ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10275/08
DATE: 2012-04-26

B E T W E E N:

Georgiann Giglia Bonner

Margaret A. Hoy, for the Plaintiff

Plaintiff

• and -

Francis Robert Bonner and Robert Alexander Bonner

Chris Bittle, for the Defendant Francis Robert Bonner

Defendants

HEARD at Welland, Ontario: February 27, 28 and 29, 2012

The Honourable Justice C. A. Tucker

DECISION

Issue

[ 1 ] Is the plaintiff Georgiann Bonner entitled to an order of foreclosure on a mortgage dated October 1994, being Instrument No. LT224645, registered on October 3, 2002 over lands municipally known as 3363 North Shore Drive, Ridgeway, Ontario?

Overview

[ 2 ] The plaintiff met the defendant Robert and they began to date in or about 1991. As testimony came out on the trial, it became obvious that Mr. Bonner was a professional gambler and that he made a habit of borrowing money from friends and acquaintances. According to Mrs. Bonner, shortly after meeting him she began to loan him money and received promissory notes to evidence the loans. She also received a mortgage to secure the loan in 1994. The mortgage is in the principal amount of $100,000 and bears interest at 10 per cent per annum. The mortgage is “on demand” but also provides for a balance due date of October 31, 2009. Robert Alexander Bonner “Robert” is the husband of the plaintiff. He and his son, Francis Robert Bonner (“Francis”), are the mortgagors on the mortgage and defendants in this action. Francis defended the action and, among other issues, denied the mortgage and claimed a limitation period defence. The plaintiff also received a transfer of the property covered by the mortgage as a result of a conveyance in 1995, but that transfer was set aside as an attempt to avoid a creditor.

[ 3 ] Robert did not testify at the trial, although he was subpoenaed by his son Francis to do so, I was told. Both parties suggested that I draw an adverse inference from the failure of the other to call Robert as a witness for their case. Robert is a husband and a father so I find his loyalty would be divided although he is estranged from Francis. I find it is more likely than not, given his desire to have Francis removed from the title of “his” home that he supports the claim of his wife. This is supported by the fact that he did not defend the action and therefore he is deemed to admit the allegations of the Statement of Claim which would uphold the plaintiff’s claim.

The Evidence

[ 4 ] Georgiann Bonner (“Georgiann”) testified that she met Mr. Bonner in 1991 and started dating him in 1993. Knowing her mother and her uncle and aunt had lent him money, which was repaid, she began to lend him monies in 1994 and received promissory notes from him in return. She provided a series of promissory notes as evidence at trial in the flowing amounts on the following dates. According to her, none of these amounts were repaid, nor was the interest as called for in the notes save and except as set out below.

AMOUNT
ORIGINAL DATE

$ 10,000.00
April 22, 1994

$ 10,000.00
May 27, 1994

$ 9,000.00
May 27, 1994

$ 9,500.00
July 23, 1994

$ 4,159.00
August 10, 1994

$ 2,030.00
September 1, 1994

$ 6,189.00
September 8, 1994

$ 9,500.00
September 8, 1994

$ 15,000.00
September 15, 1994

$ 10,000.00
October 14, 1994

$ 10,000.00
November 10, 1994

$ 15,000.00
June 3, 1996

$110,378.00

[ 5 ] The notes were all signed by Robert and had varying interest rates. Robert and Georgiann were married in September of 1996. Prior to that, Georgiann received some interest payments from Robert in the amounts of $125 or $150 a month, but the interest payments ceased after their marriage.

[ 6 ] She testified that she was worried about the loans. Although she believed Robert would protect her, she was concerned that she would not be protected in the event Robert died. Robert had been married previously and had five children, one of whom is Francis. The money she has lent Robert was her life savings and, although he reassured her, she “wore him down” and he gave her a mortgage to secure the advances. This is the mortgage in issue in court now. Georgiann testified that the amount of the mortgage was agreed to by Robert to be in the amount of $100,000 and the interest rate was set at 10 per cent, also by agreement. She provided some bank statements to show where she had withdrawn the money to give to Robert. Although she believed her total advances were approximately $150,000, the total advances were less than that in the documentation that she produced.

