Rayl v. Shull Enterprises, Inc.

BAKES, Justice.

This case involves an appeal and cross appeal from a judgment attempting to settle a dispute between a corporate landlord and a farm tenant over the termination of a lease of farmland. We reverse the judgment of the trial court and remand for final determination and resolution in accordance with the views expressed herein.

Shull Enterprises (Shull) is a closely held family corporation owned by descendants of Nora Rayl. Bill Rayl, respondent and cross appellant, is a minority shareholder in Shull. Beginning in 1962, Rayl and Shull entered into successive written leases of farm property (the Hollister farm) owned by Shull. The agreements provided for a sharecrop arrangement, wherein rent was paid by crediting Shull with a percentage of the crops grown on the land by Rayl. The last written lease entered into between the parties was signed February 9, 1970. That lease by its terms expired December 31, 1974. After 1974, however, Rayl remained in possession of the property by apparent agreement of the parties, without a written lease, until 1981, when he was dispossessed by order of the trial court.

In 1980, the corporation decided to sell the Hollister farm property. Rayl made at least two offers to buy the farm, both of which were rejected. On November 22, 1980, at a directors’ meeting, Rayl was advised that his lease would be terminated December 31, 1980, and the corporation would sell to an outsider if an agreement to sell to Rayl could not be reached. Rayl was later served with two written termination notices, one served January 6, 1981, and the other January 12,1981, asking that he vacate the premises by February 15, 1981.

On November 5, 1980, Rayl filed a labor lien against the property, seeking compensation for labor performed such as clearing sagebrush, installing ditches, leveling the property, and installing fencing, all of which was done between 1963 and 1967. On December 30, 1980, Rayl filed this action seeking a judicial determination that proper notice of termination had not been given, asking that Rayl be allowed to occupy the premises in 1981, and also seeking to foreclose the labor lien. Shull filed a counterclaim seeking eviction of Rayl and removal of the lien. The counterclaim also alleged a cause of action for slander of title and sought an accounting between the parties, and included an offer to compensate Rayl for his interest in a pivot irrigation system located on the land.

On March 13, 1981, a partial summary judgment was entered in favor of Shull, finding an unlawful detainer of the property as of February 15, 1981, and ordering Rayl to vacate the premises. The summary judgment also found the lien to be invalid. The court reserved questions of damages for a later trial.

Rayl vacated the farmhouse on March 31,1981, but did not remove his cattle from pastureland until late April and early May and did not remove all of his personal property from the land until May. When Rayl vacated the premises, he removed a pivot irrigation system in which he owned a two-thirds interest, with the corporation owning a one-third interest. Removal of the system required the removal of underground electrical cables and piping.

On September 25, 1981, by consent of both of the parties, Shull filed an amended counterclaim, realleging the unlawful detainer (which by this time had already been decided by the court) and asking for reasonable rental value as damages and, in addition, seeking treble damages under I.C. § 6-301. The complaint realleged the slander of title allegations, and the allegations of the necessity of an accounting. In addition, a new counterclaim was added alleging conversion of Shull’s interest in the pivot irrigation system and alleging that the irrigation system was a fixture and that by removing that fixture Rayl committed physical and economic waste upon the property. Shull also sought punitive damages, alleging that the actions of Rayl were willful, malicious and intentional.

A trial was held to resolve the remaining issues between the parties, including damages. On January 4, 1983, the trial court issued Findings of Fact and Conclusions of Law, finding Rayl liable for the reasonable rental value of the land only for the period of time after March 31, 1981; finding that no damages had been proven on the slander of title count; that the irrigation system was not a fixture, and that no waste was committed upon the land; and finding that no punitive damages, no treble damages, and no prejudgment interest would be allowed. Shull has filed an appeal from this judgment, and Rayl has filed a cross appeal.

Numerous issues are raised on the appeal and cross appeal. These include: (1) whether the trial court erred in finding that the pivot irrigation system was not a fixture; (2) whether the trial court erred in ruling that the attorney fees incurred in seeking to remove the false lien from the real property could not constitute those special damages necessary in proving slander of title; (3) whether the trial court erred in not allowing 18% interest on the judgment; and (4) various other alleged errors, including the failure of the trial court to allow damages for prejudgment interest, unpaid rent, treble damages, punitive damages, attorney fees, and recovery for improvements allegedly made to the real property. We find that the trial court did err in its treatment of the first three items of the above list, but that no error was committed as to those items listed under (4). We thus reverse for consideration of additional damages due because of the errors noted.

