Supreme Court Judgments

Supreme Court of Canada

The Manitoba Mortgage Company v. The Bank of Montreal, (1889) 17 SCR 692

Date: 1889-02-08

The Manitoba Mortgage Company (Plaintiffs)

Appellants

And

The Bank of Montreal (Defendant.)

Respondent.

1889: February 5; 1889: February 8.

Present:—Strong, Founder, Taschereau, Gwynne and Patterson JJ.

ON APPEAL FROM THE COURT OF QUEEN’S BENCH FOR MANITOBA.

Banker—Payment of cheque—Joint payees—Endorsement by one—Acquiescence in payment—Monthly receipts—Partnership—Buying and selling land—Stock-in-trade.

When a partnership is entered into for the purpose of buying and selling lands, the lands acquired in the business of such partnership are, in equity, considered as personalty, and may be dealt with by one partner as freely as if they constituted the stock-in-trade of a commercial partnership.

The active partner in such business has an implied authority to borrow money on the security of mortgages acquired by the sale of partnership lands.

An amount so borrowed was paid by a cheque made payable to the order of all the partners by name. The active partner had authority, by power of attorney, to sign his partners’ names to all deeds and conveyances necessary for carrying, on the business but had no express authority to endorse cheques.

Held, that having authority to effect the loan and receive the amount in cash he could endorse his partners’ names on the cheque, and the drawee had a right to assume that he did it for partnership purposes and were justified in paying it on such endorsement.

Held also, that if the payment by the drawees was not warranted the drawers having, for two years after, received monthly statements of their account with the drawees, and given receipts acknowledging the correctness of the same, they must be held to have acquiesced in the payment.

APPEAL from a decision of the Court of Queen’s Bench, Manitoba, affirming the judgment at the trial for the defendant.

[Page 693]

The action was to recover from the defendants the amount of an unpaid balance of plaintiffs’ deposit in the bank. The issue tried was whether or not a cheque for the amount of such balance had been properly paid by the bank.

The cheque was drawn by the plaintiffs in 1882, under the following circumstances: Three persons named Ross, Kennedy and McMillan, were engaged in the business of buying and selling lands on speculation in Manitoba. Ross was the active man in the business, and he held a power of attorney from the others authorizing him to sign their names to all deeds and conveyances necessary for carrying on the business. In the course of one transaction Ross acquired certain mortgages on land which he had sold and needing money he assigned these mortgages to the plaintiffs, signing the necessary transfers for his associates under the power of attorney. The amount of the loan was paid to Ross by the plaintiffs’ cheque drawn payable to the order of Ross, Kennedy and McMillan, and Ross endorsed this cheque in his own name and in the names of his associates as their attorney and received the money from the defendants’ bank. This cheque represented the balance claimed in the action.

The plaintiffs brought an action against Ross, Kennedy and McMillan on the covenants in the mortgages assigned to them as security for the loan, and this action was successfully defended by McMillan on the ground that Ross had no authority to execute the assignment for him, the power of attorney not covering the case of borrowing money. The present action was then brought against the bank and the defendants succeeded in the court below on the ground that McMillan was shown to have got the benefit of the money and the cheque was, therefore, properly paid. The plaintiffs appealed.

[Page 694]

Ewart Q.C. for the appellants. If Ross, Kennedy and McMillan were partners the partnership was of a special nature and not governed by general partnership rules. The acts of Ross, therefore, would not bind the other partners. Morrison v. Earls ([1]); Walker on Banking ([2]); Saderquist v. Ontario Bank ([3]).

Land partners have no power to borrow on behalf of the firm. Dickinson v. Valpy ([4]); Ricketts v. Bennett ([5]); Barmester v Norris ([6]).

The endorsement of all the payees was necessary to justify the bank in paying the cheque. See Carrick v. Vickery ([7]); Innes v. Stephenson ([8]); Stone v. Marsh ([9]).

