Rickaby v. Bell, (1878) 2 SCR 560

Supreme Court of Canada

Rickaby v. Bell, (1878) 2 SCR 560

Date: 1878-06-04

WILLIAM T. RICKABY

Appellant;

And

ADAM R. BELL

Respondent.

1878: Feb 7; 1878: Feb 8; 1878: Feb 9; 1878: June 4

PRSSENT :—Ritchie, Strong, Taschereau, Fournier and Henry, J. J.

ON APPEAL FROM THE COURT OF QUEEN'S BENCH FOR LOWER CANADA (APPEAL SIDE).

Insolvency—Fraud or Illegal Preference—Presumption—Insolvent Act of 1875, sec. 13, sub. secs. 1 and 3, and Insolvent Act of 1869, secs. 86 and 88—Arts. 0. C. L. C 993, 1033,1035,1040—Doctrine of opposed to Art. 1981, 1982 C. C. L. C.

T. F., an hotel keeper, being largely indebted, sold to A. B., his principal creditor, on the 19th January, 1875, by notarial deed, duly registered, certain movable and immovable property, being the bulk of his estate, comprising the hotel and furniture, for $15,409.50. The immovable property, valued by official assessors at $22,000, was sold for $10,000. The sale was, also, made subject to a right of redemption by F. on reimbursing, within three years, the stipulated price of $15,409500, and interest at the rate of 8 p.c., with a provision that, in case of insolvency or default of payment, this right of reméré should cease. No delivery took place, and ten months later F., who remained in possession of the property under a lease from A. B. of the same date as that of the sale, also became bankrupt. In the meantime A. B., with F.S consent, had leased the furniture to T. & J. in whose hands they were when Appellant, (F.'s Assignee) revendicated them as part of the insolvent estate. T. & J. did not plead, but A. B. intervened and claimed the effects under the deed of sale above mentioned. The Assignee contested the intervention, alleging that deeds passed on the 19th January, 1875, had been made by T. F. in fraud of his creditors.

Held,—That there was sufficient evidence to prove that the object of the transaction was to defeat F.' creditors generally, and therefore the deeds of sale and lease of 19th January, 1875, were null and

[Page 561]

void under Arts. 1033, 1035, 1040 and 993 C. C. L. C, and secs. 86 and 88 of Insolvent Act of 1869, and sec. 3, sub. sec. 13 of Insolvent Act of 1875.

THIS was an appeal from a judgment of the Court of Queen's Bench for Lower Canada (Appeal Side), dated 8th June, 1877, reversing a judgment of the Superior Court for the District of three Rivers, (McCord, J.) rendered on the 23rd November 1876.

The Appellant, assignee of the insolvent estate of one Thomas G. Farmer sued out a writ of saisie-revendication to attach from Messrs. Trihey 8c Johnson, lessees of Respondent, furniture and chattel property to the alleged value of $3,817.62, as belonging to the insolvent, and forming part of his estate. To this action the Defendants did not plead. The Respondent intervened, and alleged that the Defendants, to the knowledge of the Appellant and of the creditors of the insolvent, held the property seized as lessees of him; that he was owner of the property under a deed of sale from Farmer dated 19th January, 1875, and that, at the time of the attachment in insolvency, he was in possession of this property through Farmer who held it under a lease from him also dated 19th January, 1875.

The Appellant filed a contestation of this intervention alleging that Farmer was insolvent at the time of the deed of sale; that Bell knew of his insolvency; that this deed and likewise the deed of lease from Bell to Farmer were both executed in fraud and to the detriment of Farmer's creditors, and were passed in contemplation of insolvency, for the purpose of giving Bell an unjust preference over the other creditors

By the evidence of record, the following facts were established: —

On the 16th of December 1874 Bell wrote to 1armer the following letter:—

[Page 562]

Montreal, Dec. 16th, 1874.

