June 4, 1917

LIB

Frederick Forsyth Pardee

Liberal

Mr. PARDEE:

And the bank becomes

the holder of a lien, and subsequent creditors are not entitled to notice?

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

Not entitled to notice

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

Frederick Forsyth Pardee

Liberal

Mr. PARDEE:

Why should that be? Why should not the farmer who mortgages his stock give notice like any other debtor?

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

That i-s the effect of this proposed legislation- in the event of the province not passing .uch legislation as is referred to.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

Frederick Forsyth Pardee

Liberal

Mr. PARDEE:

But the province may

pass that legislation or not, is it pleases.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

If the province thinks that the advantage accruing to the farmer from opportunity to borrow on his product, as the manufacturer borrows on his product, does not more than counterbalance the other interests affected, they will pass the legislation. We will leave it to the province to determine whether notice shall be given or not. If the province determines that this lien may not be filed, the responsibility, it seems to me, is theirs, for their jurisdiction covers this subject. All chattel mortgage legislation, so far as I am aware, is legislation of the provinces, not of the Dominion. If there is any better way to overcome the difficulty than this that I have suggested, I shall be only too glad to hear of it when the Bill is in Committee of the Whole, or better still, when it is before the Committee on Banking on Commerce. We are seeking to meet a situation in which the farmer engaged in the all-important subject of live-stock raising is vitally interested.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

William Manley German

Liberal

Mr. GERMAN:

I doubt very much if the reason why the farmers have not taken advantage of the legislation of last year is that they do not desire to have a chattel

mortgage filed. I am inclined to think that they have not required to take advantage of it; the farmers have not needed to borrow so much money from the bank as they did previously; they are better off than they were. The Minister of Finance must see that when he gives the banks preferential trade over ordinary creditors, without notice, he is going a long way to protect a class of people who, I think, do not need protection, at any rate not by legislation. What expense can there be attached to the giving of a chattel mortgage? The chattel mortgage is a very simple thing, equally as simple as any sort of an assignment which a man could contract. A chattel mortgage is simply an agreement on the part of one party to pay to another party a certain sum of money at a certain time and (agreeing that certain chattel property which the borrower has is liable to he sold in default of payment. In any sort of assignment that could be devised the same conditions would be included as are included in a chattel mortgage. That assignment would necessarily have to be filed. There would be no authority on the part of this Government to' enact that the assignment should he registered in any of the county offices throughout, at all events, the province of Ontario. That would have to be done by legislation on the part of the provinces. It would have to be registered. It would be absolutely unfair to other creditors to .allow a fanner to pledge all his livestock to a bank without notice to any other person who might he inclined, or induced, to loan him money. That could not he the law. In so far as Ontario is concerned- I do not know what the law is in other provinces-it would he too unfair to either party to put such a law as that on the statute-book. The assignment would have to be registered as a notice to the world. Why should not a chattel mortgage he used just as well as an assignment? Every condition that is in the chattel .mortgage would necessarily be in the assignment. All the stock, and everything that was covered by the security, would have to be recited in the assignment and that assignment would [DOT]have to be registered, It would cost just as much as a chattel mortgage. The banks could have their forms of chattel mortgages so that when a farmer went to the bank to borrow money on the security of his live stock, the solicitors who are employed in every town and village where there is a branch bank and paid so .much a year by the (bank, could fill up the chattel mortgage and it could be executed without any

IMri German.]

expense. I think the Minister of Finance should hesitate before putting on the statute-book legislation which will allow any man to mortgage his property to a bank without putting the transaction in a position where the public generally will have notice of the encumbrance because he is giving a preference to the bank that does not need a preference, that is not asking for it and I doubt very much if the farmers, when they thoroughly understand it, will he particularly interested in the matter. I doubt the wisdom of such legislation.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

William Pugsley

Liberal

Mr. PUGSLEY:

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

John Allister Currie

Conservative (1867-1942)

Mr. CURRIE:

Does this put the farmer in any different position from that of the ordinary 'manufacturer and is not the farmer one of the manufacturers of the country? We are trying to get him put of the clutches of the loan sharks and put him in the position. of the manufacturer.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

