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Brownies Court

Justice handed down on March 10th

Stanley wedlock Limited, s Bank- rupt:

And in the matter of the applica- tion of the Eastern Trust Company, Authorised Trustee,

‘i charge from the performance of any

further duties and obligations in re- spect to the said Estate.

March 16. 1986.

Mathleson, C.J.—This application was first heard before Ine on the 24th day of" January, 1925, when it was opposed by Mr. C. G. Duffy. K.C., acting for the Royal Bank of Canada. The matters considered and disposed of on that hearing are set out iu my interim decisioniiled 8t}; )Aprii, 1925 (reported 5 C.'B.R. (l6 . '

0n the 11th day of May. 1925. whilst the application was still pending, The Royal Bank of Cana- da notified the Trustee that on the further hearing hereof it would move that the Bank of Nova Scotia be ordered to pay to the trustee herein for distribution amongst the creditors of the bankrupt such mo- noys as the last named Bank had obtained from the sale of automo- biles in the , ssession of the bank- rupt at. the time of its bankruptcy and which were taken by the Bank 0|‘ Nova Scotia under alleged ware- house receipts. On the suggestion of the court and at the instance oi the Trustee a case was stated by the said Banks for the decision of this Court upon the questions raised by the said notice.

The casq was accordingly stated and came on to be argued by Coun- sel the 26th day of January last, when it was agreed that Counsel for the said Banks should submit writ- ten arguments only, which has ac- cordingly -been done.

The roveiant facts agreed upon are;

The wedlock Company was incor- llflfflied by Letters Patent oi‘ this Province, May, 1921. ‘

A petition in ‘Bankruptcy was tiled nntl u Receiver appointed 27th July, 1023, and the Company adjudged bankrupt 8th August, 1923.

One of the principal activities oi‘ the Company was dealIn-g in auto- mobiles. it had the agency for and sold hichanghliu motor curs in this Province.

The Bunk of Nova Scotia, herein- after referred to as "The Bank" wus the Ibanker of the Company from the time it commenced busi- ness until the bankruptcy oi the Company.

On or about the 22nd day oi De- cember, A.D. 1922. Mr. C. wJ-lynd- man, the Secretary-Treasurer of1he wedlock Company and a sharehold- er therein procured from the Com- pauy a lease of part oi the premises occupied -by the Company as fol- lows:-—

"in consideration of the sum oi one ($1.00) dollar, receipt whereof is hereby ocknowlefied, we hereby agree to lease to C. West Hyndmsn and be agrees to lease from us, ior the term oi (1) year from December twenty-second, nineteen hundred twenty-two, that part of the lower floor of our premises situate ou~Up-

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‘McDonald & McPhee B. A.

J. A. MoDONAIJD H. r. MoPHEE

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B. A.

. . BARRIOTER,

Iarrlstoro, Attorney, its, Money to um

flllay luildlno Charlottetown 1220-1-11-11.

IOLIOITOR» Money to Loan Clmlfen ll0O"_1“II'lflM0Wn»P-l-|- umeuia hereinafter mentioned were other assets oi J. Itoulo

Mark R. McGuigan

r70‘ cars.

per Queen Street known as the showroom. H

Dtaed at Charlottetown, Prince Edward Island, this twent,-socond day or December, nineteen hundred and twenty-two.

J. STANLEY WEDLOCK LIMITED. (Sl-td.) J. Stanley-wedlock, (L.S.)

President. (Company's Seal.)

tsgd.) c. W. Hyndman, (L.S.) Witness: W. H. V. Dunbar.

The premises described in the lease comprised part of the business premises of the wedlock Company and was used for the purpose oi ox- hibiting to prospective purchasers the automobiles therein stored. This showroom was open to the public during business hours and was not barred up nor kept specially locked during business hours and the oiilc- ers and employees oi the Company passed through the showroom from the workshop to the office and in the regular course of business. One oi‘ the keys of the premises includ- ing the showroom was in the hands of the lessee and he was instructed by "The Bank" to make and did make o daily check of the cars on hand. reporting the same to The Bunk each morning. The dlchuugh- lin motor cars received by. the wed- lock Company were placed im~ the said Showroom and delivered there- from us they were sold. The ware- house receipts hereinafter referred to us having been given to the Bank were issued by the said C. West Hyndmnn, the lessee, in respect of the ears mentioned in such ware- house recelpts and the cars were stored in the said showroom.

in the course of its dealings with the McLaughlin Company cars were ordered thy the wedlock Company which were shipped from Oshawa to Charlottetown and bills of la/ilug for the cars shipped were taken to the order oi the shipper, the bills oi lading and hills oi w change for the price thereof being attached to the bills of ladiug and sent through a ‘flank.