"T. G. Farmer, Esq.,

Dear Sir,—I asked Mr. Wurtele to what way I could be secured in your claim or amount, so he told me you would require to make out a list of all the furniture in the hotel, to attach to our agreement; do it yourself— make a list of each room; commence at No. 1, and so on. You need not let anyone know of it] this is the simplest way of securing the whole, and then all I will trouble you for will be an amount not exceeding 8 p. c. on the whole debt to run till March, 1878. Your running amount is $6,000, and then the $10,000; the whole sale will be for $16,000, and then you will pay me every three months 8 p. c. and have it in your power to redeem the whole in March 1878 by paying me $16,000, and by doing this everything is secure both for you and me, and then all I trouble you for is the rent at 8 p. c, so that you can pay others quite easily and not be troubled any. I will bring the papers down with me for you to sign now. By having everything secured for me, if you at any time require my assistance I shall only be too happy to oblige you. Of course this course is the only one as things stands at present. Neither you nor me can tell how long we live and things has been done rather loose, it is all very well as long as we are attending to things ourselves. Attend to make out the list or if you are too busy I will send my son to assist you, so that you and him can do it very quietly between yourselves.

Hoping you and your good lady are well.

Yours truly,

ADAM R. BELL;"

On the 12th of January, 1875, Bell wrote another and most pressing letter, in which he tells Farmer that "he cannot renew his notes for ever and lay out his interest without such security as he asked ;" that "under the prospects of things he has invested enough already;"

[Page 563]

that "he wants the security now on the time mentioned and. in the order of thing's mentioned."

On the 13th Bell again writes: "Be careful in making the list to have a price to every article and mention every article of furniture, setting down price opposite; this you will find turn out good for yourself as well as me."

"Go quietly around and write down everything. It is no one's business to meddle with you in our settlements and when this is arranged you may require using me again which I hope I shall be in a position to serve you.

Upon these letters, Farmer went to Montreal, and, on the 19th of January, 1875, sold to Respondent "The British American Hotel," at three Rivers, and all the furniture it contained, together with a lot of land on the outskirts of the city and £700 stg. of fourth pre ferential bonds of the Grand Trunk Railway Company. This sale was made for $15,409.00, of which $6,000 were in payment of a bailleur-de-fonds claim, $4,000 in payment of a mortgage, and the balance of $5,409500 was declared to have been paid at the time of the signing of the deed. The sale was made subject to a droit de réméré by farmer, on reimbursing, within three years, the stipulated price of $15409.50 and interest at the rate of 8 p.c, payable quarterly, with a provision that, in case of insolvency, or default of any payment within sixty days after it was due, this right of réméré should cease.

The list of articles which is annexed to the deed of sale does not altogether agree with the furniture in the hotel, but it is alleged by Bell, in his intervention, that, notwithstanding very considerable discrepancies, the intention was to sell all the furniture in the hotel at the time of the sale.

[Page 564]

The sale included: —

1st The hotel which at the time was as

sessed by the Corporation of Three

Rivers on valuation made by the

assessors under oath at ……………………$22000 00

And which on the the following year was

assessed at $26000: —

2nd The furniture and chattel property,

including 1500 bushels of potatoes,

the whole valued at ………………………….4109 50

3rd The lot of land near the city ……………..1000 00

4rd The U-rand Trunk bonds ………………….300 00

Total…….. $27409 50

Sold for $15,409.50, a         s mentioned in the deed. The hotel being put down for $10,000. A number of witnesses say that it was fully worth the value it was assessed at, and even something above, while others say it could not have been sold, at a forced sale, for more than $10,000. On the same day, Bell leased to Farmer, for three years, for $1,237 a year, payable quarterly, all the property he had purchased from him. The two deeds were passed before Jobin, notary, at Montreal, and the deed of sale was subsequently registered at Three Rivers, on the 1st day of February, but the lease was not registered. No delivery took place, and Farmer remained in possession of the whole, as before the transaction, until the 27th day of November, 1875, when a writ of compulsory liquidation issued against him, and the property was seized in his possession by an Interim Assignee. On the 3rd December, 1875, Trihey & John son took possession of the hotel and furniture, as lessees of Bell, apparently under some understanding between Bell and the Interim Assignee, the nature of which is not well explained in the cause.

After a protracted enquéte, the Superior Court declared

[Page 565]

the sale to have been made in fraud of the creditors of Farmer dismissed Bel'ls intervention, and declared the saisie revendication valid. This decision was reversed on appeal to the Court of Queen's Bench—the Chief Justice and Mr. Justice Tessier dissenting.

