Supreme
Court of Canada
Starrs
v. Cosgrave Brewing and Malting Company of Toronto, (1886) 12 S.C.R. 571
Date:
1886-04-09
Michael
Starrs (Defendant) Appellant;
and
The
Cosgrave Brewing and Malting Company of Toronto (Plaintiffs) Respondents.
1885: November 19; 1886:
April 9.
Present: Sir W.J. Ritchie
C.J., and Fournier, Henry, Taschereau and Gwynne JJ.
ON APPEAL FROM THE COURT OF
APPEAL FOR ONTARIO.
Suretyship—Contract of with firm—Continuing security to firm
and member or members constituting firm for the time being—Death of partner—Liability of surety after.
S. by indenture under seal
became security to the firm of C. & Sons for goods to be sold to one
Q., and agreed to be a continuing
[Page 572]
security to the said firm,
or “to the member or members
for the time being constituting the said firm of C. & Sons,” for sales to be made by
the said firm, or” any member or members of
the said firm of C. & Sons,” to the said Q., so long as
they should mutually deal together.
P.C., the senior member of
the said firm, having died, and by his will appointed his sons, the other
members of the firm, his executors, the latter entered into a new agreement of
co‑partnership and continued to carry on the business under the same firm
name of C. & Sons, and subsequently transferred all their interest
in the said business to a joint stock company.
An action having been
brought against S. for goods sold to Q., after the death of the said P.C.:
Held, reversing the judgment of
the Court of Appeal, that the death of P.C. dissolved the said firm of C. &
Sons, and put an end to the contract of suretyship.
APPEAL from the judgment of
the Court of Appeal for Ontario, allowing the appeal of
the respondents from the judgment of Mr. Justice Rose dismissing the respondents’ action.
The
action was on a bond dated 16th of April, 1879, given by the appellant to
Patrick Cosgrave, John Cosgrave and Lawrence Joseph Cosgrave, then carrying on
business as brewers, under the name of Cosgrave & Sons, as security for any
beer, ale or porter they might sell to one Michael Quinn.
The
respondents alleged that after the execution of the bond the firm of Cosgrave
& Sons supplied goods to Quinn; that on the 6th of September, 1881, Patrick
Cosgrave died; that afterwards John Cosgrave and Lawrence Joseph Cosgrave
entered into a fresh partnership and carried on the business under the old
name, and supplied goods to Quinn as before till the 2nd of October, 1882, when
they transferred the business to one James Douglas, as trustee; that the business
was still carried on under the same name of Cosgrave & Sons till the 13th
of December, 1882, when Douglas assigned the business to the respondents, who
[Page 573]
thence
afterwards carried it on.
The
respondents sought to recover the balance due from Quinn on all the prior
transactions up to $5,000, the amount of the bond.
The
appellant urged that he was not responsible for any transactions after the
death of Patrick Cosgrave, and that all prior transactions were paid, which, on
the argument, was admitted to be the case.
The
following is the bond or agreement above mentioned:
Memorandum
of agreement made this 19th day of April, A.D. 1879.
Between
Patrick Cosgrave, John Cosgrave, and Lawrence Joseph Cosgrave, all of the city
of Toronto, carrying on business as brewers, under the name, style, and firm of
Cosgrave & Sons, of the first part, and Michael Quinn, of the city of
Ottawa, hotel keeper, of the second part, and Michael Starrs, of the said city
of Ottawa, grocer, surety for the said party of the second part, of the third
part.
Witnesseth
that at the request of the said party hereto of the third part, it hath been
agreed and it is hereby agreed between the said parties hereto, that they, the
said parties of the first part, should, from time to time, so long as they, the
said parties of the first part, desire, sell to the said party of the second
part, and that the said party of the second part should purchase from the
parties of the first part beer, ale, lager beer, and the casks, bottles, and
vessels containing such liquors, or any part thereof, and at such prices and on
such terms of payment as may from time to time be mutually agreed upon, and
that the said party of the third part should be a continuing security to the
said parties of the first part, or to the member or members for the time being
constituting the said firm of Cosgrave & Sons, to the amount of $5,000, to
cover and protect any sales or
[Page 574]
advances
now or hereafter indefinitely to be made by the said parties of the first part
or any member or members of the said firm of Cosgrave & Sons to the said
parties of the second part, so long as they may mutually deal together.
And
further, it is hereby agreed between the said parties hereto, that until all
such sales and advances, and every part thereof, shall have been paid in cash,
that these presents shall continue to be a good and valid security at law and
in equity to the said firm of Cosgrave & Sons to the amount of $5,000,
notwithstanding that they may from time to time receive other securities,
notes, bonds, deeds, conveyances, or assignments of lands or goods, or either
of them, from the said party of the second part, or any other person or persons
as further security for the said sales or advances, or any part thereof, and
notwithstanding that they, the said parties of the first part or any of them,
may extend the time of payment of the moneys due, or any part thereof, for any
such sales or advances, and notwithstanding that they, the said parties of the
first part, or any of them, may do any act, matter, or thing thing that would
release the said party of the third part at law or in equity from these
presents, were it not for the stipulations herein contained.
In
consideration whereof the said party of the second part hereby agrees with the
said parties of the first part to pay the price of all advances and sales of
ales, porter, and lager beer, and of all casks, vessels, or bottles that may
from time to time be sold to him by the said parties of the first part, or any
of them, and at the times that may from time to time be agreed for the payment
thereof, and also to pay all notes, bonds, mortgages, or other securities that
may from time to time be given for the same.
