ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 3862/11
DATE: 2012-08-09

B E T W E E N:

John Pinter and John Pinter Jr.

J. Ross Macfarlane, for the Plaintiffs

Plaintiffs

• and -

Niagara Hospitalities Limited, All Seasons Niagara/Knights Inn Inc., 1262828 Ontario Limited, Harmesh Chand, Neelam Chand, Santosh Chhabra, Naresh Verma, Ranju Verma, Neeraj Chhabra, and Margaret Elizabeth Pinter

Santosh Chhabra and Neeraj Chhabra, Self-represented

Defendants

HEARD: August 8, 2012

The Honourable Mr. Justice J. R. Henderson

DECISION ON SUMMARY JUDGMENT MOTION

[ 1 ] On this motion for summary judgment the plaintiffs have proved that the two defendants, Santosh Chhabra and Neeraj Chhabra (hereinafter referred to as “Santosh” and “Neeraj”), agreed in writing to guarantee certain loans that were made by the plaintiffs to the defendant corporations. The plaintiffs have also proved that the debtors have defaulted on the aforementioned loans; that notice of the default was given to Santosh and Neeraj; and that there is a substantial balance outstanding on the loans.

[ 2 ] Summary judgment should be granted if I find that there is no genuine issue for trial. In their argument Santosh and Neeraj raised two issues that they submit are genuine triable issues.

[ 3 ] First, Santosh and Neeraj submit that the plaintiffs have not accounted to them for the value of a house and surrounding property on Lundy’s Lane (“the Lundy’s Lane house”). That property had been posted by the debtors as collateral for the loans, and is now in the possession of the plaintiffs. Santosh and Neeraj allege that the value of the Lundy’s Lane house should be applied to the outstanding debt. Therefore, Santosh and Neeraj submit that the plaintiffs’ motion for summary judgment against them on the guarantees should not be granted, or in the alternative that any judgment should be at a lower amount than that claimed by the plaintiffs.

[ 4 ] The evidence indicates that the plaintiffs have in fact taken possession of the Lundy’s Lane house, and that the plaintiffs are attempting to sell the Lundy’s Lane house. However, the house has not yet been sold. Therefore, in my view the plaintiffs do not yet have an obligation to account to the guarantors for the proceeds of the sale of the Lundy’s Lane house.

[ 5 ] Moreover, the fact that the plaintiffs are in possession of collateral security for the loans does not mean that the plaintiffs’ claim on the guarantees must be postponed. Therefore, there is no genuine issue for trial with respect to the plaintiffs’ possession of the Lundy’s Lane house.

[ 6 ] Second, Santosh and Neeraj refer to a third mortgage that was given to the plaintiffs by the corporate owners of the Knights Inn property on Main Street (“the Knights Inn property”) as additional security for these loans. These defendants submit that the plaintiffs acted to the prejudice of Santosh and Neeraj when the plaintiffs agreed to postpone their third mortgage in order to allow the corporate owners to refinance the Knights Inn property.

[ 7 ] The plaintiffs’ third mortgage was registered in 2000, behind a first mortgage to BDC and a second mortgage to 952223 Ontario Ltd. The evidence shows that in 2006 the corporate owners of the Knights Inn property borrowed $2 million from the Bank of India, and used those funds to pay out the existing first and second mortgages. The plaintiffs’ mortgage was postponed so that the $2 million Bank of India mortgage became a first mortgage. Santosh and Neeraj submit that their position has been prejudiced because the plaintiffs’ mortgage on the Knights Inn property, after the postponement of the mortgage, ranked second behind the $2 million Bank of India mortgage.

[ 8 ] However, on careful analysis of the cross-examination of Neeraj on his affidavit it became clear that both Santosh and Neeraj were minority shareholders in the corporation that owned the Knights Inn property. It was also clear that Santosh was a director of that corporation; that both Neeraj and Santosh were aware of the refinancing with the Bank of India; that both Neeraj and Santosh acquiesced to the raising of funds for the corporation through the Bank of India; and that both Neeraj and Santosh were in favour of the refinancing with the Bank of India. Further, both Neeraj and Santosh left the details of the refinancing to the majority shareholder of the corporation.

[ 9 ] In light of this evidence, having read the cross-examination of Neeraj on his affidavit and having heard submissions on this issue, I find that both Neeraj and Santosh were either aware of or acquiesced to the postponement of the plaintiffs’ mortgage on the Knights Inn property in favour of the Bank of India mortgage.

[ 10 ] Still further, there is no evidence that the postponement of the plaintiffs’ mortgage so that it ranked behind the Bank of India mortgage put the debtors or the guarantors in any worse position than they would have been in had the plaintiffs’ mortgage remained in third position behind the existing first and second mortgages that had been on the property.

[ 11 ] For these reasons I find that there is no genuine issue to be tried regarding the plaintiffs’ agreement to postpone their mortgage on the Knights Inn property.

[ 12 ] Accordingly, I find that there is no genuine issue for trial in this case. Summary judgment is granted in favour of the plaintiffs against Santosh Chhabra and Neeraj Chhabra in accordance with paragraphs 1, 2, 3 and 4 of the draft Judgment attached to this decision.

[ 13 ] In addition, the plaintiffs have also asked for declaratory relief against the defendant Margaret Elizabeth Pinter, and there was no opposition to that request. Therefore, judgment will be granted against Margaret Elizabeth Pinter in accordance with paragraphs 5 and 6 of the draft Judgment attached hereto.

[ 14 ] Regarding costs, having reviewed the Bill of Costs and the Costs Outline of the plaintiffs, I hereby make an order for costs in accordance with paragraph 7 of the draft Judgment attached hereto and fix the total amount of costs, including disbursements and HST, at the sum of $15,000.00 plus interest at the rate of 3% per annum commencing August 8, 2012.

[ 15 ] Judgment to go accordingly.

Henderson J.

Released: August 9, 2012

COURT FILE NO.: 3862/11
DATE: 2012-08-09

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: John Pinter and John Pinter Jr. Plaintiffs - and – Niagara Hospitalities Limited, All Seasons Niagara/Knights Inn Inc., 1262828 Ontario Limited, Harmesh Chand, Neelam Chand, Santosh Chhabra, Naresh Verma, Ranju Verma, Neeraj Chhabra, and Margaret Elizabeth Pinter Defendants DECISION ON SUMMARY JUDGMENT MOTION Henderson J.

Released: August 9, 2012