Supreme Court of Canada
Banque Canadienne Nationale v. Tencha, [1928] S.C.R.
26
Date: 1927-10-10
Banque Canadienne
Nationale (Plaintiff)
Appellant;
and
John Tencha, Joseph Tencha and Ignace Tencha (Defendants);
and
Irene Tencha
(Claimant) Respondent.
1927: May 6, 9; 1927: October 10.
Present: Anglin C.J.C. and Duff, Mignault,
Newcombe and Rinfret JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR
MANITOBA
Fraudulent conveyance—Husband and wife—Farm
transferred by husband to wife, both continuing to occupy and work it—Grain
grown thereon subsequent to transfer seized under execution against
husband—Grain claimed by wife—Interpleader—Relevancy of evidence of
circumstances of transfer—Transfer alleged to have been in fraud of
creditors—Effect as to right to the grain—Exemption—Married Women’s Property
Act, R.S.M. 1913, c. 123, ss. 5, 2 (b), 14—Real Property Act, R.S.M. 1913, c.
171, s. 79—Executions Act, R.S.M. 1913, c. 66, ss. 29, 34—Apportionment of
costs.
T., who had bought a farm under agreement of
sale, transferred his interest therein (and also his stock and farming
implements) to his wife, who subsequently obtained title from the vendor and
became the registered owner. The consideration of the transfer was expressed to
be natural love and affection and $1. T. and his wife continued to occupy and
work the farm as formerly. Plaintiff recovered a judgment
[Page 27]
against T., and under execution issued
thereon the sheriff seized certain grain which had been grown on the farm since
T.’s wife became the registered owner and which grain had been shipped in her
name. T.’s wife claimed the grain.
Held (reversing
in part judgment of the Court of Appeal for Manitoba, 36 Man. R. 135, and
restoring in part judgment of Macdonald J., ibid; Anglin C.J.C. and
Mignault J. dissenting): The trial judge’s finding that the transfer was made
to defraud TVs creditors should be affirmed; (held, that the evidence
presented as to this was open to consideration, having regard to the form of
the issue and the course of the trial); therefore (subject to the effect of the
Executions Act, Man.) the transfer was void as against them, and as
against the sheriff representing them, even though as between T. and his wife,
it may have been intended to operate irrevocably as an absolute gift, and, the
conveyance being voluntary, it made no difference whether it was a sham or not;
hence the creditors could look to T. as having the equitable and beneficial
title to the farm, to which the possession and right to the crops were incident
(applying the rule derived from the Roman Law, by which, at least as against a
purchaser other than a bona fide possessor, the owner of the principal
thing becomes the owner also of the fruits; and not adopting the law as stated
in certain cases resting upon Kilbride v. Cameron, 17 U.C.C.P.,
373, which case is discussed). T.’s wife could not justify her claim upon the
evidence that she directed the farming operations and contributed to the
necessary labour in which T. was also engaged. The grain was, therefore, liable
to seizure under plaintiff’s execution, but subject to the Executions Act, R.S.M.
1913, c. 66. The effect of that Act was to exempt from such seizure the grain
grown on 160 acres of the farm. The grain seized was the product of 150 acres
of wheat and 100 acres of rye, and, having regard to the choice allowed the
judgment debtor under the Act (which choice the claimant might justly exercise)
the exempted grain should be fixed as comprising all the wheat (the more
valuable grain) and 1/10 part of the rye. Costs of the interpleader order to go
to plaintiff; all other costs in all courts to be apportioned pro rata according
to the value of the grain as to which the parties respectively succeed (Dixon
v. Yates, 5 B. & Ad. 347, and other cases, referred to).
Per Anglin
C.J.C. and Mignault J. (dissenting): The wife, after the transfer to her,
actually carried on the farming operations on her own account and without her
husband having any “proprietary interest” therein or control thereof. The grain
was “property acquired” by her in an “occupation in which she is engaged or
which she carries on separately from her husband, and in which her husband has
no proprietary interest” within s. 2 (b) of the Married Women’s
Property Act, R.S.M. 1913, c. 123. As to the bona fides of her claim
in that respect, evidence of the circumstances under which she acquired the
farm was admissible. But, once it is found that she so carried on the farming
operations, the facts that the transfer of the farm to her was fraudulent and
void as against her husband’s creditors (if a finding to that effect was
justified) and that the husband resided on the farm and aided in the farming,
did not prevent her from claiming the crops grown as her own to the exclusion
of his creditors (Kilbride v. Cameron, 17
[Page 28]
U.C.C.P. 373, and Standard Trusts Co. v.
Briggs, [1926] 1 W.W.R. 832, approved on this point). S. 14 of the Married
Women’s Property Act had no bearing on the question in issue.
APPEAL by the plaintiff (by leave of the
Court of Appeal for Manitoba) from the judgment of the Court of Appeal for
Manitoba which,
by a majority, reversing the judgment of Macdonald J., held that the grain referred to in the
interpleader order herein, was, at the time of the seizure thereof by the
sheriff, the property of the claimant as against the plaintiff, and was not
liable to seizure under the writ of execution issued on behalf of the plaintiff
against the defendant Ignace Tencha, husband of the claimant. The material
facts of the case are sufficiently stated in the judgment now reported.
N. A. Belcourt K.C. for the appellant.
H. A. Bergman K.C. for the respondent.
The judgment of the majority of the court (Duff,
Newcombe and Rinfret JJ.) was delivered by
Newcombe J.—The appellant, formerly known as the Banque d’Hochelaga, obtained
judgment in the Court of King’s Bench of Manitoba against the defendant, Ignace
Tencha, on 25th July, 1924, for $1,643.34 debt, and $51.80 costs, upon a
promissory note which had been given to the bank by the defendant, John Tencha,
and guaranteed by the defendants, Joseph Tencha and Ignace Tencha. The
liability was originally contracted by these parties by a promissory note of
7th August, 1922, which in the interval had been renewed from time to time.
