... Indeed, the Supreme Court of Maine said, "A special agreement may conclusively determine the question [of intention]."5 Annexation-To take on the characteristics and properties of realty, a chattel must be "annexed" to the real estate or something appurtenant thereto. Annexation may be (1) the physical incorporation of the item into the structure, the screwing or bolting down, or (2) "constructive" annexation such as a connection by wire or pipe with the realty, or, as in the case of a rail fence, solely by force of gravity." Adaptation-Outweighing annexation as a factor in determining whether an item qualifies as a fixture, adaptation to the use or purpose to which the realty is devoted is largely, in the last analysis, a matter of opinion. The tenor of the relatively few decisions on this point indicates that there must be a peculiar adaptation. For instance, built-in home equipment not only meets the test of annexation, but is conclusive evidence of its peculiar adaptation to the use and purpose of the realty. It clearly is specially planned for that particular home. Movable items, however, such as washing machines on casters, vacuum cleaners and similar items, many times fail to meet this test. Some other questions arise where items such as refrigerators and stoves are not "built-in."8 Some courts hold that since they are usually stock items for general trade, they are not specially designed for the building, and hence ! in the absence of a special agreement do not fully meet the test of adaptation. Adaptation is closely interrelated with the intention of the parties. It will be seen that the tests of annexation and adaptation are not really separate and distinct at all, but rather are components of the overall test of intention. The intention test is comprehensive and all-embracing. UST AS INTENTION is the paramount J and controlling factor in ascer taining whether a given item is a fixture, an express agreement of the annexor is the principal evidence of intention.10 Thus it is that in deciding the crucial question of intention the full importance of the package mortgage comes into play. By specific enumeration of affixed household equipment as part of the realty to which the coverage of the lien extends, the package mortgage unmistakably supplies the major evidence of intention, which intention is the paramount and controlling test of whether such articles are fixtures. For built-in home equipment the package mortgage furnishes conclusive evidence of intention in addition to that inferable from the actual annexation and adaptation of such items. For other equip "Hayford v. Wentworth, 54 A 940 (Me. 1903). "In Holt v. Henley, 232 U.S. 637 (1914), the court commented that in view of the great changes modern appliances have made in the American way of life, courts should not continue to attach "mystic importance to attachment by bolts and screws." "Leisle v. Welfare Building and Loan Assn., 232 Wis. 440, 287 NW 739 (rollaway bed, 1989); Glueck & Co. v. Powell, 61 SW (2d) 406 (Mo. 1933) (refrigerator connected by electric cord); General Heat & Appliance Corp. v. Goodwin, 54 NE (2d) 676 (Mass. 1944) (heating unit connected to fuel pipe and air ducts); Fuson v. Whitaker, 190 SW (2d) 805 (Tenn. 1945) (wall cases); Schmuch v. Beck, 234 P 447 (Mont. 1925) (pole fence); Byran v. Lawrence, 50 N.C. 337 (1858) (loose floor planks); In Cumberland Power & Light Co. v. Hotel Ambassador, 183 A 132 (Me. 1936), the court said, “It is not necessary that the chattel be physically annexed to the realty at all times. The annexation may be constructive or actual." See Note, 109 ALR 1424. 'Madjes v. Beverly Development Corp., 251 N.Y. 12, 166 NE 787. "Indeed," says Kratovil, writing in 97 U. of Pa. Law Rev. 180, "adaptation and mode of annexation are now frequently regarded as not separate tests at all, but as circumstances throwing light on the question of intention." 1o See discussion in Thuma v. Granada Hotel Corp., 269 Ill. App. 484 (1933) (package mortgage and purchase money chattel mortgage). For agreement overriding a statute, see Garnett v. Mankel 163 P (2d) 466 (Cal. 1945). Also 7 ALR 1578. ment such as ranges and refrigerators, the owner's intention that such items are attached as fixtures and are to be treated as realty is clearly expressed in the written terms of the mortgage.11 It is our opinion that in practically all jurisdictions,12 most affixed chattels may, by express agreement between the mortgagor and the mortgagee, be made a part of the realty.13 Government agencies have indicated their approval of the advantages of the package mortgage. The VA will accept package loans for guaranty or insurance, provided a proper lien is secured on the various items under the applicable state law. The value of the utilities is included in the official VA appraisal, the only restriction in addition to the lien requirement being that the equipment be of the cost, quality and type called for by the class of home involved. 