Beverly Hills Thrift & Loan v. Western Dredging & Construction Co.

FOURT, J. This is an appeal by a third party claimant from a judgment determining that such claimant was not the owner nor was it entitled to possession of certain described personal property.

On September 26, 1958, the plaintiff loaned to the defendant Western Dredging and Construction Company the sum of $19,860. The loan was evidenced by a promissory note signed by Frank M. Shallue and Frank L. Smith as copartners, and secured by a chattel mortgage of the same date, upon certain described items including, among other things, a suction dredge and items apparently connected or associated with the dredge, which was located at the Saltón Sea beach, Imperial [300]County. The defendants defaulted in their payments on the note, and plaintiff brought an action to foreclose the chattel mortgage and for a deficiency judgment. Judgment was rendered substantially for the amounts requested in the complaint, and the court ordered the chattels sold as provided by law, the plaintiff to have a deficiency judgment for any balance remaining due under the judgment after applying thereto the proceeds of the sale. Plaintiff started proceedings for the foreclosure sale of the dredge and the equipment. Fawnskin Development and Amusement Company (hereinafter referred to as appellant) filed its third party claim. The plaintiff then filed the proceeding provided for in section 689, Code of Civil Procedure. After a trial the court denied the third party claim and gave judgment accordingly and this appeal is from that judgment.

A résumé of the facts is as follows:

Appellant completed the building of the dredge in question in 1951. Frank Smith was the largest stockholder of appellant, owning 564 out of 1,310 shares, and the next largest holder of stock was V. B. Pederson, who owned 183 shares. Smith, who was associated with the appellant, built the dredge in the first instance. Smith was elected president of appellant on June 3, 1954, and served as such until 1959. No meetings of the board of directors or of the stockholders of appellant were held from January 11, 1955, to September 6, 1958.

On June 11,1955, Pederson, as vice-president and on behalf of appellant, made a contract with the Frank Smith Syndicate, by which full responsibility for the dredge was turned over to the so-called Frank Smith Syndicate. The contract was signed by Frank Smith. No person, other than Frank Smith, ever became a member of the Frank Smith Syndicate. The contract, among other things, recited that a group of men headed by Smith were desirous of securing the assets of appellant; that the syndicate agreed to buy and the appellant agreed to sell the assets of appellant, including the dredger and the equipment, and further that the syndicate was to pay certain accounts payable which appellant deemed urgent. The syndicate was authorized to use any equipment of appellant, however, the cost of reconditioning the same was to be borne by the syndicate, which also was to care for and maintain the dredger until such time as appellant gave a bill of sale. The bill of sale was to have been delivered to the syndicate after the syndicate had performed certain acts. There is no evidence