Société Canadienne-Française de Construction de Montréal v. Daveluy

RESPONDENTS. *Api 4. QUALITt (PLAINTIFFS) . .............

ON APPEAL FROM THE COURT OF QUEEN'S BENCH FOR LOWER CANADA (APPEAL SIDE).

Per Taschereau J.-Tbat an attorney ad litem has no authority to bind his client not to appeal by an agreement with the opposing attorney that no appeal would be taken.

A by-law of a building society (appellants) required that a shareholder should have satisfied all his obligations to the society before he should be at liberty to transfer his shares.

One P. a director, in contravention of the by-law, induced the secretary to countersign a transfer of his shares to the Banque Vile Marie as collateral security for an amount he borrowed from the bank, and it was not till P.'s abandonment or aissignment for the benefit of his creditors that the other directors knew of the transfer to the bank, although at the time of his assignment P. was indebted to the appellant society in a sum of $3,744, for which amount under the by-law his shares were charged as between P. and the society. The society :-Sir W.

immediately paid the bank the amount due by P. and took an assignment of the shares and of P.'s debt. The shares being worth more than the amount due to the bank the curator to the insolv- NE-FRANent estate of P. brought an action claiming the shares as forming part of the insolv.ent's estate and with the action tendered the amount due by P. to the bank.

The society claimed the shares were pledged to them for the whole amount of P.'s indebtedness D L.

to them under the by-laws.

Held, reversing the judgment of the Court of Queen's Bench for Lower Canada (appeal side) and restoring the judgment of the Superior Court, that the shares in question must be held as having always been charged under the by-laws with the amount of P.'s indebtedness to the society, and that his creditors had only the same rights in respect of these shares P. himself had when he made the abandonment of his property, viz., to get the shares upon payment of P.'s indebtedness to the society.

.

APPEAL from a judgment of the Court of Queen's Bench for Lower Canada (appeal side) (1) reversing a judgment of the Superior Court.

The respondents (plaintiffs), in their capacity of joint curators to the insolvent estate of Charles Treffl6 Picard, by their action prayed to have twenty shares of the appellant's (defendant's) stock valued at $200 per share, declared their property, and for an order to the appellant society to so enter these shares upon its books, or in default of so doing, to be condemned to pay to the respondents (plaintiffs) $4,000, and at the same time deposited $1,664.43 as due by Picard to the Banque Ville Marie and for which sum Picard had transferred these shares as collateral security. The appellants (defendants) by their pleas declared their willingness to so register the stock, but only on payment to them of the said sum of $1,664.43 paid by them to the Banque Ville Marie, and of a further sum of $3,744 with interest from the 25th of February, 1885. The facts which gave rise to. the litigation are the following:

The appellants are a building society (1) M.L.R. 7 Q.

organized under ch. 69 of the Consolidated Statutes of Lower Canada, and Picard, the insolvent, was a shareholder in the society and held as such thirty shares of $200 each.

As collateral security for loans made to him by the Ville Marie Bank and aggregating $1,550,

Picard in 1882 transferred to the bank twenty of these shares.

Picard, at the time he made this transfer to the bank, was accountant and a director of the society, and he also owed the society in the neighbourhood of

$1,000, and by the 24th of February, 1885, renewals and new loans had brought the amount to $3,744, represented by a demand note which specially covenanted that his stock was transferred to and held by the society as collateral security to be by it, in case of his default, taken in payment and sold without any mise en demeure being necessary.

The transfers were made in fraud of appellants to the Ville

Marie Bank and were entered in the transfer book, signed by the transferrer and transferee and countersigned by the secretary-treasurer, but of the fact that these transfers existed the society only became aware in February, 1886, and it then immediately paid off the claim of the Bank Ville Marie and took a subrogation dated the 11th March, 1887, of all its rights.

In November, 1885, Picard became insolvent, and. the respondents who had been appointed joint curators to his insolvent estate on the 27th of May, 1887, were authorized by the court to take an action in their name for the benefit of Picard's creditors against the appellant society for the recovery of these twenty shares, and it is the money paid by the society to the Ville

Marie Bank which the respondents tendered with their demand for the delivery of the shares.