In the Supreme Court the question argued was, whether the deeds of sale and of lease of the 19th January, 1875, could be declared void on the ground of fraud, or of unjust preference, in contemplation of insolvency.

Mr. H. T. Taschereau, Q. C. and Mr. Honan, for the Appellant.

Mr. McDougall, Q. C, for Respondent.

The arguments and authorities relied on sufficiently appear in the judgments.

Ritchie, J.:—

This is a proceeding to set aside a deed by which one Farmer transferred to the Respondent a large amount of property. I understand that under the civil law an entirely different principle prevails from what prevails at common law, where a party may make a preference, if it be a bonú-fide transaction, even if made for the purpose of delaying or defeating a specific creditor, but that under the Civil Code, L. C, such preference would not be good.

The question in this case appears to be one of fact only, viz.:— Whether, under the circumstances of the case, the result of this transaction was the delaying or defeating of creditors ? The Court of original jurisdiction determined that the effect of this transfer was to delay and defeat creditors; that it was, in fact, a preference given to the Respondent, which, under the Code, he was not entitled to have, the principle of the Code being that a party cannot, when in insolvent circumstances,

[Page 566]

prefer one creditor to another; that all have an equal right to a distribution of a debtor's goods upon the same basis as that of a bankrupt's property.

After carefully reading and considering the evidence, I am unable to dissent from the able judgment of Chief Justice Dorion, who goes into all the circumstances, and points out the particulars in which he thinks the effect of this transaction was to defeat and delay creditors, and to invalidate this deed. I cannot say perhaps because I have always been so strongly acting upon a different rule—that I can go with the learned Chief Justice in all the reasons he gives, but, in many of them, I entirely agree with him, sufficiently so, at any rate, to come to the conclusion at which he has arrived that this deed cannot stand.

It is clear that Farmer was very largely indebted at the time of this transaction; that under this deed the whole of his property (with the exception of the wine cellar) was transferred to Respondent the value of which would seem to have been much greater than the Respondent was to pay for it. The effect of this transfer was to render Farmer insolvent, and not leave property for the discharge of his other liabilities. The transaction Was carried out with secrecy, and Bell, evidently, must have known that the effect of it was to delay and defeat all Farmer's other creditors. It is true an opportunity was given Farmer of redeeming the property if he could do so, but even this was put in such a way that Farmer’s creditors could know nothing about it, and, coupled with the secrecy of the whole transaction and its obvious effect on Farmers position in reference to his other creditors, shows it to be a transaction entirely opposed to the principle of the Civil Code of Lower Canada, and, therefore, must be set aside.

STRONG, J., concurred.

[Page 567]

TASCHEREAU, J

Les faits de la présente cause sont a peu de chose prés, les suivants :

Thomes G. Farmer possédait une proprieté immobiliaire située à Trois-Rivières et connue sous le nom de British American Hotel, dans lequel ii exercait le métier d'hÔtelier; ii possédait dans cette maison un mobilier considerable qui était utilise pour les fins de son négoce comme hotelier. Le 19 janvier 1875, Farmer vendit à l'Intime cet hôte,l avec le mobilier, plus un lot de terre et quelques preferential bonds de la compagnie du Grand-Tronc, au montant apparent de £700 sterling, le tout pour le prix de $15,409533, dont $6,000 furent stipules être en prime d'un montant à lui du par privilege de bailleur defonds surl'hôtel, $4,000 pour une hypothèque sur la même propriéte, et le reste, savoir $5,109.50 comme argent payé au moment de la passation de l'acte en question. Cette venee fut faite avec droit de reméré en faveur du vendeur sous trois ans, en payant les $15,409500 avec intérêt 8 pour cent, à et avec la singulière stipulation on en cas d'nsolvabilité ou a défaut de paiement d'intérêt a chaque trimestre ce droit de reméré cesserait. Et chose aussi extraordinaire, Bell consent en faveur de Farmer le même jour, un bail de cette propriété et du mobilier susdit, moyennant un loyer annuel de $1,237 payable par quartier. Il n'y eut pas de livraison actuelle, mais Farmer resta en possession jusqu'en décembre 1875, époque a laquelle Farmer ayant Cté force de faire une cession de biens, 1 appelant Rickcaby fut appointé syndic a la banque route de Farmer, et en février 1876 ii réclama, par saisie revendication, les meubles, comme partie des biens de la faillite de farmer, contre les nommés Tnihey et Johnson, à qui Bell, avec le consentement d'un syndic ad interim, avaient consenti un bail de ces effets et de la propriéte.

