Brossard v. Dupras

Per Fournier J.-The mortgage having been registered on the 13th January, 1884, the respondent's right of action to set aside the mortgage was prescribedby one year from that date; art. 1040 C.C. :-Sir W.

34Y

.531 Bench for Lower Canada (appeal side) confirming the judgment of the Superior Court.

The facts and pleadings are fully stated in the head-. note and in the judgments hereinafter given.

1st. That the respondents were not Lamoureux's creditors at the time of the granting of such mortgage, and that they had no right as subsequent creditors to put in issue the validity of said mortgage.

2nd. That the said respondents were aware of the existence of the said deed of the 8th January, 1884, which was duly registered at the Registry Office of Coaticooke on the 13th January, 1884, and that the said respondents had knowledge of such mortgage for over a year at the time of the issue of the writ which is dated the 16th of June, 1885; that by article 1040 of the Civil Code their pretended right of action was lost. 3rd. That the transaction was made in good faith; that it did not create any undue preference in favour the appellants, and that it ought to be declared valid on its own merits.

Ouimet Q.C. for respondents contended that respondents when they paid the Exchange Bank, and became the bearers of Lamoureux's notes, then and there and de facto became subrogated to the bank in the latter's action against Lamoureux, and cited arts. 1039 and 1032 C.C; Larombibre on Obligations Upon the evidence the learned counsel contended that when respondents consented to advance $3,000, on the belief that they would stand ifor being repaid on the same footing as all the other creditors who had consented to take 65c. in the dollar, Brossard & Chaput the appellants were behind their back getting a new note of $2,934.86, saddling Lamoureux's estate with that new indebtodness, and such a transaction was void at law. Rickaby v. Bell (1) ; Arts. 1032, Ivers v. Lemieux (2); Arts. 1092, 2090 C. McGauvran v. Stewart (3); and Dwyer 4- Fabre v. McCarron

J.-For the reasons given by Mr. Justice Fournier I am of opinion that this appeal should be allowed.

FOURNIER J.-L'action des intim6s a pour but de faire annuler certains actes et billets promissoires comme faits en fraude de leurs droits et aussi pour faire obliger les appelants Brossard et Chaput A faire rapport de $2,000 & eux pay~es par Lamoureux qui avait failli. Le 20 d6cembre 1883, Lamoureux avait obtenu la signature de ses cr6anciers un acte de composition, A raison de 65 centins dans la piastre, payable par ses billets promissoires A, et mois.

Cette composition (1) est sign~e par les appelants et par tons les autres cr~anciers de Lamoureux, & l'exception de la Banque d'I2change qui, ayant refus6 de se joindre a la composition, fit avec Lamoureux un arrangement particulier.

Les intims aussi ne sont point parties A cette composition parce que alors ils n'taient pas creanciers de Lamoureux, ne 1'6tant devenus qu'apr~s la composition.

Lamoureux devait A la Banque d'ichauge $14,000, Jpour au delA de $5,000 de ce montant, il 6tait responsable comme endosseur du papier de ses pratiques. La balance, $8,389 34, se composait de ses propres billets endoss6s par les appelants.

Une des principales difficult6s de cette cause est au sujet de l'arrangement particulier avec la banque. est certain que Lamoureux avait fait un compromis avec ses cr~anciers A raison de 65 pour cent, on posshde la preuve 6crite; mais en a-t-il fait autant avec la Banque d'2change, et quelle est la nature de l'arrangement fait avec elle ?

Brossard, entendu comme t6moin des intimbs, dit que la banque a transig6 avec Lamoureux en acceptant et recevant la somme de $8,000, en paiement de sa dette de $14,000.

Lamoureux s'est procur6 la somme de $8,000, n6cesssaire pour payer sa composition particulibre avec la Banque d'Echange de la manidre suivante, savoir: $2,000 de sa femme; $3,000 prtes par Dupras et Emard, et $3,000 aussi prtes par Brossard et Chaput. Pour ce dernier montant, Lamoureux donna son billet aux appelants pour $ ,934.86, avec une hypothique de $3,000, pour en assurer le paiement. Ces avances furent faites A Lamoureux isol~ment par ces diverses parties, sans aucun concert on convention entre elles, chacune agissant pour son propre compte avec Lamoureux, seul ou avec son procureur. Telle est la transaction que faction des intimbs a pour but de faire annuler comme faite en fraude des cr6anciers, parties A la composition.

Brossard explique que le billet ne fut pas fait pour $3,000, pour la raison que Lamoureux avait pay6 certaines charges A la Banque d'Ontario dont il lui fut tenu compte, et le billet pris pour la balance, $2,934 86 ; mais il affirme que tout le montant de $3,000 a t remis A Emard qui, comme procureur de Lamoureux, conduisait les n6gociations avec la Banque d'Echange.

