Mr. Speaker, I ask your ruling on the question. If an hon. gentleman reads a letter or an extract from a letter in this House for the purpose of strengthening an argument, is he not obliged to give the names?
I want to point out that when a man's mortgage matures, if it is allowed to run on and become overdue, that is essentially the act of the two parties, both the borrower and the lender. They must agree to allow the mortgage to run on, otherwise it cannot do so. If at the time the moitgage matures, the prevailing rate of interest is lower than the rate stated in the mortgage, or if it remains the same, the mortgagee will in all likelihood allow the mortgage to run on overdue; but if the rate of interest has increased and the mortgagee has an opportunitv to lend the money at a higher rate, he will call it in. The mortgagor may allow the mortgage to continue until the opportunity occurs to call in the principal and lend it again at a better rate. Under the terms of the mortgage, the mortgagee may at any time, after the principal money is in arrear, take action without notice, to enforce the repayment of it. If he exercises the power of sale contained in the mortgage, he will usually have to give thirty days' notice, though sometimes he does not have to give any notice. If he desires to take proceedings under the mortgagor's covenant, he does not require to give any notice at all. I think the same privilege ought to exist as to the mortgagor as exists to the mortgagee. I know that an argument may be made, a very well sounding argument, that we ought not to interfere with the rights of parties to make contracts; but I want to point out that this fine or penalty of three months' interest by way of bonus is not a material part of the earnings of a loan company or any other
mortgagee; it is not necessary to add to the profits or the dividends to be paid upon the stock; and therefore it is not imposing any hardship upon anybody to enact this law and to that extent interfere with contracts that have been made. It may be said that we have not the right to interfere with existing contracts; but in the province of Ontario, by chapter 11 of the Ontario statutes of 1903, the very same law has been enacted, with the exception that the Ontario statute requires three months' notice or three months' interest, while I have made it one month. It may be said that the Bill which I have introduced is retroactive. It is, but so also is the Mechanics Lien Act of Ontario and the Woodman's Wages Act of Ontario. I took the trouble to go to the registry office and read some of the covenants contained in the mortgage to which one of the letters which I have read refers, and in that mortgage I found the following covenants
The mortgagor shall be liable for any tax the mortgagees may have to pay by reason of the mortgage, or money invested therein, or revenue derived therefrom.
Here is another covenant:
And that the society may at any time in their reasonable discretion, and from time to time, appoint some person to inspect the mortgaged premises and report thereon at the expense of the mortgagor.
Here therefore is a covenant signed by the borrower providing that the person or society he borrows from may at any time send an inspector to inspect the premises and the borrower has to pay. Then there is this covenant:
In the event of the mortgagor failing to pay the principal or any part thereof, at the time the same falls due as aforesaid, it is agreed that the mortgagor may pay the same at any time within ten days after maturity thereof, with interest for such ten days, and, if he shall fail to pay the same within ten days the society shall be entitled to three months' interest in advance at the said rate from the date of payment thereof, and to all the remedies for the collection thereof that they are entitled to in respect of any of the other moneys payable hereunder.
Another most vicious covenant reads as follows:
Whenever any interest shall be unpaid and in arrears for two weeks, the mortgagor, his executors, administrators or assigns shall and will, upon demand, give the society a chattel mortgage covering such of his chattels as, in the opinion of the society, shall be sufficient to secure the payment of arrears.
Here is a man borrowing money on his land who binds himself that he will, if required, give the loan society a chattel mortgage to secure the arrears of interest. And in the case of the sale of the land by the society before the maturity of the mort-Mr. MILLER.
gage, the society shall be entitled to costs of inspection, to three months' interest by way of bonus, and costs to them of obtaining the loan. _
Then there is a covenant providing that the loan society may exercise the power of selling the lands before the maturity of the mortgage. If the borrower allows his interest to go in default, the mortgagee may sell him out:
In the case of the sale of the lands by the society before the maturity of the mortgage, the society shall be entitled to costs of inspections to three months' interest by way of bonus, and costs to them of obtaining the loan.
