribe to this doctrine,” and holds that while by agreement barns or other structures, so attached to the soil as to become part of the realty, may be made to remain personal property; yet the general course of decisions is that a purchaser of land on which such fixtures are located must have notice of such agreement or he will be entitled to hold them as part of the realty. To the same effect, see Landigan v. Mayer, 32 Or. 245 (51 Pac. 649: 67 Am. St. Rep. 521); Union B. & T. Co. v.Wolf Co., 114 Tenn. 255 (86 S. W. 310: 108 Am. St. Rep. 903), and note to the latter case in 4 Am. & Eng. Ann. Cas. 1073, where the authorities are reviewed.

4. It is true, as stated by counsel for defendant, that an agreement for the conditional sale of a chattel is valid as well against third parties as against the parties to the transaction. Singer M. Co. v. Graham, 8 Or. 17 (34 Am. Rep. 572). But that rule relates to parties dealing for the property as a chattel, and does not apply to third parties without notice of the condition, where the character of the property has been changed to realty by being affixed to the soil.

5. Also, as defendant contends, a mechanic’s lien claimant must connect himself with the owner of the property. But Flack has no interest in the realty, nor does the lien reach the personalty, and, as to the laborers without notice, the defendant company was the owner.

6. It is not necessary that the lien notice shall state or the proof show that the labor for which the lien is claimed was done on the mill or building to subject them to the lien. Section 5668, B. & C. Comp., as amended (Laws 1907, p. 294) provides:

“That when two or more mines * are claimed by the same person or persons and worked through a common shaft or tunnel * * or at one mill, or other reduction works, then all the mines * * and all roads, tramways, trails, flumes, ditches, or pipe lines, buildings, structures, or superstructures used or owned in connection therewith, shall, for the purposes of this act, be deemed one mine.”

The reference in this language to “roads, tramways, flumes, ditches, and pipe lines,” etc., includes such appurtenances when not situated upon the mine, as those upon the mine are part of the realty and need not be specially mentioned. And so the use of the term “upon any millsite or mill used, owned, or operated in connection with such mine,” in Section 5668, prior to the amendment of 1907, had reference to such millsite and mill not situated upon the mine, as is further shown by the subsequent language of that section. Therefore, the section as amended necessarily includes the millsite and mill situated upon the mine without being specially named.

7. It is further contended by defendant that the decision in Durkheimer v. Copperopolis Copper Co., 54 Or. 37 (104 Pac. 895), precludes recovery by plaintiff Washburn upon his individual lien, for the reason that he was superintendent and manager of the defendant company. But the evidence does not disclose that he was superintendent or manager of defendant company. On the contrary, he testifies that he was foreman and did general work, helped on different things, made' things, framed timbers, and looked after the work. On cross-examination he says his business was foreman and to see that the work was done in different places; that he framed timbers; helped the men; did this, that and the other, to help the thing along; and that he took part in the erection of the mill. His employment comes directly within the holding in Flagstaff v. Cullins, 104 U. S. 176: 26 L. Ed. 704, that “he was the overseer and foreman of the body of miners who performed manual labor upon the mine. He planned and personally superintended and directed the work. * * His duties were similar to those of the foreman of a gang of track hands upon a railroad, or a force of mechanics engaged in building a house.” This language is quoted with approval in Durkheimer v. Copperopolis Company, and distinguishes the case we are considering from the latter.

8. It is also urged by defendant that Washburn must be presumed to know the terms of the agreement between Flack and Vinson as he was an officer and director of the defendant company. No doubt the defendant company is presumed to -know the terms of that agreement because its president and manager had notice and it was made for its benefit. Thompson, Corp. (2 ed.) § 1673; § 1668. But not so as to Washburn, although he was a director. To affect him individually, knowledge must be brought home to him. He denies any knowledge that the sale was conditional, and there is no evidence that shows he had notice thereof. The statement in Holly Mfg. Co. v. New Chester Water Company (C. C.) 48 Fed. 889, that “it appears that some of the directors had positive knowledge of the terms of the contract with the Holly Company and, under the circumstances, notice thereof is to be imputed to them all,” only means all as constituting the corporation and is not authority for holding that, in an individual matter, a director is charged with notice because the corporation is presumed to have notice on account of notice to another director.

9. It is said in Peckham v. Hendren, 76 Ind. 47, that knowledge is imputable to a corporation by the acts of its agent, but will not be imputed to an officer thereof in a transaction between him and the corporation in which he is acting for himself and not for it. To the same effect is Cook, Stock & Stockholders, § 727; Cook, Corp. § 727; Rudd v. Robinson, 126 N. Y. 113 (26 N. E. 1046: 12 L. R. A. 473: 22 Am. St. Rep. 816.) It is urged that there is no evidence as to the kind of work or where it was performed by the claimants, or that the claims were not paid. But it appears from the evidence that Washburn employed the men, directed the work, kept their time, and was bookkeeper. He testifies, as to King, that he worked in the mine, extracting ores and breaking ground in different places on the property described in the complaint; gives the amount of his whole bill and says that he was not paid in full; that he has a balance due him of $87.80; that the total amount paid him was $59.75. Similar evidence is given as to each claimant, and is, at least, prima facie sufficient to sustain the lien.

10. Defendant also contends that the plaintiff should be required to take satisfaction first by sale of the mines, in which Flack has no interest, and leave the mill for the satisfaction of defendant’s claim, if the mines sell for sufficient to satisfy the plaintiff’s claims. This is the rule where there are two separate and distinct properties and they can be sold separately without depreciation of either. But the mines and mill constitute one property and neither can be sold separately without a depreciation in value of the other. It is only when there are two funds or properties that the doctrine of marshaling securities can be invoked. Neither is this relief suggested by the pleadings nor asked in the prayer of the answer. The facts, however, may be sufficient to entitle defendant Flack to be subrogated to the equities of the plaintiff upon the sale of the property or other stage of the proceeding, if such relief is sought.

We find no error in the rulings of the trial court. The decree is affirmed. Affirmed.