VOL. X.] EXCHEQUER COURT REPORTS. 183 Between THE KING ON THE INFORMATION OF THE ATTORNEY-GENERAL FOR TILE DOMINION PLAINTIFF; I 906 OF CANADA Jan. 26. AND JOHN CONNOR, • MICHAEL CON-NOLLY, PA TRICK L. CONNOR, THOMAS P. CONNOR, KATIE A. CONNOR AND JOHANNA CON-NOR, EXECUTRIX OF THE ESTATE OF THE LATE ROBERT W. CONNOR, AND THE CANADIAN BANK OF COMMERCE Subr ogation-—-P. Partnership debt--Rights of one partner paying same. Under the principles of the Common Law as it obtains in England and in .Ontario a partner who pays a partnership debt cannot be subrogated to the rights of the creditor against his co-partner. (The law as applied in similar cases by the Courts of Quebec and of the United States discussed.) I NFORMATION filed by His Majes'ty's Attorney-General for the Dominion of Canada to obtain a declaration of the rights of the several defendants in certain securities held by the Crown under a deed of assignment of the 4th day of March, 1896, made by the defendant John Connor, and others, in favour of the Warden of the Kingston Penitentiary. Tho facts of the case are fully stated in the reasons for judgment. June 8th, 16th and 17th, 1905. • The case came on for hearing at Ottawa. F. S. Chrysler, KC., and C. J. R. Bethune for the plaintiff.
184 EXCHEQUER COURT REPORTS. [VOL X. 1900 A. B. Aylesworth, KC., and C. Murphy for the THE KING defendant Michael Connolly. • V. CONDOR. TV. D. Hogg, K.C., for the defendant John Connor. Argument of Counsel T. A. Be lne,?t for defendants Katie A. Connor, Johanna Connor and Patrick L. Connor. Dr. A. A. Stockton, .Zi C., for the defendant Thomas P. Connor. J. J. Gormally, £C., and J. F. Orde for the Canadian Bank of Commerce. Mr. Aylesworth, for the defendant Michael Connol-ly, contended that as Connolly had paid the debt of the partnership to the Crown he was entitled to the securities held by the Crown in respect of that debt. Connolly.was in the position of a surety called upon to pay the debt o a f the principal. Moreover, Connor was a defaulter to the Crown, and in respect of such default the Connollys were sureties and not partners. Had Connolly paid a security held by a bank, the bank would have handed over to him the security. That is the position in equity. Mr. Hogg, for the defendant John Connor, argued that Connolly was not entitled to the securities because he, in fact, had not settled the Crown's claim against the partnership. An action was still pending in the courts between the Crown and the partnership. Connolly and Connor must, therefore, be looked upon as joint-debtors to the Crown, and the relation of principal and surety could not possibly arise. Mr. Orde for the Canadian Bank of Commerce, contended that Connolly, as a partner of the firm, was debarred from enjoying the rights of a surety of the firm, and therefore, could not be subrogated to any of the Crown's rights in respect of the securities in question.
VOL. X.] EXCHEQUER COURT REPORTS. 185 .(Lindley on Partnership (1) ; Averill v. .Loucks (2) ; 1906 Murray v. Stair (3) ; Phipson On Evidence (4) ; London THE KING Freehold and Leasehold Property Co. v. Sheffield (5)). CO ND OR. Mr. Beament, for the defendants . Katie A., Johanna neàsône for Judgment. and P. L. Connor, contended that the defendant Connolly had no rigkts as against them in relation to the securities in question. • Mr. Bethune, for the plaintiff, asked that the order of the court be so framed as to relieve the Crown of all . responsibility in respect of the securities when handed over to the parties found entitled to them. He also asked for costs: Mr. Aylesworth replied for the defendant Connolly, citing .Housinger y. Love (6) ; The Mercantile Amendaient Act, R. S. 0., 1887, c. 122, secs. 234 ; Chitty's Prerogatives (7). THE JUDGE or THE EXCHEQUER COURT now (January 26th, 1906,) delivered judgment This information is filed to obtain a declaration of the rights of the several defendants in certain securities held by the Crown under a deed of assignment of the 4th day of March, 1896, made by the defendant John Connor and others in favour of the Warden of the Kingston Penitentiary. On the 23rd day of January, 1895, at the City of Montreal, the late Nicholas K. Connolly, of the City of Quebec, and the defendant Michael Connolly, of the City of Montreal, and John Connor, of the City of Saint John, entered into articles of co-partnership for the purpose of manufacturing cordage and binder twine and for the purchase and sale of fibre ; and it was thereby agreed (1) 7th ed. p. 128. (4) 3rd ed. p. 521. (2) 6 Barb. 470. (5) [1897} 2 Ch. 608. (3) 2 B. & C. 82. . (6) 16'Ont. R. 170. (7) P. 332.