I

We first consider whether the pivot irrigation system was a fixture. Two center pivot irrigation systems were purchased between the years of 1974 and 1976 for purposes of irrigating the farmland. At the time of the initial purchase, Rayl paid two-thirds of the purchase price of each pivot, and Shull paid the other one-third. The system was generally described by Rayl during his testimony.

“Q. All right. Would you explain to the court what that system that was then installed consisted of?

“A. It consisted of a pump and motor, electrical control box, underground pipe that went from the pump to the pivot point, the electrical wiring that went from the control boxes to the pivot point, a quarter mile of overhead pipe that consists of the pivot.

“Q. And this system that you then acquired, it consisted of a buried pipeline three or four feet under ground; isn’t that true?

“A. Yes.

“Q. And then it came up, that buried pipeline, to this circle that was purchased in 1974 and used in 1975 into a big cement pad which handled the pivot around which the arm rotated; is that not right? “A. Yes.

“Q. And that pivot was securely affixed to that property by means of a cement slab and bolts and other means to securely fasten it to the real estate; isn’t that right?

“A. It was — yes. It was fastened by bolts on the corners.

“Q. And then that circle, including the arm, were all tied together or connected together to form one unit; isn’t that true?

“A. Yes.”

When the pivot system was installed, a gravity irrigation system, composed of a series of ditches, was removed by pulling out cement checks through which the water flowed and filling in the ditches.

. The trial court found that there had always been an understanding between the parties that each of them owned a portion of the pivot irrigation system, but that no system for reimbursement had yet been agreed upon. Testimony of various officers of the corporation indicated that the corporation intended to pay Rayl for his contribution to the system, but that he had refused payment at various times. Other testimony indicated the possibility that the corporation had chosen not to conduct a reimbursement program before this dispute began.

The testimony is undisputed that Rayl removed the pivot irrigation system when he was ordered to vacate the premises by the court. Removal of the system included digging up the main line and piping, which consisted of plastic and steel water pipes and an electrical conduit, all of which were buried three to four feet under ground, cutting the wires of the electrical conduit, and removal of the pumps and motors, including removal of a cement slab that was buried in the ground.

The classification of a particular item as a fixture is a perpetual problem in the landlord/tenant area. In Idaho, tenants are generally allowed to remove fixtures from leased premises during their term if the removal can be effected without injury to property, so long as the fixture has not become an integral part of the premises. I.C. § 55-308. See also Beebe v. Pioneer Bank & Trust Co., 34 Idaho 385, 201 P. 717 (1921). Generally, the problem is resolved by application of three general tests.

“[I]n determining whether a particular article has become a trade fixture, three general tests are to be applied: (1) annexation to the realty, either actual or constructive; (2) adaptation or application to the use or purpose to which that part of the realty to which it is connected is appropriated; and (3) intention to make the article a permanent accession to the freehold.” Pearson v. Harper, 87 Idaho 245, 256, 392 P.2d 687, 693 (1964).

Other than the trial court’s findings concerning the ownership interests in the pivot irrigation system and the value of the system, the trial court made only one finding of fact concerning the system. That finding reads: “When Rayl left the premises, he removed a buried pipeline and electrical system and took with him two irrigation pivots.” From that finding of fact, the trial court issued a conclusion of law that “the pivot irrigation systems complete were not fixtures legally attached to the realty and instead had retained their character of personalty.” There is no indication that the trial court considered any of the three tests normally applied in situations such as these to determine whether a particular object had become a fixture.

Normally, the determination of what is a fixture is a mixed question of law and fact. State, Dept. of Revenue v. Boeing Co., 85 Wash.2d 663, 538 P.2d 505 (1975). See also Thompson, Real Property, § 55 (1964). However, application of the three-part test becomes a pure question of law when only one reasonable conclusion may be drawn from the evidence. Wisconsin Dept. of Revenue v. A.O. Smith Harvestore, 72 Wis.2d 60, 240 N.W.2d 357 (1976). See also Beebe v. Pioneer Bank & Trust Co., supra 34 Idaho at 393, 201 P. 717 (“Applying the tests laid down in the above decision to the property in question, in light of the evidence, the door to the bank vault was clearly part of the realty, and it would have been proper for the court to have so instructed the jury.”).

The first part of the test, that of annexation, is often considered in light of the actual relationship of the object to the realty. In addition, a fixture may be constructively annexed to the real property. See Beebe v. Pioneer Bank & Trust Co., supra.

“Even more importantly, however, the cases and authorities recognize that the annexation which renders the object a fixture may be not only actual, but also constructive. Thus, constructive annexation may be found where the objects, although not themselves attached to the realty, comprise a necessary, integral or working part of some other object Which is attached ....” Seatrain Terminals of California v. County of Alameda, 83 Cal.App.3d 69, 147 Cal.Rptr. 578, 582 (1978).