The following by-laws of the society were filed at the trial of the action:

Art. X.-No shareholder shall be entitled to demand. from the Society the reimbursement of the amounts. paid on his shares, the only way for him to dispose of his shares shall be by selling or transferring the same. Art. X.-To this effect, the Society shall keep a transfer book and all transfers to be valid shall be signed by the transferor and the transferee, and counter signed by the Secretary-Treasurer.

No transfer shall be made by the transferor until he has met all his obligations to the Society, and the Society shall not be obliged to acknowledge such transfer unless it be made in the form and on the conditions prescribed in the present article.

.

Art. XII.-The shares and moneys generally of any members in arrears towards the Society for any reason whatsoever, are specially and by privilege, affected to the payment of the Society's claims against him. In the Supreme Court a motion to quash the appeal on the ground of acquiescence by appellant in the judgment appealed from was made by respondent and judgment was reserved and the case heard on the merits. Laflamme Q.C. and Charpentier with him for appellants, contended that the transfer to the bank was made in fraud of the society's rights, and that no privilege. could be removed or cancelled by fraud, and Picard's creditors could not invoke the fraud of their debtor to deprive the society of their lien and privilege on these shares, and referred to art. 1972 0. C. (P.Q.)

1970 C.C., and contended also that the transfers to the bank were regular and binding on the society, and were known to the directors of the company, and they could not after Picard's assignment dispute their regularity.

Sir W. J. C.J.-(After reading the above statement of the case proceeded as follows :) The fraud in the transfer of the shares in question in this case seems to be established beyond all question, and I do not understand it to be disputed.

I think the appellants cannot by fraud be deprived of their unquestionable right and privilege in these shares secured to them by law, and as the curators stand in the place of Picard, neither they nor the creditors

Picard whom they represent, can, in my opinion, invoke the fraud of Picard their debtor to deprive the appellant of the lien and privilege on these shares which the law his so conferred on them.

When the defendants by paying the claim of the bank were reinstated in the position of which Picard's fraud had deprived them, they were simply placed in the same position in which they would have been if no fraud had been perpetrated.

To allow Picard's creditors to avail themselves of Picard's fraud to obtain the possession and the benefit of the stock which, but for such fraud, would have stood on the books of the society subject to the advances made to Picard, they can only do this by claiming through Picard's fraud, and so making themselves participators in that fraud, which seems to me contrary to every principle of law and justice. I think the appeal should be allowed and the judgment of Mr. Justice Davidson should be restored.

J.-The appellants are a non-permanent building society incorporated under the provisions of chap. 69 of the Consolidated Statutes of Lower Canada. By section 1, subsection of this act, societies organized under are empowered to make rules and regulations for the governance and guidance of the same, but such rules are not to be repugnant to the express provisions tj. of the act or to the laws in force in Lower Canada. By the Provincial Statute and 43 Vic. chap. 32, sec. 4, building societies are authorized to lend money on the security of their own shares.

The society made by-laws and regulations of which articles 11 and 12 have an application to the present case.

Art. XI. enacts that no transfer of shares shall be made by the transferrer until he has met all his obligations to the society, and the society shall not be obliged to acknowledge such transfer unless it be made in the form and on the conditions prescribed in the present article. Art. XII. provides that the shares and moneys generally of any members in arrears towards the society, for any reason whatsoever, are specially and by privilege, affected to the payment of the society's claims against him.

There can be no doubt, in my opinion, that these bylaws are not in any way repugnant to the general law of Lower Canada as it existed when the Consolidated Statutes were passed, nor to the law as it now exists as embodied in the Code.

The law, of course, was and is that property such as these building society shares were, is to be considered movable property by determination of law

And it is also the law that such property cannot be so hypothecated as to constitute a security available against the hypothecating debtor's creditors.

And also that, as expressed in art. 1970 of the Code, it is essential to the validity of a pledge that the pledged property shall remain in the possession of the creditor or of a third person agreed upon between the parties. Had the by-laws in question attempted to authorize the creation of a security in any way repugnant to these provisions of the law they would undoubtedly have been absolutely null. They have not, however, attempted to do so. The shares in the building society are shares in the capital stock of the society, and this capital stock necessarily remains in the possession of the society and the right to deal with the shares in it, is, by a provision quite usual and certainly intra vires made subject to the control of the society acting, of course, through its board of directors.

Therefore, when the by-laws provided that the society should have a privilege on a member's shares for whatever he might owe to the society, and that no transfer should be made until the transferrer had met all his obligations to the society, they provided for a security which was legal and within the competence of the society to create. The shares as shares in the capital stock of the society, were in a sense in the possession of the society and no transfer of them could be made so long as any debt was due by the holder to the society without the assent of the latter.

