Supreme Court of Canada
Agricultural Insurance Co. v. Sargeant, (1896) 26 S.C.R. 29
Date: 1896-02-18
The Agricultural Insurance Company (Plaintiffs) Appellants;
and
Amelia Sargeant, Executrix, Etc. (Defendant) Respondent.
1895: October 12; 1896: February 18.
Present: Taschereau, Gwynne, Sedgewick, King and Girouard JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Suretyship—Principal and surety—Continuing security—Appropriation of payments—Imputation of payment—Reference to take accounts.
J.H.S. was a local agent for an insurance company and collected premiums on policies secured through his agency, remitting moneys thus received to the branch office at Toronto from time to time. On 1st January, 1890, he was behind in his remittances to the amount of $1,250, and afterwards became further in arrears until on the 15th of October, 1890, one W.S. joined him in a note for the $1,250 for immediate discount by the company, and executed a mortgage on his lands as collateral to the note and renewals that might be given, in which it was declared that payment of the note or renewals or any part thereof was to be considered as a payment upon the mortgage. The company charged J.H.S. with the balance then in arrears which included the sum secured by the note and mortgage, and continued the account as before in their ledger, charging J.H.S. with premiums, &c., and the notes which they retired from time to time as they became due, and crediting moneys received from J.H.S. in the ordinary course of their business, the note and its various renewals being also credited in this general account for cash. W.S. died on 5th December, 1891, and afterwards the company accepted notes signed by J.H.S. alone for the full amount of his indebtedness, which had increased in the meantime, making debit and credit entries as previously in the same account. On the 31st July, 1893, J.H.S. owed on this account a balance of $1,926, which included $1,098 accrued since 1st January, 1890, and after he had been credited with general payments there remained due at the time of trial $1,009. The note W.S. signed on 15th October, 1890, was payable four months after date with interest at 7 per cent, and the mortgage was expressed to be payable in four equal instalments of $312.50 each, with interest on unpaid principal.
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Held, Taschereau and Girouard JJ. dissenting, that the giving of the accommodation notes without reference to the amount secured had not the effect of releasing the surety as being an extension of time granted without his consent and to his prejudice; that the renewal of notes secured by the collateral mortgage was primâ facie an admission that, at the respective dates of renewal, at least the amounts mentioned therein were still due upon the security of the mortgage: that in the absence of evidence of such intention it could not be assumed that the deferred payments in the mortgage were to be expedited so as to be eo instanti extinguished by entries of credit in the general account which included the debt secured by the mortgage; and that there being some evidence that the moneys credited in the general account represented premiums of insurance which did not belong to the debtor, but were merely collected by him and remitted for policies issued through his agency, the rule in Clayton’s case as to the appropriation of the earlier items of credit towards the extinguishment of the earlier items of debit in the general account would not apply and there should have been a reference to the master to take the account.
APPEAL from the decision of the Court of Appeal for Ontario affirming the judgments in nisi prius and the Chancery Division, by which the plaintiff’s action was dismissed with costs.
The action was to recover the amount of a mortgage given by William Sargeant to secure $1,250, due by one J.H. Scriver up to 1st January, 1890, for arrears in his remittances of insurance premiums collected for the company.
The plaintiff’s books show Scriver’s account to have been kept as a continuous entry in their ledger for a number of years previous to this transaction and it was continued in the same way up to the time of trial. Scriver continued to act as agent, collecting premiums and transmitting moneys to plaintiff from time to time which were credited on the general account, and in the aggregate exceeded the amount covered by the mortgage. As the notes became due they were retired by the plaintiff and new notes taken in place of them
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were credited as cash in Scriver’s account. Sargeant died on 5th December, 1891, leaving the defendant as his executrix, but there was no change made in the manner in which Scriver’s account was kept, save that upon the maturity of the last renewal note plaintiff accepted new notes from Scriver alone, crediting them in the usual way.
As the amount due at the time of the trial was less than the indebtedness accrued since the security was given, defendant claimed that the mortgage had been satisfied and further that plaintiff, by giving time and accepting new notes for Scriver’s indebtedness, had released the surety.
Holman for the appellants. The rule in Clayton’s case cannot be applied in this case. See Fenton v. Blackwood; Munger on Appropriation of Payments; City Discount Co. v. McLean; and if not the surety has not been released. Croydon Gas Co. v. Dickinson; Jenkins v. Robertson; Reade v. Lowndes.
