In re Tri-State Fabricators, Inc.
| Decision Date | 10 August 1983 |
| Docket Number | Bankruptcy No. 81-01252. |
| Citation | 32 BR 260 |
| Parties | In re TRI-STATE FABRICATORS, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Oklahoma |
W. Rogers Abbott, II, Oklahoma City, Okl., for trustee, W. Rogers Abbott, II.
Stephen W. Elliott of Kline & Kline, Oklahoma City, Okl., for Dewal Leasing.
This matter was heard on Motion of Dewal Leasing, the lessor, for an order of abandonment of certain funds held by the trustee. The funds sought to be abandoned are proceeds from an auction sale of buildings and related fabrication apparatus which were situated on leased property owned by Dewal and leased to the debtor. Dewal contends that the property at issue was not owned by the debtor and therefore was not property of the estate since the property was on the land when the lease was made. Should Dewal not prevail on this contention the second question presented is whether the subject items sold by the trustee were "trade fixtures" and therefore personalty of the debtor or whether they were fixtures annexed to the realty and therefore property belonging to the lessor.
The evidence shows the debtor was in the business of manufacturing, selling and servicing oilfield equipment. Originally filed as a Chapter 11 proceeding, the case was converted to Chapter 7 and a trustee was appointed.
Dewal bought real property from various sellers, including the debtor, in April of 1981. Prior to this purchase the debtor had leased property in the same general area from these persons for purpose of operating its business. During the lease period the debtor had placed upon the leased and owned property certain structures used in the business. Part of the real property was once owned by the debtor, subsequently sold to Dewal and then leased back to the debtor. The agreement for this transaction is a part of the record.
At the time the lease agreement was entered into virtually all of the property which is the subject of the dispute was on the leased premises. The property was either resting on the real estate, tack welded to beams which were set into the ground and secured by concrete or tack welded to the interior portion of a building. The latter item was the only property not on the premises when the lease agreement was entered into.
The trustee sold various items which were removed from the leased premises. The items sold and at issue were represented by Lot numbers 191, 573, 606, 577, 589, 591 and 609. The proceeds of the sale total $22,900 and this amount is being held by the trustee.
Dewal Leasing first asserts that it is the rightful owner of the property which was sold as it was considered included in the purchase of the land. However, the applicant's proof in this regard fails to convince the Court that this was the case. There was no evidence offered at trial to support Dewal's position other than the testimony of Howard Wisdom, a partner of Dewal Leasing, that it was his understanding that the lease was to include all buildings and other physical property. Yet, the lease provides:
(emphasis added)
Thus, the lease provides for the lease of a single building and the reference to "Exhibit A" is not helpful since this exhibit was not attached to the lease. Moreover, other references contained in the file clearly indicate that only a single building was contemplated along with the land sale. See e.g., Proof of Claim filed January 26, 1983, and Financing Statement.
The proof of ownership offered by Dewal is insufficient and the various items in the record militate against any inference that the subject property was considered owned by the lessor at the beginning of the lease period. Consequently, we hold that the debtor was the rightful owner of the property in question when the lease was entered into.
Next, Dewal claims ownership of the property in question due to a provision of the lease agreement with the debtor. The relevant portion provides:
"(c) All alterations, additions and improvements on or in the demised premises at the commencement of the term, and that may be erected or installed during the term, shall become part of the demised premises and the sole property of the lessor, except that all moveable trade fixtures installed by Lessee shall be and remain the property of Lessee."
It is undisputed that Dewal has not made any alterations, additions or improvements on or in the premises and that such alterations, additions or improvements were made by the lessee prior to or subsequent to the lease agreement. Furthermore, it appears that the terms "all moveable trade fixtures installed by lessee" means trade fixtures whenever installed, either prior to or subsequent to the lease. Consequently, the issue becomes whether the items in question may be regarded as trade fixtures, and thereby excepted as items referred to as "alterations, additions and improvements" by the language of the lease.
In Oklahoma a tenant may remove from the leased premises any items affixed thereto for the purpose of trade or manufacture if such items can be removed without causing injury to the premises and when the item has not become an integral part of the premises. See 60 O.S.1981 § 3341; see also, Gutierrez v. Davis, 618 F.2d 700 (10th Cir.1980). Oklahoma law defines a "fixture" to be "a thing . . . affixed to land . . . or imbedded in it . . . or permanently resting upon it, as in the case of buildings, or permanently attached to what is thus permanent, as by means of cement, plaster, nails, bolts, or screws." 60 O.S.1981 § 7. (emphasis added).
Case law has interpreted § 7 by a test which looks to whether the item has been actually annexed to realty or something appurtenant thereto, whether it is applicable to the purpose to which part of the realty with which it is connected is appropriated, and whether there was an intention to make permanent annexation to the realty. Potts v. Biggs & Co., 176 Okl. 96, 54 P.2d 341 (1936).
Generally speaking, in disputes between landlord and tenant, there exists a presumption that the tenant, by annexing fixtures, did so for his own benefit and not to enrich the freehold. See generally 35 AM.JUR.2d Fixtures § 35 (1967). This rule was prompted by public policy considerations which are long established. Grote v. Brown, 170 F.2d 747 (10th Cir.1948). Moreover, a presumption of lack of intent to permanently annex an article to realty is created when removal of an item can be done without material injury to the realty. See In re Marla Jean, Inc., 25 B.R. 282 (Bkrtcy.W.D.Mo.1982); Hedges v. First National Bank, 170 Okl. 175, 39 P.2d 57 (1934). Furthermore, it is apparent that a lessor in leasing premises for business purposes contemplates the installation of ordinary fixtures commonly used in the particular business. Consequently the lessor must be deemed to have consented to a slight defacing of certain property that would necessarily follow the installation and removal thereof. See Gibson v. Exchange National Bank of Pauls Valley, 172...
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