by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
FIXTURES; TRADE FIXTURES; TIME OF AFFIXATION: Oil drilling equipment (derricks, casings, pumping equipment) that had been attached to oil and gas wells at the time the wells were leased to the lessee consists of fixtures rather than trade fixtures.
Lehmann v. Keller, 684 A.2d 618 (Pa.Super. 1996).
Sister gave an oil lease to brother to drill for oil on land she had inherited from her father. Brother continued to operate two wells on the property that were already functioning at the time of the lease, using equipment on site and in use prior to leasing. Things went swimmingly for almost twenty years, when the relationship between brother and sister (and sister's husband) deteriorated. Old trucks were used to block roadways. Guns were "brandished."
Ultimately brother sought an injunction protecting his oil drilling activities and confirming that he owned the old leasing equipment. He argued that his use of the equipment for over twenty years without dispute established his ownership of it. The court disagreed, concluding that lessee cannot show adverse possession to property furnished with a lease when it can show no demonstrated "hostility" to the lessor's title.
The court then instructed the trial court to resolve the ownership question on the basis of the law of fixtures. Although items of equipment attached to oil and gas wells have been classified traditionally as trade fixtures, the court here reasoned that where the disputed equipment has been installed by the lessor, general fixture principles, rather than the trade fixture rule, determine the parties' rights to the equipment. Generally, chattels associated with real estate will fall into one of three categories. Chattels that are not physically attached to realty are always considered to be personality. Chattels annexed to realty which cannot be removed without materially damaging the realty or the chattels are always fixtures. But chattels physically connected to the realty but which can be removed without material injury to the land or the chattel can be considered a fixture or a chattel, depending on the "objective intent of the owner to permanently incorporate [it] into the real property." The question of which category the oil and gas well equipment would fall into was remanded to trial court.
Comment: Although the editor concurs that the rule as articulated by the court provides a good "rule of thumb" for differentiating between fixtures and removable personalty, the editor's sense of the case law is that the intent of the parties is always central, and that the degree of affixation generally is viewed as the an objective manifestation of their probable intent. This ought to be true whether or not the items can be removed without materially injuring the remaining real estate. Of course, it would make sense to view it to be the intent of the parties that the party removing a item of removable personalty ought to have the duty to "patch the hole," and restore the real estate to a reasonable condition without the removed item.
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or firstname.lastname@example.org
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.