Equibank v. U.S. I.R.S.

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: Before RUBIN, POLITZ and GARWOOD; POLITZ
• Citation: Equibank v. U.S. I.R.S., 749 F.2d 1176 (5th Cir. 1985)
• Decision Date: 10 January 1985
• Docket Number: No. 83-3587,83-3587
• Parties: -649, 85-1 USTC P 9242 EQUIBANK, a Pennsylvania Banking Corporation, Plaintiff-Appellant, v. UNITED STATES of America INTERNAL REVENUE SERVICE, Defendant-Appellee.

Page 1176

749 F.2d 1176

55 A.F.T.R.2d 85-649, 85-1 USTC P 9242

EQUIBANK, a Pennsylvania Banking Corporation, Plaintiff-Appellant, v. UNITED STATES of America INTERNAL REVENUE SERVICE, Defendant-Appellee.

No. 83-3587.

United States Court of Appeals Fifth Circuit.

Jan. 10, 1985.

Roy C. Cheatwood, New Orleans, La., for plaintiff-appellant.

Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, William S. Estabrook, Libero Marinelli, Jr., Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before RUBIN, POLITZ and GARWOOD, Circuit Judges.

POLITZ, Circuit Judge:

Equibank appeals the denial of a petition for injunction against the Internal Revenue Service which removed certain chandeliers from a house subject to an Equibank mortgage. Concluding that under controlling provisions of the Louisiana Civil Code the chandeliers are component parts of the house and, as such, are subject to the priming mortgage of Equibank, we reverse.

Facts

Norman L. Johnson and Gayfred Dorthea McNabb Johnson owned a fine home, appropriately called a mansion, on St. Charles Avenue in New Orleans, Louisiana. Equibank held a mortgage on the house, primed by a first mortgage in favor of Hibernia National Bank. The Johnsons defaulted on the mortgages and failed to pay their income taxes. The IRS made jeopardy assessments, secured a lien and served notices of levy and seizure of the residence. Hibernia brought a foreclosure action and Equibank intervened. The Louisiana state court ordered the foreclosure of both mortgages and the sale of the property to satisfy the mortgage indebtednesses. The mortgages primed the IRS lien.

Prior to the auction sale ordered by the court, with the consent of the Johnsons the IRS took physical possession of the residence. The house was valued at $3,000,000 and the contents had an approximate value of $1,500,000 at the time of the seizure. The interior house lighting included several valuable antique crystal chandeliers.

The IRS removed and stored the contents of the house, including the furniture, fixtures, appliances and decorations. The IRS took the chandeliers, some valued as high as $75,000, and other light fixtures. In order to remove these electrical units, it was necessary to disconnect the internal house wiring from the wiring of the chandeliers and other fixtures. This disconnect took place in electrical workboxes located inside the ceiling and within the walls. In addition, the bolts and other fasteners securing the chandeliers and fixtures were taken off and the units were lowered to the floor. Upon completion of the removal, the workboxes containing the internal house wiring were exposed along with the holes made by the securing connectors. Persons effecting the safe removal had to have sufficient knowledge of electricity and electrical wiring to separate the internal wires from the unit wires without risking harm to the worker, or damage to the house and fixtures by the touching of exposed wires or the "shorting-out" of the circuitry. This type removal is not comparable to the simple and ordinary unplugging of a lamp or other electrical appliance from a wall socket. The latter requires little knowledge of the mysteries and vagaries of electricity, and involves minimal risk absent abuse.

Equibank filed a state court injunctive action seeking the return of the chandeliers. The IRS removed the suit to federal court. After hearing the district court denied the injunction requested, based on a finding that the chandeliers were not component parts of the residence and were thus not covered by Equibank's mortgage.

Analysis

Whether the chandeliers were component parts of the Johnson residence or separate movables depends upon the interpretation of articles in the 1978 revision of Book 2 of the Louisiana Civil Code. As is usually the case in civilian interpretative methodology, several articles are to be considered in pari materia ¹ but the critical codical provision is article 466 which states Things permanently attached to a building or other construction, such as plumbing, heating, cooling, electrical or other installations, are its component parts.

Things are considered permanently attached if they cannot be removed without substantial damage to themselves or to the immovable to which they are attached.

Professor A.N. Yiannopoulos, the official reporter for the Louisiana State Law Institute's revision of Book 2 of the Civil Code, called as an expert witness by the IRS, gave testimony about the history of the revision of those articles and of his opinion as to their meaning, with particular emphasis on article 466. The professor was of the opinion that under article 466 items are component parts of a building or other construction: (1) if they fit within one of the categories listed in the first paragraph of the article, in which event they are considered permanently attached as a matter of law, or (2) if they are actually permanently attached as described in the second paragraph. He stated:

The first paragraph considers, are meant to consider these things as component parts as a matter of law as to which the test of permanent attachment would be immaterial.

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I would consider these things as a matter of law being component parts ... you do not need to worry about the test of damage to themselves or to the building as to things covered by 466, first paragraph. These are component parts even if their removal would not cause damage to the building or to themselves.

To complete the discussion, the professor testified that the second paragraph of article 466 covered items other than those listed in the first paragraph. A second paragraph item was to be considered a component part only if its removal occasioned substantial damage to itself or to the immovable to which it was attached. Professor Yiannopoulos concluded by expressing his opinion that the chandeliers were not component parts of the Johnson residence, although he was of the view that an electrical hot water heater would be so classified. He explained the difference by referring to societal expectation:

We are talking about [what] an ordinary man who purchases a house with ordinary prudence ought to know and ought to expect. We are talking about what ideas prevail in society today with respect to an ordinary buyer of ordinary prudence. Or an ordinary mortgagor or an ordinary mortgagee of ordinary prudence. It is an objective test rather than a subjective test.

The Louisiana Legislature did not define or otherwise describe an electrical installation when it enacted article 466 in 1978. We find no post-1978 jurisprudence addressing the issue. The Expose des Motifs and history of the predecessor articles, however, lend some guidance to today's interpretative task.

Prior to the 1978 revisions to Book 2, articles 467 and 469 governed the inquiry whether a particular item was a component part of a building. ² Former article 467 declared that wire screens, water pipes, gas pipes, sewerage pipes, heating pipes, radiators, electric wires, electric and gas lighting fixtures, bathtubs, lavatories, closets, sinks, gasplants, meters and electric light plants, heating plants and furnaces were immovables when actually connected or attached to the building. Albert Tate, Jr., a civilian scholar, then an intermediate ...