Execution was issued upon this judgment on 22nd August, 1924, and was subsequently
renewed for two years from 19th August, 1926. The writ was delivered to the
sheriff of the Eastern Judicial District of Manitoba, who was directed to levy
the amount. The bank, at the same time, held other judgments amounting to a
considerable sum against Ignace Tencha. He was a farmer residing, with his
wife, Irene Tencha, the claimant, and adopted children, on a farm in Manitoba known in the case as the Johnston farm, consisting of the west half
of section 19, township 8, range
[Page 29]
3, East, which they had occupied and worked
since January, 1918, when it was bought by the husband from Hugh Johnston, who
appears to have been the registered owner of the farm, subject to a mortgage to
the Great West Life Assurance Company for the principal sum of $6,500. Johnston says he sold the farm to Ignace
Tencha for $15,000] and received a cash payment on account of
$1,600. It is said also that the sale included some stock and farming machinery
or implements; the agreement was in writing but the writing is not produced. It
appears, however, as will be shown, that Johnston, while he retained the legal
title, received the crops of grain which were grown upon the land, and that the
proceeds, in considerable part at least, went in reduction of the purchase
price, of which the amount due upon the mortgage formed part.
On 15th November, 1922, Ignace Tencha, the
judgment debtor, gave a deed to his wife whereby he granted, released and
quitted claim to her all his “estate, right, title, interest, claim and demand
whatsoever both in law and in equity” in the Johnston farm for the expressed
consideration of natural love and affection and the sum of $1. At the same
time, and for the like consideration he gave her a bill of sale of all his stock
and farming implements. The learned trial judge found that “at this time the
husband was heavily involved financially to the knowledge of his wife, and, by
the giving away of his lands and chattels, he was stripped of every possible
available means or power of satisfying his creditors”; and that the transfers
were executed “for the purpose of defrauding creditors of the husband by
preventing the recovery of their claims against him.”
Mrs. Tencha, having thus acquired her husband’s
interest in the farm, concluded an arrangement with Johnston, who had the legal
title, whereby he transferred his title to her in consideration of the
assignment of a mortgage of $900, which she had upon the property of one
Sawchuk, and it is said that she agreed to assume the Great West Mortgage, upon
which the principal still remained unpaid. The registered title to the Johnston
farm is proved by the deputy district registrar, and it appears by his evidence
that Johnston transferred to
Mrs. Tencha on 22nd April,
[Page 30]
1924, subject to the mortgage, and that there is
a certificate of title outstanding in her name.
After the transfer by the husband to his wife,
they continued to reside on the farm and to work it as formerly, she doing a
man’s work on the place, as she had been accustomed to do. There is evidence
that she was the better manager, and that she planned the farming operations.
The husband was not called.
On 18th November, 1925, grain grown during
that season upon the Johnston farm was shipped in three cars in the name of
Mrs. Tencha from Cartier Siding in Manitoba, consigned to the Manitoba Wheat Pool, an institution of which Mrs.
Tencha seems to have been a member. In one of these cars, no. 321371, there
were 1,052.30 bushels of damp rejected 2 C.W. Amber Durum Wheat; in another,
no. 310797, 1,145.50 bushels tough rejected 3 C.W. Amber Durum Wheat, while the
third car, no. 406159, contained 632.52 bushels net brake and damp rejected Rye. It was upon this grain that the
Sheriff proposed to levy the amount of the plaintiff’s execution against the
judgment debtor, Ignace Tencha, the plaintiff claiming that the grain was
liable to answer the judgment debt notwithstanding the transfers to Mrs. Tencha
and her certificate of title; Mrs. Tencha, however, claimed the property as her
own, and the sheriff, on 5th December, 1925, obtained an interpleader order
directing that the plaintiff and the claimant should proceed to trial of an
issue in the Court of King’s Bench at Winnipeg wherein the bank should be
plaintiff, and that the question to be tried should be whether the grain
shipped
from Cartier Siding in Manitoba on or about the 18th day of
November, 1925, in railway cars Nos. C.N 321371 and C.N. 310797, consigned to
The Manitoba Wheat Pool, and that part of the grain in car No. 406159, claimed
by the above named Irene Tencha, is liable to seizure under the writ of Fieri
Facias herein as against the claim of the said Irene Tencha.
This issue was accordingly tried, and the trial
judge found for the plaintiff, but his judgment was reversed by the Court of
Appeal, two of the learned justices dissenting.
There was considerable discussion in both courts
about the Married Women’s Property Act, and there is in the respondent’s
factum an elaborate review of the provincial decisions interpreting the various
acts, although it is not denied on either side that the legislation confers
upon the
[Page 31]
wife adequate capacity to acquire and hold the
property; Married Women’s Property Act, R.S.M., 1913, ch. 123, ss. 3 et
seq. It is however expressly declared by s. 14 that:.
nothing in this Act contained shall give
validity as against creditors of the husband to any gift by a husband to his
wife, of any property, in fraud of his creditors,
and, that being so, I apprehend that while Mrs.
Tencha acquired title to the land conveyed by her husband and by Johnston, as
to which she subsequently obtained a certificate of title, that title,
notwithstanding anything in the Married Women’s Property Act, remained
subject to the infirmity by which it was affected by reason of the statute, 13
Elizabeth, c. 5. Section 79 of the Real Property Act, R.S.M. 1913, c.