Thus, in Wisconsin Dept. of Revenue v. A.O. Smith Harvestore, supra, while noting that a large silo was attached to a concrete foundation through the use of bolts, the courts ruled that an annexation had occurred because the silo was firmly attached as one unit. In Seatrain Terminals of California v. County of Alameda, supra, the court ruled that large 750-ton cranes, although not themselves attached to the realty, were attached by reason of their enormous weight to rails which were embedded in the wharf and thus, since the cranes comprised a necessary and integral part of the rails, an annexation had occurred.

The adaptation test is generally held to be met when the particular object is clearly adapted to the use to which the realty is devoted:

“The question most frequently asked is whether the real property is peculiarly valuable in use because of the continued presence of the annexed property thereon ____ [A]n object placed on the realty may become a fixture if it is a necessary or at least a useful adjunct to the realty, considering the purposes to which the latter is devoted.” Seatrain Terminals of California v. County of Alameda, supra at 582 (emphasis in original).

The test of the intention in installing the object is regarded as the most important of the three factors. The intention sought is not the undisclosed purpose of the annexor, but rather the intention implied and manifested by his act. Beebe v. Pioneer Bank & Trust, supra. Thus, the intent should be determined from the surrounding circumstances at the time of installation, and not necessarily from testimony as to the subjective intent of the installer and his frame of mind at the time of installation. See State, Dept. of Revenue v. Boeing Co., supra.

“[T]he inquiry is not strictly as to the intention of the person himself who annexed the chattel to the freehold .... The inquiry is as to what intention must be imputed to him in the light of all the circumstances, when tested by the common understanding of those familiar with the subject.” Beebe v. Pioneer Bank & Trust Co., 34 Idaho 385, 392, 201 P. 717, 719 (1921) (quoting from Boise Payette Lumber Co. v. McCornick, 32 Idaho 462, 186 P. 352 (1919)).

An Oregon court had the opportunity to consider a question very similar to that presented in this case. In Johnson v. Hicks, 51 Or.App. 667, 626 P.2d 938 (1981), the court considered whether an irrigation system on the plaintiffs land, which had been removed by plaintiffs former brother-in-law, was a fixture and thus had passed to plaintiff by reason of a divorce decree declaring the real property to be plaintiffs. Certain statements included by the court in its opinion are peculiarly applicable to the present situation.

“[I]t is apparent that ... whoever installed the irrigation system on the farm, did so with a view to enhancing the production of the farm, to increase the growth of vegetation thereon. Irrigation in a semi-arid region ... is the very life of the land. It is beyond comprehension that the system was installed for any temporary purpose.” Id. at 941 (quoting from First State, etc. Bank v. Oliver, 101 Or. 42, 198 P. 920 (1921)).

The court held that the irrigation system, although movable, was intended to have been annexed to the land for purposes of irrigating the farmland, and thus could be classified as a fixture.

All of these factors, when considered within the context of the present fact situation, can lead only to one conclusion — that the irrigation system was a fixture permanently attached to the land. The system was annexed to the land, either constructively or actually, in that 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. Removal of the system necessitated digging up these buried wires and pipes, which could only result in some damage to the realty itself. See I.C. § 55-308.

The irrigation system was also clearly adapted to the land. The purpose and use of the land in question was that of farming. Irrigation is peculiarly necessary to a farming operation conducted in Idaho. This particular irrigation system was adapted to the particular ground being farmed.

Finally, there could only be one intent inferred considering circumstances surrounding the attachment of the system to the realty. In this case, a farmer installed a necessary and integral irrigation system for the purpose of developing and farming the land in the manner he had been accustomed to. The gravity system in place before the present system was installed was destroyed, indicating that it was no longer necessary to have the gravity system because of the permanent installation of another irrigation system.

This case is one of that type wherein the facts are so clear that only one result could be reached; thus, we can determine as a matter of law that the irrigation system under consideration here was a fixture. It is clear that error was committed in the trial court’s conclusion that the system was not a fixture. Therefore, this case must be reversed so that the trial court may determine what further damages, including possible punitive damages, must be awarded because of the waste committed by the tenant in removing this fixture.

II

We next consider the slander of title count. After it became apparent that a sale of the farm was imminent, Rayl filed a labor lien. This lien alleged an obligation on the part of Shull to compensate Rayl for fencing, ditching, leveling and clearing of the land, all work that he performed from the time he began farming the premises in 1962 until approximately 1967. Thus, this claim was allegedly for work performed some thirteen years before this dispute arose. Clearly this was not a valid lien, and was declared invalid by the trial court. Even Rayl’s attorney did not seem sure of the validity of the lien, as he indicated in oral argument before the trial court that:

“[W]e will agree to strike that lien or have the court strike it. This does not mean that we have no right to the claim that was attempted to be illustrated by the lien which frankly I had in mind more or less as a lis pendens in the event that something could not be worked out between these parties. And that possibility, of course, is still available unless the court totally dismisses this case. But at least for our purposes right now I think there is no right to a lien against the property.”

