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ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Administration proceedings-Statute of Limitations-Champer tous

agreement-Practice.

O., a creditor against the estate of A. M. C., a deceased intestate, obtained an order for the administration of the estate of the intestate. On the proceedings in the Master's office, a claim which O, made to have an account of the firm of which he was a member allowed was refused, but a further claim presented by him as the assignee of certain promissory notes made in favour of H. & Co. was allowed. The present appellant, wife of the intestate, presented a petition to the court to set aside the administration order on the ground that O. at the time the order was made was not a creditor of the deceased intestate, as the assignment of the notes of H. & Co. to him was part of a champertous agreement. The court held that the judgment for administration enured to the benefit of all the creditors, and as one at least had established a claim under it, the order could not be set aside, but that O. was not entitled to be allowed in the Master's office his claim on the notes, as the transaction between him and H. & Co. in connection therewith was a champertous one. O. re-transferred the notes to H. & Co., and the latter obtained leave to prove the claim thereon in the Master's office, and on appeal from the Master's ruling, it was held that H. & Co. might now assert their title to the notes and prove on them notwithstanding the former champertous agreement with O., and that the order for administration was a bar to the Statute of Limitations running against the notes from the date of that order. Upon appeal this judgment was affirmed by the Court of Appeal.

*PRESENT:-Sir W. J. Ritchie C.J., and Strong, Fournier, Taschereau, Gwynne and Patterson JJ..

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Held, that the judgment of the Court of Appeal should be affirmed and the appeal dismissed with costs.

Held, per Gwynne J., that the maker of an unquestionably valid note could not in proceedings taken by the payee to recover upon the note institute an inquiry as to what the payee may have done with the note in the interval elapsing between the making of the note and the proceedings taken to recover payment of it, and that the transaction between O. and H. & Co. was not champertous.

APPEAL from the decision of the Court of Appeal for
Ontario, affirming the judgment of Proudfoot J., one of the
justices of the Chancery Division of the High Court of
Justice.

Howland & Co., holders of promissory notes in their favour, made by A. M. Cannon, deceased, made an agreement with W. H. Oates, a member of the firm of Taylor & Oates, as follows:

Toronto, Feb. 28th, 1884.

I have this day bought from Messrs. W. P. Howland & Co. three promissory notes made in their favour by A. M. Cannon, one for $1,000, due one year after date; one for $3,218, due two years after date; and one for $3,218, due three years after date, all three bearing date Sept. 5th, 1877, in consideration for which I agree to pay the said W. P. Howland & Co. one-half of the net amount I receive on account of the said notes, and I agree to use my best endeavours to collect the same, and if, at the expiration of two years, I have been unable to collect any portion of the said notes, I hereby agree to return them to the said W. P. Howland & Co. free from any costs or charges incurred by me. But, if at any time previous to the expiration of the two years above mentioned I have succeeded in collecting any portion of the said notes, then their portion above mentioned will be due and payable to the said W. P. Howland & Co.

WM. H. OATES.

During the currency of that agreement Oates obtained on 19th September, 1884, an order for the administration of the estate of A. M. Cannon, of whose personal estate M. E. Cannon (appellant) was administratrix. The usual advertisement for creditors was published, and one Taylor proved a claim under the reference as a creditor of the deceased, and his claim had been duly allowed by the Master prior to October, 1886. M. E. Cannon applied to have the claim of

Oates upon the promissory notes disallowed, on the ground that the title by which he claimed was champertous and void. Proudfoot J., adjudged that Oates' title to the notes, under the agreement was champertous and void, and that he could not prove in the administration by virtue of his title thereto, but he held that the administration order of 19th September, 1884, was for the benefit of all the creditors of the estate, one of whom had proved a claim and therefore he refused to set it aside (f). Neither party appealed from this order. Thereupon Oates re-delivered the notes to Howland & Co., who up to this time had been in no way party or privy to the proceedings for administration. The six years' allowance by the Statute of Limitation had expired before the notes were re-delivered, but not before the date of the administration order. The reference had not been concluded nor any report made by the Master. Howland & Co. applied for liberty to come in and prove their claim on the notes, and the Master allowed them to do so. From this ruling the appellant appealed. While the appeal was pending the respondents came before the Master to prove their claim, pursuant to leave granted, and the Master allowed their claim upon the promissory notes. From this allowance the appellant appealed, and the last mentioned appeal came on for argument at the same time as the appeal from the Master's exercise of discretion in granting leave to the respondents to prove their claim. Both appeals were dismissed by Proudfoot, J., who held that the order for administration prevented the bar of the Statute of Limitations; and that Howland & Co. might assert their title to the notes and prove on them, notwithstanding the former agreement with Oates, which he had already held to be champertous. His judgment was as

follows:

February 23, 1887.