Fournier J. D'aprbs ce t6moignage il est 6vident que cet arrangement avec la banque est tout A fait distinct et s~par6 de la composition de Lamoureux avec ses creanciers. Il n'y est question d'aucun pro rata sur la totalit6 de la dette.

L'arrangement n'est qu'une composition pure et simple de $8,000 en paiement complet et parfait de la somme de $14,000. Ces $8,000 furent paybes avec les deniers obtenus comme susdit.

Cet arrangement est d'autant plus probable que la banque 6tant elle-mAme en liquidation voulait 6tre pay6e comptant. Pour cette raison elle a accept6 57 pour cent au lieu de 65, A quatre, huit et douze mois de d61ai.

Lamoureux pr~tend au contraire que ses deux dettes de $5,000 on environ, et de $8,934.86 out t6 r~glbes s6par6ment avec la banque, que les $2,000 avanc6es par madame Lamoureux 6taient en paiement de la dette de $5,000, et que les $3,000 emprunt6es des intimbs 6tant acceptees en paiement des 65 pour cent de la somme de $8,389.34, laissent aux appelants Brossard at Chaput A payer, comme endosseurs, les autres 35 pour cent, ce qu'ils firent en prenant le billet de Lamoureux pour le montant exact.de 35 pour cent, savoir $2,934.86.

L'arrangement partiel fait avec la banque n'avait videmment aucun rapport h la composition de 65 pour cent offerte aux autres cr~auciers. D'aprbs cette version la banque avait accept6 environ 40 pour cent pour la r6clamation de $5,000, et liinit6 sa reclamation contre les endosseurs de billets au montant de $8,389.94 A 35 pour cent de ce montant, et accepth un autre 35 pour cent des insolvables au lieu de 65 pour cent.

Il n'est donn6 aucune raison pour en avoir agi ainsi

Un des liquidateurs de la banque a t entendu comme t6moin des intim6s.

dit qu'il a te fait ou qu'il a pu 6tre fait une proposition de r6gler s~par~ment la r6clamation de $5,000, avant qu'on ait d~cid6 de faire un raglement, mais que la banque a insist6 pour un r~glement de toute la dette.

Le r6sultat de son t6moignage est qu'en ce qui concerne la banque, il y a eu une composition de la somme de $8,000 accepte paiement de celle de $14,000

Le t6moignage de M. Emard A tout prendre confirme cet arrangement Il dit qu'une offre a t faite A la banque de payer $1,500 pour les billets se montant & $5,115.84. Cette offre fut faite par une lettre de M. Emard, du 17 d6cembre 1884.

Elle ne fut pas acceptee.

M. Emard dit qu'ensuite il a fait verbalement une offre de $2,000, que la banque semblait dispos6e & accepter, mais qu'avant de l'accepter d6finitivement et de se d6clarer prite A r~gler pour ce moutant, la banque exprima le d6sir que son autre r6clamation contre Lamoureux qui 6tait garantie par les endossements de Brossard et Chaput, se montant ainsi qu'il le dit A $8,385.32, fut aussi reglee.

En cela M. Emard se trouve d'accord avec M. Campbell, le liquidateur. II parle ensuite de ce qui a t6 fait au sujet de la plus forte r6clamation.

It dit que Lamoureux, n'6tant capable de payer que $2,000, lui demanda d'offrir de racheter les billets. O'est alors qu'il s'assura pour la premibre fois qu'il pouvait se procurer $3,000 par M. Dupras et qu'il fit alors la proposition A la banque. Les termes de cette proposition furent 6crits sur un blanc du t6lgraphe qui fut produit en preuve, mais a depuis disparu du dossier.

II eut t6 d'autant plus important de so procurer ce document, que d'autres qui n'ont pas 6t6 imprim6s, mais qui sont rest6s dans le dossier et nous out 6t transmis, ne confirment pas la version du r~glement donne par M. Emard. Il ne se souvient pas d'avoir pay6 a la banque $8,000, mais seulement $7,934.56. Cette somme se composant de $2,000, de Mme Lamoureux, $3,000 avanc~es par Dupras et Emard, et $2,934.56 de Brossard et Chaput.

Mais les chiques au moyen desquels cet argent a t6 pay6 sont produits et sont pour le plein montant de $8,000. Il y en a quatre, savoir: $1,000, $2,000, $3,000 et $2,000. Ces montants n'ont pas t divis6s d'apris les sources de leur provenance, mais seulement pour la facilit6 de retirer les billets qui se trouvaient dans diff6rentes banques.

ressort 6videmment de cette preuve qu'il n'y a de la part de la banque qu'une composition pour $8,000, et que la banque n'a transig6 qu'aveo Lamoureux, on avec Emard comme le repr6sentant de Lamoureux, non pa.s avec les appelants Brossard et Chaput. Ces derniers out fourni une partie du montant de la composition.

