#April 23.
AND
THE FREEHOLD LOAN AND SAY- *Feb 19.
INGS COMPANY (DEFENDANT)......
RESPONDENT. ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO. GWYNNE J.-The only question upon this appeal is as to the construction of certain mortgages.
Upon the 29th day of December, 1882, the plaintiff executed and gave to the defendants, a mortgage upon certain lands therein mentioned situate in the Province of Manitoba for securing the repayment to the defendants upon the 2nd day of January, 1885, of the sum of $20,000, then advanced to the plaintiff, together with interest thereon payable half yearly. There were two other mortgages upon the same lands subsequently executed by the plaintiff for securing two other principal sums with interest.
The principal sums secured by these two mortgages are made payable on the 14th June, 1891.
In all other respects the terms of these B mortgages are precisely the same as those of the mortgage dated 29th December, 1882.
At some time not stated on the record the defendants entered into possession of the mortgaged lands and took and received the rents issuing thereout as mortgagees in possession Gwynne J. for some default and continued in such possession and receipt of rents until the 20th of June, 1889, when they sold the whole of the mortgaged premises for an amount admitted by themselves to have been sufficient to pay and discharge all monies claimed by them to have been due upon the security of all three mortgages. The plaintiff however insists that the amount so realised was sufficient to leave a balance payable to him, and this suit was instituted to procure the taking of an account of all the monies received by the defendants on account of the mortgaged debts and to ascertain and determine whether any, and if any, what amount of the purchase money realised upon the sale remained after satisfaction of the monies secured by and chargeable upon the mortgaged premises. The sole question before us is as to the amount of interest chargeable on the taking of such account and upon the said principal sum of $20,000 after the 2nd day January, 1885, when the said sum was by the mortgage made payable, that is to say, whether or not there is any stipulation by the mortgagor contained in the mortgage of the 29th December, 1882, for the payment of interest at the rate of nine per cent upon the said principal sum after the said 2nd day of January, 1885, or whether from that date interest can only be allowed at the statutory rate of six per cent, as damages for breach of the covenant to pay contained in the mortgage.
The whole difficulty arises by reason of a printed form containing clauses in use by building and loan societies and required by sec. of ch. 127 C. when principal money and interest are blended and made payable by instalments, having been used and adapted to this mortgage whereby the principal sum advanced is made payable in one sum at a prescribed date.
By the mortgage under consideration it is witnessed that in consideration of the sum of $20,000 therein J. acknowledged to have been advanced to the plaintiff, he did give and mortgage the lands therein mentioned to the defendant company, their successors and assigns forever. Then follows, in the printed form, a clause which is required by the statute to be inserted in every mortgage wherein the principal and the interest secured by the mortgage are blended together and made payable by instalments.
It is as follows:
Then follows a clause which is inserted in the mortgage in writing for the purpose of adapting the printed form used to a loan like the present where the principal sum is made payable in one sum at a prescribed date and the interest thereon in the meantime.
The clause so written is as follows:
The mortgage then contains two provisos in the printed form upon the construction of which the question before us turns. They are as follows:
The language of these provisos has very intelligible application to the case of the loan where the principal sum advanced and interest thereon at a rate agreed upon are blended together and the sum of the amounts so blended is made payable by instalments until the whole blended sum is repaid, and the effect of the first of these provisos in such mortgage plainly is, that upon any one of those instalments becoming in arrear and continuing so for two months after the day prescribed in the mortgage for payment thereof, then the whole of the subsequent instalments shall become immediately payable in advance. whereupon the mortgagee may exercise all the powers contained in the mortgage for the recovery of the whole amount remaining on the security of the mortgage in anticipation of the day specified in the mortgage for payment of the last instalment.
