## Facts

- Key Bank loaned $2,580,000 to William J. DiBiase, Jr. in July 1986, secured by a properly recorded mortgage on his Old Orchard Beach real estate that covered after-acquired fixtures.
- On June 10, 1987, DiBiase formed Grand Beach Inn, Inc. to construct and operate an inn on the mortgaged property; DiBiase remained the record owner of the real estate until May 1988.
- On June 29, 1987, Key Bank made a second loan to DiBiase, secured by a second properly recorded mortgage on the same property, also covering after-acquired fixtures.
- On June 15, 1987, Grand Beach contracted with Lewiston Bottled Gas Co. (LBG) to buy ninety heating and air-conditioning units; the contract stated the units would remain personal property despite attachment to the real estate.
- On June 16, 1987, Grand Beach granted LBG a purchase-money security interest (PMSI) in the units; LBG filed financing statements with the Secretary of State and in the York County Registry describing the real estate, but the filings were indexed only under “Grand Beach Inn, Inc.” and not under DiBiase’s name.
- In September and October 1987, the units were installed in the exterior walls of each inn room and became part of the building’s heating/cooling system.
- Key Bank later foreclosed both mortgages; a title search under DiBiase’s name did not disclose LBG’s interest, and LBG was not joined in the foreclosure because Key Bank was unaware of its claim.
- After Key Bank purchased the property at the foreclosure sale, LBG sought declaratory relief that its PMSI had priority over Key Bank’s mortgage interests in the units.

## Issues

1. Whether the ninety heating and air-conditioning units were fixtures subject to Key Bank’s after-acquired-fixtures mortgages.
2. Whether LBG’s fixture filing was properly perfected where it was indexed under the corporate buyer’s name rather than under the record owner of the real estate at the time of filing.
3. Whether Key Bank could be liable for failing to join LBG in the foreclosure action when LBG’s claimed interest was not discoverable through a search under the record owner’s name.

## Decision

- The court affirmed summary judgment for Key Bank.
- The court held the units were fixtures based on annexation to the building, adaptation to the inn’s use, and objectively inferred intent from installation and function.
- The contract’s “personal property” language did not control fixture status as against third parties.
- LBG’s fixture filing was ineffective against Key Bank because it was not indexed under the record owner’s name, leaving LBG’s PMSI unperfected as to the mortgagee.
- Key Bank’s properly recorded mortgages, including after-acquired fixtures, had priority over LBG’s unperfected interest.
- The court rejected LBG’s damages theory based on non-joinder in the foreclosure because Key Bank’s omission resulted from the lack of record notice of LBG’s claim.

## Legal Principles

- Goods become fixtures when physical annexation, functional adaptation to the real estate, and objectively inferred intent show they are part of the property.
- A private agreement labeling installed goods as “personal property” does not bind third parties when objective circumstances establish fixture status.
- A secured party claiming a fixture interest must comply with statutory fixture-filing requirements designed to provide notice to real-estate searchers, including proper identification and indexing under the record owner of the real estate.
- A misindexed fixture filing that cannot be found by searching the record owner’s name is ineffective to perfect against a competing mortgagee who recorded first and whose mortgage covers after-acquired fixtures.
- A mortgagee is not responsible for failing to join an unrecorded or undiscoverable fixture claimant in foreclosure when the claimant’s filing defects prevent notice through standard title-search methods.

## Conclusion

The court held that through their installation and use the HVAC units became fixtures covered by Key Bank’s recorded after-acquired-fixtures mortgages, and that LBG’s PMSI lost priority because its fixture filing was not properly indexed under the record owner’s name, leaving the security interest unperfected against the bank.


Lewiston Bottled Gas Co. v. Key Bank of Me., 601 A.2d 91 (Me. 1992)