THE HOLDER FOR COLLECTION OF A BILL OF EXCHANGE SUBJECT TO THE PROVIN

CIAL LAW OF AGENCY.

The question whether the death of a plaintiff, who sues on a note as a mere préte-nom for collection, terminates his powers, or whether his heirs can continue the suit, obtain judgment, and give a final discharge, is of interest as involving the interpretation of the scope of the Bills of Exchange Act in relation to Provincial law. Is that Act the decisive authority in all matters relating to Bills of Exchange in the Province of Quebec? Where it is silent, must we look to the law of England or to the law of that province? To what extent is its authority limited by section 92 of the B. N. A. Act, which secures the exclusive right to the provinces to legislate concerning all matters relating to "property and civil rights in the province ?" These issues have lately been heard in the Superior Court, Montreal, in a case of Palmisano v. Taylor, reported in 9 Quebec Practice Reports, page 363.

The bill of exchange in question was drawn by one Rocco Palmisano, of Messina, Sicily, upon John Taylor, of Montreal; was accepted by the latter, who afterwards refused payment on the ground that the consignment of lemons, covered thereby, was rotten and not of contract brand and quality. Palmisano indorsed the bill in blank, and an action was entered in Montreal by one W. S. Marson, who lent his name for the purpose of collection. The defendant pleaded to the action, in effect, that the plaintiff became the holder of the bill after it was dishonoured for non-payment; and that, as a mere préte-nom for collection, he had no right or interest therein. Examined on discovery, ́ plaintiff declared that he had given no consideration for the bill, and that he held it merely for collection as the agent of Palmisano, whose property it remained and to whom he would account for the proceeds. Just as the case was ready for hearing, Marson died, and his heirs made a petition to be allowed to take up the suit. The defendant contested this petition on the ground that Marson was an agent or prête-nom, and that any rights he may have had in the bill as agent terminated at his death, and so could not devolve to his heirs, who were incompetent to continue the instance.

The issues being joined, the merits of the petition were argued before Mr. Justice Lynch.

Naturally, it is important to establish Marson's quality as an agent in law, as well as by his admission of record. It is clear, however, without the necessity of citing cases in point, that the holder for collection, the prête-nom, is in law, an agent. His quality is taken for granted both in the cases and by commentators. In Brooks v. Clegg,' the plaintiff is referred to as one who "received the note sued on after maturity without consideration and was merely an agent." Chalmers refers to "the holder of a bill who sues an agent for another person, or sues wholly or

in part for the benefit of another person." Falconbridge,3 commenting upon the definition of "holder," refers to the "mere agent or bailee with a defeasible title." By analogy, also, banks are holders for collection and agents; and are "bound as agents to use due diligence in performing the duties of collection." If, then, Marson was an agent, questions arising out of his agency must be decided by the law of Quebec, since agency clearly is included among the "civil rights," legislation concerning which is of provincial right. Further, where the federal Act is silent, recourse must be had to provincial law, unless by special enactment reference in such a case is directed to imperial statutes. As Judge Lynch points out, the Bills of Exchange Act does not "define the rights and obligations of the heirs of any holder," nor those of "the heirs of a holder like plaintiff." Here, however, Article 2340 of the Civil Code comes to our assistance by declaring in effect that the general law relating to bills and notes is the Federal Act, but that "in all matters relating to bills of exchange not provided. for in this code or the federal laws, recourse must be had to the laws of England in force on the thirtieth day of May, 1849." If the Act does not define the rights and obligations of the heirs of a holder for collection, and that holder can as an agent be deemed amenable to provincial law, little doubt can exist as to the law governing the rights and obligations of his heirs.

112 L. C. R. (Que.), p. 461.

Bills & Notes, ed. 1903, p. 125.

Bills of Exchange, ed. 1907, p. 345.

Falconbridge, Ibid. p. 133.

Bank of Van Diemen's Land v. Bank of Victoria, 1874, L. R. 3 P. C., 526.

Indeed it is not within the scope of the Bills of Exchange Act, apart from any omission of positive enactment, to deal with such matters. Falconbridge, commenting upon the statutory reference to the law of England, remarks that, "The Act governs the form, issue and discharge of bills, the manner in which persons become liable, as parties thereto, but neither the Act itself, nor the common law of England made applicable by sec. 10, regulates all matters of civil obligation resulting from the substance of the contracts entered into by parties to bills or determines all the consequences of such contracts. These, as a general rule, are governed by provincial law.

"For instance, the Act declares what persons are liable as endorsers, but the appropriate provincial law decides whether an endorser, as being in the nature of a surety, is discharged by dealings between the creditor and the principal debtor."