Thus, when Shull filed its counterclaim it alleged a slander of title had occurred because of a filing of the labor lien. The trial court found: “All claims of liens filed by Rayl were barred ____ The wrongful recording of such patently unenforceable claims against Shull’s realty constitutes slander of title.” However, the trial court also found that: “The slander of title, though established, is not compensable without damages, which were not established.” However, the trial court did allow Shull to recover as costs its attorney fees and court costs incurred in attempting to remove the lien which constituted the slander of title. Thus, Shull alleges that a slander of title had been proved, in that compensable damages, or special damages, were proven, and thus the trial court erred in its basic premise that a slander of title, which cannot be established without proof of special damages, was not present in this case.

We have previously considered the elements of slander of title. In Matheson v. Harris, 98 Idaho 758, 572 P.2d 861 (1977), we noted that there are four essential elements to the causé of action which include: “(1) The uttering and publication of the slanderous words by the defendant; (2) the falsity of the words; (3) malice, and (4) special damages....” Id. at 759, 572 P.2d 861 (footnote omitted). Thus, special damages must be alleged and proven before one can recover for slander of title. The trial court in this case found that all the other elements of slander of title were proven. That finding is supported by substantial competent evidence and will be upheld. However, the trial court erred when it ruled that the attorney fees and costs expended by Shull in its attempt to remove the false lien from its property did not constitute those special damages required in a slander of title action. As noted in Prosser, Torts, § 128, at p. 922: “Likewise it would appear obviously to include the expenses of. legal proceedings necessary to remove a cloud on the plaintiff’s title, or other expenses to counteract the disparagement ....” As noted by a New Mexico court, “In a slander of title action the plaintiff must prove actual pecuniary damage, and proof of attorneys’ fees and other costs of a quiet title suit to remove the slander are such pecuniary damages.” DenGar Enterprises v. Romero, 94 N.M. 425, 611 P.2d 1119, 1124 (App. 1980). Although some courts have ruled that a slander of title action must be dismissed if it fails to allege the .loss of a particular pending sale, as urged by Rayl, see Shell Oil Co. v. Howth, 138 Tex. 357, 159 S.W.2d 483 (1942), other courts have allowed maintenance of a slander of title action where the only special damage shown was the expense of removing the cloud upon a plaintiff’s title. See Summa Corp. v. Greenspun, 655 P.2d 513 (Nev.1982). Thus, in Summa Corp. v. Greenspun, supra, after considering those cases where attorney fees incurred were allowed as a special damage, the court said: “We believe the rationale of [these cases] is based on reason and recognizes that but for the wrongful act of slander of plaintiff’s title, the plaintiff would not incur any expenses in removing the cloud from his title.” Id. at 515. We agree with the reasoning of the court in Summa Corp. v. Greenspun, supra. It seems clear that, but for the slander of title caused by the filing of a false lien, Shull would not have incurred the excessive amount of attorney fees directly attributable to removal of the lien and the cloud from the title of the property. Thus, the trial court erred in ruling that no special damages have been proven. Upon remand, the trial court should award those attorney fees and costs as damages for the slander of title, and should also consider whether, in its discretion, punitive damages should be awarded based upon the establishment of a cause of action for slander of title.

III

Appellant also alleges that the trial court erred in assessing interest on the judgment awarded to Shull at only 12% interest. This judgment was issued April 8, 1983. The statute governing interest on judgments was amended effective June 30, 1981, to read:

“28-22-104. Legal rate of interest. — ...

“.(2) The legal rate of interest on money due on the judgment of any competent court or tribunal shall be eighteen cents (18<t) on the hundred by the year.”

Thus, it seems clear that the trial court was required by this statute to award interest on the judgment at the rate of 18%, instead of the 12% actually awarded by the court. Upon remand, the trial court is directed to correct this error in this judgment.

IV

We have considered all of the other errors alleged by both appellant and respondent, dealing with treble damages, punitive damages other than as referred to in Paragraphs I and II above, further alleged rental damages, interest, and attorney fees. We find that no error was committed by the trial court in its handling of these subjects.

Reversed and remanded for further proceedings consistent with this opinion. Costs to appellant.

DONALDSON, C.J., and BISTLINE and HUNTLEY, JJ„ concur.