Chapter 5Fixtures

Kohn v. Darlington Community School District (#6)698 NW2d 794 (2005), p. 96

Girl fell through bleachersPicture not actual bleachers

10 year statute of limitations applies to real property against the contractor – passed.

Or 3 year statute from the date of injury for personal property – which they still meet.

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Fixtures – general rules

Intent of party? Key item but determined by actions – not secret thoughts of what the party intended.

Physically attached to the property? What is the degree of annexation Was the item peculiarly adapted to the property? What is the nature and use of property?

Fixture Analysis

Figure 5.1

Custer v. Bedford County BD of Assessment (#5)910 A2d 113 (Pa 2006)

Greenhouse

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30 feet wide, 12 feet high, 96 feet long

Consider 5.3, p. 100

a. Floor-to-ceiling bookcases installed in an apartment by a tenant

b. Automatic garage door opener control

c. Landscaping

d. Electric ceiling fans

e. Stove and refrigerator purchased by the debtor for her mortgaged home

f. Modular commercial building attached to concrete pad by tenant

g. Partitions nailed to the floor in an office building

h. Paneled refrigerator (paneled to match kitchen cabinets)

i. Bank vault door

j. Murphy bed (bed that folds into walk.

K Seats and screens in a theater

l. Ski lifts at a ski resort

m. Storage bins on a farm

n. Display cases in a department store

o. Bus passenger shelter on a sidewalk

Consider 5.1, p. 95Sandford v. Town of Shapleigh, 850 A2d 325 (Me. 2004)

Facts – Government Run Waste transfer station– Sanford went to waste facility and placed a plywood piece next to a

dumpster. An attendant told him to put it in the dumpster.– He insured his arm doing so.

Lawsuit. Stanford sued stating that the government was negligent in its design and failure to help him.

Maine statute: “…all governmental entitles shall be immune from suit on any an all tort claims seeking recovery of damages…” except “the construction, operation, or maintenance of any public building or the appurtenances to any public building.

Issue: If the waste container is a fixture then the exception to no liability applies.

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Trade Fixtures

Trade fixtures are treated differently than fixtures. A tenant may generally remove trade fixtures. Tenants more likely to invest in business.

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End-of-Chapter Q 3, p. 110. Landowner’s land acquired for use an airport through eminent domain. Is county required to pay for: air compressors, forklifts, scales, storage racks… trade fixtures?

End-of-Chapter Q 5, p. 111. Harry owns Harry’s Discount Clothiers and rents a building. He installs wood flooring over the cement.• When the lease terminates can he take the wood floors?• Harry purchases the building and sells it – does the sale include the wood

floors?• Harry’s fire insurance policy covers only personal property, would the floors

be covered? • County tax assessor wants to increase the building value by the wood floor?

Gorman v. NGO Meng (#X)9335 S.W.3rd 797 (Tex. App. 2011)

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Facts: – Hayden installed a walk-in cooler for Ngo’s convenience

store.– Cooler malfunctioned and caused the doors to be

“energized” causing a shock to people.– Gorman, an unrelated electrician, agreed to investigate

the problem.– Gorman was electrocuted by the condenser; however, the

power was not shut off to the condenser as it should have been. He was negligent in not turning off the power.

– Condenser was installed outside on a pallet. Law: Property owners are not liable to independent

contractors injured repairing real property if the contractor was negligent.

Issue: whether the condenser was part of real-property.

Consider 5.2, p. 100

a) Cabinets – personal property subject to sales tax?

b) Gasoline pump canopy, fixture taxable as real property?

c) Pullman train car turned into a restaurant. Real property? Bolted to foundation.

d) Gas pumps, fixtures or personal property?

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End-of-Chapter Q1, p. 110

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A marble monument with a cement foundation at a cemetery.

Wall mirrors installed by a tenant.

Bookshelves in a library

A furnace bolted to a factory floor.

A printing machine in a college copy shop.

A hog house with a cement foundation on a farm.

