Merchants' Bank of Canada v. McKay, , 15 S.C.R. 672 (1888)

Supreme Court of Canada

Merchants' Bank of Canada v. McKay, 15 S.C.R. 672

Date: 1888-12-14

The Merchants' Bank of Canada (Plaintiffs) Appellant;

and

William McKay and Others (Defendants) Respondents.

1888: March 22, 23; 1888: December 14.

Present: Sir W.J. Ritchie C.J. and Strong, Fournier, Taschereau and Gwynne JJ.

(Mr. Justice Henry heard the argument in this case, but died before judgment was delivered).

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Surety-Mortgage to bank-Continuing security-Present indebtedness of principal-Commercial paper-Mode of dealing by bank.

McK. gave a mortgage to the M. Bank as security for the present indebtedness of, and future advances to, a customer of the bank. By the terms of the mortgage McK. was to be liable, amongst other things, for the promissory notes, &c., of the customer outstanding at the date of the mortgage, and all renewals, alterations, and substitutions thereof.

Held, per Ritchie C.J., Fournier and Taschereau JJ. That the bank having given up the said promissory notes, etc., and accepted, as renewals thereof, forged and worthless paper, McK. was, to the extent of such worthless paper, relieved from liability as such surety.

Held, per Strong J.-That the bank having accepted the renewals in the ordinary course of banking business, and it not being shown that they were guilty of negligence, the surety was not relieved.

Held, per Gwynne J.-That as there was a reference ordered to take an account of the notes alleged to be forged, the consideration of the surety's liability should be postponed until the account was taken.

APPEAL from a decision of the Court of Appeal for Ontario, affirming the judgment of the Chancery Division[1] in favor of the defendants.

The action in this case was brought for foreclosure of a mortgage given by the defendants as security to the plaintiffs for the indebtedness of the firm of Wm. Kyle & Co., and to enable said firm to increase their credit with the plaintiffs' bank. The obligation of the defendants under the mortgage is thus provided for:-

"Provided, this mortgage to be void on payment of twenty-six thousand five hundred and thirteen 04/100 dollars of lawful money of Canada, as follows: in two years from the date hereof, and all bills of exchange, promissory notes and other paper upon which the said firm of William Kyle & Co. were liable to the said mortgagees on the 24th day of November, A.D. 1883, together with all renewals, substitutions and alterations thereof, and all indebtedness of the said firm to the said mortgagees in respect to the said sum. This indenture being intended to be a continuing security to the said mortgagees for the above amount, notwithstanding any change in the membership of the said firm, either by death, retirement therefrom or addition thereto, and also to secure and cover any sum due or to become due in respect of the interest, commission upon the said notes o...

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