Brossard dit que c'6tait $3,000, le montant pour lequel Lamoureux a donn6 une hypothbque; c'est aussi le montaut qui, d'apris la preuve 6crite faite par les chiques d'Emard, est celui que Brossard a pay6 A la banque.

Quel que soit le montant qu'il a fourni; que ce soit $3,000, on seulement $2,934.86 comme dit Emard, il ne 1'a sans doute ainsi avance que parce qu'il 6tait J expos6 A payer comme endosseur des $8,000.

Le montaut pour lequel il a pris le billet de Lamoureux 6tait pr6cis~ment 35 pour cent du montant entier des billets. Ce calcul fut sans doute bas6 sur la notion que Lamoureux pourrait fournir la diffirence.

Mais le r~glement final ayant en lieu pour une somme comptant qui permettait d'accorder un escompte lib6ral, d'environ 57 pour cent, au lieu de 65 pour cent, ce qui faisait une diminution (le $1,000 environ, on 12 pour cent du montant qu'aurait donn6 la composition & 65 pour cent, on ne voit pas que les motifs de Brossard pour avancer de 1'argentsoient d'une aussi grande importance, on que son avance de $3,000 soit d'une nature diffirente par rapport aux cr~ances en general, des $3,000 avanc6es par Dupras et Emard. Cette dernibre somme parait avoir te avancee avec l'entente entre Dupras, Emard et Lamoureux, que la diff6rence entre $3,000 et $5,453.67 (on 65 pour cent des $8,389.34), savoir $2,453.67, serait partag6e entre eux trois, ce qui donnait $817 69 pour chacun des trois. Il y a une l6g~re diff6rence due A leur maniere d'arriver A ces chiffres, parce qu'il ont d6duit $819.48, pour la part de Lamoureux des $5,453.67, laissant $4,633.67 pour laquelle Lamoureux donna A Dupras et Emard cinq billets promissoires A des 6chbances variant de deux A douze mois A compter du 11 janvier 1884.

Cet arrangement assez 6trange est bAse sur l'idbe que les $8,389.34 de billets avaient t6 achet6s de la Banque d'Echange pour $3,000 avanc6es par Dupras et Emard, donnant aux acqu6reurs droit & 65 pour cent en vertu de la composition, mais en laissant compl6tement de ct6 Brossard et Chaput qui, s'ils avaient pay6 qualit6 d'endosseurs, (accommodation indorsers) avaient le mme droit qu'eux aux dits billets.

Le document suivant qui est en preuve contredit la th6orie que les billets ont t6 achet~s pour $3,000, de F m~me qu'il constate que le paiement fait la banque 6tait le plein montaut des $8,000, comme il est prouv6 .par les quatre chbques auxquels il a dj& td fait allusion.

Ce document est un ordre adress6 par les endosseurs i la banque, comme ayant 16gitimement le contr6le des billets. Il est ainsi concu:- & Dans son examen au sujet de cet ordre, monsieur Brossard persiste A dire, comme il l'a fait d'ailleurs dans tout son t6moignage, que le r~glement avec la banque n'a t6 qu'un seul et m6me r~glement pour $8,000, dont lui et sa socit6 out avanc6 $3,000. faut, comme i a d6j& t remarqu6, faire la distinction entre les arrangements pour se procurer les fonds, et la transaction avec la banque. I ne chose qui parait assez claire est que les $5,000 de billets, quoique compris dans la composition avec la banque, sont consid~r6s par les autres parties comme appartenant A Mme Lamonreux, comme si elle les avaient rachet6s avec ses $2,000. L'ordre que l'on vient de lire n'avait rapport qu'aux autres billets endoss6s par Brossard et Chaput et, nullement aux $5,000 de billets.

Cet ordre n'a pas d'autre importance maintenant que comme une reconnaissance des droits des endosseurs des billets que l'autre version de l'arrangement consid6re comme appartenant A Dupras et i Emard.

De la part de Dupras et Emard, la transaction n'a Ut qu'un pr~t pour laquelle ils out stipul6 pour leur profit t exorbitant, et de la part de Brossard et Chaput un autre prt de $3,000 dont ils devaient tre rembours6s par le billet de Lamoureux dont le paiement tait garanti par une hypoth6que qui n'6taitpas donn6e seulement en consid6ration de ce prit, mais aussi consid6ration de l'existence d'une hypothique ant6rieure qu'ils avaient quittanc6e.

Cette analyse des faits de la cause, 6tablit que de la part de Dupras et Emard, les intim.6s, la transaction n'a 6t6 qu'un prit pour lequel ils out stipul6 un int6rit exorbitant, et de la part de Brossard et Chaput un autre pr~t de $3,000 dont ils devaient 6tre rembours~s par le billet de Lamoureux, de $2,934.86, garanti par l'hypothique donn~e par lui, le 8 janvier 1884, et aussi en considration de la d~charge de 1'hypothbque de $7,415, du septembre 1881.

