Cooper v. Harvey — 41 N.Y. St. Rep. 594

Majority

p. 594

Alfred Cooper, Adm’r, Resp’t, v. Watson P. Harvey et al., App’lts.

(Supreme Court, General Term, Third Department,

Filed November 30, 1891.)

Headnote

1. Fraud—Opinion as to value.

Where a purchaser has full opportunity to examine premises and no artifice is used to prevent his doing so, the expression of an opinion as to value by the seller is not fraud, although the value expressed is extravagant.

2. ‘Fixtures—Mortgagor and mortgagee.

Where one purchased mill property, a main element of value being its machinery, it was held that the latter was covered by a purchase money mortgage and passed to the vendor on foreclosure.

3. Same—Their character not changed.

Upon such a sale the grantor stated that the machinery was personal property; he gave a bill of sale of it and took a chattel mortgage back. Held, that as the machinery was affixed to the freehold and as the intention of the parties was that it should be real estate, the statement of the grantor and the taking of the chattel mortgage did not change its character.

4. Same—Annexed after a mortgage given.

Machinery put in a mill, after a mortgage given, suited to its uses and permanently affixed, becomes real estate as between mortgagor and mortgagee.

Appeal from a judgment of foreclosure of a mortgage and directing the sale of mortgaged premises entered upon the report of a referee.

Cady & Hoysradt, for resp’t; E. F. Bullard, for app’lts.

On the 25th of October 1879,.Greorge B. Cooper conveyed the mortgaged premises in question in this action to Watson P. Harvey and Martha Bailey, wife of Hiram F. Bailey, for the consideration expressed in the deed of $16,500, and for the purpose of securing the payment of $14,500 of the purchase price of premises, the grantees and Hiram F. Baily executed and delivered to the grantor their bonds in the penal sum of $29,000 conditioned for the payment of such purchase money, and as collateral to such bond the grantees executed and delivered to the grantor the mortgage to foreclose which this action is prosecuted. A bill of sale of the machinery in the mill was given by Cooper .to the purchaser and a chattel mortgage given back for the same at the time of the conveyance of the real estate. The complaint is in the ordinary form in an action of foreclosure. The answer of the defendants Watson P. Harvey and Carrie Harvey, without putting in issue the execution of the mortgage, seeks to defend the action on the ground of fraud, alleged to have been practiced by the plaintiff’s intestate (Cooper) in the conveyance, and in the procuring of the mortgage. The referee finds and the case shows that at the time of the commencement of the negotiation for the sale of these premises by the agent of Cooper, the grantor, he offered to pay Hiram F. Bailey $2,000 if he would furnish a purchaser for the same at $19,000 and that it was subsequently changed so that Bailey was to receive that amount if he furnished a purchaser for the same at $16,000 and that thereafter Bailey opened negotiations with Watson P. Harvey for the sale of the premises to him, and such negotiations finally resulted in the sale to Harvey and Mrs. Bailey, wife of Hiram F. Bailey, without any knowledge on the part of the purchasers that Hiram F. was to receive for negotiating such sale the sum of $2,000 from the grantor.

The appellant now insists that in that sale Hiram F. Bailey acted as the agent of Harvey and his wife to negotiate the purchase, and also as the hired agent or broker of the grantor to effect a sale ; and that he in' effect was serving two masters, in the same transaction, whose interests were adverse to each other; and that such participation in this sale constituted a fraud as against the grantees, which taints or vitiates this mortgage. If this case clearly disclosed that Hiram F. Bailey acted as the agent of Watson P. Harvey and Martha Bailey in the purchase of this property, while at the same time he was the paid broker or agent of Alfred Cooper, the grantor and vendor of this property, and that Cooper was cognizant of the existence of that relation between Bailey and the grantees, it would furnish a very strong circumstance tending to establish the presumption of fraud. Story on Agency, § 210 ; National Life Ins. Co. v. Minch, 53 N. Y., 145 . But while the existence of relations between the parties and one assuming to act- as the agent for both parties would furnish a strong presuipption of fraud, I find no case holding that it, standing alone, unaccompanied by any proof of fraud in fact, to the. injury of the party, would be per se such a fraud as to vitiate the. contract of the parties when the same has been entered upon by them. In Ranney v. Warren, 17 Hun, 113 , the court held that

p. 596

fraud accompanied with damages gives a right of action. But fraud without damage does not But we find no evidence in this case that Hiram F. Bailey was, in fact, the agent of Watson P. Harvey and Martha Bailey, and the referee expressly refuses tp find the existence of that'relation between them, and while the •circumstances are not free from doubt ón that subject, we do not "think them- clear enough to authorize us to interfere with that finding.