Then the transfers to the Bank Ville Marie, being in the very teeth of the by-laws, and made fraudulently and entered in the transfer book only by the fraudulent complicity of the secretary-treasurer, they were absolutely null and void as regards the society. The delivery of the share-books to the bank made no difference.

These books were not the shares, they were merely evidence of the shares and the delivery of them by an original shareholder to a creditor without the registration of a proper transfer in the books was wholly inoperative and could not affect the privilege of the society, either for past or future debts. Until a proper legal transfer was regis- G9T tered, it was the right of the society to treat the original holder as absolute owner of the unincumbered property in the sharTs.

The consequence must be that apart from any special agreement to that effect, and by the mere force of the by-laws, the moneys lent and advanced to Picard be- Strong j. came privileged debts charged on the shares so soon as such moneys were advanced to him, just as much so as if the statute had itself embodied the terms of the by-law.

For these reasons I am of opinion that the judgment of Mr. Justice Davidson was correct and ought to be restored, the appeal being allowed with costs.

J.-L'appelante est incorporde comme socit6 de construction en vertu du ch. 69 des statuts consolid6s du Bas-Canada.

Son capital est divis6 par action de $200 chacune, en s6rie de livrets de dix actions chacune, portant des num6ros cons6cutifs. Le nomm6 T. Picard 6tait actionnaire dans cette soci6t6 et poss6dait trois livrets de dix actions chacune, num6rot6s 22, 59 et 274.

Le mai 1882, Picard fit dans les livres de la soci6t6 les deux transports suivants:acceptant, dix actions que je posshde dans le fonds capital de la Socit6 Canadienne-Frangaise de Construction de Montrial, connues sous le - SocIfTt livret numiro

T. PICARD, c~dant,

U. GARAND, caissier en

Cessionnaire. AMontant pay6

$587.50.

T. LAPALME, secr4taire-trisorier. Ces deux transports furent sign~s A leur date res- Fournier J. rective par le.secr~taire-tr~sorier de la soci6t6.

Art. XI. A cette fin, la socilt6 tiendra un livre de trarisfert, et tout transport, pour tre valable devra sign6 par le c6dant et le cessionnaire, et contresign4 par le secr~taire-tr6sorier.

Aucun transport ne pourra 6tre fait avant que le cidant ait satisfait toutes obligations envers la et la socit6 ne sera tenue de xeconnattre tel transport que lorsqu'il aura fait dans la forme aux conditions prescrites par le prisent article.

Art. XI.

Les actions et deniers g~ndralemnent d'aucun membre arrbrag6 envers la pour quelque cause que soit; sont spicialement, et par privilkge, affectis au paiement des r~clamations de la socith contre lui.

A 1'6poque de ces transports les actions en question n'6taient qu'en partie pay~es, mais la balance le fut plus tard en 1882 et 1883.

Picard 6tant apris cela devenu insolvable produisit an bureau du protonotaire de la cour Sup6rieure, A Montreal, une cession de ses biens pour le b6n~fice de ses cr~anciers,conform6ment aux articles 763 et suivants du code de proc6dure; et les intim6s furent nomm6s curateurs A ses biens.

YOL. XX.]

L'appelante, le 11 mars 1887, dans la vue de donner effet un transport qu'elle avait de Picard, comme re- cla ollat6rale des avances qu'elle lui avait faites,. paya la banque Ville-Marie le montant que lui devait. Picard et prit de la dite banque un transport avec subrogation des billets de Picard, ainsi qu'un transport des actions (livrets 22 et 274) qu'elle d6tenait comme j. appartenant A Picard.

Le mai suivant, les intimbs offrirent & l'appelante les montants qu'elle avait pay6s A la banque Ville- Marie avec l'int6r~t 6chn et demand~rent que les billets. et les livrets de Picard leur fussent d6livr~s par l'appelante qui s'y refusa.

De la pr6sente action contre 'appelante, all~guant les faits ci-dessus et demandant & ce que l'offre et la, consignation des deniers fussent d~clar~s valables eux-m6mes d~clar6s les propri~taires des parts en question, et ordre donn6 4 l'effet d'inscrire les intim6s dans. les livres de la socift6, comme propritaires des dites parts et de leur livrer les billets et livrets en question et a d~faut de le faire, la dite appelante condamn6e A payer aux intimbs la somme de $4,000, valeur des dites. actions.

