First National Bank of Joliet v. Adam

28 N.E. 955, 138 Ill. 483, 1891 Ill. LEXIS 1151

• Court: Illinois Supreme Court
• Decided: October 31, 1891
• Status: Published

Opinion

Mr. Chief Justice Magruder

delivered the opinion of the Court:

The appellant claims, that the decree was erroneous in allowing such portions of the proceeds of the sale under the first trust deed, as belonged to notes numbered 2, 3, 4, 5 and 6, to-be applied upon Biebling’s indebtedness to Pilcher, rather than .upon Biebling’s indebtedness to the Bank. It is contended by appellant, that the 15 notes of $1000.00 each, secured by the trust deed of March 5, 1883, were originally delivered to the Bank to secure its indebtedness then existing, or thereafter to exist, against Riebling; that the Bank permitted Riebling to take six of these notes numbered from 1 to 6 inclusive in order that he might sell them, if he could, and apply the proceeds of the sale on his indebtedness to the Bank, the notes to be returned to the Bank in case there was no sale; that Riebling thus obtained the six notes burdened with a trust in favor of the Bank, and had no right to pledge them as collateral security to another creditor. It is conclusively shown that note no. 1 was paid and cancelled, and we see no reason why appellee, Pilcher, was not entitled to hold the other notes as collateral security for the payment of Riebling’s indebtedness to him.

The Bank permitted Riebling to take the notes in question from its possession. Pilcher had no notice that Riebling held the notes in trust to make sale of them for the Bank. He held judgment notes for nearly $3000.00 against Riebling, and threatened to enter up judgments upon them, unless additional security was furnished. Thereupon Riebling delivered to him notes numbered 2, 3, 4 and 5, secured by said trust deed, as such additional security. The same state of facts exists in regard to the delivery of note no. 6 to Robisson to secure the claim which he afterwards assigned to Pilcher. The 15 notes were payable at different times, three of them running as long as five years. The trust deed provided that they were to stand equally secured, no one to have priority over the others in the application of the security.

Riebling denies the statement of the president of the Bank that he agreed to return the notes in the event of a failure to sell them, or that the proceeds of their sale were to be applied upon his "indebtedness to the Bank; he claims that the notes belonged to him, and that he had a right to dispose of them as he did. After note no. 9 was sold to Maria E. Dillman, the proceeds were placed to Riebling’s credit in the Bank, and by him checked out in due course of business. When he took the notes in question, it would appear that the eight notes left with the Bank were regarded as sufficient security for the indebtedness then existing, the makers of the paper endorsed by Biebling not having failed at that time to pay. But we do not deem it necessary to determine whether Biebling did or did not obtain the notes in the manner stated by the officers of the Bank. Even if they were so obtained, Pilcher received them from Biebling in good faith before their maturity as collateral ■security for a bona fide indebtedness, without notice of the terms on which the Bank parted with them; and, as the holder of them, he is entitled to share in the proceeds of the sale. The correctness of this .conclusion is further sustained by the admission of the Bank, that the six notes, executed afterwards •on August 19,1884, and secured by the trust deed of that date, were received from Biebling by the Bank, as security for its indebtedness, in the place and stead, of the six notes, secured by the trust deed of March, 1883, which the Bank had permitted Biebling to take from its possession. We also think that the amount which was decreed to be paid to the appellee, Pilcher, was correct as between him and the Bank.

