author: Mr. Justice Mtcecub

text:
    Morris’s Appeal.
    1. An assignee for the benefit of creditors is the mere representative of his assignor, enjoying his rights only, and is bound where he would be bound.
    2. Parol evidence may be admitted to explain a written agreement, so far as to give identity to the subject-matter and apply the contract to it.
    3. Physical annexation to realty is not necessary to convert a chattel into a fixture. Whether it be such depends rnueh on the business for which the premises are used. If the article, whether fast or loose, be indispensable in carrying on the specific business, it becomes a part of the realty.
    4. Appellees were the owners of a large manufacturing establishment in Philadelphia, called “ Southwark Foundry.” By a written agreement they agreed to sell to M. all said property and business, for a gross sum of §480,000. M. agreed to purchase the stock and material on hand, to pay §40,000 down, and the remainder in ten annual instalments, the payment thereof to be secured by “ a purchase-money mortgage of all the real estate above mentioned, and the fixtures and appurtenances.” On a given day the deeds, transfers and mortgages were delivered. The mortgage described the lands as they were described in the deeds, “ together with the buildings and improvements thereon, with all the machinery, engines, boilers, railroad tracks and fixtures contained in or appurtenant to the premises.” Inasmuch, however, as a bill of sale was also executed by the appellees, transferring some of the articles to M., it was claimed that the mortgage was not intended to cover them. It was shown that the articles in question were used by the appellees in carrying on their business, and that they considered them necessary for that purpose. Held, that the establishment was sold as a whole and bought as such for a gross sum, and the fact that when the papers were executed the consideration was divided, and part put in the deed and part in the bill of sale, could not change the character of the sale, and that whatever had received the impress of a fixture could not by this act be so dissevered as to prevent the lien of the mortgage from attaching thereto. . Held, further, that whatever was afterwards added as necessary to the business, and used as such, in like manner became fixtures, and were equally bound by the mortgage.
    January 16th 1879.
    Before Sharswood, C. J., Mercur, Gordon, Paxson, Woodward, Trunkey and Sterrett, JJ.

      Appeal from the Court of Common Pleas, No. 1, of Philadelphia county: Of January Term 1878, No. 209. In Equity.
    This was the appeal of Henry G. Morris and 0. E. Morris, his assignee, from the decree of the court enjoining said assignee from selling or removing from the Southwark Foundry the machinery, fixtures and property mentioned in a catalogue of sale issued by said assignee.
    The bill was filed against appellants by John Vaughan Merrick, William Henry Merrick and John Edmund Cope.
    It is admitted by the pleadings that the plaintiffs, by deed dated the 31st December 1870, granted to the defendant, Henry G. Morris, two lots of ground, namely: First, a largo lot of ground, with the buildings and improvements thereon erected, situate on the south side of Washington avenue, and bounded by Fourth street, Fifth street, Federal street and Washington avenue, containing three hundred and ninety-six feet ten inches on Federal street, three hundred and ninety feet six inches on Fifth street, three hundred and twenty feet two inches on Fourth street, and four hundred and four feet two inches on Washington avenue; and secondly, a lot, with the stable thereon erected, situate at the southeast corner of Fifth and Federal streets, containing in front on Fifth street eighteen feet, and in depth eastwardly sixty-eight feet; subject, as to the first lot, to the payment of a yearly ground-rent of $6000, and as to the second lot, to the payment of a yearly ground-rent of $36; together with all the machinery, engines, boilers, railroad tracks and fixtures contained in or appurtenant to the premises first described. That the real estate and premises so conveyed were mortgaged by the said Henry G. Morris to the plaintiffs to secure the payment of part of the purchase-money, for which his bonds were given to each of the plaintiffs separately in the sum of $146,666.66, making the total amount of the bonds and mortgage $440,000, these papers being executed simultaneously with the deed, and the mortgage duly recorded. That a balance of $102,-666.66 of the purchase-money secured by these bonds and mortgage remains unpaid to each of the plaintiffs, and is now due and payable, and proceedings are about to be instituted to collect the same. The defendants allege in their answers that subsequently to the filing of the bill, proceedings were instituted by the plaintiffs on the said mortgage, under which the real estate and premises above mentioned were sold by the sheriff to the plaintiffs for the sum of $291,000.
    The plaintiffs allege in their bill that the premises thus conveyed to Henry G. Morris are known as “The Southwark Foundry,” in which a very large and extensive business was carried on by the plaintiffs prior to, and by the said Morris since, the sale thereof to him. That on the premises, and constituting a very valuable part of the same, are placed and erected a very large quantity of machinery, tools and fixtures of various kinds, which are a necessary part of the foundry, and without which it could not be properly or profitably operated. That all of these are covered by the said mortgage, and constitute a very valuable part of the security for the payment of the debts due by Henry G. Morris to the plaintiffs. To this the defendant, Henry G. Morris, answers that from the 1st January 1871, until the 29th April 1875, he carried on a very large and extensive business in the premises, but that the premises were not, as he is informed and believes, conveyed to him under the name of the Southwark Foundry, and that he is advised by counsel that the mortgage given by him to the plaintiffs does not, in law, cover a large quantity of machinery and tools of various kinds which are on these premises, but which are not attached to the freehold, and many of which have been purchased by him since the execution of the mortgage. The defendant, Charles E. Morris, answers that a large number of the said machines and tools are not a necessary part of the said foundry, and that it could be properly and profitably operated without them. He denies that these machines and tools are covered by the mortgage or constitute a valuable part of the security for the payment of the debts due by Henry G. Morris to the plaintiffs, and he alleges that the premises mentioned in the mortgage are not mortgaged as the Southwark Foundry, or as constituting any part of the same. He further alleges that by a bill of sale dated the 31st December 1870, the plaintiffs, in consideration of $277,000, bargained and sold unto Henry G. Morris, his heirs, executors, administrators and assigns, all the property, machinery, engines, fixtures, tools, goods, chattels, drawings, implements, appliances and other appurtenances, owned, used or held by them in and about the engineering establishment known as the Southwark Foundry, and mentioned in two books of inventory of fixtures, tools, chattels and appliances, made for the purposes of this sale, and signed at the end thereof by the plaintiffs, and all other property, tools, goods, chattels, &c., then being in the buildings and shops erected on the large lot of ground above mentioned, and also in the stable at the corner of Fifth and Federal streets ; together with all the fixtures in use and remaining on the wharf premises of the late Samuel Y. Merrick, below Reed street, in this city. He further answers that he is advised and believes that the articles mentioned in this bill of sale and the two inventories are not included in or covered by the said mortgage to the plaintiffs, and are not constituent parts of the mortgaged premises, but that they were the personal property of the said Henry G. Morris.
    It is further alleged by the bill, and admitted by the answers, that the said Henry G. Morris, on the 29th April 1875, by deed duly recorded, assigned all his estate and property to the defendant, Charles E. Morris, as trustee for his creditors.