[ 7 ] The plaintiff testified that Robert and she attended upon a Mr. Thom Arthur, a local lawyer known to Robert. Mr. Arthur advised that since the property was jointly owned by Francis and Robert, the mortgage had to be granted by both of them. Mr. Arthur advised them that he would draw up the mortgage, send it to Francis to sign, and call them when it was completed. Mr. Arthur called and Georgiann attended with Robert to sign the mortgage. When she saw the document she testified that Francis’ name was already on it. She noted two errors on the face of the mortgage. Although she was not yet married, the lawyer had noted Robert as her “spouse” and put “Bonner” as her last name. At Mr. Arthur’s direction she bracketed the last name and changed Robert to not being a spouse. Robert signed the mortgage and it was given by the lawyer to her. The lawyer never mentioned registering the document and when she asked Robert he said it was unnecessary. She felt the mortgage was better than the notes, but still was concerned about her position. Mr. Arthur could not be located by the parties to provide evidence for the trial.

[ 8 ] Robert in 1995 agreed to put her on the title, along with one of his sons, Gregory Bonner (“Gregory”). She said she had very few dealings with Francis and she denied that she ever discussed the promissory notes with him. She said she only met him twice. She had met Gregory a number of times.

[ 9 ] Accordingly, by transfer dated December 4, 1995 Francis and Robert conveyed title to Georgiann and Gregory as joint tenants. The lawyer who prepared this deed is dead. Georgiann said that when she received title she knew she was secure and she could sleep. However, this deed was expunged in 2000 after litigation involving another creditor of Robert.

[ 10 ] After the deed was expunged she attended upon a lawyer to seek advice. His advice was to register the mortgage that she had received in 1994, which was done. She returned to the same lawyer in 2008 and asked him to send a letter demanding payment of the mortgage, which he did. Subsequently, this action was commenced.

[ 11 ] She denied backdating the mortgage and she said did not know how her husband used the money from the loans. She could not really explain why there would be two promissory notes on one day in the same amount. She testified that notwithstanding his failure to pay, she is still married to and lives with Robert. She says her husband is not contesting the action because he knows he owes her the money. She feels that the money owed is just like a bank account and now she wishes to collect from the people who promised to pay. She acknowledged that there were alterations to the mortgage and that it was undated. She was at times unable to match advances from her accounts to the quantum on a note, and was unable to explain where any additional funds may have come from. She said that she received a note every time she gave Robert money on the day she gave it. The mortgage sat in a safe for eight years. Robert had access to the safe. She was adamant that she would not have backdated the document saying she “would never do that or imagine doing that”. She acknowledged that Robert would still have the benefit and use of the property until she sold it, which at one point she indicated that she planned to do if she was successful in this litigation. She would take the proceeds and put it back in her bank, giving none to Robert. There was no discussion of family law issues or entitlement in this litigation. The money, as she described it, is her “nest egg”.

[ 12 ] Francis testified that he did not put any money into the property directly, although he has loaned his father money, some of which has not been repaid. Georgiann said Robert did the transfer for her not to avoid a creditor, but acknowledged it was expunged because of a lawsuit by a creditor.

[ 13 ] Georgiann never saw copies of her husband’s wills nor did he discuss them with her, nor has she shared her will with him. She acknowledged that Gregory knew that she had loaned Robert money.

[ 14 ] She believed Robert paid back everyone from whom he borrowed money.

[ 15 ] Originally, Francis denied signing the mortgage or the deed which was expunged. Brian Lindblom testified for the plaintiff and was qualified by the court as a document examination expert. He reviewed a number of documents that Francis had signed in the same decade as the deed and the mortgage. He described in detail how he dissects the signature and its constituent elements and renders an opinion based on the evidence. In his testimony he acknowledged that no two signatures are identical, and you need to assess the variations to determine if such are within acceptable parameters. He said that he examines the style, size and location of the signature on the documentation. Then, he looks at the elements of the signature ­­­- alignment, slope, spacing, proportion - character by character. In terms of the deed, he found a significant combination of similarities. He concluded that Francis more likely than not signed the deed. He did a similar analysis on the charge and concluded that Francis more likely than not signed the mortgage and that it is unlikely that a different person signed it.

