Lewiston Bottled Gas Co. v. Key Bank of Maine
| Decision Date | 03 January 1992 |
| Citation | 601 A.2d 91 |
| Parties | 17 UCC Rep.Serv.2d 282 LEWISTON BOTTLED GAS COMPANY v. KEY BANK OF MAINE. |
| Court | Maine Supreme Court |
Joanne L. Simonelli (orally), Isaacson & Raymond, Lewiston, for plaintiff.
Lauren C. Folsom (orally), Westbrook, Nicholas Lanzilotta, Colby & Lanzilotta, P.A., Augusta, Dennis C. Sbrega, Preti, Flaherty, Beliveau & Pachios, Portland, for defendant.
Before McKUSICK, C.J., and ROBERTS, WATHEN, GLASSMAN and CLIFFORD, JJ.
Plaintiff Lewiston Bottled Gas Company (LBG) appeals from an order of summary judgment entered by the Superior Court (Androscoggin County, Perkins, J.) in favor of defendant Key Bank of Maine in this declaratory judgment action brought to determine the rights of the parties with respect to ninety heating and air-conditioning units installed in the Grand Beach Inn at Old Orchard Beach. We agree with the Superior Court that Key Bank's mortgage gives it priority over LBG's purchase money security interest in the units and we affirm the judgment.
In July 1986, Key Bank loaned $2,580,000 to William J. DiBiase, Jr. The loan was secured by a mortgage on the real estate owned by DiBiase located on East Grand Avenue in Old Orchard Beach. The mortgage, which covered after-acquired fixtures, was properly recorded in the York County Registry of Deeds. On June 10, 1987, DiBiase incorporated Grand Beach Inn, Inc. (Grand Beach) for the purpose of constructing and operating the Grand Beach Inn on DiBiase's East Grand Avenue property. DiBiase was the president and sole shareholder of Grand Beach and at all relevant times was the owner of the property. 1
On June 15, 1987, Grand Beach contracted to purchase ninety heating and air-conditioning units from LBG. 2 The contract provided that the units would remain the personal property of Grand Beach notwithstanding their attachment to the real property. On June 16, Grand Beach granted to LBG a purchase money security interest in the ninety units. Financing statements 3 disclosing the security interest and identifying the debtor as "Grand Beach Inn, Inc., William J. DiBiase, Jr., President" and describing the real estate upon which the units were located as "Grand Beach Inn, East Grand Avenue, Old Orchard Beach, ME 04064" were filed with the Secretary of State and also recorded in the York County Registry of Deeds. In each place, they were indexed under the name "Grand Beach Inn, Inc." Nothing, however, was indexed under DiBiase's name. In September and October 1987, the units were installed in the exterior walls of each room in the Inn.
On June 29, 1987, Key Bank made a second loan to DiBiase secured by a second mortgage on the same property, also covering after-acquired fixtures and also properly recorded. The title search undertaken by Key Bank in the York County Registry of Deeds prior to the execution of the mortgage failed to disclose the financing statement and the existence of LBG's security interest in the units because LBG's financing statement was indexed under the name "Grand Beach" even though DiBiase was the record owner of the property at the time.
In May 1989, Key Bank foreclosed on both its mortgages. LBG was not joined as a party-in-interest because Key Bank was unaware of LBG's interest in the units until after the foreclosure was commenced. The parties agreed to allow the foreclosure to proceed and to litigate the issue of title to the heating and air-conditioning units later. Key Bank was the successful bidder at the foreclosure sale. LBG then filed the present complaint against Key Bank seeking a declaratory judgment that its purchase money security interest in the units had priority over the interest of Key Bank. 4 The Superior Court granted summary judgment to Key Bank concluding that the heating and air-conditioning units were fixtures and that Key Bank's properly recorded mortgages had priority over LBG's unperfected security interest. This appeal followed.