      The bill then alleges that the assignee has advertised for sale by public auction the personal property of the assignor, and has issued catalogues thereof, in which are contained many items included in the mortgage, and really a part of the mortgaged premises. The answers admit the advertisement of the sale and the issuing of the catalogues, but deny that the catalogues contain any items included in the mortgage, or anything which was really a part of the mortgaged premises, or appurtenant thereto.
    The prayers of the bill are: 1st. For an injunction restraining Charles E. Morris, the assignee, from selling or removing from the foundry, any of the machinery, engines, boilers and fixtures appurtenant to said premises, and constituting part of the said foundry. 2d. For an injunction restraining him from proceeding with the sale, until it be ascertained under the direction of the court, what are the items of property upon the mortgaged premises, which constitute a necessary part of the same, and which shall not be sold by him as the personal property of the said Henry G. Morris. 8d. Further relief.
    On the filing of the bill on the 24th June 1875, a special injunction was granted, and by an interlocutory order made on the 28th June 1875, the injunction was continued until further order, and the cause was referred to W. J. McElroy, as examiner and master, to report the facts, the law and the form of a decree.
    The master made a voluminous report, and found, inter alia, the following facts:
    “ That the Southwark Foundry was an engineering establishment, covering a large extent of ground, with substantial and capacious buildings, and embracing within it a machine shop, brass and iron foundry, boiler shop, smith shop, pattern shop, carpenter shop, drawing room and erecting shop, with the requisite machinery, tools and appliances for carrying on these various, but connected branches of the business.
    “In the fall of the year 1870, negotiations took place between the plaintiffs and the defendant. Henry G. Morris, relative to the sale and purchase of this engineering establishment, and on the 31st of October 1870, the purchase was concluded upon the terms which are set forth in the agreement in writing, which recites that Henry G. Morris has purchased from William II. Merrick and John E. Cope, trading as Merrick k Sons, and from J. Vaughan Merrick, the Southwark Foundry, used and occupied by the firm in their business as manufacturers, and all the business, good-will, contracts, patents, licenses to use patented articles, fixtures, machinery, tools, &c., belonging to said firm, useful in the said business, and appurtenant thereto, or to the said premises known as the Southwark Foundry, and also a certain stable and lot of ground thereinafter mentioned, for the sum of $480,000, payable as thereinafter mentioned; and has also agreed to purchase the stock and material which may be in the hands of the said firm on the 31st day'of December next, upon the terms and at the valuation thereinafter particularly set forth and mentioned.
    ' “ It further recites the intention of the parties, that Henry G. Morris shall receive and be vested with a good and perfect title to the real estate, subject to the yearly ground-rent of $6000 on the foundry property, and the yearly ground-rent of $36 on the stable property, and also with a good and perfect title in all and singular the estate, property, chattels, machinery, tools, contracts, patents, licenses to use patented articles, engines, fixtures, &c., used by the said firm in their business aforesaid, and necessary or appurtenant thereto.
    “ The parties then agree:
    “ That the plaintiffs will, on the 31st December 1870, convey to Morris, his heirs and assigns, by a good and marketable title, in fee simple, clear of all encumbrance other than the yearly ground-rent of $6000, the large-lot of ground, with the improvements and buildings thereon erected, situate on the south side of Washington avenue, the east side of Fifth street, the north side of Federal street, and west side of Fourth street, together with the appurtenances.
    “ That the plaintiffs will on the same day execute to Morris such deeds, assignments, transfers and other instruments of writing as shall vest in him, his executors, administrators and assigns, a good and perfect title to all and singular the goods and chattels, tools, patterns, machinery, drawings, fixtures, implements, appliances and other appurtenances whatsoever, owned and held by the said Merrick & Sons, and used in and about the engineering establishment of the said Merrick & Sons, and known as the Southwark Foundry, together with all and singular the fixtures in use and remaining on the wharf premises of the late Samuel V. Merrick, below’ Reed street.
    “ Henry G. Morris agrees to pay to William H. Merrick and John E. Cope, trading as aforesaid, and J. Vaughan Merrick, the sum of $480,000, in manner following: $40,000 on the 31st December 1870, on the delivery of the deeds and other instruments of writing above agreed to be executed, and the remaining $440,000 in ten annual instalments, with interest at six per cent., payable half yearly.
    In order to secure the payments thus agreed to be made, Henry G. Morris agrees to execute and deliver to William H. Merrick, John E. Cope and J. Vaughan Merrick, ‘ as tenants in common of • equal undivided interests, a purchase-money mortgage of all the real estate above mentioned, with the fixtures and appurtenances;’ the mortgage to be accompanied by three bonds and warrants of attorney, each for $146,666.66-|, payable in ten equal annual .instalments, with interest payable half yearly.

