Merritt-Chapman & Scott Corp. v. Mauro

Loiselle, J.

The plaintiff, Merritt-Chapman & Scott Corporation, brought this action to determine its rights in and to bowling equipment located in a building formerly owned by the defendant Nicholas Mauro, who had mortgaged it to the plaintiff’s predecessor-in-interest in 1964. The plaintiff claims that it acquired title to this bowling equipment by virtue of the strict foreclosure of the mortgage in 1968. Mauro claims that this equipment had been excluded from the mortgage, that it was personalty and that title remained in him after foreclosure. After a trial to the court, judgment was rendered in favor of Mauro on all issues. On appeal, the plaintiff challenges the court’s conclusion that the bowling equipment was not a fixture and the court’s ruling in admitting certain parol evidence offered to prove Mauro’s intention to exempt the bowling equipment from the mortgage.

The findings of the trial court, as corrected, may be summarized as follows: In 1960 or 1961, the defendant Nicholas Mauro purchased property known as the Enfield Plaza shopping center from its financially troubled owner, who had been unable to complete construction and who had rented only 60 percent of the center although the whole complex had been substantially completed. At that time the center included an unrented and unimproved area which Mauro unsuccessfully attempted to rent before he decided to turn it into a bowling alley. The unrented portion of the complex later occupied by the bowling alleys had been completed to the extent that a concrete floor had been laid but no ceiling or air conditioning had been installed. This unfinished condition would enable the owner to install the kind of flooring, ceiling and lighting that would be desired by a prospective tenant.

Thereafter, on September 28, 1962, Mauro contracted by conditional bill of sale with the defendant Brunswick Corporation to purchase the bowling equipment, the title to which is in issue here. The conditional bill of sale stated that the bowling equipment and accessories were to be located at the shopping center and would not be altered, modified or removed without the written consent of Brunswick. The total purchase price of the equipment was $267,711.06, of which $245,760 was to be paid in sixty-four monthly installments of $3840 each, with 6 percent interest thereon. Despite these terms, the purchase price was not paid in full until February, 1971. At the time of the purchase Brunswick required the defendant Mauro to obtain a consent agreement from Society for Savings, the holder of a first mortgage on the Plaza property, which stipulated that the bowling equipment “shall at all times be considered personal property and not attached to the real estate on which they are installed.” The conditional bill of sale was filed in the Enfield land records, along with a financing statement which listed the bowling equipment and stated that this equipment was “affixed or to be affixed to real property,” i.e., the Enfield Plaza shopping center.

Prior to Brunswick’s installation of the bowling equipment and accessories, the concrete floor in the vacant area in question had two levels, having a difference of approximately two feet between them. Mauro built a crib to bring the lower level of the floor up to the height required to receive the alleys and pinsetting machines. This crib, which extended the length of the building, consisted of A-frames, which supported cross planks and cross braces. The A-frames were wedged into place so as to be incapable of movement.

Thereafter he constructed a concrete block platform across the entire rear portion of the building in the place the pinsetters were to be located. This concrete block platform was topped by a one-and-one-half-inch cap of concrete slabs around the top of the concrete blocks. Mauro also installed a raised wooden platform, along with an area to collect pin balls, a ball rack, some paneling and an iron railing, all of which were removable, as were tables bolted onto the platform. These items could be removed after the removal of all the bowling and restaurant furnishings and equipment, except for the toilet facilities and air conditioning and heating equipment, so that the premises would be in the same condition as before installation. Finally, he suspended a ceiling specially designed to absorb the noise from the alleys.

Upon completion of these preparations, Brunswick installed sixteen bowling lanes, pinsetters and related accessories. Each lane was screwed into the underlying crib by means of one hundred screws, and each pinsetter was bolted to the underlying cinder block and concrete platform. In addition, eight one-inch holes were drilled through the floor in order to run ducts which would receive all wires running between the pinsetting machines and other parts of the facility.

An adjacent restaurant area was also installed, for which a dozen holes to bring up water or to serve as drains were drilled, all counter stools were bolted to the concrete floor and other restaurant equipment was installed.

The bowling lanes may be removed by cutting them in two places, carrying them out in three sections on edge through a door and placing them on a flatbed trailer. Similarly, pinsetters may be disassembled, taken out through a regular doorway and loaded onto trucks. Removal of all of the lanes would take a ten-man crew ten days, and reinstallation would require eighty-five man-hours per lane.

The bowling equipment and restaurant area were completed and opened for business by the end of 1962; they were operated by or under Mauro until 1966, when they were rented to a tenant.