171, which provides that a certificate of title, while in force, shall be
conclusive evidence in law and in equity that the person named is entitled to
the land described therein for the estate or interest therein mentioned, is
also expressed to be subject to the right of any person
to show fraud wherein the registered owner,
mortgagee or encumberancer (sic) has participated or colluded and as
against such registered owner, mortgagee or encumbrancee; but the onus of
proving * * * such fraud shall be upon the person alleging the same.
It follows from these enactments and from their
interpretation as affirmed in the judgment of this court in Fraser v. Douglas, that, in the absence of fraud, the conveyance by Ignace Tencha to
his wife would have been effective as against his creditors. I shall assume,
then, that if the conveyance had not been fraudulent, the wife would have had a
vindicable right to the crops; and therefore, if this action is to succeed, it
must be because it is established that, as against the husband’s creditors, the
conveyance of the farm by the husband to the wife was fraudulent, and that the
husband, as the owner of the land, was also the owner of the grain as to which
the right of seizure is now in question.
I have read the evidence and judgments very
attentively, and I entertain no doubt in the result that the findings of the
learned trial judge upon the facts should be allowed to stand, except in so far
as they are affected by the Executions Act, to which I shall presently
refer. It would, of course, have been more satisfactory if the written
agreement
[Page 32]
between Johnston and Ignace Tencha had been
produced, or if there had been acceptable proof of its contents, particularly
with relation to the crops, because it seems that, although after the agreement
the crops were raised by the Tenchas, they were shipped by Johnston, who
received them and their proceeds, and made the payments which were made
thereout. Johnston, who was called for the claimant, in direct examination
says:
Mr. Bowles:
Q. How were their payments made
during the first four years. Did they make them promptly?
A. Yes. We just shipped the grain, and I
looked after the grain for them. Mrs. Tencha doesn’t know very much English,
and she shipped the grain, and it went to the Station.
Q. There was a mortgage to the Great West
Life?
A. Yes. They assumed it, and I paid it.
His Lordship:
Who did you sell to?
A. To the Tenchas, Irene and Ignace.
Q. Was your agreement with both of them?
A. No. It was drawn in Ignace Tencha’s
name—I am not sure.
Mr. Bowles:
Q. You made the payments to the Great West Life on that mortgage?
A. Yes.
Q. And you handled the grain yourself, you
say?
A. Yes.
Q. Was there any dissatisfaction on the
part of the Great West Life Assurance Company, about the money that they were
getting?
A. No, except they complained one year
because they didn’t get the money, because we were holding the grain to try and
get the higher price in the spring, which Mrs. Tencha thought we should do.
* *
* * * *
Mr. Bowles:
It is an agreement in writing between yourself and Ignace Tencha?
A. Yes.
Q. It provided for the payment—the
instalments?
A. Yes, it does.
Q. Have you a copy of that agreement?
A. No. I didn’t bring it here, no.
Q. You haven’t got it with you now?
A. No, I didn’t bring it here, of course.
And further in cross-examination:
His Lordship:
You sold the property for $15,000?
A. Yes.
Q. And you got $1,500 in cash?
A. Yes.
Q. And you got this $850 mortgage?
A. Yes.
Q. And they assumed the mortgage for about
$7,000?
A. $6,500 I think it was.
Q. You had about $6,000 coming to you?
A. I had. I was getting a share of the
grain during this time, and I applied that on my agreement, of course.
[Page 33]
Mr. Bergman:
Did you get any payments from Ignace Tencha direct, on your agreement, apart
from the cash payment?
A. No.
Q. All the rest of the payments that you
got on the agreement until Mrs, Tencha took it over, were, what you realized by
taking possession of the crop each year?
A. Yes.
Ignace Tencha, as I have said, gave no evidence.
He was not called by either side. Mrs. Tencha, in her examination for
discovery, speaking of the Johnston farm and the period before she received the conveyance from her
husband, had said:
Q. And he was putting in the seed?
A. Yes.
Q. That time he was looking after it
himself?
A. Yes, he was boss.
Q. He was boss at that time?
A. Yes.
Q. He got the money from the crop?
A. When?
Q. He got the money from the crop that
time?
A. Yes.
Q. He sold the wheat?
A. Yes.
Q. And got the money?
A. Yes.
And, when called at the trial on her own behalf,
she said:
Q. Did you have any conversations with him
about the buying of the land, that is, with Mr. Johnston, I mean?
A. Yes, I had.
Q. What conversations did you have? What
was said?
A. After my husband bought the land I told
Mr. Johnston to sell the crop and take the money.
This evidence suggests that the annual crops may
have been the subject of some stipulation in the agreement of sale, and that Johnston evidently had an interest in them.
It is, of course, a necessary part of the plaintiff’s case to show that they
belonged to Ignace Tencha under a title which could be upheld in competition
with that of Mrs. Tencha, who succeeded to Johnston’s rights under his
agreement of sale when he conveyed the property to her in 1924; but that burden
was prima facie satisfied by the proof of Tencha’s title and possession
upon which the plaintiff relied, and when the transfer from Tencha to his wife,
under which she claimed the crops, was shown to be void against
[Page 34]
the plaintiff, and when she introduced the
evidence which I have quoted, if the purpose were to show that she had derived
title to the crops as the assignee of Johnston, I think it was incumbent upon
the claimant to prove the Johnston agreement; it was in her possession, or in
that of Johnston under whom she claimed, and she was therefore in a position to
produce it, and no doubt would have done so if its provisions had been
favourable to her claim. Therefore I think it must be taken that, as between Johnston or his assignee and Ignace Tencha,
the crops belonged to the latter.
