Prevost v. Bedard

Per Duff J.-In the circumstances the case the pretended contract was ultra vires and void and no right of property passed to the company.

Ashbury Railway Carriage and Iron Co. Riche (L.R.

H.L.

followed.

And, further, as the notary before whom the deed in question was executed was, at the time of its execution, an official of the company assuming to purchase the lands, the was without validity as an authentic conveyance of the lands to the company.

Per Idington J., dissentin.-As the plaintiff obtained his conveyance in circumstances which placed him in the same position as the vendor, who had knowingly entered into the illicit contract with the company and to whom the right of recovery was not open, there could no relief given the courts as prayed in the action.

Judgment appealed from affirmed, Idington J. dissenting.

*PRESENT:-Sir Charles Fitpatrick

C.J. and Idington, Duff, Anglin and Brodeur JJ.

sitting in review(1), affirming the judgment of St. Pierre J., in the Superior Court, District of Montreal (2), by which the plaintiff's action was-maintained with costs.

The plaintiff, respondent, acquired certain lands in the District of Montreal, from one Drolet, in November, 1907, by notarial deed, duly registered. The Phoenix Land Improvement Company, a company incorporated under the statutes of the Province of Quebec, and empowered to deal in real estate, had, in June, 1905, acquired the same lands from Drolet, by virtue of a deed of conveyance executed before a notary who was, at the time of the execution of the deed, president of the company. To the knowledge Drolet, the lands had been acquired by the company for the purpose of enabling it to carry on a lottery scheme and a portion of them was, in fact, made use of for that purpose. In these circumstances the plaintiff brought the action against the company which, after the institution of the action, was dissolved on proceedings by scire facias instituted by the Attorney- General for the Province of Quebec.

The appellant was appointed curator for the purpose of the liquidation of the company and took the place of the original defendant in the action.

At the trial in the Superior Court the plaintiff's action was maintained, he was declared to be the lawful owner of the property in dispute and the deed to the company was set aside as null and void. This judgment was affirmed by the judgment now appealed from.

The questions in issue on the present appeal are stated in the judgments now reported.

THE CHIEF JUSTICE.-I am of opinion that this appeal should be dismissed with costs.

J. (dissenting).-The appellant is the curator of the estate of a company which has been dissolved on account of its carrying on the illegal business of a lottery.

Certain lands had been conveyed to it by one Drolet, as he says (and the courts below find as a fact), for the express purpose of promoting said lottery business.

This deed of conveyance was registered. Drolet wants his property back and to get the benefit of it after having thus used it.

Eighteen months after instituting proceedings in the way of prosecuting officers of the company for carrying on the lottery, Drolet conveyed the lands in' question to respondent Bedard, who would seem thereby to stand in no higher position in law than Drolet himself.

The appellant contests the finding of fact by the courts below. Though there is a good deal to be said for his contention, especially as the learned judges were not unanimous in such finding and it largely turns upon the inferences to be drawn from a contre Icttre which is capable of a double meaning, I do not find it necessary, in the view I take of the rights of the respondent in law to maintain the aefion, to express an opinion upon the correctness of this finding of fact. assume, therefore, for argument's sake, that these findings were quite correct and that Drolet, and the J. company which the appellant, as curator, represents, entered upon a lottery scheme clearly contrary to law, and that he, to enable the illegal scheme (indeed, most fraudulent as he presents it) to become operative, contributed these lands and got nothing in return therefor but some evidence of promises to be fulfilled in the devious ways that he and some of the company's officers had designed and contrived might have worked out to their mutual benefit as, to put it plainly, a set of rascals.

It does not occur to me that in law our courts justice are either bound or permitted to help such a man, when seeing his venture is likely to prove unprofitable for him, to retire therefrom unscathed with all his property.

It is a pretty strong proposition in itself, but when it is made to operate (as presumably it does here, may, if we dismiss this appeal, in the like case any day) to the detriment of creditors, who must be presumed innocent, I cannot assent thereto.

The articles 989 and 990 of the Civil Code are relied upon by respondent to shew that the contract was without effect. But how far does that carry him ? The contract was completely executed and there was a consideration. That consideration may be said to be tainted with illegality.

The question in such case is whether or not the respondent can rely upon articles 1047 and 1048 of the Civil Code, or otherwise be enabled to recover back what he has given, with his eyes open, not ignorantly, or induced thereto by false pretences, by another party, but as the result of his own planning.

Counsel referred to the case of the Consumers' Cordage Company v. Connelly (1), and the authorities colleeted therein so laboriously by the late Mr. Justice Girouard.

The facts of that case, so far as seen from different points of view by the judges taking part in it, seemed to entitle the plaintiff to a recovery quite independently of the view maintained by Mr. Justice Girouard. In short, the point here involved was not necessary to be decided by the court for the determination of that case, or any part of it.

