Opinion
No. 63851-3-I.
January 25, 2010.
Appeal from a judgment of the Superior Court for Thurston County, No. 06-2-00198-0, Gary R. Tabor, J., entered August 8, 2008.
Reversed by unpublished opinion per Grosse, J., concurred in by Schindler, C.J., and Becker, J.
It is the intent of the parties that ultimately determines whether or not a chattel is a fixture or personal property. Here, because the trial court considered only the degree of annexation and not the intent of the parties in determining that cranes attached to the Port of Seattle's Terminal were personalty, summary judgment was inappropriate.
FACTS
On September 26, 1985, the Port of Seattle (Port) entered into a 30-year lease with APL Limited, American President Lines, LTD. and Eagle Marine Services, LTD. (collectively, APL) for premises at Terminal 5 for loading and unloading shipping container ships. Terminal 5 was substantially rebuilt and cranes were constructed and installed. The cranes at issue here are built to run on steel crane rails 100 feet apart, embedded in a concrete apron, and supported by specially designed steel-reinforced concrete and piers engineered specifically to support the cranes. The cranes themselves are steel structures that are 198 feet tall, 85 feet wide, more than 370 feet long and each weighs over 800 tons. They are hard wired to a dedicated high voltage electrical system that includes a power substation built specifically for Terminal 5 to power the cranes. The cranes are attached to the power substation by cables that are more than two inches thick. The cranes have been in use continuously on Terminal 5 since their construction over 20 years ago.
APL brought suit under RCW 82.32.180 for a refund of sales tax paid on the rent for the cranes. The State moved for summary judgment, arguing that the cranes were personalty and, as such, subject to sales tax. The trial court granted the motion, stating:
But I understand there are issues about something this huge, which has extra reinforcing just to make sure that the docks are stable, that has all kinds of extra stuff affixed, why wouldn't that be affixed to the land and, thus, a fixture? Well, it isn't because of several reasons, and those have been argued by the parties. But I find that these cranes are movable, that they're on a rail system that can allow their movement from one terminal to another, that if a cruise ship comes in at a particular part of the dock for that cruise ship to dock at, the crane has to be moved back away from the dock.
* * * *
Now, I understand that intent sometimes goes to whether or not something was affixed, and the intent is supposed to be at the time that the equipment was installed. And we're talking about 1985 here, and then we're talking about a term between 1997 and 2003 as far as the tax issue. Obviously, the plaintiff has paid the tax. They had to pay the tax in order to appeal this.
I recognize that a trial is often necessary if there are material issues of fact that are germane, because all three common law tests have to be met, and I found that the first test has not been met simply based on uncontested facts, as a matter of law, this equipment was not affixed to the land.
I'm not going to go beyond that to number three, the objective intent. It would have been interesting had that been necessary to look at all the various language, but I've not gone into a specific detail here today because I never got to that particular decision point.
APL appeals arguing that the summary judgment was decided on an incorrect factual basis because cruise ships do not come into Terminal 5, and the rails the cranes are connected to are only within the apron of the terminal for unloading ships there and do not connect with other terminals. The State disagrees that the factual basis employed by the judge was incorrect, but also argues that because this is a summary judgment review it is subject to de novo review and we can affirm on the alternative analysis that it was never the Port's intent to permanently affix the cranes to the terminal.
ANALYSIS
We review summary judgment de novo and engage in the same inquiry as the trial court. Summary judgment is proper only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that the moving party is entitled to a judgment as a matter of law."This court considers all facts submitted and all reasonable inferences from them in the light most favorable to the nonmoving party. The classification of property is a mixed question of law and fact.
Michak v. Transnation Title Ins. Co., 148 Wn.2d 788, 794, 64 P.3d 22 (2003).
Seven Gables Corp. v. MGM/UA Entm't Co., 106 Wn.2d 1, 3, 721 P.2d 1 (1986).
State, Dep't of Revenue v. Boeing Co., 85 Wn.2d 663, 538 P.2d 505 (1975).
Real property, for tax purposes, is defined as "the land itself . . . and all buildings, structures or improvements or other fixtures of whatsoever kind thereon. . . ." Additionally, the Washington Administrative Code (WAC) states that "real property" includes but is not limited to the following:
(2) All buildings, structures or permanent improvements built upon or attached to privately owned land.
(3) Any fixture permanently affixed to and intended to be annexed to land or permanently affixed to and intended to be a component of a building, structure, or improvement on land, including machinery and equipment which become fixtures. Intent is to be gathered from all the surrounding circumstances at the time of annexation or installation of the item, including consideration of the nature of the item affixed, the manner of annexation and the purpose for which the annexation is made and is not to be gathered exclusively from the statements of the annex or, installer, or owner as to his or her actual state of mind.
(a) Such items shall be considered as permanently affixed when they are owned by the owner of the real property and:
(i) They are securely attached to the real property; or
(ii) Although not so attached, the item appears to be permanently situated in one location on real property and is adapted to use in the place it is located. For example a heavy piece of machinery or equipment set upon a foundation without being bolted thereto could be considered as affixed.[]
Case law dictates that to determine whether the cranes are personal property or real property, i.e., fixtures, we apply the common law test.
