Opinion
October 31, 1962 —
November 27, 1962.
APPEAL from a judgment by the county court of Milwaukee county: L. J. FOLEY, JR., Judge. Affirmed.
For the appellant there was a brief and oral argument by H. J. Sanville of Milwaukee.
For the respondents there was a brief and oral argument by Ralph H. Schultz of Milwaukee.
The defendant-respondents owned a building at 701 South Sixteenth Street in Milwaukee, Wisconsin. For a period of eight or nine years prior to 1961 they leased this building to one Howard Timper under a series of written leases, the last of which is dated June 17, 1958. The first floor of this building had always been used as a tavern. The upper story of the building was a rooming house. When Mr. Timper originally leased the building, an old-fashioned bar was situated against one of the walls in the tavern. Sometime prior to April, 1957, Mr. Timper removed the old-fashioned bar and installed a modern 60-foot new circular bar in the center of the room. The bar was worth about $2,000. The respondents first had knowledge of the substitution in April of 1957, as they rarely entered the tavern. Mr. Timper did not receive permission to make the substitution. There is no evidence as to what the tenant did with the old-fashioned bar.
In November of 1960, Mr. Timper gave a note and a chattel mortgage to the appellant. The mortgage covered certain items of property in the tavern and rooming house, and specifically included the aforementioned 60-foot circular bar. The mortgage was properly filed, etc. In May of 1961, Mr. Timper abandoned the premises and the appellant, through foreclosure of its chattel mortgage, took possession of the items covered by its mortgage. Although the appellant was permitted to take possession of all other items listed on its mortgage, the respondents refused to allow the appellant to take the 60-foot circular bar. The appellant then commenced an action for replevin of the bar.
At the trial there was evidence that by removing the bar there would be approximately 12 holes left in the floor differing in diameter from one to six inches; that these holes were made so that the bar could have the necessary electrical and water connections; that beer was piped to the bar from the basement of the building and a bottle chute was installed; that appellant's expert estimated it would cost approximately $250 to $350 to restore the floor to its original condition; and that a mirror and paneling replaced the area of the wall where the old bar was located.
The lease in question specifically referred to the lease of a "tavern" and contained the following condition:
"That the lessee shall make no alterations in or to said premises without the consent of lessor first had and obtained in writing, under penalty of forfeiture of this lease and damages. All alterations to said premises shall remain for the benefit of the lessor, unless otherwise provided in said consent as aforesaid."
After a trial to the court, sitting without a jury, the court made the following findings of fact and conclusions of law:
" Findings of Fact: . . . 5. That pursuant to the terms of a written lease between the tenant and landlord no alterations could be made to the premises without the consent of lessors and in the event any improvement should be made it would remain for the lessor's benefit.
"6. That this bar was installed and attached to the building so as to become part of the same, in that connections were made through numerous holes in the floor to electrical service, hot and cold water, sewer drains, refrigeration, beer-supply pipes, and drop chute.
"7. That removal of the bar would cause material damage to the freehold."
" Conclusions of Law: 1. That the said circular bar located at 701 South Sixteenth Street, Milwaukee, Wisconsin, has been so attached and incorporated into the building owned by the defendants that the same is a fixture.
"2. That the defendants, Viola Kelm and Sylvia Kelm, being owners of the freehold are also the owners of this fixture.
"3. That the plaintiff is divested of any and all title or claim to the property of these defendants."
Judgment was thereupon entered dismissing the complaint and the plaintiff appeals.
The most-important single fact in this case is that when the defendants leased the premises to the tenant as a "tavern" it contained a "bar." From this it is easy to conclude that there was an intention on the part of the tenant and landlord to make the new bar part of the realty and to leave it as part of the premises. When the tenant, who had been utilizing the premises for a period of four years, substituted a new fixture and discarded the old fixture, which he did not initially own, it is reasonable to conclude that he intended that the new fixture was to be substituted for the old fixture and to become the property of the owner of the old fixture. In relationship to this problem of substituted fixtures, 36A C.J.S., Fixtures, p. 690, sec. 38, states:
" Substituted fixtures. A fixture substituted by the tenant for another fixture, which was on the premises at the time of the making of the lease, cannot ordinarily be removed by him, if the original fixture has been injured or permanently removed, since the effect of the removal of the substituted fixture would be to leave the premises in worse condition than when he took the lease."
The respondents leased a tavern with a bar. If the appellant were to be allowed to remove the bar then the landlords would get back a tavern without a bar, or in other words, premises which could be used as a tavern, but the primary chattel necessary, i.e., a bar, would have to be installed.
On the question of the intention of the parties the great weight of the evidence supports the conclusion that the parties intended the bar to be part of the realty and to stay there as a "fixture" and as part of the property of the landlords.
The trial court concluded that the bar was a "fixture" rather than a "trade fixture," and should continue as part of the realty, presumably because the "bar" met the three tests for determining whether fixtures remain personal property or are to be considered as part of the realty. The tests, as set forth in Standard Oil Co. v. La Crosse Super Auto Service (1935), 217 Wis. 237, 258 N.W. 791, at page 241, are as follows: (1) Actual physical annexation to the real estate; (2) application or adaptation to the use or purpose to which the realty is devoted; and (3) an intention on the part of the person making annexation to make a permanent accession to the freehold. We concur.
In deciding that under the circumstances the bar in question was a "fixture" and became a part of the realty and the property of the landlords, we do not depart in the least from our more-liberal rule on the right of a tenant to retain ownership of and the right to remove "trade fixtures." This rule has been stated in many cases.
Old Line Life Ins. Co. v. Hawn (1937), 225 Wis. 627, 631, 275 N.W. 542; Standard Oil Co. v. La Crosse Super Auto Service, supra; Shields v. Hansen (1930), 201 Wis. 349, 230 N.W. 51.
Under this more-liberal rule a tenant who brings upon realty a chattel, the purpose of which is to further the tenant's trade or business, will be allowed to remove that chattel at the expiration of his lease, provided that the removal will not constitute material injury to the premises. Even under the more-liberal rule applicable to trade fixtures we have held nevertheless that the parties' intent at the time of annexation is the main test in determining whether a trade fixture can be removed at the expiration the lease. Standard Oil Co. Case, supra, at pages 241-244; Shields v. Hansen (1930), 201 Wis. 349, 230 N.W. 51, at page 352; Old Line Life Ins. Co. v. Hawn (1937), 225 Wis. 627, 275 N.W. 542, at page 632.
We conclude that even if the bar was a "trade fixture" under the circumstances of this case, the parties intended it to remain as part of the realty and hence the plaintiff could not remove it.
By the Court. — Judgment affirmed.