Arthur. M. Grace (Plaintiff) Appellant;
and
Walter A. Kuebler, Carl Brunner and Freda Brunner (Defendants) Respondents
1917: May 10, 11; 1917: October 9.
Present:—Sir Charles Fitzpatrick C.J. and Davies, Idington, Duff and Anglin JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ALBERTA.
Sale of land—Payment by instalments—Assignment of purchase moneys— Absence of notice to purchaser—Payment by purchaser to vendor— Registration of caveat by assignee.
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Under the provisions of the Land Titles Act of Alberta, the payment by a purchaser to his vendor of the purchase moneys, without notice of an assignment from the vendor to a third person, is valid.
The registration of a caveat by the transferee does not amount to such notice.
APPEAL from the judgment of the Appellate Division of the Supreme Court of Alberta, which affirmed the
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judgment of Harvey C.J. at the trial, and dismissed the plaintiff's action with costs.
The material circumstances of the case and the questions in issue on the present appeal are fully stated in the judgments now reported.
Armour K.C. and A. H. Clarke K.C. for the appellant.
Bennett K.C. and Sinclair K.C. for the respondents.
THE CHIEF JUSTICE—Mr. Justice Stuart prefaces his judgment in the Appellate Division with the observation that
the practice which seems to have obtained to some extent in this province whereby an owner of land, who has entered into a solemn agreement to convey the land to another upon payment of certain money, deliberately puts it out of his power to fulfil his contract by himself transferring the land to a third party * * * is a reprehensible one.
The qualification does not seem too severe, and it may be added that it is also invalid, unless it be in the case of an innocent purchaser without notice, of which there can be no question here, as the deed of assignment to the appellant sets out the sale already made to the respondents. An owner of the land, who had agreed to sell it, has parted with his ownership and has nothing left but the bare legal title.
The transfer of the title here was never effected as the transfer was not registered.
The appellant, in my opinion, had only an assignment of the debt, and registration does not enter into the case at all.
It seems unnecessary to say that the mere assignment of the debt could not affect the respondents, without notice. This was recognized, no doubt, in putting the respondents in as parties to the assignment of the 5th April, 1913, to acknowledge receipt of notice
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thereof, and it is strange that, if they were not asked to execute the deed, it should never even have been brought to their knowledge.
The Land Titles Office cannot be used for the purpose of giving any such notice. It would be extraordinary, if it could, that a purchaser should have to search his vendor's title every time before paying an instalment of the purchase money.
I think the appeal should be dismissed with costs, but I have considerable doubt whether the appellant is entitled to the reference offered him by the judgment on the trial.
DAVIES J.—This was an appeal from the judgment of the Court of Appeal for Alberta (McCarthy J. dissenting), affirming a judgment of the trial judge, Chief Justice Harvey, dismissing the plaintiff's, appellant's, action to recover from respondents part of the purchase money of certain lands which the respondents had purchased from one Steinbreker and which purchase money had been assigned to the plaintiff-appellant subsequently to Kuebler's purchase of the lands from Steinbreker.
The facts are stated by Mr. Justice Beck in his judgment as follows and I agree generally with the conclusions of law he reached upon those facts:—
There is really no dispute about the facts. I state them briefly.
John and Arthur Steinbreker made on the 27th June, 1912, an agreement to sell certain land to W. A. Kuebler and Carl Brunner. The price was $21,600, payable $4,600 down and the balance, 6 payments of $2,834 or $2,833 on the 27th September, 1913 to 1918.
The land at the date of the agreement was subject to two mortgages for $2,000 and $500 held by one Thompson. By instrument dated the 5th April, 1913, the Steinbrekers assigned the moneys then owing by the purchaser to the plaintiff, stated therein to be $17,000 with interest at 6 per cent. per annum from the 27th June, 1912, and by the said instrument purported to grant and transfer to the plaintiff all their interest in the land, but expressly "subject to the terms covenants and conditions contained in the said articles of agreement."
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Concurrently therewith the Steinbrekers executed a transfer of the land to the plaintiff.
The land at that time being subject to mortgage the duplicate certificate of title ought to have been and no doubt was in the Land Titles office.
