TERRY L. MYERS, Chief Judge.
Before the Court is a "Request for Adequate Protection," Doc. No. 127 ("Request"), filed by creditor Anaconda, LLC ("Anaconda"). Anaconda is a single member LLC. The initial member at the time of prior hearings was Dana Martin ("Martin").
Anaconda's Request came on for hearing on August 4 and again on September 2, 2014. Both Ryerson and Anaconda appeared at hearing through counsel. Following the close of evidence and oral argument on September 2, the Request was taken under advisement. This Decision constitutes the Court's findings of fact and conclusions of law on this contested matter. Rules 7052, 9014.
Debtor filed the petition commencing his chapter 11 case on August 30, 2013. Anaconda obtained relief from stay in order to foreclose upon certain real property and improvements securing two notes. Anaconda acquired the notes, and the deeds of trust securing the same, by assignment from Idaho Independent Bank. See Doc. No. 103 (Memorandum of Decision).
After the Court lifted the automatic stay, Anaconda commenced foreclosure on the deeds of trust. On April 14, 2014, for a credit bid of $7,000,000, Anaconda obtained the property on which the residence is located. At a separate foreclosure sale on April 15, Anaconda obtained the two adjacent lots for a credit bid of $145,000.
Immediately following foreclosure, Martin inspected the property. Martin acknowledged Debtor was entitled to remove personal property such as furniture and art, but from his inspection believed certain "fixtures" were improperly removed. Anaconda's Request was filed ten days after the foreclosure.
The Request claims Debtor "stripped" over $550,000 worth of "fixtures" from the property. Doc. No. 127 at 2. It generally describes the same as "[w]ith limited exception, all light fixtures, bath mirrors, a large dock, built-in appliances, built-in outdoor appliances, built-in stereo components, cabinets, back-up power supply generators (3), statuary, custom window coverings, [and] plumbing fixtures." Id.
The Request expressly relied on an April 18, 2014 letter from Gerrold ("Jerry") Flowers dba Flowers Construction. See Ex. 252.
Anaconda's Request asserts that these removed items all constituted "fixtures" of the real estate and were rightly subject to Anaconda's deed of trust.
Debtor opposes Anaconda's Request.
Testimony established that, as the foreclosure date loomed, Debtor and his wife caused movers, electricians and other professionals to assist in removing what Debtor deemed to be personal property not subject to Anaconda's interest in the land, residence and related structures/improvements, and fixtures. Debtor was not present
Anaconda noted that windows on the property were covered with sheets, cardboard or other materials and asserted this was evidence of an intent to "conceal" Debtor's activity inside the residence including the so-called "stripping" of the property. Debtor's testimony indicated the windows were covered at a later stage of the move-out process and only after Debtor's wife, and women from the area assisting her in packing personal property, discovered people on adjacent roads attempting to observe or monitor them.
Additionally, Anaconda argued that the manner in which the personal property was removed was indicative of malicious intent. Though such a motive or intent was not shown to be particularly material to the legal issues presented under the Request, Anaconda repeatedly asserted that Debtor or those hired by him caused damage to the residence and adjacent improvements during the removal process.
Other testimony, however, is directly contradictory. Michael Hodan of Premier Electric is an electrician who was directly involved in the removal. He credibly testified that when the lighting was removed, it was professionally and carefully uninstalled and the wiring involved was cut and capped (i.e., he would "safe it off") in order that future lighting fixtures could easily be reinstalled and there would be no electrical risk in the interim to individuals or the structure due to unsafe or exposed wiring. He expressly testified there was no demolition and no damage. Indeed, Anaconda's own witness, Flowers, testified that most of the light fixtures were removed in a professional manner, the wiring nuts were
Eric Schoutens, the original subcontractor who had installed the "low voltage" aspects of Debtor's audio/visual, security system, and related electrical components and systems, was also retained by Debtor to assist in the removal of such equipment. He testified he had powered down the surveillance system, disconnected the A/V rack, unplugged the same from the related wall plates and stored the cabling in the rack. He stated there was no damage to the walls or racks, and he left things so they could be reconnected.
