TRUEMAN J.A.:—On December 14, 1933, the Municipality of Riverside, Manitoba, held a tax sale, included in which was a half section of land registered under the Real Property Act and owned and farmed by Edward L. Ratz, subject to a mortgage under date of December 14, 1926, for $4,000, to the Trust & Loan Co. of Canada. Arrears of taxes on the land were $664.25, for which amount the land at said tax sale was sold to the municipality, which then received a tax sale certificate, which it still holds. By virtue of s. 78 of the Real Property Act, R.S.M. 1913, c. 171 (now s. 58 of the Real Property Act, ce. 38 of the Acts of 1934) "‘land, mentioned in a certificate of title’ ‘ is “deemed to be subject to . . . (b) any municipal charge, rate or assessment existing at the date of the certificate, or subsequently imposed on the land.’’
In October, 1934, Ratz made a proposal under the Farmer s’ Creditors Arrangement Act, 1934 (Can.), c. 53, and amending Acts. On April 23, 1935, a meeting of the creditors was held by the Board of Review, when the Board formulated a proposal.
A provision thereof is the following :
“The taxes owing on the W.1 7-5-18 W. shall be fixed at $805.80 as at December 31, 1934, with interest at the rate of 6% from that date and shall be repayable as follows : $100 on the 1st days of November, 1935, 1936, 1937, 1938, 1939, 1940 and 1941; and the balance on the 1st day of November, 1942. Interest shall be paid annually with each instalment of principal, commencing on the 1st day of November, 1936. All proceedings in respect of the tax sale of the said lands on the 14th day of December, 1933, shall be forever stayed and there shall be no right on the part of any tax sale purchaser or any person to take any proceedings in respect of such tax sale.’’
On December 19, 1936, Ratz paid $200 to the municipality. The amount was applied on taxes on the land accrued since the tax sale. On November 12, 1937, he transferred the land to the mortgagee, and thereafter ceased to farm or occupy it.
The authority of the Board to deal with said taxes and to stay all proceedings by the municipality with respect to the tax sale is denied by the municipality, which now moves in certiorari proceedings to have the foregoing provision in the Board’s proposal eliminated therefrom. All material being before the Court on the motion for the writ, it was agreed by counsel that the motion be heard as though a return had been made. The need of having the legality of the provision dealt with became apparent to the municipality when in answer to a communication from the municipality to the mortgage company inquiring whether it intended to redeem the land the company took the position that the Board’s proposal deprived the municipality of its statutory rights in the land.
Founding himself on provisions of the Assessment Act, C.A.M. 1924, ce. 134 (now e. 49 of the Acts of 1934), Mr. Guild’s submission is that the taxes for which the land was sold were by the sale satisfied and ceased to be taxes; that by the sale the municipality became the owner of the land, subject to a right of redemption in Ratz and the mortgagee; title ownership and possession in the municipality being deferred until the expiry of the redemption period: Ponton v. Winnipeg (1908), 41 8.C.R. 18; Cartwright v. Toronto (1914), 20 D.L.R. 189 at pp. 192-3, 00 S.C.R. 215; see also Excelsior Mining Co. v. Lochead (1915), 35 O.L.R. 154; Leslie v. Bronfman (1922), 16 S.L.R. 159. Until the time for redemption elapsed, the land continued liable to assessment and taxation in the name of Ratz. Instead of Ratz owing $805.80, as stated in the proposal, he then owed but $72.45, being the 1934 taxes.
How the Board came to embody in its proposal the provision in question was no doubt due to the filing by the municipality of a proof of claim for $805.80 taxes, and the statement of the Reeve at the meeting at which the proposal in question was formulated that the municipality was willing to extend the time for their payment. This attitude, however misleading, has no estoppel effect.
Rule absolute to quash said provision. There will also be a declaration that the same is null and of no effect.
RICHARDS J.A.:—I agree that the rule should go.
Mr. McArthur, counsel herein for the Board of Review, under instructions from the Department of Justice, devoted his argument largely to presentation of the submission that municipal taxes (these being the taxes involved herein) are debts or liabilities within the Board’s jurisdiction. While recognizing that an opinion of mine upon this question will be extra-judicial, it may not be unusual for me to state the conclusion which I have been led to entertain in the matter. The question derives its importance by reason of the judgment of Baxter C.J., in Re Legacé (1939), 14 M.P.R. 18, in which he held that municipal taxes are not within the Act.
The Act defines ‘‘creditor’’ but does not define ‘‘debts’’ or "‘liabilities.'' Reference must, therefore, also be made to the provisions of the Bankruptcy Act which, by s. 2(2) of the Farmers’ Creditors Arrangement Act, shall apply mutatis mutandis.
