Gallagher v. Murphy and Gilroy

Gallagher v. Murphy and Gilroy

The note was valid because the real consideration moved from the payee in the form of an extension of time to pay outstanding royalties (not purchase money for a patent interest), and Gilroy’s pre-delivery endorsement operated as an aval under s.131 of the Bills of Exchange Act, making him liable to the payee and its assignee.

Citation
[1929] SCR 288
Parties
Appellant (plaintiff): Ziba Gallagher; Respondent (defendant): J.E. Murphy; Respondent (defendant): F.T. Gilroy
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
5 February 1929
Procedural Posture
Contract / Negotiable Instrument (promissory Note) / Appeal to the Supreme Court of Canada From the Appellate Division of the Supreme Court of Ontario
Outcome
Appeal allowed; judgment of the trial court restored.
Legal Topics
Consideration, Endorsement, Aval, Holder in Due Course, Statutory Formality for Patent Purchase Money, Royalties Vs Purchase Money
Source Language
English
Contract Bills of Exchange Negotiable Instruments Patent Law Consideration Endorsement Aval Holder in Due Course +2 more

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Parties

Ziba Gallagher

Appellant (plaintiff)

J.E. Murphy

Respondent (defendant)

F.T. Gilroy

Respondent (defendant)

Procedural Posture

Contract / Negotiable Instrument (promissory Note) / Appeal to the Supreme Court of Canada From the Appellate Division of the Supreme Court of Ontario

Legal Issues

  1. 1 Whether the promissory note was void under s.14 of the Bills of Exchange Act because its consideration consisted of purchase money for a patent right or partial interest therein
  2. 2 Whether the consideration for the maker’s promise moved from the payee
  3. 3 Whether Gilroy’s endorsement constituted an aval under s.131 making him liable to payee or assignee despite not being a holder in due course

Ratio Decidendi

The note was valid because the real consideration moved from the payee in the form of an extension of time to pay outstanding royalties (not purchase money for a patent interest), and Gilroy’s pre-delivery endorsement operated as an aval under s.131 of the Bills of Exchange Act, making him liable to the payee and its assignee.

Court Disposition

Appeal allowed; judgment of the trial court restored.

Orders

  • Appeal allowed with costs; judgment of trial judge restored and action maintained against defendants J.E. Murphy and F.T. Gilroy
  • Costs to plaintiff in this Court and in the Appellate Division