Supreme Court of Canada
Vivian & Co. v. Clergue, (1915) 51 S.C.R. 527
Date: 1915-06-24
H.H. Vivian and Company (Plaintiffs) Appellants;
and
Francis Hector Clergue (Defendant) Respondent.
1915: June 16, 24.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Duff, Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Contract—Sale of mining land—Substituted purchaser—Reservation of claim against original purchaser—Forfeiture of second contract—Sale of land to other parties—Effect on reserved claim.
In June, 1903, V. & Co., by agreement in writing, contracted to sell, and C. to buy, mining property for $125,000, to be paid $5,000 down and the balance in annual instalments of $24,000. The $5,000 was paid and in March, 1905, when an instalment was overdue and the second accruing a new agreement was executed, to which C. was a party, for sale of the property to a mining company for the same price and on the same terms. This agreement provided that nothing in it should affect the right of the vendor to claim from C. the amount payable under the original contract up to March, 1905, otherwise the latter was to be merged in the new contract. The mining company made default in their payments and, as provided in their contract, the vendors gave notice that the contract was at an end and, later, sold the property for $75,000. They then took action against C. for the amount unpaid on the original agreement and recovered judgment. After the final sale of the mine C. applied for and obtained from a judge an order declaring that V. & Co. were not entitled to enforce their judgment against him except for the costs. On appeal from the affirmance of this order by the Appellate Division,
Held, affirming the decision of the Appellate Division (32 Ont. L.R. 200) that by extinguishing the interest of the mining company in the land and then selling it V. & Co. had put it out of their power to place C. in the position he was entitled to occupy on making payment and had thus disabled themselves from enforcing their judgment.
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APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario, affirming a judge’s order declaring that plaintiffs were no longer entitled to enforce their judgment against the defendant.
The facts are fully stated in the above head-note.
W.M. Douglas K.C., and Lefroy K.C. for the appellants.
Shepley K.C. and H.S. White for the respondent.
THE CHIEF JUSTICE concurred in the judgment dismissing the appeal with costs,
DAVIES J.—I concur with Mr. Justice Anglin.
IDINGTON J.—The respondent bought from the appellant a mining property for the sum of $125,000 payable by instalments, paid $500 cash and gave his promissory note for $4,500 to complete the cash payment.
The appellant recovered judgment against him on said promissory note and that judgment was paid by him some time before February, 1906.
Meantime he had entered into possession of the property and assigned his purchase to the Standard Mining Company.
Thereupon, on 10th March, 1905, an agreement was entered into between respondent of the first part, the said mining company of the second part, and appellant of the third part.
Therein the foregoing facts, save as to payment of
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said judgment, were recited, and the further facts that the mining company had agreed to assume the payment of said purchase money and all other obligations imposed by the said contract upon the purchaser thereunder and that the parties desired in some respect to modify the terms of said agreement and to define their rights by a more formal document.
Then followed the last three recitals which may help to interpret the clauses of said document now in question and are as follows:—
And whereas the vendors also claim that the party of the third part is personally liable for the sum of twenty-four thousand dollars, a portion of the purchase money, falling due on the 23rd day of June, 1904, and is also liable for a portion of the instalment to fall due on the 23rd June, 1905.
And whereas the party of the third part disputes all personal liability therefor.
And whereas the parties hereto desire in the making of this agreement to reserve all the rights and liabilities both of the vendors and of the party of the third part with respect to the twenty-four thousand dollars which fell due on the 23rd June, 1904, and of the said payment accruing due on the 23rd of June, 1905.
I will refer presently to the operative parts of said agreement thus introduced.
The appellant, on the 27th of June, 1906, commenced an action against respondent to recover the sum of $33,000, being the instalment of the 23rd of June, 1904, and part of that of the 23rd of June, 1905, which are referred to in these recitals I have quoted.
In that action the appellant recovered judgment for $33,556.20, and therefrom respondent appealed unsuccessfully to the Divisional Court and the Court of Appeal for Ontario, and finally to this court.
These decisions are respectively reported in 15 Ont. L.R 280; 16 Ont. L.R. 372, and 41 Can. S.C.R. 607.
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It was contended therein amongst other things, that the property having passed from the appellant, the vendor, by virtue of a tripartite agreement, and it being no longer possible for it to give to the respondent, the vendee, title thereto, the right to recover from the vendee was gone.
This court as well as those through which the case travelled here held that, the respondent, notwithstanding that and other contentions set up, was liable.
It is pressed upon us by Mr. Douglas that the right so maintained cannot now be disturbed by what has since transpired.