In July or August of 1964, Mauro applied for a loan of one million dollars from the Industrial Finance Corporation, the plaintiff’s predecessor-in-interest. That loan was consummated in August, 1964, within two weeks of receipt of Mauro’s application, and was secured by a mortgage on ten commercial properties, including the Enfield Plaza shopping center. This mortgage was a second mortgage as the commercial properties, which had a total value of ten million dollars, were subject to existing mortgages totaling four million dollars.

The plaintiff’s mortgage included a “fixture clause” following the description of the ten mortgaged properties which stated that the mortgage was to include “insofar as the same are, or can by agreement of the parties be made, a part of the realty, all structures, fixtures and appliances now or hereafter on the described premises, or used therewith.”

Two years later, on or about August 18, 1966, Industrial Finance Corporation began legal proceedings to foreclose this mortgage; judgment was rendered in its favor, and on August 12, 1968, absolute title to these ten properties vested in Industrial Finance Corporation. Subsequently, all rights of Industrial Finance Corporation were merged into the plaintiff, Merritt-Chapman & Scott Corporation. The present action followed and resulted in the judgment for Mauro.

The plaintiff claims that the trial court erred as a matter of law in concluding that the bowling equipment was not covered under the fixture clause of the 1964 mortgage but was instead personalty, title to which remained in Mauro.

“[I]t is essential to constitute a fixture that an article should not only be annexed to the freehold, but that it should clearly appear from an inspection of the property itself, taking into consideration the character of the annexation, the nature and the adaptation of the article annexed to the uses and purposes to which that part of the building was appropriated at the time the annexation was made, and the relation of the party making it to the property in question, that a permanent accession to the freehold was intended to be made by the annexation of the article.” Capen v. Peckham, 35 Conn. 88, 94; Stone v. Rosenfield, 141 Conn. 188, 192, 104 A.2d 545. The intention of the parties, objectively manifested as of the date when the personalty was attached to the freehold, is the primary or essential test for determining whether an object has become a fixture. Cleaveland v. Gabriel, 149 Conn. 388, 391, 180 A.2d 749; Giuliano Construction Co. v. Simmons, 147 Conn. 441, 443, 162 A.2d 511; Camp v. Charles Thatcher Co., 75 Conn. 165, 170, 52 A. 953; 35 Am. Jur. 2d, Fixtures, § 14; 36A C.J.S., Fixtures, § 2; see cases in annot., 77 A.L.R. 1400.

In Lesser v. Bridgeport-City Trust Co., 124 Conn. 59, 198 A. 252, an action against a mortgagee who had foreclosed a mortgage secured by land and a building specially adapted for bowling alleys,¹ the court stated the general rule (p. 64): “There is a strong tendency as between mortgagor and mortgagee to hold that such articles are a part of the realty whereas, in the case of landlord and tenant or other holder of a limited term, the tendency is the other way. The reason for this rule is that the owner of the equity is presumed to make improvements for the permanent benefit of the property, while a mere tenant is more likely to make them for his personal convenience.” The court also said that especial stress should be given to whether a building was specially adapted to certain uses. If so adapted, then “the instrumentalities to carry out those purposes are ordinarily considered a part of the realty.” Ibid. Further, in that case, the court considered whether the postannexation acts of the owners and operators confirmed an intention, at the time of annexation, to make the alleys a part of the realty. All facts found, with one exception, fulfilled every condition from which an intention would be presumed to make the personal property— the bowling alleys — a part of the realty. The exception was a conditional sale contract under which the original owners bought the alleys and equipment. Under the contract the alleys, as between vendor and vendee, were to be considered as personal property. In that ease the vendor’s security interest arising under the contract had been éxtinguished by the payment of the debt prior to the foreclosure and the “situation [was] the same as if no conditional bill of sale had been given.” Id., 65. The court concluded that, under all the facts, the alleys, as a matter of law,² were fixtures.

In the present action, the alleys were installed by the owner, thereby creating a presumption that he intended the alleys to be for the permanent benefit of the property. The bowling equipment was also bulky and considerable effort would be required to remove it from the building. Any other building would have to be specially prepared to use the equipment. See Capen v. Peckham, supra.