The appellant further objects to the decree below upon the alleged ground, that it allows the appellee, Hyde, too much rent for the water-power used by the Des Plaines Biver Paper Mill, situated on lots 2 and 3 in block 37, as described in the trust deed of March, 1883. Under the lease from Hyde to Biebling of August 1, 1881, all the rent was paid up to February 1, 1887. The court decreed that the receiver should pay Hyde, out of the rents received from the receiver’s lessee, the sum of $10.00 per horse power for 132 horse power from February 1, 1887, that is, at the rate of $1320.00 per year. "The original lease from Hyde to Biebling provides for the payment of $1500.00 per year, but counsel for both sides seem to concede that the amount to be paid should be at the rate •of $10.00 per horse power. The question then is, how much power was furnished P The water and water power were not, io exceed 150 horse power. It seems that before August 1, 1886, a dispute arose between Hyde and Biebling as to the amount of power furnished, and they agreed upon 100 horse power, or $1000.00 per year. By the latter date, however, improvements and changes were made by which a greater quantity was furnished, and Hyde claimed the full rental of $1500.00 per year, and only received less under protest. Biebling admits that after August -1, 1886, more than 100 horse power was furnished, and Hyde swears that 132 horse power was furnished after February 1,1887. The Court acted npon this proof in making the allowance to Hyde, and we see no reason for disturbing the decree in this regard.

But the questions of most difficulty in the ease arise under the second trust deed of August 19, 1884, and the leases of 1877 and 1879 from Adam to Biebling. These questions relate to the conflicting claims of the appellant as mortgagee, and of Adam as lessor, to the property described in the second trust deed. It is contended on the part of the appellee, Adam, that he had an equitable mortgage or 'lien by virtue of the lease of July 9, 1877, upon the buildings, machinery and attachments comprising The Joliet Paper Mill; that appellant was affected with notice of such lien because the lease was recorded as early as October 10,1878, and because appellant’s trust deed put it upon inquiry by describing Biebling’s interest as a leasehold interest; and, furthermore, that the appellee, Adam, was entitled to hold the property levied on under his distress warrant, because he thereby reduced the same to possession before appellant took any action under his trust deed, or his judgments.

On the other hand, it is contended on behalf of the appellant, that it obtained a first lien upon the leasehold interest of Biebling and upon the mill and buildings and machinery comprising the Joliet Paper Mill, by virtue of its trust deed Hated August'19, 1884, and recorded the next day.

Leaving out of view for the present the portable or movable-personalty in the mill and its buildings, or upon the demised premises, which was taken under the distress warrant, the question arises, what was the character of the property mortgaged by the trust deed as to its being realty or personalty ?

When Adam’s lease to Biebling was made on July 9, 1877,. no paper mill or buildings had yet been constructed, but the stone foundations of an old mill were on the property with the race-way, flumes, gates and appurtenances for water power-ready to be attached. The upper part of the mill was built upon these stone foundations, and the lower part rested partly upon stone foundations built upon the ground, and partly on posts planted in the bed of the river; the upper part was 30 by 40 feet and had two stories; the lower part was 24 by 90 feet and had one story; connected with or joined to the latter, and resting upon the ground, was a building used as a bleach-room ; there was also a store house built upon posts standing in the ground. The paper machines, boilers, etc., were all attached to the structure. The mill, with its buildings and! machinery, was> erected and in operation on August 19, 1884, when the trust deed was executed. Such buildings and machinery cannot be regarded otherwise than as fixtures. The structures were affixed to the land in such manner as to be a part of the realty, and, although it may have been possible for the tenant to remove them, they constituted a part of the freehold until severed therefrom. (Wood’s Landlord and Tenant, sec. 527.) The mill and buildings and the machinery all formed a part of the leasehold estate; with the lease, they were chattels real. (Griffin v. Marine Co. of Chicago, 52 Ill 130; Conklin v. Foster, 57 id. 104; Dobschuetz v. Holliday, 82 id. 371.) Therefore, they were the proper subject matter of a real estate' mortgage; and the trust deed created a valid mortgage lien upon them in favor of appellant as the holder of the notes secured thereby.

Was the lien thus created by trust deed subject to any prior lien thereon under the lease of 1877 ? ' The record of that lease, although it was not acknowledged, undoubtedly operated as notice to subsequent purchasers and incumbrancers of the existence of the lease, and of the rights of the lessor thereby conferred. (Willoughby v. Lawrence, 116 Ill. 11.) But did the lease itself by its terms give the lessor, Adam, a lien upon the buildings, machinery and fixtures, comprising the paper-mill, which were thereafter erected upon the premises by Riebling ?

