ally desire to withhold. That being so I am at a loss to Judgment. perceive on what possible ground it can be contended that MACLENNAN the principle of Kennedy v. Green should have any appli

cation.

It was, however, argued for the appellant that the mortgage was void as a fraudulent preference, because the mortgage money was applied in greatest part to pay Stuart & Co. in full.

There are two answers to that. In the first place it was not proved that either the defendant or his solicitor had notice or knowledge that the mortgagor was insolvent or was unable to pay his debts in full, and unless he was he could pay his debts in any order he pleased.

But besides that, I am unable to concur in the view that when an embarrassed debtor bond fide borrows money on mortgage, he may not direct the lender to apply the proceeds of the loan for his benefit in any way in which he himself might lawfully apply it. The statute expressly exempts from illegality, as acts of unlawful preference, payments in money made to a creditor, and the borrower in the present case might have received the money from the lender, and might at once have paid it to Stuart & Co., in satisfaction of their debt. I am unable, with great respect, to see why the borrower could not have requested the lender to make the payment for him, or why, as was decided in Stoddart v. Wilson, 16 O. R. 17, the form should require to be gone through of paying the money into the hands of the borrower himself. I think it would be legislation, and not construction, to hold that the statute has forbidden a debtor to employ an agent to do for him what he may lawfully do himself.

For these reasons I am of opinion that the appeal should

be dismissed.

Appeal dismissed with costs.

J.A.

2-VOL XVII. A.R.

Statement.

JOHNSON V. HOPE.

Assignments and preferences—Bankruptcy and insolvency—Bills of sale and chattel mortgages Mortgage to secure moneys paid by mortgagee to creditor-Intent to prefer-Notice of insolvency-R. S. O. ch. 124, sec. 2.

A transaction entered into by a person in insolvent circumstances is not impeachable unless the person claiming the benefit of the transaction had notice or knowledge of the insolvency and did not act in good faith. A security given by a person in insolvent circumstances to secure an actual advance made without notice or knowledge of the insolvency, and in good faith, is not impeachable because the moneys advanced are, pursuant to the direction of the insolvent, paid over to one of his creditors, who thereby obtains a preference.

Stoddart v. Wilson, 16 O. R. 17, disapproved.

Judgment of the County Court of Hastings reversed.

THIS was an appeal by the plaintiff from the judgment of the County Court of Hastings.

The action was brought by the plaintiff, a chattel mortgagee, against the defendant, the assignee for the benefit of creditors of the mortgagor, one Hicks, to recover the sum of $165 and interest upon the sale and conversion by the assignee of the mortgaged goods.

The defence set up was that the mortgage was void, having been made by the mortgagor to secure a pre-existing debt when he was in insolvent circumstances, and unable to pay his debts in full, with intent to defeat his creditors, and to give the plaintiff a preference.

The mortgagor had borrowed from the plaintiff's wife some years before the transaction in question $200, giving his note therefor, and he had paid the interest on the loan, and also $50 on account of principal. Shortly before the date of the mortgage, the plaintiff, at his wife's request, went to Hicks, to get the money, and it was arranged that the plaintiff was to pay his wife's debt, and also a note of the debtor for $60, then held by a bank, on which one Bogle was an endorser, and was to take a chattel mortgage for both sums amounting with interest to $215.

In pursuance of this agreement the mortgage in question was made, the note for $60 was paid by the plaintiff, the note held by the plaintiff's wife was given up to the debtor,

and shortly afterwards the plaintiff paid the money to his Statement. wife.

The mortgage was made on the 3rd of May, and the assignment for creditors on the 8th of the same month.

The action was tried on the 13th of June, 1889, with a jury. The following were the questions submitted to the jury and their answers thereto :

(1) Q. Was Mr. Johnson a creditor of John W. Hicks prior to getting the chattel mortgage? A. No.

(2) Q. Did Hicks agree to give the chattel mortgage to Johnson if Johnson would pay his wife's note and Bogle's note, and was that agreement carried out? A. We believe so.

(3) Q. Did Johnson pay those two notes on the terms of being protected by the security of the chattel mortgage? A. We believe he did.

(4) Q. Was there any fraud or fraudulent intent by the parties in this transaction, or in carrying it out? A. We think no fraudulent intent. (5) Q. Was the mortgage made with the intent to defeat, delay, or

prejudice creditors? A. No.