Boeing Co., 85 Wn.2d at 667; Western Ag. Land Partners v. Dep't of Revenue, 43 Wn. App. 167, 171, 716 P.3d 310 (1986). This test is essentially restated in WAC 458.12.010.
Under this test, we must consider the following three prongs:
"(1) Actual annexation to the realty, or something appurtenant thereto; (2) application to the use or purpose to which that part of the realty with which it is connected is appropriated; and (3) the intention of the party making the annexation to make a permanent accession to the freehold."[]
Boeing Co., 85 Wn.2d at 667 (quoting Lipsett Steel Prods., Inc. v. King County, 67 Wn.2d 650, 652, 409 P.2d 475 (1965)).
Allthree prongs must be met for a chattel to become a fixture. Both parties agree that the second prong is met in this instance but dispute the first and third prongs.
Boeing Co., 85 Wn.2d at 668.
Applying a confusing factual scenario, the trial court decided that the first prong, annexation, was not met and therefore it need not consider any of the other facts presented. This was error because the determinative factor for whether a chattel annexed to real property becomes part of the real property or retains its character as personal property is the third prong: the intent with which the chattel was annexed to the land. Intent can be determined from the nature of the chattel attached and its relation or necessity to the activity conducted on the land and the manner in which it is annexed. When the owner and the person that annexes the chattel are one and the same, a rebuttable presumption arises that the owner's intention was for the chattel to become part of the realty.
However, in Department of Revenue v. Boeing Co., the court concluded that large, multiple-tonnage assembly structures called jigs were not fixtures. The jigs were dedicated and used only in the assembly of 747 airplanes. In its holding, the court focused on six factors:
85 Wn.2d 663, 538 P.2d 505 (1975).
• Boeing owned the freehold and thus the presumption of annexation arises.
• Jigs were necessary to the production of 747 airplanes and there were no plans to cease operations.
• The building could be used for other production lines necessitating the discarding of the jigs.
• Jigs were bolted down enabling them to be easily removed without harm to the building.
• Jigs were designed to be disassembled and moved without harm to the jigs.
• Boeing considered the jigs to be personalty for tax purposes.[]
Boeing Co., 85 Wn.2d at 669.
Applyingall of those factors, the Supreme Court determined that the jigs were personalty.
In Strain v. Green, the Supreme Court held that a chandelier which had been installed and removed from three prior houses, was still a fixture in a fourth house despite the vendor's private intention to retain the chandelier as personalty. Because that private intent had not been communicated to the vendees, the court analyzed how the chandelier was annexed and its purpose to make the residence livable in finding intent to permanently annex. As the Strain court noted with a clarity that has continuing validity today:
25 Wn.2d 692, 698-700, 172 P.2d 216 (1946).
We will not undertake to write a treatise on the law of fixtures. Every lawyer knows that cases can be found in this field that will support any position that the facts of his particular case require him to take. . . .
"There is a wildness of authority on this question of fixtures . . . cases . . . are so conflicting that it would be profitless to undertake to review or harmonize them."[]
Strain, 25 Wn.2d at 695 (quoting Philadelphia Mortg. Trust Co. v. Miller, 20 Wash. 607, 56 P. 382 (1899)).
And as noted in Christensen Group, Inc. v. Puget Sound Power Light, "[w]hat the Strain v. Green and Department of Revenue v. Boeing cases teach us is that the issue of intent to permanently annex cannot be decided as a matter of law simply by considering subjective declarations." The court must consider the objective intent of the affixing party to make a permanent accession to the real estate. To determine the objective intent of the parties, it is necessary for the fact finder to draw inferences from the available facts. Intention is determined from "'the circumstances surrounding the annexation, including the nature of the article affixed, the annexor's situation in relation to the freehold, the manner of annexation, and the purpose for which it was made. The test is objective rather than subjective intent.'"
44 Wn. App. 778, 781-83, 723 P.2d 504 (1986).
Christensen Group, 44 Wn. App. 781-83.
Western Agric., 43 Wn. App. at 173 (quoting Liberty Lk. Sewer Dist. 1 v. Liberty Lk. Utils. Co., 37 Wn. App. 809, 813, 683 P.2d 1117 (1984)).
In its oral ruling, the trial court itself recognized that it had not examined the facts regarding the Port's intent to annex these cranes. Because annexation is so intertwined with the intent to annex, one cannot be examined without the other. Like the trial court, we find it difficult to see how Boeing is not controlling here. This is particularly so because the lease contains language that indicates the cranes are personalty rather than fixtures. However, the factual inferences that can be drawn from the evidence presented should be permitted to be argued to the trial court. Because the trial court did not consider these inferences, summary judgment was inappropriate. We reverse.
See for example, the Sixth Amendment to the lease, giving the lessee the option to purchase the container cranes at a fair market value.