Bank of Commerce & Trust Co. v. BancCentral Nat'l Ass'n ( 2022 )

NOT DESIGNATED FOR PUBLICATION
No. 123,420
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
BANK OF COMMERCE & TRUST COMPANY,
Appellant,
v.
BANCCENTRAL NATIONAL ASSOCIATION,
Appellee.
MEMORANDUM OPINION
Appeal from Harper District Court; R. SCOTT MCQUIN, judge. Opinion filed August 19, 2022.
Affirmed in part, reversed in part, and remanded with directions.
James J. Long, of Wellington, for appellant.
Martin R. Ufford, of Hinkle Law Firm LLC, of Wichita, for appellee.
Before SCHROEDER, P.J., BRUNS and WARNER, JJ.
WARNER, J.: Bank of Commerce & Trust Company and its former tenant
BancCentral National Association dispute ownership of an ATM and an antique
cannonball safe that BancCentral removed from the building at the end of its tenancy.
The district court found that neither item was affixed to the building, so they belonged to
BancCentral. We agree that the ATM is not a fixture and affirm that portion of the district
court's ruling. But because the district court's ruling on the safe is not supported by
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substantial competent evidence, we reverse the judgment on that issue and remand the
case for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
The First National Bank Building in Harper has housed various banks
continuously since its construction in 1917. In 1999, the First National Bank of Anthony
acquired the First National Bank Building and began operating a branch there. In 2009,
the bank failed, and the federal government closed it, appointing the Federal Deposit
Insurance Corporation (FDIC) as receiver. Unable to find a buyer for a whole-bank
transaction—that is, someone to buy the banking business together with the First
National Bank Building that housed it—the FDIC severed ownership and sold these two
assets separately.
First, in 2009, the FDIC sold the banking business to Bank SNB (then known as
Bank of Kansas), which agreed to temporarily lease the building. Then, in 2011, the
FDIC sold the First National Bank Building to the Sally Olivier Trust. The deed
conveyed the building and "any and all improvements located thereon and affixed
thereto." The sale contract also indicated that a quitclaim bill of sale would list any
personal property in the building conveyed during the sale. The record does not reveal
that any bill of sale was executed.
Bank SNB continued to lease the building from the Trust until 2014, when
appellee BancCentral bought Bank SNB's Harper branch. Included in this sale was title to
all of Bank SNB's automated teller machines (ATMs) in the branch. BancCentral
continued the leasing arrangement with the Trust and operated a branch there. The lease
expired at the start of 2018, but BancCentral continued to pay rent as a month-to-month
tenant.
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In mid-2018, through a series of transfers and acquisitions, appellant Bank of
Commerce became the owner of the First National Bank Building. This transaction
resulted in Bank of Commerce also becoming BancCentral's landlord, with BancCentral
as its holdover month-to-month tenant. Bank of Commerce notified BancCentral that
operating month-to-month was not feasible and offered a new lease. The parties never
executed a lease, though BancCentral paid—and Bank of Commerce accepted—rent for
the next three months.
BancCentral then vacated the First National Bank Building. When BancCentral
left the premises, it took various items from the building, including an antique cannonball
safe from a vault, the vault's antique door and doorframe, a drive-through ATM, and safe-
deposit boxes.
BancCentral's predecessor, Bank SNB, installed the ATM in 2012, without the
Trust's knowledge or permission. The new ATM replaced an existing drive-through ATM
that First National Bank of Anthony had installed while it occupied the building. Bank
SNB installed a newer Diebold model, manufactured after the Trust bought the First
National Bank Building. The ATM extended through a hole in the wall that predated First
National Bank of Anthony's tenure, though First National Bank of Anthony had enlarged
the hole to accommodate its ATM.
The Diebold ATM is about 58 inches tall, 26.5 inches wide, and 37 inches deep. It
weighs 1,457 pounds, and its instructions show that it should be anchored to the floor
through mounting holes. Despite these instructions, BancCentral did not have it bolted to
the floor and instead it was secured with a plastic lip and caulking around the edges
where it protruded through the wall. When BancCentral vacated the building and
removed the Diebold ATM, it placed plywood over the remaining hole in the wall. Bank
of Commerce has since patched the hole where the ATM was previously located.
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The exact origins of the antique cannonball safe—and how it first got into the First
National Bank Building—are unclear, but the parties agree that it had been in the First
National Bank Building vault for decades before BancCentral removed it. Cannonball
safes were popular in the early 20th century, but banks now consider them outdated.
BancCentral has never used the cannonball safe to store cash or valuables.
