Supreme Court of Canada
Pioneer Bank v. Canadian Bank of Commerce, (1916) 53 S.C.R. 570
Date: 1916-06-24
The Pioneer Bank (Plaintiff) Appellant;
and
The Canadian Bank of Commerce (Defendant) Respondent.
1916: June 5, 6, 24.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Guarantee—Sale of goods—Payment of draft—Guarantee by bank—Bill of lading—Goods at disposal of consignor.
M., of Toronto, ordered two cars of oranges from a purchasing agent in California, and the Pioneer Bank cashed a draft on M. for the cost on receipt of the following telegram from the Bank of Commerce: “We guarantee payment of drafts on J.J.M. with bills lading attached * * * covering two cars oranges, etc.” “The goods were shipped and consigned by the bills of lading to “Mutual Orange Distributors (shippers) notify J.J.M.” A note was printed on it to deliver without B/L on written order of shippers. When the goods arrived, M. refused to accept them, and an action was brought on the bank’s guarantee.
Held, affirming the judgment of the Appellate Division (34 Ont. L.R. 531), Idington J. dissenting, that the Bs/L were not in a form to protect the defendant bank; that they left the goods under the entire control of the shippers and the guarantor was deprived of its security on the responsibility of its customer or the carrier; and that, though an action against M. for the price of the goods might have succeeded, that on the guarantee must fail.
APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario[1], reversing the judgment at the trial in favour of the plaintiff.
The material facts are set out in the above head-note.
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Saunders K.C. for the appellant.
R.C.H. Cassels for the respondent.
THE CHIEF JUSTICE.—The appellant sued upon a contract contained in a telegram in the following words:—
Toronto, Ont., Nov. 21st, 1913.
The Cashier Pioneer Bank, Porterville, Cal.
We guarantee payment of drafts on J.J. McCabe with bills lading attached not exceeding in all sixteen hundred and twenty-nine 70/100 dollars covering two cars oranges containing 396 boxes each in P.F.E. 8304 and P.F.E. 11914.
The bills of lading attached to the draft shew that the goods were consigned by the vendors, “Mutual Orange Distributors,” to themselves and on the face of the bills appears:—
Note on Waybill.—Permit inspection without bill of lading. Deliver without bill of lading on order of Mutual Orange Distributors’ Agent.
The contract is short, and, as I think, simple; indeed if it were not for the introduction into the case of matters foreign to it, there would not seem to be much room for difficulty. It cannot, I think, matter what were the motives of McCabe, the purchaser, in refusing to accept the goods; all that we have to consider is whether the conditions of the contract were fulfilled so as to render the guarantee binding.
A bill of lading is not a thing of little known or uncertain character; on the contrary, it is in everyday use and to a very wide extent in commercial transactions. I should suppose it would be difficult to find any business man who would consider that the bills of lading attached to a draft were such as the respondent intended and had a right to expect. They
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carried no title to the goods as is proved, if proof were needed, by the fact that the vendors were able properly to, and did actually, divert one of the cars in transit. The appellant indeed can only support these bills by alleging some rather dubious customs of the fruit trade in California. I think the true explanation is that, as frequently happens in the conduct of business of every description, matters were dealt with in the most convenient and practical rather than strictly regular way. In the vast majority of cases, particularly when the parties are known to each other, such a course of dealing leads to no trouble; when it does, however, and it becomes necessary to resort to the courts to settle disputes that have arisen, it is only legal rights that can be considered. Mr. Hicks, the vendor’s agent, says, in his evidence, that the bills of lading need not necessarily have been made out to J.J. McCabe
because I knew that I was dealing with a reputable concern in the Mutual Orange Distributors, and I knew that they would not take McCabe’s money and not deliver to him what I had bought for him.
An express and vital condition of the contract was not complied with and the obligation under the contract never attached.
It is unnecessary for me to add that if in this suit the issue was between McCabe and his agent in California I would in all respects agree with the trial judge; because I fear that in last analysis McCabe may be the party benefited by this judgment I most reluctantly agree that this appeal be dismissed with costs.
DAVIES J.—I concur with Mr. Justice Anglin.
IDINGTON J. (dissenting)—The appellant, being bankers in California, sued the respondent upon the following guarantee:—
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Toronto, Ont., Nov. 21st, 1913.
The Cashier, Pioneer Bank, Porterville, Cal.
We guarantee payment of drafts on J.J. McCabe with bills of lading attached not exceeding in all $1, 629. 70/100 covering two cars oranges containing 396 boxes each in P.F.E. 8304 and P.F.E. 11914.