[ 16 ] Gregory testified for his brother Francis. He recalled his close relationship with Georgiann who he called “G.G.” during his testimony. He described her as a very wonderful lady who talked a lot, who was a lot of fun and respectful of his mother. He said she was generous, honest and forthright. She told him that she had been lending money to his father. He said his father had also advised him of that fact. He thought the loans in 1995/96 were in the $35,000 to $40,000 range and that there was no interest charged. He said Georgiann wanted no interest in the real property which is the subject matter of this claim. He had seen some of the notes. He acknowledged that his father wanted to ensure that Georgiann was paid, but said his father denied any mortgage as did Georgiann. He understood by the late 1990s the loans to be capped out at $100,000. His relationship with his father ended in 2002 when he could not convince Francis to remove himself from the deed on the North Shore Drive property. He was the executor of his father’s will in 1994, the sole executor in 1996, and was removed as an executor in 2004. He had lent money to his father which was repaid. According to Gregory, his father once took out a credit card in his name by forging his signature. The 1994 and 1996 wills both provided that Georgiann was to be repaid any monies owing on her promissory notes. The 2004 will specifically directed that the property in question was to be sold and $100,000 together with interest at 10 per cent from October 3, 2002 should be repaid to Georgiann. Georgiann is the executor of that will.

[ 17 ] Gregory said he never discussed these loans, or the notes, with Francis.

[ 18 ] Francis also testified. He said that his father transferred the North Shore Drive property to himself and Robert as joint tenants with the intention that proceeds of the sale of the home would go to his mother’s care. This was done in 1988. His relationship was good with his father until the “Caligiuri” loan issue arose. Mr. Caligiuri was a close family friend who lent Robert money and was not paid. He was the creditor that resulted in the deed from Robert to Georgiann and Gregory being set aside. He severed his relationship with his father after his father failed to repay Mr. Caligiuri. He said Georgiann advised him that father had borrowed money from her and showed him promissory notes totaling $20,000 to $22,000 being two or four notes. He also said she wanted no interest on these loans, nor did she have an interest in the family home, being the North Shore property.

[ 19 ] He does not recall signing the mortgage, although he acknowledged that the signature looked like his own. He said that at the time the mortgage is dated his relationship with his father was good, so he found it strange that he could not recall any discussion of a mortgage with Robert. According to Francis, he also would have called his father on receipt of the mortgage documents to inquire as to the interest which he thought would be “0” was set at “10” and the principal amount was $100,000 when he believed approximately only $20,000 was owing at the time. He did say, however, that it is possible that it is his signature. He also signed an acknowledgment of standard charge terms according to the document filed. He agreed with the transfer to Georgiann as his brother was also going on title so that his mother would be taken care of. He recalls signing the deed. He lent his father money many times and he was repaid all but $10,000 he lent him in 2000 or 2001. He testified that his father begged him for the money and never repaid it and he never heard from his father again.

[ 20 ] He received none of the $100,000 or any benefit from it. His only explanation for the mortgage is that he received a number of documents in 1995 with the deed and it might have been included in that bundle and was signed in error. I find that different lawyers prepared the mortgage and the deed.

[ 21 ] On cross-examination he acknowledged that he had made no contributions to the North Shore property. He paid no taxes, insurance, nor did improvements. He acknowledged as well that he said he was estranged from his father in 1994, but would not agree that his memory was better at that time. He did say he lent his father money which might have been used for the property. He also said that he had done some maintenance and helped in some home projects over the years. He adamantly denied that his father always paid his debts, citing one Mary Cuomo as one unpaid lender, but later on consent evidence was given that Robert had borrowed twice from Mary Cuomo and that she was repaid both times.

Positions of the Parties

[ 22 ] It is the plaintiff’s position that monies were advanced in the amount of at least $100,000 at an agreed rate of interest in the amount of 10 per cent per annum secured by a mortgage and evidenced by promissory notes. The monies have not been repaid, the due date of the mortgage has matured, demand has been made and the mortgage is in default. As such, Georgiann is entitled to an order foreclosing the equity of redemption in the property described as 3363 North Shore Drive in Ridgeway.