The cannonball safe sits on wheels, but the safe was too large to fit through the
vault door. To remove the safe from the vault, BancCentral had to remove the antique
vault door and frame. Like the safe, the vault door and frame dated to the early 20th
century, and the frame was partially embedded in the building's masonry, which was
damaged in the removal process. After removing the vault door and frame, contractors
rolled the safe out of the bank and, because of its weight, used a power lift to place it on a
trailer. BancCentral then stored and repainted the safe, and it now sits on display in
BancCentral's Harper branch.
After learning that BancCentral had removed the ATM, the cannonball safe, and
the various other items, Bank of Commerce sued BancCentral for conversion, replevin,
and breach of contract, seeking their return. The district court granted summary judgment
for Bank of Commerce on the vault door and frame, finding that they were fixtures, or
part of the First National Bank Building, and thus belonged to the building's owner. The
court granted summary judgment for BancCentral on the ATM and safe-deposit boxes,
finding they were not fixtures. Because factual issues remained regarding the
classification and ownership of the cannonball safe, these matters proceeded to a bench
trial to determine whether the safe was a fixture and whether its removal materially
damaged the First National Bank Building. The district court ruled in BancCentral's
favor, finding the safe was not a fixture because it was on wheels and was easily removed
from the vault after BancCentral removed the door and frame. But the court ordered
BancCentral to pay over $8,000 for the repairs caused by the removal of the vault door
and frame.
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Bank of Commerce now appeals the district court's rulings related to the ATM and
cannonball safe.
DISCUSSION
Personal property that has been permanently affixed to real property "become[s]
part of the realty." City of Wichita v. Denton, 296 Kan. 244, 258, 294 P.3d 207 (2013). To
determine whether something has become affixed—or is a "fixture"—courts consider
(1) whether the property has been annexed to the real property; (2) whether the property
has been adapted to the realty; and (3) the intent of the parties who put it there. Stalcup v.
Detrich, 27 Kan. App. 2d 880, 886, 10 P.3d 3 (2000). The analysis of each of these
questions turns on the particular facts and circumstances surrounding the installation and
use of the property at issue. In re Equalization Appeals of Total Petroleum, Inc., 28 Kan.
App. 2d 295, 300, 16 P.3d 981 (2000).
The classification of an item as personal or real property intertwines factual and
legal questions. See City of Wichita v. Eisenring, 269 Kan. 767, 783, 7 P.3d 1248 (2000).
The district court concluded that neither the ATM nor the cannonball safe were fixtures,
and thus both items were personal property BancCentral acquired when it purchased the
banking business from Bank SNB in 2014. Yet its rulings arose from different procedural
postures. The court granted summary judgment to BancCentral on the ownership of the
ATM, finding as a matter of law under the uncontroverted facts that the ATM was
personal property. The court's ruling regarding the safe arose after a bench trial.
Summary judgment is appropriate when "there is no genuine issue as to any
material fact" and "the movant is entitled to judgment as a matter of law." K.S.A. 2021
Supp. 60-256(c)(2). A party seeking summary judgment must show there are no disputed
questions of material fact—that there is nothing the fact-finder could decide that would
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change the outcome. Shamberg, Johnson & Bergman, Chtd. v. Oliver, 289 Kan. 891, 900,
220 P.3d 333 (2009). This requires the district court to view the evidence in the light
most favorable to the nonmoving party, giving that party the benefit of every reasonable
inference drawn from the evidentiary record. 289 Kan. at 900. Because summary
judgment tests the legal viability of a claim, we apply this same framework on appeal.
Martin v. Naik, 297 Kan. 241, 246, 300 P.3d 625 (2013).
In contrast, when reviewing a district court's property-classification ruling after a
trial, appellate courts defer to the district court's factual findings as long as they are
supported by substantial competent evidence, i.e., "such legal and relevant evidence as a
reasonable person might accept as sufficient to support a conclusion." Gannon v. State,
305 Kan. 850, Syl. ¶ 11, 390 P.3d 461 (2017). We give no such deference to the district
court's legal conclusions, over which our review is unlimited. 305 Kan. at 886-87.
Despite these different procedural postures, both of the district court's rulings
centered primarily on its conclusion that the first element of the fixture analysis—
annexation—had not been established. Put another way, the court found that neither the
ATM nor the safe had been sufficiently annexed to the First National Bank Building to
become part of the realty.