And the
said party of the third part hereby coven-
[Page 575]
ants
and agrees with the said parties of the first part, and with each of them, that
he, the said party of the second part, will pay for all such sales and
advances, and at the times that might be agreed for the payment thereof, and
also all notes, bonds, mortgages, and other securities that may be given for
the same, or any part thereof, and that he, the said party of the second part,
will in all things perform and fulfil this agreement and all other agreements
that may hereafter be made by and between the said parties of the first and
second parts with reference to any such sales or advances, or in respect of any
money unpaid therefor, and that in default thereof that he, the said party of
the third part, will, to the extent of $5,000, be liable to, and pay, the said
parties of the first part, or to the member or members for the time being
constituting the said firm of Cosgrave & Sons, for all ale, porter and
lager beer, and for all casks, bottles, and vessels containing same that may
from time to time be sold by the parties of the first part, or the said firm of
Cosgrave & Sons, or by any member thereof, to the said party of the second
part, and also that in default of payment by the said party of second part of
all or any notes, bonds, mortgages, or other securities that may from time to
time be given by him, the said party of the second part, to the said parties of
the first part as security for any such sales or advances, or any part thereof
that he, the said party of the third part, will pay the same.
It is
hereby expressly stipulated between the parties hereto that nothing herein
contained shall compel the parties or any of them hereto to any dealing to any
given amount, or for any given period; and further, that these presents shall
continue a valid and continuing agreement till all such sales or advances have
been fully paid for in cash, and all agreements, notes, bonds mortgages, and
securities hereinafter made in respect
[Page 576]
thereof
have been fully satisfied.
McLennan Q.C. and O’Gara Q.C. for the
appellant.
This
action is for goods supplied after the death of Patrick Cosgrave and up to the
date of the notice that appellant would no longer be a surety for Quinn.
We
submit, in the first place, that the death of Patrick Cosgrave dissolved the
firm with which the appellant made his contract of suretyship, and an entirely
new firm was created by the sons after his death, although under the same name.
It is the fact that the name of the original is retained that is relied upon by
the respondents to bind us under the clause in the deed, by which he covenants
to be a continuing security to the member or members for the time being of the
firm of Cosgrave & Sons. But those words must be held to depend upon the
continued existence of the firm, and once its existence ceases any covenant
made with it must be released. To hold otherwise would be to make the appellant
covenant with any firm of the name of Cosgrave & Son, which would be
absurd. Words must be construed in a legal, not a commercial, sense. Bank of
Scotland v. Christie, Pemberton v. Oakes, Backhouse v. Hall, Chapman v. Beckinton5,
Weston v. Barton, Williamson v. Sleeves, Pollock on Contracts
p. 440.
But I
submit, secondly, that even if Starrs can be held liable after the death of
Patrick Cosgrave, he is discharged by the giving of time to his principal, the
company having taken Quinn’s notes for the full amount
of the debt
Osler Q.C. for the
respondents.
It is
admitted that effect must be given to the words “continuing security in the deed,” and I think a reasonable
explanation of our contention may be found in
[Page 577]
the
difference between the terms “firm” and “partnership.”
(The
learned counsel here read the definitions of these words from Imperial
Dictionary and Wharton.)
The
main thing in the arrangement was the goods supplied. As long as Cosgrave’s beer was sold to Quinn it
made no difference who the parties were who supplied it. All the members might
go out of the firm, and as long as the brewery business was carried on the
liability of the guarantor continued.
The
case of Pemberton v. Oakes shows the question to be whether or
not the parties ever manifested any intention that the liability should
continue in case of a change in the firm. The document itself is the best
answer to that question.
See Lloyds
v. Harper, Barclay v. Lucas, Metcalf v. Bruin, Pease v. Hirst, Pariente v. Lubbock, Lindley on Part. 4 Ed. p.
215, Ex parte Lloyd, Ex parte Loyd.
If a
change in the firm would relieve the surety I submit that, according to the
authority of these cases, we come within the exception.
As to
the question of time being given to the principal, I draw your lordships’ attention to the express
provision in the agreement. Hargreave v. Smee.
McLennan
Q.C. in
reply cites Baylis on Sureties 140, and Fire Extinguisher Co. v. North-West
Ex. Co.
Sir
W.J. RITCHIE C.J.—This action was brought to
recover $5,000 upon an agreement of suretyship. The learned judge gave judgment
in favor of the respondents.
The
firm of Cosgrave & Sons appears to have been a
[Page 578]
case of
ordinary partnership, and there being no agreement to the contrary, there can
be no doubt that the death of Patrick Cosgrave immediately dissolved the
partnership, not only as regards the deceased, but as regards all the other
partners. This, Mr. Lindsey says, is obviously reasonable, for, by the
death of one of the members, it is no longer possible to adhere to the original
contract, the essence of which is, in such a case, that all the parties to it
should be alive. And the mere fact that the partnership was entered into for a
definite term, which was unexpired when the death occurred, is not sufficient
to prevent a dissolution by such death.
The
representatives of the deceased have no right to succeed him in the firm unless
there is a clear agreement to that effect.
On
dissolution, each one of the partners has a perfect right to require, and
through equity to compel, a final settlement and adjustment of all questions
and all property. On dissolution the power and authority of the surviving
partners is for the purpose of winding up and no further; it is an incident to
the contract of partnership that the surviving partners should collect the
assets and wind up the business of the firm, and after the dissolution of the
firm the authority of each partner to bind the firm continues only so far as is
necessary to settle and liquidate existing demands, and to complete
transactions begun but unfinished at the time of the dissolution, and not
otherwise. So that, as to future dealing, the partnership is terminated by the
death of one partner, the dissolution, as between the partners themselves,
putting an end to the joint power and authority of all the partners any further
to employ the property or funds or credit of the partnership in the business or
trade thereof or do any act or make any disposition of the partnership property
in any manner inconsistent with the primary duty now
[Page 579]
incumbent
upon all of them of winding-up the whole concern of the partnership. And
therefore it is the duty of the surviving partners thenceforth to cease
altogether from carrying on the trade or business thereof.
