Southwest Bank of St. Louis v. POULOKEFALOS

931 N.E.2d 285, 401 Ill. App. 3d 884
CourtAppellate Court of Illinois
DecidedJune 4, 2010
Docket1-09-2387
StatusPublished
Cited by24 cases

This text of 931 N.E.2d 285 (Southwest Bank of St. Louis v. POULOKEFALOS) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Southwest Bank of St. Louis v. POULOKEFALOS, 931 N.E.2d 285, 401 Ill. App. 3d 884 (Ill. Ct. App. 2010).

Opinion

JUSTICE FITZGERALD SMITH

delivered the opinion of the court:

Plaintiff Southwest Bank of St. Louis (Bank) instituted a replevin suit against defendants Dimitrios Poulokefalos and Nikolaos Kalouris (Owners or Landlords), individually and as beneficiaries of a land trust. Bank now appeals from an order of the circuit court finding that certain distrained property was permanently attached to real estate such that it had become fixtures and, accordingly, Landlords had a priority interest over the distrained property superior to the Bank’s Uniform Commercial Code lien (810 ILCS 5/9 — 102 (West 2008)). For the following reasons, we affirm.

BACKGROUND

Landlords own a commercial building located at 1975 Cornell Avenue in Melrose Park, Illinois (the Premises). In December 2003, Landlords entered into a lease agreement (the Lease) with Converters Extruded Films, Inc. (Original Tenant), leasing the premises for a term of five years, from February 1, 2004, to January 31, 2009. The lease included a provision (section 9.1.12) stating that, at termination:

“all alterations, additions, floor covering and carpeting thereto and all decorations, fixtures, furnishings, partitions, heating, ventilating and cooling equipment and other equipment, which are permanently affixed to the Premises, which (if not then the property of the Landlord) shall thereupon become the property of Landlord without any payment to tenant.”

In 2003, Original Tenant installed various large pieces of equipment to be used in the commercial production of plastics. Owner Poulokefalos testified at trial that the equipment was brought in piece by piece, reassembled and welded by Original Tenant. According to Owners, the equipment included silos and large extruding machines that ran from floor to ceiling, were bolted to the floor, the ceiling rafters and joists, and the walls, along with a series of pipes, tubes, and conduit carrying raw materials and electricity to the machinery. The assembly required removing some rafters in the ceiling and replacing them with new rafters. After the silos were installed, a wall was built to divide the space rented by Original Tenant. Owner Poulokefalos testified that he discussed with Original Tenant that the machinery could never be removed because it required the removal of some of the rafters. As a result, Original Tenant considered purchasing the building.

Two years later, however, Original Tenant sold its business to C. Extruded Films, L.L.C., a Missouri limited liability company (Second Tenant). On December 5, 2005, Original Tenant assigned its lease to Second Tenant, and Second Tenant remained in possession of the premises thereafter.

On December 5, 2005, Bank loaned Second Tenant $1 million (the loan). The loan was secured by a commercial security agreement between Bank and Second Tenant, pursuant to which Second Tenant granted a security interest in all equipment, inventory and other property of Second Tenant. The security agreement and financing statement genetically identified “fixtures” as property security for the loan. Shortly thereafter, on December 20, 2005, Bank filed its UCC financing statement with the Missouri Secretary of State. 1 However, Bank did not record its UCC financing statement with the Cook County recorder of deeds.

Second Tenant ceased paying rent in September 2008 and abandoned the leasehold in October 2008. In doing so, it abandoned 12 plastic extruding machines and 3 silos that were attached to the floors, ceilings and duct work, as well as heavy duty electrical systems and piping connecting the machinery.

Landlords filed a complaint and distress warrant on December 11, 2008, seeking to distrain the plastic extruding machines and silos still in Landlords’ possession for past-due rent and property taxes. 2 Landlords claimed a landlords’ lien on the equipment in the amount of $235,000. 3 The distrained property was inventoried in an exhibit to the distress warrant. On December 12, 2008, Bank filed a replevin lawsuit seeking attachment of the same property sought by Landlords to satisfy its rent claim. The two causes were consolidated on January 21, 2009.

A bench trial of Bank’s replevin complaint was heard on December 29, 2008. At trial, Landlords claimed a priority interest over the trade fixtures and leasehold fixtures abandoned by Second Tenant by virtue of its landlord’s lien for unpaid rent and section 9.1.12 of the lease. Bank claimed a priority interest by virtue of its UCC financing statement.

At trial, owner Poulokefalos testified that it was the intent of both himself and Original Tenant at the signing of the lease that Original Tenant would bring equipment into the building. However, there was no specific agreement about what would happen to the equipment at the termination of the lease other than section 9.1.12 of the lease, which he understood to mean “whatever is bolted in the floor stays with the building.” Poulokefalos testified that the removal of the dis-trained property would cause substantial damage to the real estate. He testified that the electrical panels, conduit, and air pipes servicing the equipment were attached to the walls and ceilings. According to Poulokefalos, at the time of the lease signing, the space in question was 50,000 square feet of open space. Original Tenant informed Poulokefalos that it needed a wall built. However, it had to install equipment before building the wall or it would be unable to bring the equipment in. Accordingly, a wall was constructed after Original Tenant installed the equipment at a cost of $30,000. Now, this wall must be removed in order to remove the equipment. Many rafters supporting the ceiling over a 24,000-square-foot area used by Original Tenant would also have to be removed and replaced at substantial cost that could exceed the value of the equipment. The equipment itself, welded together, would have to be dismantled by cutting it into pieces with a blowtorch, relegating it to scrap. Unbolting the equipment from the floors would leave many holes in the floor.

Edward Mundt, Second Tenant’s general manager and chief financial officer, testified that machinery was bolted to the concrete floor with industrial anchor bolts. He did not know if the machinery was attached to the rafters. He could remove the machinery from the building, by breaking it down into several pieces, unbolting it from the floor, and lifting it with a fork truck. It could be moved out of the building through garage doors.

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Bluebook (online)
931 N.E.2d 285, 401 Ill. App. 3d 884, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southwest-bank-of-st-louis-v-poulokefalos-illappct-2010.