Court File and Parties
Court File No.: CV-12-4819
CV-12-5341
Date: 2013-10-23
SUPERIOR COURT OF JUSTICE - ONTARIO
Re: Heather Sinclair-McDonald and Wayne McDonald
AND:
Manulife Trust and Jean Gies
AND:
Manulife Trust Company
AND:
Wayne McDonald, Heather Sinclair-McDonald and Her Majesty the Queen in Right of Canada
Before: Lemon, J.
Counsel:
Heather Sinclair-McDonald and Wayne McDonald, in person
Pamela Miehls, for the Manulife Trust Company
Heard: September 6, 2013
ENDORSEMENT
ISSUE
[1] Manulife Trust moves for an order granting summary judgment of its claim against Heather Sinclair McDonald and Wayne McDonald and dismissing the McDonald's claims against it.
BACKGROUND
[2] On or about November 25, 2011, Manulife and the McDonalds entered into a mortgage under which the McDonalds mortgaged their property for one year for the sum of $500,000 and interest at the rate of three per cent per year. The mortgage provided that the McDonalds could pre-pay the whole of the principal amount at any time during the term of the mortgage.
[3] It is not disputed that in August of 2012, the McDonalds provided two separate documents to Manulife in an attempt to pay out the mortgage. Manulife refers to those documents as cheques and the McDonalds refer to them as “Reverse Wire Transfers” or “Electronic Fund Transfer instruments”. Both documents were marked “Not For Deposit” “EFT Only” “For Discharge of Debt Only” and “Without Recourse”. Both documents were drawn on a closed account at the Canadian Imperial Bank of Commerce (“CIBC”). They were written on the account of Jean Lawrence. Manulife does not know of Jean Lawrence and the McDonalds refuse to provide details about her.
[4] Manulife attempted to deposit the documents and even went so far as to provide a refund cheque to the McDonalds. However, on or about September 5, 2012, CIBC returned both of the documents advising that the account was closed. Accordingly, neither of the documents provided by the McDonalds in connection with the payout of the mortgage cleared and Manulife is not in receipt of funds necessary to payout the mortgage.
[5] On November 27, 2012, the McDonalds commenced this action against Manulife for, among other things, a deed to the property and general and punitive damages.
[6] Although the McDonalds continued to make monthly mortgage payments, they failed to payout the mortgage on the maturity date. As a result, the total amount due under the mortgage as of September 5, 2013 was $501,498.19 (inclusive of interest and discharge fees).
[7] To complete the background information, Mr. McDonald was cross examined on his affidavit on August 1, 2013. At that time, he testified as follows:
Q. Do you have any documentation; bank statement; etcetera that says 489,000 was in Ms. Lawrence’s account?
A. No.
Q. Do you have access to any documentation that establishes - - is there any documentation that would show that there was 489.000 in this account?
A. No.
Q. Do you have any documentation that this 489,000 was transferred or paid to Manulife?
A. No, we don’t.
Q. Okay - - actually - - inappropriate to speak during a cross-examination. An Exhibit D to your Affidavit is another cheque. I know that you refer to it as an EFT or another type of instrument - - drawn on the account of Jean Lawrence for 7,000. It’s dated April - - oh sorry August 20 the - - do you have any documentation that this 7,000 was in Ms. Lawrence’s account?
A. No.
Q. Do you have any documentation that this 7,000 was transferred or paid to Manulife?
A. Well, that’s why we required the audit - - -
Q. Okay - - -
A. - - - from Manulife.
Q. But in your - - -
A. - - - We weren’t given any documentation from Manulife to prove otherwise.
Q. Right, but do you have anything from the CIBC account of Jean Lawrence that this amount was transferred or paid to Manulife?
A. We don’t have any documentation for that, no.
Q. Okay, does somebody?
A. We think Manulife does.
Q. Manulife. CIBC doesn’t?
A. I don’t know.
Q. Ms. Lawrence doesn’t
A. Not that I’m aware of.
Q. Do you speak to Ms. Lawrence?
A. Occasionally.
Q. Is she a neighbour?
A. No. I don’t think - - I don’t think that’s important who she is - - not really . . .
Q. Do you have access to her bank account?
A. No. I do not.
Q. Have you asked her whether or not she has any documentation to show that the 489,000 was transferred?
A. No. I haven’t asked her.
Q. Will you ask her that?
A. No.
POSITIONS OF THE PARTIES
[8] Based on this evidence, Manulife submits that there is no genuine issue requiring a trial of either its claim or the claim against it.
[9] In their factum, the McDonalds have filed their correspondence to Manulife related to the mortgage discharge. There, they indicated, “that since Manulife Trust Company did not return the original untouched EFT instrument within the required limits as per the Bills of Exchange Act, UCC and applicable laws, Manulife Trust Company had effectively discharged the associated debt in this matter”.