Hiram F. Bailey was, therefore, the real estate broker employed by Henderson, the agent of Cooper, to sell these premises and as such was in a position to legally contract with Cooper for his compensation in finding a purchaser. He accompanied Harvey and Harvey’s father, an experienced person in mills, fixtures and machinery of this kind, on a tour of inspection of this property, and these parties made a full examination of the same, and there' is no evidence of any concealment or misrepresentation as to the char-acter, condition or quality of any of the property; but the purchasers were not informed of the compensation which Bailey was to receive for his services in procuring a purchaser. In the absence of evidence of conspiracy or fraud, Cooper and Bailey could agree upon the compensation to be paid, for finding a purchaser, and that agreement in itself would not be a fraud upon the purchasers, nor would the fact that its terms were kept secret as to them give them any just ground of complaint

Such agreements are of daily occurrence, and we are not aware that they have ever, in the absence of fraud or conspiracy, been held to violate any just rights of the purchaser.

But it is insisted that Cooper and his agents over estimated the value of this property, and that such over estimate was a fraud upon the purchasers.- We do not think that this contention is sound. The value of this property was at most only' a matter of ■opinion. The purchaser, as well as the vendor, could form an •opinion as to its value. In forming that opinion each party had a right to fix their own estimate of value.

If, in the opinion of the grantees, the grantor’s estimate was too high, they should not have accepted of his offer. The rule upon "this subject is correctly stated by Miller, Judge, in Chrysler v. Canaday, 90 N. Y., 279 , as follows: “ The rule is well settled that a naked assertion by a vendor of the value of property offered for sale, even although untrue in itself, and known to be such by him, unless there is want of knowledge by the vendee, and the sale is made in' •entire reliance upon the representations made, or unless some artifice is employed to prevent inquiry or the obtaining of knowledge by the vendee, will not render the vendor responsible to the vendee for damages sustained by him.” There can be no well founded pretense in this case that the vendees purchased with entire reliance upon the declaration of the vendor as to the value of this property. The vendor, Harvey, made several personal examinations of the premises and had the assistance of his father, who was acquainted with this kind of property, and also the assistance and judgment of the expert, Walter McFarlan. Mor was there any artifice practiced by the grantor to divert the attention of the

p. 597

grantees from a full and careful examination of the property. The referee finds that the negotiations for the purchase of the property and the subsequent sale and mortgage thereof were conducted without fraud or misrepresentation on the part of any of the parties therefo. In Ellis v. Andrews, 56 N. Y., 83 , Grover, J., in discussing the liability of the grantor for an assertion of the property sold, uses this language:

“ Upon the question of value the purchaser must rely.upon his own judgment, and it is his folly to rely upon the representations of the vendor in that respect; but in regard to any extrinsic fact affecting the quality or value of the subject of the contract he may rely upon the assurance of the vendor.” To the same effect is the case of Van Epps v. Harrison, 5 Hill, 63 ; also Hubbell v. Meigs, 50 N. Y., 480 . We do not think that within the authorities, and the principle governing this class of actions, that the statement made by Cooper or his agent in reference to the value of this property can be regarded as fraudulent, or that the deed or mortgage is in any way affected by them. We have examined the rulings of the referee in reference to the receipt and rejection of evidence to which exceptions were taken by the defendants, and find no error in such rulings for which the judgment entered upon his report should be reversed. The remaining question raised on this appeal is as to the ruling and decision of the referee upon the question as to what passed under the mortgage. Upon this question the defendants insist that the machinery used in this mill was personal property, and did not pass to the mortgagee under the real estate mortgage. It is a familiar principle that the same rule obtains between mortgagor and mortgagee of real estate as exists between grantor and grantee. Ordinarily the character of property, whether real or personal, is determined by the application of these tests.

