First Nat. Bank of Aberdeen v. Jacobs, No. 11952

CourtSouth Dakota Supreme Court
Writing for the CourtPORTER
Citation273 N.W.2d 743
Parties26 UCC Rep.Serv. 191 FIRST NATIONAL BANK OF ABERDEEN, Miguel M. Serna and Anita R. Serna, Plaintiffs and Respondents, v. Robert B. JACOBS, Kathleen C. Jacobs, Brown County, a Public Corporation, Louis Ludwig, Larson Concrete Co., Hub City Livestock Sales, Inc., South Dakota Wheat Growers Association, Redfield Livestock Auction, Inc., and Triple U Enterprises, Inc., Defendants, and Leaseamerica Corporation, Defendant and Appellant.
Docket NumberNo. 11952
Decision Date29 December 1978

Page 743

273 N.W.2d 743
26 UCC Rep.Serv. 191
FIRST NATIONAL BANK OF ABERDEEN, Miguel M. Serna and Anita
R. Serna, Plaintiffs and Respondents,
v.
Robert B. JACOBS, Kathleen C. Jacobs, Brown County, a Public
Corporation, Louis Ludwig, Larson Concrete Co., Hub City
Livestock Sales, Inc., South Dakota Wheat Growers
Association, Redfield Livestock Auction, Inc., and Triple U
Enterprises, Inc., Defendants,
and
Leaseamerica Corporation, Defendant and Appellant.
No. 11952.
Supreme Court of South Dakota.
Dec. 29, 1978.

Page 745

Charles B. Kornmann of Richardson, Groseclose, Kornmann & Wyly, Aberdeen, for plaintiffs and respondents.

Terence A. O'Keefe of Siegel, Barnett, Schutz, O'Keefe & Jewett, Aberdeen, for defendant and appellant.

PORTER, Justice.

CASE SUMMARY

This case involves ownership of a hog finishing barn near Aberdeen, South Dakota. The only parties involved in the appeal are the First National Bank of Aberdeen (Bank) and Leaseamerica Corporation (Leaseamerica). The Bank originally brought suit to foreclose the interest of defendants Mr. and Mrs. Jacobs in a half-section of land that the Jacobs were purchasing on contract for deed. Leaseamerica had leased the hog finishing barn to the Jacobs, and now claims that the barn did not become a fixture, but remained the personal property of Leaseamerica. Leaseamerica wishes to remove the barn, or in the alternative collect its reasonable value from the Bank, which has foreclosed upon the land containing the barn. We hold that the upper, aluminum portion of the barn did not become a fixture, and that the Bank has no rights by subrogation to prior owners or lienholders that would defeat the rights of Leaseamerica. We also hold that the Bank may not have the building on the strength of its own mortgage, but that the Bank would be entitled to compensation for damage done to the land if Leaseamerica removes the building. We therefore reverse the judgment and remand the case to the trial court for determination of damages that might be caused to the realty by removal of the building, or for determination of the reasonable value of the building to be paid by the Bank to Leaseamerica, at the option of the Bank.

FACTS

On October 21, 1971, Miguel and Anita Serna purchased a half-section of land in Brown County from Joseph Iverson. Iverson took back a mortgage and reserved a life estate interest so that he could live on the property until his death. On this same date, Robert and Kathleen Jacobs entered into a contract for deed with the Sernas. The Jacobs thereafter operated a farm, including a cattle and hog operation, on the half-section.

From March 13, 1973, until about September, 1974, the Bank was Jacobs' principal creditor. It loaned Jacobs nearly $200,000.00 during this time. As of April 10, 1975, the debt had been reduced to $158,319.90 through sale of personal property previously owned by Jacobs. Since paying off all prior interests, the Bank has the right to dispose of the land as it sees fit. The value of the land does not, however, equal the total of Jacobs' debt.

A Bank comment of May 3, 1974, indicates that Jacobs was negotiating with both Leaseamerica and Lease Northwest for a hog facility of the type which he eventually leased from Leaseamerica. Lease Northwest wanted to retain a security interest in the land; Leaseamerica apparently made no such demand. The building in question was

Page 746

installed by the end of April, 1974. A lease was entered into on May 25, 1974, by which Jacobs agreed to pay $1,920.00 per quarter in lease payments. The lease provided that the building was to remain personal property, and that it was to remain the property of Leaseamerica. Jacobs was given no option to purchase the building. He was required to pay all taxes on the building. The lease covered only the aluminum walls and doors. Jacobs separately installed and paid for the concrete and block foundation. Leaseamerica claims no interest in this foundation.

The building is bolted to the concrete and block foundation. There are holding pits under the slated floor for hog waste. There is wiring and plumbing in the building. A system for grinding and delivering of feed is also present. The trial court found that removing the building would damage the real estate.

The Jacobs gave the Bank a mortgage on the premises on August 2, 1974, in return for a $75,000.00 loan. The Bank advanced an additional $13,900.00 on August 15, part of which was used, as shown by Bank records, to make a lease payment to Leaseamerica. The Bank concedes that it knew of the lease transaction, but did not inquire further, since it assumed that this was a lease-purchase agreement.

