Supreme Court of Canada
Porter v. Pelton (1903) 33 SCR 449
Date: 1903-06-02
Bishop H. Porter (Plaintiff)
Appellant
And
George W. Pelton & George B. Holden (Defendants)
Respondents
1903: May 18, 19, 20; 1903: June 2.
Present:—Sir Elzéar Taschereau C.J. and Sedgewick, Girouard, Davies and Nesbitt JJ.
ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA.
Contract under seal—Undisclosed principal—Partnership—Amendment—Discretionary order.
P. sold mining areas and was paid part of the price. The purchaser signed an agreement under seal that he would organize a company to work the areas and give P. stock for the balance at the market price. H. organized a company which received a deed of the land and did some work but finally ceased operations. Only a small part of the stock was sold and none was given to P. who took action against the purchaser and H. claiming that the latter was a partner of the purchaser and that the agreement was signed on behalf of both. The purchaser did not defend the action.
Held, that no action could lie against H. on the agreement under seal not signed by him even if it was for his benefit and a seal was not necessary.
The court refused to interfere with the discretion of the court below in refusing an amendment to the statement of claim.
[Page 450]
Appeal from a decision of the Supreme Court of Nova Scotia reversing the judgment at the trial in favour of the plaintiff.
The plaintiff, Bishop H. Porter, of Bridge water in the County of Lunenburg, who was the owner of certain gold mining areas at Leipsigate Gold District, in Lunenburg County, on May 9th, 1900, gave a 60 days' option at the price of $6,000 upon those areas to the defendant Pelton, with liberty to do development work on the areas in the mean time.
The defendant Pelton, though unknown to the plaintiff, was in partnership with the defendant Holden and the option was taken for the benefit of the partnership, and by the directions of the defendant Holden. Work was done upon the areas, an extension of the option was obtained, and before it expired the defendants decided to purchase the areas and the plaintiff was notified to that effect. The sum of $1,000.00 was paid to the plaintiff by a cheque furnished by the defendant Holden and a note for $1,000.00, signed by the defendant Pelton and indorsed by the defendant Holden, was given to the plaintiff The plaintiff executed a transfer of the areas to the defendant Pelton, and received an agreement executed by him alone by which he undertook to organize a company to operate those areas, said agreement being in the words and figures following:—
"Memorandum of Agreement made this 6th day of August, 1900, by and between George W. Pelton, of Waltham, Massachusetts, Mining Engineer, at present of Bridge water, Nova Scotia, of the first part and Bishop H. Porter, of Bridgewater aforesaid, in the county of Lunenburg, druggist, of the second part.
"Whereas by transfers from said Bishop H. Porter and from Watson Porter dated and delivered this day,
[Page 451]
the said Bishop H. Porter has sold and conveyed to said George W. Pelton, his executors, administrators and assigns, the gold mining areas as set forth in said transfers for the sum of six thousand dollars, although the consideration stated in said transfers is the nominal sum of one dollar; and whereas there is at present unsettled the balance of four thousand dollars of said purchase price: Now, therefore, this agreement witnesseth that the said George W. Pelton, for and in consideration of the delivery of said transfers, the receipt whereof is hereby acknowledged, and of further valuable consideration, doth hereby for himself, his heirs, executors and administrators, covenant, promise and agree to and with the said Bishop H. Porter, his executors, administrators and assigns, to settle and arrange the said balance of the purchase price in the following manner, that is to say: That he will forthwith proceed to organize a bonâ fide joint stock company in connection with said gold mining areas so transferred as aforesaid, and that upon the due organization thereof he will cause to be issued and delivered to said Bishop H. Porter, his executors, administers and assigns, four thousand dollars worth of capital stock in said company at market price."
The defendant Holden, after the purchase of the areas from the plaintiff, returned to the United States where he lives and obtained a charter in the State of West Virginia for a joint stock company by the name of the Black Hawk Mining Company, with a capital of $1,000,000 divided into shares of $1.00 each, with head office in Boston. The defendant Holden appears as one of the incorporators of that company, but the defendant Pelton's name does not appear. The other incorporators were E. W. Baxter, W. C. Keith, H. B. Holden and S. K. Paige.
[Page 452]
Upon the company being organized the defendant Pelton transferred to it the areas obtained from the plaintiff and received in payment 999,995 shares fully paid and non-assessable of the company's stock.
The other five shares were subscribed for by the five above named incorporators who received one share each and paid $1.00.
The defendant Pelton then transferred his shares to the company, his stock certificate was cancelled, and the stock was re-issued.
With the money obtained from the syndicate, the company, under the local management of Pelton, built a mill and did a certain amount of development work underground and while engaged in these operations endeavoured to sell as much stock as possible.
About 15,000 shares were worked off through paid agents upon about 40 investors at par, although the actual value of a share based upon the price paid for the areas and the money expended in the development was not more than $ .03 a share.