      “ Ilenry Gr. Morris agrees to purchase from William II. Merrick and John E. Cope, trading as aforesaid, all the stock of material, manufactured, unmanufactured, and in process of manufacture, at its fair market value, to be ascertained by the parties, or in case of dispute, .by a referee, mutually chosen, $40,000 of the price to be secured by his notes maturing in four months, and the balance by notes at twelve months after date, with interest on said balance.
    This agreement was acknowledged on the 81st October 1870, by all the parties, for the purpose of record, but does not appear to have been in fact recorded.
    The sale made by this agreement was carried into effect on the 31st December 1870, by the execution of the following papers :
    1. A deed was executed by the plaintiffs with their respective wives, to Ilenry G. Morris, in fee, for the real estate mentioned and described in the first and second articles.
    2. Two inventories of the machinery, tools and fixtures mentioned wrere signed by the parties. A bill of sale for these was executed by the plaintiffs to Ilenry G. Morris.
    3. Three bonds were executed by Henry G. Morris, one of them to each of the plaintiffs severally, for the payment of $146,666.66 each, in ten equal annual instalments, with interest thereon, payable half yearly.
    4. A mortgage to secure the payment of these bonds was executed bv Henry G. Morris to the plaintiffs, in the sum of $440,000.
    An inventory was also made of the manufactured and unmanufactured material, but was not completed until March 1871. It amounted to $74,492.67, which amount has been paid by Mr. Morris.
    The deed from the plaintiffs to Ilenry G. Morris conveys to him in fee, in consideration of $203,000, the large lot of ground, with the buildings and improvements thereon erected, bounded by Washington avenue, Fifth street, Federal street and Fourth street, subject to the yearly ground-rent of $6000, and also the lot, with the stable erected thereon, at the southeast corner of Fifth and Federal streets, subject to the yearly ground-rent of $36; “together with all the machinery, engines, boilers, railroad tracks and fixtures contained in, or appurtenant to, the premises first above described.”
    The first inventory, labelled “Buildings and Tools,” contains a list of machinery, consisting of planing machines, punching machines, cranes, oscillating, horizontal and vertical engines, drilling machines, &c. It also contains, at the end of the foregoing list, an inventory and valuation of buildings, enumerating the land and various buildings erected thereon, on each of which a value is placed, amounting in the aggregate to $285,600. On the last page of the book is the following memorandum : “ The foregoing inventory of machinery, fixed or appurtenant to the. premises, is hereby accepted as correct, unless the same he amended prior to the first day of February 1871.” This is signed by the plaintiffs and Henry G. Morris, and is dated December 31st 1870.
    The other inventory, labelled “ Tools and Fixtures,” contains scales, hydraulic jacks, jack'screws, &c., and a great many miscellaneous tools. It includes the tools in the fire-proof store-room on the second floor machine shop. It also includes a cast iron core oven, an overhead double-track railway, a large number of tool closets, a railroad track scale and two cart scales, located at the gates of the foundry, and some other articles which are attached to the freehold. It also includes horses, wagons, harness and various articles belonging to and in use in the stable. On the last page of this book is the following memorandum : “ The foregoing inventory of chattels, &c., is hereby accepted as correct, unless the same be amended prior to the first day of February 1871.” This is signed by the plaintiffs and Henry G. Morris, and is dated December 30th 1870.
    The bill of sale recites the purchase, by Mr. Morris, from the plaintiffs, of the Southwark Foundry, and that it is the intention of the parties that he should’“ receive and be vested with a good and perfect title in all and singular the property, chattels, machinery, tools, engines, fixtures, &c., used by the said firm in their business aforesaid, -and necessary or appurtenant thereto.” The consideration is stated to be the sum of $277,000, and for that consideration the plaintiffs bargain, sell, grant and confirm unto Henry G. Morris “.all the property, machinery, engines, fixtures, tools, goods, chattels, drawings, implements, appliances and other appurtenances whatsoever, owned, used and held by them in and about the engineering establishment known as the Southwark Foundry, and mentioned and expressed, or intended so to be, in two certain books of inventory of fixtures, tools, chattels, appliances, &c., lately made for the purposes of this sale, and signed at the end thereof, on the date hereof,” to hold the same to the said Henry G. Morris, his heirs, executors, administrators and assigns for ever.
    The mortgage from Mr. Morris to the plaintiffs, after reciting his execution of the three bonds or obligations to them severally for the sum of $146,666.66 each, witnessés, that in consideration of these three debts, amounting to $440,000, and for the better securing the payment thereof, with interest, to them, severally, he grants to them in fee the large lot of ground with the buildings and im-. provements thereon erected, and the smaller lot, with the stable erected thereon, subject to the ground-rents, “together with all the machinery, engines, boilers, railroad tracks. and fixtures contained in, or appurtenant to the premises first above described,” and recites that these are the same premises which they, “ by indenture bearing even date, but duly executed and acknowledged immediately before these presents, for the consideration-money therein mentioned, which is hereby secured,” granted and conveyed to him in fee.
    The master further finds that:
    “ The sale thus made to Mr. Morris by the plaintiffs was a sale of the Southwark Foundry as a unit for a gross sum of $480,000.
    “ No special estimate was made of the value of the different parts of the establishment, nor was there on the books of the plaintiffs any statement of the cost of the land, buildings and tools as separate items. There was an improvement account to which was charged everything which was added to the establishment from time to time, whether buildings, machinery, fixtures or tools, of whatever description. The entire cost of the establishment could thus be ascertained, but not the separate cost, nor the appreciation or depreciation in value of any of its separate parts. No attempt was made, in the negotiations for the sale, or in carrying it out, so fajas the evidence discloses, to place a value on any of the machinery, tools or fixtures. The valuations of the land and buildings in the inventory amounting to $285,500. are not connected in any way with the terms of sale, and differ from the consideration of $203,000 mentioned in the deed. This latter amount was fixed upon as the value of the ground and buildings, without anything else. The remainder of the purchase-money, $277,000, was represented by the. articles included in the two inventories, but in making the sale and purchase, the plaintiffs did not ask Mr. Morris, nor did he agree to0 give these, or any, separate prices for the land and buildings, and for the articles named in those inventories. The price was a round sum for the whole — $480,000 for the entire establishment, except the material and unfinished stock. There was no agreement to sell by inventory.
    “ Two of the inventories were made under the direction and management of Mr. llobert Briggs, who acted for Mr. Morris. Neither the plaintiffs, nor any one acting for them, took part in the1 making of these lists. They were made by Mr. Morris for his own convenience, information and security, and were accepted by the plaintiffs as correct at the time for all the property passing under the deed and mortgage.
    “ The other inventory, which included the stock of material and unfinished work, was, on the contrary, made by an agent of the plaintiffs. This was agreed to be purchased by inventoj-y, at a valuation to be ascertained and fixed, and to be paid for according to this valuation.
    “ Mr. Briggs had been manager for Messrs. Morris, Tasker & Co., of which firm Mr. Henry Gr. Morris had been a member, for about seven years. In the matter of this purchase of the Southwark Foundry, he acted as his friend and adviser, with the expectation of becoming manager of the foundry, and he did in fact act as its manager under Mr. Morris until the time of his failure. He had full knowledge of the negotiations for this purchase, and was consulted by Mr. Morris in those negotiations. He was called as a witness for the plaintiffs, and from his testimony the following facts appear: The purchase was made from the plaintiffs for a round sum, $480,000, with a kind of inventory, not a very perfect one. It included all the real estate fixed and attached to the property, everything upon the premises necessary to put the works into immediate use, all the workmen’s tools, the entire equipment of the establishment, and was described in certain deeds then given and in .a certain inventory or bill of sale. The inventory was incomplete and imperfectly made. Large quantities of material and fixed and quasi-fixed machinery were not named or described in it, but everything upon the premises was conveyed or intended to be sold and conveyed to Mr. Morris. Of the purchase-money, $40,000 was paid in cash; the balance of the $480,000 was to be paid in yearly instalments of $44,000 each, to be secured by bond and mortgage of the property sold and conveyed. As to this mortgage, it was understood between the parties that the mortgage should be made to cover, as far as possible, everything that was necessary for the . carrying on of the work in its regular way at the Southwark Foundry. The preparation of the papers was left to the legal advisers of the plaintiffs on this point, and they were assented to by Mr. Morris to cover what was necessary to carry on the works.
    “ One of the plaintiffs also testified that the understanding and agreement between them and Mr. Morris was that the mortgage should cover all the machinery, tools, &c., of different kinds, which were essentia] for carrying on the business, and which did not pass under the title of stock inventory and unfinished account; in other words, everything except what was contained in the inventory.
    “ Thirteen policies of insurance against fire, amounting to $78,000, which had been held by the plaintiffs, were on December 31st 1870, assigned by them to Mr. Morris, and they were then endorsed at his request by the agents of the several companies, ‘ Loss, if any, payable to Merrick & Sons, mortgagees.’ Another policy was taken out by Mr. Morris on October 20th 1871, for $10,000, and similarly endorsed to plaintiffs as mortgagees. These policies covered not merely the buildings, such as the erecting shop, machine shop, &c., but also the machinery, fixtures, patterns, tools, implements, shafting and belting contained therein. The premiums on all these policies were regularly paid by Mr. Morris up to the time of his failure.
    On, or prior to, the 29th April 1875, Mr. Morris became insolvent, and on that day executed to the defendant, Charles E. Morris, a general assignment of all his estate and property in trust for the benefit of his creditors. The assignee took possession, under this assignment, of the Southwark Foundry, with all its contents, and advertised for sale by public auction at the foundry on the 25th June 1875, a large number of the tools, implements and machines contained therein. The catalogues issued by the auctioneer embraced over 1100 items, many of which were, however, articles of finished work, lots of scrap iron and steel, office furniture and other articles which were manifestly personal property and not covered by or subject to the lien of plaintiff’s mortgage. These were, by the agreement of the parties, relieved from the effect of the injunction, and were afterwards sold by the assignee for the benefit of Mr. Morris’s creditors. Nearly 800 items of the catalogue have been in this way eliminated from the controversy, leaving over 800 items remaining in dispute between the parties.
    During the time that Mr. Morris was carrying on the business of the foundry he made alterations and improvements in some of the buildings, and introduced new machinery into the foundry, at a cost of §118,481.86. Much of this new machinery took the place of that formerly in use, and all of it was attached to the freehold except the portable drill presses, harness chains, core-oven carriages, transfer carriages, travelling crane and new truck for main track. The drill presses are operated by being fastened to fixed machinery, and the travelling crane wmighs fifty or sixty tons. The only portion of this new machinery which is included in the catalogue is the core-oven carriages, or some of them, but which of them the testimony leaves indefinite.
    The testimony of several experts was taken as to the character of the machinery, tools and implements claimed by the plaintiffs, and their necessity in or adaptation to the working of the foundry. It is not deemed necessary to refer here in detail to this testimony.
    After the bill in this case was filed, proceedings were instituted by the plaintiffs on their said mortgage, and under these proceedings the premises described in the mortgage were sold by the sheriff, and purchased by the plaintiffs at the sale for the sum of §291,000, and a deed therefor has been duly executed by the sheriff to them.
    The position of the plaintiffs is that all of the remaining articles of the catalogue of sale are covered by the mortgage, and conveyed by it to them as security for the unpaid purchase-money.
    The defendants contended that none of these articles, and indeed no article included in the inventories made by Briggs are covered by the mortgage.
    In support of these claims, the plaintiffs, on the one side, gave evidence to show that the articles claimed by them as mortgaged to them are essentially fixtures of the foundry, that many of them are parts of fixed machines, or constructed to be used by and in connection with fixed machinery; that others are made for special classes of work done by the establishment; that others, although tools used by the workmen, and unconnecti ;1 with fixed machinery, are of such a character that the foundry could not be carried on without them, or without making and substituting for them articles of the same kind and description; that others, such as patterns, flasks, drawing-boards and tables, and. trucks, are essential and necessary for such an establishment, without which the business could not be prosecuted or even started; that all of these articles are not only useful but requisite for the conducting of the business sold to Henry G. Morris by the plaintiffs; that if a majority of them were removed from the foundry it would be impracticable to execute a single order, and that while a few articles of a certain character might be removed without serious detriment, yet the removal of a few of the others would render it impossible to run the establishment for a single day.
    On the other hand, the defendants gave evidence to show that certain of the catalogued articles — namely, all such as are not physi- ■ cally fastened to the premises, or a necessary component part of some machine so attached to the premises, are not constituent parts of the Southwark Foundry; that while many of the other articles are absolutely essential to the running of the business of that foundry profitably and economically, -many others are not necessary 'for that purpose ; and that nearly all of the articles claimed by the plaintiffs could be removed, and yet the premises would be technically a foundry.
    The defendants also insisted that the deed, mortgage and bill of sale in evidence, plainly show the intention of the parties to have been to grant on the one part and mortgage on the other only the land, buildings and such fixtures as were permanently attached to the freehold; that they treated all else as personal chattels, not included in the deed or mortgage, by the execution of a bill of sale and their memoranda at the end of the inventories; and that no parol evidence can be considered which tends to vary the legal effect of these papers, nor can the agreement of sale be examined to ascertain the intention of the parties, as that was merged in the papers afterwards executed in pursuance of it.
    As to this the plaintiffs insisted that all 'the evidence given for the purpose of showing what the parties actually intended to accomplish by the execution of the papers is proper for consideration, and that this question of intention being an important one in determining this case, it is essential to a conclusion upon it to know not only what the parties did, but what they said in making their agreements and in executing the papers necessary to carry these agreements into effect.
    The questions of law were discussed at great length by the master, his findings, in brief, being as follows :
    “ 1. As respects the position of the parties. The fact that Henry G. Morris has made an assignment for the benefit of his creditors to the other defendant, Charles E. Morris, can have no effect on the rights of the plaintiff. The assignment is his own voluntary deed, to which they were neither parties nor privies. The assignee merely represents him, not the creditors. He stands ‘ on the foot’ of his assignor, is bound by his agreements, and is affected by all the equities which existed against the property in the hands of the assignor, enjoying his rights and no others : Twelves v. Williams, 3 Whart. 485; Vandyke v. Christ, 7 W. & S. 373; Mellon’s Appeal, 8 Casey 121. This case must therefore be considered as if it were simply between the plaintiffs on .the one side and Henry Gr. Morris on the other. In other words, it is a case between mortgagor and mortgagee.
    “ 2. As to the question whether the articles claimed by the plaintiffs are fixtures, irrespective of the evidence as to the intention of the parties to include them in the mortgage as security to the plaintiffs for the unpaid purchase-money. The articles claimed by the plaintiffs as included in their mortgage (with some slight exceptions) were placed by the owners in the various shops composing the Southwark Foundry for permanent and habitual use in the virork of that foundry, and very nearly all of them have been actually used in it. I can have no doubt of the intention with which they were placed here. Many of them were made especially for the purpose for which they are used. None of them were put there temporarily. All of them were intended to perform some part of the operations of the foundry, and the weight of the evidence is that the business there carried on cannot be carried on as it has been without them. One of the defendants’ experts, Mr. Longstreth, testified that if he were to purchase this foundry as a unit, for a lumping sum, with the intention of continuing the same business, he would expect to get from the vendors everything which they had in use while they conducted the business. There can be no question about the fact that every piece of machinery, implement and tool placed in this foundry was so placed with the intention that it should remain there and not be used for any purpose not in connection with the business of the foundry, so long as it answered, or could be made, by repair and otherwise, to answer the purpose designed.
    “ 3. As to the question of the intention of the parties to include the articles claimed by the plaintiffs in the mortgage executed to them as security for the unpaid purchase-money. It is not necessary in the present case to decide that the mortgage would, as against a judgment or execution-creditor of the mortgagor, be held valid for the benefit of the plaintiffs and to the extent claimed by them, for there is no such creditor to assert any rights against them. Here the question, as already said, arises between the original parties to the transaction, and the effect to be given to their agreement is not influenced by any considerations which might arise if other liens had been acquired, or the rights. of third parties had intervened. My conclusion from the evidence in this case is, that the parties intended and agreed to include in the mortgage which the plaintiffs should receive, as a security for the unpaid purchase-money, all the machinery, tools, implements and appliances contained and used in the foundry which they sold and conveyed to Mr. Morris, or in the words of Mr. Briggs, ‘ everything that was necessary for the carrying on of the work in its regular way at the Southwark Foundryand that this intention was carried into effect by Mr. Morris in the execution by him to the plaintiffs of the mortgage in question, which must in equity be taken, as against him and his assignee, to cover and include all these articles which he thus intended to convey to them as their security. Any other conclusion must, as it seems to me, be inequitable and unjust.”
    The master reported the form of a decree wherein the defendants were perpetually enjoined “ from selling or removing from the Southwark Foundry any of the machinery, fixtures or property mentioned in the catalogue of sale issued by the assignee,” except certain enumerated articles. And further ordered that the assignee pay the costs. A number of exceptions were filed to these findings which the court dismissed, and confirmed the report. The defendants then took this appeal, their numerous assignments of error being in brief, that the court erred in holding that the sale to Morris was a sale of the Southwark Foundry as a unit for a gross sum; in admitting the parol testimony to show what was covered by the mortgage; in deciding that it was the owners’ intention to annex the articles to the manufactory was the true test whether they were fixtures or not; in holding that the assignee cannot be permitted to deny that the land, buildings and fixtures mentioned-in the deed and mortgage were those of the Southwark Foundry ; in deciding that the bill of sale manifestly included things which were granted by the deed as real estate; in holding that certain enumerated articles are parts of the machinery necessary for carrying on the business of the Southwark Foundry, and therefore covered by the mortgage; in deciding that it was proper and necessary to look beyond the papers and instruments to ascertain the intent not to vary these instruments, but to reach the real meaning of those who executed them.
    In deciding that all of the items of the catalogue of sale, except certain articles numbered, are, by the agreement and intention of the parties to the said mortgage, part of the machinery and fixtures contained in and appurtenant to the premises first therein mentioned and described, and necessary for the carrying on of the business there conducted; that they were, according to that agreement and intention, conveyed to the plaintiffs by the said mortgage, as' security to them for the unpaid purchase-money, and that they must, therefore, in equity, be treated as included in said mortgage, and subject to its lien, and in not dissolving the injunction.