The decision in the case of L'Association St. Jean- Baptiste de lontreal v. Brault(2), seems much more in point. It was a case arising out of a lottery held, in violation of the Criminal Code, as this was according to the finding of fact, which I assume for the present to be correct, and to recover a sum of over $2,000 interest earned by a deposit which it was arranged should be made in a bank and, barring the law rendering the transaction illegal, that earning of interest certainly, as Mr. Justice Girouard put it, at page 617, might be said in common honesty to belong to the plaintiff.

The appeal, however, was allowed in that case and the action dismissed.

It is to be observed this was decided a few months J. before the Consumers' Cordage Case (1), and that Mr. Justice Sedgewick assented to the judgment which, certainly of necessity, decides the neat point of the right to recover back entirely the other way from what in the Consumers' Cordage Case(1), Mr. Justice Girouard argued for. I take it that Mr. Justice Sedgewick in the later case was not changing his mind, but merely concurred in the result.

That result might have been reached quite independently of the reasons which Justice Girouard proceeded upon by the application of the law relative to allowing or disallowing interest which was all that was involved.

So far, therefore, as this court is concerned that would seem decisive of this case unless it can be distinguished in the way some authorities seem to make by a distinction between the principal and interest or fruits of that sought to be recovered back.

I do not intend going into a review of the authorities. I merely desire to point out that the provisions of articles 1047 and 1048 of the Civil Code do not seem to me to extend to an action of this kind under such circumstances as exist here.

lington J. I think the line may be drawn where the opinion judgment of Boss6 J. speaking for the majority in the case of Rolland v. La Caisse D'Economie Xotre-Damc de Qu6bec(1) puts it. That case, like Langlais v. La Caisse D'Economie Xotre-Dame de Qu6bec(2), decided by Andrews J., in truth revolves round consequences of corporate acts done ultra vires. In this latter the learned judge seems to recognize the same line as Boss6 J.

I would put contracts for promoting lotteries and other criminal acts (distinguishable from those merely invalid) amongst those which are contrary to good morals.

There are no doubt many cases of another character such as acts ultra vires and possibly mere municipal regulations, or enactments imposing a penalty in cases involving hardly (if any) moral turpitude, which might give rise to other considerations though in a sense illegal.

Counsel on each side put since argument, a supplenentary factun, and have given attention to the cases therein referred to.

I am surprised to see myself quoted in the case Lapointe v. Messier(3), as countenancing the doctrine respondent contends for. Certainly.nothing was further from my thoughts.

I thought I was, as I generally try to be, careful to avoid any unnecessary expression of opinion, and certainly expressed none on the point raised herein.

I was well aware then, as now, of the divergent views that were held on the subject. The facts in that case, as I viewed them, and the conduct of appellant aided me to view them, did not permit the question being raised, and I expressly said:- That section 11 is as follows and differs from the provisions of the Civil Code.

It seems to have escaped the attention of the courts in some other cases as well as the counsel in this case. And, with great respect, I still think that it was not necessary to the decision of the Lapointe Case to decide the question raised herein.

Notwithistandiig the conflict of authorities and opinion, I think public morality is best served by an adherence to the principle expressed in the Roman maxim already cited.

And as to the cases in which, under articles 1047 and 1048 of the Civil Code, the recovery back may be allowed, this court is on record in the case Petry v. La Caisse D'Econonie de Notre Dame de Qu6bec(2),*against it where, in the view of the court, there was no error but clear intention. In principle that case seems to me though involving many different considerations from what we are presented with herein, adverse to respondent.

The efficacy of illegality as an answer to the action has been recognized in Quebec in many cases, for example, in Ferguson v. Scott(1), where purchase money stipulated in a transaction arising out of a lottery was held to be non-recoverable. Are we to say the converse is correct that a man who got his price can recover back his land and keep the price ? In LeBlanc v. Beaudoin et Bidard (2), where a convicted felon could not recover an immovable given in way of compromise of the felony, and Massue v. Dansereau(3), where held money paid for excessive interest when usury laws in force could not be recovered back, with others, shew the jurisprudence of Quebec is not, to- say the least, unanimously established in respondent's favour.

I, therefore, think this appeal should be allowed with costs.

DUFF J.-I express no opinion upon the question which was discussed whether according to the law Quebec (art. 989 C.C.), in the circumstances of this case, the respondent was entitled in strict law to the judgment prayed, without regard to possible equities affecting creditors and others interested in the company.

I think the appeal should be dismissed upon the ground that the pretended contract of purchase was in the circumstances ultra vires of the company; and that under this pretended contract (the notarial acte de ente has, in my opinion, no validity as an authentic deed by reason of the fact that the notary being an officer of the company purchaser and lacking, therefore, the essential quality of indifference between the parties was incompetent) no right of property passed J.

to the company.