(Sgd.) THE CANADIAN BANK OF COMMERCE.
Market Branch.
1. 04 p. m.
This was given at the request of McCabe named therein and a dealer in such goods as specified; and was confirmed by a letter of same date signed and countersigned respectively, on behalf of respondent, by its acting manager and accountant.
The appellant relying thereon discounted a draft of one Hicks upon McCabe for the sum of $1,629. 70 and complied literally with the condition in the guarantee by annexing the bills of lading to the draft.
The learned trial judge held that in doing so appellant, under the circumstances in question, had done all that was required of it to demand the observance of respondent’s obligation.
Both he and the Appellate Division of the Supreme Court of Ontario recognize to the fullest extent the obvious facts that not only could the respondent bank or McCabe have got the two car loads of goods in question, if McCabe had so desired, but also that under the facts and circumstances there was no one else than McCabe or it, claiming or entitled to claim the goods in question.
I am, I respectfully submit, unable to understand how or why under such circumstances the Appellate Division can interpose in the terms of the guarantee a condition which is not expressed therein.
It is idle to suggest that sometimes and for argument’s sake I will admit usually bills of lading of a certain class are made to so read that a delivery of
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the goods by the carrier shall be made to the shipper, or according to, and in compliance with, an order endorsed thereon. What has that to do with the real question? A bill of lading might be made to read, as it has been, to deliver to the bearer (See Scrutton on Charterparties and Bills of Lading, art. 56, p. 154 of 7th ed.) and then in such a case would the court insist that doing so was all wrong and should not be permitted? Are business men to be bound to follow and observe the notions of judges and courts as to how they should conduct their business and communicate to and with each other their understanding of what they intend? Or must not courts rather try to understand what men of business are about and see that their common purposes are fully and fairly executed, no matter how foreign the methods adopted may be to the ways in which the courts might desire to see them travel?
Indeed, in this very case, the bill of lading, which is the standard approved by the Interstate Commission and substantially adopted by our own Railway Commission, is headed “non‑negotiable”.
Yet I have no doubt that the goods were deliverable to the owner, whomsoever he might be, at the point of destination.
The method in use is shewn to be, to name a consignee and to let his directions be obeyed. To facilitate this business method a direction is given which all concerned and properly instructed in regard thereto understand the meaning of. That is to name someone at the point of destination to be notified. Such party, if nothing intervenes to create a conflicting right, gets, as of course, the goods. In this case the matter is disposed of on the face of the bill thus:—
Consigned to Mutual Orange Distributors. Notify J.J. McCabe.
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And we are told the way bill was made so clearly in conformity with this method, that when one Moore, a local agent of the consignee, by mistake sought to divert one of the cars at Hamilton, he was called up on the phone by the railway company’s agent at Hamilton and told that the direction as to that car was to notify J.J. McCabe at Toronto. Immediately he called on McCabe and asked him if those were his cars and was answered in the affirmative. McCabe himself had also been phoning to Hamilton to have one of these cars, then there on its transit towards Toronto, diverted there for a possible purchaser.
It seems this accidental circumstance of Moore’s ineffectual attempt, led McCabe to inquire further. And, as the market was falling, when he learned the form of the bills of lading, he fancied he saw a dishonest means of escape from his obligations. Accordingly, without inquiry as to the real nature and effect of such form of bill of lading, he at once saw fit, without asking to see the bills of lading annexed to the draft, or the draft itself, which indeed had not yet been presented, to repudiate, and induce the respondent to repudiate, its obligations.
Both wired accordingly such repudiations to California; without waiting for presentations of the draft, or once attempting to get delivery of the cars by accepting the draft, getting the bills of lading and taking delivery of the cars, which beyond a shadow of doubt would have been accorded him, as the courts below both find. To maintain such a course of dealing seems to me to put a premium upon dishonesty.
Bills of lading and their indorsement, or want of endorsement, give rise to many questions, often difficult of solution, where there are conflicting claims to the property in the goods, or disputes involving
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something of that nature. But this case is entirely free from any of such embarrassments. It turns, or should turn, upon the obligations of respondent in guaranteeing and representing McCabe and enjoying whatever rights he might have, yet subject to the due observance of such obligations as rested upon him.
It is therefore well that we should appreciate exactly what these rights and obligations of McCabe were.