      Henry J. McCarthy and William A. Porter, for Charles E. Morris; and Lewis Wain Smith, for Henry G. Morris.
    It would seem clear from all tho facts, and under the authorities, that when the parties separated in tho execution of the papers between real and personal estate, and conveyed the one by deed and took a mortgage upon that, the transfer of the other by the bill of sale and inventories operated as a severance of all that was included in those inventories and turned it into personalty Ewell on Fixtures 310 ; Begbie v. Fenwick, L. R. 8 Ch. App. 1075, n. (1866); s. c. 24 L. T. (N. S.) 58; 25 L. T. (N. S.) 441; Folsom v. Moore, 19 Maine 252; Fortman v. Goepper, 14 Ohio St. 558.
    It is most confidently urged, therefore, that the intention of the , parties is to be ascertained from the written instruments. The court below erred in not applying that simple test, and in not deciding that the articles of the catalogue claimed by the appellees passed to Henry G. Morris, and through him to his assignee, as personal property, and are not covered by tho mortgage.
    When a contract has been reduced to writing, evidence of conversations of previous negotiations cannot be given in opposition to the written memorandum. The latter must be understood as the expression and final understanding of the parties: Monongahela Navigation Co. v. Fenlon, 4 W. & S. 208 ; Mumford v. McPherson, 1 Johns. 418; Vandervort v. Smith, 2 Caines 161; Fortman v. Goepper, 14 Ohio St. 558.
    The Southwark Foundry was not mortgaged eo nomine, or as a manufactory. This is a matter of much moment in this case. It is an admitted fact that neither the deed nor the mortgage make any reference to the Southwark Foundry. The word manufactory, or its equivalent, is not to be found in either paper.
    The natural inference to be deduced from the facts is, that the parties had no intention of mortgaging anything but real estate. If they had intended to mortgage those things which belonged essentially to the Southwark Foundry as a manufactory or engineering establishment, instead simply of conveying the land by metes and bounds, they would have used some general word in the instrument to carry that intention into effect. Even if the Southwark Foundry had been mortgaged eo nomine, such a mortgage would not pass to the appellees the thousand loose tools, patterns, goods, and chattels in the foundry.

      Gfeorye Junhin and Alexander Henry, for appellees.
    This is a matter of contract rather than of lion. An assignee for the benefit of creditors is not a purchaser: Kent, Santee & Co.’s Appeal, 6 Norris 165. He claims through his assignee, and his rights rise no higher: Ritter v. Brendlinger, 8 P. F. Smith 68 ; Missimer v. Ebersole, 6 Norris 109; Luckenbach v. Brickenstein, 5 W. & S. 145.
    Testimony was not offered to alter or contradict the words of the mortgage. It was not to show that no machinery or fixtures were “contained in and appurtenant to the premises,” but what those words were intended to cover by the parties to the instrument.
    ■Parol evidence may be given to explain a written agreement, so far as to give locality and identity of the subject-matter, and apply the contract to it: Bertsch v. Lehigh Coal and Nav. Co., 4 Rawle 130 ; Nixon v. McCallmont, 6 W. & S. 159; Gould v. Lee, 5 P. F. Smith 99; Clarke v. Adams, 2 Norris 309; Greenwalt v. Kohn, 4 Id. 375.
    In the present case, it will be seen that the whole “ establishment” was a unit, composed of its various and complicated parts. The various machines and tools, and implements, whether actually fast or loose, were as the master finds them to have been as a matter of fact, essential to the integrity of the foundry. And while, in very many instances, it could exist and be carried on as a foundry without them, yet it would not then have been the foundry which was sold by the Messrs. Merrick & Cope, and which II. G. Morris pledged to them for the balance of the purchase-money.
    The vendor and mortgagees are entitled to hold their whole security in its integrity.
   Mr. Justice Mtcecub

delivered the opinion of the court, May 5th 1879.