The mortgagor-thus attorns to the mortgagees and becomes their tenant. In case any of the covenants or agreements contained or implied be untrue, unobserved or broken, the society may, without any prior demand or notice, enter on the land and take and retain possession thereof and determine the lease. Thus the mortgagor, on borrowing perhaps half the value of his land, becomes the tenant of the mortgagee, and in case of default the mortgage may at any time, without notice or previous demand, close the tenancy and take possession of the farm and it shall be absolutely his. I say that the mortgagee who will, insert such covenants in a mortgage is not deserving of any sympathy; and if this House should chose to protect the borrower against companies which insert such provisos, I do not think any injustice would be done. I do not think there are many loan companies which insert such covenants or which would use them if they were inserted, but these have been inserted in this mortgage in order that they may be used should the mortgagees choose to use them. If such covenants were commonly used, it would be the duty of whatever parliament may have the jurisdiction and power to adopt a model form of mortgage and allow no other form to be used. These are my reasons for pressing this Bill, and I trust it will have the support of the House.
(Translation). Mr. Speaker, I wish to make a few remarks in regard to this Bill. Were such a proposal to carry, its effect would be to entirely do away with mortgages. While I do not deny that grievances may exist, I do not think they can properly be dealt with by this parliament. It does not behoove us who represent the general interests of the Dominion to enact a law with the object of doing away with grievances which, I admit, may at times be excessive on the part of the creditor by opening the door to downright abuses on the part of the debtor. I do not think it is our duty to state in our statute-books that henceforth the debtor shall no longer be left at the mercy of his creditor, but rather the
creditor who shall be left at the mercy of his borrower.
This Bill provides that whenever a sum of money has been obtained under deed of mortgage for a certain fixed period, that sum may be paid back at any time after maturity, notwithstanding the fact that there mav be in the deed a covenant whereby the parties have agreed that such payment should not be effected at any date after maturity, but only at the expiry of a term of two, five or ten years. According to the provisions of the Bill, the borrower would have the right by giving a month's notice or paying one month's interest, to terminate the mortgage.
This is what occurs as a matter of fact. Take the case of a small capitalist or of an estate. The sum of $10,000, let us say is loaned for a period of ten years, and it is covenanted in the deed that, if at the expiry of ten years the sum borrowed has not been paid back, the borrower will have to keep it for another period of five or ten years more. That clause is inserted because, as everybody knows, it is at times a difficult matter to find a good investment, ami also because the rate of interest varies from year to year. It may happen very likely that the borrower finds it more difficult to borrow at the expiry of ten years than to-day; or, on the other hand, the creditor may experience greater difficulty in finding an investment at an equal rate of interest. The creditor when negotiating a loan at a rate of interest of 6 per cent per annum, to be paid back at the end of a period of ten years, covenants that if ten years hence the amount is not reimbursed, the loan will run for five years longer as a means of providing against the ups and downs of the money market. The lender, who had the 'assurance of drawing 6 per cent on his capital during fifteen years, will have to be content with drawing 6 per cent during the first ten years; after which, if he is bound to accept payment of the principal, according to the provisions of this Bill, he may not be able to secure more than 3 or 4 per cent. It was in view of such a contingency that the lender covenanted in the deed that should the borrower fail to repay the principal at the expiry of ten years, then the loan would run for five years more on the same terms. It must be admitted, therefore, that the provisions of this Bill interfere with the fundamental principles underlying contracts, the agreements entered into being actually as law to the contracting parties.
In the province of Quebec we have been in the habit on considering agreements as something which should not be broken, something which should be lived up to, provided they contain nothing contrary to morals or public interest. Well, an agreement such as I have outlined above, would
be entirely lawful, and to my mind it would be undue interference on the part of this parliament to cancel the agreement entered into by the contracting parties.