Then, if the transfer by Ignace Tencha to his
wife were, as is found, fraudulent and void against his creditors, has Mrs.
Tencha nevertheless a right to the grain subsequently grown upon the land? The
Court of Appeal answers this question in the affirmative, relying upon the
cases of Kilbride v. Cameron,
and others to which I shall refer. Kilbride v. Cameron
was heard before two judges of the Court of Common Pleas of Ontario, Adam
Wilson J. and John Wilson J., on appeal from Richards C.J., the Chief Justice
of that court. It was an interpleader issue to try whether the crops mentioned
below were the property of the claimant as against the defendant, who was an
execution creditor of John Kilbride, the claimant’s father. There were
twenty-four acres of hay in stack, also sixteen acres of wheat and four acres
of peas growing upon a lot which John Kilbride, the former owner, had conveyed
to one of his sons, either Thomas or another who conveyed it to Thomas, who
devised it to his brother Patrick, who conveyed it to the claimant. Patrick had
got the land subject to a mortgage; the maintenance of his father and mother; a
small annuity to them during their lives, and other charges, and he had
conveyed to the claimant subject to these. The consideration of the deed from
John Kilbride was that his son should pay him $500, and also pay his debts. It was
contended at the trial that all these conveyances and transactions were
fraudulent and voluntary and not intended to pass the land in fact, but the
Chief Justice was of opinion upon the evidence that there was an intention to
pass the property in the land, and that there
[Page 35]
was no evidence upon which the jury could be
satisfied that the intention was otherwise. He was also of the opinion that
even if the conveyances were fraudulent, still the grain and crops raised upon
the land by the plaintiff or his brothers by their labour and at their expense
could not be taken in execution to satisfy the father’s debts and he directed a
verdict for the plaintiff. Upon motion for a new trial, A. Wilson, J.,
considered that, even if the transactions relating to the land were not valid
as to the creditors of the father, that would not determine the right of
property to the crops in question, because it was shown that the father did not
raise the crops nor furnish the means for doing so, and that the labour and means
were contributed by the sons alone. He thought that, assuming the deed to be
fraudulent, the sheriff’s right to seize the crops depended upon whether John
Kilbride, the judgment debtor, had contributed to the expense of raising them.
He proceeded to say, moreover, that the burdens imposed by the devisor upon the
devisee, and which the devisee assumed to discharge, constituted an actual and
valuable consideration which would support the prior fraudulent deed, unless
both devisor and devisee could be charged with notice of the fraudulent object,
and he concluded upon the evidence that the crops were the sole property of the
plaintiff as against the execution creditor. J. Wilson J., on the other hand,
considered that the evidence rather pointed to the fact that the conveyances
were colourable, and that the crops therefore belonged to the father, and he
thought there should be a new trial. The report adds that Richards, C.J.,
expressed an opinion in favour of the view of A. Wilson J., but took no part in
the judgment, as he had not been present at the argument, and that, the court
therefore being equally divided, the rule could not be discharged, and the
verdict consequently stood. There is thus nothing conclusive about this case,
even for the court by which it was decided. In Johnston Lumber Co. v. Hager
(1), Clarke
J.A., delivering his judgment of the Appellate Division of the Supreme Court of
Alberta, quotes with approval the judgment of J. Wilson J., in Kilbride v.
Cameron; and,
in Standard Trust Co.
[Page 36]
v. Briggs,
Harvey C.J., of the same court, refers to these cases as showing that, if the
conveyance of the land were fraudulent, the crops raised for the transferee do
not belong to the transferor. Newlands, J., expressed the same view, citing Kilbride
v. Cameron, in Massey-Harris
v. Moore, and in Cotton v.
Boyd. Thus
all these cases, for which no other authority is cited, rest upon Kilbride
v. Cameron, a very indecisive case, the reasoning
of which, moreover, depends upon facts the opposite of those now in proof. I
prefer to apply the rule derived from the Roman Law, by which, at least as
against a purchaser other than a bona fide possessor, the owner of the
principal thing becomes the owner also of the fruits. Here there was no case of
bona fide possession, because it was at the instance and by the
contrivance of Mrs. Tencha that she received the voluntary conveyance, and, as
to the possession in fact, husband and wife continued thereafter to occupy and
work the premises as they had done before. It is laid down in Blackstone’s
Commentaries, Vol. II, p. 404, that
The doctrine of property arising from
accession is also grounded on the right of occupancy. By the Roman Law, it any
given corporeal substance received afterwards an accession by natural or by
artificial means, as by the growth of vegetables, the pregnancy of animals, the
embroidering of cloth, or the conversion of wood or metal into vessels and
utensils, the original owner of the thing was entitled by his right of
possession to the property of it under such its state of improvement; but if
the thing itself, by such operation, was changed into a different species as by
making wine, oil, or bread, out of another’s grapes, olives, or wheat, it
belonged to the new operator; who was only to make a satisfaction to the former
proprietor for the materials, which he had so converted. And these doctrines
are implicitly copied and adopted by our Bracton, in the reign of King Henry
III; and have since been confirmed by many resolutions of the courts.
This passage is reproduced with some enlargement
in Stephen’s Commentaries, 17th ed., Vol. II, p. 525, including the statement
that even when the offspring or produce is separated from the principal
corporeal object it still belongs to the owner of the latter. It must therefore
follow, since the judgment debtor’s conveyance of the land was void when
brought into competition with the claims of his creditors, that it should, for
the purpose of adjudicating
[Page 37]
their rights, be treated as frustrate and not existing,
and then it comes to this—that Tencha had the equitable or beneficial title, to
which the possession and right to the crops was incident, while his wife, after
she had obtained the legal title from Johnston, had the rights that the latter
would have had if he had not conveyed to her. She cannot, I think, justify her
claim upon the evidence that she directed the farming operations and
contributed with her own hands to the necessary labour in which her husband was
also engaged.