Independently of the provisions of the lease, a landlord in this State has no common law lien upon the property of his tenant for rent; and he has no statutory lien except as to growing crops. (Herron v. Gill, 112 Ill. 247; Morgan v. Campbell, 22 Wallace, 381.) The clause in the lease in this case, which is said to give the lessor a lien, is the following: “Meaning and intending hereby to give the said party of the first part, his heirs, executors, etc., * * * a valid and first: lien upon any and all goods, chattels or other property belonging to the said party of the second part, as security for the payment of said rent,” etc. There is no statement in express terms, that the buildings to be erected are to be subject to alien for the rent. The solution of the question, whether or not the lease gave a lien upon the mill property already described, depends upon the construction to be given to the words: “all goods, chattels or other property.” Does the expression, “or other property,” cover and include the mill buildings, machinery and fixtures ? The clause, in which this expression occurs, follows immediately the clause, which authorizes the landlord to distrain for his rent upon any property belonging to the tenant, whether exempt by law from execution or distress, or not. In this State, only personal property can be distrained for rent. (Rev. Stat. chap. 80, sec. 16; Taylor’s., Landlord and Tenant, sec. 592; Kussing v. Keohane, 4 Brad., .461; Morgan v. Campbell, supra.) The most natural appliea-. tion of the word, “other, ” as here used, is to refer it back to the words, “goods, chattels, ” -which immediately precede it. 'The expression, “or other property,” would seem to have been intended to designate such other personal property as might1 ■be the subject matter of a distress for rent. Under the rule of construction, that “general and specific words, which are •capable of an analogous meaning, being associated together, take color from each other, so that the general words are restricted to a sense analogous to the less general,” (Misch v. Russell, 136 Ill. 22,) the general words, “or other property,” would be restricted to a meaning analogous to the meaning of the words, “goods” and “chattels,” and, consequently, would not embrace such property as fixtures or chattels real, partaking more of the nature of realty than personalty,

f But if this construction is not correct, the words, “or other property, ” are too indefinite, as a description of after acquired property, to charge third persons with notice of an equitable mortgage thereon. (Winslow v. Merchants’ Ins. Co. 4 Metc. 306; Moody v. Wright, 13 id. 17; 1 Jones on Mtges. sec. 528; Wait v. Smith, 92 Ill. 385.) The rule that the description must be sufficiently specific to afford third persons the means of identifying the property refers to chattel mortgages, as well as to mortgages of land. (Jones on Chattel Mtges. secs. 54 and 55 ; Rhutasel v. Stephens, 68 Iowa, 627; Hutton v. Arnett, 51 Ill. 198.)

In Webster v. Nichols, 104 Ill. 160, which was a controversy between the lessor on the one side and the tenant and an assignee of the tenant on the other side, and not a controversy, as is this one, between the lessor and a mortgagee of the tenant, the lessor was permitted to enforce in equity a lien reserved by the lease upon the buildings erected by the tenant after the execution of the lease; hut, there, the lease provided in express terms, that the rent should he “a valid and first lien upon any and all buildings and improvements on said premises, or that may at any time be erected, placed or put” thereon by the. tenant. But, in the case at bar, the language reserving the lien can only be made to apply to buidings to be erected in the future by a forced or strained construction. The words, “belonging to the said party of the second part, ” do not necessarily refer to future ownership, but to that existing at the date of the lease. It is not clear, that the lease reserves a lien upon after acquired property. The only clause in the lease, which could be construed as pointing to the future erection of such buildings, is that which provides for the payment of the taxes on the land by the lessor, and on the buildings by the lessees. But the indefiniteness of the description contained in the words, “or other property,” is not- cured by carrying those words back and connecting them with the provision in regard to the taxes.

