Schell v. McCallum & Vannatter, (1918) 57 SCR 15

Supreme Court of Canada

Schell v. McCallum & Vannatter, (1918) 57 S.C.R. 15

Date: 1918-06-10

Malcolm S. Schell and Others (Plaintiffs) Appellants;

and

Mccallum & Vannatter (Defendants) Respondents.

1918: May 22; 1918: June 10.

Present: Sir Charles Fitzpatrick, C.J., and Davies, Idington, Anglin and Brodeur, JJ.

ON APPEAL FROM THE SUPREME COURT OF SASKATCHEWAN.

Contract—Construction—Guarantee—Bonâ fide Agreement.

By agreement between them McC. & V. engaged in the purchase, on behalf of S., of securities known as "Purchasers' Agreements." Land in Saskatoon having been sold for $12,000 of which $4,000 was paid in cash the vendor assigned to McC. & V. the agreement to purchase and the latter drew upon S. for the amount payable under their agreement. S. then wired to McC. & V. as follows:—

"Certificate of title value five thousand assessment four thousand "fifty Jones allowed penalty on taxes. No declarations from "Love or Jones as to moneys received or paid only one lot looks dear. "Please explain and guarantee holding draft give men's standing "we are afraid been away from home caused delay."

On the same day was wired the following reply:

"Value on title made low to reduce registration costs are getting "declaration as to monies received from Love who is good man "agreement good and guarantee it."

Held, Davies and Brodeur JJ. dissenting, that the last mentioned document was ambiguous and was shewn by the circumstances to have been intended as an assurance that the vendor was a man of good financial standing and the property in question good security for the money and the agreement and title passed thereby in proper legal form, but did not guarantee payment of the purchase money.

Per Davies and Brodeur JJ. dissenting:—The document is a guarantee of the agreement including the undertaking to pay if the main debtor makes default.

Appeal from the judgment of the Supreme Court of Saskatchewan[1], reversing the judgment of Newlands J. at the trial and dismissing the plaintiff's action with costs.

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The material facts of the case and the questions in issue are fully stated in the above head-note and in the judgments now reported.

Tilley K.C. for the appellants.

Chrysler K.C. for the respondents.

The Chief Justice.—The action is brought on an alleged guarantee by the respondents of the payment of the balance of the purchase price under an agreement for sale, the vendor's rights under which were acquired by the appellants.

The guarantee was contained in the telegram which reads:—

Value or title made low to reduce registration costs are getting declaration as to moneys received from Love who is good man agreement good and guarantee "it."

There was a letter confirming this telegram but I do not know that it carries the matter much further even if it was admissible in evidence which it probably was not since it was not received until the appellants had completed the purchase of the agreement.

Some time prior to the transaction in question in this suit the appellant, in reference to similar ones had inquired of the respondents on what terms they would be prepared to guarantee the due completion of such agreements for sale. The respondents replied stating in a general and rather vague manner terms on which they would give a guarantee which apparently would have been for the payment of the balance of purchase money remaining due.

The matter went no further, but the trial judge interpreted the guarantee given by the respondents in this case by the light of this letter and held that the same meaning must be given to the guaranteein this case. I do not think there was any occasion for doing

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so but rather the contrary since here the respondents made no stipulation for any commission or other remuneration for themselves for giving such a guarantee. Indeed the only consideration for their giving it which the appellants are able to suggest is "the appellant purchasing the said agreement for sale from Robert W. Love" and this seems entirely inadequate as a consideration for the respondents, who were merely agents, undertaking to guarantee the payment of the purchase money under the agreement.

I think the simple and natural construction of the guarantee is as stated in the judgment appealed from

that it did not guarantee payment of the agreement, but went no further than to guarantee that the agreement was a bonâ fide one, and that the property and the parties were good.

In their letter confirming the guarantee the respondents say

in talking the matter over we decided to guarantee it, which should be sufficient for your requirements.

It appears from the correspondence that the respondents were aware that the appellants were only speculating in the purchase of these agreements for sale with borrowed money and that they had the greatest difficulty in getting the banks to advance money for the purpose. I think it is therefore probable that when they said

this should be sufficient for your requirements

they had in view that the guarantee was to satisfy the bank lending the money of the bona fides of the agreement in which no doubt the respondents believed.

I would dismiss the appeal with costs.

Davies J. (dissenting).—I am of the opinion that the appeal in this case should be allowed with costs and the judgment of the trial judge restored. Mr. Justice

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Lamont, who dissented in the Appeal Court, was of the same opinion on the latter point.

The question at issue between the parties is whether the proper construction of the guarantee in question of an agreement for the sale of certain lands sold by the respondents to the plaintiffs, appellants, was a guarantee of the agreement including its payment or was limited to the agreement being a bonâ fide one only as to property and parties.

