Rothermich v. Union Planters National Bank

• Decision Date: 08 February 2000
• Citation: 10 S.W.3d 610
• Parties: (Mo.App. E.D. 2000) . Betty Rothermich, Personal Representative of the Estate of Kenneth J. Rothermich, Respondent, v. Union Planters National Bank, Appellant. Case Number: ED75373 Missouri Court of Appeals Eastern District Handdown Date: 0
• Court: Missouri Court of Appeals

10 S.W.3d 610 (Mo.App. E.D. 2000)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

Betty Rothermich, Personal Representative of the Estate of Kenneth J. Rothermich, Respondent, v. Union Planters National Bank, Appellant.

Case Number: ED75373

Missouri Court of Appeals Eastern District

Handdown Date: 02/08/2000

Appeal From: Circuit Court of St. Charles County, Hon. Ellsworth Cundiff, Jr.

Counsel for Appellant: Robert H. Brownlee and Robert W. Phillips

Counsel for Respondent: Edward C. Ahlheim

Opinion Summary: Union Planters National Bank appeals the trial court judgment pursuant to the parties' stipulated facts on the issue of whether certain automatic pinsetting machines (pinspotters) installed at a bowling alley constituted fixtures or personal property. Bank asserts the court misapplied the law when it found that the pinspotters were fixtures secured by the provisions of Kenneth Rothermich's deed of trust and as such, had priority over Bank's UCC personal property security interest.

REVERSED.

Division Five holds: All of the documents pertaining to the pinspotters at the time they were put in place and subsequently confirm that the intention of all parties concerned was that they remain personal property and not fixtures. Thus, Bank's personal property security interest has priority.

Opinion Author: Lawrence G. Crahan, Judge

Opinion Vote: REVERSED. Rhodes Russell, C.J., and Pudlowski, Sr. J., concur.

Opinion:

Union Planters National Bank ("Bank") appeals from a judgment entered by the trial court pursuant to stipulated facts submitted by the parties on the issue of whether certain automatic pinsetting machines ("pinspotters") installed at a bowling alley constituted fixtures or personal property. Bank asserts the court misapplied the law when it found that the pinspotters were fixtures secured by the provisions of Kenneth Rothermich's deed of trust and as such, had priority over Bank's UCC personal property security interest. We agree and reverse the judgment of the trial court.

Kenneth Rothermich ("Rothermich")¹ and Herman Toebben owned St. Charles Bowling Lanes, Inc. ("St. Charles Bowl"), a company which owned and operated a bowling alley in St. Charles, Missouri. Rothermich and Herman Toebben operated St. Charles Bowl from the early 1960's, when the building housing the lanes was constructed, through 1987, when the business was ultimately sold.

In January 1972, after St. Charles Bowl had been in business as a bowling alley for several years, St. Charles Bowl entered into a lease agreement with AMF, Inc. ("AMF") for the installation of pinspotters in the building. The pinspotters were manufactured in three pieces and assembled inside the bowling alley. They were placed in the step-down portion of the alley lane that was re-designed to accommodate them, and screwed, bolted and riveted to the concrete floor.

The lease agreement between AMF and St. Charles Bowl, signed by Rothermich in his corporate capacity, provided for a lease term of 12 ½ years and recited, in part:

Upon any termination of this agreement, AMF shall immediately have the right to possession of the machines and AMF may enter upon the premises where the machines are located, take possession without previous demand or notice and without legal process, and remove them to the manufacturer's factory or other place of storage.

* * *

The machines shall at all times remain the sole and exclusive property of AMF (which reserves the right to assign or encumber the machines) and operator shall have no rights, title or interest to the machines but only the right to use them under this agreement. The machines shall remain personal property and shall not be deemed otherwise by reason of becoming attached to the premises.

In July 1984, with the original lease term nearing its expiration, Rothermich and Herman Toebben executed an amendment to the lease agreement extending the lease term through December 1989.

In May 1987, Herman Toebben's son, Kevin Toebben, along with several others, formed Weber's St. Charles Lanes, Inc. ("Weber's Lanes"), for the purpose of purchasing St. Charles Bowl. The purchase agreement between St. Charles Bowl and Weber's Lanes was made expressly contingent upon an assignment to Weber's Lanes of the lease agreement, as extended, between St. Charles Bowl and AMF for the use of the pinspotters. The price paid to Rothermich and Herman Toebben for St. Charles Bowl did not include consideration for the pinspotters, as they were considered by all parties involved to be the property of AMF pursuant to the terms of the lease agreement.

