Ontario Superior Court of Justice

COURT FILE NO.: 5346/10
DATE: 2012-04-05

BETWEEN:

CAPMOR FINANCIAL SERVICES CORPORATION Plaintiff – and – SIGMA 1 DESIGN LIMITED, 1646542 ONTARIO LTD., CATHERINE ANNE UNDERHILL and ROBERTO A. DeROSA, also known as ROBERT DeROSA Defendants

Cameron D. Neil, Counsel for the Plaintiff

Jerome H. Stanleigh, Counsel for the Defendant Catherine Anne Underhill

HEARD: March 5, 2012

REASONS FOR JUDGMENT

MURRAY J.

Introduction

[1] The plaintiff Capmor Financial Services Corporation (hereinafter referred to as “Capmor”) brings a motion for summary judgment in action 5346\10 in which it seeks judgment against Catherine Anne Underhill (hereinafter referred to as “Underhill “) and Roberto A. DeRosa (hereinafter referred to as”De Rosa”).

Background facts

[2] The plaintiff Capmor is an equipment leasing company.

[3] Capmor purchased certain construction equipment for $330,630 in order to lease such equipment to the defendants. Two equipment leases for heavy construction equipment were entered into by Capmor on March 1, 2006. All of the lease paperwork was signed by Underhill on behalf of the corporate defendants, including an acknowledgment of the delivery and acceptance of the leased equipment. DeRosa was not a party to the lease transactions.

[4] In applying for the equipment leases, Underhill represented to Capmor that she was the owner/manager of the corporate defendants, that she was the chief executive officer and a director of 1646542 Ontario Limited, that she was president and secretary of Sigma 1 Design Limited and that she had been operating the construction business since February of 2002.

[5] The leases went into default in June 2007. Capmor was only able to recover some of the leased equipment. A John Deere hydraulic excavator, a Caterpillar excavator and a Caterpillar concrete crusher were not recovered. Capmor believes it will not recover the balance of the leased equipment.

[6] Default judgment was obtained on June 29, 2009 against the corporate defendants (Sigma 1 Design Limited and 1646542 Ontario Ltd.) and against Underhill in the liquidated sum of $285,238.61, inclusive of prejudgment interest in action number 661/09 commenced in Milton Ontario. The judgment did not allege fraud. De Rosa was not a named defendant in that action and, as noted above, DeRosa was not a party to the lease transactions.

[7] On 25 November, 2010, the plaintiff obtained a judgment in action number 661/09 from Mr. Justice Gray of the Superior Court of Justice ordering DeRosa to deliver up possession of the unrecovered equipment to the plaintiff and authorized the plaintiff’s bailiffs to take all necessary steps to recover such equipment.

[8] On December 15, 2009, Underhill made an assignment in bankruptcy. The bankruptcy of Underhill has resulted in the default judgment obtained against Underhill being stayed by operation of the Bankruptcy and Insolvency Act , R.S.C., 1985, c. B-3.

[9] The Registrar of the Superior Court of Bankruptcy and Insolvency has, by order dated November 1, 2010, ordered that the stay of proceedings imposed by section 69 of the Bankruptcy and Insolvency Act does not operate against Capmor to prevent an action based in fraud against Underhill. Capmor then commenced this action at the Superior Court of Justice at Milton bearing court file number 5346/10 in which the plaintiff seeks summary judgment against Underhill and DeRosa.

[10] Action number 5346/10 names as defendants those defendants named in 661/09 and in addition names Roberto A. DeRosa (also known as Robert DeRosa) as defendant.

[11] In this action, Capmor alleges it was the victim of fraud perpetrated by the defendants, including Underhill and De Rosa, and that it was induced by false representations to purchase construction equipment and lease such equipment to the corporate defendants. The leases went into default, some of the equipment was not recovered and damages resulted.