Of special significance also is the Quebec case of Guy v. Paré, decided in 1892, two years after the Act came into force. Here it was held: "That Article 2340 C.C., which provides that in all matters relating to bills of exchange not provided for in this code, recourse must be had to the laws of England in force on the 30th May, 1849, applies only to the form, negotiability and proof of the instrument, and not to matters of civil obligations resulting from the substance of the contract-created thereby-in regard to which recourse must be had to the provisions applicable thereto to be found in other parts of the Civil Code." In Noble v. Forgrave, again, in substance it is held that the Act and the common law declare whether a note in a particular form is a joint note, or a joint and several note; but the provincial law regulates the consequences of joint or joint and several liability." In Ontario, in Cook v. Dodds, it was held that The Bills of Exchange Act does not deal with the consequences which are to flow from the character which attached to the promise which a bill or note contains; and, therefore, those consequences fall to be determined according to the law of the Province in which the liability is sought to be enforced."

Section 10, p. 357.

1 S. C. p. 443, Court of Review.

17 S. C. p. 234.

6 O. L. R. 1903, p. 608.

9

Girouard, in the introduction to his work on the Act of 1890,10 puts the contention succinctly in the statement that "In the Province of Quebec, in unprovided or doubtful cases, recourse must be had to the Civil Code."

Having thus far outlined what appeared to be the antecedent law sufficient to support a judgment favouring the application of Quebec law, we must allow the learned Judge to state the reasons upon which his opinion is based.

There can be no difficulty that plaintiff, as the holder and bearer, had the right to sue the bill, collect the amount due and give a valid discharge; but it is equally true that in all he did he was merely acting for the owner and as his agent, and that his powers, as such, were terminable at the will and pleasure of Palmisano, the owner of the bill. Such were the relations between Palmisano and plaintiff; but as between plaintiff and defendant, under the Bills of Exchange Act, plaintiff was the owner to all intents and purposes. There is nothing in that Act which defines the rights and obligations of the heirs of any holder, and, of course, none as regards the heirs of a holder like plaintiff.

"If the civil law is to be considered, then clearly, under Article 1755 C.C., par. 3, the agency which had existed, terminated by the death of plaintiff; and defendant would have an interest in contesting petitioners' right to continue the suit. Are the ordinary principles 'which govern mandate to apply in cases of prête-nom, such as existed in this instance ?"

Here the learned Judge cites with approval in that sense, Troplong on Mandate, No. 738, and continues:

"If then, the mandate, even in the form of a prête-nom, terminates by the death of the principal, it must, for equally strong reasons, terminate with the death of the agent.

"I was inclined to think, though with some hesitation, that the Bills of Exchange Act should be the decisive authcrity, and that as it contains no special provisions estabbushing a difference between the rights of the holder or bearer of a bill and those of a holder in due course, the heirs of the one were entitled to intervene and take up the suit as fully as would the heirs of the other. I find that the question has been considered by our courts in the case of Laforest v. Inkiel et al.11 In that case the defendants

10 Ed. 1891, p. vii. See also p. ix. 11 11 S. C. p. 534.

offered two promissory notes in compensation; and it was shewn that as regards one of such notes the defendants were only holders for collection. In the first instance, Mr. Justice White allowed the compensation, evidently treating the defendants as the real owners. In review, the majority of the Court would not allow the compensation; the following paragraph of one of the considerants shews the prevailing view: 'It cannot be offered in compensation by defendants to plaintiff's demand, as it is proved that the said defendants never were, at any time, the owners and creditors of the said note.' The present Chief Justice of the Court of King's Bench dissented upon the ground that defendant, Inkiel, although holder for collection only of said note, having derived his title through a holder in due course, and having been himself a party to no fraud or illegality affecting it, had all the rights of that holder in due course as regards the maker and all parties to the bill prior to that holder.'"

In appeal,12 the judgment of the Court of Review was sustained, Sir Alexander Lacoste and the late Mr. Justice Hall dissenting. Here the decision turned upon the assertion that the provisions of the Act must be limited in application strictly to contemplated cases, and that while giving to the holder of a bill indorsed in blank, a right of action, it does not declare him the proprietor thereof.

Judge Lynch continues: "I feel that I am bound by the jurisprudence thus established; and although the question there decided is not in all respects similar to that under consideration here, it does distinctly lay down the doctrine that the holder for collection has none of the rights of the owner apart from those of collecting and receiving. If, then, his position is thus restricted, he is certainly no more than an ordinary agent; and we must look to the civil law to determine whether the agency terminated with his death."

Hence if the holder for collection has no beneficial interest in the bill, and is an agent acting under powers which, by Article 1755 of the Civil Code, cease with his death, these powers cannot be transmitted to his heirs, who, in any event, have no transmitted interest to invoke.

The case has been inscribed for hearing before the Court of Review.

Montreal.

WALTER S. JOHNSON.

127 K. B. p. 456.