(6) Q. Was John W. Hicks in insolvent circumstances, or unable to pay his debts in full when he gave the chattel mortgage in question? A. Insolvent.

(7) Q. Did Johnson pay the money over into the hands of Hicks?

(8) Q. Or was it agreed that he should pay his wife? A. Yes.

(9) Q. Did he pay his wife the money, and if so, when? A. Yes. (10) Q. Did he pay Hicks the $60, or

(11) Q. Was it paid to Bogle? A. Paid to Bogle.

(12) Did the giving of the chattel mortgage, and the payment to Mrs. Johnson, if made, have the effect of giving her a preference as against Hicks' other creditors? A. Had the effect of giving a preference.

Judgment was delivered on the 28th of June, in favour of the defendant, on the authority of Stoddart v. Wilson, 16 O. R. 17, which the learned Judge thought governed the case.

No question was raised as to the $60 paid on the Bogle note, inasmuch as before the trial the defendant had paid that sum to the plaintiff conceding that he could not resist that part of the demand.

The plaintiff appealed, and the appeal came on to be heard before this Court (HAGARTY, C. J. O., BURTON, OSLER, and MACLENNAN, JJ. A.) on the 29th of November, 1889.

Argument.

The

Moss, Q. C., and F. E. O'Flynn, for the appellant. plaintiff was not a creditor of the mortgagor, and this mortgage is not a preference at all, but a security taken in good faith to secure a present advance. Even if the plaintiff can be considered a creditor the mortgage cannot be impeached. The plaintiff acted in good faith and without knowledge of the insolvency and is protected: Molsons Bank v. Halter, 16 A. R. 323; Gibbons v. Wilson, 17 O. R. 290. An advance to be protected need not necessarily be made to the borrower himself. Payment to a third person at the borrower's request is good. Stoddart v. Wilson, 16 O. R. 17, is wrongly decided.

R. C. Clute, for the respondent.

January 14th, 1890. The judgment of the Court was delivered by

MACLENNAN, J. A. :—

I am of opinion that the appeal must be allowed, and that judgment should be entered for the plaintiff for $155, and interest thereon from the 3rd of May, 1888.

The ground on which the judgment was rested by the learned Judge was that of preference, and that is the only ground on which it was supported on the argument before us, and it is evident there is no room whatever for any other contention against the plaintiff's claim.

Stoddart v. Wilson, 16 O. R. 17, was a case in which the wife of an embarrassed debtor, knowing the state of her husband's affairs, by agreement with him sold her own freehold property to one of his creditors, in satisfaction of the debt of her husband, upon the understanding that her husband was to give her a chattel mortgage as security for an equivalent sum. The mortgage was given, and the Divisional Court of the Queen's Bench Division held that the mortgage was void, as preferential, and that it was not protected under section 3 of the Act, R. S. O. ch. 124, as being made in consideration of any present actual bonâ fide

J.A.

sale or delivery of goods or other property. The Court in Judgment. effect held, that to maintain the mortgage, it was essential MACLEN NAN that either the wife should have conveyed her property direct to her husband, or that she should have obtained the price from the vendee, and have paid it to her husband, so that he might have had the opportunity of paying it to his creditors generally, although it was admitted he could, without impropriety, have at once paid it, the moment it came into his hands, to the same persons who had bought his wife's property, from whom it had come in the first place, in satisfaction of their debt.

Whatever may be said of the position of the creditors who received the conveyance of the wife's land in payment of their debt, by arrangement with their embarrassed debtor, I am, with great respect, unable to see how it can be said. that as between the husband and the wife, it was not a case of a conveyance made in consideration of a present actual bond fide sale or delivery of goods or other property, there being no question raised of relative value. It is undoubted law that the purchaser of property may require the conveyance to be made to his nominee instead of himself; and the vendor, on receiving the consideration, whatever it may be, whether cash, or mortgage of the same or other estate or property, has no option but to comply with the vendee's direction, and is compellable by law to do so. In like manner, also, the vendor or mortgagor of property may, when the moment comes for paying the purchase money, or advancing the loan, direct and require the money to be paid to another person, and the purchaser or lender must comply. The judgment relied on by the learned Judge and by the respondent, would hold that although the Act expressly permits an embarrassed debtor with unrestricted freedom to sell his property for full value, either for money or goods, and to borrow money on the security of any of his property, yet the purchaser or lender may not obey the directions of the vendor, or borrower, as to the payment of the money, as he might do in transactions with other people, without the peril of losing his