Empire Gas of Rochester, Inc. v. State

• Decision Date: 17 December 1985
• Docket Number: No. 3-683A178,3-683A178
• Citation: 486 N.E.2d 1036
• Parties: EMPIRE GAS OF ROCHESTER, INC., Empire Gas Corporation, and Empire Incorporated, Appellants (Plaintiffs Below), v. STATE of Indiana, and Indiana State Board of Tax Commissioners, Appellees (Defendants Below).
• Court: Indiana Appellate Court

Page 1036

486 N.E.2d 1036

EMPIRE GAS OF ROCHESTER, INC., Empire Gas Corporation, and Empire Incorporated, Appellants (Plaintiffs Below), v. STATE of Indiana, and Indiana State Board of Tax Commissioners, Appellees (Defendants Below).

No. 3-683A178.

Court of Appeals of Indiana Third District.

Dec. 17, 1985.

Jerome T. Holderead, Browne, Torrance, Spitzer, Herriman, Browne & Stephenson, Marion, for appellants.

Linley E. Pearson, Atty. Gen., Ted J. Holaday, Deputy Atty. Gen., Indianapolis, for appellees.

STATON, Presiding Judge.

This case concerns an appeal from a personal property tax assessment. The Indiana State Board of Tax Commissioners (the Board) assessed to Empire Gas of Rochester, Inc., Empire Gas Corporation, and Empire Incorporated (Empire) the value of liquid propane (LP) gas storage tanks owned by Empire and leased, during 1979 and 1980, to Empire's customers. Empire appealed the assessment to the trial court; the parties submitted cross-motions for summary judgment. The trial court granted summary judgment for Empire as to the 1979 assessment, but granted summary judgment for the Board as to the 1980 assessment. The trial court found that the regulation in effect in 1979 ¹ placed primary tax liability on the possessors of the LP tanks (Empire's customers), but that a regulatory change in 1980 ² transferred primary tax liability to the tanks' owners (Empire). Empire appeals the summary judgment only as to the 1980 assessment.

The issues presented are as follows:

1. Is Empire's assertion that summary judgment was not an appropriate procedure to resolve the dispute waived because of Empire's failure to raise the issue in its Motion to Correct Errors?

2. Are Empire's LP tanks real property and thus not subject to personal property tax assessment?

3. Is Empire primarily liable for the personal property tax assessment of LP tanks leased to its customers?

4. Is Regulation 50 IAC 4.1-6-2, which defines capital and operating leases, unconstitutionally vague?

Affirmed in part and reversed in part.

Our standard of review in summary judgment appeals is limited to the determination of whether the trial court correctly applied the law. Hale v. Peabody Coal Co. (1976), 168 Ind.App. 336, 343 N.E.2d 316. The only evidence before the trial court consisted of the Stipulation of Fact (including sample lease agreements) and the uncontroverted Affidavit of Randy Coonce, an Empire employee. A summary of that evidence follows.

Empire has fifteen subsidiary companies in Indiana which sell LP gas and lease LP gas storage tanks to customers. The contracts Empire uses are designated "Gas Purchase and Equipment Rental (or Lease) Agreement." These contracts state that "this is not a sales contract and title to the leased equipment herein shall never pass...." Stip.Exh. 1, p 8. The tanks, thus, remain at all times Empire's property. As of January 31, 1980, 9,963 LP tanks had been placed with individuals for residential use and not for use in conjunction with a business.

In its 1980 assessment, the Board assessed to Empire the value of all LP tanks owned by Empire, including those leased to its customers. Empire challenged the assessment by filing complaints in twenty Indiana counties; the cases were venued to and consolidated in the Fulton Circuit Court.

I. Whether Summary Judgment was Proper

Empire argues that summary judgment was not proper, apparently ³ because either genuine issues of material fact exist or because good-faith disagreement is possible as to inferences to be drawn from the facts. As the Board points out, no such allegation of error appeared in Empire's Motion to Correct Errors. In fact, Empire's Motion to Correct Errors states that "the evidence was without conflict." (R. at 222). Empire, in its reply brief, responds to the Board's challenge by stating:

"Empire took exception to and clearly specified in its Motion to Correct Errors those items which Empire believed to be genuine issues of material fact which were raised from the inferences and conclusions arrived at from the agreed facts. Specifically, Empire stated that the inferences and conclusion reached by the Trial Court were in error and implicit in that statement was Empire's contention that other inferences and conclusions could be drawn from those agreed facts and that those specific inferences and conclusions were set forth in Empire's Motion to Correct Errors."