[ 23 ] It is the defendant Francis’ position that he does not recall executing the mortgage. It was his understanding and that of his brother that the plaintiff had no interest in the family home and was to receive no interest for the monies advanced to their father. He points out the alterations on the mortgage which according to Georgiann occurred after his execution on it. He believed only $20,000 to $25,000 had been advanced at the time of the mortgage. His brother Gregory believed $100,000 had been advanced although he was not told about the mortgage. Francis said that he was told by his father and Georgiann that the loans were without interest and that she had no interest in the property. Both Gregory and Francis say they saw promissory notes. I find that all the notes filed as evidence in this case bore interest.

[ 24 ] Robert, as noted, did not defend the action. Francis attacks the credibility of Robert, pointing out his failure to pay Mr. Caligiuri, an old family friend, the deed which was held to have been done to avoid creditors; Robert’s obtaining of a credit card in Gregory’s name; and his failure to repay monies. I find according to the evidence that Mr. Caligiuri was paid, albeit after a lawsuit; that Francis and Gregory were both active participants in the “fraudulent” deed; and no third party evidence or documentation was tendered either about the credit card or the unpaid loan to Francis. I find that Mrs. Cuomo was said by Francis to have been an unpaid lender of Robert and yet later in the trial, on consent, Mrs. Cuomo’s evidence was to the contrary. She said that her loans to Robert were repaid with interest.

[ 25 ] Francis also points out the failure to register the mortgage for some eight years. The mortgage was evidence in the 2000 litigation involving Mr. Caligiuri and Robert (See para. 12 of the decision of Matheson J., Caligiuri v. Bonner 2000 W.L. 1443103 (Ont. S.C.J.) 2000 CarswellOnt 4483.)

[ 26 ] The central argument of the defendant Francis is that even if the mortgage is valid, it is barred from enforcement due to the provisions of the Real Property Limitations Act , R.S.O. c L.15 (the “Act”). Francis was not a party to the promissory notes. The mortgage was executed in October 1994 but not registered until October 3, 2002. Demand was made on the mortgage on March 5, 2008. The demand sought interest from 1994. This action was commenced on October 22, 2008.

[ 27 ] Section 23 of the Act provides that a mortgage action must be commenced “within ten years next after a present right to receive it accrued to some person capable of giving a discharge for … unless in the meantime some part of the principal money or some interest thereon has been paid, or some acknowledgement in writing of the right thereto signed by the person by whom it is payable … has been given to the person entitled thereto.” The action then would have to be commenced after the last acknowledgement or payment. It is the defendant Francis’ position that the mortgage is a demand mortgage and the limitation period therefore started running upon execution of the mortgage.

[ 28 ] The plaintiff acknowledges that demand mortgages are payable on execution, but submits that the mortgage in question here is a collateral mortgage and as such Francis is a surety. Francis says he is not a surety but a principal debtor and joint owner and, as such, the mortgage is not “collateral” but “parallel”. With a collateral mortgage, demand must be given to notify the surety prior to commencing action and time does not start to run until demand is made, which demand occurred in this case in 2008. Accordingly, the limitation period had just started to run, in her submissions, when the Statement of Claim was issued in 2008 shortly after demand was made.

ANALYSIS AND DECISION

[ 29 ] The two issues I need to decide to determine whether Georgiann is entitled to the relief she requests are:

(1) Is the mortgage a valid and enforceable document?

(2) If so, is the enforcement of the mortgage barred by the provisions of the Act?

If I find that the mortgage is not valid, the inquiry need not proceed to stage two.

Is the Mortgage Valid and Enforceable?

