## Facts

- Marvin and Sharon Smith (debtors) signed a promissory note to a bank to fund construction of a house on Georgia island real estate.
- The Smiths also signed a deed transferring the real estate to the bank as security; the deed applied to the land and “all existing and future improvements, structures, fixtures, and replacements that may now, or at any time in the future, be part of the real estate.”
- The bank assigned the deed to Atlantic Southern Bank (creditor).
- After the house was built, the Smiths had a chandelier installed in the foyer. The foyer already had recessed lighting, and the chandelier was installed for decoration rather than as the only light source.
- The Smiths had previously bought chandeliers and, over time, moved chandeliers from one home to another.
- The Smiths filed a Chapter 11 bankruptcy petition that was later converted to Chapter 7.
- During the bankruptcy proceeding, the Smiths removed the chandelier from the house by unclipping the electrical wiring and detaching the chandelier from its hanging chain.
- Atlantic Southern later foreclosed on the island house.
- Separately, the Chapter 7 trustee proposed to sell the chandelier at auction as property of the bankruptcy estate.
- Atlantic Southern objected, claiming the chandelier was a fixture that belonged to it as a result of the foreclosure.

## Issues

1. Whether the chandelier was a fixture under Georgia law and the parties’ security deed, such that it became part of the realty covered by Atlantic Southern’s collateral.
2. Whether the debtors’ removal of the chandelier during the bankruptcy case prevented the chandelier from passing with the real property at Atlantic Southern’s foreclosure, leaving it available for the Chapter 7 trustee to sell.

## Decision

- The court sustained Atlantic Southern’s objection to the trustee’s proposed sale.
- The court determined the chandelier was a fixture that fell within the security deed’s coverage of existing and future fixtures.
- The court treated the chandelier as part of the realty that passed with the house at foreclosure, so it was not available for sale by the Chapter 7 trustee as estate property.

## Legal Principles

- Under Georgia fixture law, an item intended to remain permanently in its place may be treated as a fixture and part of the realty even if it is not strongly attached to the land.
- Courts consider objective indicators of fixture status, including the manner of attachment (such as connection to a home’s electrical system), the item’s relationship to the building’s use and layout, and outward signs of intent that it remain with the property.
- A security deed that expressly covers present and future “fixtures” reaches items installed after the deed is executed, once those items become fixtures.
- Once personal property becomes a fixture subject to a real-estate security interest, the debtor’s unilateral severance or removal does not defeat the secured creditor’s rights; the property is treated as part of the mortgaged realty as against the creditor.
- In bankruptcy, the trustee can sell only what the estate owns under state property law; if an item is determined to belong to a creditor as part of foreclosed real property, it is not available for liquidation as estate property.

## Conclusion

In re Smith held that a chandelier installed in a home foyer and wired into the electrical system was a fixture under Georgia law and within a security deed covering existing and future fixtures; even though the debtors removed it during the bankruptcy, it was treated as part of the real property that passed to Atlantic Southern at foreclosure, so the Chapter 7 trustee could not sell it as property of the estate.


In re Smith, 2008 WL 7390623 (2008)