My hon. friend referred to the grievances which occur in the province of Ontario. Of course, excesses will happen. But one of two things must be admitted: either those arguments are lawful or they are unlawful, and remedies other than the proposed legislation are available. True, it often happens that a borrower puts himself in the hands of his creditor; but that is the outcome of circumstances over which this parliament .has no control.
I am satisfied the principle of this Bill is antagonistic to the spirit of legislation in the province of Quebec, and for that reason I am bound to oppose it.
Mr. Speaker, this Bill is so obviously ultra vires that I have no hesitation in moving the usual amendment that it be not read now but this day six months. There is no question that this parliament has no jurisdiction whatever in the matter. One would imagine it was a Bill to regulate the rate of interest, as we have power to do under section 19 of section 91 of the British North America Act. In that case my hon. friend's proposed legislation would be at any rate intra vires of this House. But it is not so. It has fox its object the regulation and modification of contracts. It would, if allowed to become law, completely upset our hypothecary system in Quebec, which is a real rights, question, and I have no doubt it would have the same effect in Ontario. It actually interferes with existing contracts relating to real rights, contracts made under our Civil Code in which our provincial legislature has sole and exclusive jurisdiction under section 13 of chapter 92 of the British North America Act. It would interfere with the institution (of millions of mortgages in Quebec, completely upset our mortgage system, -and cause inextricable confusion in the transactions of our mortgage offices.
* Although I am quite prepared to admit that grievances. If this legislation was within my (hon. friend exist even in our own province, still it is within the jurisdiction of the provincial legislature to remedy those grievance. If this legislation was within our jurisdiction, we would have to suspend and hear the interested parties, the mortgage creditors and the mortgage companies in Quebec and the other provinces before attempting such drastic legislation. I have no doubt the Department of Justice would advise my hon. friend that this legislation is absolutely ultra vires under section 13 of chapter 92 of the British North America Act, as it interferes with civil rights and touches on real rights within the provinces. I do not think it is necessary for me to
point out in what way this ^ legislation would interfere with clauses in existing contracts made under the provincial law. The legislation on its face bears that ultra vires character, and I do not think the government should allow it to be proceeded with.
I shall add only a few words to what has been said. This Bill is not under the jurisdiction of this parliament. It comes under chapter 120 of the Revised Statutes, which deals with questions of interest. The first clause in the Bill provides:
10a. Whenever any principal money, interest or other money secured by mortgage of real estate, is not paid at the time when, in the mortgage or in any agreement for the extension or renewal of the mortgage, the same is stipulated to be due and payable, the same may, notwithstanding any covenant, agreement or provision to the contrary, be paid at any time after due, by any person liable to pay or entitled to redeem the mortgage, upon one months notice.
We see immediately that under this Bill, if it should become law, the term of the payment might be enlarged and these mortgages or money thus secured under the contract, which is a civil contract, would be interfered with. I could understand an amendment to the law relating to interest, but when it comes to interfering with the capital, the principal money, and to changing the terms of repayment, it is interfering with civil rights and is beyond our jurisdiction. I shall therefore be in favour of the motion that the Bill be read this day six months.
I will support the amendment proposed by my hon. friend the member for Jacques Cartier (Mr. Monk). I think that the Bill proposed would prove to be ultra vires of this parliament. It is one of those many amendments which are being incorporated in our statute-book for the purpose of creating perpetual invasions on the legislative jurisdiction of the provinces. All the statutes of Ontario which have been quoted by the hon. member go to show that the contentions which I am now urging upon this House are sound. I understand quite well that it is within the scope of our provincial legislature to pass legislation regulating contracts and more especially to create additional causes of dissolution or setting aside of contracts; but I do not see that by the mere fact that under the constitution of 1867 the Canadian parliament is authorized to regulate the rate of interest, it is authorized at the same time and under the same section to create or define the necessary elements to constitute the contract of loan. The passing of this Bill would mean that the parliament of Canada would define Mr. MONK.
the causes of dissolution of that contract of loan and consequently then I say that the Bill would be an invasion of provincial jurisdiction, which is empowered exclusively to define the elements and causes of dissolution of civil contracts.
