Guertin v. Sansterre

69-42 & 43 V.

c. 32-Liquidation-Expiration of classes -Assessments on loans-Notice of-Interest and bonus-Usury laws -C.

S. C. c: 58-Art. 1785 C. O.-Administrators and trustees- Sales to-Prite-nomi-Art. 1484 0. C.

S. applied to a building society for a loan of $3,500 which was subsequently advanced to him upon signing a deed of obligation and bypothee submitting to the conditions and rules applicable to the society's method of carrying on their loaning business and declaring that he had become a subscriber for shares in the company's stock for an amount corresponding to the amount of the loan, namely 70 shares of the nominal value of $50 each in a class to expire after 72 monthly payments, or in six years from the date of its commencement (July, 1878), this term corresponding with the term fixed for the repayment of the loan. He thereby also agreed to make mdnthly payments of one per cent each upon the stock and that the loan should be repaid at the expiration of the class, when, upon the liquidation of the business of that class, members would be entitled to the allotment of their shares subscribed as paid up, partly by the monthly instalments and partly by accumulated profits to be derived from whatever moneys had been paid in and invested for the benefit of that class, at which time, whatever he might be so entitled to receive in Esares of stock should be credited towards the reimbursement of the loan. He furiber obliged himself to pay. as interest and bonus, the additional sum of one per cent upon the loan by similar monthly instalments during the time it remained unpaid.

S. paid all the instalments by semi-annual payments of 8420 each until 1st May, 1884, making a total of seventy monthly instalments of $70 each, :-Taschereau, Gwynne, Sedgewick, King and Girouard JJ.

leaving two more instalments of each kind still to become due before the date originally fixed for the termination of his class. The society went into liquidation under the provisions of 42 & 43 Vict. (Que.) ch. 32, in January, 1884, prior to A.'s last payment and about six months before the date fixed for the expiration of his loan.

In October, 1884, the liquidators of the society, in the exercise of the powers vested in the directors under the deed and the society's regulations, passed a resolution declaring a deficit in thejbusiness of the class to which A. belonged, and, in order to provide the necessary funds to meet the proportion of deficit attributed as his share, they thereby exacted from him a further series of twenty-eight monthly payments in addition to the seventy-two instalments contemplated at the time of the execution of the deed.

Subsequently, (in 1892) the plaintiff, as transferee of the society, brought action for the two original instalments remaining unpaid and also for the amount of the twentyeight additional monthly payments upon the loan and the subscription of shares.

Held. reversing the judgment of the Court of Queen's Bench, that the subscription for shares and the obligation undertaken in the deed constituted, upon the part of the borrower, merely one transaction involving a loan and an agreement to repay the amount advanced with interest and bonuses thereon amounting together to a rate equivalent to interest at twelve per centum per annum on the amount of his loan.

That the contract made by the building society stipulating that they were to receive such rate of interest and bonus, equivalent to a rate of twelve per centum per annum on the amount so loaned by the society, was not a violation of any laws respecting usury in force in the province of Quebec.

That the fact of the building society going into liquidation had the effect of causing all classes of loans then current to expire at the date when the society was placed in liquidation, notwithstanding that the various terms for which such classes may have been established had not been fully completed.

That under the provisions of the statute, 42 & 43 Viet. (Que.) ch. 32, liquidators have the same powers in regard to the determination of the affairs of expired classes and to declare deficits therein and to call for further payments to meet the same, as the directors of the society had while it continued in operation.

That the notice required by the twenty-first section of the Act, 42 & 43 Vict. (Que.) ch. 32, does not apply to cases where liquidators have determined a loss upon the expiration of a class and required the full amount exigible upon loans to be paid by borrowers. That, notwithstanding that the liquidation proceedings deprived the .

directors of the exercise of their powers as to the determination of the condition of the affairs of a class and the exaction of further payments when exigible in such cases on. the expiration of a class, the resolution of the liquidators determining a deficit in the borrower's class and requiring full payment of all sums exigible under his deed of obligation, was sufficient to constitute a valid right of action against the borrower for the amount of the balance of principal money loaned together with the interest and bonus instalments remaining due thereon according to the terms and conditions of his deed of obligation.