The respondents were real estate agents carrying on business in Saskatoon and the appellants were business men residing in Woodstock, Ont. Prior to May, 1913, the appellants had purchased from respondents a number of agreements for the sale of land and a proposition had apparently been made by the appellant plaintiffs to the defendant respondents respecting the guarantee of those agreements. On November 1st, 1912, Blow, one of the plaintiffs, wrote the following letter to defendants:—

Woodstock, Ont., Nov. 1, 1912.

McCallum & Vannatter,

Saskatoon, Sask.

Dear Sirs:—Your letter is received and glad to hear that everything is being put in proper shape and trust that everything will end well.

And now about further business. I think agreements ranging from one thousand to three, but smaller or a little larger would not make much difference if we could prove that they were gilt-edged. About what would it be worth to guarantee them as you propose? Now if three or four real good ones came to you and you could mail them to me in haste by registered letter I could do better by exhibiting them and attending to it and returning promptly to you if you thought wise.

I am,

Truly yours,

(Sgd.) J. W. Blow.

P.S.—Please give me the nature and details of the guarantee you could give and oblige.

In reply the defendants wrote on the 7th November a letter in which are the following paragraphs:—

As before written to you, we will not submit anything to you that is not first class, but if you will just leave the matter in our hands, we

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will secure agreements for you and put through the papers without any delay. As you know, when these people bring in an agreement to sell, they want the money right away, so we could handle them in this way having the papers put through the Land Titles Office without loss of time if we knew how you wished them made out:

As to this guarantee you mention would say that we consider it worth 5 per cent., and would give you any kind of a binding agreement of that nature that you could wish. We, of course, would expect that settled at the time and we would be fully responsible for all payments so that if the party on the agreement did not come through, we would have to come through ourselves.

On the 17th April, 1913, defendant wired plaintiffs offering them the agreement now in controversy and plaintiffs replied expressing their willingness to purchase. The papers were sent forward to them through the bank at Woodstock with a draft attached for the purchase price. After examination of the agreement and the other papers, the plaintiffs were not satisfied and wired defendants as follows:—

 

Woodstock, Ont., May 10, 1913.

McCallum & Vannatter,

Saskatoon, Sask.

Certificate of title value five thousand, assessment four thousand fifty Jones allowed penalty on taxes. No declarations from Love or Jones as to moneys received or paid only one lot looks dear. Please explain and guarantee holding draft, give men's standing, we are afraid being away from home caused delay.

21; o6k.                                                                           Schell and Blow.

To this telegram, plaintiffs replied:—

From Saskatoon, May 12 1913.

To M. Schell and J. Blow,

Value on title made low to reduce registration costs, are getting declaration as to monies received from Love who is good man, agreement good and guarantee it.

McCallum & Vannatter.

On the same day the defendants wrote plaintiffs a letter in which they explaimed that the certificate of title is

no guide to the real value of the property

and that

as to the assessment from what we can learn this is figured on a 40% basis for property of this description

adding:

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However in talking the matter over we decided to guarantee it which should be sufficient for your requirements. We know Mr. Love personally and know for a fact that he has considerable means and while we are not personally acquainted with Mr. Jones we are told he is good and will make payments promptly being a drug traveller.

On the 14th May, the plaintiffs wired defendants:—

Your telegram explaining reason low valuation on duplicate certificate and guaranteeing agreement as good came to hand on Monday afternoon and we paid draft yesterday.

Reading the correspondence and the telegram together, I cannot have any doubt that when the defendants telegraphed the plaintiffs saying, "agreement good and guarantee it" they meant what any ordinary businessman would mean that they guaranteed its payment. The letter sent by them the same day in which they say,

However in talking the matter over we decided to guarantee it which should be sufficient for your requirements

taken in conjunction with their previous letter of 7th November in which they explain what they mean by the guarantee mentioned in the plaintiff's letter they were answering was that

we would be fully responsible for all payments so that if the party on the agreement did not come through we would have to come through ourselves

place the question of the meaning of the guarantee and the intention of both parties as to what it covered beyond any doubt in my mind. Defendants say what they mean by guaranteeing agreement and I cannot agree with the limited and narrow construction which the Court of Appeal placed upon it that

it went no further than to guarantee that the agreement was a bonâ fide one and that the property and the parties were good.

Such a limited construction is right in the teeth of their letter and their telegram.

I would allow the appeal with costs.

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Idington J.—The appellants and respondents had for some months prior to the transaction now in question been negotiating with each other for the purchase by the appellants of securities known as "Purchasers' Agreements" for the purchase of lands and the covenant for the payment of the money.

