Supreme Court of Canada

Mollot v. Monette, [1981] 2 S.C.R. 133

Date: 1981-11-16

Margaret Mollot Appellant;

and

Oscar Monette Respondent;

and

Lorne A. Mollot Mis en cause.

1981: October 21; 1981: November 16.

Present: Laskin C.J. and Ritchie, Dickson, Beetz, Estey, McIntyre and Lamer JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Bills of Exchange—Promissory note—Whether appellant liable as an accommodation party under s. 55—Appellant received no value for the note—Whether respondent can be a holder for value—Bills of Exchange Act, R.S.C. 1970, c. B-5, ss. 2, 55.

Subsequent to an advance made to appellant’s husband who gave post-dated cheques to cover the indebtedness, respondent asked for a promissory note which appellant and her husband signed. Within a day or two, the respondent sought payment and action was instituted two days later. Appellant contested liability, alleging that she received no consideration for the note and that she signed it only to accommodate her husband so that the respondent could bolster his bank credit. The Superior Court allowed the action and the Court of Appeal affirmed the judgment.

Held: The appeal should be dismissed.

There was no consideration from the appellant for her signature. She was liable, however, as an accommodation party under s. 55 of the Bills of Exchange Act because the respondent, by the definition of holder in s. 2, was a holder and a holder for value of the note, given as it was for an antecedent debt to the respondent. The fact that the appellant signed the note to provide collateral security for the payment of her husband’s antecedent debt and to support the respondent payee’s bank credit did not preclude the latter’s right, as a holder for value, to recover from her.

Duplain v. Cameron, 1961 CanLII 81 (SCC), [1961] S.C.R. 693; J.D.F. Builders Ltd. v. Albert Pearl (Management) Ltd., 1974 CanLII 25 (SCC), [1975] 2 S.C.R. 846, referred to.

[Page 134]

APPEAL from a judgment of the Court of Appeal of Quebec[^1], affirming with a dissent a judgment of the Superior Court[^2]. Appeal dismissed.

Jacques Sauvé, for the appellant.

Claude Gratton and Jacques Tessier, for the respondent.

The judgment of the Court was delivered by

THE CHIEF JUSTICE—This appeal, which is here by leave of this Court, concerns an infrequently litigated issue in this Court of liability on a promissory note. An advance had been made by the respondent to the appellant’s husband who gave post-dated cheques to cover the indebtedness. Subsequently, the respondent asked for a promissory note, ostensibly to bolster his credit at his bank. Appellant’s husband signed the note and later the appellant, at the respondent’s request, also signed the note on its face. Within a day or two, the respondent sought payment and action was instituted two days later. The appellant contested liability, alleging that she signed the note to accommodate her husband so that the respondent could bolster his bank credit, that the respondent did not use her signature in that way, having sued her immediately on the note, and that she received no consideration for the note.

The appellant failed at trial, Ste-Marie J. holding that the respondent was a holder in due course vis-à-vis the appellant so that any alleged want of consideration was immaterial and, secondly, that she was liable as an accommodation party to the respondent, a holder for value, pursuant to s. 55 of the Bills of Exchange Act, R.S.C. 1970, c. B-5. A majority of the Court of Appeal, speaking through Casey J.A., Chouinard J.A., as he then was, concurring, affirmed the judgment for the respondent on the basis of the application of s. 55. Montgomery J.A. dissented on the ground that no consideration proceeded from the respondent to the appellant or her husband, neither forbearance nor any renunciation of rights but, rather, there was

[Page 135]

deceitful dealing in procuring the appellant’s signature to support the respondent’s bank credit and then, instead, suing almost immediately on the note.

Although I incline to the view of Cartwright J., as he then was, in Duplain v. Cameron[^3], that the immediate holder of a promissory note cannot be a holder in due course vis-à-vis a maker or other party thereto, it is unnecessary to determine this matter in this case. The central and dispositive point is whether there was consideration for the appellant’s signature and, if not, whether she is liable as an accommodation party under s. 55. This provision reads as follows:

55. (1) An accommodation party to a bill is a person who has signed a bill as drawer, acceptor or endorser, without receiving value therefor, and for the purpose of lending his name to some other person.

(2) An accommodation party is liable on the bill to a holder for value; and it is immaterial whether, when such holder took the bill, he knew such party to be an accommodation party or not.

First, as to consideration. An antecedent debt, which is the case here, provides consideration for the note in respect of the appellant’s husband: see s. 53(1)(b) of the Bills of Exchange Act. In the circumstances, it is not consideration flowing to the appellant. The respondent had already made an advance to the husband and hence not in reliance on the appellant’s credit. Nor was there here any detriment, by way of forbearance or otherwise, to the respondent to bind the appellant. This case is distinguishable in this respect from J.D.F. Builders Ltd. v. Albert Pearl (Management) Ltd.[^4] Certainly where, as here, the transaction is between immediate parties, the presence or absence of consideration, if that is relied upon by them, would govern regardless of liability on the note per se. This is subject, however, to possible liability as an accommodation party under s. 55.

[Page 136]

The crucial question under s. 55 is whether the respondent payee is a holder for value. There is no doubt that if the note was transferred by the payee to another person, the appellant would be liable thereon as an accommodation party. The transferee would be a holder for value of the note which itself was given for consideration, although without consideration to the accommodation party, the appellant. The point at issue is, therefore, whether the respondent, the original payee of the note, can be a holder for value. It is only to such a holder (or, a fortiori, to a holder in due course) that an accommodation party can be liable under s. 55 when that party received no value for the note.

The matter is concluded, in my opinion, by the definition in s. 2 which defines “holder” as meaning, inter alia, the payee of a note who is in possession of it. The respondent is hence a holder and he is, in addition, a holder for value of the note, given as it was for an antecedent debt to the respondent. The fact that the appellant signed the note to provide collateral security for the payment of her husband’s antecedent debt and to support the respondent payee’s bank credit did not preclude the latter’s right, as a holder for value, to recover from her. In the circumstances, it is unnecessary to consider the effect, if any, of ss. 131 and 179 of the Bills of Exchange Act.

I would, accordingly, dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Sauvé, Osborne & Bastien, Gatineau.

Solicitors for the respondent: Gratton, Tessier & Brochu, Hull.

[^1]: [1977] C.A. 492. [^2]: [1975] C.S. 108. [^3]: 1961 CanLII 81 (SCC), [1961] S.C.R. 693. [^4]: 1974 CanLII 25 (SCC), [1975] 2 S.C.R. 846.