I say that this Bill, first of all, would be unconstitutional and in the second place that it would be unfair and unjust in that it constitutes an invasion upon the law of nature which guarantees to every one full and complete opportunity to make contracts, and much more so as the Court of Appeal of the province of Quebec and the Supreme Court of Canada decided, about twenty years ago, before the amendment of the Revised Statutes of 1886, that the parliament of Canada was powerless to declare that it was without the power of a loan company to stipulate, for example, that a loan should not be repaid before a certain period of years because it is exclusively within the jurisdiction of the provincial parliament to say under what condition a loan can be made or repaid. As a consequence the law courts have been consulted and in each case they have decided that it was not within the province of the parliament of Canada to regulate such contracts, although the parliament of Canada was authorized to regulate the rate of interest. The purpose of this Bill is to have re-enacted an amendment to the statutes concerning interest which has been repealed by this parliament, because it considered it ultra vires. There is a wide difference between the power to regulate the rate of interest and the power to say under what conditions a contract of loan may be created, set aside or may be dissolved. According to the text of the constitution of 1867, according to the jurisprudence of the Court of Appeal of Quebec and the Supreme Court of Canada, and according to the law of equity, this Bill, which the hon. member proposes to have reduced to an Act, would prove to he ultra vires, unfair and unjust, and in consequence I am ready to vote for the amendment. There is no reason why we should pass _ such legislation when there is in each province a legislative authority properly empowered to decide how such a question of civil coir-tract should be governed.
The hon. member has addressed an argument to the House which I have often heard before, that is, with reference to whether an Act is ultra or intra vires. The hon. member says that in a contract made under provincial legislation we have no power to interfere or touch it, but that we might regulate interest as a matter of usury. But I remember distinctly some years ago when a Bill passed this House, that we did both the things which this Bill proposes. In the first place it provided that where a loan company stipulated that in the event of payments not being
made at certain times, a higher rate of interest should be paid, or something else which would have been a penalty. We did away with that, and we said by that law that over due interest was only to bear the same rate of interest as is stipulate'd in the original contract for the loan.
If the hon. gentleman will allow me-under the Usury Act which was passed a few years ago, the civil contract was declared to be set aside as a consequence of the creation of the so-called usury crime. But the question of crushing usury is not introduced in this Bill. The payment of three months' interest cannot be considered for a moment as a penalty, it cannot be considered as a fine. But I may say, and any member of this House who has some knowledge of business will say also, that this three months' interest is simply an indemnity, or a compensation which is made under the contract payable by the borrower to the lender. There is all the difference in the world between the Usury Act creating the cancellation of the contract as a consequence of violation of its provision; and this Bill which purports to set aside a contract of loan alone or of mortgage.
I do not know whether I correctly understand the hon. member. But there were two features of the Bill in regard to which he argued that it was ultra vires and could not be considere'd in this House. One was with reference to usury, which I contend we have strictly control oyer, and that feature would make it intra vires. But the hon. member who introduced this Bill does not touch the interest question at all, it is the contract feature. But even though it dealt with the contract, and contracts are assigned to the provinces, or the right to stipulate what a contract should be, this would appear to be an interference with that right. In that Bill to which I have already referred we provided that where a mortgage is drawn. I think it was for five or seven years, when three years of the five ha'd expired, if the party who gave the mortgage desired to pay it off he could violate that original contract by giving six months' notice and paying it off. We stipulated that he could do that. Now the question was raised: Can we apply this in all cases to loaning companies? It was held that we could not, that we might possibly apply it to loaning companies that got their corporate powers from this parliament, but not to those who got their corporate powers from a provincial legislature. I think that was held by several prominent lawyers in the House to be good law.