The appellant is an assignee in trust for’the benefit of creditors. He is, therefore, the mere representative of his assignor, enjoying his rights only, and is bound where he would be bound: Wright et al. v. Wigton, 3 Norris 163.

The contention here is to be considered solely as between Henry G. Morris, assignor, of the one part, and the appellees of the other part. No rights of subsequent purchasers or of creditors are involved. The main question is, whether the parties to the mortgage, at the time of its execution, intended it to cover the property now in controversy. The master found they did so intend. The court, with slight modification, confirmed the finding and decreed accordingly. Although numerous errors have been assigned, they all relate to this one. The court below having agreed with the master as to the facts, their conclusion should not be reversed unless error therein is reasonably apparent.

When not restrained by any technical rule of law, a court should so interpret a contract as to give effect to the true intention and understanding of the parties when it wras executed. ' While parol evidence may not, as a general rule, be received to contradict or vary the written terms in which the contract was expressed, yet such evidence of the existing and surrounding circumstances may be given to aid in ascertaining the true intent of the parties; Hence it may be admitted to explain a written agreement, so far as to give identity to the subject-matter and apply the contract to it: Bertsch v. Lehigh Coal & Nav. Co., 4 Rawle 130; Barnhart v. Riddle, 5 Casey 92; Jackson v. Litch, 12 P. F. Smith 451.

The relative rights of the parties in the present case to the property in controvery, arose under the following general circumstances: -The appellees were the owners and occupiers of a large manufacturing establishment called “ Southwark Foundry,” in the city of Philadelphia. In fact it was an extensive engine manufactory, covering a whole square of ground, with large and substantial buildings, including a machine shop, brass and iron foundry, boiler shop, smith shop, pattern shop, carpenter shop, drawing room and erecting shop, with the requisite machinery, tools and appliances for carrying on these various but connected branches of business. By written agreement, dated the 31st October 1870, they declared that Henry G. Morris had purchased from them all said property and business, and they agreed to convey the same to him on the 31st December next following by good and lawful deeds, assignments and transfers ; and also a certain stable and other lot of ground, in the contract described, for the sum of $480,000. Morris also agreeing to purchase the stock and materials which the appellees might have on hand, on said 31st December, at a valuation to be ascertained. That on the delivery of the deeds and transfers he should pay $40,000, and the remaining $440,000 in ten annual instalments, with interest, the payment thereof to be secured by “ a purchase-money mortgage of all the real estate above mentioned, with the fixtures and appurtenances.” On the day designated therefor the deeds, transfers and mortgage were duly executed and delivered. The mortgage describes the lands as they are described in the deeds “ together with the buildings and improvements thereon, with all the machinery, engines, boilers, railroad tracks and fixtures contained in or appurtenant to the premises.”

Inasmuch, however, as a written instrument or bill of sale was also executed by the appellees, transferring to Morris some of the articles now in contention, it is claimed that the mortgage was not intended to cover them. The correctness of this view depends on what did the parties understand to be fixtures ? Physical annexation to realty is not necessary to convert a chattel into a fixture. Whether it bo such depends much on the business for which the premises are used. Articles necessary or convenient in the transaction of one kind of business, would be useless in another. If the article, whether fast or loose, be indispensable in carrying on the specific business, it becomes a part of the realty : Voorhis v. Freeman, 2 W. & S. 116; Pyle v. Pennock, Id. 390; Ege v. Kille, 3 Norris 333.

It is shown that the property in question, except some few articles that Morris afterwards added, was used by the appellees in carrying on the business in which they were engaged. They considered the several items necessary for that purpose. They agreed to sell, and Morris agreed to buy, at the same time and by the same instrument, the premises and business in which the articles were used,-with the articles themselves. As the appellees had used, and appropriated, and treated as fixtures, as a necessary part of their extensive manufacturing establishment, so they sold it, and so Morris bought it. It was sold as a whole and bought as a whole. The gross sum of $480,000 was the consideration for the whole. The fact that when the papers were subsequently executed, the consideration was divided and part put in the deed and part in the bill of sale, cannot change the character of the sale. Whatever had ■received the impress of a fixture could not by this act be so dissevered as to prevent the lien of the mortgage from attaching thereto. Whatever Morris afterwards added as necessary to the business and used as such, in like manner became fixtures, and were equally bound by the mortgage.

' It is manifest that although the property sold, as well as the property mortgaged, was composed of various parts, yet those parts were united in their operations, and were intended to be used, and were actually used, in effecting one general purpose. The “ purchase-money mortgage” to secure the' unpaid portion of the purchase-money, was intended to cover all the property purchased in connection with the premises. As the rights of no third persons have intervened, there is’no legal impediment in the way of giving full effect to the contract, and we thereby prevent the true intent of the parties thereto from being thwarted. The learned judge committed no error in enjoining against the removal.

Decree affirmed, and appeal dismissed at the costs of thé appellant.

Justices Trunkey and Sterrett dissented.


source: Caselaw Access Project

author: Chief Justice Sharswood Mr. Justice Woodward

license: Public Domain

text:
    Daly versus Maitland.
    1. The attorney’s fee for collection usually inserted in mortgages, is rather in the nature of a penalty than of liquidated damages, and may be reduced at the discretion of the court.
    2. Robinson v. Loomis, 1 P. If. Smith 78, overruled.
    January 16th 1879.
    Before Sharswood, C. J., Mercur, Gordon, Paxson, Woodward, Trunkey, and Sterrett, JJ.
    Error to the Court of Common Pleas, No. 2, of Philadelphia county: Of July Term 1878, No. 2.
    Scire facias sur mortgage by Henry Maitland against Henry M. Daly and others, executors of John Daly, deceased.
    The mortgage was for $14,000, dated May 6th 1871, for five years, between John Daly and Henry Maitland. John Daly having died before the commencement of the suit the writ was issued against the executors and trustees under his will after the maturity of the mortgage.
    The pleas were nil debet and payment.
    The mortgage contained the folllowing clause, “ and provided also, that it shall and may be lawful to and for the said Henry Maitland, his heirs, executors, administrators and assigns, when and as soon as the principal sum hereby secured shall become due, * * * to sue out forthwith a scire facias upon this indenture of mortgage, and to proceed therein to judgment and execution for the recovery of the whole of the said principal debt, and all interest and taxes due thereon, together with an attorney’s commission for collection, viz.: five per cent, besides costs of suit without any stay, any law or usage to the contrary notwithstanding.”
    On the trial after the offer of the mortgage in evidence, the defendants admitted plaintiff’s claim for the principal of the mortgage and interest, but resisted his claim for five per cent, commission on the principal of the mortgage.
    The defendants submitted the following points, which the court, Mitchell, J., refused:
    1. That the plaintiff is entitled to recover upon the mortgage above the amount of the mortgage and interest, a reasonable attorney fee for the collection of the mortgage, and what is a reasonable fee must be proved by plaintiff to recover it.
    2. That the plaintiff is entitled to recover under the mortgage sued on only a reasonable attorney fee, in addition to the amount of the mortgage and interest.
    The court charged as follows:
    ‘ The plaintiff is entitled to recover the full amount of his debt covenanted in the mortgage to be paid, including the five per cent, upon the amount of the mortgage debt for collection — that being expressly stipulated for in the mortgage to be paid on a contigency which is admitted to have happened.”
    The verdict was for $14,862.40, which included interest and the five per cent, commission. After judgment, the defendants took this writ and assigned for error the refusal of the foregoing points, and the portion of the charge noted

      G. H. Gross and T. J. Barger, for plaintiffs in error. —
    The agreement of the mortgagor is to pay the five per cent, for a specific purpose, the compensation of counsel in the event of a suit, and only what is reasonable for that purpose should be allowed. Where the principal sum is large, as in this case, five per cent, is unreasonable. The amount fixed should be regarded as a penalty to secure the payment of a reasonable sum to be determined by a jury. The court evidently regarded the commissions in the nature of liquidated damages: Faulkner v. Wilson, 3 W. N. C. 339; Streeper v. Wilson, 12 Wright 450. Woods v. North, 3 Norris 407, is directly in point.

