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A crucial factor from the standpoint the package home are fixtures and, of the mortgagee is the obtaining of therefore, security appropriately ina valid first lien on the improvements cluded in and effectively covered by by their treatment and acceptance by the lien of a real estate mortgage. the courts as a part of the real estate. Three propositions have commonly In each case, the law of the jurisdic- been considered by the courts in maktion governs, although in most cases ing a determination of whether a chatthe listing in the mortgage of the im- tel used in connection with realty will provements as part of the real estate be considered a fixture:8 (1) The inwill suffice to determine their identity tention of the parties concerned to as a part of the real estate and there- make the chattel a permanent annexby assure their inclusion as a part of ation to the realty is conclusive. (2) the mortgage security. Ordinarily, Annexation of the chattel to the realty however, if the payment terms of the or something appurtenant thereto is mortgage have been arranged so as to good evidence of intention. (3) Adapleave a substantial margin of security tation or application of the chattel to at all times, the package mortgagee the use or purpose of that part of the may feel that he need look only to the realty with which it is used or conreal estate for his security.

nected is good evidence of intention. In any such determination, it is Intention—The annexor's intention first necessary to consider the law of that an item is to be considered a part fixtures. A chattel may or may not be of the realty is the most important a fixture, depending on various cir- factor in the determination of what cumstances to be discussed. But only is a fixture.4 This intention cannot be by having identity as a fixture may a a silent or secret intent, but rather chattel become real property and par- one that is demonstrated by the acts take of the character, incidents, and and circumstances surrounding the anproperties of realty.1 If an item can nexation. Although both annexation be properly defined as a fixture, then and adaptation figure in the determiits inclusion in a real estate mortgage nation of intention, i.e., the structure is assured automatically, even without and mode of annexation and the purmention in the instrument.2 The prob- pose or use for which the annexation lem, however, is to discover or predict is made, the most important evidence correctly whether all or any of the of intention is a written agreement exitems of equipment that distinguish pressing the intention of the annexor.


1See 36 CJS, 889-891 ; Thompson, Real Property. Par. 160 (perm. ed.) ; Kratovil, Real Estate Law, Sec. 327 (1962 ed.).

*First National Bank v. Reichneder, 871 Pa. 463, 91 A (20) 277 (1952).

*The leading case is Teaff v. Hewitt, 1 Ohio St. 511, 69 Am. Dec. 634 (1853), 86 CJS 892; Tiffany, Real Property. Par. 607 (3rd ed.): Thompson, Real Property, Par. 162 (perm. ed.). See Fry v. Lost Key Mines, 239 P (20) (Cal. 1952) ; In re Slum Clearance in City of Detroit, 332 Mich. 485, 52 NW (20) 195 (1952).

**The tendency found in the modern decisions is to stress the third test-that of intention-making it controlling where there is doubt as to the effect of the other two"-Dunn v. Assets Rcalization Co., 16 P (20) 370, 371 (Ore. 1932); also Mullins v. Sturgill, 192 Va. 653, 66 SE (20) 483 (1951). "The intent of the party making the annexation of a chattel to realty is the cardinal inquiry in determining whether a chattel so annexed ... is a part of the realty." Becwar v. Bear, 41 Wash. (20) 87, 246 P (20) 1110 (1952). “Of these tests the most important is intention," Rudolph Wurlitzer Co. v. Cohen, 144 A 641, 644 (Md. 1929). "The established rule in this and most jurisdictions is that ... the primary test is the intention of the parties at the time of the transaction and installation, and that proof of adaptability and necessity merely bears on the question of intention," Guardian Life Insurance Co. of America v. Swanson, 8 NE (20) 824, 826 (111. 1936); 36 CJS 894, 895 ; 22 Am. Jur. 718; Thompson, Real Prop. erty. Par. 163 (perm. ed.): Tiffany, Real Property, 606, 607 (3rd ed.); in Cumberland Power and Light Co. v. Hotel Ambassador (Me. 1936), supra, the court said, “If the owner's intention to make chattel part of the realty is duly manifested, the article is dedicated to the realty, and its status as personalty has ceased.” See also Strain v. Green, 25 Wash. (20) 692, 172 P (20) 216 (1946), where it was held that the intention test was an objective one and was to be determined from the nature of the article, relation of the parties, adaptation, mode of annexation and all the surrounding circumstances.