L'appelante a plaid6 que le transport des dites actions a t6 fait hors de la connaissance du bureau de direction de la dite soci6t6, qui n'en a t6 inform6 quele 15 juin 1886.

Qu'd 1'6poque des transferts du mai et 22 d6cembre 1882, Picard devait la dite soci6t6, la somme de $956 pour avances faites sur la garantie des livrets et 274.

Qu'en vertu des raglements de la dite soci~t6, les membres n'ont pas le droit de transporter leurs parts A moins d'avoir acquitt6 toutes leurs obligations envers la soci6t et que leurs parts sont affect6es an paiement de ce qu'ils doivent et qu'en cons6quence les dits transports sont nuls.

Que ces transports ont td faits en fraude de la socie6 appelante.

Que le 25 f&vrier 1885, Picard 6tant endett6 enveTs 'appelante en la somme de $3,744 pour argent prk, donna son billet pour ce montant et transporta en mime temps ses actions & la dite appelante de la manihre suivante:

Que ce billet 6tait en renouvellement de billets ant& rieurs pour argent prWth sur la garantie des dites parts.

Que Picard est encore endett6 en la somme de $3,744 envers 'appelante qui a droit de retenir les dites parts jusqu'd ce qu'elle ait t6 payee de ce montant, ainsi que du montant offert par 1'action des intim6s.

Les intimbs ont r6pondu que l'appelante avait perdu tous les droits qu'elle aurait pu avoir sur les dites parts en laissant faire le transport la banque

Ville-Marie,- et que le billet nentionn6 dans son plaidoyer ne pouvait 6tre consid6r6 comme un transport des dites parts, vu que le transport v6sultant de ce billet n'6tait pas conforme aux riglements de la socit6 et parce qu'au temps de ce billet, la banque

Ville-Marie 6tait en possession des dites parts.

Les intimbs ont fait la preuve de toutes leurs all6gations.. Les actions en question 6taient entr6es dans les livres de la socit6 au nom de Picard comme 6tant en sa possession et y 6tant rest6es jusqu'au mai et d~cembre 1882, dates de leurs transports par Picard A la dite banque Ville-Marie.

Ces transports, A leurs dates respectives, furent entr6s daas les livres de la J. soc6t6 comme appartenant A la banque Ville-Marie. Us 6taient sign6s par Picard comme c~dant et par Ubalde Garand agissant et acceptant pour la banque, et r6gulierement contresign6s par le secrbtaire-trisorier de 'appelante.

Lorsque Picard a fait le transport de ses actions A la banque Ville-Marie, il devait alors pris de $1,000 A la soci6th appelante, et au 25 mai 1885, des renouvellements et de nouveaux prits avaient port6 sa dette A la somme de $3,744. 'Cette somme 6tait reprisent6e par son billet A demande avec d6claration, comme dans les riglements aitbrieurs, que son stock 6tait transport6 A la soci6t6 et d&tenu par elle comme stret6 collat6rale de ce qu'il lui devait.

Il est en preuve qu'A cette 6poque le bureau de directeurs de la dite soci~t6 6tait encore dans l'ignorance du fait que Picard avait transport6 ses actions A la banque Ville-Marie depuis 1882-Picard 6tait un des directeurs de la soci6t et son teneur de livres.

Ses rapports intimes avec le secr6taire-tr~sorier lui avait fait acqu6rir sur celui-ci une influence dont il a profit6 pour l'induire A tromper la soci6t6 et A manquer A son devoir en entrant et contresignant dans les livres de la socit6 le transport de ses actions A la banque Ville-Marie, sans la connaissance du bureau de direction et pendant que Picard 6tait endett& envers la soci6t6.

Picard promettait au secr6taire-tr~sorier de rembourser promptement la banque et de d6gager ses actions pour remettre la soci6t6 dans la m~me position. Ce sont ces transports dont les intimbs veulent prendre avantage.au d6triment de la soci&t qui a perdu ses droits sur les actions de Picard.

