Merchants Bank of Canada v. Bush

Merchants Bank of Canada v. Bush

Where a guarantor gave a general undertaking to pay all moneys due from the principal, the bank's charging of interest in excess of the statutory rate did not, absent a legally binding variation or proof of payment/assent by the principal, discharge the guarantor; the guarantor remained liable up to the guaranteed limit with interest as specified in the guarantee.

Citation
(1918) 56 SCR 512
Parties
Plaintiff/appellant: Merchants Bank of Canada; Defendant/respondent: O. H. Bush
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
10 June 1918
Procedural Posture
Collection / Appeal to Supreme Court of Canada From the Court of Appeal for British Columbia
Outcome
Appeal allowed.
Legal Topics
Guarantor Liability, Illegal Interest, Variation of Contract, Discharge of Surety
Source Language
English
Contract Banking Guarantee Commercial Law Guarantor Liability Illegal Interest Variation of Contract Discharge of Surety

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Parties

Merchants Bank of Canada

Plaintiff/appellant

O. H. Bush

Defendant/respondent

Procedural Posture

Collection / Appeal to Supreme Court of Canada From the Court of Appeal for British Columbia

Legal Issues

  1. 1 Whether the bank charging interest in excess of statutory rate discharged the guarantor
  2. 2 Whether pleadings sufficiently alleged default by the principal debtor
  3. 3 Whether an alleged variation in the principal contract was legally binding so as to discharge the surety

Ratio Decidendi

Where a guarantor gave a general undertaking to pay all moneys due from the principal, the bank's charging of interest in excess of the statutory rate did not, absent a legally binding variation or proof of payment/assent by the principal, discharge the guarantor; the guarantor remained liable up to the guaranteed limit with interest as specified in the guarantee.

Court Disposition

Appeal allowed.

Orders

  • Appeal allowed with costs; judgment entered for appellant in the amount of $3,000 with interest at 6% per annum as provided in the guarantee and costs.