186 EXCHEQUER COURT REPORTS. [VOL. X. 1906 that the articles should apply not only to the fibre that THE 1 iNc might be purchased and manufactured directly by the' COYVOR. parties thereto, but also to such transactions as they or Reasons for any of them might have or conclude with the Dominion anidgn" t Government in respect to the manufacture and sale of binder twine from the Kingston Penitentiary ; and also to any business that might result to any of them in respect of the Central Prison output, then controlled by the Government of the Province of Ontario ; and that it should also include. the output of any factory leased or acquired by them. The partners were to share equally in the profits or losses, as the case might be, resulting from the proposed operations. The firm name was to be "The Continental Binder Twine Co." Each party was to contribute an equal proportion of the capital required; and it was provided that if either of them should contribute a larger amount than his respective proportion interest should be allowed on such excess at the rate of six per centum per annum. Connor had been a manufacturer of twine and cordage. The Connollys were brothers, and at the time were in partnership with each other, as contractors, under the name and style of N. K. and M. Connolly. Subsequently, after the death of Nicholas K. Connolly, Michael Connolly purchased the former's estate, and acquired his interest in the matters now in controversy. During the existence of the partnership between the Connollys and Connor, namely, on the 15th day of April, 1895, Connor entered into an agreement with the Warden of the Kingston Penitentiary with respect to the sale of all the binder twine then on hand at the Penitentiary and all that should be there manufactured between the date of the agreement and the fifteenth day of August then next. By this agreement it was, among other things, provided that Connor should be the agent for the sale of the twine ; that the Warden should fix the price at which it was to be sold, but not
VOL. X.1 EXCHEQUER COURT REPORTS. 187 to exceed the price at which the same grade of twine 1906 manufactured elsewhere in Canada was sold ; that the THE KING sales by the agent were as regards ,credit to be upon the CONNOR. usual terms in the trade ;'that the agent should guarantee se asons for the sale of all the twine and be personally responsible to J"d e" the Warden for the aggregate value thereof at the prices so fixed, less ten per cent ; that the Warden was to deliver the twine as the agent might desire ; and the latter was to furnish the Warden with collateral security to cover the value at the selling price of each shipment of twine delivered to him or to his order. During the season of 1885 a large quantity of twine was delivered by the Warden to Connor, for which the latter pledged as security a number of bonds of the Baie des Chaleurs Railway Company. These bonds, which were at the time of no commercial value, were the property of N. K. and M. Connolly. The following is Michael Connolly's explanation of how he came tohandthem.over to Connor for the purpose for which they were used : " Well, I did give Connor some bonds in Kingston. " IIe carne to me and told me when we were building " the dredge there, if he could get the entire output " from the Department and give the people credit he " could probably make ten per cent. more on the output, " and asked nie if we had any bonds lying around we could deposit with the Government, or with the Warden " rather. At the time I must tell you I had every con- " fidence in Mr. Connor's honesty ; and I said, No we have `i not anything except some Baie des Chaleurs bonds, but "they are of no commercial value at present; and I do " not think the Warden would take them. Oh, he said, " the Warden will take them all right. I said, if you " think he will.take them I will send them up to you. " So I telegraphed to Quebec and got the bonds sent up " in a package. I turned them over to Mr. Coninor's
188 EXCHEQUER COURT REPORTS. (VOL. X. 1306 " brother who took them out and gave them to the THE KING « V. Warden of the Penitentiary. CONNOR. Mr. AYLESWORTI : Your brother ?—A. Thomas P. -xr=t,ous iot• " Connor, and the Warden of the Penitentiary never Jtt. r.0 •nt. " :ooked at them, but threw them in the safe. The " poor old man lost his job over it afterwards. " Mr. Hoaa : These bonds were returned to you ?— " A. They were. " Q. For some reason, either that they were of no " value as a security, or what ?—A. Well, I think the principal reason was that we assumed the debt. " Q. •That you assumed the debt of the firm?—A. " Yes sir, and they were of no commercial value either." On the 18th day of February, 1896, the Connollys and Connor dissolved the partnership created by the articles of the 23rd of January, l 95. From one of the recitals in the agreement by which the dissolution was affected, it appears that owing to the large sums of money paid . into the business and placed to the credit of the copartner-ship by the Connollys there was at the time due to them a large sum of money, and to meet this all the assets of the co-partnership, including the debts due to it, were assigned to N. K. and M. Connolly, who undertook to account to Connor for any sum realized in excess of what was due to them. At that time nothing had been paid to the Warden of the Kingston Penitentiary on account of the twine delivered to Connor. October was the time of settlement in the trade, and the Warden had rendered an account in November. The amount of Connor's indebtedness was $49,670.18, and he had been pressed for payment. Of this sum he had actually collected about twenty-three thousand dollars, of which he had, he says, paid about nineteen thousand dollars to the Connollys or to their order. Michael Connolly does not deny the receipt of this money, but he says he did not know it
VOL. X.] EXCHEQUER COURT REPORTS. 1892 was realized from the sale of the Kingston Penitentiary 1 906 twine. THE KING About the 29th day of January, 1896, the Continental colNOR. Twine and Cordage Company, under which name, instead Reasons for- Judgment. Of that of "The Continental Binder Twine Co." mentioned . in the articles of co-partnership, Connor and the Connollys bad carried on the business of manufacturing twine at Brantford, received from the Consumers' Cordage Company a cheque for $22,421.65, which was afterwards endorsed and delivered to Michael Connolly for N. K. and M. Connolly. This amount was paid for stock sold from the Brantford Mill, and according to Connor the sale was effected to provide funds to be applied in payment pro tanto of the amount due to the Warden of the Kingston Penitentiary. Michael Connolly denies this. He says that at that time be did not know that anything was due to the Warden on the twine that Connor had sold as the Warden's agent. This is one of a number of instances in which there is a direct conflict of testimony between the two witnesses. Connor says that Connolly did know, and a letter is produced which it is contended supports Connor's statements. The letter is dated at. Montreal the 27th day of January, 1896, and is addressed by Michael Connolly to the defendant Connor. The-following is an extract therefrom :--- " We got a telegram from Hume this morning saying " sale would take place if not postponed, which has made " us rather anxious, so much so, that N. K. concluded to cs go and see you at Brantford so as to get you to with hold the payments until after we see what the Govern-" ment is disposed to do. We seat Hume up to get out " a statement of last season's operations while you are " there. I would suggest that you would not part with " any funds until after Saturday next, for if parties have " to buy in the dredge we want to be in a position to. " take care of ourselves."
