RINALDI v. GOLLER

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District Court of Appeal, First District, Division 1, California.

Italo RINALDI and Mary L. Rinaldi, Plaintiffs and Respondents, v. Ernest GOLLER, Defendant and Appellant.*

Civ. 16655.

Decided: August 22, 1956

Morris Oppenheim, San Francisco, for appellant. J. Horton Beeman, Royal E. Handlos, San Francisco, for respondents.

This case involves a contest between the owner-landlord of certain real property and a chattel mortgagee of a building constructed on the property by the tenant. The trial court determined that the building belonged to the landlord, and the chattel mortgagee appeals. The appeal is presented on a settled statement.

On July 27, 1948, the plaintiffs leased three vacant lots to Grays and Hamilton doing business as an auto repair company, for a period of 10 years. On August 2, 1948, the tenant borrowed $4,000 from Goller the appellant, for the purpose of securing money to erect a building on the leased premises. This loan was secured by a chattel mortgage on the building to be erected. The building was then constructed. It is 65 feet wide, 30 feet long, and is built on portions of two of the three leased lots. The foundations and floor of the building are concrete, and the interior is open except for a small office. The building is metal, with corrugated sides and roof. The chattel mortgage on this building was not recorded.

Thereafter, the tenant defaulted on the chattel mortgage. On August 27, 1952, the chattel mortgagee, in an action in which the landlord was not a party, secured a foreclosure judgment against the tenant.

In the meantime, the defendant defaulted on the payment of rent to the landlord. On October 3, 1952, the landlord filed the present action against the tenants and the chattel mortgagee. The complaint alleges three causes of action. The first cause is for declaratory relief, alleging the facts above set forth, and alleging that the chattel mortgagee claims an interest in the improvements which, it is averred, is without merit. The second cause of action is for overdue rent from the tenants, while the third is to quiet the title of the landlord to the premises. The tenants defaulted, and their default was duly entered. The chattel mortgagee answered, denying that this defendant had no interest in the building, and alleging that the chattel mortgage, as between the parties, is a valid lien on the building.

The trial court found that the allegations of the complaint as to the execution of the lease, the execution of the chattel mortgage, the erection of the building by the tenant and the foreclosure of the chattel mortgage were true, but that the chattel mortgage had not been recorded; that defendant Goller had foreclosed the chattel mortgage, and by reason thereof claimed an interest in the property; that such claim of Goller was without right; that plaintiffs are the owners in fee simple and entitled to possession. The allegations of defendant's answer that the property was personal property was found to be untrue. The court concluded that the plaintiffs had the legal right to terminate the lease and to claim the building as an improvement to the real property, and that plaintiffs' title should be quieted as against the claims of defendant. The judgment grants the plaintiffs declaratory relief by declaring that plaintiffs properly exercised their option to terminate the lease and to claim the improvements on the real property, grants a money judgment against the tenant, and declares plaintiffs own the real property in fee simple and that defendant has no legal right thereto. Goller alone appeals from the judgment.

The legal problem presented on this appeal is whether the building involved was a trade fixture removable by the tenant or his mortgagee or whether it was irremovable by the tenant or those claiming through him. Of course the building was a ‘fixture’ within the meaning of section 660 of the Civil Code. Section 1013 of that Code provides that: ‘When a person affixes his property to the land of another, without an agreement permitting him to remove it, the thing affixed, except as provided in section ten hundred and nineteen, belongs to the owner of the land, unless he chooses to require the former to remove it.’ Section 1019 confers on a tenant certain rights in reference to what have come to be known as ‘trade fixtures.’ It provides: ‘A tenant may remove from the demised premises, any time during the continuance of his term, anything affixed thereto for purposes of trade, manufacture, ornament, or domestice use, if the removal can be effected without injury to the premises, unless the thing has, by the manner in which it is affixed, become an integral part of the premises.’

It will be noted that under section 1013 the owner of the real property and the affixer may agree that the latter may remove affixed property that otherwise might become irremovable. That is, of course, but another way of stating that the expressed intent of the parties shall control. It will also be noted that under section 1019, as between landlord and tenant, the tenant may remove certain articles of ‘trade, manufacture, ornament, or domesticuse,’ that might between other parties become fixtures under section 660, if such removal ‘can be effected without injury to the premises,’ unless the affixed article has become ‘an integral part of the premises.’ It should also be noted that the trial court made no findings as to the intent of the parties or as to the problems presented by section 1019, merely finding that the allegation that the building was ‘personal property’ is untrue, and concluded that plaintiffs' title to the ‘real property’ should be quieted.