Christopher Robinson Q.C. for the respondents referred to Brandon v. Scott ([10]); Charles v. Blackwell ([11]); Smith v. Johnson ([12]).

STRONG J.—I am of opinion that the cheque in this case was properly paid by the bank.

The payment was a good payment inasmuch as the cheque was properly endorsed by Ross in the name of McMillan. There was, undoubtedly, a partnership for the purpose of land speculations between Ross, Kennedy and McMillan; the land mortgaged to the appellants was part of the stock-in trade of that partnership. When a partnership is entered into for the purpose of buying and selling lands it is well established that, in equity, the lands acquired for the purpose of being so dealt with are, by the doctrine of conversion, considered as personalty (13), just as much personalty as goods forming the stock-in-

[Page 695]

trade of a mercantile partnership are, and being so can, in equity, be dealt with by one partner just as freely as one partner in a commercial partnership can deal with goods forming the stock of the firm for partnership purposes. Then Ross could assign, and did assign, a good equitable title to the mortgages transferred to the plaintiffs, irrespective of the power of attorney altogether, and he had a perfect right to do so, and a right to receive payment in cash and apply the cash to the purposes of the partnership business or liabilities. It is true he could only confer an equitable title (irrespective of the power of attorney) but aside altogether from the power of attorney he could confer an equitable title which a court of equity would compel the other partners to clothe with the legal estate.

Then, having a right to receive cash, and having taken instead a cheque payable to the partners, he had a perfect right to use his partners’ names in endorsing that cheque, and the bank having a right to assume he did it for partnership purposes was justified in paying the cheque on that endorsement.

We all agree in this last ground, and Mr. Justice Patterson will state the reasons for it more fully in a written judgment which I have read and in which I concur.

This is a question with which the appellants have really nothing to do. They gave a cheque on their bankers, and this cheque the bank accepted, and there ended all right to dispute the payment so far as the appellants are concerned. So soon as the bank engaged to pay the cheque their contract with the appellants as depositors was performed, and a new contract with the persons entitled to receive payment, and with which the appellants had nothing to do, sprung into existence. If this latter contract has not been properly

[Page 696]

performed by the bank, in consequence of payment to a person not entitled to receive it, the proper person to sue for such breach of contract is McMillan, the person said to be prejudiced by payment to Ross.

Lastly, at all events the appellants must be held to be estopped by their acquiescence in the bank account as entered in their pass-book, and by their monthly receipts. The position of the bank has been changed since the payment. Assuming it to have been a bad payment, of which the appellants could have taken advantage if they had complained promptly, yet they are now too late to do so after Ross, from whom the bank might have reclaimed the funds, has become insolvent.

For these reasons the appeal must, in my opinion be dismissed with costs.

FOURNIER J.—Concurred.

TASCHEREAU J.—I am also of opinion that the appeal should be dismissed. That the only person who could maintain an action is McMillan seems to me perfectly plain. Certainly the mortgage company could have no action on the facts of the case as presented to us.

I concur also in the opinion expressed as to Laches. The company received monthly statements from the bank after payment of this cheque and gave receipts acknowledging their correctness. They cannot recede from that now when Ross is insolvent and the position of the bank is changed.

I agree with the remarks of my brother Patterson as to the authority of Ross to indorse the cheque.

GWYNNE J.—Mr. McMillan admits in his evidence that the whole management of the speculation in which he and Ross and W. N. Kennedy were jointly