190 EXCHEQUER COURT REPORTS. !VOL. X. 1006 At that time a dre.lge belonging to the Connollys was THE KING under seizure and was about to be sold to satisfy a judg- Co coi.. ment that the Crown had obtained against them and Remo for o thers, and they wished Connor to keep in hand any J udgment. moneys that might come in from the Consumers Cordage Company, or otherwise, in order that the same might be available in case they had to buy in the dredge. So far there is no conflict of testimony. And it is also clear from the letter that Michael Connolly anticipated that the money might be paid out by Connor to some one unless he were requested not to do so. Now as to that, Michael Connolly says that there were at the time no outstanding debts of the company ( \rotes of Evidence, p. 179), and his explanation is that Connor had to pay " for hemp and raw material and what was going on." (S otes of Evidence, p. 56). The substance of Connor's' version of the matter is contained in the following extract from his evidence :— " Q. You received this letter from Mr. Connolly, I " suppose, on the day following? This is dated 27th " January, 1896. This is the letter which we read. " There is one clause in it I would suggest that you would not part with any funds until after Saturday next.' I do not know what day Saturday would be. For if parties have to buy in the dredge we want to be in a position to take care of ourselves.' What funds had you on hand ?—A. That would be funds that were in anticipation of coming in, the cheque of the Consumers' Cordage Company. Mr. Connolly when he wrote that letter had no advice that the funds " had come to hand. About the 30th January the " cheque came in. About the 29th January. That was ii about the date the cheque was due, and Mr. Connolly ii from previous understanding with me knew that that Li cheque was to be remitted forthwith to th9 warden to - it apply on account. Then Mr. Connolly followed that let-
VOL. X.] EXCHEQUER ,COURT REPORTS. 191 " ter upto Brantford, and I think he arrived there about " the 30th January, and the first question he inquired • THE KING " was whether I had received that letter. I said I had. C,o rOR. " Then he inquired if there was any word from the ReBeo]on for .ru ag,neua • Consumers' Cordage Company. in respect of the cheque. " I said, yes, the cheque came in yesterday and I have it " here in my wallet, putting my hand into . my, inner coat " pocket, opening the wallet and showing it to him, Mr. " Connolly says you notice from the contents of the letter " that we may have to buy in the dredge, aua it may " become necessary for us to protect ourselves by having " funds. Now I would like, to. take this cheque and use " it for a few days, after which time I will be in a " position to . make it good. Well, I says, Mr. Connolly, " before doing this you must not forget that the under- 4, standing was that this amount should be remitted to " the Warden. You khowthat already $23,000 has been collected on account of the Continental Twine sales, and " you have already got $19,000 of the $23,000 that has " come in. Now the two notes are past due with the " Warden, the 5-day note for $20,000 and the 15-day " note for $29,600 in favour of the Warden. I said it is " important that a payment equivalent to the amount " collected on the Twine account should be remitted, " and then I could explain delay for the balance, because " it is in the form of uncollected indebtedness. Well, " he says, after a few days I will be able to make a " remittance equivalent to this cheque, you will be safe " in letting me have it, so on those representations I handed the cheque of the Consumers' Cordage Corn- " pang, which was drawn in favor of the Continental. " Twine and Cordage Company, and I put the . stamp " Continental Twine and Cordage Company then on it, " and endorsed it by John Connor, and handed that cheque to Mr. Connolly."
192 EXCHEQUER COURT REPORTS. [VOL. X.. 1906 Connor being further pres , ed for payment . of the THE KING V. amount due to the Warden disclosed to Mr. Newcombe, Co_oR. the deputy of the Minister of Justice, the fact that the Reasons for Connollys had been partners with him in the business Judgment. which he had been carrying on. He also gave such security as he could to cover the amount of his indebtedness. This security consisted of a promissory note dated the 4th day of March, 1896, and made by John Connor, Patrick L. Connor, Thomas P. Connor, Robert W. Con-nor and Johanna Connor, whereby for value received they promised to pay to the Warden of the Kingston Penitentiary at his office at Kingston thirty thousand dollars, with interest, thirty days after date; and of a deed of assignment also bearing date of the 4th day of March, 1896, whereby John Connor, Patrick L. Connor, Thomas P. Connor, Robert W. Connor and Katie A. Connor transferred to the Warden certain bonds, twine on hand, debts and other property mentioned in the assignment and in the schedules thereto. Mr. Newcombe, for the Government, sought also to obtain payment from the Connollys of the amount due, on the ground that they were co-partners with Connor, and there was considerable negotiation on the subject. The Connollys did not admit liability; but on the 30th of March, 1896, they transmitted to the Honourable John Costigan a cheque drawn by their brokers, R. Moat & Co. on The Molsons Bank in favour of the Deputy Minister of Justice for twenty two thousand lour hundred and sixty one dollars, and this cheque was handed to Mr. Newcombe with a slip attached thereto on which was written " paid on behalf of John Connor." The amount of the cheque which was cashed and credited to Connor's account, represented approximately the difference between Connor's indebtedness and the face value of the debts alleged to be outstanding for twine sold and of the twine said to be on hand.
