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Distress Clauses in Mortgages, 250 DISTRESS CLAUSES. This paper is not a re-serving of the book " Distress Clauses in Mortgages," but is fresh substance. It deals with the subject under the following headings : Part 1-Recourse Against Chattels . Part 2.-Miscellaneous. Part 3.-Eviction. PART I-RECOURSE AGAINST CHATTELS. Two Kinds of Distress Clauses . Distress clauses in mortgages and agreements for sale are of two kinds, namely : (1) Attornment clauses, to the relationship of landlord and ten- ant created by which the common law right of distress for arrears of rent is an incident, and, (2) Licenses to distrain, by which the mortgagor or purchaser specifically grants to the mortgagee or vendor, power, in case of default, to enter upon the land and by distress warrant to recover arrears under the mortgage or agreement, in the same manner as rent. Legislative Restriction . The earliest Manitoba legislation expressly restricting distress rights of mortgagees of land is sec. I of 1884, Man ., c. 27 . This is intituled "An Act respecting Distress for rent and interest upon Mortgages," and appears to be the first Distress Act passed in Mani- toba . The Journals of the Legislative Assembly show that section 1 of the Bill as introduced was as follows : " 1. From and after the first day of January, A.D. 1885, the right of (landlords and) mortgagees to distrain for (rent or) interest due upon mort- gages ; shall be limited to the goods and chattels of the (tenant or) mortgagor only, and as to such goods and chattels, only to such as are not exempt from seizure under execution ." and that in Committee of the whole House the words within brackets were deleted, and that upon the Speaker resuming the Chair the sec- tion, as so altered, was passed and received the Royal Assent . April, 1927] Distress Clauses. '25 1 Cases on the Legislation. This provision, which originated in Manitoba, was duplicated in Ontario in 1886. In Edmonds v. Phe Hamilton Provident and Loan Society;,- the majority of the Court held the section to be applicable to every case of a mortgagee distraining; whether under a license or under an attornment clause, but in Linstead v. Hamilton Provident and Loan Society,2 the late Mr. justice Killam held it to extend only to distraints under license and stated his conjecture to be that the Legislature had in mind only the usual proviso in the form of mort- gage-deed composing the .second schedule of 'The Short Forms Act. This proviso is the present covenant No. 14 in the form and, in the - short style, reads " Provided that the mortgagee may distrain for arrears of interest." This proviso is a mere contractual license to distrain and does not create the relationship of landlord and tenant. It was along with the rest ôf the form copied by the Manitoba Legislature from " An Act respecting short forms of Mortgages in Upper Canada," 1864, c . 3l . The Manitoba decision is to be preferred, because the late Mr. justice Killam sat in the Legislature in 1884 at the time of enact- anent of the Distress Act provision in question, and was one of the principal debaters on the, Bill and is accordingly to be taken to have known pretty well, what the section meant. Master-in-Chambers. Clarry, of Alberta, in Confederation Life Association v. Wood,3 pre-; ferred the Ontario decision, as did also the majority of the Court en banc in Vousden v. Hopper et al,4 but possibly this was out of' lack of knowledge of, the intimate acquaintance Mr. justice Killam . had with the section. .- Amendment of the Legislation. By 1921,'Man., c. 14, s. 1, the section under consideration was . changed to read as follows : " 2. The right of mortgagees and vendors of land under' agreements of sale to distrain for interest or for rent claimed to be due under any relationship of landlord and tenant created by the mortgage or agreement of sale shall be limited to the goods and chattels of the môrtgagor or purchaser only, and as. to such goods and chattels to such. only as are not exempt from seizure under execution." (1891) 18 O.A.R. 347. (1896) 11 Man. R. 199. °(1922) 1 W.W.R. 766. '(1911) 4 Sask. L.R. 1 ; 16. W.L.R. 294. 