The plaintiff—and in this perhaps he was right—did not register the transfer to him; but on the 7th April, 1913, he registered a caveat claiming an interest in the land " under and by virtue of a transfer of the said described property of date 9th (a mistake for 5th) of April, 1913, from John Steinbreker and Arthur Steinbreker, registered owners, to Arthur M. Grace."
Neither of the two purchasers—defendants—had any notice of these dealings between the Steinbrekers and the plaintiff, or of the caveat, until long after they had paid the Steinbrekers the full amount of the purchase money, which, however, they paid in entire good faith a considerable time before its maturity.
This action was brought by Grace to recover by way of an action for specific performance the balance of the purchase money, which by the agreement the defendants, Kuebler and Carl Brunner, had covenanted to pay to the Steinbrekers and which they had assigned as above mentioned to the plaintiff.
Freda Brunner was made a party defendant because she had on the 24th January, 1914, registered a caveat claiming an equitable interest as purchaser from her co-defendants or one of them of a one-third interest in the land.
The defendants by way of counterclaim asked that the plaintiff be ordered to transfer the land to them.
There cannot be any doubt apart from the provisions of the "Land Titles Act" in Alberta which may affect the matter in controversy in that province that where a mortgagee assigns his mortgage and the mortgagor has not received notice of the assignment, he discharges his liability under the mortgage by payment to the mortgagee.
I cannot draw any distinction in this respect between a purchaser who has entered into an agreement for the purchase of land and covenanted to pay the vendor the purchase moneys in instalments and an ordinary mortgagor. Payment by such purchaser to his vendor of his purchase money without notice of any assignment from the vendor to a third person of such purchase moneys is a good payment and pro tanto discharges the purchaser from further liability.
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The Ontario decisions would seem to have settled the law in that province in the same way, notwithstanding the provisions of the "Registry Act" of the province.
The main contention on the part of the appellant was that the legal effect of the filing of the above mentioned caveat by him was sufficient under the "Land Titles Act" to protect his rights exclusively to receive the purchase moneys Kuebler had agreed to pay Steinbrekers for the land, that it constituted constructive notice to Kuebler and that after the filing of such caveat Kuebler made any payments to any one else at his peril.
The plaintiff had full actual knowledge of the defendants' purchase and agreement to pay and he did not beyond fifing such caveat give any notice to the defendants of the transfer to him of the land and the assignment of the purchase moneys Kuebler had agreed to pay. He relied entirely upon the effect of the caveat which he registered and in effect contended that the right of the defendant to pay Steinbreker such purchase money unless and until he had received notice of the transfer and assignment, was defeated by the statute and that the filing of the caveat was sufficient notice.
The result of this contention if maintained would be that a mortgagor or purchaser such as defendant would be obliged to search the registry every time he made a payment on his mortgage or agreement to purchase in order to protect himself.
With the result of course we are not concerned if the "Land Titles Act" in its provisions relating to the filing of caveats has the effect plaintiff contends for.
Now I understand a caveat is something which
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protects the existing rights of a man filing it in and to the lands mentioned in it. It does not create any new rights.
The question then immediately arises what were the plaintiff's rights with respect to these lands and the purchase moneys Kuebler had covenanted to pay for them at the time plaintiff filed his caveat.
They were of course the right to receive those moneys which had been assigned to them and to give a proper discharge to the party paying them.
But they did not involve an exclusive right to receive them unless and until they had given the party liable to pay them notice of their rights.
These rights were, in my opinion, subject to the right of the purchaser of the land to pay to the vendor from whom he had purchased the moneys he had covenanted to pay him unless and until he, the purchaser, had notice that such moneys had been assigned to another.
That right was in my opinion an equitable one which the filing of a caveat did not annul or abrogate.
The opinion of Mr. Justice Holroyd of the Supreme Court of Victoria on the point is cited by Mr. Justice Beck from the case of Nioa v. Bell. That learned judge said in speaking of the effect of the provisions of the "Victoria Transfer of Land Act" (which is substantially the same as the "Alberta Land Titles Act") that:—
To have destroyed it (the old equitable doctrine as to notice) the language should have been extremely clear and explicit, because it is a doctrine founded on the plainest principles of justice.
I conclude therefore, concurring with both courts below, that the filing of the caveat in this case did not
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displace the equitable doctrine of the right of a mortgagor or purchaser such as Kuebler was, to pay the purchase money he had covenanted to pay to the person he had covenanted to pay to, unless and until he had received notice of the assignment of such moneys to a third person and that the mere filing of a caveat in the Registry Office was not such notice.