It is argued, and I think held by some of the
judges of the Court of Appeal, that evidence should not have been admitted to
prove that the transfer from Ignace Tencha to his wife was fraudulent, and the
case of Donohoe v. Hull et al in this Court, is cited; but, looking to the form of the
issue, which was settled by agreement between counsel, and having regard to the
course of the trial, I think the case as presented must be considered, seeing
that the character of the conveyance was regarded by the parties throughout as
a question of fact upon which the right of seizure depended. Fullerton J.A.,
who delivered the dissenting judgment in the Court of Appeal, states that:
On the trial, counsel for defendant
objected to all evidence tendered with a view to showing that the transfer of
the land from the husband to the wife was fraudulent against creditors.
He considers, however, for the reasons which he
gives, that the evidence was relevant to the issue and therefore admissible.
But I think that the learned judge was mistaken in supposing that such an
objection was taken. I do not find it noted in the record; on the contrary,
when the bank manager was being examined for the plaintiff at the very outset,
and was asked to prove some promissory notes which had been given by Ignace Tencha,
claimant’s counsel said:
I object to this on the grounds that it is
in reference to some dealings between the bank and Ignace Tencha.
Then, upon the discussion which followed,
plaintiff’s counsel having stated that he was attacking the transfer as fraudulent
as against the creditors, there was no answer on the part of the claimant’s
counsel to that contention, and the judge intimated that he would allow the
evidence. The trial proceeded without further reference to the point,
[Page 38]
and a great part of the testimony, and of the
subsequent discussion in the case, is taken up with the question as to whether
or not the transfer was fraudulent. It was held by Ritchie C.J. in Royal
Insurance Company v. Duffus,
following a similar ruling of Lord Denman in Rex v. Grant, that.
When evidence is tendered the judge and
opposing counsel are entitled to know the ground on which it is offered, and
none can be urged on appeal that has not been put forward at the trial.
This ruling expresses a sound principle, well recognized
in practice. If the conveyance be fraudulent the sheriff has the right and is
compellable to seize, and the question of fraud is therefore one which enters
into the very heart of the issue. It is no more immune from trial in
interpleader proceedings than any other material fact.
It has always been common practice to determine,
in an action against the sheriff for conversion or for a false return, the
character and effect of a conveyance alleged to be fraudulent against
creditors. It is not necessary to invoke the jurisdiction of the court to
declare the conveyance void or to set it aside. In Baron Parke’s well known
judgment in Imray v. Magnay,
he says:
The conclusion to which we have arrived is,
that where there are goods seized under a former writ, founded on a judgment
fraudulent against a creditor seeking to enforce a subsequent execution, and
such goods remain in the hands of the sheriff, or are capable of being seized,
the sheriff is compellable to seize and sell such goods under that subsequent
execution; and this by virtue of the statute 13 Eliz. c. 5. (His Lordship read
the second section of that statute). The judgment is by the statute made void
against creditors, but by implication it is void against a sheriff, who acts in
right of a creditor; as a deed is, which is fraudulent against creditors; Turvil
v. Tipper. And
it is now of frequent occurrence that the sheriff is bound to take goods which
have been fraudulently conveyed or assigned to defeat creditors, and is
responsible in an action for a false return at the suit of a creditor; and the
statute seems to us to put both on the same footing. The creditor has no other
way of avoiding the judgment, than by enforcing his execution for his debt,
notwithstanding an execution upon it; or by application to the equitable
jurisdiction of the court to set it aside, which we apprehend has arisen in
comparatively modern times; and whatever right the creditor had at the time of
the statute he has now.
The issue under the Interpleader Rules is
devised as a convenient means to enable the sheriff and the parties to have the
question determined as to whether the sheriff is
[Page 39]
compellable to seize and sell the goods, and for
the information of the court the issue is framed to include all questions which
arise as to the title. There are no pleadings, and when the parties and the
court understand, as they did in this case, that the object is to ascertain
whether or not the conveyance upon which the claimant relies was fraudulent as
against the creditors of the judgment debtor, the trial ought, I should think,
to proceed upon that footing. In any event, it is, I think, too late to object
upon appeal that there was a mistrial because the fraud was not pleaded.
It is suggested, if not held by the Court of Appeal,
that the transfer cannot be attacked by the sheriff if it be intended to
operate between the parties—that it must be shown to be a mere sham or device
for keeping off the sheriff. But it is, I think, certain, and it is unnecessary
to quote cases for the proposition, that a deed, like that of Ignace Tencha to
the claimant, made without valuable consideration and with the intention of
defeating the grantor’s creditors, is void as against them, and as against the
sheriff representing them, although, as between grantor and grantee, it be
intended to operate irrevocably as an absolute gift. Transfers of that nature
are not to be confounded with those which were intended to prefer one or more
of the grantor’s creditors, or to avoid an execution by granting such a
preference. Although the debtor’s right of preference has been abrogated or
modified by the Bankruptcy Acts or other statutes, it was admissible by Common
Law, and was not affected by the Statute of Elizabeth, and a conveyance
creating preferences was therefore formerly good, subject however to be avoided
if it were shown to be a mere sham or pretext to keep off an execution and to
enable the debtor to have the property back again; that, in a proper case, was
a question for the jury, but it does not arise in a case like the present,
which involves no question of preference, and where the purpose is to put the
property out of reach of the creditors. Such a conveyance does not operate
against them, sham or not. Twyne’s case;
Riches v. Evans.