[10] In their Affidavit, the McDonalds jointly deposed that, “it is the position of the plaintiff Heather Sinclair-McDonald and Wayne McDonald that they have paid to the defendant all monies required to properly discharge the mortgage in question”.
[11] In response, the McDonalds submit that:
A genuine payment issue exists and if Summary Judgement is awarded to Manulife without first confirming whether full payment was made, this Honourable Court will be allowing Manulife to be grossly enriched by exacting multiple payments which is unlawful and unethical.
In accordance with the Banking Act, (BA), Bills of Exchange Act (BEA), Negotiable Instrument Act (NIA), Financial Administration Act (FAA), Currency Act (CA), Canadian Payment Association Rules (CPA) and Generally Accepted Accounting Principles (GAAP), this Factum will support why Summary Judgment should not be awarded to Manulife.
The first negotiable instrument in the form of a bill of exchange was sent to Manulife on August 10, 2012 in the amount of $489,487.70 and was received by Manulife on August 14, 2012 as confirmed by Canada Post-delivery confirmation.
On August 16, 2012, the McDonald’s returned a phone call to the Manulife representative named Ms. Jean Gies, Senior Mortgage Administrator. In this recorded telephone conversation Ms. Gies indicated that she received the payment sent to pay out the mortgage. The negotiable instrument in the form of a bill of exchange had the directions written on the front and the back of the instrument boldly in red ink; NOT FOR DEPOSIT, EFT ONLY FOR DISCHARGE OF DEBT ONLY and WITHOUT RECOURSE.
Contrary to what was sworn in the affidavit of Mr. Osellame dated July 16, 2013, para 11, where he states that the instrument was marked “For deposit EFT only for Discharge of Debt Only without Recourse.” This is incorrect! To attempt to put the two bills of exchange sent to Manulife by the McDonald’s through the Canada’s Payment Clearing System would indeed render them non-negotiable hence the notation that written in bold red ink NOT FOR DEPOSIT as well as the further written correspondences sent to Manulife by the McDonald’s indicating this. The instruments sent and accepted by Manulife was not acceptable for Canada’s Payment Clearing System.
In financial transactions, the words “without recourse” disclaim any liability to the subsequent holder of a financial instrument. Thus, endorsing a negotiable instrument such as a cheque or bill of exchange and adding “without recourse” to the signature means that the endorser takes no responsibility. For example, if a cheque bounces for insufficient funds and a bank accepts the cheque and deposits the state amount into the endorser’s account, the bank will have no right to withdraw that amount from the endorsers’ account. Why is without recourse not being applied in this case?
It is not reasonable to believe that an established financial institution in the business of dealing with various types of negotiable instruments; bills of exchange, cheques and promissory notes, would issue an overpayment cheque inadvertently before a negotiable instrument was fully processed and cleared. A mortgage overpayment cheque would have only been issued and sent to the McDonald’s if there was a zero balance of the mortgage account.
ANALYSIS
[12] On a motion such as this, each side must “put his best foot forward” with respect to the existence or non-existence of material issues to be tried. As is often said in many of the cases, a responding party must “lead trump” or risk losing a summary motion judgement.
[13] It is acknowledged by the McDonalds that the instruments that they sent to Manulife were non-negotiable. There is no evidence from the McDonalds that there were funds in the account. Rather, the evidence is that the account was closed at the time these documents were prepared by the McDonalds. Without that evidence of payment to Manulife, the plaintiffs have “failed to lead trump”.
[14] There is no legal basis for the issues raised by the McDonalds. The documents do not become negotiable instruments simply because the McDonalds say they are. Without evidence that Manulife has been paid on the mortgage, the plaintiffs cannot succeed on their claim.
[15] The McDonalds brought a motion on the return of this motion seeking to conduct “a forensic audit of the mortgage account in question to prove that two negotiable instruments sent to discharge their mortgage were properly negotiated”. I have dismissed that motion. The evidence is that the documents forwarded by the McDonalds were worthless and did not pay off the indebtedness to Manulife. There is no need for an audit to search for payments that were clearly not received.
[16] I find that there is no issue for trial. The claim against Manulife is dismissed and it is granted judgment in the terms of its Statement of Claim.
[17] Within 15 days, Manulife shall serve and file its draft judgement for my review. If the McDonalds wish to make submissions with respect to the draft’s form and content, they shall do so within 15 days thereafter.
[18] If Manulife seeks its costs of these motions, it shall serve and file costs submissions within 15 days. The McDonalds shall respond within 15 days thereafter. Both submissions shall be no more than three pages not including any offers to settle or bills of costs.
Lemon, J.
Date: October 23, 2013