The testimony also differed sharply as to the wiring connections involved with a 150 KW generator that sat on an external concrete slab and provided back-up power to the residence's extensive electrical systems. Martin testified the generator cables were "cut" and left exposed. Flowers stated this damage had to have occurred at the time of the generator's removal because, if it occurred previously, the damage was such that the unit would have "shorted." Haynie testified the wiring was cut or "severed" in such a way as to render it unusable, and that significant cost would be incurred to reinstall that generator or a replacement because the concrete pad would have to be torn up, the remaining wiring pulled out, and the area re-wired from scratch.
However, Hodan explained the wiring was not severed but was in the same condition as it always had been. Hodan, who actually disconnected the generator, testified how the exposed portion of the copper wiring above the sheathing
On the whole, Anaconda's position limning a malicious and damaging destruction of the real property as fixtures and personal property were removed was not persuasively supported. There is little doubt that Debtor caused the removal of as much property as could arguably be proper, and seemed determined to leave as little as could be legally and reasonably justified,
The Request raises a fundamental issue: whether each particular item is a fixture or instead is movable (and thus removable) personal property. Evidence about the manner in which Debtor removed certain items, or about what animated his decision to remove some items and not others, is of value to the Court only in considering Debtor's credibility or evaluating the "intent" of Debtor required under Idaho law
While § 541 addresses what becomes property of the estate, the Court looks to state law to determine the nature and extent of the debtor's, and thus the estate's, interest in property as of the commencement of the case. Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979); McCarthy, Johnson & Miller v. N. Bay Plumbing, Inc. (In re Pettit), 217 F.3d 1072, 1078 (9th Cir.2000) ("bankruptcy courts must look to state law to determine whether and to what extent the debtor has any legal or equitable interests in property as of the commencement of the case"); Hopkins v. Frazier (In re Tews), 502 B.R. 566, 569 (Bankr.D.Idaho 2013); In re Thompson, 454 B.R. 486, 491-92 (Bankr.D.Idaho 2011).
Whether an item is a fixture is a mixed question of law and fact. See Rayl, 700 P.2d at 570. To determine whether an item is a fixture, the Court is to apply a three-part test evaluating (1) the annexation of the item to the realty, either actual or constructive,
The Court applies Rayl and the related authorities
Debtor conceded the impropriety of removing the recessed "can" lights, and testimony indicated he has returned those items. They are fixtures. Similarly, the installed in-cabinet lighting, the wall sconces, and installed indirect lighting are also fixtures. Further, the installed lights on the grounds (for example, the "carriage lights" along the driveway discussed by Martin in his testimony) also satisfy the test for fixtures.
Therefore, the Court concludes the suspended or hanging lighting — including the large chandeliers — are not fixtures. These hanging lights were suspended by chains — albeit some by substantial chains — from the ceiling. Though so "installed," there was inadequate proof to establish the required intention that they be permanent accessions. The specific hanging light in a room is often, and was here, a matter of personal taste, whether considering the smaller hanging or suspended lighting fixtures (e.g., over a dining, game or pool table) or the large chandeliers. Such lighting is generally removable and replaceable.
The 65" La Cornue gas range was a non-standard size appliance. It was a wedding present from Debtor to his wife, and was acquired at the La Cornue factory in France. The stove was free-standing on its "legs" and simply connected to a natural gas line and electric outlets. And it was removed without damage. Both of these factors were repeatedly emphasized by Debtor. However, the kitchen area was custom-designed around the stove's non-standard dimensions, including cabinetry, tiling, and an exhaust hood.
The La Cornue stove was "installed" in a manner that speaks objectively to the intent that it be a permanent accession. It is found to be a fixture.
There was little helpful testimony or documentary evidence as to the other itemized gas and electric stoves and ranges, and microwave ovens, located in
The listed Miele espresso maker, along with other Miele appliances such as steam or warming ovens, and warming drawers,
The Sub Zero freezer had a wood fascia panel that matched the kitchen cabinetry.
Similarly, the various washers and dryers in the residence, the caretaker house and the apartment over the garage are, on the weight of the evidence, not fixtures but, rather, movable appliances.