Held, further, affirming the decisions of both courts below, that in an action where no special demand to that effect has been made, the court cannot declare the nullity of a deed of transfer alleged to have been made in contravention of the provisions of article 1484 of the Civil Code.

APPEAL from the judgment of the- Court of -Queen's Bench (appeal side) (1) reversing the judgment of the Superior Court, District of Montreal, and dismissing the plaintiff's action with costs.

The action was originally brought by La Compagnie de Prat et Cr6dit Foncier against Alexandre Sansterre, sr., since deceased, the respondents being his executors, and, the company having subsequently transferred all its assets to the appellant, he Iook up the instance. A statement of the principal facts and the questions at issue will be found in His Lordship Mr. Justice Girouard. The following brief reference to the company's constitution and method of carrying on its business may however be added as explanatory.

The company was a building society subject under its Act of incorporation and an Act amending the same (2) to the provisions of C. S. L. C. ch. 69 and amendments thereto, and went into voluntary liquidation under 42 & 48 Vict. (Que.) ch. 32. Its member- (1) Q. R. 3 Q. B. 344.

ship consisted: Of shareholders called permanent members, whose rights and obligations resembled those of shareholders ordinary joint stock companies; and-2. Of non-permanent shareholders, composed of " classes," each " class " consisting of such persons as should become shareholders during a period of six years terminating at fixed dates. When a class expired, the shares of its members were liquidated and the proceeds paid to the shareholders in the manner provided by the by-laws.

Non-permanent members were subdivided into: Non-borrowing members who paid for their shares by instalments till the expiration of their class, when the received the amount earned either in cash or permanent shares; and-Borrowing members, who were advanced all or part of their shares on subscribing for them, on conditions for the repayment of principal, with interest and bonus provided by the by-laws. In the class to which the defendant belonged, the borrowers received in advance the face value of their shares, and agreed to repay the principal loaned by 72 monthly instalments of 1 per cent, or 50c a share each, the duration of the class being 72 months, and also to pay every month, till the end of the class, interest and bonus amonuting to one per cent of the principal loaned.

Borrowing members were either: Non-participating borrowers, whose relations with the company ceased after they had repaid their loans, and who did not participate in the profits or losses the company; or participating borrowers who at the expiration of their class, shared in its profits, or contributed to the payment of its deficits.

If its shares were completely paid up by means of the 72 instalments and accrued profits, the balances of.loans shares were paid by compensation, but if not fully paid, they continued to- pay monthly instalments in the same way as before until the shares of the class were fully paid up.

The position of a class, at its termination, and the rights and obligations of its various members, were to be determined as soon as possible by resolution of the directors declaring, as the case might be, that the shares had or had not been paid up; in the latter case specifying the amount of the deficit and how much the non-borrowing members and the participating borrowers should respectively pay to make up the de. ficits. Such resolution -was to be prind facie proof of the truth of its contents, and binding on all interested parties.

The original defendant, a participating borrower, became a member of a class formed in July, 1878, by means of a deed wherein he agreed to take 70 shares of the par value of $3,500, that amount of money being then and there advanced to him, and undertook to repay the loan at the extinction of the class according to the rules as to participating borrowers.

Up to June 1st, 1884, he made 70 payments of $85 each on account of the shares, and 70 payments of $35 each as interest and bonus.

In the meantime the company went into voluntary liquidation under 42 & 43 Vict. (Que.), ch. 32, and liquidators were appointed who, after examining the affairs of the company, found that no profits had been made in the class in question, but that part of the capital had been eaten up. They accordingly, by resolution, October 22nd 1884, declared that the 72 monthly payments were not sufficient to pay up the shares, that there was a deficiency of more than 28 per cent of the capital and that the shareholders should pay in addition to the 72 instalments accrued during the existence of the class, 28 further instalments of one per cent each on the amount of their shares.

But no profits having been earned, only 70 per cent of his debt was extinguished, leaving 30 per cent still to be paid in monthly instalments of $35 each, and until this was paid in full, he was further bound to pay $35 a month, or 12 per cent, as interest and bonus on his obligation.

The contract provided that if the defendant should at any time fail to make six consecutive monthly payments, then the whole capital sum should at once become exigible without the necessity of formal notice, and at the time of the action he was in arrears for eight monthly instalments, so the whole had become due and action was taken for:

ment.........