The first three applications for credit. hereinafter referred to as (a). (b) and (c), were made by the wedlock Company to the Bank for the purpose of obtaining loans or ad- vances from The Bank to take up the bills of exchange drawn for the price oi such curs and the amounts oi the respective promissory notes hereinafter mentioned were the amounts oi the respective advances made by The Bank at the dates of said notes in pursuance oi the res- pectlve applications and agreements of the some dates. The advances

so made were plscod to the credit of the wedlock Company in s speci- sl s count in The Bank and cheques

drs n thereon by the wedlock Com- pany in Plymsutpf the said hills of

exchange drown for the cost of the

At the respective times of

illl the some upon receiving tho

cheque oi thewsdlook Company

important Doololon of tho Chief lad the cars "°"° m" N“!!! ill the show room above mentioned.

The transactions between The

Bank and the wedlock Company

relevant to this case were the fol-

lu the matter of the lllstate oi J. ]Qyfl1‘~__.

(a) The Company gave its do- mend note to the Bank dstod 28rd May, 1928, for $4970.87 and at the

for its dis- same time hypotheceted to The

Bank a warehouse receipt of the "m9 d!“ Bill-led by the said C. w. l-lyndmso to J. Stanley wedlock Ltd., covering three McLaughlin cars.

On the 27th day oi July, 102B; when the petition in bankruptcy was filed and the Receiver appoint- ed one car had been sold and its

the other two cars remained on the premises mentioned in the lease.

then $3126.87. . (b) The wedlock Company sav

$4612.37 dated 7th June, 1923, and at the same time hypothecated to

Oi these two cars had been sold be- fore the 27th day oi July. 1923, and

then $1602.37.

same date signed by the said c.w

Lii- covering four McLaughlin cars

mines. note was then/$1258.24.

appears in the stated case:-

to the Company.

the special account and c, and used

against such advance."

Ccmtsny covering three automo

model k-nown as

the note was $2185.00.

oi warehouse receipt

for credit. On the 27th July, 1923, on the pe

the Receiving order the llnterlm Re show room where

August, 1923, the

was constituted Receiver Estate.

remained there until sold. Bank which had made arrange to the trustee.

wrote to the trustee as follows;

THE BANTK OF NOVA SCOTIA.

Charlottetown, P. E. l. August 18th, 1923

The Eastern Trust Company, City.

Dear Sirs :-—

ruptcy proceedings

Act.

(Description of seven csrs In question.)

sions of the assignments Bonk, have no jurisdiction

security being questioned in the

may lbs caused by your turning the cars over to tho Bonk. As the sea- son ls fast drswlnlxo a close it is manifestly desirdble that our se- curity be realised on so quickly as possible. in order that there will not be further loss in connection with the disposal, of tho corn which

making the advances tho other doc- sxocutod by the wodioou Company

i" i<

vflI-nwrnIsIwI-nlwvn

wedlock

Limiiod. r; .

THE enhancers-tows about»

land dolivirolto flit Rik to their purport and the q im-g were given up by the Bank hold-

proceeds applied to the note. and The unpaid balance on the note was its demand note to The Bank for

The Bank a warehouse receipt oi the same signed by the naid C. W. Hyndman to J. Stanley wedlock Ltd, covering iour McLaughlin care.

two remained on the said premises. The u-n-paid balance on the note was

(c) The Company gave its de- mand note to The Bank for $4816.09 dated June 28th, 1923, and at the same time‘hypothecated to The Bank a warehouse receipt oi the

Of these, three cars had been sold before the 27th July, 1923. and the other car remained on the said pre- Tho unpaid balance on the

The fourth loam. (d) stands upon an entirely different footing as thus

“On 14th July. 1923. J. Stanley wedlock Limited was being press- ed by creditors and applied to The Bank or Nova Scotia for an advance of $2300, to enable it to pay the claims oi such creditors mud exe- cuted the application l‘or credit and agreement to give security (Form 100-95) dated July 14th, 1928."l‘he Bank accordingly advanced $2300 ‘The $2300 was placed to the Company's credit in (mentioned above in respect of the loans a, b in payment of cheques drawn by the Cilmpsny