The appellant issued execution upon said judgment. The Standard Mining Company failed to pay purchase money as provided by the tripartite agreement above referred to; the appellant proceeded to declare under power therein the agreement null and to re-sell the property for $75,000, and, therefore, the respondent moved to set aside the said execution and obtained the order so asked for saving as to costs; which has been upheld by the Appellate Division of the Supreme Court of Ontario.
It appears to me that the correctness of such holding must turn upon the interpretation to be given the agreement of 10th March, 1905.
That agreement expressly provided for the sale by appellant to the mining company with the usual provisions one would expect to find in such a contract of sale and purchase, plus a few special provisions designed to preserve for appellant the liability of respondent for the parts of the original purchase money in respect of which the judgment has been recovered which is now in question, and at the same time pro-
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vide for its discharge out of the first payments to be made by the mining company.
Clause nine substituted the mining company for the respondent in the original agreement, and that was to be deemed merged in this agreement subject, however, to the provisions next contained.
That is followed by clause ten, reading thus:—
10. It is expressly agreed and understood that this agreement, and anything that may he done hereunder shall not affect or prejudice the claim of the vendors against the party of the third part in respect of the sum of $24,000 which fell due on the 23rd June, 1904; or the payment accruing due on the 23rd June, 1905, or for interest upon the unpaid purchase money up to the date of the said assignment hereinbefore in part recited, nor shall it affect or prejudice the rights of the said party of the third part with respect thereto, but until the purchaser shall pay the first two instalments of $24,000 each, with interest as aforesaid, the rights of the vendors and the party of the third part shall remain as they now are in respect of said instalments and interest.
Clause 12 provided that all moneys paid under this agreement shall in the first place be applied towards the discharge of said judgment (being that on the $4,500 note) and then towards the discharge of the claim of the vendors against the respondent in respect of which their rights have been thereinbefore reserved, being manifestly the claims referred to in clause 10, which are now in question.
The judgment first referred to as already stated has been paid and hence out of the way.
Nothing seems to have been paid on the purchase by the mining company.
Clause 8 of the agreement provided that upon such default as thereby occurred the appellant might forfeit the agreement by giving a month’s notice; which on the default that took place was duly given. Then it
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was declared that upon such forfeiture this agreement shall be null and void.
Is there any answer to that realized result of what was contemplated? If null and void thereby, is not the respondent in the same position as if the agreement never existed? Is the relation between the parties hereto not left as it was originally of vendor and vendee with a judgment in favour of the former against the latter? Is not the contemplated merger of the original agreement in this later one at an end? Was it not a conditional merger?
The suggestion is certainly a legal curiosity, but how otherwise can we give effect to the purpose of the parties?
Can we say the agreement stands despite this declaration of its nullity?
It was quite competent for the parties to have provided instead thereof that the appellant should be at liberty to resell the property. In that case the liability of the respondent as determined in the litigation to which I have adverted might have to be considered as finally determined and the result, it might in such event, have been argued, was that as he had assented to this sale to the mining company, he could not complain that his right as vendee had been infringed and he, therefore, entitled to be relieved as he claims herein.
But if this agreement and all therein is to be treated as null and void, surely the parties are restored to their original position as vendor and vendee, the original contract of sale and purchase and the judgment now in question standing for part of the purchase money. In that case it seems clear the relief
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given below is what respondent as vendee is entitled to.
If the re-sale had taken place by virtue of a provision in the later agreement, some very interesting questions might still have arisen. Such as in that case was he to be held only a surety for the mining company, or in some such sort of position entitled to relief over against that company and thereby entitled to claim subrogation in some way I need not pursue.
My construction of the agreement as result of the foregoing analysis is that all it stood for is at an end and respondent entitled under the authorities to the relief he sought and got. I cannot see my way to holding the declaration of intended merger of such a character as to dominate all else in the agreement. It was not so argued.
The appeal should be dismissed with costs.
DUFF J.—What is the meaning of Clergue’s being personally liable notwithstanding anything “done” under the agreement? It would be an extreme construction to hold that Clergue’s obligation which would be a secondary obligation should persist notwithstanding the fact that the primary obligation had been destroyed. The clause was no doubt intended to deprive Clergue of some of the defences ordinarily open to a surety in consequence of an agreement between a creditor and the primary debtor—giving time to the debtor for example. I think the construction proposed by which Clergue’s obligation is held to continue after the primary obligation has been wiped out must be rejected.
It is necessary to note very distinctly that no ques-
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tion is raised as to the validity and effectiveness of the so called forfeiture. The appellant is insisting upon the forfeiture and the vendee is not disputing it. The result of the appellant’s contention if successful would be that Clergue would be entitled to enforce his indemnity against the assignees and in that way the assignees would be compelled to pay an unpaid instalment after the contract had been put an end to. That would be a fraud on this contract.
