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Wrinkled 3 32X 1 2 3 1 2 3 4 5 6 I f I > I .^ "* a- S W w ^M en ir r° ^ w w g xl M ^ ^ XI ana >rt ^ l^ \W )7IHC lOvmcB or canada. LOWBB CANADA, 10 wnt j Jt Vit am pf %tm*s |rnr||. APPEAL SIDE. No. 66. JAMES HEMPSTED, {PlabiHf in tkt Court btlow,) Appbllant ; THE HON. LEWIS T. DRUMMOND, et al., {Dtftndantt in tht Court below,) RE8PONOEMT8. APPELLANT'S CASE. The Appellant's action was founded upon two promissory notes, one of ;£100, made by Mr. Drummond and endorsed by Mr. Dunlop, the other of ^50 148. 3d., made by Mr. Dunlop and endorsed by Mr. Drummond. The plea is very special indeed, and contains a number of distinct allegations, not all perfectly reconcileable. The inteution of the Defendants in making some of these allegations is not easily perceptible, although it is evident that the plea has been framed generally with the view of allowing the Defend- ants to take advantage of any question which the nature of the evidence, whatever it might be, could possibly allow them to raise. In substance it would seem to amount to a plea of want or perhaps rather of failure of consideration, with the conclusion of a dilatory plea (if a plea by which the Defendants seek to make the fulfilment of their obligation depend upon the precedent accomplishment by the Plamtiff of his be a dilatory plea,) and of a peremptory exception combined. The Defendants in effect say : " We shall not pay you, unless you first do something you bound yourself to do ; and moreover, we shall not pay you at all, because you have not done what you ought to have done, nor could you ever have done it, nor can you now," — as the Court will per- ceive by the following abstract of the plea. The Defendants ullegc, that on the 38th December, 1856, a sale of certain stock was made by John Crawford to Charles J. Dunlop, one of the Defendants, on his the ijaid Dunlop's behalf, as well as on behalf of the other Defendant — ^this sale evidenced by the following document : — •< MoMTtiEAL, 28th December, 185S. " C. J. Dunlop, Esq. " Sir, — I have this day sold to you one thousand shares of stock of the " Kingsey Slate Works (paid-up stock), at five shillings per share, payable by your ." note endorsed by the Hon. Lewis T. Drununond, at four months date, with interest, " which note I have this day received, and on payment of the said note I bind myself " to execute the necessary transfer of the said shares in the books of the said Company. '* It being agreed and understood that I am to hold the said stock in my name until the " said note is matured as a collateral security for the payment of the said note. Provided " the said note be not paid at maturity, I shall be at liberty to sell forthwith the said " stock at the best price obtainable, and appropriate the proceeds thereof to the liqui- " dation of the said note, or so much thereof as the proceeds of the said sale will amount to. (Signed) "JOHN CRAWFORD. MO. J. DUNLOP." That the note of ^9A0 mentionetl in uid agreement wai paid at maturity, to wit| by the laid John Crawford accepting fl-om the aaid DefendantSi in payment thereof, three other promitaory notes, amounting in the whole to the aum of two hundred and aixty-eeven pounds aeven ihillinga and ten pence currency i and the said Defendants aver^ that when the three last mentioned notes fell due, they were duly paid to the aaid Crawford, excepting the sum of ^160 14s. 9d., for which the two notes sued ujion were granted by the Defendants to the said John Crawford, by reason of which premises the said two notes sued upon were and are a settlement in part of the first mentioned transaction by the Defendants with the said John Crawford. And the said Defendants further aver, that in and by virtue of the payment of the aaid notes, and the same having been accepted and taken by the said John Crawford as aforesaid, the said Crawford in effect waived his right to/orthwkh sell and dispose of the aaid stock in the event of the otigimd note not being paid at the maftirity thereof, and in effect was bound and liable to execute at the time of accepting the aforesaid three notes for ^£267 7s. lOd., a transfer of the aforesaid stock. And the said Defendants aver that the said Crawford was not at the time of the sale of the said stock, nor since that date, nor at present is he or was he proprietor of the said stock or able to transfer the aame aa he hitd undertaken to do as aforesaid. Then follow allegations to the effect that Crawford has fVeqnently been requested since the aaid notes were accepted by him as aforesaid to execute the necessary transfer but that he hath continually refused to the damage of the Defendants of one thousand pounds currency, the par value of the same. And also, that previous to the maturity of the notes sued upon, and since the same became due the said Defendants notified and warned the said Crawford that the said notes would only be paid on the said Crawford executing the transfer of the said stock as aforesaid. The remaining allegations, which assert that the Defendants can urge against the Plaintiff all they could have urged against John Crawford, are admitted, and need not be adverted to. The prayer of the plea is, that it be declared that the Defendants are not liable for the payment of the notes sued upon, unless there be transferred and made over to the name of the defendant Dunlop the aforesaid shares, in due and legal form, on the books pf the said Company by the said Crawford, and that inasmuch as tho aforesaid Crawford is not now and never hath been, since the aforesaid 28th day of