SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-10-416263
DATE: 2013/01/29

RE: John Gomes

Plaintiff

• and -

Delia Contreras, Ramon Hernandez, Marcelo Hernandez and

Premium Products Inc.

Defendants

BEFORE: Justice Moore

COUNSEL:
D. Fiske, for the Plaintiff

M.J. Igbinosun, for the Defendants, Hernandez

DATE HEARD: 28 and 29 January, 2013

E N D O R S E M E N T

[1] John Gomes is a retired businessman who invested money in private mortgages, including three such investments in mortgage secured loans to the defendant, Delia Contreras. Those investments totaled $130,000 in principal sums plus interest thereon, according to the terms of the three mortgage documents.

[2] Ms. Contreras has defaulted in re-paying Mr. Gomes the principal and interest components of the mortgages but, as she has not been located and served with pleadings in this action, Mr. Gomes has discontinued his action against her and proceeded forward only against the three remaining defendants.

[3] Ramon and Marcelo Hernandez are father and son, respectively, and Marcelo was a director and officer of the corporate defendant, Premium Products Inc., a company that entered into receivership on 30 September 2010 and, by order of this court, may be immune from liability in this action. Counsel undertook to obtain and file such order but I have yet to see it.

[4] In the result, the action may now only involve Mr. Gomes’ claims solely against Messrs. Hernandez. Those claims arise from Mr. Gomes’ assertion that Ramon and Marcelo Hernandez provided a guarantee in the sum of $130,000 evidenced by an agreement dated 26 January, 2010 to repay the amounts owing by Ms. Contreras under the three mortgages in question.

[5] Ms. Contreras is the mother of two children, of whom Marcelo is the father.

[6] In their Statement of Defence, Messrs. Hernandez admit to having provided a written guarantee, an admission that they seek to resile from in their evidence at trial.

[7] Ron Hatcher was the real estate lawyer who acted for the plaintiff and for the defendants in connection with these three mortgages.

[8] On 25 January 2010, the mortgages were in arrears and Mr. Hatcher had Marcelo Hernandez sign a "payment schedule" referencing three cheques of $5,500 each, payable on the first day of February, March and April of 2010. Those cheques were duly cashed and paid for all of the arrears of interest due until 1 May 2010.

[9] Mr. Hatcher testified, and I accept his evidence, that he has known Ramon and Marcelo Hernandez for 17 years and represented them and Premium Products Inc. over the years. He agreed that he acted as solicitor for Mr. Gomes and for Ms. Contreras in connection with the three mortgage transactions at issue in this case. He was aware that Ms. Contreras was the common-law spouse of Marcelo Hernandez. He testified that Marcelo and Ramon Hernandez were both involved in the negotiation of the three mortgages and the guarantee.

[10] Mr. Hatcher's files are in storage. He has not provided copies of file materials to counsel in this case. On reviewing the documents in the exhibit brief in this trial, he noted that the guarantee documents are incomplete. He testified that the originals of those documents were complete. Copies would have gone to Mr. Gomes and to the members of the Hernandez family.

[11] He testified that the mortgages were, at times, in arrears and because he knew Marcelo and Ramon Hernandez very well, he would follow-up with them for payments. On one occasion, he went out with Mr. Gomes to the Premium Products Inc. factory to discuss the state of the mortgages with Messrs. Hernandez and those negotiations culminated in the guarantee at issue in this case.

[12] Mr. Gomes testified to that meeting as well. His recollection of the event differed somewhat from that given by Mr. Hatcher but I find that Mr. Gomes agreed with Messrs. Hernandez to forebear pursuing Ms. Contreras and/or Premium Products Inc. for repayment of the former’s mortgage indebtedness to Mr. Gomes in exchange for Marcelo Hernandez bringing the arrears up to date and Messrs. Hernandez undertaking to guarantee the mortgage loans and applicable interest going forward.

[13] Mr. Hatcher described the payment schedule of 25 January 2010 to have followed from discussions that he and Mr. Gomes had with Marcelo and Ramon Hernandez; it was a reflection of the payment agreement negotiated and the personal guarantee of the mortgage debt given by Marcelo and Ramon Hernandez. The agreement that they executed the next day he described as a more formal statement of their agreement to guarantee the loans.

[14] Mr. Hatcher prepared the 26 January 2010 guarantee document in order to add to Mr. Gomes’ security on the mortgages. His initials appear on each of the pages [except page 4 where no initials appear] along with the initials of Ramon and Marcelo Hernandez.

[15] Marcelo Hernandez is 37 years old. He is a graduate of the Schulich School of business at York University. He testified that before 2007, Mr. Hatcher had handled more than 30 mortgage transactions for the Hernandez family and between 2007 and 2010 he did another 25 mortgage transactions for the family

[16] Marcelo Hernandez admitted that he had referred Ms. Contreras to Mr. Hatcher when she needed a loan but he testified that he did not see the mortgage documents at issue in this case before these legal proceedings started.