[Summary] [j]udgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any ... show that there is no genuine issue as to any material fact set forth in those statements and that any party is entitled to a judgment as a matter of law.
M.R.Civ.P. 56(c). Although the parties differ as to the legal conclusions to be drawn from the facts, neither contends that there is any serious dispute as to any of the relevant facts in this case. Therefore, Key Bank's motion for summary judgment was appropriately entertained by the Superior Court.
11 M.R.S.A. § 9-313(1)(a) (1964 & Supp.1991) provides that "[g]oods are 'fixtures' when they become so related to particular real estate that an interest in them arises under real estate law." That interest arises when the property is (1) physically annexed to the real estate, (2) adapted to the use to which the real estate is put, that is, the personal and real property are united in the carrying out of a common purpose, and (3) annexed with the intent to make it part of the realty. Boothbay Harbor Condominiums, Inc. v. Department of Transp., 382 A.2d 848, 854 (Me.1978) (citing Bangor-Hydro Elec. Co. v. Johnson, 226 A.2d 371, 378 (Me.1967)).
The evidence compels a conclusion that, under the first prong of the three-part fixture test, the units were physically annexed to the real estate. The heating and air-conditioning units were installed when the Inn was under construction and are part of the walls of the building. The units are attached by bolts and although they could be removed, their removal would create a large hole in the walls of each room. See Roderick v. Sanborn, 106 Me. 159, 162, 76 A. 263 (1909) ().
As to the second prong of the test, it is undisputed that the units, although they are catalogue items and not specially made for the Grand Beach Inn, were adapted to the use of the real estate as the Grand Beach Inn. The real estate was designed and built as an inn to accommodate overnight guests. The heating and air-conditioning units help create a liveable atmosphere for those guests by providing heat and cooling to the rooms. The personal and real property, therefore, are united in the carrying out of a common enterprise. See Bangor-Hydro, 226 A.2d at 376. The fact that the units are catalogue items, and not custom-made, does not preclude them from being fixtures.
The intent of the person annexing the personal property to the real estate is the third and most important of the three prongs of the fixture test. Bangor-Hydro, 226 A.2d at 377. LBG contends that summary judgment was improperly granted to Key Bank because the agreements between DiBiase and LBG granted to LBG a purchase money security interest in the units and expressly stated that the units would remain personal property and therefore demonstrated DiBiase's intent that the units remain personal property. We disagree.
In determining the intent of the parties as to whether a chattel annexed to real estate becomes a fixture, it is not the hidden subjective intent of the person making the annexation that must be considered but rather "the intention which the law deduces from such external facts as the structure and mode of attachment, the purpose and use for which the annexation has been made and the relation and use of the party making it." Bangor-Hydro, 226 A.2d at 378. The agreement DiBiase made with LBG to have the heating and air-conditioning units remain personal property cannot be considered against Key Bank on the fixtures issue because Key Bank was not a party to those agreements and was unaware of them. Vorsec Co. v. Gilkey, 132 Me. 311, 314, 170 A. 722 (1934); Gaunt v. Allen Lane Co., 128 Me. 41, 46, 145 A. 255 (1929).
The objective manifestation of intent in this case, as evidenced by the physical annexation of the units to the walls of the building and their adaption to the use of the real estate as an inn, leaves no genuine dispute that the units are fixtures and part of the Grand Beach Inn real estate.
Because the heating and air-conditioning units were fixtures and part of the real estate, they became subject to Key Bank's mortgages pursuant to section 9-313. Key Bank's first mortgage takes priority over LBG's security interest in the units unless LBG's security interest falls within one of the exceptions found in section 9-313. 5 11 M.R.S.A. § 9-313(7) (Supp.1991). The only relevant exception in this case is section 9-313(4)(a), which states:
(4) A perfected security interest in fixtures has priority over the conflicting interest of an encumbrancer or owner of the real estate where:
(a) The security interest is a purchase money security interest, the interest of the encumbrancer or owner arises before...
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