William Pugsley

Liberal

Mr. PUGSLEY:

In the case of the manufacturer, it is different because of the largeness-of the operations. It has been thought well to make provision in the case of the lumber manufacturers, because of the largeness of the operations and the important interests involved. Provincial legislatures have not made any provision to meet cases of that kind, but they have legislated in

regard to ordinary bills of sale given by farmers and others. But this gets right down to the case of a farmer who might own ten cows. He would get a loan, he would give the hank a secret lien and he could go tomorrow and borrow money on that stock, the lender would lend the money in good faith, he would record his mortgage in the provincial registry office and he might wake up a fortnight or six weeks afterwards and find that the hank, under its secret lien, could take away his security.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

John Allister Currie

Conservative (1867-1942)

Mr. CURRIE:

What would happen to

the farmer if he did that? Would he go to jail?

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

William Pugsley

Liberal

Mr. PUGSLEY:

It would be very little satisfaction to the man who lends his money, to put a man in jail. It seems to be very objectionable for that reason. If it is desirable to introduce these forms in the Act, why should not the operation of this Act postponed until the legislatures of the different provinces have had opportunity to approve of the legislation?

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

There is only

one object in introducing this legislation, and that is to meet a real difficulty which has existed for years past, especially in the West, in connection with the live stock industry.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

William Pugsley

Liberal

Mr. PUGSLEY:

You do not limit it to the West.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

I do not think it advisable that any legislation we pass here should be limited to any particular section of the Dominion. On the last revision of the Bank Act, and I think in some preceding revisions, this question has been raised on behalf of those engaged in the livestock industry. It has been pointed out, as the hon. member for Simcoe (Mr. Currie) has stated, the manufacturer, great or small, can go to a hank and by a simple form of hypothecation of his product, 'under section 88 of the present Bank Act, obtain advances. That hypothecation constitutes a secret lien. I have myself always been of the opinion that Parliament should hesitate, unless on public grounds of the greatest importance, to extend that principle of the secret lien. But, on the other hand, we must remember that the great industry of this country to-day is agriculture, that we are asking the farmers to increase their production, and that it is our bounden duty to make such laws as will promote such production, that is to say, provided that the public interest otherwise is not seriously affected or injured. Until

last year it was impossible for the farmer engaged in the raising of live stock to hypothecate or pledge his live stock to a bank and obtain advances on it. Last year, in response to most urgent solicitation on the part of the western live stock raisers, I introduced legislation under which the farmer can give a chattel mortgage or bill of sale upon his livestock. We desire to respect the laws of the provinces, because most of the provinces have desired that, in the ease of a lien being taken upon personal property, notice *should be given to the public through registration, and there is on the statute books of imost of the provinces provision for such registration. The difficulty, therefore, with which we were confronted last year was how to permit the farmer to hypothecate or pledge his livestock and give a security and at the same time afford notice to the public that the security had been given. We thought then that the way out of the difficulty was to enable the banks to loan upon chattel mortgage just the same as an individual can loan upon chattel mortgage, and that the chattel mortgage so taken should be registered in accordance with the provincial laws. It seemed to me last year that it was the only way in which the Dominion could meet the situation, because it was not within the power of the Dominion to compel provincial officers charged under the legislation of the several provinces with the duty of registering bills of sale and chattel mortgages, to register a simple form of assignment such as we now propose in accordance with the laws of the province. Therefore, we enacted, that the bank might take a chattel mortgage upon live stock, and that the chattel mortgage should be registered in accordance with the laws of the several provinces. That is where the matter rested. But it has been pointed out to me, not by the banks but by the livestock raisers, that the farmers do not like to give chattel mortgages-the very words " chattel mortgage " seem to cast some doubt upon their credit.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

William Pugsley

Liberal

Mr. PUGSLEY:

Nobody likes that.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

They do not like to give a chattel mortgage, and it is further pointed out that it costs the farmer a substantial fee to have a chattel mortgage drawn. It is a lawyer's work, and there is also a fee for having it registered in accordance with the laws of the province.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
LIB

William Manley German

Liberal

Mr. GERMAN:

No more than this will be.