Le r6sultat de ces deux transactions fut de r~duire la premiere hypothbque des appelants de $7,415 an montant de celle donne comme garantie du billet de $2,934.86, c'est-A-dire

$3,000. An lieu de donner une main lev6e partielle de la premibre hypothique ils prfrerent l'acquitter et en constituer une nouvelle.

Lorsque le billet de $2,931.86 de Lamoureux fut consenti aux appelants, afin de lui faire obtenir l'escompte pour les $3,000 que devaient lui faire avoir Brossard et Chaput, le 5janvier 1884, les intim6s Dupras et Emard, n'6taient pas alors cr6anciers de Lamoureux; ils ne l'etaient pas non plus, le 8 janvier 1884, lorsque Lamoureux garantit le paiement de son billet par l'hypothbque donn6e le du mame mois.

Ils ne sont devenus les cr~anciers de Lamoureux que le onze de janvier 1884 et n'ont partant aucuns droits comme cr~anciers subs6quents d'attaquer les transactions faites entre Lamoureux et les appelants pour se procurer les fonds n~cessaires pour acquitter sa composition. La composition qu'il venait de faire avec ses cr~anciers lui avait rendu la libre disposition de ses biens, et il n'en fait qu'un usage 1gitime en donnant cette hypothbque de $3,00 sur ses biens pour 1'aider sortir de Fouier l'4tat d'insolvabilit6.

Ce principe a t6 maintenu par cette cour dans la cause de Beausoleil v. Normand (1).

Il serait plus qu'6trange de consid6rer cette transaction comme faite en fraude des cr6anciers de Lamoureux lorsqu'elle n'a 6vidernment pas d'autre but que de l'aider dans ses arrangements avec ses cr6anciers,-et il le serait encore davantage de la consid~rer comme une injuste pr6f6rence accord~e aux appelants lorsqu'ils n'ont fait que renoncer A une hypothbque de $1,415 pour en accepter une seulement de 2,934.86 comme garantie du billet du montant qu'ils avangaient h

Lamoureux pour payer sa composition.

En outre si les intim6s avaient un droit d'action pour attaquer ces transactions ils devaient, en vertu de l'acticle 1040 du code civil, 1'exercer dans 1'ann6e.

Ils out eu connaissauce de l'acte du janvier enregistr6, le 13, et leur action n'a t6 prise que dans le mois de juin 188b, plus d'un an apris les transactions dont il s'agit, et & une

6poque leur droit d'action avait cess6 d'exister.

L'appel devrait Atre allou6.

J.-This was an action by Dupras et al.

under article 1032 of the Civil Code to annul certain acts and notes as fraudulent, and to oblige the defendants, Brossard & Chaput, to return the amount of

$2,000 to them paid by the defendant Lamoureux in virtue of the aforesaid acts and notes, with conclusions against the other defendant Lamoureux for $3,612.95.

The plaintiffs allege:- " That towards the month of December, 1883, the defendant Lamoureux, then an insolvent, offered to pay his creditors the sum of 65cts. in the dollar, the amount due to each creditor respectively, payable at and months.

" That offer was accepted by all his creditors with the' exception of the Exchange Bank. It reads in the following terms: - "We, the undersigned, creditors of MI. Charles Lamoureux & Co., merchants and manufacturers Coaticooke, agree by these presents to accept sixtyfive cents on the dollar on the amount of our respective claims, payable by note to their order at four, eight and twelve months from date."

" On the remittance of the notes, as heretofore mentioned, we agree to give them a full discharge, and we promise to sign an agreement before a notary, if such be required, and we have signed on condition that the creditors for $100 sign the present composition."

" Montreal, 28th November, 1883."

" That the defendants, Brossard & Chaput, were parties to this contract and signed it the first, and in fact it was signed and accepted by all the creditors Lamoureux with the only exception of the Exchange Bank of Canada."

" That a part of the claim which Brossard & Chaput then held against Lamoureux consisted of certain notes to the amount of $8,385.32, signed by Lamoureux to the order of Brossard & Chaput, and transferred by the latter to the Exchange Bank of Canada."

"That the said bank refused to join in the agreement, but declared their willingness to accept $3,000 in lieu of 65cts. payable by Lamoureux, on condition that the 35cts. remaining would be paid by Brossard & Chaput, the whole to be paid in cash."

" That at the request of the defendants the plaintiffs consented to pay those $3,000 to the Exchange Bank, on remission to them by the latter of the notes for $8,385.52, and then to accept from Lamoureux in exchange for these his own notes to the amount of $4,633.62."

" That the defendants would not have consented to pay the said sum of $3,000 save on the faith of the compromise made by Lamoureux with his creditors, especially Brossard & Chaput who owned the heaviest claim against Lamoureux."