In Borden v. Croak, 131 Ill. 68, we have recently held that, where the terms of a lease provided for “a valid and first lien for said rent accruing and to accrue upon the property of the person or persons liable therefor, ” there was no reference thereby to after acquired property, but that, if such language could be held to include subsequently acquired property, it was not sufficiently definite and certain to create a lien thereon.

It is urged, however, on the part of the appellees, that the lease itself treats the lessor as the owner of the real estate and the lessees as the owners of the mill, and, by providing for the, payment of the taxes on the mill by the tenants, characterizes it as personal property. If it were true, that the provision in the lease in regard to the taxes indicated an intention, or agreement between the lessor and lesseps, to regard the improvements as personalty, such intention or agreement could have no effect upon the rights of third persons; it could not; as to them, convert what the law regards as a part of the realty into personal property. In Dobschuetz v. Holliday, supra, we said: “Whatever may have been the private agreement of the parties, it is very clear the engine when set up and attached to the realty, as it was, became a part of the estate the lessee had in the premises. No doubt the parties could agree among themselves they would treat the engine and other fixtures as personalty, but their private agreement could not change the character of the property so far as third parties were concerned.”

We do not understand that the doctrine of the Holliday case is opposed to the views expressed in Sword v. Low, 122 Il. 487. In the latter case an engine and boiler, attached to the realty so as to be capable of removal without injury to either, was held to have retained its character as personalty by reason of the agreement of the parties to that effect, even as against subsequent purchasers or incumbrancers. But, there, the agreement of the parties was made manifest by a chattel mortgage upon the boiler and engine, which was executed,. acknowledged and recorded as required by the statute, and' thereby notice of the personal character of the articles attached was given to third persons. Here, however, the lease was not acknowledged and recorded in accordance with the chattel mortgage Act, and hence the. appellant, as holder of the trust deed, was not bound to take notice of any intention manifested by the terms of the lease to treat the fixtures as personalty. Even a chattel mortgage does not create a lien on personal property brought into existence after its execution, as against creditors or purchasers. (Webster v. Nichols, supra.)

For the reasons thus stated, we are of the opinion that the appellee, Adam, acquired no lien upon the mill, buildings, machinery and fixtures, which was superior to the lien of appellant’s trust deed. All the fixtures and articles taken under the distress warrant and turned over to the receiver, were sold by the latter for $3500.00, and, by agreement of the parties, their rights in this money were to be determined the same as though the property had remained in its original condition. So much of the money as represents the proceeds of the sale of the buildings, shed, storehouse, machines and engines and their attachments,-oil-tanks, iron pulleys, boiler pump and attachments, and all belting, gearing, shafting and pulleys should be applied to the payment of the" indebtedness secured: by the trust deed. But the appellee, Adam, was entitled to' hold all the other articles, such as the desks, chairs, stove, barrels of resin, etc., belonging to Biebling, which he seized. and reduced to possession under his distress warrant; and so. much of the fund, as represents the proceeds of the sale of: these articles, should be applied to the payment of Biebling’s indebtedness to Adam for rent.

It is further claimed by the appellant, that the decree of the Circuit Court in favor of the appellee, Adam, was for too large an amount. The amount due Adam upon both leases ■of 1877 and 1879 was $1908.67 for rent accrued up to January 1, 1886. For this amount the distress warrant was levied, and for this “amount judgment was rendered in the distress proceeding. The trial court not only rendered a decree .for $1908.67, but also for $1255.00 being the accrued rent upon both leases from January 1, 1886, to June 25,1887, the latter being the date of the sale to Adam for $3500.00.