Under annexation, courts look to "the degree of permanency with which the
property is attached to the realty." City of Wichita, 296 Kan. at 258. This requires
examining the details surrounding an item's attachment to the real property and
removability. See Total Petroleum, 28 Kan. App. 2d at 300. A readily replaceable item,
or one that can be removed with little damage to the real estate, is less likely to be
annexed. See Dodge City Cooperative Exchange v. Board of Gray County Comm'rs, 62
Kan. App. 2d ___, ___ P.3d ___, 2022 WL 2898814, at *8-9 (No. 122,499, filed July 22,
2022).
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For example, this court found in Stalcup that a 40-by-80-foot metal building was
not sufficiently annexed to the real property. 27 Kan. App. 2d at 886-87. The building
was attached to a concrete slab by metal bolts, and it could be removed by detaching the
bolts. In affirming the district court's conclusion that the building was personal
property—and thus not a fixture that would be subject to a partition of the real estate—
our court found that though removal would "take some effort," it would cause "no
damage to the real estate." 27 Kan. App. 2d at 886-87.
Shortly after this court issued our decision in Stalcup, we found that other property
had been sufficiently annexed (and ultimately affixed) to the realty of an oil refinery. In
Total Petroleum, we considered the classification for tax purposes of refinery tanks.
Because of the tanks' sizes and weights, they had to be transported via semitruck to the
refinery location and constructed on-site, where the parts of the tank were welded
together and built 20 feet into the ground with concrete foundations and designed to
withstand 100-mile-per-hour winds. Removing the tanks would have required cutting
them apart piece by piece. We found that "substantial competent evidence [supported the
district court's conclusion] that the property was annexed to the realty." 28 Kan. App. 2d
at 300.
Very recently, we concluded in Dodge City Cooperative Exchange that various
pieces of equipment bolted to grain storage bins were not fixtures because they had not
been sufficiently annexed to the real property. 2022 WL 2898814, at *8-9. We
emphasized there that the equipment could be removed without damaging the bins, and
removal would not be "unduly complicated or costly." 2022 WL 2898814, at *8. We also
noted that similar equipment had been removed and installed on other bins,
demonstrating their movability. Because the various pieces of equipment were "not
attached—or affixed—to the real estate with the requisite degree of permanency," they
were not fixtures. 2022 WL 2898814, at *8.
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As these cases illustrate, the annexation analysis assesses the permanency of an
item's attachment to the real estate. This assessment considers the manner and degree to
which an item is physically attached to the realty, as well as the ease of the item's
removal and the effect of the removal on the realty. With these principles as background,
we turn to the district court's analysis of the ATM and the cannonball safe.
1. The district court properly concluded that the ATM was personal property that
belonged to BancCentral.
The district court granted summary judgment to BancCentral on the ownership of
the ATM, concluding that the ATM was personal property and thus had been acquired by
BancCentral when it bought the banking business. The court based this ruling on its
conclusion that the ATM was not affixed to the First National Bank Building. We agree.
As an initial matter, BancCentral asserts that Bank of Commerce failed to preserve
the issue of whether the ATM is a fixture. It argues Bank of Commerce failed to request
the district court make more specific findings under Supreme Court Rule 165 (2022 Kan.
S. Ct. R. at 234) and failed to brief the issue. Rule 165 requires a district court to
separately state its findings of fact and conclusions of law when granting a summary-
judgment motion. See K.S.A. 2021 Supp. 60-252. Failure to object to inadequate Rule
165 findings precludes a party from supplementing any omissions on appeal. Dragon v.
Vanguard Industries, Inc., 282 Kan. 349, 356, 144 P.3d 1279 (2006).
We are not persuaded by this argument and find that Bank of Commerce
sufficiently preserved the ATM issue for our review. In its order granting summary
judgment on the ATM, the district court adopted BancCentral's memoranda in support of
its motion as the court's findings of facts and conclusions of law. Those memoranda
thoroughly analyze whether the ATM is a fixture, concluding it is not. Bank of
Commerce's argument does not depend on anything that is missing from those filings.
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Nor does Bank of Commerce's briefing preclude our review. We thus proceed to the
merits of Bank of Commerce's argument.
The uncontroverted facts indicate that Bank SNB installed the ATM in 2012 to
replace an earlier ATM—as the bank before it had done in 2005—by placing the new
ATM in the existing hole in the wall and sealing the edges with caulk. Though heavy, the
ATM came and left as a fully constructed machine. It was not bolted or attached to the
floor in any way, despite the manufacturer's instructions. And even if it had been bolted
to the floor, there is no indication that removal would damage the building. Indeed, the
evidence showed that BancCentral did not damage the building when it removed the
ATM; it removed the machine through the hole that had existed since at least the 1990s.