[12] Underhill has filed affidavits on the return of this motion to the effect that that she had no knowledge of the true state of affairs, that she signed documents at the behest of DeRosa and that she was not the true owner of the businesses. She deposes that she has no knowledge of the whereabouts of the missing construction equipment. She further deposes that she worked for Mr. DeRosa and held shares for his corporations in trust for him and that the true owner and operating mind of the businesses was DeRosa. Underhill asserts in her affidavit material that she acted without knowledge of the false misrepresentations and under duress. According to the plaintiff and Underhill, DeRosa is currently charged with drug and organized crime related offences stemming from a large marijuana grow operation at the former Molson Brewery plant in Barrie, Ontario where, perhaps coincidentally, some of the leased construction equipment was found abandoned. According to the material filed by Capmor, DeRosa was apprehended in Cuba while attempting to board a flight for South America and is currently incarcerated.

[13] I am not satisfied, based on the material before me, that Capmor is entitled to summary judgment against Underhill. The question required to be answered. as established by the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633 , [2010] O.J. No. 4130, is whether, on the motion for summary judgment, there can be a full appreciation of the evidence and issues required to make dispositive findings or can this full appreciation only be achieved by way of a trial. In my view, with respect to Underhill, the answer is no. There are questions of credibility and fact which cannot be answered with any certainty on a motion for summary judgment. There must be a trial.

[14] On the other hand, DeRosa has not defended the action and the plaintiff is entitled to partial summary judgment against him in the liquidated sum of $283,939.68.

[15] The plaintiff asks for judgment on a joint and several basis against DeRosa and Underhill for punitive and aggravated damages in the amount of $100,000. Punitive damages are rarely awarded in a contract case. Whether this is one of those rare cases where the defendants’ conduct was sufficiently reprehensible to justify an award of punitive and aggravated damages on a joint and several basis should only be decided after a trial.

[16] The plaintiff has also asked for a declaration that the judgment against DeRosa shall survive any bankruptcy of the defendant DeRosa. The case at bar is easily distinguished from the case of Fung v. Cheung , [2010] O.J. No. 3252 , referred to by counsel for Capmor. In Fung v. Cheung , at paras. 46 and 47, the judge said the following:

The evidence before me shows that the issue is not merely hypothetical. Ms. Cheung's counsel has stated in correspondence in the settled action that Ms. Cheung had limited financial resources available to her and that once those resources were expended, she would be, for all intents and purposes, judgment proof.

It appears to me obtaining a determination of the effect of bankruptcy on Ms. Cheung's debt to Mr. Fong at this time is an efficient way of proceeding. It will allow Mr. Fong to assess what are the most appropriate steps for him to take in attempting to obtain payment of the debt, including whether he should continue with his efforts to have Ms. Cheung declared a bankrupt. The application is neither a pointless exercise nor an inefficient use of the courts.

[17] DeRosa has not declared bankruptcy. This is an academic and hypothetical matter at this time. The plaintiff’s request for a declaration that the judgment against DeRosa shall survive any bankruptcy of the defendant DeRosa is denied.

Conclusion

[18] Capmor Finanancial Services Corporation’s motion for summary judgment against Catherine Anne Underhill is dismissed.

[19] Capmor Finanancial Services Corporation is entitled to partial summary judgment against Roberto A. DeRosa, also known Robert DeRosa, in the liquidated sum of $283,939.68.

[20] Capmor Finanancial services Corporation’s request for punitive and aggravated damages on a joint and several basis should be decided after a trial.

[21] Capmor Finanancial services Corporation’s request for a declaration that the judgment against Roberto A. DeRosa, also known Robert DeRosa, shall survive any bankruptcy of the defendant DeRosa is dismissed.

Costs

[22] If the parties are not able to agree on costs, I may be spoken to in court - or by way of conference call if this is easier for counsel - at a mutually convenient time to be arranged through the office of the trial co-ordinator in Milton.

MURRAY J.

Released: April 5, 2011

COURT FILE NO.: 5346/10
DATE: 2012-04-05

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: CAPMOR FINANCIAL SERVICES CORPORATION Plaintiff – and – SIGMA 1 DESIGN LIMITED, 1646542 ONTARIO LTD., CATHERINE ANNE UNDERHILL and ROBERTO A. DeROSA, also known as ROBERT DeROSA Defendants REASONS FOR JUDGMENT MURRAY J.

Released: April 5, 2012