Watson Q.C. for the respondent. As to appropriation of payments see Green v. Clark. In re Sherry; Hooper v. Keay.
The surety was discharged by the giving of time to the principal debtor. Howee v. Mills; Rouse v. Bradford Banking Co.; Allison v. McDonald.
TASCHEREAU J.—I dissent on the two points raised in the case of the application of payments, and the discharge of the suretyship by the delay given. I think that the appellant’s action was rightly dismissed.
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I adopt Mr. Justice Maclennan’s reasoning in that sense. If in 1893 the appellants had taken an action against Scriver what is the amount that they would have recovered? Clearly $1,009, and that alone, as the balance of his indebtedness incurred since Sargeant’s death. What he owed in 1890 is paid, overpaid.
GWYNNE J.—For many years prior to the year 1890 one J.H. Scriver was acting as an agent of the plaintiffs, procuring insurance policies to be entered into with them and receiving the premiums thereon for transmission to the defendants.
On the 1st day of January, 1890, as appears in evidence, he was indebted to them, for premiums received by him upon policies issued by them through his agency and not remitted to them, in the sum of $1,632.37. Scriver continued to act as such agent of the plaintiffs as before, and on the 1st day of October they opened an account with him in their ledger, debiting him with the sum of $1,598.67.
One William Sargeant had been Scriver’s surety to a certain amount for the due payment by Scriver to the plaintiffs of the premiums received by him for them, and upon the 15th of the said month of October, for the purpose of securing payment of $1,250, part of the above debit, he executed the mortgage which is the subject of the present suit, whereby it was provided that the mortgage should be void upon payment of the said sum of $1,250, with interest thereon at the rate of six per cent per annum, in manner following, that is to say, in four equal annual instalments of $312.50 each, with interest on the unpaid principal annually, together with each payment of principal. This mortgage was, by a clause therein, declared to be given as collateral security to a promissory note of $1,250, or any renewals of the same, the payment of
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which, or any part thereof, to be considered as a payment upon the mortgage, each note being in the words following and made for the purpose of present discount:
TORONTO, 15th October, 1890.
Four months after date we jointly and severally promise to pay to the order of the Agricultural Insurance Co. of Watertown, at the office of the Bank of Toronto here, the sum of twelve hundred and fifty dollars with interest at seven per cent, value received.
Signed,J.H. SCRIVER,
WM. SARGEANT.
Sargeant died on the 5th December, 1891, and this action is brought against the executrix of his will, the plaintiff claiming the whole amount secured by the mortgage as still due. The defendant, in her statement of defence, alleges that the mortgage was executed for an amount larger than was then due by Scriver, and that the sum of $1,250 was inserted in the mortgage only for the purpose of covering the amount which upon the taking of the accounts should prove to have been due when the mortgage was executed; that ever since the death of Sargeant (her husband), she has repeatedly applied for a statement of the account but that none has been given to her, and she claims that the plaintiffs by giving time to Scriver since the maturity of the said note and by their course of dealing with him have released the estate of her husband from all liability under the said mortgage, and she claims to be entitled to an account between the plaintiffs and Scriver as to the present indebtedness if any there be upon the account between him and the plaintiffs as it stood on the 15th October, 1890, when the mortgage was executed; and she insists that in point of fact there is at present no such indebtedness if Scriver be credited with all the sums which he is entitled to be credited with, and she prays that if any sum should be found to be due to the plaintiffs
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the mortgaged lands should be ordered to be sold for the satisfaction thereof. Upon this statement of defence the plaintiffs joined issue and the case came down for trial when the plaintiffs produced the mortgage and an exemplification of the probate of Sargeant’s will whereby the defendant appeared to be executrix and thereupon rested their case and thereby cast upon the defendant the burthen of proving the matters alleged by her in her statement of defence. The appropriate mode of inquiring into such matters would as it appears to me clearly have been by a reference to the master under the ordinary decree in a foreclosure suit, but instead of taking such a decree the defendant called as a witness on her behalf the plaintiffs’ bookkeeper to produce and he accordingly produced the ledger in which the account opened of the date of the 1st October, 1890, with Scriver was kept, and she insisted that this account by application of the rule in Clayton’s case showed upon its face that the old debt for part of which the mortgage was given was paid off.
