Industrial Acceptance Corp. v. Richard, [1975] 1 SCR 512

Supreme Court of Canada

Industrial Acceptance Corp. v. Richard, [1975] 1 S.C.R. 512

Date: 1974-02-25

Industrial Acceptance Corporation (Plaintiff) Appellant;

and

René Richard (Defendant) Respondent.

1974: January 23; 1974: February 25.

Present: Laskin C.J. and Ritchie, Pigeon, Beetz and de Grandpré JJ.

ON APPEAL FROM THE COURT OF QUEEN’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC

Bills and notes—Contract of sale—Note—Resale—Debt of seller assumed by buyers—Note drawn by buyer—Note endorsed by seller—Payment stopped by buyer—Was the note a valid and complete negotiable instrument?—Bills of exchange Act, R.S.C. 1970, c. B-5.

Respondent purchased a laundry business and signed a note in favour of the seller; this note was endorsed to appellant. Respondent then resold the business by private writing, under which the sum of $ 1,200 was payable to respondent personally and the balance to appellant. A clause provided that the buyer personally assumed the debt that respondent had with appellant. Respondent informed the latter of the transaction, and of the arrangements to be made by the buyer with appellant to continue the payments. Five weeks later the buyer and his wife signed a note in respondent’s favour, which the latter endorsed to appellant.

A “Conditional Sales Contract”, on a form originating with appellant, was also signed by respondent as seller and by the buyer and his wife; after a time the latter ceased making their payments, and this led to the proceedings by appellant, based on the note and its endorsement. The action as to the wife was dismissed under art. 1301 C.C., but judgment was rendered against respondent and the buyer jointly and severally. The appeal of respondent was allowed by the Court of Appeal which considered that the note signed by the buyer and his wife was not a valid negotiable instrument. Appellant accordingly appeals to this Court.

Held: The appeal should be allowed.

The sale was completed when the agreement was concluded, and nothing subsequent to that date divested the buyer of his title. Signature of the “Conditional Sales Contract” was only for accounting purposes, to justify the total amount of the note drawn

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by the buyer and his wife in favour of respondent and assigned by the latter to appellant. The note is a complete and valid negotiable instrument.

Range v. Corporation de Finance Belvedère, [1969] S.C.R. 492, distinguished.

APPEAL from a judgment of the Court of Queen’s Bench, Appeal Side, Province of Quebec[1], reversing a judgment of the Superior Court. Appeal allowed.

L. Ducharme, and Jean Dagenais, for the appellant.

R. Bélec, for the respondent.

The judgment of the Court was delivered by

DE GRANDPRE J.—By an action commenced in September 1967, appellant is claiming payment of a note signed on November 20, 1964, from the two makers, François Groulx and his wife Marie-Paule, and the endorser René Richard.

The Superior Court dismissed the action with respect to Mrs. Groulx on the basis that she had bound herself to her husband’s benefit, contrary to art. 1301 C.C.; there was no appeal from this part of the judgment. On other hand, the trial judge gave judgment against François Groulx and respondent jointly and severally. Richard alone appealed from this decision, and three judges of the Court of Appeal unanimously allowed his appeal.

Plaintiff-appellant is seeking to have the trial judgment reinstated as regards respondent Richard. In my opinion this appeal should be allowed.

The facts preceding signature of the note were the following:

—On April 21, 1964, respondent purchased a laundry business and signed a note in the amount of $18,112 in favour of the seller, Lavandières Eaux Vives Inc. This note was endorsed to appellant.

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—On September 29, 1964, by private writing, respondent sold the laundry business to François Groulx for the sum of $15,448, $1,200 of which was payable to respondent personally and the balance to appellant in accordance with a clause providing that François Groulx [TRANSLATION] “undertakes to personally assume the debt owed by the seller to the said company”.

—Groulx, the buyer, took possession of the business on October 1, 1964.