VOL. X.] EXCHEQUER COURT ;REPORTs. .1.93 On the first : of April of the same year .John Connor .try -assigned 'byway of mortgage to the. Halifax Banking TILE KING. Company all ,his interest 'in the securities mentioned ,in Cow. the deed ;of assignment to the Warden of the 4th hay , of nesso.s ,.r. March, 1896 +excepting -the real estate and shipping. -3" - The second assignment was subject to the first, and was - intended to .secure an indebtedness of John Connor to the bank 'of Ian :amount exceeding the !sum :of twelve thousand dollars. Due notice =of this second assignment was given to the Warden of Kingston Penitentiary and to the deputy of the Minister (of Justice. 'The defendant, The Canadian Bank of Commerce, has succeeded to the rights of the Halifax Banking +Company, and at :the time of the hearing of the information herein 'Connor owed the bank a sum of $10,714.:6;1 and interest, of which amount it appeared that at least .$7040.00 was secured by the mortgage. On the 8th day of April, 1896,' Connor, by a letter ad:- dressed to Michael 'Connolly, in eonsideration of the lat ter settling the 'Government's claim ;fôr binder twine, agreed, .among other things, -44 to assign insurance policies " amounting to twelve thousand dollars in -addition 'to all " the .security then contained in the schedule annexed to " the agreement by which the Dominion Government • " were given collateral security under date March 28th " last past." There is an error in the 'latter date but there is no doubt .about the agreement intended. At the time the letter was written Connor' informed Connolly of the 'as- signment .by way .of mortgage _:to The Halifax Banking Company, and because it had been given he agreed to assign and afterwards did assign to Connally the insur- ance policies mentioned. That, in substance, is Connor's. statement- as to 'that transaction, .and ,it is notlenied by .Connolly., 13
194 EXCHEQUER COURT REPORTS. [VOL. X. 1906 Between the date of the assignment of March 4th, Tirs KING 1896 and the 18th of July of the same year there was V. CO NNOR. realized from the securities therein mentioned an amount se„on, for something in excess of five thousand dollars, so that J n `en'̀ .Connor's indebtedness to the Warden, at the latter date, stood at the sum of $21,649.52. It was then proposed that the Warden should, on payment of this sum by Michael Connolly, assign to him the promissory note for thirty thousand dollars that has been referred to, and also the property, debts and securities mentioned in the deed of assignment of the 4th day of March, 1896. This was to be done in pursuance of a provision contained in that instrument whereby it was in substance provided that in the event of the Warden endorsing or transferring to any person the said note, he was empowered to convey, assign, transfer and hand over to such person the balance of the real and personal property mentioned therein and in the schedules thereto. Accordingly an indenture of assignment was prepared in triplicate to give effect to that proposal. It bore date ,of the 13th of July, 1896, and was made between the Warden of the Kingston Penitentiary and Michael Connolly. It did not contain any express covenant on the part of the latter to pay the amount mentioned therein as due to the Warden. It did however contain some provisions not now material, which the assignee was to observe for the benefit of John Connor and the other parties who had joined with him in giving the assignment of the 4th day of March, 1896, and who now with him appeared and assented to this assignment of the 13th day of July of the same year. After 'execution this deed of assignment in triplicate and an assignment by the Warden to Michael Connolly of the note for thirty thousand dollars mentioned, remained in the hands of the deputy of the Minister of Justice. The following letter discloses his view of the conditions under which he held the same .—
`'
VOL. X.] EXCHEQUER COURT REPORTS. 1. 95 " DEPARTMENT OF JUSTICE, 1906 " OTTAWA, 12th August, 1896. THE Kirc+ " GÎ-ENTLEMEN,--I am directed to inform you that the .Co NR NO . " Deed of Assignment of 18th ultimo, by which the »moons for Judgment. " Warden of the Kingston Penitentiary transfers to — " Michael Connolly the securities held by him under the " Deed of Assignment to him of the 4th of March last, " from John Connor and others, has been duly executed " by the several parties thereto, and is ready for delivery. " The first mentioned deed has, as you are aware, been " prepared and executed for the purpose of giving effect 5, " to the agreement entered into between Michael Con-" holly and this Department, whereby, in consideration ' of such assignment, and the enddrsation to him of the " promissory note of $30,000 therein referred to, he was " to pay the balance 'of Mr. Connor's indebtedness to the " Department, amounting to $21,649.52. I am to inform you that the Assignment will he " delivered and the note endorsed to Michael Connolly " upon payment of the amount mentioned. {L I am further to state that the Department requires " immediate payment from you, or one of you, of the cc amount, both because of the obligation under the agree-' " ment and deed, to which I have referred, and because " of the liability therefor arising out of the partnership " formerly existing between you and Mr. Connor, on " behalf of which partnership Mr. Connor's agreement " with the Warden of the 15th April, 1895, was made, " and his liability thereunder incurred ; and I am to add " that unless immediate payment be made, I am directed " by the Minister to institute legal proceedings against " you for the enforcement thereof. " I am, Sir, " MICHAEL CONNOLLY,EBgy I" , " " Your obedient servant, " N. K. CONNOLLY, . Esq.,' (Sgd.) " E. L. NEW COMBE, " Montreal; Q."'' "- Deputy Minister of Justice." 13