Sans doute, Picard et le secr6taire-tr6sorier ont commis en se concertant pour ex6cuter ces transports l'insu du bureau de direction, et pendant que Picard 6tait endett6, une fraude A l'Agard de la socit6. Mais comme il n'y a absolument aucune J. preuve que la banque Ville-Marie ait connu cette fraude ou y ait particip6 en aucune maniere, la transaction est inattaquable, et 1'appelante l'a reconnu dans une r&clamation qu'elle a faite dans la masse en faillite de Picard, et en remboursant A la banque Ville- Marie les deniers qu'elle avait avancis h Picard sur le transport de ces actions.

Malheureusement pour 1'appelante, Picard 6tant devenu insolvable fit, le 14 novembre 1885, pour le b6n~fice de ses cr~anciers, cession de ses biens qui sont devenus par 1'effet de l'art. 1987 C.C. le gage commun de tous ses cr6anciers et le produit en doit tre distribu6 par contribution.

L'appelante ne peut s'approprier les parts en question, qui par la faillite de Picard sont devenues la proprit6 de ses cr6anciers, . moins qu'elle ne puisse

6tablir qu'elle a 16galement un droit de gage sur ces m~mes parts.

Le privildge que donne le droit de gage ne subsistant, qu'autant (art. 1970 C.0.) que le gage reste en la, possession du cr6ancier, ne peut pas exister dans le cas actuel en faveur de l'appelante qui n'a jamais la possession des dites actions depuis la date des transports faits par Picard A la banque Ville-Marie en

1882. Ce n'est qu'apris avoir rembours6 cette derni~re en 1886 que l'appelante en a obtenu la possession, mais.

apris que l'insolvabilit6 de Picard en eut fait passer la, proprist6 A ses cr6anciers.

Ni la banque Ville-Marie, ni Picard par son transport n'ont pn faire acqu6rir i d 'appelante un privilge sur ces parts que la faillite rendait la propri6th du cr6ancier.

L'appel doit 6tre renvoy6.

J.-Cette cause nous est d'abord pr6sent6e par motion des intim~s pour rejeter l'appel, parce que 1'appelante aurait acquiesc6 au jugement en J.

l'ex~cutant pour partie.

Cette motion doit 6tre rejet~e. L'ex~cution par la remise des livrets, fht-elle suffisante, a t faite par le procureur de 1'appelante. Or, il n'6tait pas dans les limites de son mandat, comme procureur ad litem, lorsqu'il a agi dans cette ciiconstance. Et de plus, son mandat avait pris fin par le jugement final dans la cause.

Maintenant, tant qu'au m~rite. En 1881, un nomm6 Picard, 6tant propritaire de vingt actions nominatives, acquitt6es depuis, dans le fonds social de la Soci6t6 de Construction, pr6sente appelante, emprunta de la soci6t6 elle-m~me une somme de $744, sur la garantie de ces actions qu'il lui transporta par un 6crit sous seing priv&.

Mais il garda ses livrets, et aucun transfert r~gulier n'en fut fait dans les livres de la soci6t6 tenus pour l'enregistrement de tels transferts. a m6me peut-6tre continu6 A toucher les dividendes. Du moins je n'en vois ancune preuve au contrairel En 1882, Picard transporta les mmes actions h la banque Ville-Marie comme sdret6 collat6rale d'avances que lui fit la banque.

Il remit ses livrets la banque et ce transfert fut dfiment enregistre au livre des transferts de la socitA.

Les directeurs, n'ayant pas en connaissance de ce transfert, quoiqu'il fut r~gulibremeut fait, la sociAt6 continua A faire des avances A Picard, qui, par un rglement final, le 25 f6vrier, 1885, reconnut lui devoir $3,744.00, et, comme stiret6 collat6rale, lui transporta de nouveau ses vingt actions, mais encore seulement par un orit sous seing prive, -et sans transfert r6gulier sur les livres de la soci6t6. 6tait depuis longtemps un des directeurs de la com.

pagnie, et continua . 1'6tre.

Le 14 novembre, 1885,

Picard fut. d~clar6 en faillite. En 1887, la socit6 remboursa & la banque Ville-Marie. le montant que lui devait Picard, sur quoi la banque remit A la dite soci~te les vingt parts en question par acte authentique et par

J. un transfert r6gulier sur les livres de la soci6t6.

Les intimbs prtendent que ces vingt parts sont devenues le gage commun des cr6anciers de Picard. L'appelante soutient qu'elle a un privilige sur icelles parce qu'elle

-en est en possession comme cr6ancibre gagiste.