"That while Brossard & Chaput openly signed and accepted the aforementioned agreement by which they consented to give Lamoureux a full discharge of his indebtedness in consideration of his notes to the amount of 65 cents on the dollar, they secretly and fraudulently exacted from him a further note for.$2,934.86, that is to say, for the amount of the 35cts. that they had consented to pay to the Exchange Bank, in discharge of their own liability and indebtedness to the bank, beyond the 65cts. for which they had compromised with Lamoureux.

These $2,934.86 represent to a cent the proportion of thirty-five per cent in the above sum of $8,385.52, the amount of the Lamoureux's notes held by the Exchange Bank, bearing the endorsation of Brossard & Chaput."

" That to secure the advantage thus fraudulently obtained over all the other creditors of Lamoureux Brossard & Chaput induced Lamoureux to give them a mortgage on his immovable property, which was done by an act passed the 8th January, 1884, before Pepin, notary, said mortgage, to the amount of $3,000, being especially to secure the payment of the above note of $2,934.86."

" That said note and mortgage were made and given without a lawful consideration, and in fraud of all the other creditors of Lamoureux and especially of the plaintiffs, and for the purpose of giving an illegal and fraudulent advantage and preference to Brossard & Chaput.

"That by an act bearing date the 12th January, 1884, Brossard & Chaput, transferred the above men- Tase.reau tioned hypothec to La Banque du Peuple, as security for the payment of the same note which they consented to discount for them the same day."

" That by another act, passed the 10th December, 1884, between Lamoureux and Brossard & Chaput, Lamoureux agreed that said hypothec would exist as long as anything was due by him to said Brossard & Chaput, whether on account of the note for $2,934.86, or any other note."

"That all rights or claims falling to Brossard & Chaput in consequence of the last act were transferred to La Banque du Peuple the 19th of the same month, (December, 1884)."

"That all the aforementioned deeds (or acts) were duly registered."

"That at the time of the passing of those deeds Lamoureux was, to the knowledge of Brossard & Chaput, and to that of La Banque du Peuple, notoriously insolvent and has been so ever since and is still insolvent."

" That Brossard & Chaput received on account the above note of $2,934.86 the sum of, at least, $2,000, as a fraudulent privilege over the other creditors Lamoureux."

" That at the time of the transfers of the 12th January and 19th December, 1884, the notes that such transfers were destined to guarantee were not yet matured, and that these transfers were made to La Banque du Peuple in violation of the law and of its charter."

"That the plaintiffs haVe had no knowledge those deeds and the aforementioned fraudulent payments until three months previous to the institution of their present action."

"That Lamoureux still owes to the plaintiffs, in virtue of the notes for a sum of $3,612.95." I- "Wherefore the plaintiffs pray that Lamoureux be condemned to pay them the said sum of $3,612.95 with interest and costs; that the deeds (acts) of the 8th and 11th January, and of the 13th and 19th December, 1884, and the note of the 5th January of the same year and all other notes given in renewal of these, be declared fraudulent, null and of no effect, and be annulled, and that Brossard & Chaput be condemned to deposit in the prothonotary's office of this court the sum of $2,000, or all other sums that can be proven to have been received by them from Lamoureux on account of the note of $2,934.86, with interest, in order that the same be divided between the creditors of the latter according to law, and that in default of so doing, within 15 days of the service of noti.ce, they be purely and simply condemned to pay that amount to the plaintiffs, with int6rests and costs, the said amounts to be, by the latter parties, deposited and distributed in the above mentioned manner."

The mise en cause, La Banque du Peuple, filed a declaration in the case that they were willing to abide by the judgment to be rendered by the court (s'en rapportant a justice).

The defendants Brossard & Chaput and the defendant Lamoureux filed separate pleas, but substantially offered the same de as follows: " that the plaintiffs only became creditors of Lamoureux after the contract between him and the defendants Brossard & Chaput; that the plaintiffs were not subrogated in the rights of the Exchange Bank; that they knew of the transactions complained of and made between the defendants at the time they took place, and their action was therefore prescribed, more than one year having elapsed before it was instituted; that the defen- V* dants Brossard & Chaput had only accepted the compounding (composition) of the defendant Lamoureux for the amount of $11,384.98, besides $100 lent to the defendant Lamoureux, not including the $8,885.52, amount of the latter's notes transferred by them to the Exchange Bank; that the Exchange Bank was creditor of Lamoureux to the total amount of $14,752.14, and that it did not consent to accept a composition, but offered to return the notes forming the basis of its claim against Lamoureux, in consideration of the cash payment of the sum of $8,000; that Lamoureux then asked from the defendants Brossard & Chaput a loan of $3,000 to clear himself of the Exchange Bank to which the latter agreed on condition that Lamoureux would give them an hypothecary guarantee, and that it was in execution of these agreements that Lamoureux gave them the note of the 5th January, 1884, payable four months from the date thereof, for $2,934.86, and gave them the hypothecary guarantee of the 8th of the same month; that Brossard & Chaput paid Lamoureux the said sum of $3,000, to the knowledge of the plaintiff Emard; that after said arrangements Lamoureux borrowed from the plaintiffs a further sum of $3,000, and at that period Lamoureux was solvent; that the note for $2,934.86 does not represent the amount for which Lamoureux was previously discharged by his acte de composition."