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based 1st. on the deed of obligation for the advanbce the shares; 2ndly. on the by-laws invoked by said deed; 3rdly. on the resolution of the liquidators, and 4thly. on the statute 42 & 43 Vict. ch. 32, secs. 18, 19 and 21.

The liquidation caused all classes to expire, and at that time a balance was due upon this loan and the company was entitled to demand both principal and interest according to contract and by-laws, and also interest at per cent since the last payments made. Geoffrion Q.C. and P. H. Roy for the respondents. The defendant opened negotiations in this matter by a simple application for a loan, and never intended to be and never was a member of the plaintiffs corporation; nevertheless the plaintiff, by using equivocal terms and expressions in the deed, took advantage of his ignorance and illiteracy and he should be treated as a non-participating borrower for nothing in the evidence can lead to the conclusion that he was a participating borrower.

His obligation ceased at the expiration of the class in which plaintiff thought fit to include him.

The liquidation put an end to all classes and the liquidators were bound, without requiring further instalments on shares (which would have been continuing the operations of the society), to proceed according to section 21 of 42 & 43 Vict. ch. 32, and call in, on the capital of the obligations, such amounts as they might consider necessary to place all shareholders on an equal footing at the close of the liquidation, but only after one month's notice to the debtors. This they did not do.

The company being in liquidation on the 10th January, 1884, and classes all expired, the special powers in respect thereto did not pass to any one because, for such purposes, the directors alone were designated, and consequently the time fixed by the statute lapsed, and the liquidators never had the right either by law or by the by-laws of the society to pass the resolution of October 22nd, 1884. This resolution is ultra vires and of no effect.

The plaintiff cannot recover the usurious rate .interest charged and the by-laws charging interest above per cent are illegal and ultra vires. Section 2 of ch. 69 C. L. C does not provide a method of charging more than 6 per cent on loans.

The only S bonus there authorized is in the case of a member receiving his share in advance before the class to which he belongs is realized, and this bonus cannot be anything but one fixed sum, payable once, and not a series of small sums forming a sum equal to 6 per cent over and above the per cent charged as interest. The bonus, in this form, is usury disguised and a violation of the statute against usury with respect to building societies.

The defendant paid plaintiff from 1878 to May, 1884, $5,65-.51 ; the sum loaned was $3,500, and the interest accrued on the capital remaining due after each payment amounts to $630, forming together $4,130, which was all the plaintiff was ever entitled to receive; hut defendant has, through ignorance, paid $1,527.51 in excess of his legitimate debt and should have it reimbursed.

Thus the defendant owed nothing to the plaintiff at the time of action.

The present appellant has no actual interest in the suit, but is merely the prd/e-nom of one of the liquidators of the company who has, through his intervention, sought illegally to acquire the company's property while a trustee, in contravention of article 1484 of the Civil Code.

T.-Cette cause, dbarrassee de nombreux d6tails de fait et de procedure qui sont plus propres A 1'embroniller qu'd l'eclaircir, se r~duit A pen de points. En 1878, Alexandre Sansterre, p6re, devint emprunteur participant, c'est-a-dire A ]a fois empruntenr et actionnaire d'une socit6 de construction, et comme toujours il esperait que les profits realisis lui permettraient de rembourser, en 72 versements mensuels de $35 chaque' le capital emprunt6, savoir $3,500, et les int6rts bonus au taux de 12 par cent par annhe, c'est--dire, 72 versements mensuels de chaque.

L'entreprise ne fut pas aussi profitable que ses promoteurs 1'esp6raient, et le janvier 1884, elle demanda sa liquidation volontaire.

Le 1er mai 1884, Sansterre completait ses soixante-dix versements en capital et int~rts et bonus de $70 chaque, et il n'avait que deux versements de plus remplir pour s'acquitter entiarement envers la socit6, s'il n'6tait survenu rien d'extraordinaire

Mais voild que le 22 octobre 1884, les liquidateurs constatent, conformment aux reglements de la soci&t, qu'il y a eu perte d'au moins 28 par cent pour la classe de Sansterre, et ajoutant les deux versements non pay s, le d6biteur devait encore au moins 30 par cent sur le capital.