La cour Sup6rieure a donn gain de cause i la socith appelante, mais la cour d'Appel a t favorable aux intim6s.

La socit6 nous demande de d6clarer avec la cour Sup6rieure, qu'elle est cr6anci~re privil6gi6e. Je suis d'avis qu'elle ne peut r~ussir.

Elle n'a jamais en la possession de ces parts avant la faillite de Picard.

Ces transports sous seing priv6, valables entre Picard et elle n'ont aucune valeur vis-avis des tiers. Et ne 1'a-t-elle pas elle-m~me reconnu en payant la banque Ville-Marie ? Elle a non seulement laiss6 h Picard ses livrets, mais n'a m~me pas exig6 de lui le transfert r6gulier sur ses livres exig6 par la loi et ses propres raglements surtout dans 1'int6rst des tiers.

Quand Picard a failli, ces parts 6taient en la possession le la banque, comme son gage, et la banque une fois pay6e, elles sont devenues le gage commun des cr6anciers de Picard. La r6trocession qu'en a depuis faite

,en 1887 la banque A la socitd ne peut prjudicier aux cr6anciers.

Pas plus qu'une mise en possession par

Picard lui-m~me, en 1887, n'aurait pu donner un privilige A la socift6 vis-A-vis des tiers int6ress6s.

C'est comme si Picard avait en 1881 promis donner ses parts en gage, mais ne l'avait fait et n'ei avait mis la. societe en possession r6elle qu'en 1887, apris sa faillite. Toute la question se resume A celle-ci.

La soci6t& avait-elle ces parts en gage vis-A-vis des tiers, tonjours, en 1885. Non, bien certainement. Elle ne les a jamais eues ni en 188 1, ni en 1885 vis-A-vis des tiers, parce que le transfert r~gulier sur ses livres, n6cessaire, visa-vis eux, pour la meltre en possession n'a jamais 6t& J.

fait avant la faillite.

La cause serait la mime, 6cartant la transaction avec la banque, et supposant que Picard eit failli en 1882.

La soci6t6 aurait-elle pu r6clamer un privilge sur parts l'encontre des cr6anciers de Picard.

Non, parce qu'elle n'en avait pas la possession, la d6tention necessaire pour constituer le gage, vis-a-vis des tiers.

Chaque actionnaire de la socit6 est propritaire et en possession de ses actions. Elles peuvent 6tre saisies et vendues en .justice, et il pout A son gr6 les vendre, mettre en gage et ceder i quelque titre que ce soit. Pardessus, Droit Commercial (1). Et, je le r~pite, la soci~t6 Fa admis elle-m6me en payant la banque, quoique, quand Picard lui avait transf6r6 ses parts, la socith un 6crit sous seing priv6 les lui transportant A elle-m~me.

Est-ce que si, au lieu de transporter ces parts seulement comme sfiret6 collat&rale, Picard les est vendues purement et simplement A qui que ce soit, et qu'un transfert r~gulier sur los livres de la soci~t6 eftt t6 fait A l'acqu6reur de bonne foi, la soci6t6 pourrait contester le titre de cet acqu6renr, on r~clamer contre lid le privilige de gagiste ? Non: la vente serait parfaitement valable, comme le transport A la banque 1'6tait. Et pourquoi? parce que Picard, malgr6 1'6crit sous seing priv6 entre lui et la banque est, vis-A-vis des tiers, rest6 en possession mattre absolu de ces parts. La socite n'en a jamais en la possession avant sa banqueroute, cons6quemment elle ne les a pas eues en gage. Et apris la banqueroute, elle n'a pu acquerir un privilege an prejudice des autres cr6anciers.

statut lui donne un privilige, mais vis-&-vis des tiers, il lui fallait pour l'exercice de ce privildge, se DE faire mettre l6galement en possession de son gage.

statut doit s'interpr6ter conjointement avec le droit commun. D'ailleurs c'est comme cr6ancibre gagiste que la soci~t6 reclame ici.

J. La proposition que les cr6anciers de Picard, 6tant ses ayants-cause, ne peuvent avoir plus de droits que lui, et que, cons6quemment, comme Picard n'aurait pu contester A la soci6t0 son droit de cr6ancibre gagiste, eux, non plus, ne peuvent le faire, est bas6e sur une erreur 6vidente.