(Reply Brief at 3) (emphasis added). While Empire did not enclose the emphasized language in quotation marks, Empire seems to represent that the language is reproduced from its Motion to Correct Errors. We have searched Empire's Motion to Correct Errors in vain for any such statement, and indeed for any indication that Empire challenged inferences the trial court might have made. The Board's argument that Empire has waived the issue by failing specifically to bring it before the trial court in its Motion to Correct Errors is well taken. See, e.g., Stanley v. Fisher (1981), Ind.App., 417 N.E.2d 932, 934. Nevertheless, both parties have fully briefed the substantive issues dispositive of this case. For this reason, and because we prefer to decide an appeal on its merits, ⁴ we will reach the other issues.

II. Real or Personal Property

Empire argues that its LP tanks are real property and are therefore not subject to personal property tax assessment. Empire's argument lacks merit. The Board argues, and we agree, that the determination whether the LP tanks are real property or personal property must begin with the statutory definitions of those terms. IC 6-1.1-1-15 provides:

"6-1.1-1-15. 'Real property' defined.--'Real property' means:

(1) Land located within this state;

(2) A building or fixture situated on land located within this state;

(3) An appurtenance to land located within this state; and

(4) An estate in land located within this state, or an estate, right or privilege in mines located on or minerals, including but not limited to oil or gas, located in the land, if the estate, right or privilege is distinct from the ownership of the surface of the land. [IC 6-1.1-1-15, as added by Acts 1975, P.L. 47, Sec. 1; 1975, P.L. 48, Sec. 1.]"

The LP tanks obviously are not land, an estate in land, or a building. Therefore, if they qualify as real property they must qualify as either fixtures or appurtenances.

Under the stipulated facts, the LP tanks cannot qualify as either fixtures or appurtenances. First, as to fixtures, the Indiana Supreme Court has explained:

"Generally, under the law of fixtures, the question as to whether any particular thing which has been attached to land has become part of such land or whether such property remains personal property is a mixed question of law and fact and depends on the particular circumstances of each case. Citizens Bank v. Mergenthaler Linotype Co. (1940), 216 Ind. 573, 25 N.E.2d 444; Peed v. Bennett (1944), 114 Ind.App. 412, 52 N.E.2d 629. Also, in order that a certain item of personal property can be said to have become a fixture, the following elements must exist; (1) Annexation of the article to the land; (2) adaptation of the article to the use of the land; and (3) an intention that the article become a permanent part of the freehold." (Citation omitted.)

State ex. rel. Green v. Gibson Circuit Court (1965), 246 Ind. 446, 451, 206 N.E.2d 135, 138.

We need not consider the elements of "annexation" or "adaption"; the element of "intention" is dispositive. ⁵ From the undisputed facts it is clear that Empire and its customers never intended that the tanks become a permanent part of the land. The lease agreement, as it pertains to this issue, provides:

"6. That in the event of the termination of this agreement, the Second Party shall immediately surrender possession of the leased property to the First Party. It is further understood and agreed by the parties hereto that as a part of the consideration for this agreement, the First Party, its agents and employees, shall have the immediate right upon any termination of this agreement, to go upon the premises of the Second Party and take possession of said leased property and remove the same from said premises without process of law, and the Second Party hereby waives any trespass or right of action for damages by reason of said entry and removal. Furthermore, that the First Party's license to enter said premises and remove said leased property therefrom, is an irrevocable license and part of the consideration for this agreement."

Stip.Exh. 1, R. at 53 p 6. In light of the clearly expressed intention of the parties, and the stipulated fact that the tanks remain at all times Empire's property, Empire's suggestion that the tanks are fixtures is without merit.

The stipulated facts also require a finding that the tanks do not qualify as appurtenances. While Empire makes no cogent argument that its tanks might qualify as appurtenances, the Board, noting a dearth of Indiana caselaw on this point, quotes the Mississippi Supreme Court:

"The appellees acquired title to the entire tract of land and to all buildings and improvements thereon by a single deed. The damaged house was located on the land; it was a part of the land in a legal sense. In the case of Governor of Missouri v. McNair, 1 Mo. 302, 305, it was held that houses and buildings, if belonging to the estate sold, pass by a grant by virtue of the use of the single word 'appertaining.' In City of Milwaukee v. C[hicago] M. & St. P. & P.R. Co., 223 Wis. 73, 269 N.W. 688, 691, it is said ' "Appertain" means to belong to * * * the land upon which it stands so as to be a part of the land in a legal sense.'

Webster's New International Dictionary defines 'appertain' as 'to belong or pertain' and it defines 'pertain' as 'to belong, to have connection with or dependence on some thing, to appertain', and says 'Pertain, appertain are frequently used without distinction in the general sense of belong.' The house here in question...