The doctrine of ultra vires I have no -doubt applies to the contract of the Phoenix Land Improvement Company.

That doctrine is not a principle of the English common law and does not rest upon any theory as to the nature of corporations or as to the legal relationship subsisting between a corporation and its governing body.

(See the judgments of Lord Cairns in Ashbury Railway Carriage and Iron Co. v. Riche(1), of Lord Haldane in Sinclair v. Brougharm (2), and Bonanza Creek Gold Mining Co. v. The King (3).)

It is a rule resting upon the interpretation the legislative enactments through which the companies to which it applies derive their corporate existence and capacity.

The Phenix Land Improvement Company, while created through the instrumentality of letters patent, exists as a corporation and enjoys such capacity as it possesses in virtue of the Quebec statute in pursuance of which the letters patent were granted, and I think the reasoning of Lord Cairns in Ashbury Railway Carriage and Iron Co. v. Riche (1) applies to that statute.

J.-I would dismiss this appeal on the ground that the deed from Drolet to the land company was void for illegality and that property transferred for an illicit consideration may be recovered back. Article 989 C.C. Lapointe v. Messier(4). J.-Le contrat qui a kt fait entre la conpagnie Phoenix Land Improvement et Drolet le 28 juin, 1905, a kt 6videmment fait dans le but d'exploiter une loterie. La preuve sur ce point est, il est vrai, un pen contradictoire, mais les termes de la contre-lettre qui a td doune h Drolet doivent faire disparaitre tout doute h ce sujet.

D'ailleurs il s'agirait la d'une question de fait et, les cours inf~rieures s'6tant prononcies sur ce point contre les pr6tentions de 1'appelant, il n'y a pas lieu pour nous de renverser cette opinion.

L'exploitation d'une loterie ne pouvait facilement se faire par cette compagnie sans avoir certains lots de terrain et alors Drolet, qui 6tait actionnaire de la compagnie et bien au courant de ses affaires, a consenti par cet acte du 28 juin, 1905, A ui passer un titre pour ces lots de terre. C'tait de sa part et de la part de la compagnie une participation h une violation de la loi et L une fraude que l'on voulait pratiquer sur un public cr6dule.

Toute consid6ration d'un contrat est illigale si elle est prohibde par la loi on contraire h l'ordre public (art. 990 C.C.), et ce contrat est sans effet. (Art. 989 C.C.; Association St. Jeah-Baptiste v. Brault(1 Sirey (1869-2-53), nous rapporte une decision il a 6 jug6 que

4tant A A Il y a eu en France beaucoup de divergence d'opinion sur la question de savoir si la personne qui avait fait un acte illgal comme celui-ci pourrait r6pter l'argent qu'elle aurait donn6 en execution de ce trat illgal. Cette divergence d'opinion s'est manifestie surtout parmi les premiers commentateurs du Code Napolkon; mais par la suite sest quelque pen d6parti de cette rigidit6 et les anteurs les plus modernes sont g~nu(ralement d'opinion que laction en r~pdtition existe.

Voir Marcad6, vol. 4, no. 458; Hue (ed. 1895), vol. 8, no. 392; Demolombe, vol. 24, no. 382; Laurent, vol. 16, no. 164; Colmet de Santerre (ed. 1883), vol. 5, no. 49 bis IV.; Pont, Explications du Code Civil (ed. 1884), vol. no. 53, au titre des Soci~t~s; Guillouard, Socibtis (ed. 1892), no. 58.

Nous avons dans cette cour appliqu6 le m~me principe dans la cause de Lapointe v. Messier(1).

On peut done dire que l'action en r6p6tition existe en faveur de celui qui veut se servir de -sa propre turpitude pour faire mettre de ct le contrat illigal qu'il a fait.

Dans le cas actuel le contrat 6tait de plus fictif on simul6.

Il n'y a jamais eu intention de la part des parties contractantes que Drolet cessit d'tre propridtaire des lots de teire en question. Les operations subs6quentes qui out faites avec les gagnants de lots Flont 6t de fagon A laisser subsister cette simulation.

Je n'ai donc pas de doute que ce contrat est sans effet et doit Atre aussi d~clar6 simul6.

II pent se faire que des cr~anciers de bonne foi aient transig6 avec la compagnie en se basant sur le fait qu'elle 6tait propri~taire des terrains en litige dans cette cause.

Les droits de ces cr~anciers ne sauraient 6tre affect6s par le maintien de laction p6titoire du demandeur intim6.

Le jugement a quo doit 6tre confirm6 avec d6pens. Appeal dismissed with costs.

Raymond.