Consider 5.4

Divorce situation where former wife placed lien on former husband’s farm land after crops were planted.

Are the crops part of the lien? Part of real property?

Fructus industriales. Annual crop with human effort. Personal Property

Fructus naturales. Citrus, apples, berries, etc. Real Property.

Today – many more crops are classified as fructus industriales. Any crop that owes its value to human labor.12

Article 9 Security Interests

Creation of a security interest– Underlying debt; creditor gives value– Record reflecting the grant of a security interest

by the debtor– Authenticated by debtor

End-of-Chapter Q 2, p. 110. Bill leases an apartment and has the right to remove fixtures. He installs a custom bookshelf and finances it. The apartment owner has a mortgage. Carl’s cabinets files a financing statement on Dec 1, 2009. The apartment owners mortgage dates to 2002.• If Bill defaults can Carl’s remove the cabinets?• What obligations does Carl’s have?• If the apartment owner defaults, does the mortgagee get the shelves?• What happens to Carl’s if no filing is made?

Start here tues

Purchase Money Security Interest (PMSI)

Creditor advances funds for the purchase of the collateral

Gives the creditor priority over other creditors when financing statement is recorded

Perfection of Security Interests

Record financing statement Record with land records

Requirements for Financing Statement

1. Names of the debtors and the secured party

2. Signature (authorization under Revised Article 9) of the debtor

3. Address of the secured party from which information can be obtained

4. Mailing address of the debtor5. A statement describing the items of

collateral

In Re Williams (#X)381 BR 742 (WD ARK 2008)

Gutter system purchased with a Wells Fargo Projects Visa Card.

Affixed with silicone and that screws are used for hoods and down-spouts.

Card Stated:– Where applicable you give us a purchase

money security interest in any goods, described n this charge slip will remain personal property and will not become a fixture even if attached to real property.

– Security Interest: To the extent permitted by applicable law, you hereby grant to us and we are retaining a [purchase] money security interest under the Uniform Commercial Coe in the merchandise purchased on your account….

Mortgage company alleged that gutter system became a fixture. 17

Priorities under Article 9 for Perfected Security Interests

1. Priority over Unsecured. A secured creditor has priority over an unsecured creditor.

2. Priority over Later Interests. A perfected secured creditor has priority over subsequent real estate interests. (For example, a filing on January 3 gives the secured party priority over filings occurring later in that month or simply later in time.)

4. Priority over Unperfected. A perfected secured creditor has priority over an unperfected secured creditor.

5. No Priority over Some Prior Interests. A prior real estate interest (mortgage, deed of trust, lien, or judgment) has priority over a subsequently filed security interest.

6. Date of Filing Key. Between perfected secured creditors the date of filing is controlling, with the first creditor to file having priority.

End-of-Chapter Q 10

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Exceptions to General Priority Rules

1. PMSI has priority over prior recorded land interest if financing statement filed within 20 days from when fixture becomes affixed

2. Construction mortgage exception

3. Readily movable exception

4. Tenant exception

5. Good-faith purchaser exception

Type of Party

Priority Over Exceptions

Secured Party Unsecured party, secured party whose interest attached after Good-Faith Purchasers

Perfected Secured Party

Secured party, unsecured party, subsequently filed real estate encumbrances (mortgages, deeds of trusts, liens, etc.)

Good-Faith Purchasers

PMSI perfected secured party

Secured party, unsecured party, subsequently filed real estate encumbrances

Constr. Mortg. with un-made advancements ; good-faith purch.

Construction mortgage

All subsequent encumbrances and security interests

Sec. party for rem. office or factory machines

No fixtures filing required; perfection required Construction

Secured party for a tenant

Priority over all real estate encumbrances (prior and subsequent). Priority regardless of perfection so long as tenant holds right to remove property

Good faith purchaser

Prior security interests if purchase is made in the ordinary course of business. For real estate, filing on fixtures gives creditor priority

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Article 9 Priorities and Exceptions