14 The FHA will include the value of items in the appraised value, provided it is reasonably convinced that the items are commonly treated as part of the real estate in the community and that the mortgage terms set them out specifically as such.15 LTHOUGH WE HAVE set out insofar A as possible what the law of fix tures appears to be, another important factor to be considered is how the law is construed and applied by the courts in a given case. In a controversy over whether an item is or is not a fixture, the relationship of the parties often affects the decision. In cases involving grantor and grantee, vendor and purchaser, mortgagor and mortgagee, the rules for determining what is a fixture are strongly construed by the courts against the first-named parties. Accordingly, courts are usually quite prone to find that chattels annexed to the realty are fixtures so that they will pass with the land. On the other hand, in other controversies where landlord and tenant, owner of fee and conditional sales vendor, owner of fee and life tenant are involved, the courts have consistently relaxed the law of fixtures to permit the tenant and the conditional vendor to remove whatever chattels they may have affixed to the realty.16 For the most part, however, such situations involve the relationship of mortgagor and mortgagee; it may be expected, therefore, that the courts will find few obstacles in holding the home equipment under consideration to be fixtures. The courts seem to try to arrive at intention which is controlling. The owner is presumed to intend to improve his property, especially if he expresses his intention to do so. The tenant is not presumed to intend to make his chattels a part of the landlord's property, even if he attaches them to the house in some way. "The evidentiary value of agreements is, however, not without limitation. See excellent discourse in Madfes v. Beverly Development Corp., 166 NE 787, 251 N.Y. 12. Pure intention, as set forth in an agreement, is not alone sufficient to compel the courts to regard some items as realty; no matter how strong the intention, throw rugs, items of furniture can never be fixtures. The apparent intention, the legal intention, the intention indicated by the physical facts may override the expressed intent of the annexor. See also In re Allen St. and First Ave., 176 NE 377 (N.Y. 1931). In New York, however, due to the courts' rigid application of the doctrine of "inherent chattels," most mortgagees, instead of attempting to characterize mortgaged articles as fixtures, seek to have the real estate mortgage operate also as a chattel mortgage. It has been held that one instrument mortgaging both chattels and real estate may be a valid chattel mortgage as to the personal property included. See General Snyod, etc. v. Bonac Realty Corp., 297 N.Y. 119, 75 NE (2d) 841 (1947). This is also permitted in California, Durst v. Battson, 9 Cal. (2d) 156, 69 P (2d) 992 (1937). 13See Brandt v. Koppelman, 169 Pa. Super. 236, 82 A (2d) 666 (1951); Hill v. Salmon, 236 P (2d) 518 (Wyo. 1951). "VA. TB 4A-95; also 38 USC, Secs. 694 and 694a; see also VA Solicitor's Opinion No. 127-53, July 14, 1953. 15Letter to Architectural Forum from B.C. Bovard, General Counsel of FHA, July 11, 1944. See 12 USC, Sec. 1709. 18 Kelly v. Austin, 46 Ill. 146; Standard Oil Co. v. LaCrosse, etc., 217 Wis. 237, 258 NW 791; Notes, 41 ALR 601, 88 ALR 1114; Swift Lumber & Fuel Co. v. Elwanger, 127 Neb. 740, 256 NW 875. Other Problems Controversies most likely to arise concerning the package mortgage will be actions involving the mortgagee and any one of the following persons: (1) the mortgagor, (2) purchasers of the realty, (3) bona fide purchasers of the home equipment having no notice of the mortgage, (4) judgment creditors, (5) mortgagees holding subsequent chattel mortgages. In the first instance, both parties would be estopped by the express terms of the mortgage contract from asserting that the articles in controversy were, in fact, chattels. In the case of sale of the mortgaged premises, the recordation of the mortgage is, of course, notice to the venIdee that the items of equipment are real estate. Should he remove the fixtures, he would be liable to the mortgagee for damages. The situation where the mortgagor severs a fixture from the real estate, transports it elsewhere and sells it to a bona fide purchaser for value is more serious: the mortgagee has no recourse except against the mortgagor.17 The purchaser's title is good against the world, inasmuch as there is no actual or constructive notice of the mortgage where the item is to all appearances a chattel.18 If, however, it can be shown that the purchaser has actual notice of the mortgage, any title he acquires will be inferior to that of the mortgagee. A subsequent chattel mortgage and a sale of the fixtures while still annexed to the realty raises the question of whether the nature of the article and its attachment to the realty puts the chattel mortgagee or purchaser on notice that the articles