[17] Nevertheless, he did see, read and sign each of the payment schedule and the guarantee agreement that Mr. Hatcher had drawn and presented to him. The guarantee agreement refers to mortgage loans totaling $130,000. Asked why he agreed to pay money in connection with those loans to Mr. Gomes, he said that the Hernandez family had a very lengthy relationship with Mr. Hatcher and sometimes friends try to help friends. He went on to say that it was an error of judgment on his part. His answers were not convincing or helpful to his position.

[18] Ramon Hernandez testified that he too signed the guarantee agreement, although he recalls now that he did so in February of 2010 when Mr. Hatcher put it before him along with other documents for him to sign. He did not read the agreement. On hearing that his son had already signed it and that Mr. Hatcher would not act on the agreement until Mr. Gomes had also signed it, he simply signed as borrower. This too was unhelpful to his position.

[19] Messrs. Hernandez each stumbled over contrary evidence they gave on their examinations for discovery. Neither made any effort to correct their discovery answers before trial. Neither offered a viable explanation for the cavalier, careless inattention they paid to the execution of the document that evidenced their agreement to guarantee the indebtedness of the mother of their children/grandchildren, owed to Mr. Gomes on the Contreras mortgages.

[20] I do not accept the evidence of Messrs. Hernandez where it is contradicted by that given by Messrs. Gomes and Hatcher. The Hernandez defendants were experienced businessmen who had been actively involved in loans and mortgage transactions over many years. They were well able to understand the negotiations that led to the guarantee they gave Mr. Gomes and the documents signed to evidence it.

[21] The law is clear that the need for certainty and security is to be recognized and advanced in circumstances where, as here, an innocent party stands to lose the benefit bargained for with parties who chose to later deny the existence of an agreement and further insist that the documents recording certain terms of the agreement should be ignored.[^1] Messrs. Hernandez unquestionably executed the guarantee agreement of 26 January 2010 and Marcelo Hernandez both signed and acted upon the payment schedule document of 25 January 2010.

[22] Whether an order has issued from this court under which the corporate defendant may shelter from the obligations otherwise arising from the Guarantee it gave Mr. Gomes, as evidenced by the document Elena Hernandez signed on 26 January 2009, remains to be seen. But for such order however, Premium Products Inc. is required to repay Mr. Gomes the $130,000 borrowed by Ms. Contreras plus interest thereon at the rate of 12% per annum. I accept the calculations tendered by counsel for Mr. Gomes and fix any interest payable by Premium Products Inc. between 1 May 2010 and 28 January 2013 to be $42,900.92, inclusive of interest. I am not prepared to award the contract rate of interest plus PJI as well.

[23] Mr. Gomes is entitled to judgment against each of the Hernandez defendants upon the guarantee that I find that they intended to and did provide to him. As such Mr. Gomes shall recover from them, on a joint and several with any liability of Premium Products Inc. basis, $130,000 plus interest thereon.

[24] As to applicable interest, I have considered the calculations submitted by counsel for Mr. Gomes and award interest as specified in the three mortgages at issue in this case but will not augment same with a specific further award of PJI. In the result, Mr. Gomes shall recover interest from Messrs. Hernandez of $16,495.72 in respect of the Mortgage registered 23 May 2007, $20,622.16 for the mortgage registered 13 September 2007 and $12,369.28 for the mortgage registered 23 May 2008.

[25] Mr. Gomes shall also recover costs of the action. In the event that Premium Products Inc. is not protected from liability in this matter, Mr. Gomes shall recover costs from it fixed, on a partial indemnity basis at $20,814.60 for total fees with HST thereon plus $2,869.30 for disbursements inclusive of HST thereon. Messrs. Hernandez are jointly and severally responsible with Premium Products Inc. to Mr. Gomes for said costs.

[26] In addition, Messrs. Hernandez, by reason of their conduct in these proceedings and at trial, are hereby found liable to pay costs on a substantial indemnity basis. They have each repeatedly and without explanation ignored orders of this court requiring them to pay costs to Mr. Gomes in fixed amounts and by certain dates. Costs ordered to be paid by the time of trial were not paid. Mr. Gomes chose to proceed to trial regardless but I take a very dim view of the conduct of these defendants in this regard, reprehensible conduct[^2] that brings the administration of justice into disrepute.

[27] In fixing a fair and reasonable amount by which the individual defendants must pay substantial indemnity based costs, I have considered the submissions by counsel for Mr. Gomes. I called upon both counsel to exchange costs demands during the trial and advised that I required information on the reasonable expectations of the paying party/parties, whoever that/those may be. Counsel for Messrs. Hernandez made no submissions on costs issues.

[28] Although Mr. Gomes seeks more, I am content in all of the circumstances of this case and upon reflecting on the many criteria described in Rule 57 and the overall fairness of my award to require that the individual defendants pay the sum of $5,000, inclusive of Fees and HST in addition to partial indemnity costs.

[29] Mr. Gomes shall therefore recover judgment in accordance with my findings and awards herein.

Moore J.

Date: 29 January, 2013

[^1]: Marvco v. Harris, 1982 63 (SCC), [1982] 2 S.C.R. 774

[^2]: Oz Optics Limited v. Timbercon, Inc., 2012 ONCA 735