On the other hand, other facts found by the court suggest an intention that the bowling equipment was to remain personalty. Mauro bought a shopping center that was in financial trouble and that had a vacant, nnleased area. He was unable to find a tenant for the unleased area. He then decided to put bowling alleys in the vacant area. The purchase contract for the alleys specifically provided that the alleys remain personalty. The first mortgagee also agreed to this provision so that, at the time of installation, all parties having an interest in the shopping center, the first mortgagee, the owner of the equity of redemption, and the vendor of the equipment, recognized that the alleys were personalty. It is true, as stated in Lesser v. Bridgeport-City Tryst Co., supra, that an article may retain its chattel character between a vendor and vendee but remain real property as between a mortgagor and mortgagee. Such evidence, however, although not conclusive, may be considered with other evidence presented, especially when at the time of foreclosure by the mortgagee, the vendor’s security interest had not been extinguished by the payment of the debt. The alleys could not have been deemed to be realty as to all concerned. See Cleaveland v. Gabriel, 149 Conn. 388, 393, 180 A.2d 749.

Contrary to the situation in Lesser in which the court placed “especial stress” on the fact that the building was specially adapted to bowling alleys, the building in this case, as constructed, was not adapted to bowling alleys, but the alleys were installed in a vacant area in a shopping center already built and adapted to produce rental income from any source.³

Furthermore, acts subsequent to the installation of the alleys tend to confirm an intent that the alleys were to remain personalty. When the alleys were rented to a tenant, the rental was split, that is, rent was specifically charged for the space in the premises and rent was specifically charged for the use of the alleys. This arrangement continued after the foreclosure of the plaintiff’s mortgage on August 12, 1968. After that date, the tenant only paid the plaintiff as owner of the premises for the use of the space. As the vendor of the alleys was not fully paid at the time of the foreclosure of the plaintiff’s mortgage in August, 1968, Mauro continued to pay the vendor for the alleys after the foreclosure until they were paid in full in February, 1971. Mauro, or his tenants, paid the taxes, assessments and insurance premiums for the alleys as personalty before the foreclosure and, after the foreclosure, for the years 1969, 1970 and 1971. Furthermore, Mauro, after the foreclosure, spent from $25,000 to $28,000 for additional equipment on the alleys. All of these acts could be considered as confirming an intention that the bowling alley equipment placed in the vacant area of the shopping center was to remain personalty. Cleaveland v. Gabriel, supra; Giuliano Construction Co. v. Simmons, 147 Conn. 441, 443, 162 A.2d 511.

“A question of intent is a question of fact, the determination of which is not reviewable unless the conclusion drawn by the trier is one which cannot reasonably be reached.” International Brotherhood v. Commission on Civil Rights, 140 Conn. 537, 543, 102 A.2d 366; McDermott v. McDermott, 97 Conn. 31, 35, 115 A. 638. It cannot be held that the court was in error in concluding upon all the evidence that the intention of Mauro, objectively manifested as of the date when the bowling equipment was installed in the shopping center, and confirmed by later actions, was that such equipment remain personalty.

Because the court could properly find that the equipment was not a fixture, the remaining assignments of error concerning the application of the parol evidence rule need not be considered. The substance of the contested evidence involved statements made by Mauro to the plaintiff at the time of the execution of the mortgage relative to the exclusion of the bowling alleys from the mortgage deed.

There is no error.

In this opinion House, C. J., and Bogdanski, J., concurred.

1 In Lesser v. Bridgeport-City Trust Co., 124 Conn. 59, 61-63, 198 A. 252, a construction mortgage had been obtained for the erection of a building. The application for the loan associated with the mortgage stated that the building would house two stores and bowling alleys. Plans showing the construction for those purposes were submitted to the defendant-first mortgagee with the application. A second mortgage was given to the plaintiff. Twelve bowling alleys and equipment were purchased on a conditional bill of sale and installed. The original owners transferred the property to a corporation and the alleys as personal property under the bill of sale were transferred to the corporation with the consent of the vendor of the alleys. The corporation paid the vendor in full, but incurred indebtedness to the West Side Bank and transferred its interest in the alleys to the bank. The plaintiff foreclosed his second mortgage, conveyed the premises to the Hancock Corporation, and was given back a second mortgage. In this mortgage there was an express agreement that the alleys, pins and balls were to be part of the mortgaged premises. When the first mortgage was foreclosed, the plaintiff surrendered the keys to the defendant. Later the plaintiff brought an action for conversion.

2 At the trial, a verdict was directed for the defendant, assignee of the original mortgagee, on the issue of whether the bowling alleys were fixtures. The plaintiff appealed from the judgment rendered on the verdict, assigning error in the refusal of the trial court to set aside the verdict.

3 In Webb v. New Haven Theatre Co., 87 Conn. 129, 133, 87 A. 274, the court found that one of the important factors tending to show an intent to annex permanently was that the removal of the installed articles would render the building practically useless for the purpose for which it was constructed and used.