Thomas White,]

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

William Thomas White (Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir THOMAS WHITE:

I disagree with my hon. friend. Therefore I believe that some of the provinces will be quite willing that these liens should be taken and should not be registered. They will not fear that the ordinary creditors will suffer. They believe that the livestock industry is of such importance that the men raising livestock should have the right to hypothecate or pledge their stock in the same way as a manufacturer is to-day empowered to pledge his manufactured product. Let us assume that in New Brunswick it was considered inadvisable that the farmer should have the right to give a secret lien upon his livestock. Then, under this law, the legislature of that province could authorize the officers who now are authorized to receive and file chattel mortgages and bills of sale, to receive and file this assignment, and if that was not done in accordance with that legislation of .the province, then the assignment would be null and void as against creditors or subsequent purchasers for valuable consideration. On the other hand, let us say that in Alberta, the Legislature was content that the farmer should have the right to give this assignment of his live stock to the bank and that such assignment need not be registered, then the province would allow this Act to operate without bringing in such legislation.

The hon. member for St. John (Mr. Pugs-ley) has, however, raised a question which did appeal to me and which I am quite willing to have considered when the matter is before the Banking and Commerce Committee, and that is as to whether or not the Act should immediately become operative. I feel that it would be a mistake, although my mind is open to conviction, to enact that it should not come into effect until after the provinces have passed this legislation to which I have referred, because then the matter would not be advanced very much further than it is at present.

The assignment would then be taken in lieu of chattel mortgage, and would be filed in the ordinary way. I do think, however, that there is a good deal to be said for the view that the Act should go into operation on a date to be named, the legislatures of the several provinces being enabled in the meantime to enact, if they so desire, legislation'to compel the registration of the assignments taken under this 1 measure. I have brought this Bill in, as I did the Bill of last year, to meet the urgent requirements of the farming community, especially of the West, engaged in the raising of live stc ck. I should like the

Banking and Commerce Committee to hear the parties interested; they will then be able to reach a better conclusion than we can reach by discussing the matter here. The live stock industry is a great industry in Canada, and we look forward to a much greater development of it. One of the chief complaints made against our 'banking system by the raisers of live stock throughout Canada is the lack of simple means of getting bank credit readily upon almost the best kind of security. Live stock raisers and manufacturers are engaged in raising or producing something that they require not for their own needs, but for sale in the markets of the world. In order to carry on business of either kind, it is absolutely necessary that there should be facilities for credit, and it is to meet that situation that this Bill is introduced. I should have hesitated to introduce it at this session, in the midst of the war, if I had not believed that it was highly desirable and in the interests of the live stock industry, which especially at this time we are endeavouring to promote and increase. If in the view of the Banking and Commerce Committee a strong case is made against proceeding with the Bill, personally I should be disposed to pay a great deal of regard to that opinion. I should like, however, in the interests of the live stock industry, the matter to go to the Banking and Commerce Committee, and there be considered on its merits.

Mr. iMiQLLOY: The only thing wrong

with the legislation proposed is that it does not go far enough. The banks should be permitted to lend money to the farmer on his live stock without talking either mortgage or assignment. Last year in the district in which I live a sale of eight or nine thousand sheep was advertised. A great many men who had previously been grain farmers only wished to purchase a number of those sheep. Upon going to the bank, they were told that they could have the money, but would have to give a chattel mortgage on whatever stock they bought. As a consequence, they did not buy. Two persons whom I have in mind, however, did purchase the stock, misapprehending what the bank had told them. When they came to make settlement simply by giving a note for the amount borrowed, as they had done that year and many years before, they were told that they 4 p.m. had to give a chattel mortgage.