All
parties must be assumed to have entered into this agreement with the full
knowledge of the law governing partnerships. Who then were the parties of the
first part with whom Starrs contracted? The firm of Cosgrave Bros. by
whomsoever and of what time soever composed? Clearly not. The deed itself
states that the parties of the first part were Patrick Cosgrave, John Cosgrave
and Lawrence Joseph Cosgrave, doing business under the firm of Cosgrave &
Sons; it is with that firm, as so composed at the date of the deed, that Starrs
contracted; it was with the association of these three, so carrying on business
under the name of Cosgrave & Sons, and no other. So soon as the death of
the one partner occurred there was a dissolution, and though the surviving
partners might enter into a new co-partnership, they had no power or authority
to continue the old co-partnership so at an end, and their duty then was, as
surviving partners, to close up the affairs of the defunct co-partnership, and
the representatives of the deceased partner had the right, and their sole right
was, to compel an account by the surviving partners of the state of the firm on
the death of their principal, and to call on the surviving partners to settle
and close up the affairs of the co-partnership, and to pay over to the estate
of the deceased partner the share coming to him on such settlement; and they
had no right to carry into a new partnership affairs of the old, whether the
old would be thereby benefited or injured.
In this
case, the moment Patrick Cosgrave died, eo instanti, the partnership was
dissolved. When was the
[Page 580]
new
partnership established? And what were the rights of all parties in the
interval that must have existed between the death of the partner and the then
dissolution of the firm, and the coming into existence of the ‘new firm, which could only
exist by virtue of the new contract entered into by the members of such new
firm? In my opinion, the rights of the surviving members of the old firm, and
of the representatives of the dead partner, and of every one dealing with that
firm, in the absence of an express contract to the contrary, was then and there
fixed and determined, and the affairs of the old firm with whom Quinn dealt and
for whose indebtedness Starrs became guarantee were then and there settled and
determined, and the liability on the guarantee could not be extended, without
the consent of Starrs, to dealing between Queen and a new firm with which, as
such, Starrs had no connection. The wording of the agreement itself, I think,
clearly shows that the security was only to the firm of Cosgrave & Sons as
it existed at the time of entering into the contract; the sum guaranteed,
$5,000, was “to cover and protect any
sales or advances now or hereafter indefinitely to be made by Cosgrave &
Sons, or any member or members of the said firm of Cosgrave & Sons to Quinn
(that is as I construe it—sales on account of the
said firm) so long as they, that is, in my opinion, the firm of Cosgrave &
Sons as it existed, and Quinn, may mutually deal together.”
The law
of England was well established before the passing of the Mercantile Amendment
Act; a guarantee was not a continuing guarantee so ‘as to remain in force after the death
of a member of a firm to or for which it was given, unless it appeared by the
terms of the instrument that it was the intention of all parties that it should
so continue, and the Mercantile Amendment Act did not alter the English law as
settled by
[Page 581]
decided
cases, but it was, as said by Blackburn J. in Backhouse v. Hall, to make the law of Great
Britain uniform, there being a difference in Scottish law. The question as put
in that case is just what arises in this: “Does the intention that the guarantee
should continue appear by express stipulation, or by necessary implication, or
from the nature of the firm, or otherwise?” And, the answer, as given in that
case, applies with equal force to this. Now there is certainly no express
stipulation and there is nothing in the nature of the firm beyond those
incidents common to every partnership that the partners had changed or might
again change, with the exception or additional consideration that, in the
present case, the partnership had ceased to exist by the death of one of the
partners and no provision for its continuance.
I
think, therefore, that this contract should not be construed as a continuing
guarantee after the dissolution of the firm with which the guarantor
contracted, and that the appeal should be allowed.
The
following authorities may be cited in support of the views I have expressed. In
Myers v. Edge, the report gives the
facts as follows:—
At
the trial before Rooke J.; at Lancaster, the plaintiffs, to take the case out
of the statute of frauds, gave in evidence the following letter written by the
defendant dated 15th, January, 1794. “To
Messrs. Myers. Fielden, Ainsworth & Co.:—If you please you may let the bearer,
Thomas Duxbury, have six bunches of twist more than I told you, and I will be
answerable for them as before; and after this I will be answerable for one pack
and no more; so when he pays you for the first half pack you may let him have
another, and so on till I tell you to the contrary; and you may make the
invoice to us both, &c.” At the time when this
engagement was entered into, Ainsworth was a partner in the same house with the
plaintiffs, and continued so till May, 1795; during which time many parcels of
goods were delivered to Duxbury, which were all paid by him, who wa
[Page 582]
debited
for them in the plaintiffs books. The goods in question were furnished to
Duxbury by the plaintiffs alone after Ainsworth had retired from the
partnership, and Duxbury having failed to pay for them, they demanded payment
of the defendant, who said it should be settled, and requested time; but
afterwards refusing to pay, this action was brought. It was objected on the
part of the defendant, that the action could not be maintained by the present
plaintiffs, because Ainsworth, with whom also the contract was made, was not
joined with them, and he not being a partner at the time when the goods were
furnished. Rooke J. overruled the objection, considering the security as having
been given to the house and not to the individuals; the jury found a verdict for
the plaintiffs. A rule was granted in this term calling on the plaintiffs to
show cause why the verdict should not be set aside and a non-suit entered, or a
new trial granted.