      J. Hodman Paul and A. Sidney Biddle, for defendant in error.
    —That these commissions are not a penalty, but in the name of liquidated damages is res adjudícala: Robinson v. Loomis, 1 P. F. Smith 78.
    The result of reversing the judgment of the court below would be to destroy the value of the Affidavit of Defence Law as applied to mortgages; for it would always be in the defendant’s power to insist that the jury should determine the amount of the attorney’s commission for collection: Moller v. Ohse, 5 W. N. C. 510; Schmidt’s Appeal, 1 Norris 524; Faulkner v. Wilson, supra.

   Chief Justice Sharswood

delivered the opinion of the court, March 17th 1879.

In Huling v. Drexel, 7 Watts 126, it was decided by this court that a stipulation in a mortgage that in the event of the necessity of proceeding to recover the mortgage by suit, the mortgagee shall be entitled, in addition to the debt and interest, to damages for cost and expenses incident thereto, was not usurious, and might be enforced in the scire facias. In consequence of this decision, it has become common to insert a provision not only in mortgages, but notes and other instruments for the payment of money, that the creditor, in the event of being obliged to resort to a suit, shall recover a certain percentage as commissions to the attorney who is retained by him to collect the debt. This commission, it has been held, does not belong to the attorney, but to the creditor. It cannot be collected as costs, but must be included in the judgment: Mahoning County Bank’s Appeal, 8 Casey 158; McAllister’s Appeal, 9 P. F. Smith 204; Faulkner v. Wilson, 3 W. N. C. 339; Schmidt & Friday’s Appeal, 1 Norris 524. In Robinson v. Loomis, 1 P. F. Smith 78, it was ruled that such commission was not a penalty, but an agreed compensation to the mortgagee for expenses incurred by the default of the mortgagor.

It is undoubtedly true that the parties to a contract may lawfully agree that the damages in case of a breach shall be liquidated at a certain amount. Equity will not relieve against such a contract, fairly entered into, unless it is evidently a penalty. This principle of liquidated damages is not applicable, however, to a contract for the loan of money — at least such stipulation is subject to the control of courts of equity. As in the days of Solomon, “ the borrower is servant to the lender,” and courts of equity, from the earliest period, have assumed the jurisdiction of relieving the borrower from unreasonable and oppressive stipulations, exacted from his necessities, altogether apart from the statutes against usury. Especially has this always been the case as to mortgages. Agreements embarrassing or restraining the equity of redemption have invariably been set aside. The stipulated commission for the attorney may be so far beyond the ordinary rate charged for such services as to require imperatively the interposition of the equitable powers of the court. Equity has always been a part of the law of Pennsylvania. In the administration of equitable principles, it is the court and not the jury who exercise the functions of the chancellor, even where the action is in the common-law form. The jury, like the same tribunal in an issue directed by the chancellor, decide disputed facts, but it is the court that must be satisfied and apply the equity on the facts found or undisputed. If they think an equitable title to relief not made out by the proofs, it is their duty so to direct the jury, and contra, if they think the equity has been established. These rules are so familiar and well settled that it would be a work of supererogation to cite the numerous cases which support them.

We think these principles apply to the questions raised upon this record. The lender of money on any species of security cannot exact an unreasonable stipulation in the shape of an agreed liquidation of damages. Equity interposes her shield to protect the borrower. The debtor in cases of this kind will readily yield to the demand of the creditor, as he would be apt to regard collection by suit as a remote and improbable contingency. Even at law wiiat is reasonable is often indeed a question of fact, but in many cases it is a pure question of law. Thus, notice of the non-payment of a promissory note, though it was at first submitted to the jury to decide whether it was within reasonable time, is now unquestionably the exclusive province of the court; so it is now held that after a lapse of seven years an abandonment of a title by settlement is a conclusive presumption of lawr. No court has ever thought of sending an issue to a jury to determine what is reasonable compensation to trustees. They would be a tribunal entirely unsafe to intrust with such a question. These decisions have been reached by the necessity of certainty in the rules in such cases. Many other illustrations could be given. It is important unless wre are prepared to say that the lender may stipulate for any amount as commissions for the collection of his debt, that there should be some more certain rule than could be reached by submitting every case to a jury. It would practically in a great number of cases have the effect of destroying the stipulation altogether. If the question must in every case be referred to a jury, the creditor will abandon the claim sooner than encounter the delay, and the risk of a very small sum being allowed. The court, from practical knowledge of professional work, are able to say in every particular case what ought to be the compensation or rate of commissions for collecting a debt by suit. Whatever is stipulated beyond a reasonable rate should be relieved against upon equitable principles. Certainly no certain commission can be determined upon to be applied to all cases. As responsibility as well as labor and skill is involved, in reason and the usage of the profession, it depends upon the amount collected, but not absolutely so. If there should be no defence to the mortgage, or other instrument of writing for the payment of money, the court, in giving judgment, can decide whether the stipulated rate is too large, and enter judgment for what is right. Should, however, a defence be set up in whole or in part, and the case necessarily go to a jury, it would be the province of the court to instruct the jury what, under all the circumstances, should be allowed, of course not exceeding the agreed rate.

It does not appear by the paper-books that there was in this case any rule for judgment for want of an affidavit of defence, though it does appear that there was no other defence than the amount of the collection fee. Had there been such a rule, the court should have decided the question, and not have sent the case to the jury. We think the learned judge below was right in refusing to leave it to the jury to determine the rate of commission, but he was wrong in instructing them to find the full amount agreed upon. Five per cent, upon $14,000, in other words $700, was far beyond what was reasonable, even in view of the fact that the defendant below had interposed a defence against the commission, and that the case might be carried by writ of error to this court. We think even under these circumstances, two per cent, would have been an ample and liberal allowance, and the jury should have been so instructed. In general, this court will not review the exercise of a sound discretion by an inferior court upon such a question, and the presumption will always be in favor of their decision unless it is plainly excessive, or, as appears to have been the case here, founded on the mistaken idea that they had no equitable power to interpose and moderate the agreed amount.

Judgment reversed, and venire facias de novo awarded.

Mercur, J., dissented.

Mr. Justice Woodward

filed the following concurring opinion:

So long as contracts stipulating for the payment by debtors of the expenses of litigation incurred by their creditors, shall be held to be within the policy of the law, the rule that has prevailed hitherto ought to be maintained. That rule has been to treat the amount of collecting fees agreed upon as stipulated damages, and not as a penalty. The agreements of parties should be carried out except where, in affidavits of defence or in trials of causes, circumstances of oppression or injustice should be affirmatively disclosed, or an attempt to evade the usury laws should be indicated. In every such instance, the question as to the amount of the allowance should be settled by a jury. Scarcely any case could arise in which some element of fact outside the instrument in suit would not enter. And an inquiry into doubtful and complicated facts would be fréquently indispensable. The judges of the eourts ought not to be required to assume a duty of this sort.

Acquiescing in the action of the majority of the court in reversing the judgment, I would refer the question in controversy to the determination of a jury.


author: Mr. Justice Gordon

text:
    Humane Fire Company’s Appeal.
    1. The assets of a corporation organized for charitable purposes are held in trust for the public, and cannot, like the assets of a trading corporation, be distributed, upon its disssolution, among the members thereof.
    2. A fire company is such a charitable organization, and upon its disso-' tion to distribute its assets among the members is a perversion of the trust for which these assets were contributed by the public.
    3. To entitle members of a fire company in Philadelphia to avail themselves of the provisions of the Act of May 28th 1872, providing for the dissolution of such companies and the distribution of their assets, they must show they have complied with all the provisions of the statute.
    January 17th 1879.
    Before Sharswood, C. J., Mercur, Gordon, Paxson, Woodward, Trunkey and Sterrett, JJ.
    Appeal from the Court of Common Pleas, No. 2, of Philadelphia county: Of July Term 1878, No. 27. In Equity.
    This was a bill in equity, filed by one Joseph E. Smith and Francis Jordan, “ and such others as agreeing to contribute to the expense of this suit, may become parties thereto,” against “James McCullough, John M. Melloy, George W. Plumley and John A. Franks, holding forth as members and officers, and acting under color of the name and style of the Humano Fire Company of the City and Liberties of Philadelphia, and also the Humane Fire Company of the City and Liberties of Philadelphia,” to recover two shares, to which they alleged themselves to be entitled as members in the property, real and personal, of the defendant corporation, which it was further set forth had in part been converted and divided among the other members thereof.
    The material portions of the bill will be found in the opinion of this court. The answer of the defendants denied that plain tiffs were members of the corporation. The case was referred to a master, who reported that Smith was a member of the corporation at the time of the above-mentioned distribution, and that he was entitled to a distributive share thereof, and made a decree that defendants should pay him $2713.38. The court dismissed the exceptions filed to this report and confirmed the same. From this decree this appeal was taken. It appearing that Jordan never was a member, the bill as to him was dismissed.