196 EXOREQ 7ER 'COURT POT TS. [VOL. X. 1906 Afterwards Mr. Michael 'Connolly *event to Mr. New- THE Ktral combe and refused to carry out the agreement, or to pay Co NNOR. the money. He claimed to , have -delivery of the assignment and the benefit thereof without ,paying anything 1`'``` more. He said he would not pay a œnt more. Mr. Newcombe regarded the position he took as untenable and •ridiculous and retained the assignments. When Connolly refused to pay the amount due to the Warden, he thought the negotiation was •off altogether. Subse-gnei fly he caused ,an information to be filed in this court against the Connollys and Connor to recover the amount mentioned. The warden of a penitentiary is a corporation sole and as such may sue and be sued, but he acts • for the Crown, and the debt in question was in reality a Crown debt. The information was filed on the 23rd of September, 1896, and by it a claim was made against the defendants upon the ground that they were co-partners in the transaction out of which the liability arose; and also upon the deed of assignment of July 13th, 1896. The statement of the claim set up on this instrument is to be found in the 13th paragraph of the information. Mr. Newcombe appears to have inserted it as a matter of caution, and not, he tells us, because he could support it by his evidence. This deed of assignment in triplicate was afterwards removed from the files of the Department of Justice by some person, but by whom is not known, and it has never been recovered. A copy of it is in evidence. The information of the 3.rd day of September, 7896, did not come on for hearing until the 24th day of April, 1900, and in the meantime the sum due to the Crown had been greatly reduced by amounts realized from .the securities that the Crown held. At the latter date the amount due to the Crown was eight thousand eight hundred and twenty dollars, and for that sum, with costs, there was on the '25th day of April, 1900, judgment
VOL.. X.] 13,X hIlEQTJE . QQLJ'Rt. BE ©R ; 1,97 against all the defendants, Nicholàs K. Connolly and, Laps Michael Connolly having consented that such judg- 'a Ki ment should be entered . against them on, the. condition Co. NoE. that the securities which. the Crown then held. should; be' ss.,ô1, ter retained by the Crown until the accounts: should be, . A°` ' adjusted. between them, and the other defendant J'ohn- Connor. With reference. to these securities it also - appears that , Mn:. Barwick, acting for, Mr. Michael, Connolly;, preferred to they Minister of Justice a1 claim to . have them transferred. to Michael' Connoli , and that the latter under his advice, offered the ; Ministers to, pay the balance, then; due in order to obtain the securities; Mr. . Barwick thinks that tibia occurred sometime in, the year. 1902. If so, it was subsequent to the date of they judg ment mentioned: On the 7th day of December, 1900, John Connor assigned to the Crown a claim he had against- the Hobbs Hardware Company of the City of London, for which' . an action had then recently been , brought in the High: Court of Justice of Ontario. The assignment was- subject to a prior assignment of the same cl'uim to. Robert W. Connor to secure the payment of the sum of eighteen , hundred-doll"ars and: interests and any amount recovered by the Crown was to be held in trust to secure the pay- ment pro tanto of they judgment of the 25th of April, 1900. Robert W. Connor's claim has, it appears, been satisfied' , but- no part of the moneys accruing from this . assignment has, so far as I understand the matter, been applied' on account of the said. judgment. On the 31st day of May, 1901, an information was filed by the Crown against John Connor, : P. L. Connor, Thomas P. Connor, Johanna Connor, and Johanna Connor, ahministratrix of the estate of'aR. W. Connor, deceased, to recover a balance ot. $9,002'.32' and interest alleged to , be due on the note fOr thirty thousand dollars made in favour of the Warden of Kingston Penitentiary
198 EXCHEQUER COURT REPORTS. [VOL. X. 1906 on the 4th day of March, 1896. That action was not THE KING , further prosecuted. CO NNOR. Eventually the judgment of the 25th of April, 1900, o ,.or was satisfied by the amount of it being taken into SsUdaaaens. account in the settlement of a number of matters then outstanding between Mr. Michael Connolly and the Crown. The statement of acconnt in which the amount of the judgment with interest and costs appears as a debit entry against Mr. Connolly was sent by the Audi-tor-General to the solicitor then acting for Mr. Connolly on the 21st of December, 1903, and the matter was closed on the 8th of January following by the payment to him and his acceptance of a balance of $754.75 which the statement showed to exist in his favour. Of the securities that the Crown held to secure Connor's indebtedness to the Warden of the Kingston Penitentiary it now has in its possession, or under its control, the following :--~ 1. Bonds of The Tobique Valley Railway Company, as follows :- 12 1st Mortgage Bonds, Nos. 97 to 108, both inclusive ; 70 2nd Mortgage Bonds, Nos. 281, to 350, both inclusive; 16 1st Mortgage Bonds, Nos. 27 to 42 both inclusive; 44 2nd Mortgage Bonds, Nos. 421 to 464, both inclusive ; 27 1st Mortgage Bonds, Nos. 43 to 69, both inclusive ; and 12 1st Mortgage Bonds, Nos. 15 to 26, both inclusive. 2. A CertificEite numbered 205, for 100 shares in the John Good Cordage and Machine Company. 3. The promissory note for thirty thousand dollars that has been mentioned.-