may be realty and covered by the lien of a real mortgage. Courts hold that the annexation and adaptation serve to place such parties on inquiry as to whether such items are personalty or realty, and that since the articles are a part of the realty, the real mortgagee has superior rights.19 This reasoning applies also to the judgment creditor. Package items acquired after the recording of the mortgage and the replacement of worn-out items also offer a problem.20 As between the mortgagor and the mortgagee, the package mortage extends the mortgagee's interest to these items. This may be done by express clause in the mortgage instrument, or it may be inferred from the fact that by the lumping of fixtures with the realty in the mortgage, similar fixtures and replacements are also to be considered as such. Subsequent purchasers or creditors also would take an interest secondary to that of the mortgage under the principles discussed earlier. The conditional sales vendor of such items, however, has sometimes been held to have a lien superior to that of the mortgagee, on the ground that the injury to the mortgagee's security is caused by the disposing of the old item, not by the vendor in selling the 17In some states, however (usually title theory states), the mortgagee is permitted to reclaim such articles even when he finds them in the possession of an innocent purchaser. See Note, 97 U. of Pa Law Rev. 180, 210. 18In an effort to prevent such articles from passing into the hands of a bona fide purchaser, many mortgagees as a matter of routine affix a notice on the article itself, stating that it is covered by the real estate mortgage; purchasers of the marked articles would lose their protection if they saw the notice, for they could not qualify as bona fide purchasers. Easton v. Ash, 18 Cal. (2d) 530. 116 P (2d) 433 (1941); First Mortgage Bond Co. v. London, 259 Mich. 688, 244 NW 203; Mortgage Bond Co. v. Stephens, 74 P (2d) 361 (Okla. 1937); Guardian Life Insurance Co. of America v. Swanson, 3 NE (2d) 324 (Ill. 1936); Leisle v. Welfare Building and Loan Assn., 287 NW 739 (Wis. 1939); Chicago Title & Trust Co. v. Waldman, 5 NE (2d) 737 (Ill. 1936). 30See "The Package Mortgage and Optional Future Advances," 65 Harvard Law Rev. 478 at 482 (1952). for a discussion of this question; also Cohen and Gerber, "The After-Acquired Property Clause," 87 U. of Pa. Law Rev. 635 (1939). large cash outlays for home appliances. If the intent of the parties to include certain chattels as a part of the realty is carefully spelled out in the mortgage and if there is no attempt to extend the coverage of the mortgage to freely movable household furnishings or appliances, 23 the benefits accruing to both the mortgagor and the mortgagee will not ordinarily be denied by judicial authority. We advise the mortgagee to decide what may be made a part of the real estate and to take a real estate mortgage and rely upon it. It is obviously contradictory to say that certain articles are a part of the real estate and concurrently to say that they are chattels and take a chattel mortgage. THE OPEN-END MORTGAGE OPEN-END MORTGAGE is a contract rower providing that future borrowings after the original loan may be secured by the original mortgage. It means that once a homeowner has qualified for a mortgage on his property, he is enabled thereafter within varying limitations in the different jurisdictions to increase the amount of his mortgage to cover the cost of modernization or needed improvements, or for other purposes. The open-end form offers advantages material to both parties. To the borrower, it allows modernization on a long-term credit basis, easy payments with no money down, and an economy in or elimination of refinancing costs. To the lender, it offers a large source of additional invest "Holt v. Henley, 232 U.S. 637. Hurathal v. Huræthal, 45 W. Va. 584, 32 SE 237. "Since it is by no means certain that the real estate mortgage alone, even with elaborate fine-print clauses, will afford the mortgagee protection against the removal of readily removable articles, many mortgagees insist that the mortgagor in a package mortgage sign a separate chattel mortgage, which is filed in the chattel mortgage records of the county. Alternatively, the real estate mortgage may be filed in the chattel mortgage records as well as in the real estate records. Use of a separate chattel mortgage is preferable, because it contains a more specific description of the articles. The fine-print clauses of the real estate mortgage are, in many states, considered too vague and general to be valid as chattel mortgages." Kratovil, Real Estate Law, p. 212. security, independently of the will of the mortgagor; and (3) where future advances may or may not be made, depending on the future agreement of the parties. We will not deal extensively with the first, inasmuch as the law appears to be uniform throughout the country: where the lender is contractually obligated to make certain advances, the advances