As part of the purchase agreement, Rothermich and Herman Toebben agreed to finance part of the purchase price for St. Charles Bowl, with the remainder financed by Boatmen's Bank of O'Fallon ("Boatmen's"). In June 1987, Weber's Lanes executed a promissory note in the amount of $522,500.00 in favor of Herman Toebben, a promissory note in the amount of $327,500.00 in favor of Rothermich, and a promissory note in the amount of $500,000.00 in favor of Boatmen's. Each promissory note was secured by a deed of trust and recited that it conveyed to the trustee both the real property and "all buildings, fixtures and appurtenances now or hereafter to the same belonging. . . ."

In early 1989, with the extended lease term for the pinspotters nearing expiration, Kevin Toebben, in his capacity as an officer of Weber's Lanes, approached Bank² regarding financing the purchase of the pinspotters by Weber's Lanes from AMF. On March 31, 1989, Weber's Lanes, by Kevin Toebben as an officer thereof, executed a promissory note in favor of Bank for the purchase of the pinspotters, and also executed a security agreement granting Bank a security interest in the same. The security agreement provided, in relevant part:

That upon default or at any time thereafter, Secured Party may, without notice, declare all obligations owed hereunder immediately due and payable and shall have all the rights and remedies of a secured party under the Uniform Commercial Code of Missouri, and any other applicable laws. Debtor will, at Secured Party's request, assemble the collateral or make it available to the Secured Party at such place as is designated by the Secured Party, which shall be reasonably convenient.

On April 14, 1989, Bank filed a UCC 1 financing statement with the St. Charles County Recorder of Deeds, setting forth Bank's security interest in the pinspotters. On April 17, 1989, Bank filed a UCC 1 financing statement with the Missouri Secretary of State, again setting forth its security interest.³

Thereafter, Weber's Lanes defaulted on its loans. In the fall of 1995, Bank foreclosed on its interest in the pinspotters pursuant to its rights under the security agreement and Boatmen's foreclosed on the real estate pursuant to its deed of trust. Prior to the foreclosure sale, Bank entered into an intercreditor agreement with Boatmen's to resolve their disagreement regarding the status of the pinspotters as fixtures or personal property. Under this agreement, Bank agreed to reimburse Boatmen's from its anticipated sale proceeds of the pinspotters in the event a deficiency resulted from the foreclosure sale by Boatmen's.

After the agreement was signed, Bank sold the pinspotters at the foreclosure sale to Charan Industries, Inc. ("Charan") for $124,000.00. Contractors hired by Charan removed the pinspotters from the bowling alley premises with no physical or structural damage to the property. Charan subsequently resold the pinspotters to another bowling alley operator outside of the United States.⁴

Thereafter, Betty Rothermich, personal representative of the estate of Kenneth Rothermich, brought a declaratory judgment action against Bank seeking a declaration that the pinspotters sold by Bank were fixtures constituting a part of the real property and thus, subject to her deed of trust which was not satisfied by the Boatmen's foreclosure sale.⁵ After Rothermich entered into an agreement with Herman Toebben as to their respective percentages for sharing the potential funds, all parties agreed to submit to the trial court on stipulated facts the issue of whether the pinspotters were fixtures subject to the deeds of trust of Rothermich and Toebben, or personal property subject to the security interest of Bank.

On October 11, 1998, the trial court entered judgment for Rothermich, finding that the pinspotters were fixtures and ordering Bank to pay $124,000.00 plus accrued interest into the registry of the Court. No findings of fact or conclusions of law were requested. Bank appeals from this judgment.

Our standard of review is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo.banc 1976). We will sustain the judgment of the trial court unless there is no substantial evidence to support it, unless it is against the weight of the evidence, or unless it erroneously declares or applies the law. Id. In a case tried on stipulated facts, the only issue on appeal is whether the court drew the proper legal conclusions from the stipulated facts. State Farm Mut. Auto Ins. Co. v. Sommers, 954 S.W.2d 18, 19 (Mo.App. 1997).

In its first point on appeal, Bank argues the trial court misapplied the law and drew improper legal conclusions from the stipulated facts. Specifically, it argues that the court erred in finding the pinspotters to be fixtures because the three-factor test, as originally discussed in Bastas v. McCurdy, 266 S.W.2d 49, 51 (Mo.App. 1954), when applied to the agreed upon facts, clearly establishes that the pinspotters were personal property.

A fixture is an article in the nature of personal property which has been so annexed to the realty that it is regarded as part of the land and partakes of the legal incidents of the freehold and belongs to the person owning the land. Bastas at 51. The test for determining whether property has become a fixture is three-fold,...