[Page 568]

Trihey et Johnson firent défaut de comparaître à cette demande de Rickaby et Bell intervint pour réclamer tout ce que Farmer lui avait vendu. Le jugement en premiŁre instance, prononcé par M. le juge McCord, donna gain de cause a Rickaby, et annula la vente que Farmer avait consenti a l'intimé Bell. Sur appel a la Cour du Bane de la Reine a Quebec, ce jugement fut renversé par trois sur cinq honorables juges composant ce tribunal, et c'est de ce jugement dont cette cour est actuellement saisie.

De l'exposition des faits de la cause telle que constatée par le dossier, nous avons à déclarer si les actes du 19 janveir 1875 exécutés entre Farmer et l'Intimé doivent être considérés comme faits et exécutés en fraude des créanciers de Farmer et si comme tels ils doivent être annulés.

La premiere question est celle de savoir, si a l'epoque de l'éxécution des deux actes du 19 janvier 1875, Farmer lui-même et Bell savaient que Farmer était incapable de rencontrer ses engagements. L'affirmative me semble prouvée de la maniére la plus positive par les nommés McGibbon, Dawes, Mountain et par Farmer lui-meme, par les lettres singulières de Bell à farmer, du 14 décembre 1874 et 12 janvier 1875, qui indiquent clairement cbez l'un et l'autre la conviction de liinsolvabilité de farmer, surtout lorsque le tout est suivi de l'exécution des deux actes du 19 janvier 1875. Ces lettres et les deux actes du 19 janvier 1875 sont la preuve complete du pitoyable tat étes finances de farmer, et de la grande pression que Bell voulait exercer sur son débiteur dans le but de se protéger, et ce en se faisant transporter tout son actif a un prix comparativement vii comme le dossier le constate, et de fait a peine 50 p. 100, et ne laissant rien a espérer pour ses autres créanciers.

Si lonprend en consideration que la venee de tout

[Page 569]

l'actif de Farmer, dont la valeur approximative était de $27,409, a été faite pour $15,409, on ne pourra se défen-dre dun fort soupcon de la sincérite de l'acte de vente mais mŒme nous devons dire que cette vente n'était ainsi consentie que dans le but de protéger Bell à l'exclusion des autres créanciers de Farmer en un mot de lui donner une préférence indue. D'ailleurs, l'acte contient une declaration fausse du paiement de $15,409.50 lors de la passation de cet acte puisqu'en réalite tel paiement n'a pas eu lieu, et que ce paiement prétendu n'etait que l'extinction d'une dette antérieure chiro. graphaire pour des avances d'argent et fournitures pour lesquelles Bell n'avaitaucun gage ni sureté quelconque.

La preuve, je le répete, que l'on trouve au dossier me convaine que ces deux actes ne furent que l'oxécution d'un projet bien arrêté de la part de Bell et de Farmer de donner au premier une préférence 1ndue, et ce au detriment des créanciers de Farmer et entre autres de Rickaby. J'avoue que la fraude, qui résulte de l'exécution de ces deux actes, n'est pas prouvée avec l'exactitude que l'on pourrait attendee dans une transaction ordinaire de la vie mais d'un autre cote la loi, sans présumer la fraude, n'en defend pas la preuve par tous les moyens possibles, par toutes les circonstances possibles. En effet la fraude serait le plus sou-vent insaisissable si la preuve des circonstances tendant a l'établir n'était pas permise.

M. Chardon ([1]) dit;

Les créanciers doivent prouver et le dommage qui leur est fait et l'intention qu'a eue leur débiteur de leur. faire; mais comment établir cette intention ? Dans cette occurence, comme dans beaucoup d'autres, si la preuve directe n'est pas possible, ii en est diindirectes que fournissent les présomptions offertes par les circonstances

Et Bedarride ([2]) dit:

[Page 570]

Dans tous les cas ou la preuve testimoniale est admissible, la preuve par présomption l'est également.

