British Confectionery Co. v. National Bank of Canada, (1994) 118 Nfld. & P.E.I.R. 234 (NFTD)

• Judge: Orsborn, J.
• Court: Supreme Court of Newfoundland and Labrador (Canada)
• Case Date: June 01, 1994
• Jurisdiction: Newfoundland and Labrador
• Citations: (1994), 118 Nfld. & P.E.I.R. 234 (NFTD)

British Confectionery v. Nat. Bk. (1994), 118 Nfld. & P.E.I.R. 234 (NFTD);

    369 A.P.R. 234

MLB headnote and full text

British Confectionery Company Limited (plaintiff) v. National Bank of Canada (defendant)

(1994 St. J. No. 0037)

Indexed As: British Confectionery Co. v. National Bank of Canada

Newfoundland Supreme Court

Trial Division

Orsborn, J.

June 21, 1994.

Summary:

National Bank took security over property of Majestico, part of which was a dance bar and pub. Opco leased and operated the pub. Opco financed the purchase of equipment through National Bank. Majestico and Brit­ish Confectionery guaranteed Opco's debt to the Bank. When Majestico and Opco defaulted on their loans, British Confection­ery paid in full on its guarantee which entitled it to the security held by the Bank, namely three chattel mortgages of Opco's assets located in the bar and pub. The Bank refused to surrender possession of the assets, saying they were now considered part of the realty. British Confectionery applied for possession of the assets.

The Newfoundland Supreme Court, Trial Division, allowed the application.

Contracts - Topic 9000

Rights and liabilities of strangers to con­tract - General - Privity of contract - Majestico mortgaged property to National Bank - Opco leased premises on the property and financed the purchase of equipment to operate its business through National Bank - British Confectionery guaranteed Opco's debts - When Opco defaulted British Confectionery paid off the debt and sought possession of Opco's assets - The Bank refused and relied on the mortgage security given by Majestico to assert it had a contractual right to have the equipment regarded as part of the realty - The Newfoundland Supreme Court, Trial Division, held that the assets were chattels under common law principles uninfluenced by any agreement between third parties - See paragraphs 28 to 31.

Guarantee and Indemnity - Topic 1450

Rights of surety - General - Re security - Right to security upon payment to creditor - British Confectionery guaranteed the debts of Opco to the National Bank - When Opco defaulted British Confection­ery paid on its guarantee and sought pos­session of Opco's assets - The Bank re­fused to surrender the assets and argued that they had become part of the realty - The Newfoundland Supreme Court, Trial Division, ordered the Bank to surrender Opco's assets to British Confectionery - The court looked at the degree of affixation to the land as well as intention - The court held that the assets were not affixed to the land and that the Bank had intended that Opco's chattels remain as such when it took chattel mortgages as security - See paragraphs 17 to 27 and 34 to 39.

Landlord and Tenant - Topic 8203

Fixtures and personalty - General princi­ples - What constitutes a fixture - [See Real Property - Topic 4203 ].

Mortgages - Topic 1405

The mortgage - Property mortgaged - Fixtures - [See Real Property - Topic 4203 ].

Real Property - Topic 4203

Fixtures - General principles - Considera­tions in determining what constitutes a fixture - Opco operated a bar in leased premises - Opco financed the purchase of equipment to operate the bar through the National Bank via three chattel mortgages - British Confectionery guaranteed Opco's debts - When Opco defaulted on its loan, British Confectionery paid the debt and sought possession of Opco's assets - The Bank foreclosed on the building and re­fused to surrender Opco's assets - The Bank argued that the chattels had become fixtures - The Newfoundland Supreme Court, Trial Division, held that the assets were not affixed to the realty and remained chattels as originally intended by the Bank when it took security by way of chattel mortgages - See paragraphs 17 to 39.

Cases Noticed:

Club 7 Ltd. et al. v. E.P.K. Holdings Ltd. et al. (1993), 115 Nfld. & P.E.I.R. 271; 360 A.P.R. 271 (Nfld. T.D.), refd to. [para. 17].

Gregrik Investments Ltd. et al. v. Clavelle et al. (1982), 22 Sask.R. 177; 27 R.P.R. 47 (Q.B.), refd to. [para. 18].

Amic Mortgage Investment Corp. v. Investors Group Trust Co. (1985), 62 A.R. 174; 40 Alta. L.R.(2d) 71 (C.A.), refd to. [para. 32].

North West Trust Co. v. Rezyn Develop­ments Inc. et al. (1991), 1 B.C.A.C. 219; 1 W.A.C. 219; 56 B.C.L.R.(2d) 226 (C.A.), refd to. [para. 37].

Counsel:

Daniel W. Simmons, for the plaintiff;

Christopher Sullivan for the defendant.

This application was heard on June 1, 1994, before Orsborn, J., of the Newfound­land Supreme Court, Trial Division, who filed the following judgment on June 21, 1994.