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1889

BROWN บ.

For some time after the 10th June he says he applied for security, that the debtor kept putting him off. He said at one time that on applying he asked for a hire receipt and that the debtor said he thought he would give a chattel mortgage. Again, that on LA MONTAGNE applying the debtor said he would not sign just then, that it would hurt his credit. The plaintiff says, "I was asking him all the time for the chattel mortgage;" first he asked for the hire receipt, and up to as late as in August the hire receipt was talked of between them.

I hold, on the evidence, that the plaintiff knew of the defendant's suing Paquette on the day after the writ was served. He knew of his being in arrear with his payments to the defendant from the fact of his being applied to for help to meet the $208 note.

As soon as he heard of the defendant's suit he asked for the chattel mortgage. He did not succeed in getting it for eight days, two days being consumed in getting Paquette's consent to include all his other goods.

Then it is urged that it can be supported as given at the time it was originally agreed, on the well known equitable principle discussed before us in our recent case of Clarkson v. Stirling (a). I think there are several objections to the application of the doctrine.

First. There was no absolute contract for a chattel mortgage. The contract was in the alternative, either a hire receipt or a mortgage. Paquette might have satisfied his contract by giving either.

But even if the right to elect, which it should be, was in the plaintiff, it is abundantly clear that for a couple of months they kept discussing which it was to be.

Secondly. The mortgage as ultimately given was not the security contracted for. Instead of that it was changed, on the plaintiff's urgency, into a mortgage of all Paquette's goods, including other goods, and of all goods of every kind that might be on his premises during the four years the mortgage had to run, or for any renewals thereof, and with the right of immediate entry and sale if an execu

tion should issue.

If the defendant had been deterred by the registration of this mortgage from attempting to enforce his execution the effect would have been to cover and protect from creditors' claims all existing and future acquired goods of Paquette during the currency of a four years' mortgage,

or any renewal of it.

I am of opinion that no such security was ever contracted for, and that the plaintiff's security must stand or fall as it was on the day of the actual execution thereof.

I am further of opinion that, apart from the objection as to the mortgage being different from that agreed to be given, it cannot

(a) 14 O.R. 460; 15 Ont. App. R. 234.

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BROWN

v.

be supported for the reasons given in such cases as Ex parte Fisher (a); Ex parte Burton (b); Ex parte Kilner (c).

The execution of it was held over for nearly two months and a LAMONTAGNE half, and I cannot avoid believing on the evidence that, but for the pressure of the defendant's action and threatened execution, it is very doubtful if it would have been given.

Paquette swears, and, I think, his statement may be credited, that when urged to execute, the plaintiff told him it would prevent any one troubling him or bothering him, as he expresses it.

I think the conduct of the parties points to the conclusion that it was held over, as Paquette declared, as its registration would injure his credit.

James L.J., says in Re Burton (b), p. 109:

"Ex parte Fisher (L.R. 7 Ch. 636) establishes this exception upon the exception to the rule, viz., that if the bargain be not an out and out one, but only an agreement to give the bill of sale when required, then it is only a device to enable the debtor to acquire false credit, and the creditor is not entitled to avail himself of it in the event of the debtor's bankruptcy. It is a fraud upon the bankrupt law.”

The trial judge did not find any fact beyond that it was a fraud upon the creditors to include other property than that purchased from the plaintiff in the bill of sale.

This is certainly one of the strongest indications on the plaintiff's part that the execution of the mortgage was not a bonâ fide completion of an original contract.

It is much to be regretted that the facts were not distinctly found at the trial.

We are left to form our own opinion on them.

When Paquette was under examination the plaintiff's counsel objected, and I am obliged to regret, successfully objected, several times to his being questioned as to the particulars of the bargain and dealings with the plaintiff, insisting that the memorandum signed by him could alone be referred to, so he was prevented from answering questions, relating to the discussion or agreement, as to giving a chattel mortgage.

Of course the written memorandum shews the final arrangement, but an insolvent debtor is being examined and the essence of the enquiry was to ascertain the real nature of the dealing with the creditor who asserts priority over other creditors.

On the face of the memorandum, and on proof of actual delivery of the goods therein, there is nothing beyond the words "a hire receipt" to raise any question as to that being an executed contract of sale the agreement to execute a chattel mortgage by itself is quite intelligible, and such could be given by the vendee of the goods. (b) 13 Ch. D. 102.

(a) 7 Ch. App. 636.

(c) 13 Ch. D. 245.

The words "or a hire receipt" are utterly irreconcilable with the right to give a mortgage.

It is urged for the plaintiff that this shews the property remained in the plaintiff till either security was given.

If so, then, what act was required to be done, or was done, to pass the property to Paquette so as to vest in him and be conveyed by mortgage back to the plaintiff ?

We can understand that when a man executes a chattel mortgage to another, who accepts and acts upon it, the latter admits a title in the mortgagor to convey to him: Cameron v. Perrin(d).

But we are here to discover when the mortgagor acquired any right to convey. The purport of this contract of sale was in itself certainly not to create any contract of hiring.

What, then, is the effect of this utterly repugnant alternative agreement to give security? It would necessitate the creation of a new contract, viz., a contract of hiring.

On the agreement to insure Paquette was to "Keep said machinery insured payable, if any loss, to W. E. Brown."

This would, to all ordinary understanding, convey the idea of an insurance as Paquette's property, but if he became entitled to claim for loss, such loss would be paid to Brown.

