Court Opinion

ID: 4192402
Source: CourtListenerOpinion
Date Created: 2017-08-03 15:09:19.032787+00
Date Added: 2024-06-11T14:40:16.186625
License: Public Domain

FILED
                                                                      Aug 03 2017, 5:59 am

                                                                           CLERK
                                                                       Indiana Supreme Court
                                                                          Court of Appeals
                                                                            and Tax Court

ATTORNEY FOR APPELLANT                                     ATTORNEY FOR APPELLEE
Mark J. Crandley                                           James G. Pittman
Barnes & Thornburg, LLP                                    Pittman Emery & Nikirk
Indianapolis, Indiana                                      Bedford, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

11438 Highway 50, LLC,                                     August 3, 2017
successor in interest to Regions                           Court of Appeals Case No.
Bank, successor by merger to                               47A01-1702-PL-354
Union Planters Bank, N.A.,                                 Appeal from the Lawrence Circuit
successor in interest to NBD                               Court
Bank, N.A.,                                                The Honorable Andrea K.
Appellant-Intervenor,                                      McCord, Judge
                                                           Trial Court Cause No.
        v.                                                 47C01-1609-PL-1101

Timothy John Luttrell,
Appellee-Plaintiff.

Riley, Judge.

Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017                       Page 1 of 11
                                  STATEMENT OF THE CASE
[1]   Appellant-Intervenor, 11438 Highway 50, LLC, successor in interest to Regions

      Bank, successor by merger to Union Planters Bank, N.A., successor in interest

      to NBD Bank, N.A. (the Lender), appeals the trial court’s Default Decree and

      Order on Plaintiff’s Motion to Award Surplus Property in favor of Appellee-

      Plaintiff, Timothy J. Luttrell (Luttrell).

[2]   We affirm.

                                                       ISSUE
[3]   The Lender raises three issues on appeal, which we consolidate and restate as

      the following single issue: Whether the trial court erred in determining that

      certain pieces of equipment were not fixtures subject to the Lender’s mortgage

      liens.

                       FACTS AND PROCEDURAL HISTORY
[4]   In 2005, Luttrell was employed as a superintendent at Indiana Stone Works,

      Inc. (ISW), located at 11438 Highway 50 West, Bedford, Lawrence County,

      Indiana. At the time, ISW was owned by Luttrell’s brother-in-law, Don Short

      (Short). 1 Near the end of 2005, Luttrell personally purchased a fifty-ton

      industrial crane with auxiliary hoist from a former co-worker for $8,000.00.

      1
        Short was a named defendant in this case, but he failed to appear before the trial court, and he does not
      participate in this appeal.

      Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017                           Page 2 of 11
      The crane was intended to be used in limestone sawing operations, so Luttrell

      approached Short and suggested that they partner in a new venture aside from

      ISW. Short agreed, and on November 1, 2005, Luttrell and Short orally formed

      a partnership: J&D Sawing. On November 8, 2005, J&D Sawing opened a

      bank account, and on November 16, 2005, the Internal Revenue Service issued

      an employer identification number to J&D Sawing. Using funds from his

      wife’s retirement account, Luttrell contributed $45,000 to the partnership, and

      Short added $30,000 to the partnership’s funds. These contributions were

      intended as loans, with the proceeds from J&D Sawing to be first used towards

      repayment thereof. In 2006, using either partnership funds or his personal

      money, Short purchased a hydraulic narrow-belt saw on behalf of J&D Sawing

      for the purpose of cutting slabs of limestone.

[5]   At the back edge of ISW’s property, Luttrell and Short constructed a new

      building for J&D Sawing’s crane and saw. The crane and the saw required

      electricity and water to operate, so separate utilities were established for this

      building. Once the equipment was assembled, the crane and saw were used

      daily. However, Luttrell stated that he never received any payments in

      connection with J&D Sawing, and Short handled all finances associated with

      the partnership. For tax years 2006 through 2012, J&D Sawing filed tax returns

      reporting only loss of income in the form of depreciating assets. According to

      the partnership’s accountant, it was intended that ISW operate J&D Sawing’s

      equipment for limestone fabrication and pay an equipment rental fee to J&D

      Sawing. However, Luttrell indicated that J&D Sawing’s operations were

      Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017   Page 3 of 11
      entirely separate from ISW’s business. Luttrell had hoped to eventually

      purchase the newly-constructed building and piece of real property from ISW,

      but the partners “never really got around to discussing [it] because [the

      business] never really got off the ground good.” (Tr. p. 22).