"That, moreover, in December, 1883, the defendants Brossard & Chaput held on Lamoureux's immovables hypothecary guarantees to the amount of $7,415; that without being obliged, but to help Lamoureux, they gave him acquittance (main leilde) of their hypothec, by a deed passed the 8th January, 1884; that the plaintiffs, knowing Lamoureux to be insolvent, wished to make a speculation and instead of taking guarantees upon his property for what they advanced, they exacted usurious interest; Ihat in fine, the immovables belonging to Lamoureux and hypothecated to the n

~Taschereau defendants Brossard & Chaput were sold to J. Bous. quet, who undertook to pay off all the hypothecary debts attached to them, and agreed, in case certain hypothecs should be annulled, to place the amount in rightful hands to be distributed amongst the creditors." Then the defendants declared themselves ready to consent that after the payment of the loan of $3,000 with interest at 8 per cent per year, all existing balances on the said hypothec should be placed in the .hands those legally authorized to receive them to be distributed amongst the creditors, and they demanded the dismissal of the plaintiff's action.

The plaintiffs replied that Lamoureux's notes endorsed by Brossard & Chaput to the amount of $8,385.52 were withdrawn from the Exchange Bank with $3,000 furnished by the plaintiffs to pay the composition of 65 cents on the dollar payable by Lamoureux, and by means of $2,934.86 paid by Brossard & Chaput to clear off the 35 cents on the dollar that were not covered by the composition ; as to the surplus of the debt held by the Exchange Bank against Lamoureux, Brossard & Chaput had nothing to do with it and it was settled by the amount of $2,000 paid by Lamoureux himself, that is by his wife ; that it appears by the agreement that Brossard & Chaput were the first to sign the agreement (concordat) without reserve.

The Superior Court granted the plaintiff's conclusions for $3,612.75 against Lamoureux, and declared null and void the notes by him given to the other two defendants of the 5th January, 1884, and the deeds 8th and 11th January, and of the 16th and 19th December, 1884. The Court of Appeal unanimously confirmed that judgment.

Brossard & Chaput now appeal. Lamoureux does not.

I am of opinion that this appeal should be dis- missed.

It results clearly from the evidence that J.

when respondents consented to advance

$3,000, on the belief that they would stand for being repaid on same footing as all the other creditors who had consented to take 65c. in the dollar, Brossard & Chaput were behind their back getting that new note of $2,934.80, saddling Lamoureux's estate with that new indebtedness, and what was still worse, were getting ahead of all the other creditors by means of a mortgage affecting as security for the payment of that new and secret debt, the best and clearest part of Lamoureux's estate, its immovables, and of the fraudulent character of such a transaction there can be no doubt.

The appellants contend, however, that even assuming this point against them, yet the respondents under art. 1039 C.C. have no action to get these dealings set aside because they were not then creditors of Lamonreux, having become so only a few days subsequently. This point has been disposed of by the learned judge in the Superior Court by saying that all the divers deeds, notes and agreements formed, with the concordat, but one and a continuous transaction, which was affected and vitiated by the work of deception and concealment conducted by the appellants with the apparent intent on their part to gain an undue advantage the respondents anq all the other creditors of Lamonreux.

As a matter of fact this is undoubtedly so, and this ground alone the appellants' contention based art. 1039 C.C. fails, without it being necessary to consider respondents' contention that they had become by operation of law subrogated to the Exchange Bank. J.-Lamoureux, who was insolvent, effected a composition with his creditors, the terms of which are set out in an instrument which bears

-. date the 28th of November, 1883, but which, according to the evidence, was not completed until the 20th Patterson J. of the following December;

The instrument, which is very short, is in these words

Then followed the signatures of Brossard, Chaput &

Cie who are the present appellants, and of all the other creditors of Lamoureux with the exception of the Exchange Bank. The respondents Dupras and

Emard are not among the signers. ,They became creditors after the date of the instrument.

The Exchange Bank was a large creditor of Lamoureux, but being in liquidation preferred to compound for a payment in cash to joining in the composition for

65 per cent on time.

Lamoureux's liabilities to the bank may be called in round numbers $14,000. For upwards of $5,000 of that amount he was liable as endorser of customers' notes.

The remainder, being $8,389.34, was represented by his own notes on which the appellants Brossard &

Chaput were accommodation endorsers.