He could insure as agreed at once, on getting possession, before either of the repugnant securities had been agreed on. Both he and Brown may have had insurable interests, whether property did or did not pass, but the words used point to an insurance as owner.

In any country where an insolvent law, or such a statute as we have in lieu thereof, is in force, I cannot believe that such a course of dealing, as is here exhibited, can be allowed as against creditors.

I do not think any man can be allowed to hand over a large quantity of trade machinery to a man at a fixed price to be used in his trade, retaining the right of property as is done here.

He says, in effect: "At any time that I ask it, you must give me a chattel mortgage on the goods, as if they are your own, or, if I prefer it, we will make a contract or hiring of these goods by you

from me."

Paquette, thus the apparent possessor of a large and valuable plant for his boot and shoe trade, obtains credit from the defendant and others apparently on the plaintiff's recommendation.

But at

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v.

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any moment the plaintiff is to be at liberty, as he may be advised, either to treat the goods as Paquette's by taking the chattel mortgage, or treat them as still his own by making some new contract on undefined terms.

I agree he may take the chattel mortgage, but, I think, he must stand or fall by its validity as against creditors, at the time it is given by an insolvent debtor.

(d) 14 Ont. App. R. 565.

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BROWN

v.

The mortgage itself, nearly two and a half months after the sale, recites that,- "the mortgagor has purchased from said mortgagee the goods and chattels set forth in the schedule, etc., etc., and LAMONTAGNE it is part of such purchase that said mortgagor shall give to said mortgagee a chattel mortgage to secure payment of the purchase money."

On the face of this we should understand that the contract to give the chattel mortgage was part of the contract of sale.

I have to find the fact, having no findings by the trial judge to assist or guide me.

I find, on the whole case, that the property passed to Paquette on delivery into his possession.

That the introduction of the option of a "hire receipt" on some new unascertained terms must be treated as a device to enable the vendor to frame some new guard against creditors.

I am willing to concede to the plaintiff that he was entitled to get a chattel mortgage as security, but, for the reasons set forth in the equity cases cited, he cannot treat such mortgage as given at the original contract.

I would have been ready to concur with my learned brothers if they thought that a new trial should be directed to have the facts more fully investigated and found, but as that is not agreed to, I cannot see my way to hold the decision appealed from erroneous, and, I think, the appeal should be dismissed.

I do not discuss some of the points raised by my brother Armour, but agree in the result.

BURTON J.A.-I am unable to agree with the judgment pronounced in the court below.

There is no special finding by the learned judge at the trial as to the defendant's circumstances at the time of his purchase from the claimant of the machinery and fixtures in question, and there is no evidence of how he stood at that time, or whether in truth he was at all indebted at the time of that purchase.

The learned judge must have been of opinion that at the time the chattel mortgage was given he was not solvent, or he could not have held the mortgage void as to the small quantity of additional goods included in it beyond those which formed the subject of the sale of the 10th June.

The property in question in this suit was not merchandise sold in the ordinary course, the property in which would pass on delivery to the purchaser and put an end to any lien for the price, but consisted of a quantity of machinery, tools and fixtures then in a factory belonging to the vendor, and which the defendant agreed to purchase upon a long credit, without interest, on the distinct agreement that the property was not to pass till full payment, but that

the payment should be secured either by means of a hire receipt or chattel mortgage.

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If the mortgage had not been given, I think it clear that the property would not have been liable to seizure at the suit of Pa- LAMONTAGNE quette's creditors, and it seems to me that it would be a grotesque travesty of justice if the giving of the chattel mortgage in pursuance of the agreement to do so, whenever the election was made, should have the effect, unless the objection taken that the whole instrument is avoided by reason of the small additional quantity of goods being included in it and which, as against the creditors, were held not to pass, is entitled to prevail.

The difficulty is to see how this transaction could ever be said to come within the provisions of our Act at all, as the property never was at any time before the giving of the mortgage liable to execution at the suit of Paquette's creditors, still less am I able to follow the suggestion of Chief Justice Armour, in the Divisional Court, that it was void under the Statute of Elizabeth, even with the aid of the interpretation put upon it by our own Act, 35 Vict. ch. 11.

It was given admittedly to secure an actual debt, and not as a mere cloak for retaining a benefit to the grantor, and was, therefore, clearly a good deed under that statute.

It is said that it was made to cover all goods to be subsequently acquired by Paquette, and there would probably be much force in that objection if the property had passed on the 10th June, and the plaintiff was relying on an agreement to give a mortgage, when called upon, upon certain specified property, and the mortgage did not follow and comply with the terms of the agreement. That is not this case, the property did not pass at all to Paquette till the election was made to take an actual transfer of the property, and whenever that election was made he was bound eo instanti to give the mortgage.

Then, can including a small additional quantity of goods in the mortgage have the effect of vitiating the whole security and make this property, upon which Paquette has never paid a cent, liable for the payment of his debts?

It is explained in the evidence that as the goods were sold upon a long credit without interest, and were in continual use and deteriorating therefore in value, the plaintiff urged upon him to give this additional security to better his own position, and not with the view of defeating or delaying creditors.

It may be that the decision of the learned judge as to these chattels was too favourable to the defendant, but if Paquette was not then in a position to give that security it could not stand, and so the learned judge held, but in the absence of actual fraud I can see no ground for holding that the mortgage would be void altogether.

I do not throw the slightest doubt upon those cases which decide

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