He was in communication with one Hicks, a broker at Potterville in California, and induced him as such broker to buy for him, McCabe, for shipment to Toronto, the two car-loads of oranges in question. Hicks on his behalf bought these two car-loads of oranges from the Mutual Orange Distributors, and, the bargain made, they loaded the cars accordingly, and to expedite the business started them on their way, consigned, as they had a right to do, to themselves, till the price paid. The need of getting this guarantee, before the appellant would advance the money to pay the price, took a day or two, I imagine. Be that as it may, the appellant advanced the money and the full price (less brokerage charges to pay Hicks) was paid the Mutual Orange Distributors, who thenceforward had no claim or possibility of claim on the goods.
Their right ceased thenceforth to divert or order any other delivery than to McCabe or any one, such as the bank, possessing the bills of lading.
It is idle therefore to point to the original memo at the foot of each of the bills of lading as having longer effect on the destination of the goods.
Even the carriers, having notice of the facts, could no longer take any orders from such consignors
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or consignees. No one else than McCabe had any rights in the premises saving only the bank holding the bills of lading, and them only, until he accepted the draft, when the appellant became bound to surrender to him the bill of lading, and entitled to look only to such acceptance and the guarantee of respondent.
When the draft was presented he refused instead of accepting it.
When the railway company tendered him the remaining car left after his interference with the other at Hamilton he refused that also.
The railway company upon delivery to it by McCabe, of the bills of lading without any indorsement by anyone, was bound upon payment of their freight to deliver to McCabe the goods which then and thereby should have become his property.
As I read the documents and the evidence and the law upon the subject as laid down in decided cases, that was his right. I respectfully submit it needed no telegraphing, as suggested by the learned trial judge, to reach that result. Nothing was needed but a straightforward honest and usual course to be pursued by McCabe in order to reap the fruits of the work of himself and of his own agent, for that was all that Hicks was in the premises.
The Mutual Orange Distributors never intended by taking the bills of lading in the form they did to assert or retain any property in the goods beyond the time needed for McCabe’s own agent arranging to get the cash from the bank and pay them, and their surrender of the bills under such circumstances needed no endorsement of the bills.
Something was suggested in argument as flowing from what Moore, an agent of the vendors, had said. He had said, though he was not asked to do so, that
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he would give no order. It was urged that this supported respondent and McCabe’s positions.
I interpret that incident as of quite the contrary effect. Moore had no more authority than any one else to interfere and it needed no help from him or his principals under the circumstances, as he well knew, to enable McCabe to get the goods.
I have not the time at my disposal to enter upon a long exposition of the law, but those desiring to find it can do so by reading the chapter in Scrutton’s work, already cited, on the effect of endorsement and the cases therein referred to and the chapter in Leggett on Bills of Lading, part 4, pp. 611 et seq., the case of Mirabita v. The Imperial Ottoman Bank[2] and Benjamin on Sales, 5th ed., pp. 380 et seq., and pp. 395 and 396.
The peculiar facts of this case, including Hick’s agency and the non-negotiable nature of the bill of lading and the intention of the parties, which must always be borne in mind, render it impossible to accept literally judicial dicta based on an entirely different sort of bill of lading and other purposes than evident herein.
I do not think if one reaches a correct view of the facts there need be much puzzling over the law.
Hicks swears he has handled during six seasons of such dealing from five hundred to a thousand cars a season and in seventy-five per cent. of the cases of shipment he had substantially acted as he did in this case and no difficulty had arisen in any one of them by reason of so doing.
I believe him. Business men and carriers find the honest simple course the best and that course
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pursued by such men in California, where McCabe tried to do business and initiated this transaction, binds him.
The “Banking Act” I incline to think would have protected respondent if it had advanced the money and taken delivery of the bills of lading as they were presented. See sec. 87, sub‑sec. 2.
Although having suggested that in the course of the argument as worth looking at I have not had time to form a definite opinion and express none.
The reasoning in the case of Saunders Bros. v. Maclean[3], properly applied, supports the appellant instead of respondent for whom it was cited. The respondent here is like unto the defendant there. See also Anglo-Newfoundland Development Co. v. Newfoundland Pine and Pulp Co.[4]
The appeal should be allowed and the trial judgment restored with costs.
ANGLIN J.—The sole question in this case is whether the bills of lading (so called) attached to the draft discounted by the plaintiff bank were in compliance with the terms upon which the defendant bank guaranteed payment of the draft. I agree with the learned judges of the Appellate Division that, in guaranteeing
payment of drafts on J.J. McCabe with bills of lading attached,
the guarantors were stipulating for documents to be attached to the draft which would exclusively entitle them or their customer McCabe (whom they knew and were prepared to trust) to delivery of the consignment from the carrier. The bills of lading in fact attached to the draft made the vendors, The Mutual
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Orange Distributors, consignees, and each on its face also bore this note:—
Deliver without bill of lading on written order of Mutual Orange Distributors’ agent.