The natural construction of such a clause when applied to a mortgage wherein the principal sum advanced is made payable in one sum at a prescribed date and the interest thereon hal yearly in the meantime, is, as it appears to me, very plainly to be, that upon default being made and continuing for two months in payment of any of the sums, which, by the immediately preceding clause (to which this proviso must be construed as having special reference) are made payable as half yearly interest, then the principal sum shall become payable in advance of the day appointed in the mortgage for the payment thereof. Thus effect is given to an imperfect clause as applied to a loan not payable by instalments but in one sum at a prescribed date ut res magis valeat pereat. The object the second of the above provisos in a mortgage where the principal sum and interest thereon are blended together and made payable by instalments is to make interest, and that compound interest, become payable at the rate named upon all instalments coming due every half year, and also upon all sums, if any should be advanced by the mortgagees, by way of premiums of insurance.
And the effect of that clause in a mortgage like the present, where the principal is made payable in one sum at a prescribed date and interest thereon in the meantime half yearly, is simply, as it appears to me, to make interest, and that compound interest, become payable upon all sums of the half yearly interest not paid at the days prescribed in the mortgage; this is the construction which can naturally and reasonably be put upon the words " any of the instalments hereby secured" as used in mortgage like the present one. The provision as to interest upon insurance moneys has relation to a covenant in the mortgage whereby the mortgagor covenanted to insure and keep insured the mortgaged premises in the sum of six thousand dollars, and that in default thereof the mortgagee might insure the premises and charge the premiums to the mortgagor.
As to these insurance monies a veiy different provision is made in the next clause whereby it is agreed between the parties that interest at the rate of per centum per month upon all moneys paid by the mortgagees for insurance and for taxes, and for incumbrances, if any, on the said lands, and for costs incurred by the mortgagees in recovering and keeping possession of the mortgaged premises shall be a charge the lands.
The only remaining clause is that which empowers the mortgagees, in case of any default aforesaid, by sale of the mortgaged premises to realise payment of the principal money and interest and all other moneys charged on the mortgaged premises. This clause in short substance provides that if default awynne should be committed in payment of any of the sums becoming due half-yearly for interest or in payment of insurance moneys, or in payment of the principal sum, and that such default should continue for three months then the mortgagees
Now in none of these clauses is interest upon the principal sum of $20,000 stipulated for at the rate nine per centum per annum, or indeed at any rate interest after the 2nd day of January, 1885 ; interest in the antime, that is to say up to that day, is stipulated for payable half yearly, and as the mortgagees were given power to sell the mortgaged premises in case of any default, to reimburse themselves before the expiration of another half year, it may have been deemed quite unnecessary to make any stipulation for interest on principal after the day prescribed for the payment thereof; but whether the not expressly providing for the payment of interest upon the principal sum after that day is attributable to inadvertence or design is of no importance, for none being stipulated for no more than six per cent (the amount by law allowable in the absence of stipulation) can be allowed.
Take the case of the mortgaged lands proving insufficient to pay the whole of the mortgage security, and that after sale a large part of the principal should remain unsatisfied, it surely cannot be held that nine per centum per annum would still be recoverable under the covenant or any stipulation contained in the mortgage.
The sole contention of the respondents has been that the principal sum of $20,000 is comprehended in the words "any of the instalments "
&c., in the two provisos above mentioned.
To this contention Gwynne J. the Court of Appeal at Toronto have assented.
One of the learned judges was of opinion that this construction might be inferred from certain words in column
No. 2 of schedule B of the Act respecting short forms of indentures set opposite No. 13 of the Act of the
Province of Manitoba, but as already shewn an express clause is inserted in the mortgage specifying all the powers given for sale of the mortgaged premises upon any default; and moreover a rate of interest in excess of the rate of interest allowed by law in the absence of stipulation cannot be inferred.
In fine the contention of the respondents cannot be maintained.
The appeal therefore must be allowed with costs, and an order made for the allowance only of six per centum on the principal sum of $20,000 after the second day of January, 1885, as the only sum allowable by law in the absence of a stipulation for a greater amount.
and JJ. also concurred in the judgement of Mr. Justice Gwynne.
Appeal allowed with costs.
Solicitors for the appellant : Laidlaw, Kappele (
Bicknell.