Opinion ID: 1147506
Heading Depth: 3
Heading Rank: 1

Heading: The Fixtures Test

Text: We first consider the test for classifying an item of personal property as a fixture of the host real property for purposes of taxation. As noted above, Revenue and Taxation Code section 104, subdivision (c), defines real property to include [i]mprovements. And Revenue and Taxation Code section 105, subdivision (a), defines [i]mprovements to include fixtures. (1) (See fn. 1.) The latter provision apparently refers back to Civil Code section 660. (Horowitz, The Law of Fixtures in California  A Critical Analysis (1952) 26 So.Cal.L.Rev. 21, 57 [hereafter Horowitz].) [1] That provision refers back, in turn, to the seminal decision in Teaff v. Hewitt (1853) 1 Ohio St. 511. (See code comrs. notes foll. 1 Ann. Civ. Code, §§ 660, 1013 (1st ed. 1872, Haymond & Burch, comrs.  annotators) pp. 202-203, 285-286.) Properly read, Teaff v. Hewitt stands for the broad proposition that the classification of fixtures does not depend ultimately on how or indeed whether an item of personal property is physically attached to the host real property, but rather on the nature of the underlying legal problem and the policy considerations implicated in the solution of that problem. In that case, the legal problem was the construction of a conveyance that did not mention certain items  did the conveyance transfer interest in the items or not? The policy considerations were those common to all such problems  how to determine what the parties would have decided had they thought about the matter. The court there held that the united application of the following requisites will be found the safest criterion of a fixture: [¶] 1. Actual annexation to the realty, or something appurtenant thereto. [¶] 2. Appropriation to the use or purpose of that part of the realty with which it is connected. [¶] 3. The intention of the party making the annexation, to make the article a permanent accession to the freehold  this intention being inferred from the nature of the article affixed, the relation and situation of the party making the annexation, the structure and mode of annexation, and the purpose or use for which the annexation has been made. (1 Ohio St. at pp. 529-530, italics in original.) The court made plain that the third requisite was the crucial and indeed ultimate factor: In no case is a fixture created without the apparent intention of the party making the annexation to make a permanent accession to the freehold. ( Id. at p. 533.) The court impliedly defined intention not as the subjective intent of the annexor but the objective intent that would be inferred by a reasonable grantee or mortgagee. As stated, it is the apparent intention that is crucial. Thus, when the legal problem to be solved involves the construction of a conveyance, the rule of Teaff v. Hewitt is reducible to the test, what does the grantee or mortgagee, as a reasonable man, think he is receiving under the conveyance. Those chattels on the land will be included in a conveyance of the land which look like they would come along in a conveyance of the land, based upon objective factors of annexation to the land, adaptability for use with the land as an economic entity, and other objective manifestations of the intent of the land owner to include them.... (Horowitz, supra, 26 So.Cal.L.Rev. at p. 28.) When, however, the legal problem to be solved involves the classification of an item of personal property for purposes of taxation, The policy considerations ... do not seem to be compelling either way. The most important factor would seem to be to have a certain and workable rule under which both the tax assessor and the person subject to the tax can most efficiently operate. (Horowitz, supra, 26 So.Cal.L.Rev. at p. 57.) The rule of Teaff v. Hewitt is such. (See Horowitz, supra, at p. 25.) And indeed, it has been followed by the case law in its broad lines. (See, e.g., Simms v. County of Los Angeles (1950) 35 Cal.2d 303, 309 [217 P.2d 936]; see also Trabue Pittman Corp. v. County of L.A. (1946) 29 Cal.2d 385, 397-398 [175 P.2d 512] [holding that in matters relating to taxation in this state, rules ... conforming to those used in determining what constitutes fixtures as between grantor and grantee, vendor and vendee, or mortgagor and mortgagee, should apply ...].) (2) Accordingly, in California It is well settled that in determining whether an article constitutes a fixture, three criteria must be taken into consideration: (1) the manner of its annexation to the realty; (2) its adaptability to the use and purpose for which the realty is used; and (3) the intention with which the annexation is made [citations].... `It is also settled that for tax purposes the intention must be determined by the physical facts or reasonably manifested outward appearances....' [Citation.] [¶] In resolving whether an article placed on the premises constitutes a fixture or personal property, the aforelisted three elements do not play equal parts. In making the determination in a particular case the element of intent is regarded as a crucial and overriding factor, with the other two criteria being considered only as subsidiary ingredients relevant to the determination of the intent. ( Seatrain Terminals of California, Inc. v. County of Alameda (1978) 83 Cal. App.3d 69, 74-75 [147 Cal. Rptr. 578], citing cases.) (3) Because the legal problem here is taxability and not, as in Teaff v. Hewitt , the construction of a conveyance, and because the intent crucial here is constructive and not actual, the test reduces itself to whether a reasonable person would consider the item to be a permanent part of the property, taking into account annexation, adaptation, and other objective manifestations of permanence. (See Trabue Pittman Corp. v. County of L.A., supra, 29 Cal.2d at pp. 391-398; Horowitz, supra, 26 So.Cal.L.Rev. at pp. 57-58.)