ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 1039/10
DATE: 2013/12/06

B E T W E E N:

Meridian Credit Union Limited

Clark Peddle, for the Plaintiff

Plaintiff

• and -

Peter Vrankovic and Nada Vrankovic

Faraaz A. Damji, for the Defendant Nada Vrankovic
Peter Vrankovic, Self-represented

Defendants

HEARD at Welland, Ontario:
November 14, 2013

THE HONOURABLE JUSTICE C. A. TUCKER

REASONS FOR DECISION

Issue

[1] The plaintiff Meridian Credit Union Limited (“Meridian”) seeks summary judgment against the defendants Peter Vrankovic and Nada Vrankovic on their guarantees.

[2] The defendants resisted the application, and Nada Vrankovic, in a separate motion, sought to amend her statement of defence to add additional defences and withdraw admissions made in a previous statement of defence.

[3] Peter Vrankovic sought an adjournment of the motion explaining he wished to retain counsel. I denied his request. The statement of claim in this action was issued on August 20, 2010. This motion was commenced on February 25, 2011 to be heard on March 16, 2011. Mr. Vrankovic was represented by counsel who withdrew from the record in March 2013. Mrs. Vrankovic obtained new counsel shortly after that. This matter was heard some eight months later. A motion was brought November 6, 2013 by Mrs. Vrankovic as noted above. Given that the original summary judgment motion was commenced two and one half years before, I denied the motion to amend. With the consent of the applicant on the basis that it would be entitled to costs in the event the summary judgment motion was defeated by an unplead defence, I did however allow the defendant Mrs. Vrankovic to argue the various new defences which she wished to put forth in her proposed new pleading. My dismissal was without prejudice to Mrs. Vrankovic being able to raise the motion to amend again if the summary judgment motion failed.

Background

[4] The guarantees arose in connection with a credit agreement made between HEPCOE Credit Union Limited, now Meridian, and Cambridge Place Commercial Corporation (“Cambridge”), originally a $4.9 million loan in 2002 which was repaid later, and a term loan of $3,922,186 in 2009. The two credit agreements required the signatures of Mrs. Vrankovic and it appears she signed them in addition to an unlimited continuing guarantee. Demand was made upon the facility and the guarantees on May 17, 2010. As noted above, the statement of claim was issued on July 2, 2010 and the statement of defence on August 6, 2010. A reply to the statement of defence was dated August 20, 2010. There were cross-examinations of the Credit Union’s representative Mr. Huber and upon an affidavit filed by Mrs. Vrankovic.

The Evidence

[5] The defences raised in the statement of defence were: non est factum; Meridian failing to realize upon their security prior to enforcing the guarantees; and improvident realization. Two of these can be dealt with quickly by the court. Firstly, the guarantee clearly provides that the lender does not have to realize on its security first or at all prior to calling upon the guarantee. Accordingly, any such defence would fail on a clear interpretation of the terms of the guarantee. The only submissions made by Peter Vrankovic on the hearing of this matter was to argue that the bank should have first realized upon the security. As noted, this argument fails in law as a defence to a lawsuit on the guarantees.

[6] Secondly, the security is being realized upon by a court appointed receiver pursuant to an order issued by the court (Commercial List) dated October 7, 2010. Thus, the argument of improvident realization fails.

[7] The only defence originally raised was non est factum which will be discussed later in my analysis and decision. In 2012 the defendants filed an amendment to their statement of defence, claiming that they did not have independent legal advice, that they did not understand the nature and effect of the guarantees, and that the mortgage security should be realized upon prior to any action on the guarantees as well as non est factum. Less than a week before the summary judgment motion Mrs. Vrankovic sought to further amend her statement of defence.

[8] New defences for Mrs. Vrankovic were suddenly raised after over three years of litigation asserting that there were genuine issues requiring a trial in the proposed amended statement of defence. The defendant now argues that the actions of the bank are unconscionable given that she was not a beneficiary of the loans or that she had no involvement whatsoever as a shareholder, director or officer of the debtor, and that there was misrepresentation by omission by Mr. Vrankovic as agent of Meridian.

[9] It is also Mrs. Vrankovic’s position that she knew nothing of the documents or the loan, and that she was not told, albeit she never asked, about the loan by the company lawyer, her husband or the bank. It is acknowledged that she did not receive independent legal advice. It is her position that she does not speak or read English.