Lord
Keynon C.J.:
I
think that the rule ought to be made absolute. We are to judge on the contract
that the parties have made, and ought not to substitute another in lieu of it.
Here the defendant contracted with Myers, Fielden, Ainsworth & Co. Perhaps
the defendant when he entered into this contract had great; confidence in
Ainsworth, and thought that he would use due diligence in enforcing payment of
the goods from Duxbury regularly as they were furnished; at least it is too
much for us to say that, after Ainsworth ceased to be a partner, the defendant
would have given the same credit to the remaining partners. * * * But we cannot
say that a contract, that on the face of it imports to have been made with
five, ought to be construed to be a contract made with four persons only.
I very much approve of the case cited from 3 Wilson 532.
Ashhurst
J.:
This
is not a contract made with a corporation, it is made with a partnership
consisting of a certain number, of individuals; and when one of the partners
left the business, it put an end to this engagement. If the plaintiffs had
intended to furnish goods to Duxbury after this alteration in the partnership,
they should have required a new undertaking.
Denman
C.J. in Chapman v. Beckinton.
All
this may well have been without advertising to or intending to alter the legal
consequences of such change in the members of the firm; and we ought to be slow
in extending by implication the meaning of words beyond that which they
ordinarily bear in legal construction, in order to extend the liability of a
surety.
[Page 583]
We
are strengthened in this opinion by the authority of a case cited by the
counsel for the defendant, which it is difficult to distinguish in principle
from the present, that of Pemberton v. Oakes. There a banking
partnership was formed for fifteen years, between Harding, Oakes and
Wellington; it was stipulated that, if Oakes or Wellington should die during
the term the concern should be continued by the survivor or survivors, the
deceased’s share to be paid to his
executor up to the death; but if Harding should die he might dispose of his
share to his wife and children; and there was a provision for his appointing
persons who should carry it on, as if he were living, during the minority of
his children; and the business was, in that event, to be carried on by the
surviving partners and the appointee, in the manner and on the terms and
conditions directed by the partnership articles, as if he had not died. Harding
made his will in favor of his children as to this share, and appointed persons
to carry on the concern with his partners; and, he dying, this was carried into
effect. The question was, whether a surety for a customer of the original firm,
who had executed a deed to the members of that firm to secure them for sums
already due or which should become due to them for advances to be made
thenceforward to the end of fifteen years, was liable for any advance made
after the death of Harding. And the present lord chancellor held clearly that
he was not liable for advances by a new firm, although he had stipulated to
secure advances made during the whole fifteen years; and that the death of
Harding, with the substitution of the appointees, though contemplated by the
original articles, made a new firm. In this case it is true, no new partner has
been admitted; but that is immaterial if the death of one of the old ones works
a dissolution. And it is true, also, that in this case the defendant (the
surety) is averred to have had full notice of the covenants in the partnership
deed, a circumstances which did not exist in the case cited; but this also is
immaterial, the question turning on the written language of the instruments.
In DeColyar’s Law of Guarantees, 2 Ed. 255:
To
the same effect, also, is the case of Weston v. Barton. There the condition of
the bond was for the repayment to five persons of all sums advanced by
them, or any of them, to Catterall & Watson, in their capacity of bankers.
It was held that the bond did not extend to sums advanced after the
decease of one of the five by the four survivors, the four then acting as
bankers. Mansfield C.J. delivered the following judgment: “The question here is,
whether the original partnership being at an end, in consequence of the
[Page 584]
death
of Golding, the bond is still in force as security to the surviving four; or
whether that political personage, as it may be called, consisting of five,
being dead, the bond is not at an end. The case has stood over in consequence
of doubts which the court entertained on particular expressions in the bond.
Many cases were cited at the bar, and the result of them is that, generally,
when a change takes place in the number of persons to whom such a bond is
given, the bond no longer exists. These decisions certainly fall hard on the
obligees; for I believe the general understanding is that these securities are
given to the banking house, and not to the particular individuals who compose
it; and we should readily so construe the bond if the words would permit. The
words of the condition on which the question depends (and which His Lordship
now read over), again and again refer to the obligee’s capacity as bankers; they were
bankers, only as they were partners in their banking house, as it is called,
and this security is conditioned to pay any money advanced ‘by them five, or any or ‘either of them.’ Taking those last words by
themselves, it might at first be conceived that, if any one of the five
advanced money this bond should secure it, but the words are afterwards
explained, when it is seen that the money is to be paid to the five. Now it
could never be intended that money advanced by one of them singly should be
repaid to the five; and this shows that the words ‘advanced by them, or any,
or either of them,’ must be confined in their meaning
to money advanced by any or either of them in their capacity of bankers, on
behalf of all the five. This, then, being the construction of the
instrument, from almost all the cases, in truth, as we may say, from all (for
though there is one adverse case, Barclay v. Lucas, the propriety
of that decision has been very much questioned), it results that where one of
the obligees dies the security is at an end. It is not necessary now to enter
into the reasons of those decisions, but there may be very good reasons for
such a construction; it is very probable that sureties may be induced to enter
into such a security, by a confidence which they repose in the integrity,
diligence, caution and accuracy of one or two of the partners. In the nature of
things there cannot be a partnership consisting of several persons, in which
there are not some persons possessing these qualities in a greater degree than
the rest; and it may be that the partner dying, or going out, may be the
very person on whom the sureties relied; it would, therefore, be very
unreasonable to hold the surety to his contract after such change. And, though
the sum here is limited, that circumstance does not alter the case; for,
although the amount of the indemnity
[Page 585]
is
not indefinite, yet £3,000 is a large sum; and,
even if it were only £1,000, the same ground, in
a degree, holds, for there may be a great deal of difference in, the measure of
caution or discretion with which different persons would advance even £1,000; some would permit
one who was almost a beggar to extend his credit to that sum; others would
exercise a due degree of caution for the safety of the surety; and, therefore,
we are of opinion, that as to such sums only which were advanced before the
decease of Golding can an indemnity be recovered by the plaintiffs; and, as to
the sums claimed for debts incurred since his decease, the judgment must be for
the defendant.”