The appellants resided in or about Woodstock, in Ontario, and the respondents in Saskatoon, Saskatchewan. Several transactions of that kind had taken place during these negotiations prior to the one in question, which was an agreement for the purchase of some land in Saskatoon alleged to have been purchased by one Jones from one Love, both of Saskatoon, for the price of $12,000 on which a sum of $4,000 on account of principal was supposed to have been paid. Love made an assignment of the agreement of purchase by an instrument dated 18th April, 1913, to the respondent Schell.

The respondent who procured this drew upon the appellants for the amount agreed upon as the price of said security, making their draft payable at Woodstock, Ontario, and accompanying the draft with the assignment and other documents relative thereto.

On the 12th May, 1913, by night lettergram, the appellants wired respondents as follows:—

Certificate of title value five thousand assessment four thousand fifty Jones allowed penalty on taxes. No declarations from Love or Jones as to moneys received or paid only one lot looks dear. Please explain and guarantee holding draft give men's standing we are afraid been away from home caused delay.

The respondents on the same day wired reply as follows:—

Value on title made low to reduce registration costs are getting declarations as to moneys received from Love who is good man agreement good and guarantee it.

Upon this instrument lastly mentioned the appellants

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brought an action which was instituted on the 18th September, 1916, claiming that respondents had guaranteed to them in writing the payment of the balance of the purchase price under the said agreement for sale. The learned trial judge maintained the claim, but the Court of Appeal for Saskatchewan reversed that judgment and dismissed the action. Hence this appeal which should be determined solely by the correct construction to be placed upon the said telegram.

I think the document is very ambiguous and capable of more than one meaning. Counsel for the appellants contends that it must mean a guarantee by the respondents of the payment by Jones of the amount of the balance of purchase money of the land or by Love, his vendor, who covenanted therefor. On the other hand, counsel for the respondents contended that it could have no such meaning or any meaning beyond being an assurance that Love was a good man and the agreement in proper form and possessing the validity such an agreement should have.

I confess that from the perusal of the judgments, and listening to the argument of counsel for the appellants, I had received the impression that an interpretation and construction midway between these extreme contentions was more consonant with reason and better fitted to express in truth what the parties had in view. According to that impression I should hold that it represented Love as a man of good financial standing, the property in question good security for the money and the agreement and title passed thereby in proper legal form. In that view, if Love could be shewn to have been at the time in question of such apparent good financial standing as would answer the description and the land of the value which the agreement represented and the title perfect, there could be no recovery; and

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on the other hand, if it turned out that between the date of the telegram and the recovery on the action brought by appellants against Love and Jones financial disaster had overtaken one or both or the condition of the market value of the land in question had become such that the land had fallen far below the market value of that of previous years, these circumstances should not be taken into account in determining adversely to these respondents their liability. I am still inclined to think that is the correct view of the nature of the instrument sued upon and the liability thereunder.

Counsel for the appellants repudiated in argument any such construction as possible. Possibly the circumstances that had transpired were of such a nature as to indicate that an action seeking to enforce that view would be of little avail.

I cannot accept the interpretation and construction contended for by appellants that it was distinctly intended that the respondents should, on default of those liable under the agreement and the assignment thereof, become liable to pay the balance of the purchase price of the land named in the security. The instrument being of an ambiguous character I think that anything which had passed between the parties prior thereto, and leading up to it, as well as that concurrent therewith and the acts of the parties immediately after, may be looked at. Counsel for appellants relies in that connection upon a letter of the 7th November, 1912, from the respondents to Mr. Blow, one of the appellants, in which they further explain to him the nature of the business involved in the buying such like securities and used these words:—

As to this guarantee you mention would say that we consider it worth 5% and would give you any kind of a binding agreement of that nature that you could wish. We, of course, would expect that settled at the time and would be fully responsible for all payments so that if

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the party on the agreement would not come through, we would have to come through ourselves.

These two sentences taken from the middle of a long letter are evidently an answer to a letter of Mr. Blow of the 1st November in which, amongst other things, he says, speaking of such like agreements:—

About what would it be worth to guarantee them as you propose?

and then adds the following postscript:—

Please give me the nature and details of the guarantee you could give and oblige.

I am very far from finding anything in that correspondence to support the appellants in their view of the transaction now in question. Indeed, I think that a letter written only five months before so expressly stipulating for 5% being paid at the time of the sale of such a security, as the price of the guarantee for its payment, excludes the possibility of the parties hereto having ever intended that such a guarantee was to be implied in the telegram in question.

There was no 5% paid or anything paid by way of securing an assurance of payment, and when reliance is placed upon a letter written on the same day as the telegram but not received until after the draft had been paid, I do not think it helps.

