According to the elementary rule of the common law, whatever is annexed to the freehold becomes, in legal contemplation, a part of it, and is thereafter subject to the same incidents and conditions the soil itself. But the diversity of trade and the development of manufactures required that the strict rules of the common law be measurably relaxed, and it may now be said that the nature of the articles and the manner in which they are affixed, and the intention of the party making the annexation, together with the policy of the law, are controlling factors in determining whether an article, which may or may not be a fixture, becomes part of the realty by being annexed to the freehold. The purpose or intention of the parties, the effect and mode of annexation, and the public policy in relation thereto, are all to be considered.

When the parties immediately concerned, by an agreement between themselves, manifest their purpose that the property, although it is to be annexed to the soil, shall retain its character as personalty, then, except as against persons who occupy the relation of innocent purchasers without notice, the intention of the parties will prevail, unless the property be of such a nature that it necessarily becomes incorporated into, and a part of, the realty by the act and manner of annexation. Taylor v. Watkins, 62 Ind. 511; Yater v. Mullen, 24 Ind. 277.

Thus, if, in the course of constructing a house, brick should be placed in the walls, and joists and beams in their proper places, the brickmaker and sawyer would not be permitted to despoil the house by asserting an agreement with the owner that the brick and beams were to retain their character as personalty notwithstanding their annexation. In such a case the mental attitude of the parties cannot modify the legal effect resulting from the annexation. Campbell v. Roddy (N. J.), 14 Atl. Rep. 279; Henkle v. Dillon, 17 Pac. Rep. 148; Jones, Chat. Mortg., section 125.

But when chattels are of such a character as to retain their identity and distinctive characteristics after annexation, and do not thereby become an essential part of the building, so that the removal of the chattels will not materially injure the building, nor destroy or unnecessarily impair the value of the chattels, a mutual agreement in respect to the manner in which the chattels shall be regarded after annexation will have the effect to preserve the personal character of the property between the parties to the agreement. Rogers v. Cox, 96 Ind. 157; Price v. Malott, 85 Ind. 266; Hendy v. Dinkerhoff, 57 Cal. 3; Haven v. Emery, 33 N. H. 66; Ewell, Fixtures, 66; Malott v. Price, 109 Ind. 22.

Accordingly, the proposition is well sustained that one who purchases machinery with a view that it shall be annexed to, or placed in, a building of which he is the owner, and who executes a chattel mortgage on the property so purchased, thereby evinces his intention that the property shall retain its character as personalty, regardless of the manner in which it may be annexed to the freehold. Eaves v. Estes, 10 Kan. 314; Ford v. Cobb, 20 N. Y. 344; Sisson v. Hibbard, 75 N. Y. 542 ; Tifft v. Horton, 53 N. Y. 377 ; Campbell v. Roddy, supra; Henkle v. Dillon, supra.

Except where the rights of innocent purchasers are involved, it is the policy of the law to uphold such contracts in the interest of trade.

The execution of a chattel mortgage by the owner of the land, upon machinery which he afterwards places in a building thereon, is regarded as an unequivocal declaration of his intention that the act of annexation shall not change or take away the character of the machinery as personalty, until the debt secured by the mortgage has been fully paid. Tifft v. Horton, supra.

A provision in a chattel mortgage that, upon default of payment of the mortgage debt, the mortgagee may take possession of the mortgaged chattels and sell the same, if anything beyond the mortgage itself was needed, is equivalent to an express agreement that the property shall continue to be regarded as personalty.

Having reached the conclusion that, when the nature of the property admits of it, parties may by convention fix its character as personalty as between themselves, after it is annexed to the freehold, and that a chattel mortgage, such as the one under consideration, is equivalent to an express agreement in that respect, the case would be of easy solution but for the intervention of the rights of others than the immediate parties to the chattel mortgage.

It remains to be considered whether the chattel mortgage from Kemper to Hadley, Wright & Co. was effectual to preserve the character of the mortgaged chattels as against the purchase-money mortgage given by Kemper to Eckart Bros., and the subsequent mortgage to the bank. What are the rights of a mortgagee of chattels of the description of those in question, who consents that the mortgaged property may be taken out of the county in which his mortgage is recorded, and that it may be annexed to real estate in such a manner as that, in the absence of an agreement or intention to the contrary, the act of annexation, ipso facto, makes the property accessory to the freehold?

In some jurisdictions, as will appear from the authorities already cited, the rule seems to be that an agreement between the owner of land and the vendor of chattels, which are to be annexed thereto, concerning the character of the chattels, is valid, not only between the parties, and against a prior mortgagee of the land, but also against a subsequent mortgagee or purchaser without notice, while in others an essentially different effect is attributed to such an agreement. Thus, in Tifft v. Horton, supra, and Ford v. Cobb, supra, it was held by the Court of Appeals, in the State of New York, that neither a precedent nor subsequent mortgagee of real estate could defeat the claim of one holding a chattel mortgage upon property which had been annexed to the mortgaged premises under an agreement that it should continue to be regarded as personalty.