Supreme Court of Canada
Rodburn v. Swinney (1889) 16 SCR 297
Date: 1889-04-30
Joseph Rodburn impleaded with George James Rice (Defendant)
Appellant
And
Dawnay J. C. Swinney and others (Plaintiffs)
Respondents
1888: Nov. 8 & 9th; 1889: April 30.
ON APPEAL FROM THE SUPREME COURT OF NEW BRUNSWICK.
Mortgagor and mortgagee—Sale of mortgaged lands—Power of attorney—Authority of agent—Sale on credit—Power of sale in mortgage—Application of proceeds—Duty of purchaser.
A power of attorney by mortgagees authorized their agent to enter and take possession of the mortgaged lands and sell the same at public or private sale, and for the best price that could be gotten for them, and to execute all necessary receipts, &c., which receipts "should effectually exonerate every purchaser or other person taking the same from all liability of seeing to the application of the money therein mentioned to be received and from being responsible for the loss, mis-application or non-application thereof." The agent took possession and sold the land, receiving part of the purchase money in cash and the balance in a promissory note of the purchaser payable to himself, which he caused to be discounted and appropriated the proceeds. The purchaser paid the note to the holders at maturity.
Held, affirming the judgment of the court below, that the power of attorney did not authorize a sale upon credit, and the sale by the agent was, therefore, invalid, and the purchaser was not relieved by the above clause from seeing that the authority of the agent was rightly exercised. The sale being invalid the subsequent payment of the note by the purchaser could not make it good.
Appeal from a decision of the Supreme Court of New Brunswick dismissing an appeal from the decree of the judge in equity in favor of the plaintiffs.
This was a suit in equity to set aside a deed to the defendant Rodburn of certain timber lands in New
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Brunswick, and to restrain him from disposing of or encumbering the same, or cutting the timber thereon. The facts of the case may be stated, shortly, as follows:
In 1874 one of the plaintiffs mortgaged the lands in question to the others for some $45,000, which sum was payable in six months from the date of the mortgage. There was a power of sale given to the mortgagees in case of non-payment, which was to be exercised after publication for three months in the Royal Gazette of notice of intention to sell, and such sale might be made either at public auction or private sale. Provision was made for the application of the proceeds of such sale, but it was declared that the purchaser need not inquire whether they were applied as directed or not, or whether or not proper notice of sale had been given.
When the mortgage was nearly three years over due the mortgagers, who resided in England, gave a power of attorney to the defendant Rice, authorizing him to take possesion of the mortgaged lands and sell them for the best price he could obtain. Rice came to New Brunswick in 1877, took possession of the premises, and published a notice of sale in the Royal Gazette for 3rd August, 1877. The sale was postponed several times, but could not be effected at a satisfactory price, and in the fall of 1880 Rice offered the land to the defendant Rodburn at private sale. Rodburn had the land examined and offered to buy it for $6,000—which Rice at first would not accept, but asked $10,000. Rodburn refused to pay more than his offer; and Rice, after making further endeavors to sell, accepted the $6,000 from Rodburn and gave him a deed. Part of the purchase money was paid in cash and the balance by a promissory note in favor of Rice.
The plaintiffs filed their bill to set aside the sale, charging therein fraud on the part of Rice in making the sale; that Rodburn took the deed knowing that Rice had acted fraudulently; that Rodburn paid no
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money for the land and that the sale was not bonâ fide. The answer of the defendant negatived these charges.
At the hearing, at the request of the plaintiff, a jury was summoned and certain issues were left to them, the finding on which would determine the bonâ fides of the sale and the question of fraud. These issues were found in favor of the defendants. A new trial was moved for and the verdict set aside, the learned judge deciding that the sale was invalid, as Rice had exceeded the authority given to him by the power of attorney in two respects—first, in selling some three years after publication of the notice in the Royal Gazette, which was really selling without notice; and secondly, in taking a note payable to his own order for a portion of the purchase money.
The Supreme Court of New Brunswick dismissed an appeal from the decision of the judge in equity, and thereupon the defendants appealed to the Supreme Court of Canada.
Gilbert Q.C. for the appellants:
The only ground upon which the plaintiffs could succeed without recouping Rodburn for the money paid Rice is that of collusion between the defendants, and the whole evidence contradicts that position.
There can bo object in requiring a special notice in order to effect a private sale, and the notice given fully complied with the terms of the power of sale.
The following authorities were referred to: Jenkins v. Jones, Hewitt v. Loosemore, Davey v. Durrant.