Or, dans le cas present, les faits prouvés prouvent abondamment l'intention de frauder, au moins dans le sens legal, car Bell n'iignorait pas, ne pouvait ignorer, liinsolvabilité de son débiteur; et les autorités vont mŒme jusqu'au point d'établir que si le d6biteur an moment de sonl transport, ne laisse pas assez pour payer ses dettes il doit être considéré comme ayant été insolvable, et que le cessionnaire doit en subir les consequences.

Lélément de fraude que l'on trouye dans les transactions en question consiste lo. dans l'insolvabilité évidenee de Farmer, bien connue de Bell et qu'il ne pouvait ignorer, quoique le public en general ne pit que la soupfonner:

2o. Dans le fait que, quant a la somme de $5,109.50, que Bell pretend avoir payee a Farmer comme partie du prix total de $15,109 50 Bell absorbait ainsi à lui seul une somme de $5,109.50 représentant des meubles et effets appartenant a farmer, qui étaient le gage commun de ses créanciers en general, et sur lesquels meubles Bell n'avait aucun privllége ni lien quelconque. C'etait done, au moins quant a cette somme, une perte de $5,109.50 :

3o. Dans le fait que la propriété mobiliere qui est entree dans l'estimation de Bell comme partie du pnix de vente des $15,109.50 n'y est estimée qu'au montant de $10,000, tandis qu'a l'époque de cette vente, l'hôtel était estimé de $22 à $26,000 par les estimateurs officiels de la corporation de la ville de Trois-Rividres :

4o. Dans le fait de la venee a remére, qui indique que la vente n'etait pas sérieuse mais fait dans le but seul de protéger le créancier et le débiteur, an prejudice des créanciers du débiteur, en empêchant ces derniers de pouvoir exercer leur recours immédiatement contre

[Page 571]

Farmer sans avoir au préalable fait annuler ces actes comme frauduleux.

II me paraît de toute évidence que, commele dit M. le juge en chef Dorion en ses notes de jugement, l'iintimé Bell se trouve dans ce dilemme bien evident savoir, Si la proprieté valait $26,600 et qu'il l'avait achetée pour $10009 Bell et son débiteur commnettent une fraude palpable et punissaable comme fraude en violation de la loi de faillite, et si la proprieté ne valait one $10000 Fuemer était alors insolvable sans espoir de se rétablir, et conséquemment ii était passible d'une punition, dont son créancier qui s'y était associe partageait le risque savoir: de voir ces actes de vente annulés par les tribunaux comme faits en fraude des créanciers de l'insolvable.

Les articles 1033 1035 1040 993 du Code Civil et les provisions de l'acte de faillite de 1869 me semblent s'appliquer a. la présente cause et militent avec force contre les prétentions de l'intimé.

Les autorités que l'on trouve an factum del'appelant, savoir: Caprirna([3]), Bell's Commentaries([4]), Bedarride([5]), établissent une bien saine doctrine savoir: que si un débiteur paie un créancier en tout où en partie an prejudice des autres, il y a présomption où douee de fraude, et un créancier sera réputé avoir connu liinsolvabilité de son débiteur, si a l'epoque d'une transaction il était en position de connaitre l'etat de ses affaires où si ses transactions indiquaient chez lui un fort doute de l'insol vabilit6 de son débiteur, et qu'il n'est pas mŒme néces saire d'etablir que le débiteur fut insolvable a l'époone de la transaction; et il est suffisant de prouver qu'en faisant cette transaction il s'est réduit a lŒetat d'insol-vabilité. La clandestinité est aussi un indice de fraude,

[Page 572]

telle qu'une vente a reméré sans tradition publique. Nos tribunaux de la province de Quebec ont maintenu la doctrine qne la clandestinité était un indice de fraude. Or nous voyons tous ces indices et tous ces éléments de fraude dans les transactions du 19 janvier 1875 savoir: insolvabilité indubitable, clandestinité, défaut de tradition par Farmer à Bell. Voila pour le droit commun. Maintenant la loi statutaire acte de faillite 1869 section 13 sous-sections 1 et 3 de l'acte de 1875 et sections 86 et 88 de l'acte 1869 frappe de nullité des actes faits sous les mêmes circonstances