And although removing the ATM left the hole exposed, it was easily patched. In short,
the undisputed evidence supports the court's conclusion that the ATM was never
sufficiently annexed to the realty with any degree of permanency.
Our analysis could end there, as all three elements of the fixture analysis must be
established for personal property to be converted to realty. See Dodge City Cooperative
Exchange, 2022 WL 2898814, at *7. After all, if an item has not been annexed to the real
estate, it cannot be affixed to that property. See 2022 WL 2898814, at *8-9. But for the
sake of completeness, we note that there is evidence in the record to support the district
court's other findings regarding the ATM.
In assessing the second element of the fixture analysis—adaptation—courts look
to whether an item is "particularly adapted to the use of the [realty] on which it sits."
Stalcup, 27 Kan. App. 2d at 887. Put differently, a fixture is more likely to be unique to
the property on which it sits, rather than something that exists on similar properties
around the state. 27 Kan. App. 2d at 887. Courts also evaluate the item's importance to
the function and value of the realty. Total Petroleum, 28 Kan. App. 2d at 301.
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Again, we agree with the district court's finding that the ATM was not adapted to
the use of the First National Bank Building. ATMs are common in banks throughout the
state. Nothing in the record shows that Diebold manufactured this ATM specifically for
the First National Bank Building, and its removal did not cause the building to cease
functioning as a bank. Accord Dodge City Cooperative Exchange, 2022 WL 2898814, at
*8 (concluding various pieces of equipment were not fixtures, in part because similar
equipment had been removed and replaced on other grain storage bins). There was also
no evidence that its removal devalued the First National Bank Building in any significant
way. The undisputed facts show that the ATM was not adapted to the use of the building.
Similarly, there is evidence in the record to support the district court's finding that
the ATM was not intended to be a fixture. When examining the intent of the parties,
courts look to the time when the property was installed or acquired. Total Petroleum, 28
Kan. App. 2d at 301. The undisputed evidence also showed that when Bank SNB sold its
business—not the building—to BancCentral, it explicitly included the ATM in the sale,
suggesting Bank SNB viewed it as personal property. Under all three aspects of the
fixture test, the undisputed facts show that the ATM was not a fixture and thus summary
judgment in BancCentral's favor was appropriate.
In its final argument on this point, Bank of Commerce asserts that even if the
ATM is personal property, it belongs to the owner of the First National Bank Building
because it was not abandoned property. The parties discussed whether the cannonball
safe was abandoned property during the trial, but neither party raised this issue before the
district court regarding the ATM.
A party generally cannot raise an issue on appeal that it did not raise below.
Trotter v. State, 288 Kan. 112, Syl. ¶ 2, 200 P.3d 1236 (2009). This preservation
requirement is particularly important when a party is attempting to present a fact-
intensive question, like whether property has been abandoned, for the first time on
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appeal. Accord Botkin v. Kickapoo, Inc., 211 Kan. 107, 109-10, 505 P.2d 749 (1973)
(whether property has been abandoned requires an examination of all the facts and
circumstances). Appellate courts, as courts of review, are not in a position to make fact
findings. Furthermore, parties opposing a summary-judgment motion, as Bank of
Commerce was here, have the obligation to come forward with any possible reason why
judgment should not be entered in favor of the moving party. See K.S.A. 2021 Supp. 60-
256(e)(2). Bank of Commerce thus waived its argument concerning abandonment of the
ATM when it did not raise it to the district court, and we decline to consider that question
here.
The undisputed facts show that the ATM was not a fixture as a matter of law
because it was not annexed, adapted, or intended as a fixture. BancCentral, as the tenant,
purchased the ATM from the previous tenant and used it as part of its banking business.
The district court did not err when it granted BancCentral's motion for summary
judgment as to the ATM.
2. Because the cannonball safe was annexed to the First National Bank Building, the
case must be remanded for consideration of the other elements of the fixture analysis
before ownership of the safe can be determined.
Bank of Commerce next asserts that the district court misapplied the fixture test
when it found, after a bench trial, that the cannonball safe was also personal property that
belonged to BancCentral. After carefully reviewing the record and the district court's
ruling, we agree with Bank of Commerce that the court's annexation analysis failed to
adequately consider the effect of the removal of the safe on the building. We therefore
reverse the district court's judgment and remand for further proceedings to determine the
ownership of the safe.