A
similar decision was also come to in the case of Pemberton v. Oakes, 4
Russ. 154. There a banking partnership was formed for fifteen years, between
Harding, Oakes and Wellington. It was stipulated that if Oakes or Wellington
should die during the term, the concern should be continued by the survivor or
survivors, the deceased share to be paid to his executors up to the
death; but that if Harding should die, he might dispose of his share to his
wife and children, and there was a provision for his appointing persons who
should carry it on as if he were living during the minority of his children;
and the business was, in that event, to be carried on by the surviving partners
and the appointee, in the manner and on the terms and conditions directed by
the partnership articles, as if he had not died. Harding made his will in favor
of his children as to this share, and appointed persons to carry on the concern
with his partners, and he, dying, this was carried into effect. The question
was, whether a surety for a customer of the original firm, who had executed a
deed to the members of that firm to secure them for sums already due, or which
should become due to them for advances to be made thenceforward to the end of
the fifteen years, was liable for any advance made after the death of Harding.
Lord Chancellor Lyndhurst held clearly that he was not liable for advances by a
new firm, although he had stipulated to secure advances made during the whole
fifteen years; and that the death of Harding, with the substitution of the
appointees, though contemplated by the original articles, made a new firm.
And
yet another case in which the same view prevailed, is that of Chapman v.
Beckington. In that case the
plaintiff and one William Chapman entered into partnership, by deed, with one
Potts. Potts was to be the acting partner. In consideration of this trust he
and the defendant bound themselves by a bond of guarantee to the plaintiff and
the said William Chapman, for the observance by Potts of the covenants in the
partnership deed, and also that Potts, during
[Page 586]
such
time as he 3houlcl continue the acting partner in the said trade of the said
copartnership, should faithfully make and deliver a true account in writing of
all sums of money, notes, bills and other partnership effects, which should
come to his hands, or which he should be intrusted with by or on account of the
said co-partnership, and also make good, answer for and pay over, the moneys
due on the balance to the said plaintiff and W. Chapman. Potts, after the
decease of W. Chapman, rendered false accounts. It was held, that the
co-partnership referred to in the condition of the bond was determined by W.
Chapman’s death, and that the
defendant was therefore not liable for Potts’ default happening after that event.
In this case Lord Denman C.J., said: “Many
cases were cited to show that, where the surety had covenanted with the house,
and not the members of the firm, or had stipulated that his liability should
not be affected by a change of the members, he would remain liable to the new
firm. These cases we do not in the least question, our judgment proceeding on
the language of this condition, making all due allowance for the effect which
the language of the deed ought to have on its construction.”
And at p. 270:
The
effect of the death of one of the principal debtors is to determine the surety’s liability. Thus in Simon
v. Cooke, a bond by which, after
reciting the partnership of J.C. and T.C, one W.P. become surety for such sums
as should be advanced to meet bills drawn by J.C. and T.C. or either of them,
was held not to extend to bills drawn by J.C. after the death of T.C.
The
voluntary retirement of one of the principal debtors likewise has the effect of
putting an end to the surety’s liability. In the case of
The University of Cambridge v. Baldwin, the condition of a bond
recited that the chancellors, masters, and scholars of the university of
Cambridge had appointed B., C. and J. their agents for the sale of books
printed at their press in the university, and that the defendant had offered to
enter into a bond with them as a surety; and it was conditioned that if the
said B., C. and J., and the survivors and survivor of them, and such other
persons as should or might at any time or times thereafter, in partnership with
them or any or either of them, act as agent or agents of the said chancellor,
&c., and their successors, for all books delivered or sent to them or any
or either of them for sale as aforesaid, and should pay all moneys which should
become payable to the said chancellor, &c., in respect of such sale, then
the obligation to be void, &c. An action having been brought on this bond
against the surety, it was held that, by
[Page 587]
the
retirement of J. from the partnership of B., C. and J., the defendant, as their
surety, was discharged from all further liability on this bond.
Lord
Arlington v.
Merricke:
In
Bodenham v. Purchas, a bond was given to secure a banking account
to several partners; one of them died and a new partner was taken in; the
obligor was at that time indebted in a considerable sum; new advances were
made, and money paid on account, no new head of account being opened, but the
whole being treated as one entire account; the balance was much reduced, and
was afterwards transferred to another customer, who, with his assent, was
charged by the bankers with the debt of the obligor; that customer becoming
insolvent the surviving bankers sued the obligor; it was held, that in the
absence of any specific appropriation the money paid on account must be applied
to the debt due at the death of the partner, and the money so paid being
sufficient to cover that debt, the bond was discharged.
FOURNIER
J.—I think the agreement
plainly shows that the appellant only became a guarantee to the firm of Patrick
Cosgrave & Sons. In no other way can effect be given to the words “member or members for the
time being constituting the firm of Patrick Cosgrave & Sons.” I believe these words must
have oeen inserted there inadvertently, but being there we must give effect to
them. The appeal must be allowed.