The result was that the savings which they had put aside in the bank for operations in 1917 were drawn out and used

to pay the amount of the purchase of the live stock. These men will be obliged now to borrow on their note from the bank in order to carry on operations this year. The farmer will not purchase live stock and give the hank a chattel mortgage, paying them, as one farmer said, from $8 to $10 to be advertised. I shall certainly support this legislation, but I repeat that it does not go far enough. Any man who is a bona fide settler and a worthy citizen should be able to borrow from ,a bank $1,000, $1,500, even $5,000, for the purchase of live stock. The banks will not lose, 'because they never lend money to anyone unless they expect to get it back with good interest.

IMr. McOOIG: I believe that the banks

should lend money to the farmers for the purchase of stock, as is proposed, especially in this particular year. The farmers would buy a great deal of the stock that is on the market in the province of Ontario if they could get the money to purchase. But they protest against giving a chattel mortgage and -advertising themselves, when they are endeavouring to do what is in the best interest's of the country and of their own industry. The idea of the Bill, I believe, is to place the bank in the same position as the manufacturer when he disposes of his machines. The manufacturer has a lien on the machines that he sells; the bank has a lien on the stock which is purchased by the money which the farmer borrows. If I understand the Bill rightly, I am heartily in accord with the proposed legislation and should be glad to see it passed. I believe that it would have a very good effect upon the live stock industry of Canada.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink
CON

John Allister Currie

Conservative (1867-1942)

Mr. CURRIE:

This is one of the most important pieces of banking legislation yet offered to the House. The one great obstacle to successful farming in Canada is lack of credit. That obstacle has been largely overcome in Europe 'by the establishment of rural credit banks, and the United States is endeavouring to overcome the difficulty in the same way. There is no reason why the farmer, in regard to his product, should not be in the same position as the manufacturer, because, in a sense, the farmer is a manufacturer. Ninety-nine per cent of the farmers are honest, and will pay their debts. Failures -among farmers are less numerous than among manufacturers. When the farmer wants a comparatively small amount of money he is up against the loan shark. Suppose a farmer who has a good deal of live stock, but is short of feed, wants to buy feed to tide him

over the spring .months. He goes to the bank for $100. As he has nothing to offer in the way of security, the bank sends him to an attorney, or a gentleman who lends money. This gentleman takes the farmer's note for $125 at the legal rate of interest, and a chattel mortgage, which is duly filed. The result is injurious to the farmer, who is not given a fair chance; many prosperous farmers have been ruined by the methods employed by loan sharks. If a farmer is out of debt and has good credit he should be able to finance his business the same as any merchant does. * If he has a surplus of wheat which is of bad grade, as many western farmers have, lie should be able to get money from the bank to buy hogs or cattle to which he can feed that stuff and make from 50 to 100 per cent on the money in a short time. The bank is secured, because it has a first lien on the property, just as it has on logs that are going through the sawmill. It is able to get all necessary information about the farmer's standing and his prospects of success. The farmer needs this legislation very badly.

The quantity of stock in the country is diminishing. Take a man who has a large *farm and a large number of stock, and who, through no fault of his, has a crop failure. At present he is either compelled to sacrifice his stock or to borrow money from a loan shaik at ruinous interest rates. Why should such a man not be able, on the security of one or more head of cattle, to borrow money from a bank so that he may be able to carry over his stock? In Kansas and other Western 'States several banks have been formed for that purpose, and they show the greatest expansion and success of any monetary institutions in the United States; in fact, they have been so successful that they are able to lend to farmers who have plenty of feed, money to buy stock, and after the feed is fed to the cattle, the banks still look after the farmers, and the latter are able to make lots of money and to get rid of the middleman in their hanking just as they are trying to get rid ol the middleman in their buying and selling. This is the most valuable banking legislation that has been brought before this House, and those who are making money drawing up chattel mortgages, and the loan sharks who are lending at fifteen per cent interest are not going to prevent this legislation from becoming law. Had I my way, I would not send this legislation to the provinces; this House can legislate on /banking without any preference to the provinces. This is good legislation

and it will enable the farmer to get rid of a great deal of stuff which is now going to waste around his farm.

Topic:   QUESTIONS.
Subtopic:   BANK ACT AMENDMENT.
Sub-subtopic:   LOANS ON SECURITY OF LIVE STOCK.
Permalink

June 4, 1917