Elle pche par ses pr6misses.

Les creanciers, sous ces circonstances, n'agissent pas comme ayants-cause de leur d6biteur, mais comme tiers. La jurisprudence et la doctrine sont unanimes sur la question. Dans quatre causes rapport6es dans Sirey, (1)

la cour de Cassation a d6cid que:

&

Dans une autre cause, re Clauzel (2), la mime cour d&cida que " les cr6anciers sont recevables A demander la nullit6 d'un nantissement consenti par leur d6biteur sans l'observation des formalit6s 16gales."

Dans re

Vidic et re Langer (4), la m6me jurisprudence est

Cette dernibre d6cision surtout est particulibrement applicable A la pr6sente cause.

eux qui r~clament un drbit privil6gid.

Dbs lors, le syndic, repr6sen- A

S tant la masse des cr6anciers a qualit6 pour contester le nantissement r~clamb par 1'un d'eux pour d6faut des conditions requises pour 1'exercice de ce privildge.

DE

Et 1'annotateur ajoute:

DE

Le failli consent un gage avant la faillite, mais le crdancier n'est mis en possession qu'aprbs la faillite.

Ce gage est-il nul vis-h-vis des erdanciers ? Oui.

Le gage est un contrat rdel, et tant que le d~biteur Taschereau a conserv6 ]a chose en sa possession, il peut y avoir stipulation de J.

gage, il n'y a pas de gage rbel.

C'est la mise en possession qui donne naissance an droit du crdancier.

Le crdancier qui n'a pour lui qu'ane simple convention, sans possession, n'est pas saisi, et s'il n'est pas saisi au moment de la faillite, il ne peut 8tre saisi ex post facto. Aucun droit ne peut prendre naissance contre laimasse aprbs la faillite diclarbe. Tant qu'aux auteurs, ils sont unanimes A adopter cette solution. Je r~fire plus particulirement i Duranton 16 (1); Duvergier, Vente 2 (2) ; Troplong, Vente 2 (3);' Laurent 16 (4); Laurent 19 (5); Demolombe, des* Contrats 6 (6); Troplong, Nantissement (7); Pardessus, Dr. comm. (8).

Cef auteur, loc. cit. dit:

La masse peut encore, m~me sans d6nier ni la rdalit6 ni la qualit6 de la dette, en contester la qualit6 privilgi~e. Cette masse est compos~e de cr~anciers divers qui sont tous des tiers

Il'6gard du crdancier pr6tendu nanti et du failli qui a consenti le nantissement. Ce n'est point le cas de dire que la masse n'a pas plus de droit que le failli. Les intim6s, je rem arque, out ici th driment nommbs curateurs A-la faillite de Picard sous les arts. 763a et seq. du Code de proc6dure, et out 6t6 autoris6s par la cour A instituer la prbsente action.

Leur locus standi est d'ailleurs reconnu par les plaidoyers.

PATTERSON J.-C. T. Picard being insolvent, made an abandonment of his property for the benefit of his creditors on the 14th of November, 1885, under, the (1) No. 502.

(6) Nos. 552 et seq.

763, &c.

The respondents, plaintiffs in the action, are the curators appointed under art. 768.

.

Picard was a shareholder and a director of the build- cTON ing society, defendants in the action and the present appellants.

In 1882 Picard transferred to the Banque Ville Marie J. twentyshares of the stock of the societyto secureloans from the bank amounting to $1,550.

He owed money to the society at that time, amounting to about $1,000.

A by-law of the society required that a shareholder should have satisfied all his obligations to the society before he should be at liberty to transfer his shares.

The transfer to the bank was in violation of this bylaw, but it was made in due form, Picard inducing the secretary-treasurer to countersign it.

Picard incurred further debts to the society, bringing up the amount he owed at the end of February,

1885, to $3,744. That amount was covered by his promissory note dated the 25th of February, 1885, payable on demand, and purporting to transfer to the society in security his shares in the capital stock, with power in case of default in payment of the note, to retain the shares or to transfer them to any person terms and conditions agreed on with such person.

There had been similar notes given on the occasion of the several advances of money, which, together, made up the sum of $3,744.

This note was in fact a renewal of all the others.

The terms of these notes may possibly have given, or have been intended to give to the society power to deal with the shares in case of default more extensive than the society would have had under its by-laws, but it is important to bear in mind that, the shares existing only under the bylaws, they had always, by virtue of the by-laws, been AI charged, as between Picard and the society, with Picard's obligations to the society.

