DATE: 20040915

DOCKET: C40502

COURT OF APPEAL FOR ONTARIO

RE:

FAIR-VALLEY DEVELOPMENTS LIMITED and ABE KAGAL (Plaintiff/Respondents) – and – MANLEY TESSLER and KORETZ ESTATES LIMITED (Defendants/Appellants)

BEFORE:

MACPHERSON, JURIANSZ JJ.A. and SPEYER J. (ad hoc)

COUNSEL:

Kevin R. Aalto, Christopher Stanek and Lindsay Cader

for the appellants

Evert Van Woudenberg and Jane E. Sirdevan

for the respondents

HEARD:

September 13, 2004

On appeal from the order of Justice Blenus Wright of the Superior Court of Justice dated July 11, 2003.

E N D O R S E M E N T

[1] Following a short trial in July 2003, the trial judge, B. Wright J., rendered a judgment in favour of the respondents (plaintiffs) in two respects: (1) $47,000, being the amount the appellants (defendants) improperly withdrew pursuant to a line of credit; and (2) $7786.56 for cleaning and grading costs which were the responsibility of the appellants, but paid for by the respondents. The trial judge dismissed the respondents’ claim for $50,120.69, which they alleged was an overpayment of interest on the vendor take‑back mortgage.

[2] The appellant appeals the component of the judgment relating to the line of credit. The respondent cross‑appeals the portion of the judgment dealing with interest payments on the mortgage.

The appeal

[3] The appellants appeal on two bases.

[4] First, the appellants contend that the trial judge made a palpable and overriding error in concluding that they had no basis upon which to draw upon the letter of credit.

[5] We disagree. As the trial judge noted, the appellants provided no evidence that they had actually spent $47,000 to remedy alleged deficiencies when they made a demand for payment pursuant to the letter of credit. In addition, the appellants’ own consulting engineers were prepared to issue a certificate of completion, but were instructed not to do so by Mr. Tessler.

[6] The appellants’ second contention is that, in light of the findings and judgment of O’Driscoll J. in the companion case Kagal v. Tessler, the trial judge erred by awarding judgment against Manley Tessler personally because of the doctrine of issue estoppel.

[7] We disagree. The issue in Kagal v. Tessler relating to the residential units was damages Mr. Kagal sought for managing the developer’s (Tessler’s) obligations under an agreement to bring those units to market. The issue before Wright J. was the validity of the appellants’ draw on a letter of credit relating to that agreement. There is no overlap between these issues.

The cross‑appeal

[8] The respondents contend that the trial judge erred by concluding that the respondents did not overpay any mortgage interest on the vendor take‑back mortgage.

[9] The agreement provided that interest accrued on the balance of the purchase price three months after the closing date. The closing date was August 27, 1999 and the respondents started paying interest on November 27, 1999.

[10] At trial, the respondents contended that they closed the deal on August 27 under duress. The trial judge rejected this position, pointing out that Mr. Kagal was “represented by legal counsel who could have delayed the closing until the building permits were available according to the provisions of the agreement”. The trial judge also stated that “the closing date and the interest adjustment date were meant to be the same date”. We are of the view that both of these conclusions are amply supported by the wording of the agreement and the testimony at trial. The wording of the agreement indicates the parties’ mutual intention to merge the obligation to convey lots for which building permits were available in the deed.

Disposition

[11] The appeal and the cross‑appeal are dismissed. Success is divided, in terms of both legal result and the money at stake; accordingly, there will be no costs order.

“J. C. MacPherson J.A.”

“R. G. Juriansz J.A.”

“C. Speyer J. (ad hoc)