Rehearing Denied Jan. 13, 1953.
[75 Ariz. 46] Udall & Udall, Tucson, for appellant.
Knapp, Boyle, Bilby & Thompson, Tucson, for appellee.
PATTERSON, Superior Court Judge.
This is an appeal from a directed verdict and judgment rendered against appellant by the lower court.
In 1942 The Texas Company, appellee, entered into a lease with one Ivins, pertaining to the service station property hereinafter mentioned, wherein Ivins was landlord and the company, tenant. This property consisted of realty particularly described in the lease, and other property described as follows:
'One service station building with plumbing installation and electrical wiring.
'One automobile hoist.'
The Texas Company installed, on the premises, certain equipment required for the operation of the service station, including the gasoline tanks involved in this action but reserved in its lease with Ivins the right to sever and remove such equipment at any time.
Appellant, Paul Marcos, leased this service station and certain equipment from the Texas Company on August 1, 1948. Appellant had worked on the leased premises for about three months prior to his obtaining the lease. After taking possession, under his lease, Marcos kept a daily account of gasoline delivered by appellee and all gasoline sold to customers. Appellant testified that in the month of September he tallied his sales records against the gasoline delivery invoices and discovered a discrepancy of some 7,000 gallons of gasoline. He immediately notified appellee, and its agent promptly tested the storage tanks and found that the tanks involved in this action were leaking. The lease between appellant and appellee provided that it was subject to all the terms and conditions of the original lease between appellee and Ivins.
Appellant instituted an action against the appellee to recover the price he had paid the company for the gasoline which was lost by leakage from the defective tanks. The complaint contained two counts; the first, predicated upon negligence, the second upon breach of warranty. During the trial the first count was abandoned.
Appellant contends that although the tanks were affixed to the realty at the time he entered into his lease with appellee, that by virtue of the terms of the lease they were considered as personalty. Also by reason of the tanks being classified as 'personalty' and not 'realty', appellant is entitled to rely upon the law of implied warranty pertaining to bailment of personalty; that is, there was an implied warranty on the part of appellee that the tanks were in proper condition for the purpose leased and were not defective.
The following legal principles are pertinent:
'As a general rule, parties as between themselves, may, in their dealings[75 Ariz. 47] with chattels annexed to, or used in connection with, real estate, fix on them whatever character, as realty or personalty, on which they may agree, such right being, in some jurisdictions, recognized by statute, and the law will enforce such understanding whenever the rights of third parties will not be prejudiced.' 36 C.J.S., Fixtures, § 13. See also 12 Cal.Jur., 566.
'Effect as rendering article personalty. The cases are ordinarily to the effect that an article which is annexed by the tenant, subject to a stipulation granting him the right of removal, retains its chattel character, as long as the right of removal continues, as between the parties, although it may lose its chattel character, if so closely annexed as to become an integral part of the land.' 36 C.J.S., Fixtures, § 15.
'In the absence of fraud or statutory provisions to the contrary, ordinarily there is no implied covenant on the part of the landlord that the premises are or will remain suitable for the purposes for which they ...