First Guar. Bank v. Rex Theatre Co.

• Decision Date: 09 November 1923
• Citation: 50 N.D. 322,195 N.W. 564
• Parties: FIRST GUARANTY BANK v. REX THEATRE CO. et al.
• Court: North Dakota Supreme Court

50 N.D. 322

195 N.W. 564

FIRST GUARANTY BANK

v.REX THEATRE CO. et al.

Supreme Court of North Dakota.

Aug. 13, 1923.

Rehearing Denied Nov. 9, 1923.

Syllabus by the Court.

A chattel mortgage on property afterwards acquired by the mortgagors is valid, and attaches when such property comes into the possession of the mortgagors. Subsequent purchasers, having notice of the mortgage, cannot attack its validity.

In an action in claim and delivery, to obtain possession of property on which the plaintiff has a mortgage, when the plaintiff is entitled to said possession, it is not necessary to prove a demand for possession when the defendants resist plaintiff's claim on the ground of their own ownership and right to possession, basing their defense on their own right.

In an action to obtain possession of certain personal property for the purpose of foreclosure, and plaintiff proved its right to the possession of the property described in the complaint, and directed the sheriff to take said property. Defendants counterclaim on the ground that the sheriff took property other than the property described, and, also, that the taking of the property described caused them damage. Held, such counterclaim cannot be maintained.

Appeal from District Court, Burleigh County; W. L. Nuessle, Judge.

Action by the First Guaranty Bank of Bismarck against the Rex Theatre Company and others. From a judgment for plaintiff, defendants appeal. Affirmed.F. O. Hellstrom and Theodore Koffel, both of Bismarck, for appellants.

E. T. Burke, of Bismarck, for respondent.

BURR, District Judge.

This is an action in claim and delivery wherein the plaintiff seeks to recover the possession of certain property, for the purpose of the foreclosure of a chattel mortgage thereon, which chattel mortgage, it is claimed, was executed by Rex Theatre Company and Geo. V. Halliday, and contains the usual provisions of immediate possession, power of sale, etc., on default. The complaint further alleges default in payment of the debt secured, the maturity of the debt, election to declare it all due and payable, demand upon the defendants for the possession of the property, and their refusal to deliver. An affidavit in claim and delivery was made, the proper undertaking given, and the property taken by the sheriff thereunder. Service of process was made upon the defendants, Rex Theatre Company, a corporation, and F. O. Hellstrom, who answer separately. The company denies it gave the plaintiff a mortgage upon the property described in the complaint; denies the plaintiff has any special property therein; alleges the ownership of the property and the right to the possession thereof in itself; and claims the plaintiff wrongfully converted the property described in the complaint to its damage in the sum of $12,000. It then sets up a counterclaim, alleging that said property was used in the theatre business and by reason of the taking of this property by the plaintiff it lost good will, credit and standing, lost its business as a theatre and lost the property worth $12,000 and suffered special damages to the extent of $13,000. So it asks the recovery of the property, or its value, in the sum of $12,000 and the recovery of the further sum of $13,000 in damages. The defendant, F. O. Hellstrom, files his answer, alleging the property in dispute is the property of Rex Theatre Company, a corporation; that said corporation is entitled to the possession of the property; that the plaintiff is not the owner of the property, and has no special property therein. Both defendants deny the execution of any chattel mortgage to the plaintiff. The plaintiff files a reply, and so the issues are joined. The jury found the plaintiff was entitled to the property described in the complaint, and judgment was entered accordingly. From this judgment the defendants appeal.

To get the proper perspective it is necessary to state some of the facts, shown by the record. In December, 1919, Geo. V. Halliday, one of the defendants, formed a partnership with one Geo. D. Mann for the purpose of engaging in the theatre business. The partnership had no furniture, equipment, or fixtures for this business, but made arrangements to get money from the plaintiff to buy what was necessary. The business was not established, however, and later the partnership was dissolved. Halliday then formed a copartnership with one Mildred Hellstrom, afterwards known as Mildred Snow, under the trade name of Rex Theatre Company, Limited. Prior to this time, however, and after the dissolution of the partnership with Mr. Mann, the defendant F. O. Hellstrom and the defendant Halliday entered into business arrangements with the plaintiff in order to get money to purchase the necessary fixtures and equipment. Notes aggregating $3,000 were given to the plaintiff by these two defendants, signed by each thus, “Rex Theatre Co., Geo. V. Halliday, Mgr.,” “F. O. Hellstrom,” and as security for the repayment of this sum defendant Hellstrom gave a second mortgage on some land in Minnesota, and the defendant Halliday gave the mortgage in question, signing it “George V. Halliday, Manager Rex Theatre Company.” The mortgage was given on the property described in the complaint, though the property was not yet purchased. The amount of money borrowed, $3,000, was placed to the credit of Rex Theatre Company on the books of the bank, and was used to purchase the property in question. The checks were signed by Geo. V. Halliday and Mildred Hellstrom, in accordance with an arrangement to this effect made with plaintiff at the time the deal was entered into. The property purchased was the property of the copartnership of Geo. V. Halliday and Mildred Hellstrom, known as Rex Theatre Company, Limited, and this partnership commenced business about December 21, 1919. The furniture, fixtures, and equipment purchased with this borrowed money were received and placed in position about January 6, 1920, and the Rex Theatre Company, Limited, then began business. On or about November 26, 1920, Rex Theatre Company, a corporation, the other defendant in this case, was organized with the defendants Halliday and Hellstrom and three others as incorporators. Mildred Hellstrom Snow was not a member of this corporation, but the corporation took over the business of the Rex Theatre Company, Limited. Apparently there was no sale of the property made by Rex Theatre Company, Limited, to Rex Theatre Company, a corporation. In the language of Mildred Hellstrom, “Well, not exactly sold; it was turned over. It was incorporated. There was no actual sale.” The arrangements for the money were made by Halliday and F. O. Hellstrom. The property was purchased by Halliday and Mildred Hellstrom, in copartnership, and the money turned over to them and drawn out by them to be used to purchase the property....