ANGLIN J.—Upon the assignment to the Standard Mining Company of his contract to purchase from the plaintiffs the defendant became entitled to be indemnified by his assignees against liability under it. The right of indemnification carried with it a right, in the event of his being called upon to pay the plaintiffs, to a lien for the sum so paid on the Standard Mining Company’s interest in the land, or to subrogation pro tanto to the rights of the plaintiff’s under their vendors’ lien. Vivian & Co. v. Clergue. By a subsequent agreement, to which the plaintiffs, the defendant, and the Standard Mining Company were parties, the liability of the defendant to pay two instalments of purchase money due under his original agreement, and now in controversy, was expressly preserved, as were also his rights with respect thereto, and it was declared that the rights of the vendors and of the defendant should
remain as they now are in respect of said instalments and interest.
Amongst such rights were those incident to the position of quasi-surety to the plaintiffs, which the de-
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fendant held, for payment to them by the Standard Mining Company of these instalments of the purchase money.
Judgment was recovered against him in the present action for the two instalments in question, which the Standard Mining Company had failed to pay. Before realizing on this judgment, the plaintiffs, exercising a power conferred by their agreement with the Standard Mining Company, annulled their contract for sale to that company by notice to them. Without any notice to the defendant they subsequently sold the land thus forfeited to another purchaser for $75,000—$50,000 less than the sale price to the Standard Mining Company. The defendant claims that he was thereby discharged from his liability to the plaintiffs and that execution on the judgment against him, still unsatisfied, should be stayed except as to costs; and his right to that relief has been upheld in the provincial courts.
By extinguishing the interest of the Standard Mining Company in the land and re-selling it, the plaintiffs have put it out of their power to place the defendant in the position he was entitled to occupy upon making payment in fulfilment of his obligation as surety. Having done so they, in my opinion, disabled themselves from enforcing their judgment. Indeed, by annulling their contract with the Standard Mining Company they would seem to have extinguished the defendant’s liability for any moneys not already paid, although judgment had been recovered for them. The liability of the principal debtor, the Standard Mining Company, no longer existed and with it the liablity of the surety also ceased. An unsatisfied judg-
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ment against the principal debtors for purchase money could not have been enforced after the vendors took back the land. Cameron v. Bradbury; Gibbons v. Cozens; McPherson v. U.S. Fidelity Co. The surety’s position must be at least equally favourable. The former judgment in this action affords no support to the plaintiffs’ contention in this appeal. No question such as that now before us was, or could have been, then presented for consideration.
The appeal fails and should be dismissed with costs.
BRODEUR J.—By their agreement of the 10th of March, 1905, the appellants sold to the Standard Mining Company of Algoma certain property with the condition that upon default of payment of the purchase price the appellants could rescind the agreement which would then become null and void.
The appellants having exercised that power of rescission, the contract was put an end to and they could not afterwards claim the payment of the purchase money from the purchasers.
The same property had been previously sold to the respondent, but he failed to pay the instalment that became due in June, 1904, and it was agreed then between the appellants and the respondent that the property would be re-sold for the same price to the Standard Mining Company and the agreement of the 10th March, 1905, was then passed for that purpose. It was stipulated that the
agreement and anything that may be done hereunder shall not affect or prejudice the claim of the vendors against the party of the third
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part (Clergue) in respect of the sum of $24,000 which fell due on the 23rd June, 1904, * * * nor shall it affect or prejudice the rights of the said party of the third part with respect thereto, but until the purchasers (Standard Mining Company) shall pay the first two instalments of $24,000, etc.
We have to construe the agreement and specially the clause just quoted.
There is no doubt that the respondent was bound to pay the sum of $24,000. He tried to dispute that liability, and this court decided against him. But the appellants having thought advisable to rescind the contract because the payments were not properly made, can they still claim from the respondent the payment of those $24,000?
The cancellation of the contract has put an end to the right of the vendors to claim the payment of the purchase money. But they say that the obligation of Clergue did not cover any part of the purchase money. I cannot accede to such a proposition. I consider that Clergue was surety for a part of the purchase price, and as the vendors cannot, after the rescission of the contract of sale, claim any part of the purchase money from their purchasers, they could not proceed also against the surety.
We must not forget also that it was formally stipulated in the agreement that the whole agreement would become null and void in case the vendors would exercise their right to rescind. The nullity which is stipulated would affect all the obligations mentioned in it, not only the obligations of the purchasers, but also the obligations of Clergue.
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The judgment a quo which declared that the appellants could not recover from the respondent is well founded and should be confirmed with costs.
Appeal dismissed with costs.
Solicitor for the appellants: A.H.F. Lefroy.
Solicitors for the respondent: Macdonald, Shepley, Donald & Mason.
16 Ont. L.R. 372, at p. 379.
Clergue v. Vivian & Co., 41 Can. S.C.R. 607.
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