ABB, Inc. v. Integrated Recycling Group of SC, LLC

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

ABB, Inc., and BFP, LP, a/k/a Bullington Family
Partnership, Respondents,

v.

Integrated Recycling Group of SC, LLC, John Murphy
Armstrong, Jr., and Michael T. Armstrong, Appellants.

Appellate Case No. 2017-001943

Appeal from Spartanburg County
J. Derham Cole, Circuit Court Judge

Opinion No. 5793
Heard March 10, 2020 – Filed January 27, 2021

AFFIRMED

J. Falkner Wilkes, of Greenville, for Appellants.

Gregory Jacobs English, of Wyche Law Firm, of
Greenville, for Respondents.

LOCKEMY, C.J.: Integrated Recycling Group of SC, LLC (IRG), John Murphy
Armstrong, and Michael T. Armstrong (collectively, Debtors) appeal the circuit
court's order granting summary judgment in favor of ABB, Inc. and BFP, LP
(collectively, Creditors). Debtors argue the circuit court erred by (1) finding the
collateral at issue was personal property rather than a fixture and (2) failing to find
Creditors lost their priority over the collateral when their UCC-1 filing lapsed. We
affirm.
FACTS/PROCEDURAL HISTORY

In 2005, Creditors loaned Debtors approximately $5 million (the ABB Loan).
Creditors filed a complaint against Debtors to collect the debt March 16, 2011.
IRG then filed for bankruptcy. To settle their claims as to both actions, Debtors
and Creditors entered into a debt settlement agreement (the Settlement Agreement)
on October 27, 2011, with an effective date of November 10, 2011. Pursuant to
this agreement, IRG executed a promissory note (the Note) in favor of Creditors
for $1.4 million with an interest rate of 4% per annum. The Note provided that
after five years all remaining principal and interest were to be due and fully
payable as a balloon payment. IRG signed a blanket continuing security agreement
granting Creditors a security interest in IRG's "inventory, general intangibles,
accounts, chattel paper, instruments and documents, equipment, commercial tort
claims, letter-of-credit rights, and all parts, replacements, substitutions, profits,
products, accessions and cash and non-cash proceeds and supporting obligations of
any of the foregoing." To further secure the loan, Debtors signed a "continuing
Pelletizer security agreement" (the Pelletizer Agreement) giving Creditors a
security interest in a "60 Ton Air Cooled Pelletizing Machine/Cooler, Model
#NGR105VSP, Series #Q02028" (the Pelletizer). IRG defaulted on the Note by
failing to pay interest from August through November of 2016 and by failing to
pay the full balance of the debt when it became due on November 10, 2016.
Creditors then instituted this action against Debtors to collect the debt and enforce
their security interest in the Pelletizer and other collateral.

The Settlement Agreement defined "the Assets" of IRG as IRG's "Accounts
Receivable, Equipment, Furniture, Fixtures, Inventory, Instruments, Chattel Paper,
and General Intangibles." The Settlement Agreement stated, "[O]n March 27,
2006, to . . . secure the ABB Loan, ABB filed a UCC-1 Financing Statement, along
with a UCC-3 Continuation" against IRG's Assets. Additionally, IRG agreed "the
2006 UCC [wa]s a valid, perfected lien on the Assets of [IRG] and that such lien
secure[d] the Debt." Further, as part of the Pelletizer Agreement, which was
executed simultaneously with the Settlement Agreement, Debtors agreed Creditors
held a "valid and perfected security interest in the [Pelletizer]."

John Murphy and Michael Armstrong (the Armstrongs) filed an answer in their
individual capacities, and IRG answered separately. The circuit court subsequently
issued a consent order relieving IRG's counsel; however, IRG never retained new
counsel. In their answer, the Armstrongs admitted Debtors entered into the
Settlement Agreement with Creditors and signed the Pelletizer Agreement giving
Creditors a security interest in the Pelletizer.
Thereafter, Creditors moved for summary judgment. In support of their motion,
Creditors submitted the affidavit of Bryan Bullington, the Settlement Agreement
and the exhibits attached to and incorporated in the Settlement Agreement,
including the security agreements and UCC financing statements. Creditors also
moved to strike IRG's answer and for default judgment against IRG. In his
affidavit, Bullington stated he was the vice president of Creditors, whom he
attested held a duly perfected first security interest in the Pelletizer and other
collateral of Debtors pursuant to the UCC-1 financing statements filed with the
South Carolina Secretary of State and attached to the motion. Further, he stated
Creditors provided the purchase money for all collateral and the Pelletizer.