"It did not," as Stuart J. says in his reasons for judgment
protect him (the plaintiff-appellant) from the exercise by the purchaser of rights which he knew the purchaser had, rights, indeed, which were the very subject of his own contract with the vendor,
and which of course were exercised without any actual notice or knowledge of appellant-plaintiff's assignment. I would dismiss the appeal with costs.
IDINGTON J.—The appellant, as the assignee of John and Arthur Steinbreker who had sold land in Alberta to the respondents Kuebler and Karl Brunner, sought specific performance of the contract after the purchasers had paid the price to the Steinbrekers in cash and a promissory note of fifteen hundred dollars which had passed into a third party's hands for value. The cash payments were made partly at the time of the sale and later by a reduced sum agreed upon in which considerable discount was allowed the purchasers in consideration of cash anticipating the time given by the agreement for payment thereof.
The appellant had made a loan to the Steinbrekers upon the security of the assignment to him of the said contract and other securities.
He never gave any notice of this assignment to the respondents, or either of them, and it is not pretended they had any notice of the assignment until long after they had paid in full, in the manner I have mentioned.
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These facts seem rather a novel foundation upon which to rest an action for specific performance at the suit of the appellant as an assignee of the contract for sale and purchase, hoping to enforce thereby a second payment of the price by the purchasers.
I should, but for the fact evidenced herein to the contrary, have said such a claim was hardly arguable on the ordinary principles governing such suits.
And when we find that, in Alberta, there is an express statutory provision which deals with assignments of choses in action, validating them upon notice in writing to the debtor, only from the date of such notice and then only subject to the equities which would have existed but for the enactment, we are puzzled to find it argued that there are some provisions in the "Land Titles Act" which enable a creditor in the case of sale and purchase of land to impose upon his debtor the obligation to search the Registry Office at the time of making any payment, no matter how trivial the amount of his instalment, before he can safely pay the man he bought from.
Logically followed out the argument would require this search, on every occasion of payment, to ascertain whom to pay what he desired to pay.
I must say it seems a startling proposition. And when we turn to the instrument of assignment by virtue of which this claim is set up and we find it expressly limited as follows:—
To have and to hold the said lands and premises unto and to the use of the said assignee, his heirs and assigns forever, subject to the terms, covenants and conditions contained in the said Articles of Agreement,
we must ask ourselves whether it is possible that the Legislature, enacting such a statute as the "Land Titles Act," can really have intended to have so dealt
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with the contractual relations of parties concerned in sales and purchases of land, as to bring about such confusion.
I do not think it ever so intended or so expressed itself.
The usual way in which purchasers protect themselves against such possible frauds as the vendors committed and are in question here is to register a caveat. But what is a caveat for? Surely it never was conceived as a something to enable the vendee to protect himself against the assertion of right on the part of the vendor. His agreement binds him and no need of it for that purpose as the appellant assignee is equally bound. It is intended solely as against others, not parties to the contract and bound by it, but who innocently might have purchased and but for its registration have acquired a right.
Yet it has been argued herein that, because the appellant as assignee of the contract of sale registered a caveat to protect himself against subsequent assignees of the same contract, hence he is entitled to enlarge thereby the rights conveyed to him beyond that which the instrument under which he claims gave him.
I do not think such a consequence was ever conceivable as flowing from the non-registration of a caveat.
But then it is said and proven that besides the assignment of the lands, contained in the assignment of the purchase money, there was another instrument simply transferring the land and that the caveat covers that also and that upon the proper or improper production of that transfer for registration it would take the place of that caveat and have the effect given thereto of vesting the lands in appellant.
One answer to that is, appellant has not got so far. And as to the caveat itself it only pretends that he has
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an interest and the affidavit of the agent thereto in order to effect its registration states his principal has a good and valid claim upon said land.
Investigation herein has shewn just what that claim is. It never justified a, claim as the purchaser or anything but what the instrument first mentioned above conveyed.
The caveat was quite proper as a protection of what the appellant had acquired thereby.
In any way one can look at these instruments the caveat cannot enlarge their effect and the argument resting upon section 9'7 of the Act does not help appellant, unless we are to assume that by a fraudulent use of the substitution of the transfer for the caveat, when on the facts the appellant had no right to acquire registration or continue the caveat, he might gain something.