[Page 40]
There is, however, difficulty in the plaintiff’s
way arising out of a point which does not appear to have been raised in the
courts below nor by the respondent’s factum, and which nevertheless has been
pressed in this Court without any objection on the ground of prejudice. In any
case, it invokes a statutory rule and the Court is bound to consider it. It is
declared by s. 29 of the Executions Act, R.S.M., 1913, ch. 66, that:
The following personal and real estate are
hereby declared free from seizure by virtue of all writs of execution issued by
any court in this province, namely, * * * *
(h) the land upon which the judgment
debtor or his family actually resides or which he cultivates either wholly or
in part, or which he actually uses for grazing or other purposes;
Provided the same be not more than one
hundred and sixty acres; in case it be more, the surplus may be sold, subject
to any lien or encumbrance thereon.
And by s. 34, it is provided that:
The judgment debtor shall be entitled to a
choice from the greater quantity of the same kind of property or articles which
are hereby exempted from seizure.
It is said in the appellant’s factum that the Johnston farm was a 240 acre farm, but I
see no evidence in support of that statement. The farm appears to have
consisted of 320 acres, that is the statutory complement of a half section, and
Mrs. Tencha says that in 1925 they sowed on the Johnston farm 150 acres of
wheat, 20 acres of oats, and 100 acres of rye. She says, moreover, that there
were 30 acres not worked or ploughed, and that the farm comprised in all 320
acres. This leaves 20 acres, the use of which is unaccounted for. The issue to
be determined is whether the wheat and rye are liable to seizure under the
execution: but transfers of property which is not available to creditors are
not, I take it, avoided by the Statute of Elizabeth. Therefore I think the
Statute may be taken as declaring, in its application to the case, that the 150
acres of wheat and 10 acres of rye are exempt, because the judgment debtor
having a choice, which it would seem to be just that the claimant should
exercise, would naturally elect for the exemption of the more valuable part of
the crop. The plaintiff can therefore in these circumstances succeed upon the
issue only as to nine-tenths of 632.52 bushels net brake and damp rejected rye.
As to so much the plaintiff appears to be entitled to the proceeds.
[Page 41]
The plaintiff should have the costs of the
interpleader order; and, as the costs with relation to the wheat and the rye
are not separable upon any other basis, all other costs in all Courts should be
apportioned pro rata according to the value of the grain as to which the
respective parties succeed. Dixon v. Yates; Lewis v. Holding; Clifton v. Davis;
Annual Practice 1927, p. 1336.
The judgment of Anglin C.J.C. and Mignault J.,
dissenting, was delivered by
Anglin C.J.C.—In this interpleader issue the question for determination is
whether the grain seized by the sheriff under a writ of fieri facias issued
by the plaintiff (appellant) against the lands of Ignace Tencha was liable to
such seizure against his wife, Irene Tencha, the defendant.
The grain when seized was upon cars of the
Canadian National Railway consigned to the Manitoba Wheat Pool by Irene Tencha,
who was a member of that organization. It had been grown in the year 1925 on
land known as the Johnston Farm, which had stood in her name in the land titles
register since 1922, and for which she held a certificate of title.
By the Married Women’s Property Act (R.S.M.
1913, c. 123, s. 5) it was enacted that
all property which * * * * shall be,
standing in, or allotted to, or placed, registered or transferred in or into,
or made to stand in, the sole name of a married woman, shall be deemed, unless
and until the contrary be shown, to be her property * * *; and she alone shall
be entitled to deal therewith, and to receive the rents, issues, dividends,
interests and profits thereof;
and by s. 2 (6) “property” is defined as meaning
any real or personal property, of every kind
and description, of a married woman
and as including
all wages, earnings, money and property,
gained or acquired by a married woman in any employment, trade or occupation in
which she is engaged or which she carries on separately from her husband, and in
which her husband has no proprietary interest * * *.
Apart, therefore, from any question of onus
arising from the facts that the execution creditor is the plaintiff and the
[Page 42]
claimant is the defendant, the property in
question must be regarded as that of Irene Tencha “unless and until the
contrary be shown” by the execution creditor. Accordingly, the question for
determination is: Did the evidence establish such an ownership of, or interest
in, the consigned grain on the part of the judgment debtor, Ignace Tencha, as
was exigible under the execution against him? The learned trial judge held that
it did, explicitly resting that conclusion on the two distinct grounds:
1. That the transfer to the wife was a
fraudulent transaction, executed for the purpose of defrauding creditors of the
husband by preventing the recovery of their claims against him, and that,
although the land is registered in the name of the wife, it is not hers, and
the crops grown thereon are his.
2. That even if the farm were the property
of the wife she was not carrying on the farming business separate and apart
from her husband within the meaning of the statute, and, adopting the language
of Mr. Justice Killam in the Slingerland v. Massey case, “I cannot think that the legislature
intended to protect from the husband’s creditors the produce of his labour in
an occupation which the wife allows him to carry on upon her lands—or to permit
him thus to bestow the fruits of his labour on his wife against his creditors.