[6]   On September 21, 2016, Luttrell filed a Complaint against Short and ISW,

      seeking, in part, to dissolve the J&D Sawing partnership. 2 Short and ISW never

      filed a responsive pleading or otherwise appeared before the court. Thus, on

      November 9, 2016, Luttrell filed a Motion for Default Decree and Affidavit of

      Damages, requesting a judgment in the amount of $291,500 plus attorney fees

      and court costs. Luttrell also filed a Motion to Award Surplus Partnership

      Property to Plaintiff—i.e., Luttrell sought possession of the crane and the saw.

[7]   At some point, the Lender, who held the mortgages associated with ISW,

      foreclosed on the ISW property. On November 23, 2016, the Lender filed a

      Motion to Intervene in Luttrell’s case against Short and ISW and filed an

      objection to Luttrell’s motion for default judgment. According to the parties,

      the Lender claimed to have a first-priority security interest in the crane and the

      saw by virtue of its mortgage liens. A Uniform Commercial Code financing

      statement initially filed in 2008 indicated that the Lender had an interest, in

      relevant part, in “ALL EQUIPMENT, FIXTURES, INVENTORY AND

      OTHER TANGIBLE PROPERTY OF [ISW], AND ANY AND ALL

      2
          Neither the Complaint nor any of the other motions have been included in the appellate record.

      Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017                         Page 4 of 11
      ACCESSIONS AND ADDITIONS THERETO, ANY SUBSTITUTIONS

      AND REPLACEMENTS THEREFORE, AND ALL ATTACHMENTS

      AND IMPROVEMENTS PLACED UPON OR USED IN CONNECTION

      THEREWITH, OR ANY PART THEREOF.” (Appellant’s Exh. C). 3 On

      November 30, 2016, the trial court authorized the Lender’s intervention in the

      case.

[8]   On December 7, 2016, the trial court conducted a hearing on Luttrell’s motions.

      After hearing evidence, the trial court took the matter under advisement. On

      February 9, 2017, the trial court issued a Default Decree and Order on

      Plaintiff’s Motion to Award Surplus Property. The trial court dissolved the

      J&D Sawing partnership and, by default, ordered Short and ISW to pay

      Luttrell’s requested damages in full. The trial court further awarded the

      partnership assets—namely, the crane and the saw—to Luttrell over the

      Lender’s objection. The trial court found that the crane and the saw were

      personal property of J&D Sawing and were not fixtures subject to any security

      interest the Lender had against ISW’s property.

[9]   The Lender now appeals. Additional facts will be provided as necessary.

      3
         In its appellate brief, the Lender includes certain details about the foreclosure cases, the mortgages, and its
      security interests that are nowhere to be found in the record. Facts and arguments must be supported with
      citations to the Record on Appeal, and our court will not consider matters extraneous thereto. Ind. Appellate
      Rule 46(A)(5)-(6),(8).

      Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017                             Page 5 of 11
                                DISCUSSION AND DECISION
                                               I. Standard of Review

[10]   On appeal following a decision from the bench, our court does not set aside a

       judgment unless it is clearly erroneous. Dinsmore v. Lake Elec. Co., 719 N.E.2d

       1282, 1285 (Ind. Ct. App. 1999) (citing Ind. Trial Rule 52(A)). Moreover, in

       this case, the trial court issued findings of fact and conclusions thereon. Thus,

       pursuant to Indiana Trial Rule 52(A), our court will not set aside these findings

       or the judgment unless clearly erroneous—that is, if “there is no evidence

       supporting the findings or the findings fail to support the judgment” or if “the

       trial court applies the wrong legal standard to properly found facts.” Piles v.