Speaking as respectfully as one can of such a proposition it seems an idle play upon words in disregard of the entire purview of the statute.
I think the principle that Rose v. Watson, proceeds upon is still good law, and that the appellant is but a trustee, who is bound to obey the order of the court and convey to the purchasers when required thereby. And that is not inconsistent with but may proceed upon the exposition of the principle as dealt with in Howard v. Miller, even though that was the converse of this as to the requirement of specific performance. The counterclaim is, I hold, maintainable.
The appeal should be dismissed with costs.
I do not see anything calling for our judgment on the question reserved by the learned Chief Justice as to the possible right of subrogation as to mortgages and have not examined same.
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DUFF J.—I think this appeal should be dismissed. The most important of Mr. Armour's contentions was that, while the appellant took any interest he acquired by the transfer and assignments under which he claims, subject to the rights of the respondents as purchasers from Steinbreker under the agreement of the 27th June, 1912, yet these last mentioned rights were subject to this—that in paying the purchase money to the Steinbrekers, as each successive payment was made, notice must be imputed to them of any dealing by Steinbreker, with his title properly appearing on the registry; and that notice consequently must be imputed to them at the time the payments in question were made of the transfer and agreements under which the appellant claims by reason of the caveat filed by the appellant.
After full consideration I think the argument must be rejected and that the appeal fails. I think the law is settled that a vendor is acting in violation of a vendee's rights if he attempts to dispose of the property sold to any person other than the purchaser and an injunction will lie to prevent him from carrying any such intention into effect; Hadley v. London Bank; and such a disposition, if completed, gives the purchaser the right to rescind and to sue for damages; Synge v. Synge. The judgments in Ex parte Rabbidge, really rest on the provisions of the "Bankruptcy Acts" and I think the dictum of Moulton L.J. in In re Taylor, at page 573, must not be taken too absolutely.
It is clear', however, that the vendor may assign the benefit of his contractual rights under the contract and the assignee may enforce those rights, assuming the provisions of the law with regard to assignments
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to be fulfilled, and the assignee to be in a position to require the vendor to carry out his obligations under the contract. It is elementary, however, that as against the assignee claiming under an assignment of the vendor's contractual rights, the vendee is entitled to deal with 'the vendor until he has received notice of the assignment. See the observations of Lord Cairns in Shaw v. Foster. It follows that the vendee having no notice of the assignment under the vendor's contractual rights, could not be affected by a caveat, unless there is some statutory provision giving to a caveat the effect of a notice in such circumstances. I can find nothing in the statute pointing to that. Section 84 authorizes the filing of a caveat in the form mentioned
against the registration of any person as transferee or owner of any instrument affecting such an estate or interest unless such instrument be expressed to be subject to a claim of the caveator.
There is nothing in this language pointing to the conclusion that a caveat is intended to operate as a warning against the mere payment of money; nor indeed do I think, speaking generally, that the office of the caveat is anything more than to protect rights which otherwise might be prejudicially affected by some conflicting registration.
ANGLIN J.—In my opinion notice to the debtors Kuebler and Brunner that their debt to the Steinbrekers had been assigned to the appellant Grace was necessary in order to complete his title to it so as to render subsequent payment by the purchasers to their original creditors made in ignorance of that assignment ineffectual to discharge their debt. Section 101 of the "Lands Titles Act," invoked by Mr. Armour,
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is, I incline to think, applicable only to the interest of the vendee or encumbrancee. The proviso certainly so indicates. If applicable at all to a transfer by the original vendor or owner, in my opinion it has to do with the transfer of his right, title and interest in the land only—not in the debt. Moreover, any such transfer is explicitly made
subject to the conditions and stipulations in such assignment contained,
i.e., in this case to the original purchasers' right to have the land "conveyed to them on payment of the debt—their purchase money. The registration of a caveat by Grace did not amount to the requisite notice to them of the assignment to him of their debt to the Steinbrekers. It would, no doubt, be notice of his interest in the land to persons subsequently dealing with it—but not to persons in the position of Kuebler and Brunner so as to render their payments to the Steinbrekers ineffectual to discharge their debt or to entitle Grace to compel them to make such payments again to him. A search of title by Kuebler and Brunner when they entered into their agreement to purchase would have shewn their vendors, the Steinbrekers, to be then the registered owners of the land. In merely making their payments, they were not persons subsequently dealing with it to whom registration in the interval would be notice; Gilleland v. Wadsworth; Williams v. Sorrell. To their subsequent payments the equitable principle of the mortgage cases applies in which it is held:
that as against an assignee without notice (meaning without notice to the mortgagor) the mortgagor has the same rights as he has against the mortgagee, and whatever he can claim by way of set-off, or mutual credit, as against the mortgagee, he can equally claim against the assignee.