The way bills also carried the same note. The effect of these documents, according to their terms, was to leave the consignment under the control and subject to the order of the vendors, the Mutual Orange Distributors, and, if it had been delivered to them or upon their order or that of their agent, the carrier would probably have had a complete answer to any claim by the defendant bank. In other words, the effect of the bills of lading was that (if liable on its guarantee) the bank would have been compelled to trust for its security upon the goods to the responsibility of the Mutual Orange Distributors and not to that of its own customer or of the carrier, for which it had stipulated.
It was contended that in California, where the shipment was made and the draft discounted, it was customary for banks to accept a bill of lading under which the consignor should also be the consignee as equivalent to a bill in which the purchaser was named as consignee, and that when such a bill of lading had been issued the carrier would make delivery to the person producing it and to him only. It is possible that if this had been the situation the stipulation upon which the bank guaranteed payment would have been complied with. But there is no evidence that it was customary in California or anywhere else to treat a bill of lading, bearing a note, such as that placed upon the bills here in question, entitling the carrier to deliver without production of the bills of lading, as equivalent to a bill of lading wherein the purchaser was named as the consignee, or that such a
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bill of lading would exclusively entitle the person producing it to delivery from the carrier. As Mr. Justice Riddell said, while the defendant bank may not have been entitled to have McCabe named as the consignee rather than the vendors,
the effect of the added clause permitting delivery without bill of lading on the mere order of the consignors (consignees) is different.
Again to quote from the opinion of the learned appellate judge (Riddell J.)
Looking now at the transaction in question, the object of attaching the bills of lading to the draft was the security of the Bank of Commerce. This might have been effected by a bill of lading properly drawn and (or) indorsed, whereby the bank became entitled to the goods themselves. This was not asked for. Or the bill of lading sent forward might be for the protection of the bank in that the bill of lading, being in their hands, no one could legally obtain possession of the goods covered by the bill of lading without the bank’s consent. It seems to me clear that both banks quite understood that such a protection should be afforded by the bill of lading, and that anything, even though called a bill of lading, which did not afford that protection to the Bank of Commerce would cause “such a failure of consideration as can not have been within the contemplation of either side”: The Moorcock[5], at p. 68, per Bowen LJ.
Admittedly the bill of lading sent did not, as it could not, prevent the goods being dealt with (and lawfully dealt with so far as the carrier is concerned) without the bank’s consent; and therefore, in my opinion, this was not such a bill of lading as the Canadian bank had a right to receive before being bound by their guaranty.
Much was made in the argument of the words, “notify J.J. McCabe,” which followed the name of the consignee on the face of the bills of lading. But these words are under the heading
Mail address, not for the purpose of delivery,
and do not import any right to delivery in McCabe. They were probably meant to enable McCabe, upon advice from the carrier of the arrival of the goods,
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to take steps to obtain a right to delivery under the terms of the bill of lading. As a fact, on application to the consignor’s agent, McCabe was refused an order for delivery without instructions from the consignors, which were not given.
It may be that by some means or device McCabe could have got the goods from the carrier on their arrival at destination. It may be that, if sued for the price by the vendors, McCabe would have no defence to the action. But it does not follow that there was compliance with the terms on which the defendant bank agreed to assume the liability of a guarantor. Those terms were that from the moment that liability should arise, i.e., from the time at which the draft should be discounted by the plaintiff bank, the guarantor should have, through the bill of lading attached to the draft, such security as would be afforded it by goods held by the carrier subject to delivery only to itself or its customer McCabe. In my opinion the defendant bank did not receive the consideration for which it stipulated as a term of guaranteeing the draft on McCabe and on that short ground its defence should prevail.
For authorities shewing the necessity for strict compliance with the terms of a guarantee reference may be made to DeColyar on Guarantees (3 ed.) p. 201 n. (i) and 15 Halsbury, Laws of England, page 479, par. 914.
I would dismiss the appeal with costs.
BRODEUR J.—I concur with MR. JUSTICE ANGLIN.
Appeal dismissed with costs.
Solicitors for the appellant: Saunders, Torrance & Kingsmill.
Solicitors for the respondent: Blake, Lash, Anglin & Cassels.