—That same day respondent wrote appellant a letter including his monthly cheque, and stated: [TRANSLATION] “Please be avised further that this business was sold to François Groulx, Notary, of Hotel-de-Ville Street in Hull, on October 1, 1964, and he will make arrangements with you to continue the payments.”

—On November 20, 1964, François Groulx and his wife Marie-Paule signed in respondent’s favour a note for $18,626, which the latter endorsed to appellant, with a notation in ink below his signature, “seller”.

—A document titled “Conditional Sales Contract”, on a form originating with appellant, was also signed by the Groulx as buyers and by respondent as the seller. The evidence is not very clear as to the date of this document; the copy filed as an exhibit in the record is dated November 9, 1965, and this was the date mentioned by François Groulx in his testimony; however, other witnesses stated that this document and the note were signed simultaneously. In view of my conclusion on the merits it is unnecessary to pursue this point any further.

—The Groulx made their payments regularly until June 1965; they then failed to meet the payments from that time on and proceedings were brought.

In its declaration plaintiff merely relied on the note and its endorsement, but the issue was widened by the written defence, in particular

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that of respondent. The latter raised the following grounds:

(a) The note was only endorsed by him as the “seller”, and did not make respondent an endorser within the meaning of the Bills of Exchange Act; this ground was not accepted by the Superior Court or the Court of Appeal, and it need not detain us.

(b) The note was not a true bill of exchange, and has essentially the same nature as of the conditional sales contract to which it was appended.

(c) The note was merely a document acknowledging a debt owed by the Groulx to respondent; this debt was assigned to appellant by the latter without any guarantee being given by respondent other than that he had a valid claim against the debtors.

Obviously, this last ground should only be considered if the document relied on by appellant is not in its true nature a bill of exchange. On this point the trial Court said:

[TRANSLATION] “The note on which plaintiff bases its claim is not an appendage to the contract for sale of a laundry made by defendant to the maker François Groulx on September 29, 1964 and restated on November 20, 1964 as a ‘conditional sale’ contract, in which François Groulx’s wife is added as a buyer.

Indeed, it is a separate, negotiable instrument.”

Owen J.A., speaking for the Court of Appeal, came to a diametrically opposite conclusion:

“…the present action should have been dismissed on the ground that the document P-1, on which I.A.C. sued, should not be looked at separately from the conditional sales contract and accordingly was not a promissory note.”

The Court of Appeal regarded the present action as similar to that heard by this Court in Range v. Corporation de Finance Belvedère[2]. With respect, I do not think the Range case

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applies here. In that case this Court considered the effect of a note made by a purchaser who had never received the thing promised in the conditional sales contract originally attached to the note, and the evidence showed that the promise to pay could not be treated separately from the conditional sales contract.

Here the situation is quite different. The sale was completed as between François Groulx and respondent on September 29, 1964, and nothing subsequent to that date divested François Groulx of his title. Nothing in the record indicates that François Groulx renounced his rights over the property purchased from respondent. Signature of the document titled “Conditional Sales Contract” was only for accounting purposes, to justify the total amount of the note drawn by the Groulx in favour of respondent and assigned by the latter to appellant. The note is a complete and valid negotiable instrument.

For these reasons, therefore, I would allow the appeal with costs in all Courts and, reinstating the trial judgment, with the slight alteration hereinafter set out, I would allow the action in part, against respondent, and condemn him jointly and severally with François Groulx to pay plaintiff the sum of $16,194 with interest at 12 per cent per annum. Under the Superior Court judgment interest was payable from November 30, 1964. As the evidence showed that until August 5, 1965, payments were received by appellant and credited by it to respondent, I would make the interest payable from that date.

Appeal allowed with costs, the interest being payable from the date of the last payment received by appellant from respondent.

Solicitors for the appellant: Dagenais & Dagenais, Gatineau.

Solicitors for the respondent: Bélec, Boulanger, Joyal & Bélec, Hull.