Tho loan was made upon the wedlock Company's note and upon the hypothecation of a wraehouse by C. W. Hyndman to the wedlock

bites apparently in stock, viz: Mc- Laughllvu Sedan No. 53876 E. 7367. one Oldsmobile light cylinder 1920 Dr. Scantlebury car, Light 6 McLnu~ghlin_1919 model know-u as Laughlln McDonald cur. 0f these, two cars remained ou the premises at the time oi‘ the bank- ruptcy. The balance then due on

in every instance the wedlock Company at the time of giving the note also executed an agreement in writing to furnish security-by way upon the goods mentioned in each application

tition of the Bank of‘Nova Scotis the Eastern Trust Company was appointed Interim Receiver of‘ the property of the wedlock Company.

immediately upon the making ofnhusluess o, not"

ceiver locked up the doors oi the wedlock premises, including tho the cars were kept, and retained the key of the premises, and on the 8t.) day of said wedlock Company was adjudged bankrupt and the Eastern Trust Company of the

At the time of the bankruptcy the seven automobiles hereinafter refer- red to were in the show room and

‘Two of these care were sold by the trustee with the consent of the

ments for their sale, the price of the two cars. viz: $2400, bsiu-g paid

On the 18th oi August, 1923. the Manager of the Bank of Nova Scotin

Having reference to the Bank- ln contiovtlon with J. Stanley wedlock Limited; please note the following care nre under warehouse receipt to tho Bunk signed by Mr. C. W. l-lynd- man as warehousernan under the provisions oi Section 80 of the Bunk

We understand two of these cars have been sold, the relative pro- ceeds tbeim-g in your hands at this writing. We feel that the Eastern Trust Company. under the provi- to the over these‘ cars and we shall, therefore. be glad if you will instruct Mr. C. W. l-lyndmam». the vvuPBlIOlIBGIHBIL to act on the Bank's instructions in credit and would go down» before a reference thereto. ln consideration‘ breath oi flood or undue advantage. of your giving these instructions and in order that you may be pro- mined is the elect of the bankrupt- teoted in the event of the Bank's c, of the wedlock. company upon

future we hereby undertake to re- imburse you for any loss which the first three (s). (b) sud (c) fall

To ~ t to totnis nut- 11% $iihlli§nvlitisti~ "

(8rd) L. D. MURRAY. Manager-

ln pursuance of the above letter the trustee paid over to tho said iBauk the sum oi $2400 and the Banksold the remaining automo- biles then in the said show room and sppliod the proceeds of such sale and the said $2400 sgshet the advances mode by the Bank to the Company.

‘ The prices at which the cars were sold and the application o! the funds received are all admitted The question raised for the couaid erstion of the Court is “whether the Bank of Nova Scotia is entitled to

before set forth."

sale of the seven cars remaining in was $8708.18. The Bank of Nova Scotlo claims to be entitled to re-

tain out of that amount the follow- lug sums:——

. 1662.37 . 1258.24

Balance 0n loan (h) . .. ‘Balance on loan (c) .

$8232.48

leaving a. balance duo the wedlock Company of $475.70.

The Royal Bank challenges the right oi’ the Bank of Nova Scotia to any part of the said sum of $8708.18 which the former alleges should have been paid to the trustee ior distribution among the creditors

l-lyndman to J. Stanley wedlock general!»

The admitted balance of $475.70 ~ to which the trustee is ‘clearly en- titled, reduces the amount iu coll- troversy to $8282 made up oi the four items (a), (b). (c) and (d).

Why this-admitted balance was not obtained and accounted for by the Trustee in its Statement oi Re- ceipts. l am utterly at a loss to un- derstand.

The Bank of Nova Scotia relies upon two grounds:

(a) The warehouse receipts sign- ed by C. W. Hyndman nre valid un~ der section 86 of the Bank Act. and (b) The moneys were advanced -by the Bank to the Wedlock Company on the Company's promise to give security -hy wurehduse receipts u!!- der the Bank Act.

l do not think that the second ground will hold except to the lim- ited extent hereinalter mentioned. The promise was executed in the delivery of the warehouse receipts leaving m0 outstanding equity.

ln my view the sole question is on the validity 9L these securities which will require to be determined upon their compliance or otherwise with (1) The Bank Act, and (2) ' The Bankruptcy Act.

