Section 47-9102(41), A.R.S., defines "fixtures" as "goods that have become so related to particular real property that an interest in them arises under real property law." In Fish v. Valley National Bank of Phoenix, 64 Ariz. 164, 170, 167 P.2d 107, 111 (1946), the court articulated the test in Arizona for whether an item of personal property has become a fixture: The rule is that for a chattel to become a fixture and be considered as real estate, three requisites must unite: There must be an annexation to the realty or something appurtenant
"'There must be an annexation to the realty or something appurtenant thereto; the chattel must have adaptability or application as affixed to the use for which the real estate is appropriated; and there must be an intention of the party to make the chattel a permanent accession to the freehold.'" Id. (quoting Fish v. Valley National Bank, 167 P.2d 107, 111 (1946)). The cameras in this case were affixed to the eaves of the house and to palm trees on the property, satisfying the first element of the test.
Under the Arizona common law definition of "real property," the covers became part of the real estate at Stonybrook once they were affixed to the columns. SeeFish v. Valley Nat'l Bank of Phoenix, 64 Ariz. 164, 167 P.2d 107, 111 (1946). When repairs were made to the covers, they remained affixed to the columns and were not removed to facilitate repairs, reinforcing the real property determination.
Arizona law uses a three-part test for determining when a chattel becomes a fixture: "[1] There must be an annexation to the realty or something appurtenant thereto; [2] the chattel must have adaptability or application as affixed to the use for which the real estate is appropriated; and [3] there must be an intention of the party to make the chattel a permanent accession to the freehold." Murray v. Zerbel, 159 Ariz. 99, 101, 764 P.2d 1158, 1160 (Ct. App. 1998) (quoting Fish v. Valley Nat. Bank of Phoenix, 64 Ariz. 164, 170, 167 P.2d 107, 111 (1946)). The improvements identified by Lipin were annexed to the Land, adaptable to its use, and intended to be permanent.
Assuming a lack of fraud on the part of the plaintiffs, we believe that the plaintiffs may not prevail on two grounds: 1. There was failure of consideration for the $150,000 certificate of deposit and where there is an entire or substantial failure of consideration a contract may be rescinded. Fish v. Valley National Bank of Phoenix, 64 Ariz. 164, 167 P.2d 107 (1946); Mahurin v. Schmeck, 95 Ariz. 333, 390 P.2d 576 (1964). Plaintiffs maintain that parol evidence is not admissible to contradict or explain the consideration for the certificates of deposit.
This rule is well-established in Arizona. Morgan v. Bruce, 76 Ariz. 121, 259 P.2d 558 (1953); Fish v. Valley Nat. Bank of Phoenix, 64 Ariz. 164, 167 P.2d 107 (1946). However, some courts have often refused to give it strict application where to do so would lead to inequitable results.
Thomas v. Krug, 139 Cal.App.2d Supp. 941, 294 P.2d 785. The problem essentially in the case is whether the purchasers are entitled to the equitable remedy of rescission. Ordinarily a mutual mistake of material fact or a failure of consideration of an essential part of the contract will justify rescission. 91 C.J.S. Vendor and Purchaser § 157c. Fish v. Valley Nat. Bank of Phoenix, 64 Ariz. 164, 167 P.2d 107. Mahurin v. Schmeck, 95 Ariz. 333, 390 P.2d 576. Rescission, however, is an equitable remedy, and he who seeks equity must do equity. Sandia Development Corp. v. Allen, 86 Ariz. 40, 340 P.2d 193. Arizona Coffee Shops, Inc. v. Phoenix Downtown Park. Ass'n, 95 Ariz. 98, 387 P.2d 801.
Parsons v. Smilie, 97 Cal. 647, 32 P. 702. We have here special circumstances warranting the invocation of equitable relief. Where there is an entire, or even a substantial failure of consideration, a contract may be rescinded. Fish v. Valley Nat. Bank of Phoenix, 64 Ariz. 164, 167 P.2d 107. In the instant case, the agreement provided:
A breach of such a covenant amounts to a breach of the entire contract; it gives to the injured party the right to sue at law for damages, or courts of equity may grant rescission in such instances if the remedy at law will not be full and adequate." Dula v. Cowles, 52 N.C. 290; Carrow v. Weston, 247 N.C. 735, 102 S.E.2d 134; Wallace v. Smith, 240 P.2d 799; Wilson Corrugated Kraft Containers, 256 P.2d 1012; Sanders v. Meyerstein, 124 F. Supp. 77; Fish v. Valley Nat. Bank of Phoenix, 167 P.2d 107;; Village of Wells v. Layne-Minnesota Co., 60 N.W.2d 621; 12 Am. Jur. 972; 17A C.J.S. 517; Restatement of Contracts, sec. 274; Black on Rescission and Cancellation, 2d Ed. Vol. I, secs. 196, 214, 215. Rescission, an equitable remedy, is allowed to promote justice.
It seems to be basic contract law — apparently so basic that there is little case law on the point — that where there is a material breach of contract, substantial nonperformance and entire or substantial failure of consideration, the injured party is entitled to rescission of the contract and restitution and recovery back of money paid. United States v. Haynes School Dist. No. 8, 102 F. Supp. 843 (E.D. Ark. 1951); 17A C.J.S., Contracts, 420, p. 515; Farrell v. Third National Bank, 20 Tenn. App. 540, 101 S.W.2d 158; 12 Am.Jur., Contracts, 440, p. 1020; 5 Williston on Contracts, 4046, 1455; Restatement, Contracts, 384(1), (1932); id., 347; Fish v. Valley National Bank, 64 Ariz. 164, 167 P.2d 107; Barber v. Rochester, 52 Wn.2d 691, 328 P.2d 711 Texas Co. v. Northup, 154 Va. 428, 153 S.E. 659. From the testimony above reviewed and other testimony of the same character and nature contained in the record, on trial de novo, we are impelled to the conclusion that the learned Chancellor's finding that the contract was breached and that appellees were entitled to rescission, restitution and discharge of the materialmen's liens was not against the preponderance of the evidence.