Northwest Iowa Mental Health Center d/b/a Seasons Center for Behavioral Health v. G. William Phelps and Applewhite Dental, LLC

IN THE COURT OF APPEALS OF IOWA
No. 20-0767
Filed April 14, 2021
NORTHWEST IOWA MENTAL HEALTH CENTER d/b/a SEASONS CENTER
FOR BEHAVIORAL HEALTH,
Plaintiff-Appellant,
vs.
G. WILLIAM PHELPS and APPLEWHITE DENTAL, LLC,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Clay County, Don E. Courtney,
Judge.
Northwest Iowa Mental Health Center appeals the district court order
granting summary judgment in favor of G. William Phelps. AFFIRMED.
Jill M. Davis of Montgomery, Barry, Bovee, Steffen & Davis, Spencer, for
appellant.
Matthew T.E. Early of Fitzgibbons Law Firm, L.L.C., Estherville, for appellee
G. William Phelps.
Considered by Mullins, P.J., and May and Schumacher, JJ.
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MULLINS, Presiding Judge.
Northwest Iowa Mental Health Center, d/b/a Seasons Center for Behavioral
Health (Seasons), appeals the district court order granting summary judgment in
favor of G. William Phelps. Seasons argues its own motion for partial summary
judgment should have been granted based upon its common law breach-of-
contract claim.
Phelps is a dentist. He purchased a building in Spencer, Iowa, and a dental
practice from another dentist in 1994. Phelps remodeled the building and
maintained his own practice from it. In 2011, Phelps sold his practice and all of its
assets to AppleWhite Dental, LLC (AppleWhite). AppleWhite then leased the
building from Phelps, and he became an employee of AppleWhite. The contract
for sale of Phelps’s practice assets specifically included all tangible personal
property “including, without limitation, inventory, supplies, equipment, machinery,
computers, furniture, fixtures, devices, and instruments.”
Seasons is a non-profit organization. Seasons purchased real estate
adjacent to the building and approached Phelps in late 2014 to discuss purchasing
the property at issue. In January 2015, Seasons entered into an option agreement
with Phelps for the purchase of the building. The parties dispute whether Seasons
was aware of the AppleWhite lease, which had time remaining on its term. In
November 2015, Seasons provided Phelps notice that it intended to exercise its
option. In September 2016, Seasons, Phelps, and AppleWhite entered into a
settlement terminating AppleWhite’s lease at the end of January 2017 and
executing Seasons’s purchase of the building at that same time. Following the
purchase, Seasons took possession of the building and found the trade fixtures
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were removed. The assets removed included, among other things dental chairs,
x-ray machines, lighting, speakers, and cabinets.1 Seasons filed suit for breach of
contract based on alleged damage done to the building when the trade fixtures
were removed.
The looming issue over the course of proceedings was the ownership status
of the trade fixtures removed from the building. In October 2018, Phelps filed a
motion for summary judgment alleging the trade fixtures were the property of
AppleWhite and removal resulted in no damages. The district court found a
question of material fact existed regarding whether the removal of the trade fixtures
resulted in a breach of contract. “If, in fact, it is found that Phelps annexed the
items to the Property, under Iowa Law, those items would pass with the real estate
upon conveyance. Conversely, if the items were attached by AppleWhite, they
may not pass with the realty and may be rightfully removed.” Seasons filed a
motion for partial summary judgment in January 2020 alleging it was entitled to
judgment as a matter of law on the breach-of-contract claim following the removal
of the trade fixtures. Phelps filed a competing motion for summary judgment the
same month arguing the trade fixtures were never intended to be permanent
additions to the property and the removal resulted in no damages. The district
court granted Phelps’s motion in April, finding the intent of the trade fixtures was
to serve the dental practice, wherever that happened to be. Seasons appeals.
1For the purposes of this opinion, we will use the term trade fixtures to refer to all
of the items removed from the building. It is the same term used by the district
court.
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Phelps argues Seasons failed to preserve error on the issue because it did
not resist the motion for summary judgment or file a motion pursuant to Iowa Rule
of Civil Procedure 1.904(2). Phelps insists that Seasons’s argument that the
district court ruling is contrary to the law of the case was raised for the first time on
appeal. “It is a fundamental doctrine of appellate review that issues must ordinarily
be both raised and decided by the district court before we will decide them on
appeal.” Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002). “The claim or
issue raised does not actually need to be used as the basis for the decision to be
preserved, but the record must at least reveal the court was aware of the claim or
issue and litigated it.” Id. at 540. Our review of the record reveals Seasons did
make arguments related to the tests applied by courts to determine whether
property has become a part of real estate, but it never argued that the April ruling
on the motion for summary judgment was against the law of the case from the
ruling on the 2018 motion for summary judgment. Because the law-of-the-case
argument was neither raised in nor ruled on by the district court, it is not preserved.