      N. II. Sharpless, for appellants.
    The court below appears to have assumed, in the face of both reason and authority, that upon the unlawful seizure of the property of the company by the members, they changed the title to it to themselves and held it in partnership, and are under a liability to account to each other for it. As there is no pretence of the corporation voluntarily parting with the title to this property for value or lawfully making a gift of it, how is it possible that the mere manual caption of it vested title to it in the defendants and their fellow members. Suppose the charter had been forfeited or they had surrendered it; this was not a money or a trading corporation; it was neither more nor less than a charity, and upon dissolution its personalty went to the Commonwealth: Angell & Ames on Corporations, sect. 779; Riddell v. The Harmony Fire Co., 8 Phila. R. 310-13; Commonwealth v. The Hibernia Engine Co., 1 W. N. C. 187; Thomas v. Ellmaker, 1 Parsons’s Select Equity Cases 98. The principle contended for is recognised in the Act of May 28th 1872, Pamph. L. 1872, p. 1171,. providing for the surrender of the charter and dissolution of these fire companies and distribution of their assets upon terms and conditions, with which there is no allegation or proof of compliance in-this case.

      Henry McIntyre and David W.- Sellers, for appellees.
   Mr. Justice Gordon

delivered the opinion of the court February 3d 1879.

The bill in this case sets forth “ that the Humane Fire Company of the City and Liberties of Philadelphia, one of the defendants, is an incorporated company in the city of Philadelphia, and that the other defendants are and were members and officers thereof. That the plaintiffs were for many years, and still are, honorary members of the said corporation. That the property of said company consisted, inter alia; of a steamer, hose, hose-carriage, horses and harness, real estate, stock in thé Fire Association and other property, in all of the value of $50,000.”

“ That the said Humane Fire Company and the other defendants, members of said company, have, to wit: In the year 1871, sold part of the stock, namely: steamer, hose, hose-carriage, horses, &c., necessary for the corporate purpose and business, and are about giving up their organization and disbanding, and have illegally and frauduíently distributed and set over certain shares of stock of the Fire Association, and other property, of great value, to wit: of the value of $20,000; the property of said company, to and among’ the said members, defendants and others, other. than your orators, and are threatening to sell the real estate of the said company defendant, situate in the city of Philadelphia, and so, as aforesaid, distribute and divide the proceeds of said real estate and other property of said company, to and among the said members, defendants and others, other than your orators.”

Then follows the averments that the plaintiffs are severally entitled, in law and equity, to a full equal part and share of said property with the other members of said corporation, and that the defendants have refused, and still do refuse, to divide with the complainants.

Next come the prayers : 1st, for discovery and account; 2d, that the defendants be decreed to pay, distribute and divide, to and with the complainants and each of them, the value of the said shares of stock and proceeds of said sales, in a fair and equal ratio with the other members of the said company; 3d, that the defendants be decreed to return to the said company the shares of stock illegally distributed, or pay to the company the value thereof, and that they be restrained from selling the real estate; and 4th, and last, that the complainants bo decreed to be members of the company defendant, that the distributions made be declared illegal, and that said company be directed to collect, recover and receive the stock of the Fire Association so, as aforesaid, illegally distributed, or the value thereof in money.

The master found that Joseph E. Smith, one of the complainants, is now and was, at the time of the distribution above mentioned and set forth, a member of the Humane Fire Company, and as such entitled to a distributive share of its estate and property, and thereupon reported the following decree which was adopted by the court, to wit: “ That of the assets distributed by the Humane Fire Company of the City and Liberties of Philadelphia, there is due the plaintiff the sum of $2713.38. That the defendants, the Humane Fire Company of the City and Liberties of Philadelphia, John M. Melloy, George W. Plumley and John A. Franks, pay to said plaintiff the said sum hereby adjudged to be due him.”

It would thus seem to have been assumed that the defendants, co-members of the company with the plaintiff, had disposed of and used to their own profit and advantage, property in part belonging to the plaintiff, and that for such part not only they but the company must account. Now if this assumption be correct, then is the conclusion also correct; but if it be so that this property belonged to the company and not to its memhers, then is this conclusion wrong and the decree founded upon it is also wrong. This is not a trading corporation designed to make money for its shareholders, whose money has purchased its property and in which property every such shareholder has a right, proportioned to the amount of his contribution, but it is a charity, incorporated as a public benefaction, and it consequently holds its property, which has been contributed by the public, in trust for that public. There are no shareholders in companies of this kind, and if any contributions have been made to this company by the members thereof, they were made as gifts and donations for the public good, and these members themselves are but trustees and agents to carry into effect this charitable organization. That a voluntary association of individuals, who have contributed funds for a purely public purpose, will be regarded as a charity was ruled in Thomas v. Ellmaker, 1 Pars. 98; and that such association has been incorporated alters neither its design nor nature, but only gives it a legal status which it would not otherwise possess. Such being the case, it is very clear that when the members of this company undertook to divide among themselves the corporate property, they did so without right. At that time they had no shadow of title in that property, and but for the act passed May 28th 1872, Pamph. L. 1171, never could have such title. That act, in effect, donates the property of the corporation to such as may be members thereof when it is dissolved, but in order to produce this result the terms of the statute must be complied with, and without such compliance, the corporate members acquire nothing. It follows that Smith had no property in the assets of the Humane Eire Company, and if the respondents, wrongfully and without right, appropriated such assets, the wrong done was to the corporation and not to him, and so he has no personal redress. The company is in full life and ought to be both able and willing to take care of its own affairs. If there were no other obstacle in the way of the plaintiff, this would be an insuperable one, for he is endeavoring to set up and enforce a corporate right in his own favor and for his own purposes; this cannot be done. Neither can he, as he now stands, maintain this bill for the company; for as is said in Grant on Corp. 73, it is a rule in equity that a suit by an individual shareholder of an incorporated company complaining of an injury to the corporation, cannot be maintained if it appears that the plaintiff has the means of procuring a suit to be instituted in the name of the corporation itself; and this rule is held to apply equally whether the subject-matter of complaint be an act or transaction which is merely voidable at the discretion of the majority of shareholders, or an act or transaction absolutely illegal and incapable of being confirmed by a majority. Of course, the rule here announced must apply with equal or greater force to public charities where the individual member has no personal interest in the corporate assets. Now, from the bill, which we have under consideration, it does not appear that the plaintiff ever attempted to procure the corporation to move in this matter, or ever required it to take the necessary steps to recover the property of which it was despoiled: yet, as we have seen, this was a sine qua non to the plaintiff’s right to act for it.

It has been urged, by the learned counsel for the plaintiff, that this-was but a division by the corporation of certain of its assets among its members, a power belonging to all corporations, and that the defendants wrongfully possessed themselves of the plaintiff’s share and so may he compelled to account. This would apply, in some cases, with much force to trading corporations, but not to a charity, for a charity has no property which it can thus dispose of. It is but a trustee for the public and to give its assets to its members would be a perversion of such trust.

It follows, that in no view of this case has the plaintiff any standing to maintain his bill.

The decree of the Court of Common Pleas is reversed and vacated, and the plaintiff’s bill is dismissed, and it is ordered that he pay the costs.


author: Mr. Justice Paxson

text:
    Girard Life Insurance Co., versus City of Philadelphia.
    Complainants, who were the mortgagees of certain premises, purchased the same at sheriff’s sale, under a foreclosure ; they tendered the water-rent for one year on each of said premises to the water department, which was declined, on the ground that there was three years water-rent in arrears, with penalties, and notice was given complainants, that unless said arrears were paid, the water supply would be cut off from said premises, under the authority of the ordinance of March 22d 1862. Complainants filed a bill to restrain the city from such action. Held, that they had no equity to restrain the city, and that payment of all the arrears due before the sheriff’s'sale could be enforced in the mode prescribed by the ordinance. Held, further, that while the neglect of the water oilieials to enforce the ordinance may make them personally liable to the city for any loss by such omission, such neglect could not be taken advantage of by the water tenant or one claiming under him.
    January 17th 1879.
    Before Sharswood, 0. J., Mercur, Gordon, Paxson, Woodward, Trunkey and Sterrett, JJ.
    Appeal from the Court of Common Pleas, No. 2, of Philadelphia county: Of January Term 1878, No. 213. In Equity.
    Bill in equity filed by the Girard Life. Insurance Annuity and Trust Company, against the City of Philadelphia and the Chief Engineer of the Water Department. The facts will be found fully stated in the opinion of this court.