De la presente action qui fut intent~e le 19 avril 1890 par la socit6 de construction et reprise par 1'appelant comme son cessionnaire, une premibre poursuite ayant 6 rejetee, sauf A pourvoir. L'action a deux objets, d'abord le recouvrement de la dite balance de capital et celui de pareille somme & titre d'inthrts et bonus, en tout $2,100 et $586 d'int6rAt au taux de par cent par an.

La Cour Superieure (Tait J.) accorda les conclusions de l'action. Sur appel pris par les ex6cuteurs testamentaires d'Alexandre Sansterre, d6ced6 pendant 1'instance, la Cour d'AppA les renvoya in tote.

Elle fut unanime A juger que la liquidation mettait fin aux ophrations de la socith, et qu'aucun versement subs6quent ne pouvait 6tre demand& aux actionnaires, A, ce soul titre, sauf pour payer les dettes imputables A la classe A laquelle Sansterre appartenait, et il n'en existait aucune. Les juges Boss6 et Blanchet 6taient enfin d'avis que 1'emprunteur devait payer la balance de son obligation, et que l'action devait 6tre maintenue pour autant. Nous sommes aussi de cet avis.

Les intines pr6tendent que 1'appelant n'est que le pr~te-nom d'Alexandre Lapalme qui, bien que liquida- -iouard teur de la dite societe, en a acquis l'actif pour son profit et particulirement la dite Trclamation contre lui, par 1'interposition de 1'appelant contrairement A, Particle 1484 du Code Civil. Mais il n'a pas demande la nullite de ce transport.

Et puis, peut-elle tre prononc6e lorsque la societh on ses liquidateurs ne sont pas en cause ? Ce moyen n'est done pas fonde, et il a 6 rejeth tant par la cour Suphrieure que par la cour d'Appel. La majorit6 des juges de la cour d'Appel invoque la derniere partie de la section 21 de la 42 & 43 Vict. ch. (Qu6bec) qui exige un mois d'avis A 1'emprunteur participant, on actionnaire, avis qui n'a pas t donn6; mais comme je lis cette section, cet avis n'est requis que lorsque les liquidateurs demandent le paiement partiel de ce qui reste dd en vertu de 1'obligation, et non pas lorsqu'ils ont d6cid6, comme ils 1'ont fait dans 1'espace, que 1'obligation recevrait sa pleine execution et que 1'emprunteur doit payer cent centins par piastre. Cette section 21 en effet se lit comme suit:

jugs Le paiement des 100 versements a 6t6 ordonn6 par une r6solution des liquidateurs pass6e le 22 octobre 1884, de laquelle je dtache le passage suivant:

respectif. il est maiitenant r6solu que les actionnaires de ces classes (au -nombre desquelles dtait la classe de Sansterre) auront h payer, en outre des soixante-douze verseinents mensuels 4chus pendant la durbe des dites classes, vingt-huit autres versentents aussi mensuels de un pour Giur ~cent chacun sur le montant de leurs actiong, c'est-k-dire, qu'ils devront Gixronard J. payer en tout cent versenents mensuels de un pour cent ou le montant entier du capital souscrit par chacun d'eux.

Le jugement de la cour d'Appel d6clare cette r~solution ultra vires. Mais les liquidateurs n'ont fait que ce qu'nn premier jugement de la cour d'Appel, pr6sid,e par Sir A. A. Dorion, C J., entre les mimes parties et an sujet du recouvrement de la m~me obligation, les autorisait de faire. La cour a en effet d&clar6 dans ses consid&rants que la mise en liquidation avait 6teint toutes les classes de la soci&t et qu'd compter du janvier les actionnaires ne pouvaient 6tre appel6s A fournir de nouveaux versements qu'en vertu d'une dclaration des liquidateurs cet effet tel que re juis par Particle section 5 des rkglernents de la sociftd.

Cejugement me parait chose jughe entre les parties et s'il ne lest pas, il constitne, au moins, une forte antorit6 en faveur de 1'appelant que la rTsolution du 22 octobre 1884 est intra vires et 16gale, et .je crois que cette conclusion est bien fond~e.

La section 18 de la 42 & 43 Vict., ch. 32, dit queles liquidateurs auront tous les pouvoirs confirs et seront soumis envers les actionnaires, A toutes les obligations imposdes aux directeurs par la loi et par les rbglements de la soci6td.