Barker Q.C. for the respondents:
The evidence is ample to show collusion between the defendants, to enable Rice to appropriate the purchase money to his own use.
The power of sale requires notice as well for a private
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as for a public sale, and the power must be strictly followed Dicker v. Angerstein.
The learned counsel also referred to the following cases: Parkinson v. Hanbury, Jenkins v. Jones, Jones v. Smith.
Sir W. J. RITCHIE C. J.—I am of opinion that the appeal should be dismissed.
STRONG J.—This is a suit in equity instituted by the respondents, who were plaintiffs in the court below, and who are respectively the mortgagor and mortgagees in a certain indenture of mortgage, dated the 29th of January 1874, whereby the respondent, Henry Hoste Swinney, mortgaged the lands in question, situate in New Brunswick, to the other respondents to secure a sum of $35,420, or thereabouts, together with interest. The mortgage contained a power of sale under which the mortgagees were authorized to sell in case of default.
The object of the suit is to set aside and have declared void an alleged sale in pursuance of this power of sale made in December, 1882, by the defendant Rice, assuming to act under a power of attorney from the mortgagees. The sale in question was made to the defendant Rodburn, the present appellant; it is alleged to have been made in November, 1882, and was carried out by a conveyance bearing date the 8th of November, 1882. The alleged consideration for this sale was $6,000, of which the appellant states he paid to Rice, the attorney of the mortgagees, $2,500 in cash and gave him for the balance of $3,500 a promissory note payable two months after date, which note the appellant now produces, swearing that he paid it at maturity to the Chemung Valley Bank, the holders of it. The bill,
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which offends against well established rales of equity pleading forbidding multifariousness and misjoinder, amalgamates at least two distinct equities,—one that of the mortgagees to have the sale set aside as not having been made in conformity to the terms of the power of sale in the mortgage, a case in which the mortgagor alone is interested; and it further impeaches the sale as having been made by Rice, who was the attorney of the mortgagees only, in excess of the authority conferred upon him by his constituents. No effect was given to this objection to the pleading in the courts below, and it is only noticed now for the purpose of pointing out that there are thus two separate and distinct grounds for relief embraced in the same suit, which must, in considering the case, be kept separate.
The cause having come on to be heard before the judge in equity, pro confesso as regards Rice, the defendant Rodburn alone having answered, that learned judge directed certain issues to be tried before himself with a jury. On the trial of these issues a verdict was found for the appellant. On a motion for a new trial this verdict was set aside and a new trial was granted. Subsequently the learned judge discharged the order directing the issues, and the cause again came on before him, when he pronounced the decree which the Supreme Court has affirmed and which is now brought under appeal here. By this decree the conveyance of the 8th of November, 1882, was declared to be fraudulent and void, and was ordered to be set aside. From the order of the Supreme Court sitting in appeal, the present appeal to this court has been taken.
The objection to the sale as an undue exercise of the power conferred upon the mortgagees by the mortgage deed is that the notice required by the terms of the power was not given. The purchaser insists that he was not bound to see to this, and that he is protected against the objection by the express words of the deed.
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The judge in equity appears from his judgment, delivered when deciding the motion for a new trial, to have considered this objection established, and the full court, with the exception of Mr. Justice Tuck, appear to have, adopted all the reasons assigned by the judge of first instance. I do not, however, purpose to enter upon this part of the case, as it appears to me the present appeal can be decided in accordance with the views of both the courts below on a much plainer and shorter point.
The ground upon which the mortgagees impeach the sale is that their agent, Rice, and the purchaser, Rodburn, acted fraudulently and collusively in the matter of the sale; and further, that the power of attorney under which Rice acted conferred upon him no authority to make such a sale as he assumed to make. Upon this latter point the judge in equity, Mr. Justice Palmer, is very emphatic and distinct. In his judgment, delivered on the 22nd of September, 1885, that learned judge says upon this head:—
Fourth.—That Rice had no authority to take a note payable to himself and give time for payment, and the taking of it instead of money was a violation of his duty, and Rodburn was assisting in this and thereby assisting the agent to dispose of his principal's property, not for the benefit of such principal, but for the agent's own benefit.
I have come to the conclusion that the last point is well taken, is unanswerable, and is decisive of the case. I take the law to be that when an agent parts with the property of his principal under such circumstances that the person purchasing it must be taken to know that it was sold, not for the benefit of the principal, but for the purpose of the agent selling it and disposing of it for his own benefit, the result is that the purchaser holds the property as if he himself were the agent of the principal.