December, t8fi6, able to {ulfil his aforesaid contract, nor hath ho doue so, that it be declared that the notes aued upon have been obtau^ed by the Plaintiff, without value having been given for them either by the aforesaid Crawford or by any one for him, and that in consequence the action of the Plaintiff be dismissed with costs. It is to be noticed that no tender of the amount sued for accompanied this plea ; that no fraud is alleged to have been committed ; ond that the solvency of either Craw- ford or the Appellant remains unquestioned. The Appellant by his special answer distinctly asserts that under the agreement of the 28th December, 18S6, which agreement is admitted to have been the consideration of the note of ^260, of which the notes sued upon are a renewal in part, the obligation of Crawford to execute a transfer of the shares in question will only begin after he has been paid in full. That in the meantime he holds the shares as collateral security for the payment of the balance due on said original note of ^250, to wit, tho ^160 148. Sd., claimed by the action, with power to sell them when he should think proper to do ■o, and in the manner he should deem most to his advantage, the construction put on the vrori/orthtnth by the Defendants being totally denied. In other words, that the ques- tion as to the execution of the transfer cannot come up until after payment of the amount sued for, when Crawford would become bound to execute the transfer, unless he had sold the shares in the meantime at the best price obtainable, in which latter case the obligation of executing the transfer would resolve Itself into that of giving the Defendant Dunlop an account of the sale, at the latters risks, of the stock in question. Further, the Appellant in these special answers, claims the benefit of the admission iqade by the Defendants in their plea to the effect that the ^160 148. 9d. are a balance of the original note of ^250, and denies that by taking the three notes alluded to in the plea and the notes sued upon, he has been paid the amount of the original note — the three notes and the two notes having been given him as additional collateral security, and in renewal of the original note. And also denies that thereby he has renounced to his rights under the agreement of holding the stock as collateral security, and of selling it when and where, and in the manner he should deem most conducive to his interests. The iiiue liaving b««n joiiiml by genenl Rnplicstions fyled by the Defendsnto, the partlei went to proof, and at thu Biiqu^tea no uvidonco woa adduced on either tidei beyond that which the following admiMoni aflbrd. " To Mve ootta, the laid Plaintiflf and the laid Defondanta admit that the paper- " writing produced by the Defetidanta with their plea, and being thoir Kxhibit, No. 1, " the laid paper-writing purporting to contain the terma of a certain agreement men- ** tioned in the pleadings in the cauie between John Crawford and the said C. J. Dunlop, " and bearing date, the said paper-writing, at Montreal, the 3Sth December, 186fi, really " contains the terms of the agreement entered into by and between the said John Craw- " ford and the said C. J. Dunlop, regarding the sale of one thousand shares of the stock *' of the Kingsey Slate Works on said mentioned day, and that the notes sued upon '* were given in part satisfaction of the note of two hundred and fifty pounds mentioned " in said agreement of twenty-eighth December, one thousand eight hundred and fifty- " Ave, the balance of said two hundred and fifty pounds note having previously been '• paid." The only questions, therefore, that could arise under such circumstances, were the following : — 1. Does the vrordJbrtkwUh in the agreement imply that Crawford should be obliged to sell the stock the moment the original note matured, whatever the state of the mar- et at that time, and that he could not do so ailerwards. The Appellant trusts that their question will be decided in his favor as one admit* ting of no difficulty. The words of the agreement are, " I shall be at liberty to sell •• forthwith," and refusing him the right of selling afterwards would be a very extraor- dinary interpretation indeed of a clause which was evidently inserted for ii&Lspeoial benefit. J^ S. Has the taking, by Crawford, of the three notes alluded to in the {ma, and the two notos subsequently sued upon, operated as a novation, making it inowbent upon Crawford to execute the transfer at the time he cook the said three notes t>^ This question, again, must be answered in favor of the Appellant. A novation is never presumed. It must bo proved beyond doubt, and the intention of the creditor to change his condition established by the clearest evidence. Mr. Crawford's right was to be paid £SfiO before he could be called upon in the terms of the agreement to execute a transfer, and there is certainly no reason to suppose that his intention was to make the condition of the agreement hung upon the fate of that particular note} and because his debtor could not pay at the appointed time, and he, Crawford, found himself obliged to renew tho note, to say that he became obliged, moreover, to dispossess himself of the stock ihwas his collateral security. If, when the original note matured, Dunlop paid Craing upon tlie note*. The Court beU>w wm of opinion he wai. Thf n\' ilsnt luhinita that the deciaion ia inconcct, and would, if ratified by thii Court go > the deatruotion of a very Urge cUia of commercial aecnritieii, viz ; coliaterol aecurili k. Tlie importance of the deoiaion in thia retpect cannot bo