Opinion ID: 1896325
Heading Depth: 2
Heading Rank: 1

Heading: Fixture Analysis

Text: The main issue in this case, as we see it, is whether the mooring buoys used by Hartge at its marina are to be classified as real property or personal property for taxation purposes. Under Maryland Code (2001 Repl.Vol.), § 1-101(cc)(1) of the Tax-Property Article, `Real property' means any land or improvements to land. Because the mooring buoys at issue here are at least initially personal chattels and not in and of themselves land, the initial question becomes whether these mooring buoys are fixtures that have become actually or constructively affixed either to the soil itself, or some structure legally a part of such soil. Schofer v. Hoffman, 182 Md. 270, 274, 34 A.2d 350, 351 (1943); see also Dudley & Carpenter v. Hurst, Miller & Co., 67 Md. 44, 47-48, 8 A. 901 (1887) (stating the common law test for identifying fixtures). If so, they may be considered fixtures and therefore taxable as real property. The fixture test, first delineated by this Court in Dudley, was more recently restated in Colonial Pipeline Co. v. State Department of Assessments and Taxation, 371 Md. 16, 806 A.2d 648 (2002). In Colonial Pipeline, we stated: The common law test for identifying fixtures considers the following factors: `First, annexation to the realty either actual or constructive. Second, adaptation to the use of that part of the realty with which it is connected. Thirdly, 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 annexed, the situation of the party making the annexation, the mode of annexation, and the purpose for which it was annexed.' Dudley, 67 Md. at 47, 8 A. at 902. An item is annexed to the land if it cannot be removed without serious injury.... The second element of the test, adaptation, is met when an item has become an important or essential part of the land's use or enjoyment. [RICHARD R. POWELL, POWELL ON REAL PROPERTY, § 57-45 (1969) ]. This test requires a relationship between the land itself and the fixture. The affixed item must be adapted to the specific use of the land for it to be characterized as a part of that land. The intent requirement, however, is the most important, and takes preeminence over the other two factors. Dudley, 67 Md. at 48, 8 A. at 902. The common law annexation, adaptation, and intention factors as set forth in Dudley continue to control resolution of questions arising under the law of fixtures in Maryland. Colonial Pipeline, 371 Md. at 33-34, 806 A.2d at 658-59 (alterations added) (some citations omitted). While the Dudley factors do continue to control the resolution of fixture disputes, there exists an important exception to this common law rule-property that can be classified as a trade fixture. Despite its name, a trade fixture is not actually a fixture. [8] We explained the origins of the trade fixtures exception in Colonial Pipeline: The trade fixtures exception to the common law rule of fixtures dates back almost as far as the common law rule itself. Van Ness v. Pacard, 27 U.S. 137, 143-44, 2 Pet. 137, 7 L.Ed. 374, 376-77 (1829). In 1802, this Court held in Kirwan that `where a tenant puts up any thing for the purpose of carrying on his trade, he may remove it.' 1 H. & J. at 291. A trade fixture commonly is defined as an item affixed to realty for the purpose of enabling the tenant to perform properly a trade or profession, which can be removed without material or permanent injury to the realty. [RICHARD R. POWELL, POWELL ON REAL PROPERTY, § 57-45 (1969)]. The touchstone for the trade fixtures test, like the Dudley fixtures analysis, is intent.... When the proper intent is found, `[n]o matter how strongly [the fixtures are] attached to the soil or imbedded in it, they are treated as personal property, and as such are subject to removal by the person erecting them.' N. Cent. Ry. Co. v. Canton Co., 30 Md. 347, 352 (1869). Colonial Pipeline, 371 Md. at 34-35, 806 A.2d at 659 (some citations omitted). Under the common law fixtures test, the mooring buoys at issue in the case sub judice are to be classified, at the most, as trade fixtures and therefore personal property for tax purposes. Mooring buoys, as attested to by both petitioner and respondents, are not permanently affixed to the river bottom, but their anchors are objects that fall to the bottom due to their sheer weight and rest on the river bottom. As was also explained, these mooring anchors are brought up from the river bottom, along with the entire buoy apparatus, by the use of a crane from time to timeapproximately once every ten yearsfor a complete inspection to see if any repairs are needed. As we stated in Colonial Pipeline, [a] trade fixture is not annexed to the soil in the manner of a fixture because it must be removable without permanently damaging the realty; and the intent of annexing a trade fixture to the land is to benefit the business of the party annexing the fixture to the land, not the land itself. Id. at 38, 806 A.2d at 661. That is exactly the situation in respect to the utilization of mooring buoys described in the case at bar. The facts of the case sub judice do not support petitioner's argument that the mooring buoys are fixtures to be treated as the real property of Hartge. For these moorings to be properly deemed fixtures, they would have to be so affixed to the river bottom that their removal would result in serious injury to the property. Id. While the anchors of the moorings are heavy enough to hold large boats in the same general place, for they would be of little use if this was not so, they can be and are periodically removed from the West River bottom without causing any damage to the river bottom. Petitioner provided no evidence to the contrary. Therefore, the nature of the mooring buoys do not meet the first prong of the fixtures test delineated in Dudley. The most important element of the fixtures test at common law is the intent of the party installing the fixture. See Colonial Pipeline, 371 Md. at 37, 806 A.2d at 661 (stating that `[t]he third criterion dealing with intention is preeminent, whereas the first and second criteria constitute evidence of intention.' quoting Lingleville Independent School Dist. v. Valero Transmission Co., 763 S.W.2d 616, 618 (1989)). Hartge's business intentions concerning the mooring buoys cannot be said to meet the Dudley elements indicating a permanent fixture. At the Tax Court hearing, a representative of Hartge stated that, once Hartge's lease of the marina expired in 2008, he would [s]ell [the buoys], get rid of them in some way. Hartge does not intend to leave the mooring buoys in the river if it does not renew its lease in the future, nor will the moorings, absent a purchase agreement, belong to Whitestake after the lease terminates. Such intent cannot be said to reflect the desire to make the article a permanent accession to the river bottom. Dudley, 67 Md. at 47, 8 A. at 902. Here, the obvious purpose for the installation of the mooring buoys was to generate rent for Hartge's marina operation. This rent is part of the overall income generated by the marina. In deciding that a fixture had been designed for trade purposes, this Court in Colonial Pipeline reasoned that a utility pipeline was used for trade purposes because the owner was motivated by a single factor in installing the pipeline system: to operate its business for profit. Colonial Pipeline, 371 Md. at 39, 806 A.2d at 661. Like the utility pipeline in that case, we find no other evidence in the record that the mooring buoys were installed for any other purpose than to provide a means for Hartge to benefit economically. The mooring buoys do not meet the elements of fixtures under the Dudley test. At most, they fall within the trade fixtures exception that we discussed in Colonial Pipeline. The very reasons that the mooring buoys fail the Dudley fixtures analyses are why they may be considered trade fixturesthe mooring buoys are not affixed to the soil, they exist simply to provide marina users a service that Hartge directly profits from, and Hartge never intended for the mooring buoys to permanently remain on the West River bottom and they may be removed at any time without damage to the bottom of the watercourse. As such, the mooring buoys, at best, are properly classified as trade fixtures and therefore are to be considered personal property for tax purposes.