VOL. X.1 EXCHEQUER COURT REPORTS. 199' 4. A promissory note, dated . the 16th day of Decem- 19°6 ber, 1895, for $5,777.74, made by Frank 'P T a xN a Killeen and John A. Monniger in favour of John. . CoN;on. Connor. moons Mar Judgment. 5. A balance in cash amounting to $ 1,950.76. With regard to other property and securities that the Crown held as security for the amount due to it, the. twine, or such- of it as turned out to have been manu- factured at the-Kingston Penitentiary, was sold, and the: debts due for that which . Connor had disposed of were . collected as far as that was possible. For the rest it is, said that a number of the things mentioned in the schedules to the deed of assignment never came into the. possession of the Crown. As to others there were prior charges, and as to some, and that refers especially to the real estate, there is nothing to show what the grantor's title was or whether he had any. It seems to me, there- fore, to be convenient to deal at present with those things _ . -. only that have been enumerated, and to reserve an-y question that may arise as to any other matter,'giving any of the parties interested leave to apply for further directioîis. . I am also compelled from the want of sufficient informa- tion as to .the source or sources from which the balance of $1950.76, mentioned as,being in the hands of the Crown, was derived to reserve the question as-to what disposition should be made of it. - The defendants, Patrick L. Connor, Katie A. Connor, the wife of John Connor, and Johanna Connor, the executrix of the estate of. the late Robert W. Connor, appear and disclaim any interest in the' matters now in controversy. They demur to the information and ask that it be dismissed as against them with costs. - The ' defendant, Thomas P. Connor, is the owner of twenty-seven first mortgage bonds of the Tobique Valley Railway Company which 'he and - Robert W. Connor assigned ' to the: Warden of the. Kingston Penitentiary by
2Ù0 EXCHEQUER COURT REPORTS: [VOL X. 1" the deed of the 4th day of March, 1896, as security for 1ns. . K Iva John Connor's indebtedness to the Warden. He now v Co NNoR. claims these bonds with all the interest that has bee illeawoaa:ter collected upon them. Otherwise he is not interested in arentan.m.any of the questions arising in this matter. The defendant, The Canadian Bank of Commerce, claims under the indenture of assignment by way of mortgage of the 1st day of April, 1896, to have a transfer and delivery by the Crown of all securities and property (excepting real estate and shipping) still remaining in its• hands and comprised in such indenture, and particularly certain items of property enumerated in the statement in defence. This enumeration includes the items of property that bave been mentioned as being now in the possession of the Crown, except the promissory note for thirty thousand dollars and the twenty-seven first mortgage bonds of the Tobique Valley Railway Company that Thomas P. Connor claims. It also includes some items as to which there will, . for the reasons stated, be no decision at present. The defendant, Michael Connolly, claims to stand in the position of the Crown in respect to everything remaining of the property assigned by the deed of March 4th, 1896, and to be entitled thereto and to the benefit of the note of that date for thirty thousand dollars, and to have the action brought thereon continued to judgment. This claim is in the statement in defence grounded upon an agreement alleged to have been made in the month of March, 1896, between the Crown, as represented by the Attorney-General of Canada, and himself whereby in consideration of his paying the balance of Connor's indebtedness, all the securities mentioned were to be transferred to him, and he alleges that he paid such balance and is entitled to the securities. The evidence does not in any way support this alleged agreement. There was no doubt negotiation on the subject, but