By a majority the Court of Appeal reversed this
decision, questioning the soundness of the finding that the transfer of the
Johnston Farm to Mrs. Tencha was fraudulent and void as against her husband’s
creditors, but holding that, although it were, inasmuch as the transfer was inter
partes intended to be effective and was not a mere sham and the farming
operations had been carried on by Mrs. Tencha as proprietor and without her
husband having any interest in or control over them, the grain seized was her
exclusive property and was not exigible under the plaintiff’s execution against
the husband. The dissenting judges also expressed the views that
there is no issue on the record * * * that
the transfer of land * * * was fraudulent against creditors
and that a finding that it was
is by no means conclusive of the question
as to the ownership of the grain;
and they agreed with the trial judge that
the question of how she (the wife) became
the owner cannot be enquired into * * * in any way to affect her registered
title, but it seems to me that it can be gone into for the purpose of
ascertaining the bona fides of her (the wife’s) claim to be engaged in
the business of farming these lands separate and apart from her husband.
[Page 43]
In holding that the farming operations on the
Johnston Farm were not carried on in 1925 by Mrs. Tencha separately from her
husband, the learned trial judge rested his conclusion on some early decisions
of the Manitoba courts, of which Striemer v. Merchants’ Bank, is, perhaps, the strongest. These cases discussed
the words “which she carries on separately from her husband” before the
amendment had been made which attached to them the words: “and in which her
husband has no proprietary interest.” They, in effect, held that if the husband
resides with his wife on the farm and assists her in the raising of the crops,
although the farm belonged to the wife and she conducted it on her own account,
employing her husband to aid in the work, the crop is liable to seizure under
an execution against the husband.
The learned judge did not find that the carrying
on of the farming operations by Mrs. Tencha was merely colourable or a sham;
and the evidence, as we read it, would not warrant such a finding. On the
contrary, there is abundant evidence to support the view expressed by the
learned judges who constituted a majority in the Court of Appeal that, after
1922, the farming operations on the Johnston Farm were actually and bona
fide carried on by Mrs. Tencha on her own account and without her husband
having any “proprietary interest” therein or any control thereof.
If the question whether Mrs. Tencha is the owner
of the Johnston Farm as against the creditors of her husband were to be
determined in this proceeding, we should have to consider the evidence very
carefully indeed before holding that she is not. It seems to us extremely
doubtful whether Ignace Tencha had any real or substantial equity in that
farm—whether the whole beneficial interest did not belong to Johnston and did not vest in Mrs. Tencha by
virtue of his conveyance to her. But that issue is not before us and in our
view its determination is of very little importance in deciding the ownership
of the grain in question.
We shall, therefore, assume, but without so
deciding, that the evidence of the circumstances under which Mrs. Tencha
acquired the Johnston Farm justified the finding
[Page 44]
that the transfer of it to her was void as
against the creditors of Ignace Tencha. We accept the view that such evidence was admissible as relevant to the
question of the bona fides of Mrs. Tencha’s claim that she had actually
carried on the farming operations since 1922 separately and on her own account
and that her husband had no proprietary interest therein. We are, however,
satisfied that the conclusion of the majority of the learned judges of the
Court of Appeal, that the operations were in fact so carried on by Mrs. Tencha,
as she asserts, must also be accepted.
We are further of the opinion that the
construction placed by the learned trial judge on the words of s. 2 (b)
of the Married Women’s Property Act was erroneous, and that the contrary
view held by the majority of the learned judges of the Court of Appeal as to
its meaning and effect was correct; and we agree in the unanimous view of that
court, to quote from the dissenting judgment of Fullerton J.A., that
a finding that a transfer is fraudulent as
against creditors is by no means conclusive of the question as to the ownership
of the grain.
On the point last mentioned the various
provincial Courts of Appeal appear to have uniformly held that the invalidity
of the title of the transferee of land as against an execution creditor of the
transferor by no means determines the right of such creditor to have crops
grown on the land taken under his execution. It was so decided in Ontario, in 1867, in the case of Kilbride
v. Cameron, by
the Court of Common Pleas (Adam Wilson and John Wilson JJ.) affirming Richards
C.J. So far as we can ascertain, that decision has never since been questioned
and has been followed and approved in recent years by the Supreme Courts of the
Western Provinces in cases cited in the judgments of Dennistoun and Trueman,
JJ.A., in the Court of Appeal.
It was pointed out in the Kilbride Case
by Adam Wilson J., that
the parties intended to pass the estate in
the land by the different conveyances
and that
there was no proceeding whatever which
directly impeached the land transfer, for the execution was against goods, not
against lands
[Page 45]
The admission, he said, that the
transactions as to the land were not valid
as against the creditors of the father * * * would by no means determine the
right of property to the crops in question.
John Wilson J., said
If * * * as against creditors (the
conveyances) were fraudulent and void, the crops would not belong to the
(transferor); but if * * * the whole was colourable only * * * then the crops
were the property of John Kilbride (the grantor).
The last of the decisions cited, Standard
Trusts Co. v. Briggs, was
rendered by the Court of Appeal for Alberta. The circumstances very closely resemble those now before us.
Indeed they were stronger in favour of the execution creditor, inasmuch as the
land had there been transferred to the wife after the execution against her
husband had issued and the wife admitted that the farming operations were
carried on by her and as her separate business, although with her husband’s
assistance, because of the existence of the execution against him. The judgment
of the Court was delivered by Harvey C.J.A., who said, at p. 833:
Even if the conveyance of the land were
fraudulent—Kilbride v. Cameron,
and Johnstone Lbr. Co. v. Eager,
show that crops raised by the transferee do not belong to the transferor. The
crops in question were, of course, not transferred by the husband to the wife.