Indeed, the Supreme Court of Maine "built-in."8 Some courts hold that said, “A special agreement .. may since they are usually stock items for conclusively determine the question general trade, they are not specially (of intention]."5

designed for the building, and hence AnnexationTo take on the char- in the absence of a special agreement acteristics and properties of realty, do not fully meet the test of adaptaa chattel must be "annexed” to the tion. Adaptation is closely interrelated real estate or something appurtenant with the intention of the parties. thereto. Annexation may be (1) the It will be seen that the tests of physical incorporation of the item in- annexation and adaptation are not to the structure, the screwing or bolt- really separate and distinct at all, but ing down, or (2) "constructive" an- rather are components of the overall nexation_such as a connection by test of intention. The intention test wire or pipe with the realty, or, as in is comprehensive and all-embracing. the case of a rail fence, solely by force of gravity.7

UST AS INTENTION is the paramount Adaptation-Outweighing annexation as a factor in determining wheth- taining whether a given item is a fixer an item qualifies as a fixture, adap- ture, an express agreement of the antation to the use or purpose to which nexor is the principal evidence of inthe realty is devoted is largely, in the tention.10 Thus it is that in deciding last analysis, a matter of opinion. The the crucial question of intention the tenor of the relatively few decisions full importance of the package morton this point indicates that there must gage comes into play. By specific be a peculiar adaptation. For instance, enumeration of affixed household built-in home equipment not only equipment as part of the realty to meets the test of annexation, but is which the coverage of the lien extends, conclusive evidence of its peculiar the package mortgage unmistakably adaptation to the use and purpose of supplies the major evidence of intenthe realty. It clearly is specially tion, which intention is the paramount planned for that particular home. and controlling test of whether such Movable items, however, such as wash- articles are fixtures. For built-in ing machines on casters,

home equipment the package mortcleaners and similar items, many gage furnishes conclusive evidence of times fail to meet this test. Some other intention in addition to that inferable questions arise where items such as from the actual annexation and adaprefrigerators and stoves

not tation of such items. For other equip



Hayford v. Wentworth, 64 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 (20) 406 (Mo. 1933) (refrigerator connected by electric cord); General Heat & Appliance Corp. v. Goodwin, 64 NE (2d) 676 (Mass. 1944) (heating unit connected to fuel pipe and air ducts) ; Fuson v. Whitaker, 190 SW (20) 805 (Tenn. 1945) (wall cases) : Schmuch v. Beck, 234 P 447 (Mont. 1926) (pole fence) ; Byran v. Lawrence, 50 N.C. 337 (1868) (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. *Madfes 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." 20 See discussion in Thuma v. Granada Hotel Corp., 269 m. App. 484 (1933) (package mortgage and purchase money chattel mortgage). For agreement overriding a statute, see Garnett v. Mankel, 163 P (20) 466 (Cal. 1945). Also 7 ALR 1578.

ment such as ranges and refrigera- in a given case. In a controversy over tors, the owner's intention that such whether an item is or is not a fixture, items are attached as fixtures and are the relationship of the parties often to be treated as realty is clearly ex- affects the decision. In cases involving pressed in the written terms of the grantor and grantee, vendor and purmortgage.11 It is our opinion that in chaser, mortgagor and mortgagee, practically all jurisdictions, 12 most the rules for determining what is a affixed chattels may, by express agree- fixture are strongly construed by the ment between the mortgagor and the courts against the first-named parties. mortgagee, be made a part of the Accordingly, courts are usually quite realty.13

prone to find that chattels annexed to Government agencies have indi- the realty are fixtures so that they cated their approval of the advantages will pass with the land. On the other of the package mortgage. The VA will hand, in other controversies where accept package loans for guaranty or landlord and tenant, owner of fee and insurance, provided a proper lien is conditional sales vendor, owner of fee secured on the various items under and life tenant are involved, the courts the applicable state law. The value of have consistently relaxed the law of the utilities is included in the official fixtures to permit the tenant and the VA appraisal, the only restriction in conditional vendor to remove whatever addition to the lien requirement being chattels they may have affixed to the that the equipment be of the cost, realty.1

16 For the most part, however, quality and type called for by the class such situations involve the relationof home involved.14 The FHA will in- ship of mortgagor and mortgagee; it clude the value of items in the ap- may be expected, therefore, that the praised value, provided it is reason- courts will find few obstacles in holdably convinced that the items are ing the home equipment under considcommonly treated as part of the real eration to be fixtures. The courts seem estate in the community and that the to try to arrive at intention which is mortgage terms set them out spe- controlling. The owner is presumed cifically as such.15

to intend to improve his property, es

pecially if he expresses his intention LTHOUGH WE HAVE set out insofar to do so. The tenant is not presumed



as possible what the law of fix- to intend to make his chattels a part tures appears to be, another important of the landlord's property, even if he factor to be considered is how the law attaches them to the house in some is construed and applied by the courts 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). 12In 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 (20) 841 (1947). This

is also permitted in California, Durst v. Battson, 9 Cal. (2d) 166, 69 P (20) 992 (1937). 13See Brandt v. Koppelman, 169 Pa. Super. 236, 82 A (20) 666 (1951); Hill v. Salmon, 236 P (20) 618

(Wyo. 1951). KVA, TB 4A-95; also 38 USC, Secs. 694 and 694a ; see also VA Solicitor's Opinion No. 127-53, July 14,

1953. 15 Letter to Architectural Forum from B.C. Bovard, General Counsel of FHA, July 11, 1944. See 12