252 The Canadian Bar Review . [No. IV Distress Clauses v. Chattel Mortgages. Such is the present form of the section, and a question which arises is : Can goods upon which the mortgagor or purchaser has given a chattel mortgage be said to continue to be his goods and chattels and distrainable under the attornment clause? Distress Act section 5, first passed in this Province in 1596, pro- vides that a landlord shall not distrain for rent on goods and chattels the property of any person except the tenant or person who is liable for the rent, but that this restriction shall not apply in favour of any person whose title is derived by purchase, gift, transfer, or assign- ment from the tenant, whether absolute or in trust, or by way of mortgage or otherwise. If the effect of the section limiting distress rights under attorn- ment clauses to goods and chattels of the mortgagor or purchaser be that landlords under such clauses are not entitled to the benefits of the reservations in section 5, then such landlords will largely have to rely upon the fact that although at law ownership of mortgaged goods is in the chattel mortgagee, in the view of equity the property is in the mortgagor subject to but a charge in favour of the chattel morgtagee. The following cases directly touch the question of the respective rights of a chattel mortgagee and a mortgagee or vendor of the land upon which the goods are situate : McDermott v. Fraser,5 McDougall & Secord Ltd. v. Merchants Bank of Canada,6 In re Lake Winnipeg Navigation Company Limited, Northern Trust Company's Claim, 7 In re Larratt and Canadian Bank of Commerce," The Queensland Mortgage and Agency Company,. Limited, v. The British and Aus- tralasian Trust & Loa-it Company, Limited.9 In the Queensland case, Edmund Dalton, a sheep-rancher, had given to the plaintiff a chattel mortgage upon the sheep and after- ward, to the defendant, a land mortgage upon the ranch and the latter mortgage contained an attornment under which seizure had been made of a number of the sheep for arrears of rent under the clause. The Court of three judges which heard the case delivered opinions holding the distraint to have been without justification as against the mortgagee of the sheep. The reasoning of the Court may be sum- marized as follows : 5 (1915) 25 Man. R. 298 ; 8 W.W.R. 196 ; 119151 23 D.L.R. 430. (1920) 1 W.W.R. 364; (1919) 1 W.W.R. 830 ; 119201 51 D.L.R. 309. 1 0921) 2 C.B.R. 380. '(1923) 1 W.W.R. 875 ; 119231 1 D.L.R. 1141. °(1887) 3Q.L.J.R.4. April, 1927] Distress Clauses. 253 Registration of the chattel mortgage constituted notice of it to all persons who might afterward deal with the sheep or with mat- ters which might involve the sheep. Accordingly, the defendant `must be taken to have known that to accept from the rancher a mortgage containing a right of distress under an attornment clause would be to assist him to purport to derogate from his prior grant to- the plaintiff. The law could not, allow such derogation to be effective. Under the chattel mortgage, the plaintiff had acquired not only security upon the sheep, but also, necessarily, an implied easement in the land for their pasturage. One proposing to buy or to take a mortgage upon land in a grazing country, if he would protect him- self, should first search and see whether there are any subsisting ights of this kind. Moreover, as the attornment clause was in effect a security over already mortgaged sheep, it came within the 31 st section of The Mercantile Act of 1867, which forbade the granting of a further mortgage upon already mortgaged sheep without the consent of the subsisting mortgagee . Share-crop Attornment Clauses. The benefits of The Crop Payments Act, of Manitoba, now expressly extend to attornments at a rental -of a share of the crop. This is by virtue of an amendment passed last year, namely, 1925, Man. c. 12. Previously, there was room for doubt that this was the position. That there should be such doubt was unsatisfactory, because it frequently happens that the share-crop form of tenancy best suits a particular case, from the standpoint of the person farm- ing the land, as well as from that of the other party. Insertion of share-crop attornments is becoming more common as time goes on. One at least of the banks has its own printed farm mortgage form, the attornment in which is at a share-crop rental ; and a certain company which has extensive land holdings in the West incorpor- ated in a recent revision of its standard form of money-payment agreement for sale the following attornment clause and license to distrain, namely : "And for the better securing the payment of the moneys-payable here- under, the purchaser doth attorn and become tenant to the Company of the said land from the date hereof until the-happening of default hereunder at a yearly rental equivalent to the annual interest secured hereby, to be paid on each day herein appointed for the payment of interest, but, from and after the occurrence of such default, from year to year at a rental of one-third of all crops grown upon the said land in each year without any exemption or 254 The Canadian Bar Review.
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