200 Garrison Assocs. Ltd. Partnership v. Crawford Constr. Co.

W.C. GARMON, Jr. and Susan Garmon v. Troy
MITCHELL d/b/a Troy Mitchell Elevator and
First National Bank in Stuttgart

CA 95-39                                           ___ S.W.2d ___

                  Court of Appeals of Arkansas
                           Division II
                Opinion delivered March 20, 1996


1.   Property -- determination whether property constitutes chattel
     or fixtures -- considerations. -- Although it is true that
     there are cases in which storage facilities were found to have
     been fixtures, rather than personalty, it does not follow that
     such grain storage facilities are fixtures as a matter of law;
     the question of whether particular property constitutes a
     fixture is usually a mixed question of law and fact; in
     determining whether items are chattels or fixtures, it is
     necessary to consider: (1) whether the items are annexed to
     the realty; (2) whether the items are appropriate and adapted
     to the use or purpose of that part of the realty to which the
     items are connected; and (3) whether the party making the
     annexation intended to make it permanent.

2.   Property -- party making annexation clearly intended storage
     facility to be treated as a chattel -- chancellor did not err
     in holding that storage facility was not a fixture. -- Where
     it was clear that the original lessee of the property did not
     intend for the annexation to be permanent because the lease
     agreement expressly provided that the lessee should have the
     right to build a grain storage facility on the property and,
     within 60 days of termination of the lease, "to remove from
     the premises all improvements placed thereon" by the lessee,
     the appellate court, given this clear expression of the intent
     of the party making the annexation to treat the storage
     facility as a chattel, could not say that the chancellor
     clearly erred in holding that it was not a fixture.  

3.   Property -- value of grain bins disputed by appellant -- no
     error found. -- Appellant's argument that the trial court
     erred in finding the value of the bins to be $3,500.00 was
     without merit where the testimony was in sharp dispute, with
     the appellee opining that the value of the bins was
     $90,000.00, while the bank's agent in the sale of the property
     to the appellants testified that he viewed the grain bins as
     a liability with no value whatsoever; furthermore, the record
     showed that the grain bins were in poor repair and inoperable,
     and that the appellants paid only $50,000.00 for the entire
     property, including a house and a store and the store, which
     later burned, was itself insured for $50,000.00; under these
     circumstances, giving due regard to the superior position of
     the chancellor to resolve disputes in the evidence and assess
     credibility, the chancellor did not clearly err in finding the
     value of the grain bins to be $3,500.00.

4.   Property -- appellants entitled to judgment against bank for
     attorney's fees incurred in defense of title -- chancellor
     erred. -- Where there is a covenant to warrant and defend
     title, the covenantee is entitled to recover the costs and
     necessary expenses incurred in the bona fide defense of title,
     including a reasonable attorney's fee; although the record
     shows that the bank provided the appellants with an attorney
     during the first trial in this matter, it failed to provide a
     defense when it appeared that its interests were adverse to
     those of the appellants and a second trial was necessitated;
     this partial participation in the appellants' defense was not
     a sufficient defense of title, and in light of the appellants'
     successful defense of their title to the realty against
     appellee Mitchell's assertion of a leasehold interest, the
     case was reversed and remanded for the chancellor to enter
     judgment against the bank for costs and necessary expenses,
     including a reasonable attorney's fee.

5.   Property -- appellants were innocent purchasers for value --
     no error found. -- The appellee's contention that the
     chancellor erred in finding that the appellants were innocent
     purchasers for value and, therefore, not bound by the terms of
     the unrecorded lease between appellee Mitchell and the bank's
     predecessor in title was meritless where the lease was not on
     record and it was not readily apparent that the 70-foot-tall
     structure at issue was personalty; the chancellor did not err
     in failing to find that the circumstances were such as to put
     the appellants on inquiry.  


     Appeal from Arkansas Chancery Court; Russell Rogers,
Chancellor; affirmed in part, reversed in part on direct appeal;
affirmed on cross-appeal.
     Ramsay, Bridgforth, Harrelson & Starling, by: William M.
Bridgforth and John T. Starling, for appellants.
     Russell D. Berry, for appellee Troy Mitchell.
     Duff Nolan, Jr., for appellee First National Bank.  