Stress is laid upon an expression in that letter that the respondents had decided to guarantee, I do not attach the importance to the expression in the letter that counsel seems to think was attached to it. In short, the circumstances to be gathered from the correspondence clearly shew that appellants' difficulty and hesitation in accepting the draft was what the night lettergram indicates. The difficulty seems to have been that the certificate of title valued the property at $5,000 and the assessment only $4,050 and that Jones the purchaser had allowed the imposition of the penalty for non-payment of taxes. Hence the suggestion of a

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declaration from Love or Jones as to the moneys received or paid for what looked dear. These were the things that were to be explained and guaranteed against as well as an assurance relative to the man's standing, and pursuant thereto a declaration was got from Mr. Love verifying the price and terms of the cash payment according to the terms of purchase and also his own standing to the extent that he had not been sued for the money or it garnisheed.

It is to be observed that the parties had several transactions of a like kind between the date of the letter and the telegram in question, but in not a single instance was a 5% premium for guarantee resorted to.

I do not think under such circumstances that the construction contended for by appellants of the document sued upon can or should be maintained and I therefore think the appeal should be dismissed with costs.

Anglin J.—I concur in the dismissal of this appeal substantially for the reasons stated by Mr. Justice Idington.

Brodeur J. (dissenting).—The appellants by their action claimed from the respondents the payment of a sum of money for which they say the respondents gave a guarantee, that sum of money being originally due by Love and Jones.

The respondents claim that they did not guarantee the payment of the obligation of Love and Jones but simply guaranteed that the agreement was bonâ fide and that Love and Jones were good.

The appellants succeeded before the trial judge; but the Supreme Court of Saskatchewan en banc by a majority dismissed their action and reversed the judgment of the trial judge.

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For some time, the appellants had some business dealings with the respondents and had been purchasing some agreements of sale through the respondents or from the respondents. They were purchasing the interest of the vendor in those agreements, taking assignments thereof.

In the month of April, 1913, the respondents offered for sale the agreement of Love and Jones for the sum of $7,300, and they sent a few days afterwards a draft for the purchase price as was the usual custom of dealing between the appellants and the respondents.

The appellants, after having inspected the document, were not satisfied, having found out that the certificate of title valued the property only at $5,000 and that the municipal assessment was only $4,050 and they asked whether they would guarantee.

The respondents answered stating that the value and title were made low in order to reduce the registration costs and they added, "Agreement good and guarantee it." They sent a confirming letter stating that having thought the matter over, they had decided to guarantee it.

I must state that in a previous correspondence exchanged between the parties, the respondents had been willing to guarantee the debts which they would sell to the appellants who were living in Ontario when those agreements of sale were made in the Province of Saskatchewan. They said, however, that a sum of 5% should be given to them for such a guarantee and they added:—

We, of course, would expect that settled at the time and we would be fully responsible for all payments so that if the party on the agreement did not come through we would have to come through ourselves.

We see by that letter the nature of the guarantee which the respondents were willing to give concerning those agreements of sale.

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But outside of that what is the nature of the contract of guarantee?

It is an undertaking to answer for another's liability and collateral thereto. It is a collateral undertaking to pay the debt of another in case he does not pay it. It is a provision to answer for the payment of some debt or the performance of some duty in the case of the failure of some person who in the first instance is liable for such payment or performance. Bouvier, "Law Dictionary," word Guaranty.

It is in the nature of that contract of guarantee that the primary debtor will perform his contract and the guarantor has to answer for the consequence of the primary debtor's default.

13 Halsbury, vbo. Guarantee, sec. 864. Anson on Contract, 10th ed., p. 73.

What was the obligation of Love and Jones in this case? It was to pay a certain sum of money when it would become due. There is no statement, no warranty in their contract that they were solvent at the time they made it or that the agreement was a bonà fide document. Then, what obligation would a guarantor of their debt contract? It would be the obligation of payment when the debt would become due. As I have said, the contract of guarantee presupposes a primary debt and when a person becomes a guarantor he undertakes to carry out that obligation if the main debtor makes default.

The contract of guarantee made in this case would necessarily induce the appellants to accept the draft of the respondents because the latter were undertaking to pay the debt if Love and Jones would not pay it. If the respondents wanted to restrict the nature of their contract or wanted to give to the word guarantee another meaning than the one which is being naturally

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given, then it was their duty to specify in a clear manner that they were undertaking not to guarantee the obligation of the main debtor but the fact that the debtor was solvent and that the agreement was bonâ fide. As they have not done it, the word guarantee should be considered in its ordinary sense, which means that the respondents undertook to pay the debt of the principal debtor if the latter failed to do it.

I have come then to the conclusion that the appellants should succeed. The judgment a quo should be reversed with costs of this court and of the court below and the judgment of the trial judge restored.

Appeal dismissed with costs.

Solicitors for the appellants: Carrothers & Williams.

Solicitor for the respondents: G. H. Yule.