HENRY
J.—I cannot conceive the
existence of the slightest relationship between the company here, the
Cosgraves, who entered with partnership after the death of the senior partner,
and Starrs.
In the
first place there was a new partnership of the surviving members of the old
one. ‘J hey carried on business,
not for the late partnership, nor for any one interested in that partnership,
but for themselves. There was no time when the heirs-at-law of the deceased
partner could not have enforced a settlement of the previous partnership. The
law does not make a party answerable to any one unless by his own act.
[Page 588]
As soon
as Patrick Cosgrave died the contract was put an end to, and I think the
plaintiffs here have no cause of action. All the advances made to Quinn were
paid for up to a certain time, after notice by the appellant that he would not
be answerable under the contract.
The
business was conducted for several years in the name of the sons, and then a
company was formed. Now how can it be said that there was any privity of
contract between Starrs and the company? What right had the company to carry on
a contract entered into with totally distinct persons and hold the guarantor to
another party answerable?
I
consider that the appeal should be dismissed, and judgment given in favor of
the appellant with costs.
TASCHEREAU
J.—I am of the same opinion. I
do not think the appellant is answerable for any sales made after the death of
Patrick Cosgrave.
GWYNNE
J.—I am of opinion that
whatever right of action, if any there was, which the firm of Cosgrave &
Sons constituted as it was after the death of Patrick, had against the
defendant upon his guarantee, at the time of the execution of the instrument of
the 2nd of October, 1882, that right has passed to the plaintiffs by force of
that instrument and of that of the 13th December, 1882, and that therefore this
action is well brought by the plaintiffs, if Cosgrave & Sons had such a
right of action.
The
learned counsel for the defendant in his argument before us contended that
assuming the guarantee of the defendant to be a continuing guarantee until the
5th of April, 1882, as adjudged by the Court of Appeal for Ontario, and to
cover what was then due by Quinn to the firm of Cosgrave & Sons as then
constituted, still the evidence showed such amount to have been subsequently
and before action fully paid, and that therefore the
[Page 589]
Court
of Appeal for Ontario should have adjudicated upon this point instead of
directing a reference to the registrar of the divisional court to enquire and
report thereon to that court. The parties at the trial certainly seem to have
been of opinion that the evidence as taken was sufficient to enable a
determination to be made not only of this point but upon all the points raised,
when it was agreed that, upon the jury passing upon the single point agreed to
be submitted to them, namely, whether the notice, admitting it to have been
given, had not been retracted, as was alleged, then all the other questions
should be submitted to the determination of the court. The defendant was, and
now is, entitled to judgment in his favor upon this point or any of the points
raised and which have all been argued before us, if the evidence be sufficient
to warrant and require such judgment as it is contended that it is. The
evidence shows Quinn to have been indebted to Cosgrave & Sons on the 5th
April, 1882, in a sum varying from $5,931.56, according to Quinn’s evidence, to $6,640
according to the evidence of John Cosgrave It also appears in evidence that
between the 5th of April and the 2nd October, 1882, Quinn paid to Cosgrave
& Sons $6,620.25, but that this sum was applied, or should have been, or
was applicable, to the payment of the amount due on the 5th April, 1882, does
not appear, for goods were delivered by Cosgrave & Sons to Quinn between
the said 5th of April and 2nd of October to the amount of $6,000, and the
manner in which the parties dealt appears to have been that Quinn was in the
habit of giving his notes or acceptances to Cosgrave & Sons for the amounts
of the several deliveries of the goods sold to him, which notes Cosgrave &
Sons discounted and used the proceeds in their business. These notes, under
what was deemed to be the authority of the provision in the guarantee relating
to extension of time for pay-
[Page 590]
ment to
Quinn, were, as they fell due, renewed, and their renewals were again from time
to time renewed in whole or in part; Quinn’s practice as to payments made by him
appears to have been to remit moneys for the purpose of meeting particular
notes falling due in the bank where they were. By exhibit No. 9, which appears
to have been filed by the defendant, it appears that on the 5th April, 1882,
there were in existence and discounted by Cosgrave & Sons ten notes given
by Quinn which represented the goods previously sold to him, which notes were
made payable at different times between the 6th of April and the 3rd of August,
and that all of these notes were renewed at least once, and many of them
several times, and that one of such renewals for $406.65, was dated the 2nd
November, 1882, after the execution of the indenture of the 2nd October, and
after the firm of Cosgrave & Sons had assigned all their estate, good will,
debts and securities to Douglas in trust to be assigned to the plaintiff
company when formed; now, if this exhibit is to be relied upon, and its
correctness does not appear to be questioned, then there appears to have been
still due by Quinn, when the plaintiffs became assignees of Cosgrave & Sans’ assets, notes and
securities, (in respect of sales made to Quinn by Cosgrave & Sons prior to
the 5th April, 1882,) the sum of $2,759.11, which still remains due, and for
which, if the judgment of the Court of Appeal for Ontario be correct as to the
continuance of the guarantee, the defendant is liable to the plaintiffs, unless
he has become discharged from such liability by reason of the time given by
Cosgrave & Sons to Quinn after the 5th April, 1882, and by the plaintiffs
since the assignment to them.