The Farmers’ Creditors Arrangement Act provides: 4 ‘2(1) (d) ‘creditor’ includes a secured creditor and, nothwithstanding the absence of privity of contract between the debtor and any of the persons hereinafter mentioned, a person holding a mortgage, hypothec, pledge, charge, lien or privilege on or against the property of the debtor or any part thereof and, in case the debtor holds real property under an agreement of sale, or under an assignment of an agreement of sale, the vendor of such property or any person entitled under an assignment by such vendor.’’ (amended 1938, c. 47, s. 1)
Then by s. 6(1) it is provided that "‘A farmer who is unable to meet his liabilities as they become due may make a proposal for a composition, extension of time or a scheme or arrangement either before or after an assignment has been made.’’
The Bankruptcy Act provides:
"2(0) ‘debt provable in bankruptcy’ or ‘provable debt’ or ‘debt provable’ includes any debt or liability by this Act made provable in bankruptcy or in proceedings under an authorized assignment ; ’ ’
"’2(ii) ‘secured creditor’ means a person holding a mortgage, hypothee, pledge, charge, lien or privilege on or against the property of the debtor, or any part thereof, as security for a debt due or accruing due to him from the debtor.’’ (amended 1932, c. 39, s. 2(1))
Under the heading “Debts Provable,’’ it is further enacted as follows :
“104. Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise, or breach of trust, shall not be provable in bankruptcy or in proceedings under an authorized assignment.
“2. Save as aforesaid, all debts and liabilities, present or future, to which the debtor is subject at the date of the receiving order or the making of the authorized assignment or to which he may become subject before his discharge by reason of any obligation incurred before the date of the receiving order or of the making of the authorized assignment, shall be deemed to be debts provable in bankruptcy or in proceedings under an authorized assignment.
“3. The court shall value, at the time and in the summary manner prescribed by General Rules, all contingent claims and all such claims for unliquidated damages as are provable by this section, and after, but not before, such valuation, every such claim shall for all purposes of this Act, be deemed a proved debt to the amount of its valuation.”
The Assessment Act, 1934 (Man.), c. 49, provides: ‘‘120. Taxes may be recovered with costs in a court having jurisdiction as a debt due to the municipality from a person by whom the taxes are payable, or who is the owner of property on the assessment roll liable to taxation.’’
Section 116 of the Act provides that taxes shall be a lien on the land.
The principle that taxes are not a debt in the ordinary sense of the term—Pipestone v. Hunter (1916), 28 Man., R. 970 at p. 571; Lynch v. Canadian N.-W. Land Co. (1891), 19 S.C.R. 204 at p. 208; Dillon on Municipal Corporations, 5th ed., s. 1414— has thus no application to Manitoba.
Apart from the provisions of the Assessment Act it seems to me that where liability exists to pay taxes the same are a debt provable in bankruptcy, and thus within the Farmers^ Creditors Arrangement Act. In Ex p. Kemp, Re Fastnedge (1874), L.R. 9 Ch. 383, Sir G. Mellish at pp. 387-8 says: "Now, the words ‘debts due to him’ are certainly words which are capable of a wide or a narrow construction. I think that prima facie, and if there be nothing in the context to give them a different construction, they would include all sums which any person is legally liable to pay, whether such sums had become actually payable or not. On the other hand, there can be no doubt that the word ‘due’ is constantly used in the sense ‘payable,’’ and if it is used in that sense, then no debts which had not actually become payable when the act of bankruptcy was committed would be included. Lastly, the expression ‘debts due’ is sometimes used in bankruptcy proceedings to include all demands which can be proved against a bankrupt’s estate, although some of them may not be strictly debts at all . . . .”
Reference was made to s. 125 of the Bankruptcy Act. It is as follows: “125. Nothing in the four last preceding sections shall interfere with the collection of any taxes, rates or assessments payable by or levied or imposed upon the debtor or upon any property of the debtor under any law of the Dominion, or of the province wherein such property is situate, or in which the debtor resides, nor prejudice or affect any lien or charge in respect of such property created by any such laws.’’
The four last preceding sections referred to in s. 125 relate only to priority of claims in the distribution of the debtor’s estate. Section 125 does not, in itself, confer any preferential rights in the collection of municipal taxes and does not state that claims for same shall not be filed or dealt with under the provisions of the Act. It simply preserves any preferences liens or charges given by provincial statutes. See Duncan & Reilly on Bankruptcy, 2nd ed., p. 631, and the cases there referred to.
Section 2(d) of the Farmers ‘ Creditors Arrangement Act, quoted above, is undoubtedly wide enough to include the municipality within its definition of creditor which includes a secured creditor and I think too, if the liability for payment of taxes is a debt under s. 104, supra, that the municipality must be considered a secured creditor under s. 2(ii) of the Bankruptcy Act.
Then, if my reasoning is sound, taxes can be dealt with as a debt under the provisions of the Farmers’ Creditors Arrangement Act, and, if proper, a reduction or extension of time may be ordered although the creditor may not be deprived of his security; A.-G. B.C. v. A.-G. Can., Reference Re Farmers 9 Creditors Arrangement Act, 1934, [1937] A.C. 391 at p. 408. In making this statement I realize, of course, that taxes being a prior charge on land are seldom, if ever, reduced.
PRENDERGAST C.J.M., DENNISTOUN and ROBSON J J. A. agreed.
Application granted.