This ground of decision was affirmed and acted upon by the Supreme Court on appeal, for Mr. Justice Fraser, in delivering the judgment of the majority, says:
As the judgment of the learned judge in equity will be printed in the report of the ease, I may say without quoting from it that I agree
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with the result he has reached and with the reasons therefor given by him.
I agree with Mr. Justice Palmer and the Supreme Court that this objection to the validity of the sale is not susceptible of any answer. The letter of attorney under which Rice acted contains authority to sell, but not to sell upon credit. So much of the instrument as is relevant to the present question is contained in the following extract:—
To enter and take possession, make sale and absolutely dispose of at any time, or from time to time, either by way of public auction or private contract, or partly in each such mode as he, in his discretion, may think fit, for the best price or prices that can be gotten for the same respectively, all or any part or parts of the freehold and other estates, lands, &c.
It needs no demonstration or argument to show that this authority is insufficient to warrant a sale upon credit such as that which was made by Rice to the appellant.
As to the terms of the sale actually made there can be no doubt, for we have it from the appellant himself that having paid Rice in cash only $2,500,—the latter executed the absolute conveyance which has been put in evidence, dated the 8th of November, 1882, thus purporting to convey the land absolutely and without any real security when less than half the purchase money had been paid—the residue of the price, $3,500, being secured merely by the promissory note of the appellant, payable to the order of Rice himself two months after date. Such a sale as this was entirely unauthorized by the only instrument to which Rice's authority can be referred—the power of attorney of the 5th of April, 1877, already quoted from. It was, in the first place, a sale upon credit instead of for cash; and in the next place, even if there had been authority to sell upon credit, the security given for the unpaid portion of the purchase money was one to Rice himself, and a mere personal security, which, from its form, Rice could easily
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convert to his own use, as he in fact did by discounting it with the bank to whom the appellant afterwards paid it. There is nothing in the power of attorney exonerating a purchaser from seeing that its terms are properly pursued as regards the mode of selling. It does, it is true, contain a clause exonerating the purchaser from seeing to the application of the purchase money, but that is nothing to the purpose as regards the present question. The appellant was bound to see that Rice in selling kept within his powers. This he clearly did not do. It is no answer to this to say that the appellant afterwards in good faith paid the $3,500 which formed the residue of the purchase money to the holder of the promissory note which represented that amount. If the sale was not good as a proper exercise of the powers of agency conferred by the letter of attorney the day after the conveyance by which the sale was carried out was executed, it could not be made good by matter ex post facto; so that even if the cash had been paid at the maturity of the note to Rice himself, instead of to the bank with whom he had effected the discount of it, the result would have been just the same—the sale would still have been unauthorized and invalid. Further, it is of no avail to say that the deed of conveyance thus being void is void at law, and therefore the interposition of equity to avoid the sale or to declare the deed a nullity was not requisite. The deed forms a cloud on the respondent's title, which alone justifies the resort to a court of equity to have it removed.
Therefore, upon this ground the appeal ought to be dismissed, though in saying this I am far from meaning to imply any dissent from the other grounds upon which the judge in equity proceeded. As to them, I express no opinion.
The appeal must be dismissed with costs.
FOURNIER, J.—Concurred.
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Gwynne J.—I entirely concur in the judgment prepared by my brother Strong in this case, to which I can add nothing, unless it be to say that there appears to me to be abundance in the evidence to justify the imputation that the conveyance by the defendant Rice to Rodburn was contrived fraudulently and collusively between them to indemnify or compensate Rodburn in respect of some transactions between them, which are only hinted at without the particulars being disclosed or being capable of being discovered. If the transaction had been a bonâ fide one it would have been Rodburn's interest to have produced the testimony of Rice which there is no doubt he could have done had he been so minded. In view of the facts which do appear, I do not think that Rodburn could reasonably expect a judgment in his favor, unless Rice should be produced as a witness on his behalf, and should be able to withstand a sifting cross-examination as to his dealings with Rodburn and the precise circumstances attending the execution of the conveyance to him. But instead of Rodburn attempting to support the purchase which he relies upon, by calling Rice as a witness on his own behalf, there seems, upon the evidence which we have, just ground for concluding that Rice's evidence was withheld in Rodburn's interest, in whose house he was when the commission under which Rodburn gave his evidence was being executed.
PATTERSON J.—Concurred.
Appeal dismissed with costs.
Solicitors for appellant: Gilbert & Straton.
Solicitors for respondents: Rainsford & Black.
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