USC, Sec. 1709. 26 Kelly v. Austin, 46 III. 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

a sale of the fixtures while still an

nexed to the realty raises the quesControversies most likely to arise tion of whether the nature of the articoncerning the package mortgage will cle and its attachment to the realty be actions involving the mortgagee puts the chattel mortgagee or purand any one of the following persons : chaser on notice that the articles may (1) the mortgagor, (2) purchasers of be realty and covered by the lien of the realty, (3) bona fide purchasers a real mortgage. Courts hold that the of the home equipment having no no- annexation and adaptation serve to tice of the mortgage, (4) judgment place such parties on inquiry as to creditors, (5) mortgagees holding sub- whether such items are personalty or sequent chattel mortgages.

realty, and that since the articles are In the first instance, both parties a part of the realty, the real mortwould be estopped by the express gagee has superior rights. 19 This terms of the mortgage contract from reasoning applies also to the judgasserting that the articles in con- ment creditor. troversy were, in fact, chattels. In Package items acquired after the the case of sale of the mortgaged recording of the mortgage and the repremises, the recordation of the mort- placement of worn-out items also offer gage is, of course, notice to the ven- a problem.20 As between the mortdee that the items of equipment are gagor and the mortgagee, the package real estate. Should he remove the fix- mortage extends the mortgagee's intures, he would be liable to the mort- terest to these items. This may be gagee for damages. The situation done by express clause in the mortwhere the mortgagor severs a fixture gage instrument, or it may be inferred from the real estate, transports it from the fact that by the lumping of elsewhere and sells it to a bona fide fixtures with the realty in the mortpurchaser for value is more serious : gage, similar fixtures and replacethe mortgagee has no recourse except ments are also to be considered as against the mortgagor.1? The pur- such. Subsequent purchasers or credchaser's title is good against the itors also would take an interest secworld, inasmuch as there is no actual ondary to that of the mortgage under or constructive notice of the mortgage the principles discussed earlier. The where the item is to all appearances conditional sales vendor of such items, a chattel.18 If, however, it can be however, has sometimes been held to shown that the purchaser has actual have a lien superior to that of the notice of the mortgage, any title he mortgagee, on the ground that the acquires will be inferior to that of injur to the mortgagee's security is the mortgagee.

caused by the disposing of the old A subsequent chattel mortgage and item, not by the vendor in selling the

"In 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.

In 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.

19 Easton v. Ash, 18 Cal. (20) 630, 116 P (20) 433 (1941); First Mortgage Bond Co. v. London, 259 Mich. 688, 244 NW 203 ; Mortgage Bond Co. v. Stephens, 74 P (20) 361 (Okla. 1937) ; Guardian Life Insurance Co. of America v. Suanson, 3 NE (20) 324 (IU. 1936); Leisle v. Welfare Building and Loan Assn., 287 NW 739 (Wis. 1939); Chicago Title & Trust Co. v. Waldman, 5 NE (20) 737 (II. 1936).

"See "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).

new one.21 In cases where the condi- large cash outlays for home applitional vendor is not permitted to re- ances. If the intent of the parties to move his appliance, however, courts include certain chattels as a part of have held that he should be protected the realty is carefully spelled out in to the extent the mortgagee has been the mortgage and if there is no at"unjustly enriched”-usually at the tempt to extend the coverage of the time of foreclosure.22 The law on this mortgage to freely movable household point appears to vary even in the same furnishings or appliances, 28 the benejurisdiction.

fits accruing to both the mortgagor Conclusion

and the mortgagee will not ordinarily

be denied by judicial authority. We We see then that for the new home- advise the mortgagee to decide what owner, the package mortgage offers may be made a part of the real estate the advantage of low-cost, long-term and to take a real estate mortgage and financing of household equipment. For rely upon it. It is obviously contrathe mortgage lender, it offers an in- dictory to say that certain articles are creased volume of business and elim- a part of the real estate and concurinates defaults early in the life of a rently to say that they are chattels mortgage because of the borrower's and take a chattel mortgage.


N OPEN-END MORTGAGE is a contract A

ments and an opportunity to give

additional service to the public; it rower providing that future borrow- tends to prevent an over-extension ings after the original loan may be of credit on the part of the borrower, secured by the original mortgage. It with consequent arrears and foreclosmeans that once a homeowner has ures. The economy and ease of addiqualified for a mortgage on his prop- tional financing often provide a erty, he is enabled thereafter within strong incentive for the borrower to varying limitations in the different keep his loan with the original lender jurisdictions to increase the amount instead of going elsewhere, thus enof his mortgage to cover the cost of abling the lender to retain seasoned modernization or needed improve- loans with an enhanced value to the ments, or for other purposes.

original security. The open-end form offers advan

Lien Status of Additional Advances tages material to both parties. To the borrower, it allows modernization on There are three major kinds of fua long-term credit basis, easy pay- ture advances: (1) where the lender ments with no money down, and an is, by the terms of the mortgage, oblieconomy in or elimination of refinan- gated to make certain advances; (2) cing costs. To the lender, it offers a where the lender has the right to large source of additional invest- make certain advances to protect the

*Holt v. Henley, 232 U.S. 637.

BHuruthal v. Huræthal, 45 W. Va. 684, 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 Aled 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.

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