Now upon the authority of the City Discount Co. v. McLean and of other cases, the presumption that the earlier items of debit in a general account are extinguished by the earlier items of credit is a presumption which may be rebutted by evidence. Every case must be determined according to its own circumstances, and the evidence in the present case, which was necessarily the evidence of the defendant herself, shows that the rule in Clayton’s case has no application in the circumstances of the present case. The first item in the account in the ledger is no doubt the debit entry of the date of the 1st October, 1890, of the sum of $1,598.67, of which the $1,250 secured by the mortgage constituted a part, but this sum of $1,250 was made payable in four equal annual instalments, the first of
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which would not be payable until the 15th October, 1891. It cannot then be assumed to have been the intention of the parties that these deferred payments should be expedited and eo instanti extinguished by entries of credit in a current account. Some evidence of a contract to that effect would be necessary, and there is not only none such, but there is evidence having a directly contrary effect. On the 18th February, 1891, a renewal note for $1,150 at four months was given by Scriver and Sargeant in the precise form of the note for $1,250; this renewal note was taken up by the plaintiffs at maturity, and a new renewal note for $900 at four months given in like form, which was also taken up by the plaintiffs at maturity, and shortly afterwards, namely, on the 5th December, 1891, Sargeant died.
Now these renewal notes are clearly primâ facie admissions that at the respective times of their being given the amounts mentioned therein at the least were still due upon the security of the mortgage, but the evidence as to the reduced amounts named therein was that they were respectively so inserted upon promises made by Scriver, which, as is alleged, were never fulfilled, that he would pay the differences in cash. This may or may not be true, but even though it should not be true, the notes themselves afford at least primâ facie evidence that the amounts therein respectively named were, at the date of the respective notes, still due as part of the amount secured by the mortgage, and the evidence further is that these notes, which were made for the express purpose of being discounted by the plaintiffs, were taken up by them at maturity. Under these circumstances it seems impossible to hold, upon the authority of Clayton’s case, or of any reported case, that the old debt existing on the 1st October, 1890, of which the $1,250 secured by mortgage formed
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a part, was paid off by reason of the entries of credit in the ledger account. But the evidence, further assuming it to be true, which for the purpose of the present inquiry we must do as it is uncontradicted, although no doubt it may be questioned upon further inquiry in taking the account before the master, but for the present, assuming it to be true, it appears to be very clear that the rule in Clayton’s case has no application whatever to the present. For what is that rule? It is laid down thus in City Discount Co. v. McLean by Blackburn J., and expressed by Lord Selborne in Re Sherry, in somewhat similar language:
It has been considered a general rule since Clayton’s case that when a debtor makes a payment he may appropriate it to any debt he pleases and the creditor must apply it accordingly. If the debtor does not appropriate it the creditor has a right to do so to any debt he pleases and that not only at the instant of payment but up to the very last moment as was decided in Mills v. Fowkes.
Now it is obvious that, to the application of this rule, one unbroken account is not the only one thing necessary. “It may be” (says Blackburn J. in his judgment in the above case),
as a general rule in ordinary cases, and there is nothing to show a contrary intention, the items of debit in order of date and the half-yearly account rendered would constitute a fresh permit of departure. Clayton’s case and other similar cases show that where a partner dies and there is a change of the partnership and the transactions with the new and old firms are all mixed up together in one account the law treats the whole as one entire account and applies the items of credit to those of debit according to date in favour of the estate of the deceased partner. But when the parties remain the same the question is whether the rendering of the account amounts to an appropriation of the items to one another in order of date.
Then applying these principles to the case then before him the learned judge proceeds:
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In such a case as this where the earlier items constituting the £5,000 were secured by a mortgage and a guarantee it never could have been the intention that they should be so appropriated; but it is contended that as a matter of law though there is no authority so deciding, or as an inference of facts though it is contrary to all probability, we are bound to hold that the £5,000 is to be considered as paid off; and if so paid off it follows that it must be treated as paid off in six months though by the terms of the guarantee a period of two years was contemplated. I cannot draw such an inference either as matter of law or of fact. The true rule is that laid down in Henniker v. Wigg, which is, that accounts rendered are evidence of the appropriation of payments to the earlier items, but that may be rebutted by evidence to the contrary.
