Question 561. - (1) Section 88 of the Bank Act appears to deal only with wholesale manufacturers, wholesale purchasers, dealers or shippers, and with farmers. Can a bank take from others security of the same kind and upon similar terms as if a private person were making the advance? (2) Can a bank take security of a different kind than that mentioned in section 90 from the class dealt with by section 88, i.e., wholesalers, etc.? (3) Can a bank take security in the form prescribed in section 87 from persons who are not wholesalers or shippers? (4) Can a bank take security for future advances from wholesalers, etc., in the form of a chattel mortgage? (5) Need a bank register chattel mortgages for protection against other creditors?

Answer. - (1) A bank cannot take security such as that described in section 88, and amendments, except from persons that came within the description contained in the first, second and third clauses.

(2) (3) A bank can take security under section 87 or section 80 from any debtor, whether he cames under the descriptions in section 88 or not.

(4) A bank cannot take security from wholesalers by way of chattel mortgage for future advances, except possibly as suggested below.

(5) A bank's rights under chattel mortgage are precisely the same as the rights of other parties, and they must register securities if they are to be good against other creditors.

It is probable that the security taken under section 88 might be in the form of chattel mortgage. On this point we think the view expressed in La Banque d'Hochelaga v. Merchants Bank of Canada case, referred to on page 382, Volume II. of the Journal, is sound:

"I agree with the contentions of the plaintiff's counsel that in lending money to the classes of persons and upon the security of the goods mentioned in section 88, the bank is not limited to taking security in the form set out in the schedule, but may take it in any manner known to the law. The section is directed chiefly to transactions of a certain nature. It occurs among a number of provisions defining the powers of banks and the nature of the business which they may transact. There was in the more general section (76) a qualified prohibition against lending upon such security, and section 88 empowers the bank to lend to certain persons upon certain security otherwise prohibited by section 76. The clause as to the form is permissive only, and was probably designed for the convenience of banks, that they might draw up such securities for themselves without a solicitor's assistance, and feel that a long mortgage was unnecessary. That clause cannot, I think, control the general enabling powers contained in the earlier portions of the section. It is true that I interpret section 76 as meaning that, except as authorized by the Act, a bank shall not lend on certain security. But this has to do with the substance and not with the form of transactions, and if no form were authorized it could not be said that the earlier part of section 88 would be inoperative."

It should, however, be said that expressions made use of elsewhere, where the point was not directly involved, indicate that there may be a difference of opinion in the courts respecting this matter.