The problems involved in socalled ‘fixture’ cases are complex and confusing. The cases are by no means consistent and some are contradictory of others. (See for a critical discussion of many of the cases an article ‘Fixtures in California’ by Harold W. Horowitz, 26 So. Cal.L.Rev. 21.) The courts in such cases, subject to the statutory provisions, seek to determine the actual or presumed intent of the parties. In determining that question the relationship between the parties is of great importance—trespasser, licensee, invitee, tenant, bona fide purchaser, etc., on one side, and owner, landlord or seller, etc., on the other. The courts apply different standards in determining the presumed intent of the parties dependent upon the relationship involved. When the relationship is landlord and tenant it is obvious that, in determining the presumed intent, if a structure constructed by the tenant is given to the landlord, the latter has been given to windfall at the expense of the tenant. The equities and inferences are in favor of the tenant. As was said in Pomeroy v. Bell, 118 Cal. 635, 638, 50 P. 683, 684; ‘The principle upon which a tenant is permitted to remove from the land demised to him trade fixtures that he has placed thereon is that as he has hired the land in order that he may occupy it for use, and has paid for such use and occupation, it is but equitable that he should be permitted to remove the structures that he may have placed thereon for the very purpose of enabling him to enjoy the use for which he hired the land.’

In Shafter Estate Co. v. Alvord, 2 Cal.App. 602, 604, 84 P. 279, 280, in holding that a small house and barn could be removed by the tenant as ‘trade fixtures,’ it was said: ‘Whatever the rule may have been at common law the modern decisions, both in this country and in England, in regard to the removal of Fixtures, as between landlord and tenant, most liberally construe the right in favor of the tenant. In all cases, where the improvements are erected at the expense of the tenant for his own uses and purposes under the lease, policy and justice demand that the tenant should be allowed, before the expiration of the lease, to remove them, provided that the removal does not injure the freehold nor operate to the injury of the inheritance. The landlord pays nothing for the fixtures, and there would be no justice in allowing him to take them from the tenant without consideration. If the lessee pays the hire of the property, or performs the other covenants of his lease, and returns it in as good condition as he found it, the landlord should be satisfied.’

As to trade fixtures the permanency of the method of attachment, while a factor, is a relatively unimportant one in determining the issue. The key question is the intent of the tenant in making the installation. Roberts v. Mills, 56 Cal.App. 556, 205 P. 872; Camp v. Matich, 87 Cal.App.2d 660, 197 P.2d 345. The question is primarily one of fact, Hessell v. Healey, 131 Cal.App.2d 144, 280 P.2d 124; Bank of America Nat. Trust & Savings Ass'n v. New York Life Ins. Co., 16 Cal.App.2d 719, 61 P.2d 364; Alderman v. Baggett, 134 Cal.App. 501, 25 P.2d 532, as is the question as to whether the attached fixture can be removed without injury to the realty. Bebbe v. Richards, 115 Cal.App.2d 589, 252 P.2d 688; Borchers Bros. Co. v. Ciaparro, 211 Cal. 507, 295 P. 1035.

In applying these rules the courts have frequently held that very substantial structures securely attached to the realty were, as between landlord and tenant, trade fixtures, and therefore removable. In Security Loan & Trust Co. v. Willamette, etc., Co., 99 Cal. 636, 34 P. 321, it was held, as a matter of law, that an office resting on mudsills was a trade fixture, and removable. A similar result was reached as a matter of fact in Macdonough v. Starbird, 105 Cal. 15, 38 P. 510. In Borchers Bros. Co. v. Ciaparro, 211 Cal. 507, 295 P. 1035, a finding that buildings, barns, sheds, platforms, a railroad track and pig pens were trade fixtures and removable was affirmed. A similar finding as to a substantial house and barn was affirmed in Shafter Estate Co. v. Alvord, 2 Cal.App. 602, 84 P. 279. In Woods v. Bank of Haywards, 10 Cal.App. 93, 106 P. 730, a steel safe constructed within a bank vault was held to be a trade fixture. A refrigerating plant constructed on a concrete base was found to be a trade fixture in Marker v. Williams, 39 Cal.App. 674, 179 P. 735. (See also Goldberg v. Stanton, 84 Cal.App. 665, 258 P. 417.) A frame building resting on mudsills was held to be a tradefixture in Roberts v. Mills, 56 Cal.App. 556, 205 P. 872. In Murr v. Cohn, 87 Cal.App. 478, 262 P. 768, a gasoline station, gas tank and air pump were held removable by a tenant as trade fixtures.