There is a discrepancy in the accounts given of the arrangement with the bank.

The appellant Brossard, who was examined as a witness on behalf of his opponents the respondents, says that the bank received $8,000 in satisfaction of the He says that $3,000 of that amount was a ' loan from him and his partner to Lamoureux. He took from Lamoureux a promissory note for $2,934.86, s Jand to secure payment of that sum Lamoureux gave him a mortgage for $3,000.

That is the transaction which this action is brought to set aside as fraudulent against the other creditors. Brossard gives an explanation of the note not being for the even sum of $3,000 by reference to some items of charges which he says Lamoureux paid to the Ontario Bank; and he says that the whole amount of $3,000 was handed to Mr. Emard, who, as attorney for Lamoureux. conducted the negotiations with the Exchange Bank.

According to Brossard the arrangement with the bank was a direct and simplh composition of $8,000 for $14,000, the $8,000 being made up of $2,000 advanced by Lamoureux's wife,

$3,000 obtained from the respondents Dupras and Emard, and $3,000 from Brossard.

This, on the face of it, contains nothing improbable, the payment being about 57 per cent cash in place a promise to pay 65 per cent at four, eight and twelve months.

The other account is given by Lamoureux, and is supported by Emard if we look only at some of his direct statements.

Whether his evidence as a whole, including the documentary part of it, really does support it or is not rather confirmatory of the account given by Brossard is a matter to be considered. The account given by Lamoureux is that the two debts of $5,000 or thereabouts and of $8,389.34, were settled separately with the bank, the $2,000 contributed by Madame Lamoureux being accepted in satisfaction of the $5,000 debt, and the $3,000 borrowed from the respondents being accepted in satisfaction 65 per cent of the $8,389.34, leaving the appellants Brossard & Chaput to pay, as endorsers, the other 35 per cent, which they did, taking from Lamoureux his note for the exact amount of the 35 per cent, viz., IUVAS. $2,984.86.

J. If this piecemeal arrangement was made with the bank it is evident that it had very little reference to the 65 per cent composition that was offered to the creditors generally.

According to the statement the bank accepted about 40 per cent for the $5,000 claim; confined its claim on the endorsers of the $8,389.34 of notes to 35 per cent of that amount, though why it should have done so is not explained; and accepted another

35 per cent from the insolvents in place of 65 per cent. I am satisfied from careful consideration of the evidence that the bank did not enter into that arrangement, but compounded, as one transaction, for 57 per cent in cash of its whole claim of nearly $14,000 in lieu of 65 per cent on time.

I do not doubt that a scheme such as that deposed to by Lamoureux was discussed among the parties with some of the bank people as well as amongst the others, and I think that, in giving evidence in the action, the actual arrangement with the bank has been sometimes spoken of as if it was the same as that which had been talked of among the other parties but not carried out with the bank.

There seems to be some confusion in this respect.

He shows that there was or may have been a proposition to settle the $5,000 claim by itself but that before a settlement of that claim had been decided on it was insisted that one settlement should be made of the whole debt. The effect of his testimony is that, as far as the bank was concerned, there was one composition of $8,000 for the I take Mr. Emard's evidence to really bear out that understanding.

He shows that an offer was made to the bank to pay $1,500 for the notes which amounted to $5,115.84.

That offer was madeby letter of Mr. Emard dated 17th December, 1884.

It was not ~ accepted. Then Mr. Emard says that he verbally made an offer of $2,000 which the authorities of the bank seemed disposed to accept, but before definitely accepting it and declaring themselves ready to settle for the amount they manifested the desire that their other claim against Lamoureux which was secured by the endorsement of Brossard & Chaput, amounting (as he gives the figures) to $8,385.32, should also be settled. In this Mr. Emard agrees with what is told us by Mr. Campbell the liquidator.

Mr. Emard then speaks of what was done towards providing for the larger claim.

He says that Lamoureux, being able to pay only $2,000, asked Emard to make an offer to redeem (racheter) those notes, whereupon he first ascertained that he could procure $3,000 through Mr. Dupras, and then made a proposition to the bank.

I have been desirous of seeing the terms of that proposition.

It was noted, Mr. Emard tells us, on a telegraph blank which was produced in evidence but which I have not been able to find. It is said not now to be with the record.

I have been more anxious to see it because other documents which were not set out in the printed case before us, but which remained with the record and have been sent up, do not fully sustain Mr. Emard in the view of the settlement which his oral evidence presents.

His recollection seems to be that what he paid to the Exchange Bank was not $8,000 but only $7,934.56, that sum being composed of Madame Lamoureux's $2,000, of the $3,000 advanced by Dupras and Emard, and of $2,934.56 from Brossard & Chaput. But the cheques by which he paid the moneys are produced and are for the -full amount of $8,000.