       Gosman, 851 N.E.2d 1009, 1012 (Ind. Ct. App. 2006). Conclusions of law are

       reviewed de novo. Id. “To determine whether a judgment is clearly erroneous,

       we give deference to the trial court’s decision by considering only the evidence

       favorable to the judgment and all reasonable inferences flowing therefrom, and

       we will not reweigh the evidence or assess the credibility of witnesses.”

       Dinsmore, 719 N.E.2d at 1285. We will find a judgment to be clearly erroneous

       if “a review of the record leaves us with a firm conviction that a mistake has

       been made.” Id.

                                                     II. Fixtures

[11]   The Lender claims that the crane and the saw are subject to its security interests

       because they are fixtures that “are necessary and integral parts of [ISW’s] real

       property.” (Appellant’s Br. p. 15). Our court has previously determined that

       “[a] piece of equipment is typically thought of as personal property.” Dinsmore,

       Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017    Page 6 of 11
       719 N.E.2d at 1286. However, “[a] ‘fixture’ is a former chattel or piece of

       personal property that ‘has become a part of real estate by reason of attachment

       thereto.’” Gill v. Evansville Sheet Metal Works, Inc., 970 N.E.2d 633, 641 (Ind.

       2012) (quoting Ochs v. Tilton, 103 N.E. 837, 838 (Ind. 1914)). “Generally,

       under the law of fixtures, the question as to whether any particular thing which

       has been attached to land has become part of such land or whether such

       property remains personal property is a mixed question of law and fact and

       depends on the particular circumstances of each case.” State ex rel. Green v.

       Gibson Circuit Court, 206 N.E.2d 135, 138 (Ind. 1965).

[12]   In determining “whether a particular article has become so identified with real

       property as to become a fixture,” Indiana courts utilize a three-part test.

       Dinsmore, 719 N.E.2d at 1286. This test considers: “1) actual or constructive

       annexation of the article to the realty, 2) adaptation to the use or purpose of that

       part of the realty with which it is connected, and 3) the intention of the party

       making the annexation to make the article a permanent accession to the

       freehold.” Id. The third part of the test—the intent—is controlling. Id. at 1287.

       “Intention may be determined by the ‘nature of the article, relation and

       situation of the parties making the annexation, and the structure, use, and mode

       of annexation.’” Id. at 1286 (quoting Citizens Bank of Greenfield v. Mergenthaler

       Linotype Co., 25 N.E.2d 444, 448 (Ind. 1940)). “If there is doubt as to intent, the

       property should be regarded as personal.” Id. at 1287.

[13]   In the present case, the undisputed evidence establishes that the equipment,

       purchased by the partners for J&D Sawing, was annexed to ISW’s property and

       Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017   Page 7 of 11
       assembled in a building constructed specifically to accommodate the crane and

       the saw. The saw is a fourteen foot by seven foot, three-inch industrial

       hydraulic narrow-belt block saw. It is placed on top of rails, which are bolted to

       the floor, and it functions by moving up and down the track to cut stationary

       blocks of limestone. The saw has an electrical cord and water hose that connect

       to the building’s utilities. The saw can be disassembled, usually in “no more

       than two (2) days,” and transferred by a semi-truck to a new location. (Tr. p.

       35). Similarly, the crane—a fifty-ton piece of equipment—is situated atop legs

       and rails, which Luttrell purchased in conjunction with the crane and which are

       anchored to the floor. The crane “runs up and down the rail just like a train

       would on rails” to hoist the blocks of limestone in to place. (Tr. p. 30). The

       crane is “tied in [to the building] with three (3) wires that suppl[y] the electricity

       to it and that’s it.” (Tr. p. 30). Luttrell explained that it is common for such

       cranes to be bought and sold and transferred to various mills and stone-cutting

       operations. A 100-ton crane would be required to lift the crane off its rails and

       lower it onto a semi-truck for transport. Although J&D Sawing maintained

       separate utilities for this building, based on Luttrell’s testimony that he intended

       to eventually purchase the building and the real estate upon which it sat, it can

       be inferred that the building itself was the property of ISW and was not

       constructed using partnership funds.