Id. at 537. However, we choose to address the merits of the law-of-the-case
argument.
“We review a district court’s grant of summary judgment for correction of
errors at law.” Hedlund v. State, 930 N.W.2d 707, 715 (Iowa 2019). We examine
the record to determine “whether a genuine issue of material fact exists and
whether the district court correctly applied the law.” Id. (quoting Pillsbury Co. v.
Wells Dairy, Inc., 752 N.W.2d 430, 434 (Iowa 2008)). “We view the summary
judgment record in a light most favorable to the nonmoving party” and provide “the
nonmoving party every legitimate inference that can be reasonably deduced from
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the record.” Id. (quoting Phillips v Covenant Clinic, 625 N.W.2d 714, 717–18 (Iowa
2001)). “Even if the facts are undisputed, summary judgment is not proper if
reasonable minds could draw different inferences from them and thereby reach
different conclusions.” Id. (quoting Banwart v. 50th St. Sports, L.L.C., 910 N.W.2d
540, 544–45 (Iowa 2018)).
Seasons argues the district court’s statement that, “If, in fact, it is found that
Phelps annexed the items to the Property, under Iowa Law, those items would
pass with the real estate upon conveyance,” became the law of the case upon
entry of the ruling on the October 2018 motion for summary judgment. That
assertion is incorrect. “An interlocutory order is not the law of the case because
the court is free to change it at a later time.” Ahls v. Sherwood/Div. of Harsco
Corp., 473 N.W.2d 619, 624 (Iowa 1991). Furthermore, the district court applied
the same law in its ruling on the October 2018 motion that it applied to the January
2020 motion. The district court did not deviate from the three-part test pronounced
in First Trust & Savings Bank of Moville, Iowa v. Guthridge, 445 N.W.2d 401, 402
(Iowa Ct. App. 1989). In its ruling on the January 2020 motion, the district court
stated that new facts had been established, namely that Phelps installed the trade
fixtures. It then answered the question whether AppleWhite could “claim the
fixtures as its trade fixtures and therefore remove them even though AppleWhite
did not physically install them.” The court applied the same law but came to a
different conclusion based on the facts before it.
Seasons argues the district court erred in finding the trade fixtures removed
from the building were trade fixtures that belonged to AppleWhite.
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Under common law personal property becomes a fixture when
(1) it is actually annexed to the realty, or to something
appurtenant thereto;
(2) it is put to the same use as the realty with which it
is connected; and
(3) the party making the annexation intends to make a
permanent accession to the freehold.
Guthridge, 445 N.W.2d at 402 (quoting Ford v. Venard, 340 N.W.2d 270, 271 (Iowa
1983)). Our paramount concern is “[t]he intention of the party annexing the
improvement.” Ford, 340 N.W.2d at 272. “The character of the physical
attachment, whether slight or otherwise, and the use, are mainly important in
determining the intention of the party making the annexation.” Speer v. Donald,
207 N.W. 581, 582 (Iowa 1926) (quoting Ottumwa Woolen-Mill Co. v. Hawley, 44
Iowa 57, 63 (1876)). “Whether in a given case property attached to a building upon
real estate should be deemed as a part of the real estate is, in the last analysis, a
question of intention. Such intention is usually implied form all the facts appearing
in the case.” Fehleisen v. Quinn, 165 N.W. 213, 214–15 (Iowa 1917).
The district court found Phelps installed the trade fixtures and then
examined whether AppleWhite could claim and remove them even though it was
not the installing party. The district court engaged in a thorough discussion related
to the facts of this case and how they related to Phelps’s intention for the trade
fixtures. We agree with the district court that Phelps’s intention for installation of
the trade fixtures, considering both use and character, was to support his dental
practice. There is nothing in the record showing an intent that the trade fixtures
become permanent additions to the building. In fact, the asset purchase of the
trade fixtures by AppleWhite shows a contrary intent. AppleWhite’s purchase was
not affected by the fact that it did not install the trade fixtures, and having
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purchased them from Phelps, it was entitled to remove them at any time. Because
no genuine issue of material fact remains regarding whether the trade fixtures were
permanently affixed to the property and should have remained, we agree with the
district court’s order granting summary judgment in favor of Phelps. See Hedlund,
930 N.W.2d at 715.
AFFIRMED.