In the application of the rule in Clayton’s case, besides its being necessary that the entries of debit and credit should all be in one unbroken account, it is also necessary that the debit entries should represent payments made by the debtor of money which the debtor paying it has a right in law to appropriate to the payment of any debt of his that he pleases; the payment must be of the debtor’s own money, or at least of money over which he has the absolute power of appropriating as he pleases. Now the uncontradicted evidence is that of the items entered in the plaintiff’s ledger to the credit of Scriver’s account therein, not a single one was of any sum of money belonging to Scriver or over which he had any power of appropriation in payment of any debt of his. They were all moneys of the plaintiffs received by him as the plaintiffs’ agent, and upon their account as and for premiums upon policies entered into by them through his agency, and the evidence is that when transmitted by Scriver to the plaintiffs they were respectively transmitted as the premiums paid on such policies, with the nos. of the policies to the credit of which they were respectively to be applied, and the evidence adds that this appears in other books of the
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company than the ledger which was the only one the defendant called for and made use of. That account appears to have been kept for the purpose of showing how Scriver, the plaintiffs’ agent, stood with them on current business; in it were entered the amounts received by discounts of the note for $1,250 and the renewals thereof, which were expressly made for discount purposes, and of other notes also given by Scriver alone for the accommodation of the plaintiffs and their banking purposes, all of which notes were protected by the plaintiffs on maturity. The practice was at the end of each month to insert the amounts transmitted in the month by Scriver as premiums upon new policies entered into by the plaintiffs through his agency and to charge him with the amount of such premiums as appeared to have been received by him and not transmitted. The result of these new transactions was that upon the 1st of January, 1893, Scriver was charged with a sum of $1,098.21 as for premiums received by him since the 1st January, 1890, and not remitted by him. This item was wholly apart from the sum of $1,250 secured by the mortgage as to which sum the evidence was that nothing whatever was paid on account thereof notwithstanding the reduced amounts for which the renewals were taken as before stated.
Upon the 31st July, 1893, the plaintiffs and Scriver seem to have had an accounting of some nature, for it appears that the plaintiffs then consented to deduct from their then claim for such premiums received by Scriver and not transmitted, the sum of $816 and the amount as then agreed by Scriver to be due by him, including the mortgage debt, was $1,926.22. How precisely this sum was arrived at did not appear, but it is apparent, assuming the uncontradicted evidence to be true, that the mortgage debt was not then paid
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off. For this sum of $1,926.22 a new account was opened with Scriver in the plaintiffs’ ledger, in which credit entries are made as in the former account, but which the plaintiffs allege are also entries of sums remitted by Scriver as premiums upon new policies entered into by the plaintiffs through his agency, and have no relation whatever to the debt secured by the mortgage. There seems no reason to suppose that these entries differ in any respect from the like entries in the previous account, but if they do, or if even any of the entries in the previous account should appear to be properly referable to the mortgage, the defendant will have the benefit thereof upon the taking of the account under the ordinary decree of reference to the master in a foreclosure suit. This, as it appears to me, was the proper decree to have been made in accordance with the defendant’s statement of defence. Until the account shall be taken it is impossible to say that any of the moneys remitted by Scriver since the execution of the mortgage were attributable to the mortgage debt. The evidence adduced by the defendant has failed to establish this contention. The learned trial judge declared at the trial that he had no intention to take the account, and in that ruling counsel for the defendant entirely concurred; the result, however, has been that which could only be arrived at upon a taking of the account, and such result not being supported by, but being contrary to, the evidence as adduced by the defendant, all that can be done is to refer the account to be taken by the master, when it will be open to the defendant to adduce, if she can, evidence in support of her contention as stated in her statement of defence.
As to the contention that the estate of the testator Sargeant is discharged from the mortgage debt by time given to Scriver to the prejudice of the surety, Sargeant, there does not seem to be any foundation for this con-
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tention; it rests wholly upon the fact that between the 18th October, 1892, and the 27th January, 1893, Scriver gave to the plaintiffs four promissory notes, but all the evidence which has been given in relation to these notes shows them to have been accommodation notes made by Scriver to be discounted by and for the use of the plaintiffs, and to be retired by them, and that they all have been so retired by the plaintiffs. They don’t appear to have had any reference to the mortgage debt, or to have tied the plaintiffs’ hands in any respect whatever in relation to that debt. The appeal must, therefore, in my opinion, be allowed with costs, and the ordinary decree for taking the account in a foreclosure suit be ordered to be made.
SEDGEWICK and KING JJ. concurred in the judgment of Mr. Justice Gwynne.
GIROUARD J.—I would dismiss the appeal for the reasons given by Mr. Justice Maclennan in the Court of Appeal.
Appeal allowed with costs.
Solicitor for the appellants: John W. Kerr.
Solicitors for the respondent: Dumble & Leonard.
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