But whether it is good law or not, I know that we went so far as to alter a contract [DOT]to that extent, with a provision that the morgage was to be payable at a certain time; we changed that contract by providing that after the major portion of that time had expire'd the mortgagee could give notice and pay that mortgage off before it matured by effluxion of time.
I must say that I am rather inclined to think that the hon. member for Jacques Cartier (Mr. Monk) is right in his view of the law. But although I am in doubt, I would still be willing to vote for the second reading of this Bill for the purpose of having it brought before a proper committee, and also for the purpose of getting the opinion of the Justice Department. 1 must say that if there is any class of corporations in Canada for which I have very little respect it is loan companies. I have been practising law 19 years, and I have never yet allowed a client of mine to borrow a dollar from a loan company if I could help it. You have only got to take up the contract such as the bon. member for North Grey (Mr. Miller) has cited here to show the unfairness of those contracts. Why, we are spending days and weeks of our time in this House in attempting to enact legislation against railway companies that we think are unfair to the people. But all the iniquities of all the railway companies in Canada heaped together could not, in my judgment, compare with the iniquities of the insurance companies and the loan companies. True, we are not now discussing insurance companies, but I hope later on I shall have an occasion to say something about insurance companies. But on account of the justice of the claim which my hon. friend is advocating this evening, I propose to vote with him, although I have grave doubts as to our jurisdiction. There is, however, one excellent example we might follow and that is section 10 of chapter 120 of the Revised Statutes of Canada, referred to by the hon. member for South Grey. This section I am informed was drafted by the Hon. Edward Blake, a lawyer whose opinion I think will be taken for its face value anywhere in Canada. Now it is true, as the hon. member has stated, that if, under this section, a contract is drawn for more than five years, then, after the expiration of the fifth year the mortgagor can tender the amount due, principal and interest, and three months interest in advance, and no further interest can be demanded. If that be intra vires of this parliament, then it is certainly interfering with a contract which has been made by two parties, and which, according to the contention of my hon. friend from Jacques Cartier, wou'd be relegated to the provinces under the British North America Act. But in view of the action of this parliament on a previ-
ous occasion, and in view of the fact that the matter has gone on for probably twenty years, I think it is a ma'ter of much importance that we can well afford to consider it. For these reasons I will vote for the second reading.
It is quite evident that the Bill which the hon. member for South Grey (Mr. Miller) has presented to the House is regarded as one of great interest and great importance. I am afraid, however, my hon. friend has not impressed the House generally with the merits of the Bill, I think that the sense of the House is against ' him. Nevertheless, I would hope that the hon. member for Jacques Cartier (Mr. Monk) would not press the motion to give this Bill the three months' hoist in a thin House, and I would suggest perhaps that it would serve all purposes if he were to move the adjournment of the debate so that we may have a further opportunity of discussing the question. If that meets with the favour of my hon. friend from South Grey, I would ask him to accept that suggestion.
Mr. -SPROULE. As the Minister of Justice is present could wTe not have his opinion?
I rather think that if the debate is adjourned it may be a long time before we will have further discussion. ,1 would like to have the Bill pass its second reading and be referred to the Committee on Banking and Commerce. We will then have"an opportunity of obtaining the opinion of the Minister of Justice, not an offhand opinion, but an opinion given after due consideration. We all agree as. to the justice of che Bill, and that I am endeavouring to do something that is reasonable and right. I talked to a number of the members of -the legal profession before introducing the Bill, and they have agreed that it is a reasonable thing, and none of them objected that it was beyond the jurisdiction of this parliament. I relied upon section 10, which was referred to by the hon. member for East Grey and the hon. member beside me, as being of the same class of legislation, and I think that if one was within the jurisdiction of this House the other certainly is. I may be wrong in that. I would ask the minister who is leading the House to permit the Bill to pass its second reading and be referred to the Committee on Banking and Commerce.