VOL. `X 1 EXCHEQUER COURT REPORT , 201 nothing came of it other• than theindenture of the 13th isas. of July, 1896, that was not delivered. Any claim that THE Kia Michael Connolly now has to such securities depends CO NNOR. upon the documents and facts that have been already B ;N,,, mentioned. .f udguaeat. The defendant, John Connor, admits: the claim of the Canadian Bank of Commerce to the securities comprised in the mortgage of the 1st day of April, 1896, but subject thereto claims that he is entitled to a reconveyauce of all the property, real and personal, transferred by him under the deed of assignment of the 4th day of March, 1896. He contests Michael ConnoIly's claim to the securities mentioned, and among other things alleges that if the accounts of the 'co-partnership were taken it would be found that Michael Conolly individually and as executor for Nicholas K. Connolly, deceased, is indebted to• him, Connor, in a large amount. The first question to he determined is this :—Did the deed of assignment of Ju1' 18th, 1896, to which . reference has been made ever become operative and effective in favour of Michael Connolly ? If it did, then he is entitled to succeed as against all the other defendants claiming any interest in any of the securities mentioned. In the view I take of the evidence that question must be answered in the negative, and if his claim is to be supported it must be on other grounds. And that brings us to a second question ? Is he entitled to be subro-gated to the rights of the Crown under the deed of the 4th day of March, 1896, by reason of the payment of the sum of $22,461 on the 30th or 31st day of March, 1896, or because he satisfied the judgment of the 25th of April, 1900 ? As to that, it seems clear that he and hisbrother Nicholas K. Connolly were co-partners with John Connor in the transactions out of which the latter's indebtedness to the Warden of the Kingston Penitentiary arose ; and if what Connor states as to the circumstances under ~--
202 EXCHEQUER COURT REPORTS. (VOL. X. 1906 which Michael Connolly about the last of January, 1896, tit THE KING got the cheque for $22,421.65 made by the Consumers' Cor- V. CoNN0R. dage Company in favour of the Continental Twine and Reasons- for Cordage Company, is true, it would be difficult to see Judgment. how any equity would arise in favour of the Connollys by reason of the payment of the sum of $22,461 made to . the Crown in March following. But these matters are are in dispute between Mr. Connolly and Mr. Connor, and perhaps it is not necessary to come to a conclusion as to whether credit should be given to one or to the other. It does appear to me however that Mr. Connor's version of the matter fits in with Mr. Connolly's letter of the 27th day of January, 1896, better than Mr. Connolly's does. And then, while of course it may be true that the latter had no information about the state of the account between the Warden and Mr. Connor, it is not what; having regard to the facts about which there is no room for dispute, would be expected of as good a business man as Mr. Connolly. The articles of co-partnership of the 23rd day of January, 1895, contemplated air arrangement. by one or more of the co-partners with respect to the binder twine manufactured at the Kingston Penitentiary. Mr. Connolly knew that Mr. Connor had made some arrangement of that kind, and he had provided the bonds that enabled the latter to get possession of the twine. The Connollys were to share in the profits and losses accruing from this transaction. Under such circumstances one would naturally expect them to be interested in knowing what the state of the account between the Warden and Connor was. But assuming Mr. Connolly's version of the matter to be correct, it appears to me that his .claim to be subro-gated to the rights of the Crown because of the payment of this sum of $22,461, or of the amount of the judgment of the 25th of April, 1900, cannot be sustained.'
VOL. Xi EXCHEQUER COURT REPORTS. 203: The articlee of co-partnership, to which reference 'has 1906 been made, were entered into by the Connollys and Con- THE KING nor in the Province of Quebec. The business of thé firm CONN. OR. or company was for the, most part to be carried on in the Re,,,,ome for Province of Ontario ; and the transactions, out of which Ja° ent. the liability for which the securities were assigned, arose, occurred there. In . the Province of Quebec subrogation to the rights of a creditor in favour of a third person who pays . him is either conventional ' or legal (1). Subrogation takes place by the sole operation of law in favour of a party who pays a debt for which he is held with others or for others ; and has an interest in paying it (2). The doctrine of subrogation by operation of law has been adopted and acted upon by the courts ot'the Province of Ontario ; and in addition it is in that Province provided by statute that every person who being surety for the debt or duty of another, or being liable with another for any debt or duty, pays the debt or performs the dul y, shall be entitled to have assigned to him or a trustee for him, every judgment, specialty or other security which is held by the creditor in respect of such debt or duty, whether such judgment, specialty or other • security be or be not deemed at law to have been satis- fled, by the payment of the debt or the performance of the duty '(3). This provision was adopted from .the 5tn section of the English Mercantile Amendment Act, 1856 (19 and 20 Vict. c. 97, s. 5) which was:. enacted to meet the case of a surety who. paid off the bond debt of hi's principal, for which. he was 'bound ; and who . as the. law then stood could not require the creditor to assign to him such bond debt because it was, satisfied and extinguished . by. the very' act of payment by the surety (4). (1) The Civil. Code, Art. 1154. (3) The Mercantile Amendment Act, (2) The Civil'Code, Art. 1156 (3). R.S.O. 1897, c. 145, $s. 2, 3 and 4. (4) lieColyar's Law of Guarantee,' 3rd eil. p. .;26.