The contention of the appellant is, that Adam levied his warrant not only on the detached personalty, but also on the buildings, machinery and fixtures; that the levy upon the latter was improper, as they were a part of the realty; that, in making the levy, Adam took possession of the buildings and machinery, and locked the doors, and prevented the operation of the mill by Biebling; that this conduct amounted to an eviction of Biebling; that the latter was thereby deprived of the use of the demised premises, and, therefore, not liable for rent after March 5, 1886, the date of the seizure under the distress warrant; hence, that the decree was erroneous as to the $1255.00. The rent from January. 1, 1886, to March 5, 1886, was properly allowable, as accruing before the levy, under appellant’s own theory. Appellee, Adam, contends on the other hand, that there was no eviction; that the lease was in force; and that the tenant was liable for all the rent until the lease was cancelled by the sale.

Counsel on both sides have submitted learned and able arguments upon this branch of the case as to what constitutes eviction, and as to the right to levy a distress warrant upon fixtures treated as personalty by the parties to the lease. We do not deem it our duty to pass upon any of these questions, as it is unnecessary to do so in order to decide this case. The-decree for rent was in favor of Adam and against BieblingThe latter is the only party entitled to complain, and he is not-here assigning errors. It is true, that the Circuit Court held, the buildings, machinery and fixtures to be subject to a lien-under the leases, and, so, decreed the whole amount found to-be due to Adam to be paid out of the $3500.00. If the decree-in this regard were to stand, then appellant might be interested in having the amount of Adam’s decree reduced, in order that the Bank might receive a larger proportion of the: $3500.00. But in view of the conclusions which we have announced upon this branch of the case, it is a matter of no-concern to the appellant, whether the amount decreed to be due from Riebling to Adam is great or small. The lessor,.. Adam, had no lien upon the detached personalty under his lease,which was not acknowledged and recorded as required by the Act in regard to chattel mortgages, but his right to the proceeds of the sale of such personalty was due to the fact, that he took it under his distress warrant. The amount, for-which the distress warrant was levied, and for which judgment was rendered in that proceeding, to wit: $1908.67, was the-only amount, due to Adam, to the payment of which the detached personalty levied upon could be applied. It was only the rent accrued up to January 1, 1886, and not the rent accruing after that time, that was to be made by the levy of ther distress warrant. No part of the rent represented by the sum-of $1255.00 was embraced in the judgment in the proceeding-by distress warrant. Under the statute, where the tenani abandons the demised premises, growing crops may be seized whether the rent is due or not. (Rev. Stat. chap. 80, sec. 33.) But otherwise, property cannot be taken under a distress warrant, except for rent due. (Asay v. Sparr, 26 Ill. 115; Hare V. Stegall, 60 id. 380; Harms v. Solem, 79 id. 460; Johnson v. Prussing, 4 Bradw. 575).

In the case at bar, the record shows, that the detached personalty was levied upon on March 15, 1886, under the executions issued upon appellant’s judgments, and on August 12, 1886, under the executions issued upon Pilcher’s judgment,, both of these levies being subject to the levy under the distress warrant made on March 5, 1886. Therefore, if the portion of the $3500.00, which represents the personal property, not attached to the realty and levied upon by Adam, is more-than sufficient to pay the $1908.67, the surplus is to be applied first to the payment of appellant’s judgments, and next to the payment of the judgment of the appellee, Pilcher. Such surplus cannot be applied to the payment of the $1255.00 in preference to the executions which were subject only to Adam’s distress warrant for $1908.67. It follows, that it is unnecessary to disturb the decree below in so far as it found Rieblingto be indebted upon the lease to Adam for $1255.00, because the Bank, the only appellant here, has no right to complain of' the decree in this respect. Hence, the judgment of the Appellate Court was erroneous in reversing the decree below as to said sum of $1255.00. , The judgment of the Circuit Court was also erroneous in awarding the appellee, Adam, a lien upon the mill buildings, machinery and fixtures under his leases.

The costs of this Court will be divided between appellant and the appellee, Adam.

The decree of the Circuit Court and the judgment of the Appellate Court are reversed, and the cause is remanded to the Circuit Court for further proceedings in accordance with, the views herein expressed.

Judgment reversed.