Judgment of the Court
JUDSON J.:-Adelaide Motors Limited sued James Byrne on a guarantee which he had given to that company for the indebtedness of A.B.C. Taxi Cabs Limited. The company obtained a judgment at trial which, on the reference directed, would have resulted in an assessment of $15,519.89. On appealP judgment was given for $2,399.90. The Appellate Court took a different view from the trial judge concerning the application of certain payments made on account of the taxi cab company's indebtedness. This makes necessary a review of the dealings among the three parties.
Early in 1958, Byrne, along with one other person, incorporated A.B.C. Taxi Cabs Limited. He intended to go into the taxi business and he negotiated the purchase of nine used cars from Adelaide Motors for a purchase price of $19,382.40. These were sold under conditional sales contracts and, in addition, Byrne gave his personal guarantee of payment in the following terms:
St. John's Nfld. June 30th, 1958. Adelaide Motors Ltd.,
St. John's Nfid.
Dear Sirs,
This is to advise you that in view of the accommodation which you arranged through the Bank of Nova Scotia for S19,382.40 on behalf of the A.B.C. Cabs Ltd., I give you my personal guarantee that I will see that this indebtedness is paid off according to the arrangements made and that your interests are protected at all times. (sgd) James E. Byrne 1 (1964), 49 M.P.R. 197.
S.C.R.
[19661 "The arrangements made" referred to in the guarantee were that monthly instalments of $1,000 each would be paid in accordance with the terms of the conditional sales contract.
When the cars were purchased the taxi cab company had given a promissory note to Adelaide Motors for the purchase price of $19,382.40. Adelaide Motors had discounted this note with the Bank of Nova Scotia and the bank had informed the parties that the limit of its lending on this account would be $20,000. In August, September, October and November of 1958 the taxi company paid to the bank four payments of $1,000 each. There is no question that these payments must be applied on the $19,382.40, the guaranteed indebtedness, in reduction of Byrne's liability under the guarantee.
In December 1958, the taxi cab company purchased five new cars from Adelaide Motors for a total sum of $13,- 672.50. It traded in five of its fleet of used cars and received a credit of $7,982.50, leaving a balance owing on the deal of $5,690. With $15,000 plus interest still outstanding on the original purchase, if this sum of $5,690 had been added to the outstanding indebtedness any consolidated new note taken would have been over the $20,000 limit set by the bank. Therefore, as part of the same deal, the taxi cab company paid direct to Adelaide Motors the sum of $1,000. Byrne now says that this $1,000 should be credited on the guaranteed indebtedness. When these new cars were purchased Byrne had refused to extend his liability on the guarantee to cover this new indebtedness. The $1,000 cash paid on the new deal is in the same position as the credit of $7,982.50. It was not a payment on the guaranteed indebtedness any more than the $7,982.50 credit for the old cars which were traded in. Both the credit and the $1,000 cash payment were part and parcel of the purchase of the new cars. Up to this point, therefore, Byrne is entitled only to a credit of $4,000 on the original guaranteed indebtedness of $19,382.40.
In 1959, the taxi cab company paid to the bank in February, March and April three payments of $1,000 each, and in August and September two payments of $500 each. These payments were made in accordance with the terms of the guarantee and the surety is entitled to have these credited on the original amount. Therefore, the total principal payments on the original note of $19,382.40 amount to $8,000, and Byrne, as guarantor, is entitled to these credits. From the date of each payment interest runs on a diminishing sum which will have to be calculated.
The taxi cab company did not prosper and its cars deteriorated rapidly. After September 1959 no further payments were made on account of its liabilities to Adelaide Motors and it went out of business in October or November. In May of 1960 the bank charged back to Adelaide Motors the amount of the note which was then outstanding. This note, of course, included not only the original indebtedness but the $4,690 by which the original indebtedness had been increased as a result of the purchase of the new cars in December of 1958 and for which Byrne was not liable on his guarantee.
After the failure of the taxi cab company, at Byrne's request Adelaide Motors took possession of the cabs. Again at the suggestion of Byrne, those cars that could be repaired were sold and the proceeds amounted to $1,713.32. Byrne is claiming this sum to be applied on the guaranteed indebtedness. He is in error in this submission. He was only entitled to be subrogated to the security on the four original cars that were left. As guarantor he had no interest in the five new cars purchased in December 1958. He had not increased his guarantee to cover this purchase. He also says that non-compliance with The Conditional Sales Act, 1955 (Nfld.), c. 62, excuses the taxi cab company entirely from the whole indebtedness but the evidence shows that Adelaide Motors did not repossess under the terms of its conditional sales contracts; that, on the contrary, there was a voluntary surrender of these cars and that Adelaide was instructed to make the best of the situation. They did repair the cars and sold them privately. It was agreed by counsel that the four original cars in which Byrne was interested as guarantor realized approximately $50 each. Byrne is entitled to a further credit on the guaranteed indebtedness of $200.
Byrne also urged that when the new cars were purchased and a new note was signed for $19,855.60, the indebtedness represented by the old note or the balance owing on the old note disappeared. Again, this is incorrect. What Byrne guaranteed was a specific indebtedness of $19,382.40. This