There were four cheques, viz., $1,000, $2,000, $3,000 and $2,000, the amounts not being thus divided by reference to the sources from which the money came, but for convenience in retiring the notes which were held by different banks.

J. From this evidence I cannot resist the conviction that on the part of the Exchange Bank there was simply one composition for $8,000, and that the bank dealt only with Lamoureux, or with Emard representing Lamoureux, and not with the appellants Brossard & Chaput.

Those gentlemen contributed a part of the money.

Brossard says it was $3,000, the same amount for which the mortgage was given by Lamoureux, and the amount which we find from the written evidence of Emard's cheques was paid to the bank. I am satisfied that whatever money he raised, whether the full $3,000, or $65 short of that sum, was raised because he was exposed to be called on as endorser of the $8,000 of notes, and I do not see any reason to doubt that the amount for which he took the note, and which was precisely 35 per cent of the full amount of the notes, was arrived at by a reckoning based on the notion that 65 per cent would be provided for in some way by Lamoureux.

But the actual settlement being the acceptance from Lamoureux of a sum which seems to allow a fairly liberal discount for cash, being as I have said about 57 per cent in place of 65, making a rebate of $1,100 or so which was 12 per cent of what the composition at 05 per cent would have come to, I do not see that the motive which led Brossard to raise the money is so material, or that the $3,000 advanced by him differs, in its relation to the general creditors, from the $3,000 advanced by Dupras and Emard. last named sum was advanced, as it appears, upon an understanding between Dupras, Emard and Lamoureux that the difference between $4,000 and $5,453.07 (which was 65 per cent of the $8,389.34), viz., $2,453.07, was to be shared among the three.

That would seem DouPs. to give $s17.69 to each of the three. There is a slight difference as they computed the figures, for they de- PattersonJ~ducted

$819.45 as the share of Lamoureux from $5,453.07, leaving $4,633.62, and for that amount Lamoureux gave to Dupras and Emard his five promissory notes at dates from two to twelve months from the 11th of January, 1884.

This somewhat remarkable arrangement is based the idea that the $8,389.34 of notes were bought from the Exchange Bank for $3,000, giving the purchasers the right to rank for 65 per cent under the composition arrangement, but ignoring Brossard & Chaput, who, if they paid money in the character of endorsers, and accommodation endorsers, would certainly have had some right to the notes.

We have in evidence the following document which is not consistent with the theory that the notes were purchased for $3,000, nor on the other hand with the proved fact that the payment made to the bank was the full $8,000 as evidenced by the four cheques already referred to, but which, being an order addressed by the endorsers to the bank, properly treats the endorsers as the persons entitled to control the notes :- Mr. Brossard when examined with reference to this order insisted, ashe did throughout his evidence, that the settlement with the bank was one settlement for $8,000, $3,000 of which was advanced by his firm.

We must keep in mind, as before noticed, the distinction between arrangements about procuring funds and the transaction with the bank.

One thing that seems clear enough is that the $5,000 of notes, although included in the one composition with the bank, were yet, as DPAbetween the other parties, understood as going to

Whatever importance attaches at present to the order seems to me to be in its recognition of the legal right of the endorsers to the notes, which is ignored in the arrangement which treated them as belonging to

Dupras and Emard.

The real transaction seems to have been a loan

$3,000 from Dupras and Emard for which those gentlemen were to be paid an exorbitant rate of interest, and another loan of $3,000 from Brossard & Chaput which they were to be repaid according to the tenor of the promissory note given them by Lamoureux, payment being secured by a mortgage given, not only in consideration of that loan, but in substitution for a previous mortgage which they released.

I think this case turns essentially on the questions of fact in which I cannot agree with the understanding of the evidence acted on in the court below.

The plaintiffs found their right to attack the transaction with the defendants on their subrogation to the rights of the Exchange Bank as holders of the $8,000 of notes.

In that sense only are they parties to the composition.

My conclusion is that they are not holders of the notes but that the notes were satisfied by the. composition paid to the bank, the plaintiffs being simply creditors of Lamoureux for the $3,000 they lent him.

I am not now disputing the power of

Lamoureux to promise to repay the plaintiffs their loan with abnormal interest, I am merely dealing with their locus standi as compounding creditors.

I do not think they sustain that character and therefore, in my opinion, they have no right to maintain this action. Further, I am not satisfied that the position of the defendants is open to successful attack by any com- PattersonJ~pounding creditor. I think the proper conclusion from the whole evidence is that the money paid by the defendants Brossard & Chaput was a loan from them to Lamoureux to assist in the payment of his composition. They were parties to the composition deed, but that was as creditors for another debt. This loan was a later matter and was not subject to the composition deed.

Lamoureux had the right to secure its payment by a pledge of part of his assets.

To use the language James L.J. in Ex parte Burrell (1)

Or in the language of my brother Strong in Beausoleil v. Normand

Mercier, Beausoleil, Choquette

Emard.