I
understand it to have been contended by the learned counsel for the defendant,
that by the books of the plaintiffs and all of Quinn’s notes remaining still
[Page 591]
unpaid,
and which were before the court at the trial, it appeared that the plaintiffs
held notes or acceptances of Quinn’s
given payable to themselves, which have been discounted by them, and which were
taken and received by them in renewal of the notes which were current in the
hands of Cosgrave & Sons on the 2nd of October, 1882, and by which notes
the plaintiffs have given an extension of time for payment of the moneys
secured by the notes, which Cosgrave & Sons held on the said 2nd October in
respect of goods sold prior to 5th April, 1882. This may have appeared at the
trial, but I find a difficulty in tracing it upon the exhibits before us. If it
be true, the parties must be aware of it, and a reference to ascertain it would
involve a needless expense, but if it be true the defendant is, in my opinion,
discharged and entitled to judgment in his favor upon this point, for the
agreement in the guarantee as to the extension for time for payment which might
be given to Quinn cannot, in my opinion, be construed to extend to the
plaintiffs, who derive title only as the assignees of the assets, business
notes, debts and securities, which belonged to the firm of Cosgrave & Sons;
which firm upon the execution of the instruments of the 2nd October, 1882,
became extinct; assuming the defendant’s
right to have judgment rendered in his favor to rest upon this point alone the
reference ordered by the Court of Appeal for Ontario, does not appear to be
large enough to authorize the taking of evidence upon this point, if the
evidence given at the trial be insufficient; nor upon a point as to which the
plaintiffs can so readily supply what evidence may be necessary, ought there be
any necessity for a reference. Whether the defendant is discharged by the
extension of time given by Cosgrave & Sons after the termination of the
guarantee upon the 5th of April, as the Court of Appeal for Ontario has
adjudged, of which extension of time extending over
[Page 592]
six
months there is abundant evidence, has still to be considered, and as the
consideration of this question seems to me to throw some light upon the
question as to the continuing character of the guarantee, I propose to consider
these two questions together. The authorities relating to the question of
continuance of the guarantee, notwithstanding the death of Patrick, have been
so fully reviewed by the Divisional Court and the Court of Appeals that I do
not propose to refer to them further than to say that the principle to be
collected from them and which governs this case is, that the question whether
or not the guarantee is to be construed as continuing in force after the death
of Patrick is to be solved by ascertaining, upon a full consideration of the
whole instrument, giving effect as far as possible to all of its clauses and
provisions, what was the intention of the parties as appearing expressed in the
instrument containing the guarantee, or to be gathered by necessary implication
therefrom. I entirely agree with the majority of the Court of Appeals for
Ontario that the clause which declares that it was mutually agreed upon that
the defendant should be a continuing security
To
the said parties of the first part or to the member or members for the time
being constituting the said firm of Cosgrave & Sons to the amount of $5,000
to cover and protect any sales or advances now or hereafter to be made by the
said parties of the first part, or any member or members of the said firm of
Cosgrave & Sons, to the party of the second part (Quinn) so long as they
may mutually deal together.
and
that portion of the clause containing the covenant of the defendant to the
effect that in default of payment by Quinn for all goods sold to him at the
times that might be agreed upon for the payment therefor, the defendant
Will
to the extent of five thousand dollars be liable to, and pay, the said parties
of the first part, or the member or members for the time being constituting the
said firm of Cosgrave & Sons
do seem
to manifest the intention of the parties to have
[Page 593]
been
that the guarantee should continue in force not only for the benefit of the
three persons then parties of the first part who then constituted the firm of
Cosgrave & Sons, but for the benefit also of some other persons, who, as
was contemplated should, in the future, for the time being, constitute the
firm, regarding it as having a continuing existence with a varying
constituency; the whole instrument, however, must be taken together, and if
there be some other clauses and provisions in the instrument which are
inconsistent with this construction their effect may be to require a
modification of the construction, to the extent even, if necessary, of wholly
eliminating the words “or to the member or members
for the time being constituting the said firm of Cosgrave and Sons,” wherever they occur. It is
quite impossible, in my opinion, to construe them in the connection in which
they are found with the words “the said parties of the
first part,” as meaning, as has been
contended, the said Patrick, John and Lawrence Cosgrave or any or either of
them. If the other clauses of the instrument require us to hold that the
guarantee must determine upon and by reason of the death of Patrick, no
sensible meaning can, I think, be attached to the above words and they must be
wholly rejected. Whether or not they must be so rejected is the question. The
construction of the instrument containing the guarantee is, as the plaintiffs
contend, not merely that the defendant is surety for Quinn and guarantees the
payment by him for all ale, porter, &c., sold to him by the firm of “Cosgrave and Sons,” as it was constituted when
the instrument was executed, but that he continues to be such surety for all
sales made to him by the firm as constituted after the death of Patrick; and
that the instrument being under seal the defendant’s liability under it could not be
terminated so long, as the firm, however constituted, should continue dealing
[Page 594]
with
Quinn or at least not without payment, as a condition of such termination, of
all moneys then remaining unpaid upon the sales made to him; and further, that
the defendant is not merely guarantee for payments being made by Quinn at the
expiration of the credit upon which the goods should be sold to him, but that
it should be competent for the firm, however constituted from time to time,
indefinitely, to give to Quinn extension of time for payment upon his
promissory notes or acceptances, and that the defendant shall not be discharged
by such extension of time being given, but shall continue liable to pay all
such paper, however indefinitely renewed and even though the firm continued
renewing after the notice of the 5th April was given and for such length of
time as seemed pleasing to the firm. The right of the defendant to terminate by
notice all liability for any goods that might thereafter be sold to Quinn
cannot be doubted. It is well settled upon the authority of Orford v. Davies, Coulthart v. Clementson, and Lloyd v. Harper. In the last case the
distinction is pointed out between a guarantee for a thing done once for all as
upon the appointment of a person to an office or employment guaranteeing his
trustworthiness and fidelity during such employment and a guarantee like the
present one for payment of goods to be sold from time to time to one upon whose
behalf the guarantee is entered into, in which case the guarantee is divisible
and attaches to each sale when made as a separate transaction; as to the
payment for all previous sales being a condition precedent to, or concurrent
with, the notice taking effect; no case in support of that contention has been
found; however, in the present case defendant’s liability as to those sales had not
attached on the 5th of April, 1882,
[Page 595]
for at
that time they were all covered by notes of Quinns then current which had been
discounted by Cosgrave & Sons.