After May, 1901, it became impossible to sell any more stock and the company stopped paying wages to the men at the mine and in consequence the workmen quit work, attached the property and all operations ceased.
The stock of the company never acquired a market value, and the plaintiff never received any stock, nor any part of the $4,000 due.
The plaintiff's action as launched was for damages for breach of agreement of August 6th, 1900, to deliver to him $4,000 worth of stock, and was based on the assumption that Pelton and Holden were partners in the transaction and that the agreement was signed by Pelton on behalf of both. The trial judge refused
[Page 453]
to allow the statement of claim to be amended by adding a charge of fraud.
Russell K. C. and Wade K. C. for the appellant. Pelton signed the agreement as agent for Holden who ratified his action and is therefore liable. Hunter v. Parker.
It was not necessary that this agreement should be under seal and the technical rule as to sealed instruments does not govern it. Tapley v. Butterfield; Harrison v. Jackson.
Holden was present when the agreement was signed and it was done at his request. It was therefore, in law, his own act. Ball v. Dunslerville.
Holden having adopted the contract and received the benefit of it is liable in a court of equity. Conant v. Miall.
The statement of claim should have been amended to meet the evidence given by defendant himself and it may still be amended. Zwicker v. Feindel; Riding v. Hawkins.
New combe K.C. for the respondent. Holden was not a party to the deed and did not execute it. He cannot therefore be held liable on it. Pollock on Contracts, p. 98. Chesterfield &c. Colliery Co. v. Hawkins; Russell v. Annable.
A person cannot bind others by executing a deed under seal. Lindley's Law of Companies pp. 193-5, ed. 6. Fry on Specific Performance, p. 85.
The amendment was properly refused. Lever & Co. v. Goodwin Bros.; Bentley & Co. v. Black.
[Page 454]
The judgment of the court was delivered by:
NESBITT J.—The appellants applied at the opening of the argument to add three alternative claims We are of opinion that all proper amendments should be made where the court is satisfied that such amendments are necessary to do justice and the nature of the demand is not changed, and that neither party can be prejudiced. Such amendments must be dealt with in each case in the sound exercise of a judicial discretion. We cannot in this case interfere with the exercise of a discretion in the court below.
On the cause of action as stated by the plaintiff there can be no doubt The argument addressed to us by the appellant's counsel, that although the contract entered into between Pelton and Porter was under seal the appellant was entitled to sue Holden, was:
(a). Because it was a contract which could be made by an instrument in writing and the seal was unnecessary.
(b). Because the original promise to pay for the land could be relied upon against Holden and the price in money claimed since Pelton's promise under seal to pay in stock worth $4,000 had not and could not be fulfilled and the plaintiff could revert to the original consideration.
(c). Because Pelton was really a partner of Holden and the partnership name was simply Pelton, and therefore the partnership was bound by the signature "Pelton" under seal, as a partnership signature.
(d). Because Holden was an undisclosed principal of Pelton, and therefore bound by the sealed instrument signed on his behalf.
(e). Because Pelton was really signing for the benefit and on behalf of Holden.
[Page 455]
(f). Holden by his fraudulent dealings with the company had rendered the stock of no value.
The cases for over a century establish the rule of law firmly that where partners contract under seal they are bound by the form of the instrument, and where parties so signing are merely acting as agents and are so described, only the parties signing can be bound. A principal or partner cannot be bound unless he has given authority for his signature under seal, and is designated as a party to the deed. A cestui que trust cannot either sue or be sued upon a covenant made by and in the name of a trustee on his behalf.
The case of Schack v. Anthony (1813), seems to completely set at rest the contentions (a) and (b) above referred to.
In Re Pickering's claim, (1871), the arguments (d) and (e) were in substance unsuccessfully urged by Sir Roundell Palmer as answers in equity to the technical rules at common law relating to instruments under seal.
See also Colder v. Dobell, (1871). and particularly Hannen J. at p 500.
Beckham v. Drake, (1841), affirmed on this branch sub nom. Drake v. Beckham,.
We think too that the evidence discloses that the option to purchase given to Pelton was exercised by him by the instrument under seal in question in the action and we see no evidence of any other bargain. The evidence seems also to indicate that Pelton fell in with a suggestion that Holden should sell his stock and that the failure of the mine to realise the high hopes of the promoters has caused the change of view indicated by the letters of the 20th May 1901, and 24th September 1901.
[Page 456]
We think it is a case of disappointed hope and that the evidence in no way discloses any reason for allowing on terms a charge of fraud to be added.
The case of Conant v. Miall, 1870,, so much relied on by the appellants, is quite consistent with all the authorities. That was a case of property purchased for an undisclosed principal who affirmed the transaction and took a conveyance of the land, and the unpaid vendor was held entitled to recover against the principal to whom the land had been conveyed and in whom was then vested the balance of the purchase money.
The appeal will be dismissed with costs in all courts.
Appeal dismissed with costs.
Solicitors for the appellants: Wade & Paton.
Solicitor for the respondent: E. M. McDonald.
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