     James R. Cooper, Judge.

*ADVREPCA4*
                           DIVISION II



                                        CA95-39

                                                          March 20,
1996


W.C. GARMON, JR., and                   APPEAL FROM THE CHANCERY
COURT
SUSAN GARMON                            OF ARKANSAS COUNTY,
ARKANSAS
               APPELLANTS               [NO. E-91-158]

VS.                                     HON. RUSSELL ROGERS,
                                        CHANCELLOR

TROY MITCHELL d/b/a                     AFFIRMED IN PART, REVERSED
AND
TROY MITCHELL ELEVATOR                  REMANDED IN PART ON DIRECT
APPEAL;
and FIRST NATIONAL BANK IN              AFFIRMED ON CROSS-APPEAL.
STUTTGART
               APPELLEES




                     James R. Cooper, Judge.


     The appellants in this chancery case purchased from the
appellee, First National Bank in Stuttgart, ten acres of land on
which were located a store, a house, various outbuildings, and a
large grain storage facility.  After occupying the property for
several months the appellants learned that the appellee, Troy
Mitchell, claimed to be the owner of the grain storage facility and
that he had a lease to keep the facility on the appellants' land. 
Advised by the appellee bank that Mitchell had no valid lease or
interest in the grain storage facility, the appellants disputed
Mitchell's claim.  Mitchell subsequently brought suit to enforce
the lease and, after a hearing, the trial court found that the
grain storage bins were personal property belonging to Mitchell;
that Mitchell would be permitted to remove the bins if he did so
within 90 days; that the Bank will have breached its warranty if
Mitchell removes the bins; and that the value of the bins is
$3,500.00.
     The appellants argue on appeal that the chancellor erred in
finding that the bins are personalty, in finding the value of the
bins to be $3,500.00, and in failing to enter judgment against the
bank for their attorney's fees incurred in defending title to the
subject property.  On cross-appeal, Mitchell argues that the
chancellor erred in finding that the appellants were not bound by
the lease, and in finding that the appellants were not liable for
evicting Mitchell from the leased premises.
     We first address the appellants' contention that the trial
court erred in finding that the grain storage facility constituted
personal property owned by the appellee, Troy Mitchell.  The
appellants argue that the grain bins were fixtures as evidenced by
their very large size, their attachment to their footings by
extremely large bolts, and expert testimony to the effect that the
bins could not be moved unless they were dismantled and cut into
smaller pieces with a cutting torch.
     Although it is true that there are cases in which similar
installations were found to have been fixtures, rather than
personalty, see e.g., Corning Bank v. Bank of Rector, 265 Ark. 68,
576 S.W.2d 949 (1979); Barron v. Barron, 1 Ark. App. 323, 615 S.W.2d 394 (1981), it does not follow that such grain storage
facilities are fixtures as a matter of law.  The question of
whether particular property constitutes a fixture is usually a
mixed question of law and fact.  Corning Bank v. Bank of Rector,
supra.  In determining whether items are chattels or fixtures, it
is necessary to consider: (1) whether the items are annexed to the
realty; (2) whether the items are appropriate and adapted to the
use or purpose of that part of the realty to which the items are
connected; and (3) whether the party making the annexation intended
to make it permanent.  McIlroy Bank & Trust v. Federal Land Bank,
266 Ark. 481, 585 S.W.2d 947 (1979).  In the case at bar it is
clear that the original lessee of the property did not intend for
the annexation to be permanent because the lease agreement
expressly provided that the lessee should have the right to build
a grain storage facility on the property and, within 60 days of
termination of the lease, "to remove from the premises all
improvements placed thereon" by the lessee.  Given this clear
expression of the intent of the party making the annexation to
treat the storage facility as a chattel, we cannot say that the
chancellor clearly erred in holding that it was not a fixture.  See
Ark. R. Civ. P. 52(b).
     The appellants next contend that the chancellor erred in
assessing the amount of their damages arising out of breach of
warranty by the appellee bank.  The record clearly demonstrates
that the bank agreed to sell to the appellants the subject
property, including any attached fixtures or equipment, and that
the grain bins were attached to the property under the terms of the
agreement.  The chancellor found that a breach of warranty would
arise if Mitchell elected to remove the grain bins as permitted by
the order appealed from and that, in such event, judgment should be
entered in favor of the appellants for the value of the grain bins. 
The thrust of the appellant's argument under this point is that the
trial court erred in finding the value of the bins to be $3,500.00. 
The testimony in this regard was in sharp dispute, with the
appellee Mitchell opining that the value of the bins was
$90,000.00, while Cole Martin, who was the bank's agent in the sale
of the property to the appellants, testified that he viewed the
grain bins as a liability with no value whatsoever.  Furthermore,
the record shows that the grain bins were in poor repair and
inoperable, and that the appellants paid only $50,000.00 for the
entire property, including a house and a store.  In this context we
think it significant that the store, which later burned, was itself
insured for $50,000.00.  Under these circumstances, giving due
regard to the superior position of the chancellor to resolve
disputes in the evidence and assess credibility, we cannot say that
the chancellor clearly erred in finding the value of the grain bins
to be $3,500.00.
     Finally, the appellants contend that the chancellor erred in
failing to enter judgment against the bank for attorney's fees
incurred in defending their title to the property.  We agree. 
Where, as here, there is a covenant to warrant and defend title,
the covenantee is entitled to recover the costs and necessary
expenses incurred in the bona fide defense of title, including a
reasonable attorney's fee.  Murchie v. Hinton, 41 Ark. App. 84, 848 S.W.2d 436 (1993).  Although the record shows that the bank
provided the appellants with an attorney during the first trial in
this matter, it failed to provide a defense when it appeared that
its interests were adverse to those of the appellants and a second
trial was necessitated.  We do not consider this partial
participation in the appellants' defense to be sufficient defense
of title, see Murchie, supra, and in light of the appellants'
successful defense of their title to the realty against Mitchell's
assertion of a leasehold interest, we reverse and remand for the
chancellor to enter judgment against the bank for costs and
necessary expenses, including a reasonable attorney's fee.
     On cross-appeal, the appellee, Troy Mitchell, contends that
the chancellor erred in finding that the appellants were innocent
purchasers for value and, therefore, not bound by the terms of the
unrecorded lease between Mitchell and the bank's predecessor in
title.  It is undisputed that Mitchell's lease was not recorded. 
Arkansas Code Annotated  14-15-404(b) provides that:
          No deed, bond, or instrument of writing for the
     conveyance of any real estate, or by which the title
     thereto may be affected in law or equity, made or
     executed after December 21, 1846, shall be good or valid
     against a subsequent purchaser of the real estate for a
     valuable consideration without actual notice thereof or
     against any creditor of the person executing such an
     instrument obtaining a judgment or decree which by law
     may be a lien upon the real estate unless the deed, bond,
     or instrument, duly executed and acknowledged or proved
     as required by law, is filed for record in the office of
     the clerk and ex officio recorder of the county where the
     real estate is situated.