The Armstrongs filed an affidavit in opposition to Creditor's motion for summary
judgment. They attested the "heavy equipment that was installed in the building"
constituted a fixture because it was "very large," "bolted down," and "very difficult
to move in and out of the plant." The Armstrongs stated a third party held a
mortgage on the real property where this equipment was located and the mortgage
attached to all fixtures on the property. The Armstrongs stated the mortgagee
would have priority over Creditors' security interest because Creditors' UCC-1
financing statement had lapsed. In response, Creditors submitted a second
affidavit of Bullington, who attested the collateral was "personal property that
c[ould] be removed from the real property without damaging it" and therefore was
not covered by the third-party mortgage.

At the hearing on their motions, Creditors argued the Armstrongs' affidavit was not
made on personal knowledge pursuant to Rule 56, SCRCP, and did not raise any
genuine issue of material fact. No counsel appeared on behalf of IRG at the
hearing. The Armstrongs argued "the equipment" was a fixture because it was
"very heavy equipment and would take a very—would be very difficult to
remove." They asserted the mortgage on the real property attached to the
equipment and had priority. Creditors argued that as between Debtors and
Creditors, the record contained a financing statement and security agreement
covering the collateral and any issue of priority between third parties was
irrelevant. The Armstrongs stipulated the principal balance of $1,146,923.12 was
due under the Note.

The circuit court granted summary judgment in favor of Creditors. The court
found Creditors held a "duly perfected first security interest in the Collateral and
[the] Pell[e]tizer." The court concluded the collateral and the Pelletizer were not
fixtures or improvements but personal property and Creditors were therefore
entitled to possession of the collateral and the Pelletizer. Additionally, the court
struck IRG's answer and granted judgment against it for $1,221,984.06. This
appeal followed.

ISSUE ON APPEAL

Did the circuit court err by granting summary judgment in favor of Creditors when
it classified the equipment at issue as personal property rather than a fixture?

STANDARD OF REVIEW

"When reviewing the grant of a summary judgment motion, this court applies the
same standard that governs the trial court under Rule 56(c), SCRCP." Coker v.
Cummings, 381 S.C. 45, 51, 671 S.E.2d 383, 386 (Ct. App. 2008). Summary
judgment is warranted "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law." Rule 56(c), SCRCP. "To determine if any genuine
issues of fact exist, the evidence and all reasonable inferences must be viewed in
the light most favorable to the non-moving party." Sauner v. Pub. Serv. Auth. of
S.C., 354 S.C. 397, 404, 581 S.E.2d 161, 165 (2003).

LAW/ANALYSIS

Debtors argue the circuit court erred by concluding the Pelletizer was personal
property because the evidence could reasonably support a finding it became a
fixture when it was anchored to the ground and attached to the building.1 Debtors
contend the Armstrongs' affidavit, which stated the Pelletizer was large, heavy, and
installed in the building, provided evidence it was a fixture. They argue the only
evidence suggesting the Pelletizer was personal property was Creditors' assertion it
could be removed without damaging the real property. We disagree.

"Summary judgment should be granted when plain, palpable, and undisputable
facts exist on which reasonable minds cannot differ." NationsBank v. Scott Farm,
320 S.C. 299, 302-03, 465 S.E.2d 98, 100 (Ct. App. 1995). "When a party makes
no factual showing in opposition to a motion for summary judgment, the trial 'court
must grant summary judgment to the moving party if, under the facts presented, the

1
Debtors' arguments address the security interest in the Pelletizer rather than any
other equipment or collateral.
latter is entitled to summary judgment as matter of law.'" Coker, 381 S.C. at 55,
671 S.E.2d at 388 (quoting S.C. Elec. & Gas Co. v. Combustion Eng'g, Inc., 283
S.C. 182, 189, 322 S.E.2d 453, 457 (Ct. App. 1984)). "[T]o resist a motion for
summary judgment, the nonmoving party must come forward with specific facts
showing genuine issues necessitating trial." NationsBank, 320 S.C. at 303, 465
S.E.2d at 100; see also Rule 56(e), SCRCP ("When a motion for summary
judgment is made and supported as provided in this rule, an adverse party may not
rest upon the mere allegations or denials of his pleading, but his response, by
affidavits or as otherwise provided in this rule, must set forth specific facts
showing that there is a genuine issue for trial. If he does not so respond, summary
judgment, if appropriate, shall be entered against him.").