Now the
second clause of the instrument, which immediately follows that which declares
the agreement of the parties as to the continuance of the security, provides as
follows:
And
further, it is hereby agreed between the said parties hereto, that until all
such sales and advances and every part thereof shall have been paid in cash,
that these presents shall continue to be a good and valid security at law and
in equity to the said firm of Cosgrave & Sons to the amount of $5,000,
notwithstanding that they may from time to time receive other security, notes,
bonds, deeds, conveyances or assignments of lands or goods or either of them,
from the said party of the second part or any other person or persons as
further security for the said sales or advances or any part thereof, and
notwithstanding that they, the said parties of the first part or any of them,
may extend the time of payment of the moneys due or any part thereof for any
such salees or advances, and notwithstanding that they, the said parties of the
first part, or any of them, may do any act, matter or thing that would release
the said party of the third part at law or in equity from these presents were
it not for stipulations herein contained.
“The said firm of Cosgrave
& Sons,” in this clause must, I
think, be construed as referring only to the firm, as then constituted, namely,
Patrick, John and Lawrence, who are described in the first clause of the
instrument as carrying on business as brewers under the name style and firm of
Cosgrave & Sons of the first part; and the persons who may extend to Quinn
the time for payment of the moneys due on sales to him are expressly declared
to be “the said parties of the
first part or any of them,” these words “ or any of them” in this connection having
no more force than declaring that any of them may do what, the said parties of
the first part that is to say, what the three of them might together do. Then
in the next clause Quinn, the party of the second part to the instrument, in
consideration of what has gone before, “agrees with the
[Page 596]
“said parties of the first
part” to pay the price of all
advances and sales of ale, porter and lager beer and of all casks, &c.,
&c., that may from time to time be sold to him “by the said parties of the first part,
or any of them,” at the times that may be
agreed from time to time for the payment thereof, and also to pay all notes,
&c., &c., that may be given for the same.
“The said parties of the
first part” in this clause must be
construed as referring to the same Patrick, John, and Lawrence Cosgrave, and by
this clause it is manifest that the only persons whom Quinn covenants to pay
for all goods contemplated as to be sold to him on the faith of the instrument
are “ the said parties of the
first part.” This covenant can only be
construed as a covenant by Quinn with the parties to the instrument of the
first part; that is, with Patrick, John and Lawrence Cosgrave jointly, to pay
them the price of all goods to be sold by them, or any of them on behalf of
all, to Quinn, and also to pay all notes, &c., &c., as may from time to
time be given for the same goods. Then follows the covenant of the defendant
that Quinn “will pay for all such
sales,” which words must be
referred to the sales mentioned in the previous clause containing Quinn’s covenant, that is to say,
the sales to be made by the three persons who were the said parties of the
first part, or any of them on behalf of all, and also all notes, &c.,
&c., that may be given for the same. Then as to these notes, &c.,
&c., in default of payment by Quinn the covenant contains these words:
And
also that in default of payment by the said party of the second part of all or
any notes, &c., &c., that may be given by him to the said parties of
the first part as security for any such sales or advances, or any part thereof,
that he (the defendant) will pay the same.
This
latter clause in connection with that first above extracted in full, seems to
place beyond all doubt that the only persons who were competent to extend the
time to Quinn for payment of goods sold to him, by
[Page 597]
from
time to time taking notes, &c., &c., from him, without thereby
discharging the surety, were “the said parties of the
first part,” to whom alone the notes
were to be given, that is to say, Patrick, John and Lawrence Cosgrave, or any
of them, acting on behalf of the three of them; and as it appears by the
instrument, as I think it does, to have been the clear intention of the parties
that the power of extending the time for payment of the price of the goods to
be sold must belong to “the said parties of the
first part,” it follows that if the
power of extending to Quinn the time for payment be limited, as I think it
clearly is upon the sound construction of the clauses and provisions above
extracted to Patrick, John and Lawrence Cosgrave jointly or to any of them on
behalf of them all, it follows that they must be the only persons who are dealt
with by the instruments as the vendors to whom alone the defendant became Quinn’s guarantor and that
therefore the guarantee came to an end upon the death of Patrick. The clauses
and provisions which I have above extracted seem to me so plainly to
demonstrate that the defendant only became guarantor to Patrick, John and
Lawrence Cosgrave in respect of their joint sales to Quinn, that I do not think
any effect can be given to the words, “to
the member or members for the time being constituting the said firm of Cosgrave
and Sons,” which have created all the
difficulty and we must regard them as having been inadvertently introduced by
the draftsman of the instrument. I am of opinion, therefore, that the appeal
must be allowed with costs both in this court and in the Court of Appeal for
Ontario and that the judgment for the defendant in the Divisional Court must be
reinstated.
Appeal allowed with costs.
Solicitors for appellant: O’Gara & Remon.
Solicitors for respondents:
Boswell & Eddis.
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