if properly made take precedence over any lien or incumbrance arising after the date of recording of the mortgage,24 and usually even where the prior mortgagee has actual notice of the intervening incumbrance. An example is the construction loan, where in many instances the lender is obligated to disburse funds as the building progresses. In holding that an obligatory advance is a part of the original debt and that the lien relates back to the date the "entire debt" was created, the courts reason that it would be manifestly unsound to hold that even actual notice of a subsequent lien would deprive the mortgagee of his lien for advances which he is compelled to make.25 Neither will we consider extensively the second type of advance, where, by the terms of the mortgage, the mortgagee reserves the right to make further advances or expenditures which are necessary to protect the security or the priority of the mortgage, whether or not the borrower shall request or desire the same. The situation could arise, for example, in a construction loan where the mortgagor has abandoned the work, the mortgagee having the right to protect his interests by making additional expenditures to complete the structure and to have a lien therefor which is superior to intervening incumbrances. Payment of delinquent taxes and assessments and the making of essential repairs often fall within such cases.26 Although the matter has been little litigated, it is clear that in such cases there is a contractual interest which is as entitled to protection as an option to purchase. When such an interest is put on record there is little reason to believe that a subsequent incumbrancer could impair it, irrespective of the mortgagee's notice thereof.27 "Where a mortgagee is obligated, by contract with the mortgagor, to advance funds to be secured by the mortgage, such mortgage will be a valid lien from the time of its recording, as against all subsequent incumbrances, even though the mortgage money is paid to the mortgagor after such subsequent incumbrances have attached to the mortgaged land. This holds true even though the mortgagee is actually aware of the existence of the subsequent incumbrances at the time he pays out the mortgage money. Land Title & Trust Co. v. Schoemaker, 257 Pa. 213, 101 A 335. Because of the mortgagee's obligation to pay out the money, the mortgage debt is regarded as being in existence from the very beginning." Kratovil, Real Estate Law, Sec. 332. 36"A mortgage, duly recorded, given for definite future advances which the mortgagee is obligated to make, is entitled to priority for the full amount of such advances over a subsequent mortgage, recorded after the former one, though prior to the making of such future advances." Connecticut General Life Insurance Co., 101 NE (2d) 408 (Ohio 1950), quoting Kuhn v. Southern Ohio Loan and Trust Co., 101 Ohio St. 84, 126 NE 820. In Schaeppi v. Glade, 195 Ill. 62, the court said, “. where the mortgagee is bound to make the advances, the lien relates back to the date of the mortgage recordation, and is superior to any subsequent lien or conveyance." Other cases upholding the priority of "obligatory" future advances, even where the mortgagor has actual notice: Peaslee v. Evans, 82 N.H. 313, 133 A 448; Brinkmeyer v. Browneller, et al., 55 Ind. 487; Guaranteed Title & Trust Co. v. Thompson, 93 Fla. 983; Chartz v. Cardelli, 52 Nev. 1, 279 P 761; Omaha Coal, Coke & Lime Co. v. Suess, 74 NW 620, 54 Neb. 379; Gerrity v. Warham Bank, 202 Mass. 214; Boise Payette Lumber Co. v. Winward, 47 Idaho 485, 276 P 971; Antrim Lumber Co. v. Claremore Federal Savings and Loan Association, (Okla. 1951) 230 P (2d) 274 (LEGAL BULLETIN, May, 1953); Cedar v. Roche Fruit Co., 16 Wash. 2d) 652, 134 P (2d) 437 (1943); Elmendorf-Anthony Co. v. Dunn, 10 Wash. (2d) 29, 116 P (2d) 253, 138 ALR 558; Hance Hardware Co. v. Denbigh Hall, Inc., 17 Del. Ch. 284, 152 A 130; Land Title å Trust Co. v. Schoemaker, 257 Pa. 213, 101 A 335; Anglo-American Savings and Loan Association v. Campbell, 13 App. D.C. 581; and other cases listed below in table of approximate state positions. "In many instances provision for such advances has been made by statute. See, for example, Sec. 14(3) Colorado B&L Act. "An association may pay taxes, special assessments, insurance premiums, repairs and other similar charges for the protection of its real estate loans. All such payments may .. be added to the unpaid balance of the loan and shall be equally secured by the first lien on the property." See also Sec. 45-54, S.C. Code, where the law uses the words "[Such advances] shall be secured by the mortgage and have the same rank and priority as the principal debt secured thereby..." "One of the most excellently reasoned cases on this subject is Cedar v. Roche Fruit Co., 16 Wash. (2d) 663, 134 P (2d) 437 (1943): Whether advances made under a mortgage are obligatory or optional usually depends upon whether or not the mortgagee is contractually bound to make them; however, |