Summary
suggesting that the result in that case would have been different if the mortgagee had relied on the presence of the items when taking the mortgage
Summary of this case from In re SchultzOpinion
No. 83-369
Decided July 3, 1984
1. Property — Fixtures — Generally A chattel loses its character as personalty and becomes a fixture and part of the realty when there exists an actual or constructive annexation to the realty with the intention of making it a permanent accession to the freehold, and an appropriation or adaptation to the use or purpose of that part of the realty with which it is connected.
2. Property — Fixtures — Generally If a chattel becomes an intrinsic, inseparable and untraceable part of the realty, it is deemed a fixture regardless of the intent of the parties.
3. Property — Fixtures — Generally The classification of a chattel, as either personalty or a fixture, is dependent upon the relationship between the owner of the realty and the person who claims an interest in the chattel.
4. Property — Fixtures — Ownership Where defendants, intended buyers of a house, had purchased and installed certain items in the house after the execution of the owner's last mortgage to the plaintiff bank and prior to a foreclosure sale, the defendants having entered into a purchase and sale agreement with the owner but a closing not having taken place, the items in dispute, which consisted of the kitchen cabinets, storm doors and lighting fixtures, were deemed personalty between the owner and the defendants since implicit in the master's report was the finding that the defendants did not intend to make the items a permanent accession in the event the purchase and sale agreement did not close.
5. Vendor and Purchaser — Purchase and Sale Agreements — Remedies Where seller has defaulted under a purchase and sale agreement, purchaser has the right to remove items of personalty installed by the purchaser in the subject premises, or ask for restitution.
6. Property — Real Property — Transfer of Mortgaged Property Generally, a mortgage deed conveys the same title to the mortgagee as the mortgagor had.
7. Property — Fixtures — Ownership Unless and until items added to mortgaged premises by intended buyers became the property of the mortgagor, by contract or accession, the mortgagee under a pre-existing mortgage had no claims on those items.
8. Property — Fixtures — Ownership Where defendants, intended buyers of a house, had purchased certain items and installed them in the house after the execution of the owner's last mortgage to the plaintiff bank and prior to a foreclosure sale, the defendants having entered into a purchase and sale agreement with the owner but a closing not having taken place, the supreme court held that the trial court was correct in finding that the items in dispute were personalty belonging to the defendants if the items, which consisted of the kitchen cabinets, storm doors and lighting fixtures, could be removed from the realty without material damage to the premises, since the items were deemed personalty between the owner and the defendants, where the defendants had not intended to make the items a permanent accession in the event the purchase and sale agreement did not close; since the owner of the home as mortgagor had never become owner of the disputed items and therefore the plaintiff, as mortgagee under pre-existing mortgages, had no claim on the items; and further, since the plaintiff had not relied on the presence of the items when taking the mortgages.
Stebbins, Bradley, Wood Harvey P.A., of Hanover (Blair C. Wood on the brief), by brief for the plaintiff.
Clauson, Smith O'Connell, of Hanover (Daniel G. Smith on the brief), by brief for the defendants.
The Superior Court (Johnson, J.), on the recommendation of the Master (Walter Murphy, Esq.), declared that the defendants were entitled to remove certain items from real estate owned by the plaintiff. The plaintiff appeals, and we affirm.
The facts are as follows:
On May 1, 1981, the defendants entered into a purchase and sale agreement with Benjamin Porter, Sr., d/b/a Porter Homes (Porter) for the sale of real estate and the construction of a house thereon for $102,000. At the time of the agreement, the property was subject to two mortgages to the Dartmouth Savings Bank (which later merged with the plaintiff), in the amounts of $20,000 and $25,000. After the execution of the agreement, Porter subjected the property to three additional mortgages to the Dartmouth Savings Bank in principal amounts totalling $50,000.
