Judgment of the Court
J.-The plaintiff being indebted to the bank in the sum of $12,800 for which the bank held as collateral security certain debts due from the company mise en cause to the plaintiff to the amount of about
$5,000 asked his creditors for a composition at seventyfive cents on the dollar, said composition to be payable by his notes at three, six, nine, twelve, fifteen and eighteen months from the 1st May, 1900.
All creditors of $100 and over were to sign.
Certain of the creditors signed with a condition following their signatures that notes at three and six months should be given instead of the notes provided for in the deed, and one firm signed excepting goods sold on a certain date. The bank signed by its general manager adding the words
"special reserve being made as to the securities which we hold."
The bank had collected from the Telephone Company about $4,500 and the plaintiff has paid them in addition some $4,869, which two sums added together would pay the seventy-five cents on the dollar due under the composition deed. The plaintiff claims that the money collected from the Telephone Company should be applied on the seventy-five cents on the dollar and that he should be entitled to receive the return of the balance of the claim against the Telephone Company and a return of his notes.
And the bank claim that they are entitled to receive from him seventy-five cents on the dollar and to obtain, if possible, the other twenty-five cents on the dollar from the realisation of the collateral security.
The trial judge found in favour of the plaintiff and that judgment has been confirmed by a majority of the judges of the Court of King's Bench. The majority of the court below take the view that the reserve of the securities in the composition deed was a reserve to guarantee the payment of the seventy-five cents on the dollar.
I think that the true construction of the bank's reservation when they signed the deed is that the bank v.A say to the debtor, " we will accept seventy-five cents on the dollar from you in full discharge of your personal J. liabilitity to us, but the collateral securities we have we will hold for whatever they may be worth, and to the extent of twenty-five cents on the dollar we will collect on them if we can. "
Of course any balance over the twenty-five cents would be accounted for. I think the view taken by Mr. Justice Hall in the court below was the correct one. True the original notes were given up by the bank to the respondent, but not to extinguish the debt, but for the purpose of being handed to the other creditors. These notes were, moreover, mere evidence of the debt and if it can be established that the latter was not extinguished or novated then it is in full force. The deed of composition declares in express terms that in case any of the instalments were not paid at maturity the balance of the original debt would revive in full. Some interesting questions presented themselves at the hearing arising out of the manner and expressed conditions under which the deed of composition was signed by the several creditors by virtue of which the necessary equality which the deed called for amongst the assenting creditors was destroyed. No question was raised before us on the point and in the view we take of the case it is not necessary to do more than refer to it to shew that we have not by our silence given an apparent sanction to such a proceeding.
The actions of the respondent should be dismissed with costs.
Appeal allowed with costs.