Leaseamerica filed a Uniform Commercial Code financing statement in the Brown County Register of Deeds office, but did not record anything in the chain of title to the land. Leaseamerica never paid taxes on the building, nor was it entered on the tax rolls as personal property. The leasing company also never bought insurance on the building, but the contract required Jacobs to buy insurance. The contract called for 18% Interest when lease payments were late.

In January, 1975, the Bank paid the Sernas and Joseph Iverson for their mortgage and contract for deed interests in the property. This was done to protect the Bank's security as a junior lienor. The Bank obtained a satisfaction of the Iverson mortgage, which has not been recorded, and a warranty deed from the Sernas. The name of the grantee has not been filled in on the deed, but the Bank, since January 2, 1975, has had the right to complete the deed by putting any name, including its own, in the blank.

The trial court ruled that Leaseamerica had no interest in the premises, that it could not remove the building, and that it was not entitled to any compensation for leaving the building on the premises.

ISSUES

The major issues presented by this appeal are:

Issue One: Is the building a fixture?

Issue Two: Is the Bank entitled to the building as the successor to the rights of the Sernas and Iverson?

DECISION

ISSUE ONE:

We conclude that the building is not a fixture.

The controlling criterion in determining whether an article becomes a "fixture," and thus a part of the realty, is the intention of the party placing the article on the land. Killian v. Hubbard, 69 S.D. 289, 9 N.W.2d 700 (1943); Metropolitan Life Ins. Co. v. Jensen, 69 S.D. 225, 9 N.W.2d 140 (1943). This intent is not the secret intent in the mind, but the intent that may be deduced from the relation of the parties and the circumstances of the particular case. The physical facts are to be considered, particularly whether the article placed on the land is designed to promote the use to which the realty has been put. Metropolitan Life Insurance Co. v. Jensen, supra. The parties may, however, agree...

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4 practice notes
  • Nosker v. Trinity Land Co., No. 8479
    • United States
    • New Mexico Court of Appeals of New Mexico
    • April 21, 1988
    ...was not a fixture, and hence, was not subject to foreclosure under the real estate mortgage. See First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743 (S.D.1978); G E C C Leasing Corp. v. Berkshire Life Ins. Co., 226 So.2d 231 (Fla.App.1969); see also R. 12-213(A)(3) (appellant must set fo......
  • Dakota Harvestore Systems, Inc. v. South Dakota Dept. of Revenue, No. 13875
    • United States
    • Supreme Court of South Dakota
    • February 17, 1983
    ...Among the generalized factors, the intention of the party making the annexation is controlling. First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743 (S.D.1978). As we held in First Nat'l Bank, 273 N.W.2d at This intent is not the secret intent in the mind, but the intent that may be deduc......
  • Tax Appeal of Logan and Associates, Matter of, No. 13853
    • United States
    • South Dakota Supreme Court
    • January 21, 1983
    ...to making the article a permanent accession to the realty is the controlling Page 283 criterion. First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743 (S.D.1978); Metropolitan Life, supra; Killian v. Hubbard, 69 S.D. 289, 9 N.W.2d 700 (1943). The other tests derive their chief value as evi......
  • Rushmore Shadows, LLC v. Pennington Cnty. Bd. of Equal., No. 26584.
    • United States
    • Supreme Court of South Dakota
    • October 9, 2013
    ...Dakota Harvestore Sys., Inc. v. S.D. Dep't of Revenue, 331 N.W.2d 828, 829 (S.D.1983) (quoting First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743, 746 (S.D.1978)). [¶ 10.] Rushmore Shadows argues that the cabins are not “improvements to land” because it did not intend to permanently aff......
4 cases
  • Nosker v. Trinity Land Co., No. 8479
    • United States
    • New Mexico Court of Appeals of New Mexico
    • April 21, 1988
    ...was not a fixture, and hence, was not subject to foreclosure under the real estate mortgage. See First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743 (S.D.1978); G E C C Leasing Corp. v. Berkshire Life Ins. Co., 226 So.2d 231 (Fla.App.1969); see also R. 12-213(A)(3) (appellant must set fo......
  • Dakota Harvestore Systems, Inc. v. South Dakota Dept. of Revenue, No. 13875
    • United States
    • Supreme Court of South Dakota
    • February 17, 1983
    ...Among the generalized factors, the intention of the party making the annexation is controlling. First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743 (S.D.1978). As we held in First Nat'l Bank, 273 N.W.2d at This intent is not the secret intent in the mind, but the intent that may be deduc......
  • Tax Appeal of Logan and Associates, Matter of, No. 13853
    • United States
    • South Dakota Supreme Court
    • January 21, 1983
    ...to making the article a permanent accession to the realty is the controlling Page 283 criterion. First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743 (S.D.1978); Metropolitan Life, supra; Killian v. Hubbard, 69 S.D. 289, 9 N.W.2d 700 (1943). The other tests derive their chief value as evi......
  • Rushmore Shadows, LLC v. Pennington Cnty. Bd. of Equal., No. 26584.
    • United States
    • Supreme Court of South Dakota
    • October 9, 2013
    ...Dakota Harvestore Sys., Inc. v. S.D. Dep't of Revenue, 331 N.W.2d 828, 829 (S.D.1983) (quoting First Nat'l Bank of Aberdeen v. Jacobs, 273 N.W.2d 743, 746 (S.D.1978)). [¶ 10.] Rushmore Shadows argues that the cabins are not “improvements to land” because it did not intend to permanently aff......

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