Proudfoot, J.-Some time ago (29th October, 1886) I held that Oates had not established a legal title to the promissory notes upon

(f) Re Cannon, 13 O.R. 70.

1889

CANNON

v.

HOWLAND

& Co.

1889

CANNON

v.

which he had applied for and obtained an order for the administration of A. M. Cannon's estate; and I would have set aside the order but for the fact that one Taylor, a creditor of the intestate, had HOWLAND proved a claim under it. The objection to Oates' title to the notes, & Co. which I sustained, was that they were obtained by him under a champertous agreement, or an agreement savoring of champerty, with W. P. Howland & Co., the original holders of the notes. The agreement between these parties was not produced before me on the former occasion, but it has now been produced, and I notice that it differs in some particulars from the account given of it by Oates in his examinnation and upon which the parties were content to rely. One statement that Oates was careful to emphasize was, that he was not to give Messrs. Howland & Co. one-half of what might be recovered upon the notes, but a sum equal to one-half; while the agreement itself provides for the payment to them of "one-half of the net amount I receive on account of the said notes."

Since my decision on the 29th of October, and in the month of November, 1886, I think, the notes were handed back to Messrs. Howland & Co.

Messrs. Howland & Co. then, on the 30th of November, 1886, obtained leave from the Master to come in and prove their claim on the 13th of December last,

The Master certified on the 13th of September last that he had advertised for the creditors of A. M. Cannon, and that the time for sending in claims expired some time before that date.

The defendant, the administratrix, appeals from the order of the Master upon a number of grounds, several of which I overruled at the time of the argument.

The principal arguments for the defendant at the hearing were, that at the time of the order for administration being made Messrs. Howland & Co. were not the holders of the notes having transferred them to Oates: that Howland & Co. were bound by the decision against the notes in Oates' hands: that before they got back into Howland' & Co.'s hands the notes were barred by the Statute of Limitations, and therefore no order should have been made allowing them to prove upon them. And lastly, that the notes were barred by the statute. The two last may be considered together.

To understand these arguments it will be necessary to refer to the original agreement between Oates and Howland & Co., and the dates of the several matters involved.

The agreement between Oates and Howland & Co. is in the following terms:

"Toronto, February 28th, 1884.

"I have this day bought from Messrs. W. P. Howland & Co. three promissory notes made in their favour by A. M. Cannon, one for $1,000, due one year after date, one for $3,218, due two years after date, and one for $3,218, due three years after date, all bearing date September 5th, 1877, in consideration for which I agree to pay

1889

CANNON

v.

the said W. P. Howland & Co. one-half of the net amount I receive on account of the said notes, and I agree to use my best endeavors to collect the same, and if at the expiration of two years I have been unable to collect any portion of the said notes I hereby HOWLAND agree to return them to the said W. P. Howland & Co. free from any & Co. costs or charges incurred by me. But if at any time previous to the expiration of the two years above mentioned, I have succeeded in collecting any portion of the said notes, then their portion, above mentioned, will be due and payable to the said W. P. Howland & Co. "WM. H. OATES."

The order for administration was made on the 19th of September, 1884, upon the application of Oates, swearing that the estate was indebted to him upon these promissory notes. Upon the 14th of April, 1885, Oates filed an affidavit proving his claim upon these notes, and also a claim for $200 or $300. This last claim the Master has found against him.

The notes were all dated the 5th of September, 1877, payable at one, two and three years respectively; as to the first one the time for payment was enlarged at A. M. Cannon's request and by his promise to pay it, till the 1st of May, 1879. So that six years elapsed after the first note was due on the 1st of May, 1885, after the second note on the 5th of September, 1885, and after the third note on the 5th of September, 1886. So that the Statute of Limitations had not run as to any of the notes when the order for administration was made on the 19th of September, 1884, nor when Oates attempted to prove upon them on the 14th of April, 1885, but it had run as to all before the notes got back into the hands of W. P. Howland & Co.

It does not appear when the claim of the creditor who came in under the decree was proved, but it is not perhaps material; for although but for his claim I would have set aside the administration order, yet I think I cannot treat the date of that proof as the date of the order; if the proof saves the order it saves it from the date of the order.

Upon the former occasion I held that Oates had not established a title to the notes, because of the vice of the agreement under which he held them, but nothing was decided as to the right of Messrs. Howland & Co. upon them. The order was not obtained by Oates as agent for them, but on his own right as owner. That title was defective, but it did not make him the agent of the real owner, because he could not shew title in himself. The title remained in Messrs. Howland & Co., and it seems to be established by Hilton v. Wood (a), that they might assert their title notwithstanding the agreement with Oates. It is said that they had parted with the ownership, or at all events the control of the notes, and were not entitled to, or at least did not, get them back again till after the statute had run. But the

(a) L.R. 4 Eq. 432.

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