[ 30 ] I acknowledge there are a number of issues with the creation of the mortgage, primarily the denial of execution of it by Francis, which later in his testimony became a “maybe” to “it could have been signed when it was slipped in between the deed papers of 1995”, and finally to “it looks like my signature but I question the amount and the interest rate”. He even suggests that the interest had been changed from “0” to “10” per cent. I have a number of issues with his testimony. Both he and Gregory used a similar expression that Georgiann “had no interest in the property in question and asked for no interest on her loans”. I find that the expression is collusion. Georgiann said she was looking for a better rate of interest than her financial institution provided and each of the notes provided for interest. The defendant Francis and Gregory both saw the notes, or some of them, according to their testimony. Gregory acknowledged knowing $100,000 was loaned at or around the time of the mortgage. Both were aware of the mortgage in 2000 as it was evidence on a trial where they were defendants. They knew or could have known the terms, quantum and interest rate provided at the time, yet neither appears to have questioned the document, nor brought an action to set it aside at that time.

[ 31 ] Firstly, given the evidence of Francis and that of Brian Lindblom, the document examination expert, I find that the mortgage was signed by Francis. I would reject Francis’ explanation for perhaps having signed it in the transfer papers by mistake for two reasons. Two different lawyers prepared the documents, and it is obvious on its face that the document in question is a mortgage. I find that everyone knows the meaning of the word “mortgage”. Not only did he sign the mortgage, but also he signed the acknowledgment of receipt of the standard charge terms. Accordingly, I find that on a balance of probabilities he signed the mortgage.

[ 32 ] As for the argument that the mortgage was altered as to interest rate as Francis suggests, I find that is speculation at its best. The promissory notes called for interest. It only is logical for the mortgage to do the same. Interest was paid on other loans by Robert to other parties and, according to Georgiann, to her by Robert up until her marriage to him. Mr. Francis Bonner cannot rely upon non est factum . There is no evidence that he could not read or understand the document. In fact, evidence was led as to the fact that he is a self-employed business owner. He was over 18 at the time. If he executed the document without completion of the date or with any blanks, he is the one responsible for his actions. Although he said he signed the deed to protect his mother’s interest in the family land, he willingly signed a deed in favour of Georgiann and his brother Gregory as joint tenants shortly after he signed the mortgage. Given the rules of survivorship, Georgiann could have become the sole owner of the property. In fact, a similar result could still occur with the present ownership, giving Francis no interest in the land if he predeceased his father. This would leave Robert as the surviving joint tenant. I also question why a property from Robert’s family should benefit Francis’ mother. She divorced Robert in 1973 and remarried in the late 1990s according to the testimony.

[ 33 ] I find that the true beneficial owner of the property was Robert, and Francis was added for convenience to the deed. He has not contributed financially directly to the property, notwithstanding the fact that he is, and has been for over 20 years, a joint owner of the land. It is clear from Gregory’s testimony that the schism between his father and himself arose as a result of the failure of Francis to reconvey the property to his father in the 2002.

[ 34 ] The alteration on the mortgage to “spouse” and “Bonner” I find do not invalidate the mortgage. It does not affect the relevant terms. At best, it corrects an obvious error and reflects the true status of the parties at the time. The relevant terms are the quantum, the rate, the terms and the parties, and I find that they were completed. The exact date of signing does not invalidate the mortgage given that the month and year are completed and the term of the mortgage would suggest the date of execution.

[ 35 ] The fact that the mortgage provides for “on demand” and due date does not, I find, make it invalid. The rules of construction assist us to find validity, not the opposite. There are a number of ways to read this mortgage: that it had a 15 year term but there was an option to demand earlier; or, that there was a term, and demand could be made at the end of the term. I will discuss this further under my next analysis.

[ 36 ] Finally, in terms of quantum, there are sufficient promissory notes, in an amount which exceeds $100,000, some of which postdate the granting of the security and would eliminate the problem of prior consideration being insufficient considerations for the mortgage. I note that this issue was not raised in argument at all.

[ 37 ] Georgiann says she lent over $100,000, and the quantum and interest rate were agreed to by Robert. Gregory believed the loans were $100,000. The last will of Robert refers to $100,000. The mortgage which I find was executed by Francis is for $100,000. It is too late now to question the actual advances when the evidence of the mortgage is that the quantum was $100,000.

[ 38 ] Accordingly, I find the mortgage is on its face a valid and enforceable document.

Is Enforcement of the Mortgage Barred due to the Provisions of the Act?