Mais l iintimé a prétendu que l'appelant ne pouvait demander la nullité de la vente des immeubles. Ii y a une double erreur dans cette prétention car 1o. la pro. priété avait été vendue a bas prix, savoir, $10,000 au lieu de $26,000 où environ qu'elle valait. En efffet Bell  aussitôt aprés l'acquisition la fit assurer, savoir: la construciion seule pour $16,000, ce qui avec le terrain la portait a une valeur de plus de $20,000; et 2o. il y aune seconde erreur dans cette prétention de l'intimé en ce que les actes, étant attaqués comme frauduleux entre commercants et commercants, la fraude sur un point quelconque important étant prouvée elle affectuait toutes les transactions du 19 janvier 1875.

Si liintimé a une hypotbéque valable sur la propriété de l'hôtel son droit est sauvegardé et complétement protégé devant le syndic officiel, qui la fera vendre et paiera les hypotbéques et dettes privilegiées tout aussi bien que le ferait un shérif. Ainsi le jugement de cette cour en annulant ces actes du 19 janvier 1875 remettra les "parties au mŒme état dans lequel elles se trouvaient a la date de ces actes frauduleux, et leurs droits et priviléges et ceux de tous les autres créanciers que le syndic present appellant est par la loi oblige de protéger renaîtront comme s'ils n'avaient jamais été afiectés.

Le iugement de cette cour sera a l'effet de renverser

[Page 573]

le jugement de la Cour du Banc de la Reine à Québec, d'annuler comme frauduleux les deux actes de vente du 19 janvier 1875, avec frais et dépens tant en cour d'appel que devant cette cour.

Fournier, J., concurred.

Henry, J.:—

I do not think it necessary in this case to refer to the Civil Code of Lower Canada to sustain the judgment the Court has announced, so far, in regard to the case before us The Statute of 1869 the general Act of the Dominion Parliament authorized as it is by the Imperial Act to legislate on the subject of insolvency, if sufficient in itself could not be controlled by any Act previously existing in any of the provinces; and, therefore, if, on looking at that Act, the assignment is not legal we have no necessity to refer to the Civil Code. The 88th section of the Statute reads :—

All contracts, or conveyances made and acts done by a debtor, respecting either real or personal estate with intent fraudulently to impede, obstruct or delay his creditors in their remedies against him, or with intent to defraud his creditors, or any of them, and so made, done or intended with the knowledge of the person contracting or acting with the debtor whether such person be his creditor or not and which shall have the effect of impeding, obstructing or delaying the creditors of their remedies, or of injuring them or any of them, are prohibited and are null and void, notwithstanding that such contracts, conveyances or acts be in consideration, or in contemplation of marriage.

A similar enactment is in force in England and decisions have already been had upon it, which, I think, are in the spirit of the words of this clause. The interpretation given to these words and their equivalent in the English Courts, may be gathered from the following cases:—See Ex parte Bailey ([6]); Lindon v. Sharp ([7]); and Oriental Bank v. Coleman ([8]).

[Page 574]

Under the Statute, we have, then, first to enquire as - to the knowledge of the party to whom the assignment is made. I think the evidence is abundant to show that he knew the party was indebted to others and insolvent and in fact by his conduct generally he shows he knew everything, and got the property for the purpose of shielding it from the other creditors. That is sufficient to satisfy the terms of this Act. The decisions of the courts in England make all these assignments fraudulent, not necessarily in the intention of the party who makes them, but by the operation of the Statute, and I conceive there is no difficulty in coming t6 the conclusion that if that is the construction to be given to the Statute, the assignee here knew everything that was required to be known to give effect to that section of the Act, and that this assignment was made by the insolvent while he was largely indebted to other people and, therefore, the assignment was made in a manner which is prohibited by the statute. Under all the circumstances, therefore, I think the case is plainly and fully made out so much so that no jury would hesitate in regard to it. I agree with the judgment already given, that the assignment is void in law; and that the judgment originally given should be carried out, with costs of the Court of Appeal below and of this Court.

Appeal allowed with costs.

Solicitor for Appellant: M. Honan.

Solicitor for Respondent William MacDougall.