[14]   The trial court found that the crane and saw are J&D Sawing’s personal

       property, and “the intent of the partners was for the crane and saw to remain

       personal property after they installed the crane and saw on [ISW’s] real

       Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017    Page 8 of 11
       property.” (Appellant’s App. Vol. II, p. 8). The trial court further found that

       because ISW “does not have any ownership interest in the crane and saw,” it

       “could not use the crane and saw as collateral for its mortgage loan or Security

       Interest.” (Appellant’s App. Vol. II, p. 8). The Lender now asserts that,

       contrary to the trial court’s determination, the ownership of the crane and saw

       as personal property is irrelevant in considering whether the crane and saw have

       become fixtures to the real property. Rather, the Lender insists that the crane

       and the saw “are enormous, necessary, integral pieces of machinery in a

       building built solely for them, and they are attached to other machinery that is

       attached to the real property.” (Appellant’s Br. p. 21). Furthermore, the

       Lender argues that “[a]ny objective observer would conclude that the [c]rane

       and [s]aw are permanent fixtures to a stone fabricating business given their size,

       the building they are housed in and based on the fact that the building, rails and

       legs would be useless without them.” (Tr. p. 21).

[15]   The Lender cites several cases, including some from other jurisdictions, to

       support the crux of its argument that the crane and saw should be deemed

       fixtures because they are essential to maintain the intended operation of the

       building in which they reside. See, e.g., Hamilton v. Huntley, 78 Ind. 521, 526-27

       (Ind. 1881). We, however, rely on the well-established tenet that “the intention

       to make [personal property] a permanent accession must affirmatively appear.”

       Mergenthaler Linotype Co., 25 N.E.2d at 448. “[T]he intention which controls is .

       . . to be inferred from all the circumstances of the annexation.” Peed v. Bennett,

       52 N.E.2d 629, 631 (Ind. Ct. App. 1944). Here, the evidence presented

       Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017   Page 9 of 11
indicates that J&D Sawing “did not intend for any of its equipment to become a

fixture or permanent accession to the [ISW] freehold.” Dinsmore, 719 N.E.2d at

1287. Rather, Luttrell stated that J&D Sawing was a completely independent

business from ISW; ISW had its own equipment and its operations in no way

depended upon J&D Sawing’s equipment. Although this particular building

would be empty upon removal of the crane and the saw, the building would

suffer no damage from the equipment’s removal, and ISW’s operations would

not be disturbed. See Mergenthaler Linotype Co., 25 N.E.2d at 449. Moreover,

according to Luttrell, the parties apparently intended to maintain the equipment

as J&D Sawing’s personal property until such a time that the partnership could

purchase the building and real property from ISW. See Dinsmore, 719 N.E.2d at

1287. Accordingly, based on the particular circumstances of this case, we find

no error in the trial court’s determination that the crane and the saw should be

regarded as the personal property of J&D Sawing rather than a fixture subject to

the Lender’s mortgage liens. 4

4
  Because we find that the crane and the saw are not fixtures, we need not address the parties’ arguments
concerning whether Short, as a partner in J&D Sawing, had authority to offer partnership property as
collateral for ISW’s mortgages. And, based on our determination that the pieces are not fixtures subject to a
mortgage lien, we need not address the Lender’s contention that the trial court erroneously determined that
the Lender “lack[ed] standing to argue that J&D [Sawing] should be estopped from asserting its purported
ownership of the [c]rane and the [s]aw to prevent [the] Lender’s security interest from attaching to them.”
(Appellant’s Br. p. 24).

Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017                        Page 10 of 11
                                              CONCLUSION
[16]   Based on the foregoing, we conclude that the crane and the saw are not fixtures

       subject to the Lender’s mortgage liens; thus, the trial court did not err.

[17]   Affirmed.

[18]   Najam, J. and Bradford, J. concur

       Court of Appeals of Indiana | Opinion 47A01-1702-PL-354 | August 3, 2017     Page 11 of 11