On December 4, 1981, Porter recorded, without notice to either the plaintiff bank or the defendants, a deed transferring the property from Porter to the defendants. No closing occurred, however, because the defendants' financing institution refused to advance loan funds due to the extent of the encumbrances against the property.
On December 10, 1981, the defendants moved into the premises with the approval of Porter, although no closing had taken place. On March 9, 1983, the plaintiff foreclosed Porter's mortgages and purchased the house and land at the foreclosure sale. The items in dispute — the kitchen cabinets, storm doors and lighting fixtures — were purchased by the defendants and installed in the dwelling at the defendants' expense, after the execution of Porter's last mortgage and prior to the foreclosure sale.
On May 16, 1983, the plaintiff petitioned the court for injunctive and declaratory relief, seeking to determine title to the disputed items and to enjoin the defendants from removing those items from the real estate.
After a hearing on the request for temporary injunction, the master found that, since the plaintiff had taken the mortgages without reliance on the presence of the disputed items and was notified prior to the foreclosure sale of the defendants' claims, the items should be deemed personalty if they could be removed from the realty without material damage to the premises and if the defendants agreed to repair any damage which might result. The plaintiff appealed, arguing that the superior court erred in finding the items personalty and not fixtures.
[1, 2] A chattel loses its character as personalty and becomes a fixture and part of the realty when there exists "an actual or constructive annexation to the realty with the intention of making it a permanent accession to the freehold, and an appropriation or adaptation to the use or purpose of that part of the realty with which it is connected." Dana v. Burke, 62 N.H. 627, 629 (1883) (emphasis added). However, if a chattel becomes an intrinsic, inseparable and untraceable part of the realty, it is deemed a fixture regardless of the intent of the parties. WO Co. v. Benjamin Franklin Corp., 562 F.2d 1339, 1345 (1st Cir. 1977); Haven v. Emery, 33 N.H. 66, 68 (1856).
[3-5] The classification of a chattel, as either personalty or a fixture, is dependent upon the relationship between the owner of the realty and the person who claims an interest in the chattel. Tibbetts v. Horne, 65 N.H. 242, 246, 23 A. 145, 147 (1889). Between Porter and the defendants, the items in dispute would be deemed personalty. Implicit in the master's report is the finding that the defendants did not intend to make the items a permanent accession in the event the purchase and sale agreement did not close. Thus, in a case such as this, where the seller has defaulted under the purchase and sale agreement, the purchaser has the right to remove the property, Waters v. Reuber, 16 Neb. 99, 105-06, 19 N.W. 687, 690 (1884), or ask for restitution, Petrie-Clemons v. Butterfield, 122 N.H. 120, 127, 441 A.2d 1167, 1171-72 (1982).
[6, 7] We are therefore faced with the question of whether the plaintiff, as mortgagee, has greater rights against the defendants than would the mortgagor. Generally, a mortgage deed conveys the same title to the mortgagee as the mortgagor had. See Flynn v. Nashua Fed. Sav. Loan Ass'n, 118 N.H. 84, 85, 382 A.2d 628, 628 (1982). Unless and until the items become the property of the mortgagor, by contract or accession, the mortgagee under a pre-existing mortgage has no claims on these items. See Cochran v. Flint, 57 N.H. 514, 543 (1877). In this case the mortgagor never became the owner of the disputed items; Porter did not buy the items pursuant to the purchase and sale agreement. Rather, the defendants bought the items and installed them at their own expense.
Additionally, the plaintiff did not rely on the presence of the items when taking the mortgages. See Tibbetts v. Horne, supra at 246-47, 23 A. at 147-48; Haven v. Emery, supra at 69-70 (when mortgage is executed after the affixing of chattel to the property, notice to the mortgagee plays a role in determining the classification of the chattel); see also WO Co. v. Benjamin Franklin Corp. supra.
We hold that the superior court was correct in finding that the items in dispute were personalty belonging to the defendants if the items could be removed from the realty without material damage to the premises.
Affirmed.
All concurred.