[ 39 ] I find that,

(i) demand on this mortgage was not made until 2008;

(ii) no payment had been received on the mortgage or the notes since the couple’s marriage in 1995;

(iii) the mortgage provided for a fixed term of 15 years as well as demand;

(iv) the mortgage was not registered until October 3, 2002;

(v) this action was not commenced until 2008;

(vi) the mortgage provides for an interest rate of 10 per cent and a calculation period of annually;

(vii) the mortgage provides for no fixed payments, neither a first or last payment date nor an interest adjustment date.

[ 40 ] The defendant relies upon the provision of s.23(1) of the Act and the case of Cioccio v. Cioccio, [2005] O.J. No. 1182. That case relies upon Alter v. Csontos, [2004] O.J. No. 1590 which held that time began running on a conventional mortgage on the date the first payment was not made, and accordingly, ten years having passed, the Act applied and the mortgage was unenforceable. The court in Cioccio rejected that the mortgage was a demand mortgage given that there was no evidence of the same in writing as required by the Statute of Frauds. The court, however, noted as an aside that if it was a demand mortgage, time started running on execution which would also have left the mortgage unenforceable given the effluxion of time in excess of that allowed by the Act.

[ 41 ] In the Alter v. Csontos case the mortgage was held to be valid. It was a demand mortgage and demand was made within the ten year period. The mortgage also provided for prepayment and no interest and a due on assignment clause.

[ 42 ] Neither of these cases or the mortgages referred to there are the same as this mortgage. This mortgage provided for a due date and demand which, as I indicated before, allows for an interpretation that there was a fixed term which upon expiry called for demand to be made.

[ 43 ] Central to the plaintiff’s position is the case of In re J. Brown’s Estate, [1893] 2 Ch. 300, which held that time did not begin required until demand is made upon the guarantor as the guarantor did not know the state of the debt. I find it is the wording of the mortgage itself that is relevant to the interpretation of the application of the Act. In this case, the mortgage is granted in part by Francis who is not the original borrower. By signing the mortgage he became a covenantor who was obligated to repay the debt in the same way a guarantor would be so obligated. He is not the borrower and would not know what if any payments had been made upon the mortgage unless he is given notice of the same by the mortgagee. He requires a demand to have such knowledge and to provide time for him to pay the amounts he now knows that he owes. The mortgage on its face clearly states that it was additional security for the promissory notes. It was collateral in the sense that it was security to the primary obligation of the debtor Robert to pay the loans as evidenced by the promissory notes. The mortgage also had a 15 year term on its face, which reasonably could be interpreted as the first date demand could be made, given that no payments were called for by the mortgage terms.

[ 44 ] Such an interpretation does not render the Act meaningless so that a failure to demand could extend the mortgage forever. In fact, in my one interpretation, demand would have to be made within 10 years of the due date providing an outside date for the limitation period of the Act. Construction should be in favour of enforcement. On my findings, the limitation period has not expired. In fact, demand was made in 2008 and the action commenced before the due date of the mortgage when the time provisions of the Act may not have commenced. The demand and this action could feed the estoppel once the due date of the mortgage matured in 2009. I also find that default in payment could not exist until 2009 after demand was made.

[ 45 ] I find that the mortgage is valid and enforceable, and its enforcement is not barred by the provisions of s.25 of the Act. I find the debt owing in principal to be $100,000. As request was made for foreclosure rather than payment, no accounting submissions were made by the defendant. The plaintiff’s position is that she is entitled to interest from October 1994 to October 2011 resulting in a total debt of $505,449.00. If for any reason an accounting is required, I may be spoken to.

[ 46 ] I find the plaintiff is entitled to foreclose the equity of redemption in the mortgaged lands and to have possession of the same.

[ 47 ] If the parties are unable to agree upon costs, I may be spoken to.

Tucker, J.

Released: April 26, 2012

COURT FILE NO.: 10275/08
DATE: 2012-04-26

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N: Georgiann Giglia Bonner Plaintiff

• and –

Francis Robert Bonner and Robert Alexander Bonner Defendants

DECISION Tucker, J.

Released: April 26, 2012