There are some cases that hold that a particular structure could not be removed by the tenant. In West Coast Lumber Co. v. Apfield, 86 Cal. 335, 24 P. 993, a fourstory building was held not to be a trade fixture. In Alden v. Mayfield, 163 Cal. 793, 127 P. 44, 41 L.R.A.,N.S., 1022, a heavy plate glass and marble front of a building installed by a tenant were held, as a matter of law, to have become integral parts of the building, and not removable. In Bank of America Nat. Trust & Savings Ass'n v. New York Life Ins. Co., 16 Cal.App.2d 719, 61 P.2d 364, a bank vault that could not be removed without seriously affecting the stability of the building in which it had been installed was held not to be a trade fixture. A similar holding as to a refrigerating plant that had become an integral part of the building in which it was housed was made in Yokohama Specie Bank v. Higashi, 56 Cal.App.2d 709, 133 P.2d 487. In Camp v. Matich, 87 Cal.App.2d 660, 197 P.2d 345, and in Hessell v. Healey, 131 Cal.App.2d 144, 280 P.2d 124, buildings somewhat similar to the one here involved were found by the trial court not to be trade fixtures, and these holdings were affirmed.

How do these rules apply to the present case?

In the first place, there is some evidence that the landlord and tenant expressly agreed that the tenant could remove this improvement. One of the clauses of the lease reads: ‘At the expiration of said lease, and if there has not been and/or will not be another contract entered into, the Lessors [the landlords] have the option to purchase all improvements, provided the Lessees [the tenants] intend to sell.’ Such option would be meaningless if the landlord was to keep improvements without paying for them. The clause seems to imply that, if the tenant does not ‘intend to sell,’ he may remove the improvements upon the termination of the lease. Of course, the expressed intent of the parties, when ascertained, is controlling. Renner v. Huntington etc. Oil & Gas Co., 39 Cal.2d 93, 244 P.2d 895; Camp v. Matich, 87 Cal.App.2d 660, 197 P.2d 345; Trabue Pittman Corp. v. County of L.A., 29 Cal.2d 385, 175 P.2d 512. The trial court made no reference to this clause of the lease and did not attempt to interpret it. Inasmuch as we think that in any event the case must be reversed, we will not attempt to interpret the clause as a matter of law, but will leave that to the trial court on the retrial, at which time admissible parol evidence may be available on this issue.

Even if this clause be disregarded, the case must be reversed. According to the facts as set forth in the settled statement the building here involved. as a matter of law, became a fixture and therefore ‘real property’ under the provisions of section 660 and 1013 of the Civil Code. It is equally clear, however, that as between the landlord and tenant (or one claiming through the tenant), the building, although a fixture, might be removable by the tenant. Clearly, the building was affixed to the real property for purposes of trade or manufacture. It is equally clear that the tenant in affixing the building to the real property did not intend that it should be permanently affixed thereto because the tenant executed a chattel mortgage on it. Therefore, the building was a trade fixture within the meaning of section 1019 of the Civil Code and can be removed if such removal can be effected ‘without injury to the premises' and if it has not become ‘an integral part of the premises.’ These are factual matters. They are the basic factual questions presented in this case. Yet the trial court made no findings on them. The trial court simply found that the allegations of the answer that the building was personal property are not true and concluded that plaintiffs are entitled to quiet their title to the ‘real property.’ Thus, at most, the findings simply characterize the building as ‘real property.’ Such conclusion determines nothing. The better reasoned authorities hold that a trade fixture is ‘realty’ until severed from the property, so that characterizing it as ‘real property’ while still attached decides nothing. The real question is not whether the building is ‘realty’ or ‘personalty,’ but whether the tenant, or one claiming through him, has the right to sever this building from the realty and convert it back into personalty. In Trabue Pittman Corp. v. County of L.A., 29 Cal.2d 385, 394, 175 P.2d 512, 518, the court stated the applicable principles as follows: “The nature of this right of removal has been explained in two ways: by supposing that the chattel nature of the thing is preserved after its annexation, or by considering that the thing ceases to be a chattel by being affixed to the land, and becomes real property, but reducible again to a chattel state by separation from the realty.' * * *

‘The view that trade fixtures, removable by a tenant, are a part of the realty until removed represents the weight of authority elsewhere and is regarded by Tiffany as the ‘much sounder view.’ (See Tiffany, Real Property (3d ed.) § 620, p. 605.)'

Thus, the findings fail to pass on the basic factual issues presented. The trial court should have determined (1) whether the parties expressed an intent as to whether the building should be severable; and (2) if no intent on this issue was expressed, since the building, as a matter of law, was a special type of fixture known as a ‘trade fixture,’ whether it could be removed without injury to the premises or whether it had become an integral part of the premises. These issues are pivotal. The issues decided actually determine nothing. It is obvious, therefore, that there was a failure to find on the material and controlling issues. This being so the judgment must be reversed.

The judgment appealed from is reversed.

PETERS, Presiding Justice.

BRAY and FRED B. WOOD, JJ., concur.

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