L'on concede que la r6solution aurait pu tre adopt6e par les directeurs pendant la dnre de la soci6t6; mais 'on pr6tend qu'elle ne pouvait 1'6tre par les liquidateurs.

Le savant juge en chef Lacoste, observe que la section 18 ajoute que la soci6t6 ne pourra pas faire d'autres op6rations que celles requises pour parvenir A la liquidation.

Mais en ordonnant le paiement entier des obligations consenties en faveur de la socik6, les liquidateurs, loin .53 2 de faire de nouvelles op6rations, liquidaient celles qui avaient t6 commenc6es par la soci6t, et qui n'6taient pas termin~es.

Je"'crois enfin qie 1'acte d'obligation contient une stipulation qui suffit pour d6terminer l'6chdance et GirouardJ. 1'exigibilit6 du capital de la dite obligation, et c'est la snivante :

Et le dit sieur Sansterre, ieprisente comme susdit, s'oblige de rembourser et payer ]a dite somme capitale A la dite Compagnie de Pr~t Credit Foncier, acceptant, 1'extinction de la dite classe, savoir: & 1'6poque oii conformiment aux lois rigissant la constitution de la dite compaguie et ses rbglcments, les affaires de ]a classe de membres dont le dit d~biteur fait partie h raison des dites soixante et dix parts seront liquidies et oii les membres seront en droit d'en toucher leurs actions parts, c'e-t-h-dire, lorsque les profits accumulds, joints au capital pay6 sur les parts, formeront un montant 6gal au montant nominal des dites parts.

La classe h laquelle appartenait Sansterre expirait naturellement le ler juillet I <84; mais il est admis qu'elle expira et devint 6teinte par le seul fait de la mise en liquidation, le 10 janvier 1884.

L'appelant sontient que c'est & 1'emprunteur h d~montrer que les profits accumul6s, joints an capital pay6 sur les parts, forment un montant 6gal an montant nominal des dites parts, c'est-h-dire, an montant capital de l'obligation. 11 a fait plus : il a prouv6 qu'il y avait perte ou dflicit, au montant de 28 par cent, et ajoutant les deux versements dus en juin et juillet 1884, et n&cessaires pour former les 72 paiements payables A tons 6v6nements, il ajoute qu'il est en droit de demander les 30 Yersements. Cette preuve r~sulte de la rsolution du 22 octobre 1884, que Sausterre, en signant les raglements de la soci6t6, s'est en gag6 d'accepter comme prenve primb facie. Voici ce que disent les reglements de la socit6, art. 3, par. 5 et 6: Aussit6t possible aprbs l'expiration d'une classe, le Bureau de Direction d~clarera, par rdsolution enregistrie dans son 'Livre de D6lib6rations' d'aprs les livres de socit, parts on actions de Reste une dernibre objection.

L'appelant, par son action, ne demande pas nomm6ment une balance due sur l'obligation de Sansterre, mais seulement ce qu'il doit sur ses actions. Je crois que la souscription des actions par Sansterre et son obligation ne forment qu'une seule et meme transaction, et que comme, en vertu de la convention des parties, les versements sur les actions devaient 6teindre et ont 6teint l'obligation d'autant, d'apris 1'aven de tous, il n'est que juste de considerer cette partie do 1'action qui demande $1,050 stir les actions comme ayant pour objet le recouvrement de la balance du capital de l'obligation anx termes de la section 21 de la 42 & 43 Vict., ch. 32. C'est.d'ailleurs ainsi que les parties out consid&r6 la nature de leur contrat.

Dans son cinquieme plaidoyer le d~fendeur admet qu'il a empruntd de la demanderesse la somme do $3,500 et qu'il s'agit de cot emprunt dans cette cause, puisque pour des raisons qu'il alligue et que nous ne pouvons pas accepter, il demande qu'il soit d6clare qu'il y a en compensation.