[Page 697]

interested was confided to Ross, who had authority to sell the lands which were the subject of the speculation in such parcels and upon such terms as he should think fit, and that the whole financial administration of the speculation was confided to him. As part of the financial administration confided to him he had to make arrangements to meet from $75,000 to $80,000 balance of purchase money of the lands placed in his hands for sale. The better to enable him to dispose of the property a power of attorney was executed by McMillan to him whereby he was authorised, as McMillan’s attorney and in his name, to grant, sell, convey, transfer and mortgage all and singular (the lands jointly purchased) and for this purpose to sign, seal, execute and deliver the necessary deeds, papers, writings and conveyances, either in parcels or in block, and upon such terms and conditions as to the said Ross might seem meet, and, for that purpose, McMillan gave and granted to him full and absolute power and authority to do, perform and execute all and every such acts, deeds, matters and things as might be requisite and necessary, or expedient to be done in and about the premises as he, the said McMillan, if personally present and acting in the premises, could do. If, in order to execute these powers effectually, it should be necessary to effect a loan upon the security of a mortgage of any part of the joint estate it was competent for Ross to execute such mortgage in the name of McMillan, and of the necessity for effecting the loan and executing the mortgage Ross was made by McMillan sole judge. So, likewise, Ross had power to sign in McMillan’s name, and for McMillan, all necessary receipts for the money and, in fact, to do in McMillan’s name and for McMillan, every act, matter, and thing necessary for the completion of the loan transaction. There can, I think, be no doubt that

[Page 698]

he had power to effect the loan which he did effect with the plaintiffs upon the assignment to them of the mortgage which had been executed to the three, Ross, McMillan and W. N. Kennedy, by a purchaser of a portion of the joint estate to secure the purchase money, and also to receive the money advanced by the plaintiffs upon such security, and as necessary to the completion of that transaction to endorse in McMillan’s name the cheque given by the plaintiffs as the mode adopted by them of advancing the money lent upon the security of the mortgage assigned to them by way of mortgage. McMillan, indeed, admits that if the money was applied by Ross for the purpose of the joint speculation he has nothing to complain of, and that it was so applied Ross swears and both courts below have found, as matter of fact, it was. But whether it was, or not, is no concern of the present plaintiffs or defendants. In order, however, to so apply it it was necessary that Ross should receive it and the only question, here is whether in order to receive it he had authority to endorse the cheque made in favor of himself, W. N. Kennedy and McMillan in McMillan’s name, and I am of opinion, for the above reasons, that he had, and that this appeal should be dismissed with costs.

PATTERSON J.—I am satisfied, notwithstanding the learned and able argument of Mr. E wart for the plaintiffs, that we ought not to disturb the judgment appealed from.

The matter seems to me very simple. McMillan, Kennedy and Ross engaged in joint speculations in the purchase and sale of lands, the entire financial management being left with Ross, as McMillan very clearly explains in his evidence. They were co-partners to all intents and purposes, Ross being the managing partner.

[Page 699]

The position is exactly described in the passage in Lindley on partnership to which we were referred ([13]);

If persons who are not partners agree to share the profit and loss or the profits of one particular transation or adventure, they become partners as to that transaction or adventure, but not as to anything else. In all such cases as these, the rights and liabilities of the partners are governed by the same principles as those which apply to ordinary partnerships; but such rights and liabilities are necessarily less extensive than those of persons who have entered into less limited contracts. The extent to which persons can be considered as partners depends entirely on the agreement into which they have entered and upon their conduct.

McMillan gave Ross a power of attorney to grant, sell, convey transfer and mortgage all his lands, tenements, right, title and estate, in and to certain specified lots of land, with certain general powers, but it is a mistake to say, as the plaintiffs do in their factum, that Ross’s authority was limited by the terms of that instrument. He required, no doubt, to resort to it for authority to execute deeds in the name of McMillan, just as in ordinary partnership, but the power to buy and manage lands for the three partners, and to do all things incident to the prosecution of the joint enterprise, did not depend on the power of attorney. Debts were incurred by the partners and Ross was depended upon to find money to pay them. He may have received from sales of lands much more than enough for the purpose, and may have been blamable, as between himself and his partners, for raising money in any other way. That was, however, a matter between him and his partners. The present dispute arises from his having borrowed money from the plaintiffs’ company by pledging certain mortgages which he had taken for the purchase money of lands sold to one J. H. Kennedy—not the partner who is called Col. Kennedy. His legal power to assign these