exaggerated. The Appellant admita that in ordinary raani. and even in case* where the itipulation ia that the price will be paid before delivery, the aeller oeeking to enforce the payment of die purchaae money, muit tender the thing aold. It ia apprehended there would be a material difference if the thing lold were to mnain, u ider the ogreement in the hondi of the seller, oa collateral aeourity { for the only inference to be drawn from auch an agreement would be that the parties meant that the thing sold should be considered as having been delive^d to the purchaser, and by him re-delivered to the buyer, as giiyer and be his property, only that this property would be in the hands of another, its would be a gage for any ordinary debt. The seller would then have a recourse ngoinst the gage, and the right to obtain a judgment in this cose, for instance, for the amount of the notes with a provision tliat in default of payment ho might sell the proceeds in whole or in part to the payment of his debt, wiib his recourse against the Debtor for any balance that might remain due in case the proooeda of the sale of the gage should not be sufficient. In such a cose of course, the Creditor could not sell the gage without a judgment. It is not oleor that a Defendant could obtain more, if so much, upon such an action, than to have it declared that the Plaintiff had a gage in his hands as security for his debt, and thot the Plaintiff should proceed to sell the gage in due course of law before taking in execution any other property of the Debtor. But in this esse the agreement goes much further. Not only is Crawford to hold the stock as collateral security, but he may sell it whenever he thinks fit, and of course without any judgment being necessary. Moreover, he has a perfect right to ob- tain a judgment upon ihe notes, and execute auch judgment against all the property of his Debtors, reserving the stock as a lost resource. Had the Defendants by their pleas asked for nn account of the stock, it is possible the Plaintiff would hiivo been obliged to say what hod become of the stock, whether or not he had sold it. But in the present case the Plaintiff was not bound to do more than to deny the right of the Defendants to claim the transfer of the stock as a condition precedent to the payment of the amount of the notes. At all events, after the notes are paid, the Dcftmdants will have a right to call upon Crawford or upon the Plaintiff for the stock, and ho may then shew that he sold it for some nominal price, it having become depreciated and having no longer any value in the market, and give credit to Dunlop for the proceedn of such sale, if any. But nothing in law could justify the Court below to say without aay qn.>lincaHon that the Defendants are entitled, on the payment of the notes to give a trail' ti.\- jf the stock, and that the Plaintiff was bound to offer such transfer in and by his declaration, and the judgment appealed firom violates all the principles of law relating to collaterals, than which few principles are more important, more generally acted upon by mer- chants, and resting upon a sounder basis, and it is impossible to calculate the mis- chief that would be done to the mercantile community if it were to be conGrmed. It would have the effect of disturbing numberless transactions, and destroying the nature of the security upon which these transactions have been entered into ; and that for no conceivable reason whatever, for nothing shows that the slightest fraud has been com- mitted, or that there is any reason to suppose that Mr. Crawford will be loss able to account for the stock after the notes are paid as before, and that Dunlop will suffer if he be unconditionally condemned. The only remaining question raised by the Respondents is as to the proof that the stock vested in the hands of Crawford at the time of the sale. The Appellant sub- mits that in the absence of a special allegation of fraud, the agreement must be taken as conclusive evidence upon the point. The rule in actions on promissory notes is that they are presumed to be for value received, unless the Defendant first makes out a cose of fraud or suspicion of fraud. Moreover, when ths Defendant relies on a plea of consideration the oniw probandi lies on him. Even had the action been brought upon the agreement it would not have been I ( :: 'j{ the ikratlon, lUaterals, by mer- ini«- iod. It lO nature for no len com- able to suffer if j that the lant 8ub- Ibo taken for value aud. \jirobandi are been licrnssnry far tho plaintiff' tn prove tlie exiitoncn of tlio itocl( in tlin ImiidH of Crowfonl, niucli li'NH in tluH caao wliuru tliti notn in to lin preiuinod for vnliiu ruceiveX A* to the pit'u of till) Uiifuniluntt, it \h pi-rlmpR proper to obNurvo timt the only tiling that could have kIvum it uny validity in lonie ronpeotiii would liave bcmi the tender of tito money. There in nu iioulit but the trunniiction lias been nri unfortunntA one for the Defen- dant*, an tlie Dtock in now admitted on all iuindu to l>e worthlem ; but tliat can be no cxcufo for the attempt of the Ucipundent to liavu the action diNniijuied upon technical objectiona, liavinj^ no foundation in law and auddlo tho costii of thix action upon the I'luintill'. If the int4)ntion of tho UcHpondcnIa waH to put in isNue, the posHeMion of the Rtock in tho liandN uf ('ruwfbnl at the time of the aale, they ouglit to huvo given tho I'laintiifonu u moio formal notico of their intention timn tliat plea aflbrds. Montreal) October, 1868. LAFLAHME, LAFLAMME & BAliKARD, Attorneyi/or Ajipcllanl, ;*.'■ ! i U' hf>