"A fixture involves a mixed question of law and fact. It is incumbent on the court
to define a fixture; but whether it is such in a particular instance depends upon the
facts of that case, unless the facts are susceptible of but one inference." Carson v.
Living Word Outreach Ministries, Inc., 315 S.C. 64, 70, 431 S.E.2d 615, 618 (Ct.
App. 1993). "'Fixtures' means goods that have become so related to particular real
property that an interest in them arises under real property law." S.C. Code Ann.
§ 36-9-102(41) (2003 & Supp. 2019). "A fixture is generally defined as 'an article
which was a chattel, but by being physically annexed to the realty by one having
an interest in the soil becomes a part and parcel of it.'" Creative Displays, Inc. v.
S.C. Highway Dep't, 272 S.C. 68, 72, 248 S.E.2d 916, 917 (1978). "Mere
affixation does not automatically render property a fixture." Carjow, LLC v.
Simmons, 349 S.C. 514, 519, 563 S.E.2d 359, 362 (Ct. App. 2002). "An addition
made by a person claiming fee simple title is presumed to be a fixture, whereas no
presumption arises where the one making the addition has an estate limited in time
or use." 18 S.C. Jur. Fixtures § 9; see also Planters' Bank v. Lummus Cotton Gin
Co., 132 S.C. 16, 23, 128 S.E. 876, 878 (1925) ("[I]t is considered more probable
that an improvement, placed on the premises by one who did not own the fee, was
placed there for his personal convenience and during the limited term of his
estate."). "In determining whether an item is a fixture, courts should consider the
following factors: '(1) mode of attachment, (2) character of the structure or article,
(3) the intent of the parties making the annexation, and (4) the relationship of the
parties.'" Carjow, LLC, 349 S.C. at 519, 563 S.E.2d at 362 (quoting Hyman v.
Wellman Enters., 337 S.C. 80, 84, 522 S.E.2d 150, 152 (Ct. App. 1999)).

First, we find the circuit court did not err by granting summary judgment in favor
of Creditors as to IRG. It is undisputed IRG was in default. See Transp. Ins. Co.
v. S.C. Second Injury Fund, 389 S.C. 422, 431, 699 S.E.2d 687, 691 (2010) ("An
unappealed ruling is the law of the case and requires affirmance."). Although IRG
argues for the first time in its reply brief that the circuit court erred by granting
Creditors' motion to strike its answer, a party cannot raise an issue for the first time
in an appellate reply brief. See Elam v. S.C. Dep't of Transp., 361 S.C. 9, 23, 602
S.E.2d 772, 779-80 (2004) ("Issues and arguments are preserved for appellate
review only when they are raised to and ruled on by the [circuit] court."); Chet
Adams Co. v. James F. Pedersen Co., 307 S.C. 33, 37, 413 S.E.2d 827, 829 (1992)
(holding an issue was waived when the appellant raised it for the first time in its
reply brief). Further, IRG failed to oppose the motion for summary judgment in
any way. See Thompkins v. Festival Ctr. Grp. I, 306 S.C. 193, 196, 410 S.E.2d
593, 594 (Ct. App. 1991) ("[A] party opposing summary judgment may not rest on
mere allegations or denials contained in pleadings."). Accordingly, we affirm the
circuit court's ruling granting summary judgment in favor of Creditors as to IRG.

Next, viewing the facts in the light most favorable to Debtors, we believe there was
no genuine issue of material fact as to whether the Pelletizer was personal
property. Although the Armstrongs contend the Pelletizer was a fixture, nothing in
their affidavit or the mortgage documents indicated an intent on the part of the
Debtors that the Pelletizer or any other equipment was to become a fixture. Their
affidavit referred generally to "heavy equipment" but not the Pelletizer specifically.
Further, it did not address the nature of the Pelletizer or any other equipment, nor
did it describe the relationship of such items to the use of the real property. Rather,
the affidavit stated only that the equipment was very heavy, was bolted to the floor,
and was difficult to move. Moreover, the Armstrongs did not state they intended
any equipment to remain permanently in the building or dispute that the equipment
or Pelletizer could be removed from the building without damaging the real
property. Finally, the Armstrongs did not dispute Creditors had a valid and
enforceable security interest in the Pelletizer or any other collateral identified in
the Settlement Agreement. We find the record contains no evidence to show the
Pelletizer or any other collateral was a fixture. We conclude the facts were only
susceptible to the inference that such items were personal property. Therefore,
viewing the facts in the light most favorable to Debtors, we find there was no
genuine issue of material fact as to whether the Pelletizer was personal property
and the circuit court did not err by granting summary judgment in favor of
Creditors.

In light of our disposition of this issue, we need not address Debtors' remaining
argument concerning priority. See Futch v. McAllister Towing of Georgetown,
Inc., 335 S.C. 598, 613, 518 S.E.2d 591, 598 (1999) (providing that when an
appellate court's disposition of a prior issue is dispositive, it need not address
remaining issues).
CONCLUSION

For the foregoing reasons, the circuit court's order granting summary judgment in
favor of Creditors is

AFFIRMED.

GEATHERS and HEWITT, JJ., concur.