The cross-appellant contends, however, that the appellants should
have been held to be bound by the lease despite the lack of
recordation because the circumstances were such to put them on
notice of Mitchell's lease.  For this proposition he cites
Affiliated Laundries, Ltd. v. Keeton, 270 Ark. 841, 606 S.W.2d 370
(Ark. App. 1980), where we held that the purchasers of an apartment
complex had a duty to inquire as to the ownership of equipment in
the laundry room.  However, in Affiliated Laundries, supra, the
purchasers were aware prior to closing that the laundry equipment
was owned and maintained by someone other than the seller.  Such
actual notice was lacking in the case at bar and, in addition, we
think that it was not readily apparent that the 70-foot-tall
structure at issue in the case at bar was personalty.  On our
review of the record, we cannot say that the chancellor erred in
failing to find that the circumstances were such as to put the
appellants on inquiry.  
     Finally, the cross-appellant contends that the chancellor
erred in finding that the appellants were not liable for damages
arising out of an assertedly wrongful eviction of Mitchell from the
leased premises.  Insomuch as this argument is foreclosed by our
holding that the appellants were not bound by the terms of the
unrecorded lease, we need not address it.
     Affirmed in part, reversed and remanded in part on direct
appeal; affirmed on cross-appeal.
     Stroud and Griffen, JJ., agree.