[Page 700]

mortgages is questioned. I am not disposed to regard the objection as serious, but I think it is outside of the matter with which we are concerned. The plaintiffs, in fact, got the mortgages and gave their cheque on the defendants for the amount of the loan. They might as well have paid the cash and no question of the right of Ross to receive it could have been seriously raised. It is laid down in Story on Agency ([14]), that an authority to sell lands for cash includes the authority to receive the purchase money. In section 59 the author says:—

Upon the same ground an agent who is employed to procure a note or bill to be discounted may, unless expressly restricted, endorse it in the name of his employee, and bind him by the endorsement, for he may well be deemed as incidentally clothed with this authority as a means of effectuating the discount.

Nothing so serious as binding one’s principal by the contract of endorsement is involved in what Ross did when he endorsed the’ cheque for McMillan for the purpose merely of negotiating it. The distinction between endorsing for one purpose and the other is explained in Denton v. Peters (2) and other cases.

In Grant on Banking (3) there is this exposition of the rule:

An agent, though unauthorized to draw or endorse cheques in the name of his principal, can, nevertheless, bind his principal by doing so, provided the drawing and indorsing of cheques is incidental to the business he is deputed to transact, and provided the party dealing with him has no notice of want of authority.

Among the cases cited for this proposition is Edmunds v. Bushell (4) the head note of which reads as follows:

A employed B to manage his business and to carry it on in the name of B & Co. The drawing and accepting of bills of exchange was incidental to the carrying on of such a business, but it was stipulated between them that B should not draw or accept bills. B having accepted a bill in the name of B & Co., Held, that A was liable on the

[Page 701]

bill in the hands of an endorsee who took it without any knowledge of A and B or the business.

We may also note the rule as expressed in Chalmers on Bills ([15]), that

an authority to sign bills on behalf of another may be either express (verbal or written) or implied from circumstances.

Having here the character of the business in which Ross, McMillan and Kennedy were engaged as explained by McMillan; the unlimited power confided to Ross to manage it for the joint adventures; the uncontrolled discretion committed to him, which McMillan clearly informs us of; the fact that what Ross was doing was raising money on assets of the concern by pledging them to the lenders; and the fact that the cheque was merely an order to the bank to pay what the plaintiffs might themselves have paid in cash; having regard also to the express power to “ mortgage,” which, though we do not require to pronounce upon its effect as bearing on the title to the securities acquired by the plaintiffs, yet implies authority to pledge assets of McMillan in security for debts, a general authority not in terms restricted to securing unpaid purchase money, but as wide as the discretion reposed in Ross for the conduct of the adventure; I do not see any reason to hesitate in holding that he could properly endorse the cheque, as he did, in the name of McMillan, for the purpose of procuring the cash upon it, and that the payment of it was a good discharge to the defendants as against the plaintiffs.

Upon this ground I am of opinion that the appellants must fail in their appeal, and I do not enter upon the other matters discussed before us. I do not examine, as the appellants invite us to do, the details bearing on the question of what Ross did with the money. It would require a very clear demonstration of the incorrectness of the conclusion of the court below upon

[Page 702]

that question of fact to warrant us in disturbing it, and I form no opinion respecting it.

Nor do I discuss other questions which have been debated. One of them is whether, assuming that the endorsement was invalid and that Ross mis-applied the money, any action at law would lie against the defendants after they had paid the money to two of the three persons jointly entitled to it, and, in case an action would lie, it would not be at the suit of McMillan only, and not of the plaintiffs. Another question is the effect of the acquiesence of the plaintiffs by the confirmation of the statements of account rendered them from time to time by the defendants.

But while I do not discuss these questions I agree with the opinions expressed upon them by my brothers Strong and Taschereau.

I am of opinion that we should dismiss the appeal.

Appeal dismissed with costs.

Solicitors for Appellants: Richards, Brophy & Brad Shaw.

Solicitors for respondents: Perdue & Robinson