These cases hold that the agreement between the holder of the chattel mortgage and the owner of the land, that the chattels shall retain their character as personalty, rebuts the presumption that they were intended as permanent accessories to the land, and binds both prior and subsequent mortgagees.
In Pierce v. George, 108 Mass. 78, a chattel mortgage was taken upon certain machinery in contemplation that the machinery was to be fastened to a building and annexed to real property owned by the mortgagor, and it was held that a subsequent mortgagee of the real estate could hold the chattels as a part of the land. So it was held by the same court, in Hunt v. Bay State Iron Co., 97 Mass. 279, that an agreement between the owner of iron rails and a railroad company, that the rails should retain their character as chattels after they had been fastened to the roadbed, would be unavailing as against a previous mortgagee of the road or a purchaser without notice. See, also, Stillman v. Flenniken, 58 Iowa, 450.
There is, therefore, no general rule which declares that machinery, upon which there is a chattel mortgage, becomes necessarily subject to an existing mortgage upon real estate to which it may afterwards be annexed with the consent of the mortgagee, to the exclusion or postponement of the prior chattel mortgage.
A prior mortgagee cannot occupy the attitude of an innocent purchaser. The interests and rights of the holder of a chattel mortgage upon property which is annexed to real estate upon which there is an existing mortgage, must be determined by the practical application of equitable principles to the rights of the respective parties.
Whether the chattel mortgage shall be postponed, notwithstanding the agreement between the owner of the land and the mortgagee, must depend upon the inquiry whether or not the preservation of the rights of the holder of the chattel mortgage will impair or diminish the security of the real estate mortgagee as it was when he took it. If it will not, then it would be inequitable that the latter should defeat or destroy the security of the former. If it will, then it was the folly or misfortune of the holder of the chattel mortgage that he permitted the property to be annexed to a freehold from which it cannot be removed without diminishing or impairing an existing mortgage thereon. As was said by the Court of Errors and Appeals of New Jersey, in Campbell v. Roddy, supra, " Where the articles are of such a character that their detachment would involve a destruction of or a dismantling of an important feature of the realty, such annexation might well be regarded as an abandonment of the lien by him who impliedly assented to the annexation."
Unless the detachment of mortgaged chattels would materially affect the security of the real estate mortgagee, by depreciating the value of the mortgaged property, or by dismantling it of an important feature existing at the time the mortgage was taken, the precedent real estate mortgage only attaches to the actual interest which the mortgagor has in the personal chattels subsequently annexed at the time of their annexation. Campbell v. Roddy, supra; United States v. New Orleans Railroad, 12 Wall. 362; Fosdick v. Schall, 99 U. S. 235.
Or if, as in Bass Foundry, etc., v. Gallentine, 99 Ind. 525, the introduction of the new machinery involved the dismantling of a mill upon which a prior mortgage existed, so as to impair the security thus afforded, a claim upon the machinery so introduced would not prevail over the prior real estate mortgage.
In the present case it appears that the removal of the engine and boiler and other machinery would not injure or impair the value of the real estate or the building thereon. There can be no reason, therefore, so far as the Eckart Brothers are concerned, why a court of equity should practically destroy the security of the appellant, so long as the preservation of his rights are not prejudicial to those of the Eckart Brothers. As is in effect said in the well considered case already quoted from, if the detachment of the articles so annexed would occasion no damage to the realty, then the lien upon them can be enforced by a court of equity in the same degree as if they had remained chattels according to the agreement. If the detachment would occasion some diminution in the value, as it would have stood had the attachment not been made, then the depreciation must be made whole, and the rights of the parties adjusted by the chancellor according to the equity of the case.
The distinction between chattels whose completeness and identity as separate and distinct articles may be preserved, notwithstanding their annexation, and those which necessarily become absorbed or merged in the realty by being annexed, must be kept in view. Porter v. Pittsburgh Steel Co., 122 U. S. 267, 283; Dunham v. Rail-way Co., 1 Wall. 254; Galveston Railroad v. Cowdrey, 11 Wall. 459.
This disposes of the case so far as it relates to the precedent mortgagees. As to the holder of a chattel mortgage who consents to have the mortgaged chattels placed in such an attitude in relation to real estate as that subsequent innocent purchasers and mortgagees are liable to be misled by the owner of the land to which they are annexed, there seems to be no equitable ground upon which his title should be enforced as against such purchasers or mortgagees.
The peculiar character of the subsequent mortgage executed to the bank in the present case, renders it unnecessary, however, that we should enlarge upon this feature of the subject. Recurring to the statement of the case, it will be seen that, after describing the real estate upon which the factory and machinery were situate, the engine, boiler, and other machinery are particularly and specifically enumerated as being also and in effect separately mortgaged. Coupled with this was the further stipulation that the mortgagor should not remove any of the machinery enumerated from the land on which it was then situate, until the mortgage debt was fully paid.