Debtor created a complicated, multi-function system that was extensively integrated throughout the residence. It allowed for satellite tv and radio signals to be delivered independently to rooms throughout the structure, with each room's occupant capable of determining what media source to access. This system also included an extensive intercom. For functional and esthetic reasons, all the infrastructure is within the walls of the house. The Court finds that the in-wall speakers, wiring and infrastructure for this entire system constitutes fixtures.
The Request generally refers to "all electronics." The Court concludes that discrete items of electronic and A/V equipment — for example an amplifier, a satellite tv or a radio receiver, or a CD or DVD player — which are simply plugged into the system in the main control room or elsewhere and which could be and were easily detached (unplugged), are removable personal property and not fixtures. That they were useful to and used in connection with the portions of the sound "system" which has been found to be a fixture has been considered but is neither determinative nor persuasive. Any number of components could be purchased and used in connection with the installed wiring and speakers, and could be easily replaced or upgraded. Additionally, the flat panel tv monitors that were hung in various rooms on brackets and removed are items potentially included within the asserted category of "all electronics." Though not specifically addressed in the
Some of the "electronics" relate to the security system in the house. Those items of equipment and the security system as a whole were not specifically identified in Flowers' letter, but were discussed by witnesses. There were security cameras, particularly outside the residence,
There was one large 150KW generator, and two smaller 20KW generators, designed to provide back-up power in case of emergency. These generators were of importance given the overall design and sophistication of the residence and its several systems (security, sound, lighting, heating) that required constant and reliable power.
The larger generator weighed up to 1500 pounds
Debtor emphasized the mobility of the unit, even though it would take several men, and potentially a mechanical hoist, in order to move it. Anaconda in turn emphasized not just the generator's size and weight, but its direct function, which was to provide back-up power to the property, as the various systems Debtor had installed required uninterrupted power. But Debtor rejoins that, if Martin has similar desires for back-up power, he can purchase and install a generator, and the slab and intact wiring is there to facilitate it.
In Boise-Payette Lumber Co., the Idaho Supreme Court considered machinery located in a lumber planing mill and concluded the machinery was not specially constructed for the building and could be bought on the general market, and that even though the machinery rested on a constructed foundation (there wood instead of concrete as here), this was not a determinative factor. "[T]hough heavy, [the machines] could be moved without injury to the building, and were equally adapted for use elsewhere. The mere fact that they were adapted to be used in this factory, and that they were necessary to carry on the business, is not enough of itself to impress on them the character of realty." 186 P. at 252.
In Rencher v. Brown, Rencher and her LLC purchased a 5 acre parcel from Brown. During negotiations, the parties
Rencher distinguished its situation from that in Rayl. There an irrigation system was found constructive or actually annexed. It was bolted to cement slabs buried in the ground, and attached to pipes and electrical wires which were buried three to four feet underground. Not only did this new system fully replace a gravity irrigation system (that was deconstructed when the new one was installed), the removal of the new system would necessitate substantial digging and damage to the real property. Id.
The generator could be and was removed without damage to the realty.
The item identified as a "pedestal sink" in the Request is actually a 48" × 24" × 32" free-standing vanity cabinet on which a sink or basin made of petrified wood was later placed.
Window coverings such as curtains and drapes are not generally, and are not here shown to be, fixtures. They can be and regularly are removable and replaceable.
Debtor evidently returned some window coverings, which is within his discretion. No evidence was presented as to any unreturned window coverings, and Anaconda has failed to show the same were fixtures. Debtor will not be required to return any window coverings not already returned.
The remote control units for the gates and garage doors are small, portable, and of little monetary consequence. Similarly, the vacuum system hoses and attachments were relatively minor items of little monetary consequence. That these items were removed in the first place, and that they became part of the litigation, speaks more to the parties' enmity than to anything else. Not surprising, there was very little evidence presented regarding these items. Essentially, the Court was informed that these items were missing and they were necessary for systems (garage doors and vacuums) that were attached to the property to function.