If they ever were his, his creditor has a right to seize them. If they were
not, equally, the creditor has no such right. The question is really whose
business the farming operations which produced the crops, was * * *
and, at p. 835,
In the present case the only oral testimony
is that of the wife. She is quite evidently a very clear minded, intelligent
woman and one may judge quite capable of managing any ordinary business
enterprise. The learned trial judge made no finding of fact whatever helpful as
to the decision whether she is the real manager of the farming operations * * *
and, at p. 836,
There is no law of which I am aware that
gives an execution creditor the right to compel the debtor to work for him
though we have laws which impose obligations upon a man to provide for his wife
and children. The plan adopted here was for the purpose of enabling the husband
to work efficiently, to perform his legal obligations to his family without
furnishing his creditor with the opportunity to deprive them of the fruits of
his labour. When the wife was asked if she paid her husband anything for his
labour she said she did not but that he was receiving the same reward for his
labour that she had received for hers during the preceding 12 years of their
married life. She said, however, that she employed and paid all the hired
labour that was required and paid all other
[Page 46]
expenses and, while her husband apparently
worked much as he had done before, she and her children also themselves worked
to some extent in the fields and that her husband in respect to any acts of
management acted as her foreman.
The resemblance between these facts and those of
the case now before us is very striking. The Court (Harvey C.J.A., Beck and
Clarke JJ.A.) set aside the judgment of the trial judge in favour of the
execution creditor.
In our opinion the statement of the law, bearing
on the question now being considered, in Kilbride v. Cameron and the decisions following it is correct.
But, if we thought its soundness dubious, we should hesitate to reject a view
so distinctly enunciated and which has prevailed so long and has been so
uniformly acted upon. We, accordingly, agree with what appears to have been the
unanimous opinion of the Manitoba Court of Appeal in the present case that,
although the transfer of the land to the wife should be deemed a fraudulent
transaction as against the creditors of the husband, it does not follow that he
had an interest in the crops which would make them seizable under an execution
against him.
On the second ground taken by the learned trial
judge we are of the opinion with the majority of the learned judges of the
Court of Appeal that the grain in question was “property acquired” by the
respondent in an
occupation in which she is engaged or which
she carries on separately from her husband, and in which her husband has no
proprietary interest
within the meaning of clause (b) of s. 2
of the Married Women’s Property Act, R.S.M., 1913, s. 123.
Once the conclusion is reached that the carrying
on of the farming operations by Mrs. Tencha was not a mere sham but was bona
fide intended to be for her exclusive benefit and that her husband had no
proprietary interest therein or control thereof, we are satisfied that the
facts that he resided on the farm and aided in the farming do not prevent the
wife from claiming the crops grown as her own to the exclusion of his
creditors. We should have viewed the farming operations as having been carried
on by Mrs. Tencha “separately from her husband” had the case arisen under the
Manitoba Married Women’s Property Act of 1892, i.e., before the addition
of the words:
[Page 47]
“and in which her husband has no proprietary
interest.” We agree with the construction placed on the words “carried on
separately from her husband,” as they stood in the early Ontario statute, by Spragge C.J.O., and
Cameron J., in Murray
v. McCallum (1), rather than with the
narrower construction given them by Burton and Patterson JJ.A. That the Ontario Legislature intended that the
view taken by the two former judges of the effect of the legislation should
prevail was made clear by its action in substituting in 1887 the words: “and in
which her husband has no proprietary interest” for the words: “separately from
her husband.” (50 V., c. 7, s. 22).
In Manitoba, instead of making such a substitution, the Legislature in 1900
merely added the words: “and in which her husband has no proprietary interest,”
leaving the words “separately from her husband” still in the Act. (63-64 V., c.
27, s. 2 (2)). Unless the words so added be regarded as designed to indicate
the view of the legislature that the phrase: “Separately from her husband”
shall be taken to mean what Cameron J. (at p. 306) held it did in Murray v.
McCallum, it is
difficult to understand why these words were inserted. If that be not their
effect they are mere surplusage. It should, perhaps, be noted that the Manitoba statute speaks of an “occupation”
carried on by the wife “separately from her husband,” and not “separately and
apart from her husband” as the learned trial judge expressed it.
Where the occupation is bona fide carried
on as the business of the wife and without her husband having any proprietary
interest in it or any right of interference in or control over it—when he takes
no part in it other than as his wife’s employee—the facts, that he resides with
and aids her in carrying it on, do not prevent its being, for the purposes of
the Married Women’s Property Act, her business and an occupation carried
on separately from her husband. As Osier J.A., in delivering the judgment of
the Court in Baby v. Ross,
said, at p. 446:
There is no law which compels (the husband)
to work for his creditors if he chooses to live in idleness, or which prevents
him from giving away his time and services, or devoting them towards satisfying
one creditor’s demand. The arrangement (that he should work for his wife
[Page 48]
alone, she receiving the whole of the
proceeds and he getting nothing but his board) which the plaintiff complains of
was neither unreasonable nor illegal; and I am unable to comprehend on what
principle it can be said to be a making away of property in order to defeat or
defraud creditors.
We have not overlooked the provision of s. 14 of
the Married Women’s Property Act of Manitoba that
nothing in this Act contained shall give
validity as against creditors of the husband to any gift by a husband to his
wife, of any property, in fraud of his creditors.
The only gift suggested to have been made by
Tencha to his wife is of the land comprised in the Johnston Farm. The title to
that farm is not in issue; we determine nothing as to it; and the plaintiff is
entirely at liberty to impeach it in any way in any other proceeding it may be
advised to take. There was no gift of the crops by Tencha to his wife. He never
had any interest in, or claim upon, them which could be the subject of such a
gift. Section 14 has no bearing on the matter of which we dispose.
We are, for these reasons, of the opinion that
the judgment a quo is right and should be affirmed.
Appeal allowed
in part
Solicitor for the appellant: J. T. Beaubien.
Solicitor for the respondent: A. E. Bowles.
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