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Industrial crane, saw not subject to mortgage liens, COA affirms

August 3, 2017

An industrial crane and saw used to cut limestone are the personal property of a sawing company and can’t be claimed by a lender to satisfy liens on a foreclosed property owned by one of the owners of the sawing company, the Indiana Court of Appeals ruled Thursday.

Timothy Luttrell and Don Short entered into a verbal agreement to partner and create J&D Sawing in November 2005. Luttrell, who worked for Short, owner of Indiana Stone Works Inc. in Lawrence County, purchased an industrial crane and Short purchased a hydraulic narrow-belt saw to cut slabs of limestone. No money from ISW was used to buy either piece of equipment, but they were housed in a separate building on ISW’s property built specifically for J&D Sawing.

The company never took off, Luttrell never was paid anything from J&D Sawing, and so he sued in 2016 seeking to dissolve the partnership. At some point, 11438 Highway 50 LLC, which held the mortgage associated with ISW, foreclosed on the ISW property and later filed a motion to intervene in Luttrell’s case. The lender argued it had a first-priority security interest in the crane and saw by virtue of its mortgage liens.

The trial court ruled in favor of Luttrell and granted him more than $290,000 in damages. The court awarded the partnership assets — the crane and saw — to Luttrell after finding they were personal property of J&D Sawing and not fixtures subject to any security interest the lender had against ISW’s property.

On appeal, the lender says that ownership of the crane and saw as personal property is irrelevant in considering whether they have become fixtures on the real property. Rather, because the crane and saw are enormous and integral pieces of machinery in a building built solely for them and are attached to other machinery that is attached to the real property, they are fixtures to the real property.

But the Court of Appeals found no error in the trial court’s determination, citing Luttrell’s statement J&D Sawing was a completely independent business from ISW, that ISW did not depend on J&D Sawing’s equipment, and ISW’s operations wouldn’t be disturbed if the two pieces were removed from the property. The evidence also shows that Luttrell and Short intended to purchase the building and real property from ISW.

The case is 11438 Highway 50, LLC, successor in interest to Regions Bank, successor by merger to Union Planters Bank, N.A., successor in interest to NBD Bank, N.A. v. Timothy John Luttrell, 47A01-1702-PL-354.
 

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