The evidence at trial showed that the cannonball safe was housed within a vault
inside the bank building and had been there for decades. The safe was on wheels, as the
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district court noted in its ruling. But other evidence showed that the safe had been
essentially built into the vault: The only way BancCentral was able to extricate the safe
from the building was to remove the vault door and doorframe—actions the district court
found damaged the building. Once the vault entrance was enlarged through this damage,
BancCentral was able to roll the safe out of the bank building, load it into a truck via a
power lift (since the safe's heft is substantial), and remove it from the premises.
The district court found the cannonball safe was not annexed to the First National
Bank Building because the safe "sits on wheels" and "was rolled out of the vault easily
after the vault door was removed." This analysis is based on two erroneous premises.
First, Kansas cases have long recognized that actual physical connection is not the
touchstone for annexation. Rather, as the Kansas Supreme Court observed more than a
century ago, property may be "actually or constructively annexed to the realty." Winslow
v. Bromich, 54 Kan. 300, 306, 38 P. 275 (1894); see Cent. Branch Rld. Co. v. Fritz, 20
Kan. 430, 434 (1878) ("[T]his connection may be slight, as well as strong, remote, as
well as near, and constructive, as well as actual or absolute."). Thus, the fact that the
cannonball safe was on wheels is but one factor the court should consider in determining
whether that object was part of the bank building. The district court erred when it relied
solely on that consideration to the exclusion of all other facts.
Second, in noting that the cannonball safe was easily rolled out of the bank after
the antique vault door and doorframe had been removed, the court neglected to take into
consideration that removing the safe was only possible after the building itself had been
damaged. Under Kansas caselaw, courts must consider not only "how permanently [an]
item is attached to the real property," but also the difficulty and effect of the item's
removal—both on the item itself and on the realty. Dodge City Cooperative Exchange,
2022 WL 2898814, at *7.
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Our review of the evidence demonstrates that the safe was constructively confined
to the First National Bank Building's vault. BancCentral could not remove the safe
without first removing the antique vault door and frame and damaging the building. The
district court determined that the vault door and frame were fixtures—that is, part of the
building—a finding BancCentral has not challenged on appeal. This means that
BancCentral had to remove part of the building, damaging the masonry in the process, to
remove the safe from the property.
BancCentral argues that removal must cause "material injury" to the building to
show annexation, citing Smith v. Holland Furnace Co., 128 Kan. 580, 583, 278 P. 719(1929). But more recent cases suggest that any injury to the realty is a relevant
consideration under annexation. See Stalcup, 27 Kan. App. 2d at 887; Smith v. Anguiano,
No. 122,135, 2021 WL 2171155, at *5-6 (Kan. App. 2021) (unpublished opinion).
Contrary to BancCentral's assertion, there is no structural-damage requirement under the
annexation inquiry.
Taking all this evidence into consideration, we find that Bank of Commerce
showed that the cannonball safe had been annexed to the First National Bank Building.
The safe had been installed in the First National Bank Building's vault several decades
ago—long before either Bank of Commerce or BancCentral had an interest in the
property. Though the safe was on wheels, it could not be removed from the vault without
damaging the property—the antique vault door and doorframe had to be removed,
damaging the building. The safe had been constructively attached to the building with the
requisite degree of permanency to be considered part of the building.
As we have indicated, however, the fixture analysis does not end with this
conclusion. "'[A]nnexation to the realty is not the sole and controlling test of whether a
certain article is a fixture or not.'" Winslow, 54 Kan. at 306 (quoting A. T. & S. F. Rld.
Co. v. Morgan, 42 Kan. 23, Syl. ¶ 3, 21 P. 809 [1889]). Rather, when an object has been
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annexed to real property, courts must consider whether it has been adapted to the use of
the realty and whether the party who installed the object intended it to be permanently
affixed to the realty. Dodge City Cooperative Exchange, 2022 WL 2898814, at *7.
In some cases involving fixtures, the record has been sufficient—and the facts
sufficiently undisputed—for an appellate court to conduct this fixture analysis on appeal.
See 2022 WL 2898814, at *8-9. In this case, however, such a review is not possible.
Because the district court found the safe was not attached to the building, it did not make
any factual findings regarding the safe's "use and purpose in relation to" the building. See
2022 WL 2898814, at *7. Nor did the court make any findings regarding intent.
Because substantial competent evidence does not support the district court's
annexation finding for the antique cannonball safe, we reverse the judgment in favor of
BancCentral on that issue. We remand the case so the district court can continue its
analysis of whether the safe is a fixture—assessing the evidence and making factual
findings regarding the safe's adaptation and whether it was intended to be a permanent
part of the First National Bank Building.
Affirmed in part, reversed in part, and remanded with directions.
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