204 EXCHEQUER COURT REPORTS. [VOL. X. 1906 No case has been cited,. and; I am not aware of any, in THE KING which in England or in Ontario a partner paying. a part-CoNOR, nerahip debt has been subrogated to the rights of the . lisa „ona tor creditor against a co-partner, and in the Province of Judgment.. Quebec it has been held that a partner who has paid the amount of a judgment rendered against him and bis co-partner, jointly and severally, is not entitled to be subro-gated in the rights of the plaintiff, but has an action pro socio only for his recourse (1). In some of the States of the United States, where the doctrine of subrogation has been carried further than it has been in England or in Ontario, there are cases in which, a partner paying a partnership debt bas been subrogated to the rights of the creditor against a co-partner. But that has happened in cases in which there had 'been a settlement of the affairs of the copartnership ; or where something had occurred to place one partner in the position of a surety for his co-partner (2). And it is on the latter ground, that in this aspect of the case, it was argued that Michael Connolly's claim to the securities in question should be supported. It is al- leged that Connor was, in fact, a defaulter to the Crown ; and it was contended that in respect of such default the Connollys were sureties and not partners. The facts have been stated. Connor obtained possession of the twine mentioned by depositing with the Warden of Kingston . Penitentiary bonds of no commercial value provided for that purpose by the Connollys. Connor collected some twenty-three thousand dollars from the purchasers of the twine and paid nothing to the Warden. Something over nineteen thousand dollars of the amount so collected was-paid over to the Connollys by Connor. Michael Connolly (1) Leduc y. Turcot, 5 L.C.J. 96. mont, 35; Fesxler v. Hickernell, 82 (2) LePage v. McCrea, 1 Wend. Penn. 150 ; in re Smith 16 Nat. 164 ; Baily v. Brownfield, 20 Penn. Bank. Reg. R. 113 ; Bittner v. 41 ; Shattuck v. Lawson, 10 Gray Hartman, 139 Penn. 632 ; and Mc. 140 ; Field v. Hamilton, 45 Ver- Donald v. Holmes 29 Pac. R. 735.
VOL.. 'EXC I Q CC1TRT REPORTS. ; , 2OO knew ,that the bonds were of no commercial \'value and of asp the use that was to be made ofthetn. He denies iaving .?DBE KING any knowledge as to where the'nineteen thousand dollars Co7rro came from. But even so, the impotrtant thing and that,,,,, which 'made all the rest possible was the . . advantage "d °s" taken of the Warden in , depositing with him worthless securities, and as to that .Michael Connolly's position ;is little, if any better, than Connor's. in respect Hof the matters 'in issue here the Connollys were, tI think, co- partners with John Connor, and not sureties for him. But assuming even that by reason of the .premises some equity :has arisen against John %Connor in Michael Connolly's 'favour, •no effect ought to be given to it against the parties to the note for thirty 'thousand dollars, who joined in making 'it 'to secure a debt for 'which the Connollys .as well as John Connor was .liable. Their equity in the matter would begreater than Conn'olly'p. And as between Michael :Con.nolly. ;and the defendant Thomas P. 'Connor the -same would be true in respect of the twenty-seven first mortgage • bonds of The Tobique Valley :Railway Company that he- and :Robert W. Connor assigned to the warden. The answers that have been given 'to the , questions stated, and the considerations that have been mentioned dispose, I think, of all the grounds upon which Michael Connolly's claim to 'the securities in question could be sustained as against any of the defendants Idther than John 'Connor. But as between Michael Connolly ;and John :Connor .there still remains 'the letter of :the. 8th .day of April, 1896, ;and 'the condition =contained in 'the judg- ment of the 25th day of April, .1900.; .and .as Ito these matters ;the result appears to tie that neither of :them is as yet in a position to claim an assignment or Teconvey- ance of anything comprised in the schedules .ôf the deed of assignment cif the 4th day -of March, 1896. Their accounts have not been adjusted or settled. In this
N6 EXCHEQUER COURT REPORTS. [VOL. X. 1906 aspect of the case, and in the condition recited in the ME KING judgment mentioned that the Crown was to retain these CoNoR. securities until such accounts were adjusted, I have Reasons for found some difficulty in making any disposition of the Judgment. matters in controversy. But as more than five years have elapsed since that judgment was entered, it seems reasonable that in favour of other parties having superior rights to such securities the Crown should not be held to the terms of the condition, and that a declaration should be made in favour of such parties. There will be a declaration : 1 That the makers of the promissory note of the 4th day of March, 1.896, for thirty thousand dollars, are discharged from any liability thereon and are entitled to have the same delivered to them or to their order. 2. That the defendant Thomas P. Connor is the owner of and entitled to the twenty-seven first mortgage bonds of The Tobique Valley Railway Company that he and Robert W. Connor assigned to the Warden of the King-ston Penitentiary by the deed of assignment of the 4th day of March, 1896, and that he is entitled to have the same transferred and delivered to him. 8. That the defendant the Canadian Bank of Corn merce is entitled to a transfer and delivery to it (to be held under and for the purposes mentioned in the inden ture of assignment by way of mortgage of the 1st day of April, 1896) : (a) Of the other first mortgage bonds of The Tobique Valley Railway Company, hereinbefore mentioned ; (b) Of the second mortgage bonds of that company hereinbefore mentioned ; (c) Of the stock certificate No. 285 of The John Good Cordage and Machine Company ; and (d) Of the note of Killeen & Monniger of the 16th December, 1895, in favour of John Connor.
VOL. X.1 EXCHEQUER COURT REPORTS. And I reserve . all other questions arising in the premises, including the question of costs, and give leave to any party hereto to apply for further directions. Judgment accordingly.% Solicitors for the plaintiff: Chrysler & Bethune. Solicitor for the defendant John Connor : Solicitors for the defendant M. Connolly : Solicitor for the defendants P. L. Connor, Katie Connor and Johanna Connor : W. Solicitor for the defendant T. P. Connor : A. Solicitors flr the defendant, the Canadian Bank of Commerce : '207 1906 Tx KING V. CONNOR. Ja I d r ~ e c 7 o n aa 6 fo . r T. A. Beament. Murphy & • Fisher. J. Code. A. Stockton. Gormully & Orde.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.