COURT OF APPEAL FOR ONTARIO

2014 ONCA 57

DATE: 20040123

DOCKET: C57347

Rouleau, Tulloch and Strathy JJ.A.

BETWEEN

2148251 Ontario Incorporated

Plaintiff (Respondent)

and

Catan Canada Incorporated and Leanne Duscio

Defendants/Plaintiffs by Counterclaim (Appellants)

and

2148251 Ontario Incorporated, Calum Waddell and Leslie Waddell carrying on business as Keystone Settlements International

Defendants by Counterclaim (Respondents)

Kevin D. Sherkin and Robert A. Gold, for appellants

Mark A. Radulescu, for respondents

Heard and released orally: January 17, 2014

On appeal from the judgment of Justice James W. Sloan of the Superior Court of Justice, dated June 19, 2013, with reasons reported at 2013 ONSC 4049.

ENDORSEMENT

[1] This is an appeal from a judgment granting summary judgment for $500,000, plus interest and costs, on a promissory note made by the corporate appellant (Catan) and guaranteed by the individual appellant (Duscio). The respondent cross-appeals the dismissal of its motion for summary judgment dismissing the counterclaim.

[2] The following facts are not in dispute:

• a promissory note, dated April 25, 2008 was executed in favour of the respondent as payee by Catan as payor and Duscio as guarantor;

• it was secured by a collateral mortgage of the same date;

• the funds were duly advanced;

• although the note called for interest to be payable monthly both before and after maturity, from and including May 25, 2008 to April 25, 2009, interest was never paid;

• demand for payment was made on May 31, 2010;

• the promissory note was not repaid;

• the statement of claim was issued on April 20, 2011.

[3] Before the motion judge, the appellants argued that the claim was time-barred because the limitation period began to run when Catan failed to make the first interest payment, due on June 25, 2008. The respondent argued that the limitation period did not begin to run until, at the earliest, the maturity date of the note, namely April 25, 2009.

[4] The motion judge found the note was a demand note. He held the limitation period did not begin to run until the date of the demand, since the note provided that it was payable “on demand after maturity date or at the discretion of the payee on the occurrence of any of the following events: (a) if the Payor does not pay when due any of its obligations to the Payee … .”

[5] The motion judge also rejected Duscio’s argument that the note was never to be repaid, but was instead intended to reflect an advance on her share of the profits of an alleged business venture with the principal of the respondent. The motion judge was not prepared to consider parol evidence to alter or vary the terms of the promissory note.

[6] The appellants submit the motion judge erred in finding that the promissory note was a demand obligation. Instead, they say, the note was repayable on a fixed date, namely its maturity date of April 25, 2009. This feeds into the appellants’ submission that the limitation period began to run when the Payor failed to make the first interest payment, due on June 25, 2008.

[7] The short answer to this submission is that the express terms of the promissory note gave the Payee the right, but not the obligation, to demand payment of the full amount of the note on the Payor’s default. The Payee had no obligation to demand repayment of the principal when an interest payment was missed. The limitation period did not begin to run, at the earliest, until maturity. It is not necessary to consider whether it may have commenced at a later date, namely, the date of demand after maturity.

[8] We agree with the motion judge that parol evidence could not be considered to show that the funds paid under the promissory note were intended as an advance rather than a loan.

[9] The appellants argue that they are entitled to a share of profits and that these sums should have been credited towards the payment of the note. We disagree. As conceded by the appellants, the note stands on its own. There is no evidence the note is in error. The dispute as to whether any profits are owed to the respondents is an issue for the trial of the counterclaim.

[10] For these reasons, we would dismiss the appeal.

[11] On the cross-appeal, the respondent submits the motion judge should have dismissed the counterclaim as time-barred, because he found there was an admitted falling-out between the parties between July and September 2009. On this basis, the respondent says, the counterclaim is time-barred because it was not commenced until November 25, 2011.

[12] Clearly the motion judge had some doubt about whether the respondent had established the proper date for the commencement of the limitation period. The significance of the falling-out on the commencement of the limitation period is an issue for trial. We see no reason to interfere with the motion judge’s conclusion and therefore dismiss the cross-appeal.

[13] Success was divided, but the main appeal was of greater significance and involved more work. Costs are therefore ordered to the respondent in the amount of $7,000, inclusive of applicable taxes and disbursements.

“Paul Rouleau J.A.”

“M. Tulloch J.A.”

“G.R. Strathy J.A.”