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Turner v. Smith; Norrish v. Marshall. I find nothing in the "Alberta Land Titles Act" which excludes this equitable doctrine;
to have destroyed it clean and explicit language would be necessary,
Nioa v. Bell. The insufficiency of registration as looked the fact that in that case the prior mortgage notice in such cases is illustrated in the case of Pierce v. Canada Permanent Loan Co.. I have hot over-was registered. Here the actual and complete notice which Grace had of the rights of the original purchasers when he advanced his money and took his security puts him in a position less favourable in the eyes of a Court of Equity than he would have held had he had merely the constructive notice which registration gives to persons whom it affects. Underwood v. Lord Courtown. The equitable doctrine is that notice which gives real and actual knowledge affects the conscience of the person who receives it. An attempt by him to give to rights acquired with such notice an effect inconsistent with and destructive of prior rights of which he has had the notice is looked upon by equity as a fraud which it cannot countenance. I should require very explicit language indeed to lead me to the conclusion that the legislature in enacting the "Land Titles Act" intended to give to registration under it an effect which would render this wholesome equitable doctrine unenforceable. I am not certain that it is not expressly saved by s. 139 of the statute.
The express notice of Kuebler and Brunner's rights and of their position in regard to the Steinbrekers which Grace had when he acquired his interest clearly distinguishes this case from McKillop v. Alexander,
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to which I refer merely to make it clear that it has not been overlooked. Grace in fact acquired his interest in the land subject to Kuebler and Brunner's right to increase or better their pre-existing interest in it by payments on account of purchase money made to their vendors until notified that that right had ceased. The increase or betterment of Kuebler and Brunner's interest in the land by the payment which they made was therefore not adverse to or in derogation of the interest which Grace was entitled to protect by registration, whether of his assignment and transfer or of a caveat. By failing to notify his position to them he permitted their right to pay their vendors to subsist as something anterior to and higher than his right to hold the land as security for payment to him of the sums for which he had contracted in consideration of his advances to the Steinbrekers.
Until Kuebler and Brunner had notice of the assignment to Grace, they were entitled to treat the Steinbrekers as their creditors and to make payments to them and payments so made discharged their debt pro tanto. Under the assignment of the agreement and the ancillary transfer of the land the appellant Grace held the latter upon trust to convey it to Kuebler and Brunner upon their purchase money being paid to the persons entitled to receive it. As to Kuebler and Brunner, until notice to them of the assignment, the Steinbrekers were so entitled as against Grace, of whom and of whose rights Kuebler and Brunner knew nothing, whereas Grace had full notice of their obligations and rights under their agreement with the Steinbrekers. If the rights of the parties depended upon a balancing of their equities based upon the character of the duty of each towards the other, I should hold that the duty of the appellant to give
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notice of his assignment was higher and stronger than any duty of Kuebler and Brunner to search the registry before payment of each instalment of their purchase money in order to make certain that no entry there would disclose that their vendors had parted with their interest in the land and their right to receive the purchase money under their contract. In the absence of notice to the contrary they were entitled to assume, and to act on the assumption, that the right to receive their money had not been transferred. The appellant had actual and complete notice of the position of the respondents and took the risk of their innocently making payments to their vendors. The respondents, iii my opinion, had not even constructive notice of the rights of the appellant. It was undoubtedly the failure of the latter to give notice that afforded the Steinbrekers the opportunity to pose as still entitled to receive payment from Kuebler and Brunner.
I am, therefore, of the opinion that the respondents' debt under their agreement was discharged by their payment to the Steinbrekers and that, under the trust on which he took it, the appellant is bound to convey the land to them.
I would dismiss the appeal.
Appeal dismissed with costs.
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