The annexation element of the test under the Idaho cases can be met by "constructive annexation" where objects, though not themselves attached to the realty "comprise a necessary, integral or working part of some other object which is
Anaconda objects to Debtor's removal of certain statues. While a "full-size moose" and a "carved wooden eagle" were referenced, there was no evidence regarding the Rayl elements as to either. The Court finds the contention that these two statues are fixtures was unproven.
The real focus here was on two "monumental bronze" works by sculptor Lincoln Fox. One is named "Heaven Bound," and is a 96" × 76" × 34" limited edition bronze.
The Court finds and concludes all these disputed bronze statues are personal and movable works of art, and are not fixtures.
Anaconda's Request (though not Flowers' letter, Ex. 252) raises issues with Debtor's removal of several large mirrors, variously characterized as "beveled with rope border," "copper framed with rope border," "leather framed oval Mercier," and "antique style Dutch woodchip."
Debtor had a dock built for use in conjunction with this property. It sat in Lake Coeur d'Alene directly adjacent to the residence.
The State of Idaho owns and controls the lake, and structures thereon such as docks are allowed only through an encroachment permit issued upon strict compliance with state law and regulation.
Brady testified that docks and dock permits are site-specific and appurtenant to the adjacent real estate. The permit allowing encroachment into the lake is similar, in his view, to an easement. If the ownership of the appurtenant land changes, the dock must be removed, or the new owner must qualify for an assignment of the encroachment permit.
The dock here is a floating structure of timber, wood composite, and other material. It is movable and Debtor concedes that, when he vacated the property, he caused it to be moved. It is presently in a nearby bay, with one end grounded on a beach, with ropes tethering it to trees on shore.
Prior to being moved, the dock was attached to pilings that had been driven into the lake bed. See Ex. 253 at 49. The pilings are the sole permanent structures; the dock was attached by steel hoops or cables to the pilings.
The dock, when it was attached to the pilings, was connected to the shore by a removable 4' × 20' gangway or ramp. That ramp was then attached to the floating dock that was moored to the pillars.
As with the 150 KW generator discussed earlier, application of Boise-Payette Lumber, Rencher and the other case law to these facts establishes the dock is not a fixture. It was not permanently affixed to the property in question, it was removed without damage to the realty, and its utility (i.e., "useful adjunct") and arguable adaptation is not alone sufficient to make it a fixture.
Also instructive is Prudente v. Nechanicky, 84 Idaho 42, 367 P.2d 568 (1961). In that case, there was a structure variously identified as a boathouse, float house or houseboat. Once dilapidated, it was repaired and improved, and placed on logs so that it would float on water. The owners of certain land purchased through tax deed asserted they had rights to this structure, as did the parties who repaired and improved
The Court reaches the same conclusion on this record as to the dock. The dock was at no point erected upon real property owned by Debtor and subject to the deed of trust. It was custom built and then attached to pilings driven into the lake bed. The ability to place those pilings in the lake was solely due to the State granting an encroachment permit for that purpose. The dock was connected to the subject realty solely by an easily removable gangway or ramp.
The dock at issue — like the machinery in Boise-Payette Lumber and the fuel tank in Rencher — was utile to the subject real property. But unlike in those two cases, the personal property here was not on, much less affixed or annexed to, the real property. And in all three of these cases, the removal of the personal property caused no physical harm to the realty.
If the State were to allow an owner like Debtor to construct an immovable dock permanently and physically affix it to his shoreline property — like a wharf or a pier — the analysis could well be different. But that is not the situation presented. The lack of physical annexation (actual or constructive), the impermanence of the right to have and use a dock,
The dock is not a fixture.
As to each removed item that is found to be a fixture,
Additionally, as to each removed item found to be a fixture and, thus, improperly removed, Debtor will be required to pay the cost of repair and reinstallation. If the expense of repair or reinstallation has already been incurred and paid, Debtor will be required to reimburse Anaconda the reasonable expense associated with that repair and reinstallation. As with the question of value of an item that cannot be returned, any dispute over the allowable cost of repair or reinstallation is subject to further hearing.
The Request will be granted, in part, as set forth above. The Court will enter its own form of order.