      John J. liidgway, Jr., for appellants.
    Under the provisions of the ordinance of March 22d 1862, it is made the imperative duty of the officials of the water department, in case of the non-payment of water-rent due for any year on the first day of September, to immediately detach the ferrules from the delinquent premises. These arrears would have had no existence if these officials had done their duty.

      O. JE. Morgan, Jr., Assistant City Solicitor, and W. JV West, City Solicitor for the city.
    If the city officials are delinquent, their superior authorities may call them to account, but their failure to do their duty furnishes a tenant with no ground of complaint.
   Mr. Justice Paxson

delivered the opinion.'of the court, May 7th 1879.

This was a bill in equity, filed by the Girard Life Insurance Annuity and Trust .Company, against the City of Philadelphia, and the Chief Engineer of its Water Department, praying for an injunction to restrain the defendants from cutting off the water supply to certain premises which said company had purchased at sheriff’s sale in the year 1876. The bill sets forth that the complainants had tendered the water-rent for one year upon each of the said premises respectively, which was declined, and they were informed by the water department, that water-rent for three years was due on each, together with a penalty of fifteen per centum, and that unless said arrears, with the penalty were paid, the water supply would be stopped under the authority given by the ordinance of March 22d 1862. The complainants refused to pay, and filed this bill for the purpose of preventing the city from stopping off the water. The defendants demurred to the bill, but subsequently withdrew the first six causes of demurrer, whereupon it was agreed that the bill and demurrer should stand as a case stated.

This is a very inartificial mode of stating a case, and is not to be commended. A case stated should consist of a clear statement of the facts upon which the court is asked to pronounce judgment. The forms- of equity pleading are not appropriate; and were not intended for such purposes as this.

The complainants concede the complete power of the city to make ' any conditions precedent to supplying the citizens with water. The -supplying of water and gas to a city is not a municipal duty. Hence, when the city undertakes to do so, it acts, not by virtue of any rights of sovereignty, but exercises merely the functions of a private corporation: Western Saving Fund Society v. The City, 7 Casey 175; Wheeler v. The City, 27 P. F. Smith 338. The introduction of water by the city into private houses is not on the footing of a contract, but of a license which is paid for : Smith v. The City, 31 P. F. Smith 38. It may very well be that when a license has been given by the city to the owner of a house to use the water, Such license may not be withdrawn arbitrarily, or from mere caprice. But it is equally clear that the city may adopt such rules in regard to the use of the water and the payment therefor, as the municipal authorities shall deem expedient. All this is admitted by the complainants. Their contention is, that while councils may so legislate, they have not done so, and that the ordinance of March 22d 1862, does not authorize the water department to demand from them more than the water-rent for one year as a condition of supplying their premises with water.

The ordinance referred to is as follows: “ That all water-rents shall be payable to the Register of Water-rents at his office annually in advance on the second Monday of January; and upon all •water-rents upaid upon the 1st day of May in any year there shall he charged the sum of five per centum, and upon all rents unpaid on the 1st day of July in any year, there shall be charged an additional sum of ten per centum; and if such rent, with the said additional charges, shall remain unpaid on the 1st day of September in any year, the said register shall notify the chief engineer of the water-works of the names of such delinquents, who shall cause the ferrules of all such delinquent water-tenants to be detached from the pipe of conduit, and suit be instituted for the recovery of such rent; and after such ferrules shall have been detached, the water shall not again be supplied or furnished to the said premises except upon payment of all arrears of water-rent, and the sum of $2 for expenses incurred; and a printed notice, containing the first section hereof, shall be left upon the premises.” There is, of course, no personal liability on the part of complainants to pay these arrears of water-rent. They concede the right of the city to turn off the water for the non-payment of one year’s rent immediately preceding the sheriff’s sale, but that as to the prior years, the city having neglected to enforce the ordinance according to its terms, and allowed the rent to accumulate, cannot now cut off the supply of water for its non-payment. It has been gravely argued that because the city indulged some of its water-tenants, and did not turn off the water when it might have done so, it has lost the right to do so as a means of enforcing the payment of the arrears thus allowed to accumulate. This is an extraordinary proposition, and unless it is supported by the terms of the ordinance referred to, cannot be sustained. I find nothing in the ordinance to justify such a conclusion. It provides that the names of all water-tenants who shall be delinquent on the 1st day of September shall be furnished to the chief engineer, whereupon that officer shall cause the ferrules in all such cases to be detached; and that thereafter the water shall not be again supplied to said premises except upon the payment of all arrears of water-rent. What is meant by “ all arrears of water-rent ” ? The complainants contend that it refers to the rent of the one year only. There is nothing in the ordinance to warrant such a conclusion. It clearly means all arrears up to the time of detaching the ferrules. The case was argued upon the theory that the ferrules are to be detached upon the 1st day of September. The ordinance does not say so. It does not designate the time when the names of delinquents are to be furnished to the chief engineer, nor when the latter shall cut off the ferrules. Undoubtedly it was intended to be done within a reasonable time after the first of September; yet the provisions of the ordinance are merely directory, and may be waived by the municipal authorities. The water-tenant has no right to complain that he has been indulged, and additional time given to pay his rent before the city resorted to the harsh measure of stopping off the water from his premises. As well might a mortgagor refuse to pay his arrears of interest because his easy creditor had allowed them to accumulate. Conceding this to be so, it is alleged that these complainants occupy a better position as purchasers at a sheriff’s sale; that as to them there can be no such arrears of water-rents because the city “forbids them to exist.” I am unable to see that the rights of the complainants rise any higher than those of the water-tenants, to whom they have succeeded. They have no standing to complain that the city did not enforce its ordinance strictly. The city owed no duty to protect the mortgages of the complainants, and hence as to them could be guilty of no neglect. Nor were complainants misled. The water department is open to all, and any purchaser at a judicial or other sale can readily ascertain if the water-rent is in arrear. But it is said the complainants were in one sense involuntary purchasers; that they were compelled to buy to save their mortgages. This, if true, gives them no equity. At most, it proves that they have made a bad investment, a misfortune they share in common with many other corporations and individuals, the result of great and unexpected shrinkage in values.

With equal reason might a mortgagee complain of arrears of taxes which are sometimes allowed to accumulate on the property mortgaged. For the last few years this has been a more serious peril to mortgagees than the accumulation'of water-rents. The analogy between the cases is believed to be complete, for while, in the latter instance, there is the ordinance referred to for detaching the ferrules, ■ yet, as before stated, that provision was intended solely for the benefit of the city, and not for the water-tenants or their mortgagees. Both evils may be avoided, in my opinion, by a provision in the mortgage, that at stated periods in each year the mortgagor shall produce to the mortgagee the evidence of the payment of taxes and water-rents, and that default in such payment shall make the mortgage-debt become due and payable, with a scire facias clause, as in the case of the non-payment of interest on the mortgage. Indeed I am informed that this is now done in many instances.

It is not true, in point of fact, that the city has limited the amount of arrears of water-rent necessary to be paid by a purchaser at sheriff’s sale to one year. No such limitation is to be found in the ordinance of March-22d 1862, or elsewhere. In the absence of any such restriction, the right of the city to detach the ferrules-for the non-payment of all arrears cannot be successfully questioned.

As before said, the ordinance fixes no precise time when the ferrules shall be detached. - The water-rent is payable annually in advance, and the water may he cut off at any time after the 1st of September. The neglect of the chief engineer to enforce the ordinance may make him personally liable to the city for any loss in consequence of such omission. The water-tenant, however, who receives the benefit of the indulgence, cannot complain; nor can a purchaser of his title at a judicial sale, for the reasons already given. . Judgment affirmed.

Sharswood, C. J., and Gordon, J., dissented.