It was not until some time after Picard's abandonment or assignment for the benefit of his creditors was made that the directors of the society, other than Picard himself, knew of the transfer of the stock to the bank. Patterson J.

The transfer being in due form, and the bank having no knowledge of Picard's debt to the society or of his fraud upon the society in transferring the shares without first satisfying his obligations to the society, it was of course entitled to hold the security. Therefore, on the 11th of March, 1887, the society paid to the bank the $1,550 with interest and took a formal assignment of the shares and of Picard's debt. The claim of the society now is to hold the shares as security for that debt-which claim is conceded by the respondents -and also to hold them for Picard's other debt of $3,744.

This latter claim is disputed by the respondents and is the subject of the present appeal. It was sustained in the Superior Court by Mr. Justice Davidson, but his judgment was reversed on appeal to the Court of Queen's Bench, Mr. Justice Boss6 dissenting.

The judgment of the Court of Appeal is put on the ground that the twenty shares were:- Considering that the right to recover the said shares from the said bank on payment of its advances thereon, was vested in said Picard and passed to his creditors upon his insolvency;

Considering that long before the eleventh of March eighteen hundred and eighty-seven, the said Picard bad become insolvent having on the DE fourteenth day of November, one thousand eight hundred and eightyfive, as such insolvent, made an assignment of his estate and effects for the benefit of his creditors, and after such an insolvency, it was not competent for the said society to acquire any privilege or pledge over the said shares to the prejudice of the creditors of the said Picard, by Patterson J. paying the claim of the said Bank Ville Marie for the advances made by it to the said Picard, on the security of the said shares, and getting subrogated in the rights of the said bank, by transfer from the said bank to the said society, made on the said eleventh March one thousand eight hundred and eighty-seven, other than to be reimbursed the amount thus paid, to wit, the sum of fifteen hundred and fifty dollars and interest thereon.

No account seems to be taken of the circumstance that the transfer of the shares to the bank was, as between Picard and the society, a fraud upon the society, but the effect of the transfer taken by the society from the bank, whether or not it is in other respects correctly apprehended, is treated as if the society was previously a stranger to the shares and had no title to them but that acquired from the bank. The bank was innocent of the fraud, but if it had been otherwise, if there had been a collusive scheme to defeat the lien which the society had upon the shares by virtue of the by-laws, the fraudulent transaction could have been set aside and the bank postponed to the society.

The possession of the shares would, if necessary, have been decreed to the society. I say if necessary, because

I do not understand that the possession was ever out of the society. The statement in the judgment is that the bank acquired possession by means of the transfer in the books of the society.

No doubt that was sufficient possession, but it was possession of the character mentioned in the last words of article 1970 of the Civil

Code, the thing pledged being in the hands of the. person appointed by the parties to hold it, viz., the society, and not in the hands of the creditor, or the bank. As. said by Laurent (1):

The bank being an innocent holder of the shares, Pato J.the society could recover them only by assuming Picard's debt and paying off the bank.

In that wdy it in effect annulled the transfer to the bank. The effect, as far as Picard was concerned, was the same as if the transfer had been annulled by the decree of a court, or as if it had never been made, but the $1,550 had been advanced by the society itself. In the deed of transfer and subrogation from the bank it is, as a matter of precaution, declared that the transfer is made without novation of, or derogation from, the rights of the society in respect of the shares by virtue of Picard's note of the 25th of February, 1885.

Those are the rights which the society is now asserting, not rights acquired after Picard's insolvency. I see no reason to doubt the power of the society to make the by-laws under which the shares of every member are charged with the payment of the claims of the society against him, and no share is transferable until the shareholder has satisfied all his obligations to the society.

Those by-laws are part of the contract between the society and the shareholder.

The shares were never held except under those terms, and the respondents have only the same rights in respect them as Picard himself had when he made the assignment.

For these reasons and those more fully expressed by Mr. Justice Davidson in the Superior Court, and without discussing whether, as between the debtor and his creditor-in this case between Picard and the society -the transfer of possession is essential, or whether it A9 is not required only as respects third parties and as a notice to them of the existence of the pledge, I am of opinion that we should allow the appeal and restore the judgment of the Superior Court.

Beique, Lafontaine 4 Turgeon.