Copendant, si 1'appelaut le juge n&cessaire, nous lui permettons d'amender sa d&laration de manibre A faire concorder si' demande avec la preuve.

en serait autrement si nous accordions le's autres $1,050 A titre d'int&r&t- et bonus, qui formaient sa mise dans le fonds social de Ia socite et la source de ses esp6rances de profits; nous admettrious par lI mime que la soci&6 peut realiser des profits, qu'elle est encore en operation, quo les actions n'ont pas 6 eteintes par la liquidation, et enfin que l'empTunteuT est Tedevable comme actionnaire pur et simple, sans savoir s'il y a des cr4anciers A satisfaire on non, on plut6t sachant qu'il n'y en a pas.

Ce serait un appel h un membre Giroard de la soci6t6 comme simple actionnaire, tandis qu'ici la demand6 ne lui est faite que comme d6biteur emprunteur.

Voild pourquoi les sections 19 et 21 du inmme statut mettent fin A l'int6rit et bonus et declarent que 1'int&t que les liquidateurs pourront exiger sur ses arrerages, c'est-A-dire, sur la balance de son obligation, sera non pas an taux de 12 par cent, mais A colui de par cent par an.

L'appelant ne demande que ce taux d'interst sur les 30 versements dus et non payes.

n'est que juste que l'empruntent rermbourse le montant de son obligation, avec l'int~rkt an taux de 12 par cent, qu'il s'est oblig6 do payer, et qu'il a de fait pay~s pendant que la socit4 6tait en operation, et an taux de 6 par cent sur la balance qui restait non paybe lorsqu'elle fut mise en liquidation, et cela aux 6ch~ances fixbes par le dit acte d'obligation et la r~solution du 22 octobte 1884.

Enfin, la classe laquelle Sansterre appartenait, expirant le 10 janvier 1884, date de la mise en liquidation, Sansterre se trouve avoir pay6 quatre versements de d'int&rts et bonus qu'il ne devait pas, savoir ceux dus les let fevrier, mars, avril et mai 1884, en tout $140 qui doivent tre port6es A son credit. Apres mfire d61ib6ration, nous sommes arrives A la conclusion suivante : Sansterre a requ $3,500 de la soci6t de construction qu'il promit remboutser avec int&t et bonus au taux de 12 par cent par an. D'aprts la jurisprudence de toutes les provinces et la d6cision de toutes les couts dans la prtsente cause, ce taux ponvait stipul6 sans violer les lois contre 1'usure Lorsque la soci6t6 tomba en liquidation, l'emprunteur avait pay6 $2,450 ses parts on le capital do son obligation et pareille somme titre d'int&~rt et bonus, et par cons6quent, il restait dii, 6 tous &v6nements, Girouard une balance de $1,050 sur le capital, savoir, 30 versements mensuels de $35 chaque, dont deni sont devenus 6chus avant la r6solution du 22 octobre 1884, savoir, le 1er juin et le 1er juillet 1884, tel que port6 en l'acte d'obligation, et les vingt-huit autres versements apris la dite resolution, A commencer le ler d~cembre 1884, et ainsi de suite le premier de chaque mois suivantjusqu'd ce que la dite somme de $1,050 soit complte-soit le ier mars 1887- avec 1'int6rt sur chaque versement 6chu apres le 19 avril 1885 (cinq ans avant 1'action) au taux de par cent par aunee, jusqu' parfait paiement, conform~ment A la section 19 de la 42 & 43 Vict., ch. 32.

Nous n'allouons que cinq ann~es d'int&rt, accrues avant l'institution de 1'action, les int6rits ant~rieurs an 19 avril 1885 6tant prescrits aux termes des articles 2250 et 2267 du Code Civil.

I faudra d6duire les $140 paybes apres la declaration en liquidation & titre d'intrat et bonus, ainsi qu'il est dit plus haut. Cette somme compense les quatre premiers versements chus les ler juin, juillet, d~cembre 1884, et janvier 1885.

reste done non pay~s: vingtsix versements, dont le Ier est devenu 6chu le ler f6vrier 1885 et ainsi de suite le premier de chaque mois, avec intrit an taux de par cent par ann&e, A compter de chaque 6ch6ance arrivant apris le 19 avril Jugement doit tre rendu contre les intims en faveur de 1'appelant sur cette base, c'est-A-dire pour vingt-six versements formant la somme capitale de neuf cent dix piastres, et les int6rts an taux de six par cent par ann6e A compter de 1'6ch6ance de chaque