1. Actual annexation, which must be of a permanent character, except in case of those articles which are not themselves annexed, but are deemed to be freehold from their use and character.

2. Adaptability to the use of the freehold.

3. The intention of the parties at the time of making the annexation. In this case the machinery that was in the mill at the time of the sale, as between the grantor and grantee, constituted one of the chief features of the property for manufacturing purposes, for which it had been used, and for which manifestly it was to be used by the purchasers. For the grantor to have removed it after the purchase, on the ground that it was personal property, would practically have destroyed all that was valuable in contemplation of the purchasers for the purpose of manufacturing knit goods. Such machinery was therefore deemed to be part of the realty from its use and character.

It must also be deemed a part of the realty from its adaptibility to the use of the freehold. As to the machinery put in the mill after the purchase by the defendant and after the execution of the mortgage, its character must be determined by the intention of the parties. That intention-we think is clearly indicated by the manner in which the machinery was placed in the buildings

p. 598

and attached to the same by the owner of the fee of the mortgaged premises after the mortgage was given and while it remained in force against the premises. Permanent erections and fixtures made by a mortgagor after the execution of the mortgage, upon lands conveyed by it, become part of the mortgaged premises, Snedeker et al. v. Warring, 12 N. Y., ,170, and this case also holds that the same rule exists between mortgagors and mortgagees as would prevail between grantor and grantee. Tested, therefore, by the rule that would prevail in case of a sale of these premises, there seems little doubt that this added machinery, boiler and engine became a part of the real estate by being placed upon and attached to it, as shown in this case, unless the legal effect of their annexation was changed by the execution of the chattel mortgage and the statement of Cooper as found by the referee that the real estate mortgage did not cover the boiler, engine and machinery, and a bill of sale and chattel mortgage were executed by the parties respectively conveying the same.

It seems to be conceded by the defendants that but for the bill of sale and chattel mortgage this property would have passed by the deed and real estate mortgage, so far at least as it was in the mill at the time of the sale; but as to that placed therein after the execution of the deed and mortgage a different rule is claimed to exist, but we have shown upon the authority above cited that fixtures which would pass by the mortgage if on the premises before its execution would, as between the mortgagee and mortgagor, in like manner pass if placed on the premises after the execution of the mortgage. Snedeker v. Warring, supra. What, then, was the effect of the bill of sale and chattel mortgage as to changing the character of this machinery from real to personal property.

In Voorhees, Receiver, v. McGinnis, 48 N. Y., 278 , the owner of a saw and grist mill erected a substantial building and placed therein a steam engine, boiler, shafting and gearing, which were constructed with especial reference to the place in which they were to be used, but without any intent on the part of the person making the improvement either of making them a part of the freehold or of removing them in the future, and gave a real estate mortgage upon the property.

Subsequently the boiler and machinery were removed for the purpose of having them replaced by a new boiler and new machinery, and while the new boiler and machinery were at the shop for repair the owner of the mill gave a chattel mortgage upon them, and after the repairs were completed and the mill was in running order he gave another mortgage upon them and other machinery. After the repairs and before the last chattel mortgage he gave another real estate mortgage on the premises, and the plaintiff acquired title under the foreclosure and sale on the two real estate mortgages. The holders of the chattel mortgages removed the machinery covered by these mortgages. Held, that although the mortgagor had no special intent .upon the subject, the facts disclosed that the boiler, engine, shafting and gearing were permanent accessions to the freehold. Applying the prin

p. 599

ciple of that case to the facts in this, there seems to be a much stronger reason for holding that this machinery and fixtures covered by the chattel mortgage were a part of the realty, and passed under the real estate mortgage. In this case the right of no third party is involved. The object of "the parties, manifestly, was to confer upon the purchaser a valid title to all of this property, whether classed as real or personal, and a like object on the part of the mortgagor and mortgagee to create a valid security for the entire debt upon all of the property sold. Their misapprehension as to the legal effect of the annexation of and adaptability to the uses of this mill of the'machinery did not change the law or legal effect of the physical annexation of the same to this real estate.

It follows, therefore, -that the real estate mortgage attached to all the real estate and fixtures of which the property covered by the chattel mortgage was a part. On the whole case we see no error for which this judgment should be reversed.

Judgment affirmed, with costs.

Learned, P. J., and Landon, J., concur.