Objection is taken to the docu- ments purporting to be warehouse receipts on the ground that the per- son who gave them was not in “actual visible and continued pos- session as bailee thereof in good faith," as defined ‘by Sec. 2 s. s. (p) (i) of "The Bank Act." That definition is intended to include persons other than warehousemen. The following s. s. (ii) is the one which applies to the present case; defining “warehouse receipt" as in- cluding "receipts given by any per- son who is the owlner or keeper oi‘

house or other place for the storage ' of goods . . . . . .. for goods . . . . . .. delivered to him as bailee and actu- ally in the place or one or more oi the places owned by him whether such person is engaged in other ll adopt as appli- ' cable to the present case the view expressed -by Boyd, C. in Merchants Bank va. Montolth 1O 0-H. 529; "l think the two classes were con - founded during the argument. The same sort oi proof is not required in the case of a warehouse man grant- ing such documents as in the caselof a mere bailee of goods and the test of their validity does not necessari- ly depend upon proof that be was “actually visibly and continuously in possession of them."

Objection is also taken that Mr. C. w. Hyndman as an oilicer of the Company and owner of some stock therein was disqualified from acting ' as warehousemsvn of the Company's goods.

The ownership of stock in a Com- pany does not make the stockhold- er an owner of the Company's pro- perty or any part of it. As to the lessee being an ofllcer or servant oi’ the Company, that question was dealt with in La IBanque Nationals v. Royer 1910 QR. 20 K3. 341, cited ' as an authority in its favor by each 'of the contestants in this case. ln that case the majority oi the Court upheld a warehousi receipt grant- ed by a clerk to is employer in circumstances not in principle from the presentt

what impressed me at first in this case was an appearance or nrtiticiality in the foundation upon which the warehouse receipt rest- ed, lhut upon consideration it up- pears to me that the fair inference to be drawn from the facts stated is that the hypothecation methods and proceedings were devised and carried through solely for the pur- pose or giving a security to the Bank in literal compliance with the provisions of "The Bank Act." l think there is such a compliance and that, as no fraud is imputed. the estoppels affecting the immedi- ate parties would in the circum- stances of this case (apart from the Bankruptcy Act) effectually valid- ate the trsnsactions Inter so. Yet it is a iraii stru ure to support

The second question to be deter-

these securities. _ . . Of the four transactions involved

for consideration into one class and will first be disposed of. ,

The three transactions took place within the period of three months (before the tbantkruptflr. llsoh belles with cars in the possession and ownership of the McLaughlin Com- pany to be delivered only upon-

would of necessity rank sgsinstpsyment.

The Bank advanced the money to , tho wedlock Company upon suote

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Yours very truly. l1 - - to the Bank. The result was that

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eithor iu-sulfer of the bill of lading to the wedlock Company or if any enure- oioble time intervened it was bridl- ed-tby the equity arising to the Bonk on tho promise to give the security. lt is therefore not within Sec. 81 (l) oi the Bankruptcy Act which applies to the tmnsior oi property to s creditor with s view of giving him a preference over other creditors. nor is such a vie :'

Upply inasmuch as the eifec,t glfihe transaction so fer from pre u c n! retain the moneys applied by it in other creduom operated ,0 mo“. payment of the special loans herein- advunua to the “m”, m. the pm The net amount realised on the a}: 3:? o“ u“ subsequent “l9 or hand at the time of the bankruptcy luazeszntg-gngfigf?lfiilogilomzta‘; provisions of Sec. 32 of The Bank- ruptcy Act, because there is no evi- deuce nor allegation in the case that The Bank had previous notice oi an available act or baukruptc , but it Balance on loan (a) . . . . ..$3126.87 do“ 8pm" m“ n had sited m good faith for adequate valuable ' consideration and that the securi y 391"” m1‘ "m" (d) - ' ' ' " 218500 was perfected before the receiving - order was made.

ln my opinion the documents of title held by the Hank in (u). (b) and (c) were valid securities unaf- fected by the bankruptcy to the ex- tent of the respective amounts due thereon.