Analysis

[10] Meridian was approached by Cambridge to make the original loan through its broker. The guarantees were offered as part of the original package made by its broker who I must presume knew its client and the defendants. Much is made by the defendant Mrs. Vrankovic that in the bank papers it indicates that it is not “relying on the guarantees” in terms of the loan. I see no merit in this argument. Firstly, I find the reference relates to an analysis of the value of the security held. The decision about any reliance upon the guarantees in order to advance the loan has nothing to do with the enforceability of the guarantees. Interestingly, the same page of the facility evaluation notes that the Vrankovics were carrying some $100,000.00 of credit card debt. According to the proposal provided to Meridian and signed by the personal defendants, the net worth of the defendants in 2002 was $37,997,500.00. Peter Vrankovic was a real estate developer, owning and developing property in Canada and U.S. since 1973. Mr. Vrankovic indicates in his affidavit that he has limited education and no formal training in financial affairs. He may not have a university degree, but in the real estate business world he is obviously skilled.

[11] Mrs. Vrankovic in her affidavit says she came to Canada from Yugoslavia in 1973 when she was 26 years old. She is now 66. She says she was a mother only after working at a few menial jobs. She had five children, one of whom was disabled and, sadly, died. She has 15 grandchildren. She says she speaks little English. Frankly, I find it incredible that with five children raised in Canada and with almost 40 years being a resident, let alone from interacting with 15 grandchildren, that she speaks little English. She may not understand financial documents but she owns a home worth over three million dollars in Toronto and another home in Florida. She may not be a shareholder, officer or director of Cambridge, but her lifestyle clearly arises from her husband’s financial dealings to her direct benefit.

[12] I also find it unbelievable that not only did Mrs. Vrankovic not ask any questions in 2002 and/or in 2009 when signing documents, but I also I find incredible a person who receives a statement of claim from a process server who has to access her home from a gated entrance makes no inquiry about the document. Further, I find it incredible that the lawyer for Cambridge, Mr. Lean, would not know she did not speak or read English and/or that he would fail to explain the documents to her or arrange for a translator for her. No one filed any affidavit from Mr. Lean nor was he third-partied for his apparent “negligent” dealing with Mrs. Vrankovic. According to Mrs. Vrankovic, Mr. Lean never asked if she understood or could read English, nor explained an unlimited guarantee to her. Again, I find this incredible. I would also suggest that given his dealings with her husband, Mr. Lean must have had some knowledge of Mrs. Vrankovic’s ability to speak or not speak English or to read it. I was not given any information if Mr. Lean could speak Croatian or Serbian so I assume he spoke English only.

[13] I find that the unbelievable nature of the defence further extends to the allegation that Mrs. Vrankovic never spoke to the lawyers who filed her statement of defence in 2011 and also her amended statement of defence, nor did she know anything about the litigation until April of 2013 or do anything about such until the beginning of this month, being November 2013. According to her, she never instructed, consulted or retained the lawyers who previously acted on her behalf. She never spoke to counsel. Again, no material was filed by these lawyers to corroborate this allegation or explain again their apparently blatant negligence in failing to communicate with a client they represented on a five million dollar claim or even to ascertain if the client read or spoke the English language before they filed a defence to a guarantee action on her behalf.

[14] On a summary judgment motion pursuant to Rule 20.02.1, I may exercise any of the following powers to determine whether there is a genuine issue requiring a trial, unless it is in the interest of justice for such powers only to be exercised at a trial:

1. Weighing the evidence
2. Evaluating the credibility of a deponent;
3. Drawing any reasonable inference from the evidence.

It is clear from my decision to this point that I have already begun to evaluate the credibility and have drawn reasonable inferences while weighing the evidence.

DECISION

Non Est Factum

[15] It is the position of the defendant Mrs. Vrankovic that she did not understand what she was signing, and that it was never explained to her and she does not speak or read English. As noted above, the documents in 2002 were signed at the office of the solicitor for Cambridge. The owner and operating mind of such corporation would be the instructing client Mr. Peter Vrankovic, her husband.

[16] As I have pointed out, there is a definite issue of credibility surrounding Mrs. Vrankovic’s sworn evidence. Her cross-examination sounds like the evidence of a well-trained person schooled in her defence. She repeats that she trusted her husband and signed because he told her to do so. When questioned about her skills in business she originally says she has no experience. Confronted with the purchase and building of her three million dollar home in Toronto she qualifies her answer so that transaction is to be seen as an exception. She then says that the money for the purchase came from an insurance payout and adds that to the list of exceptions to her non-financial dealings.

[17] The plaintiff asserts that the remedy of non est factum is not available to those who are willfully blind, and I agree. Mrs. Vrankovic says she signed documents without inquiring as to the content at all, either from her husband or the lawyer who presented to her, Mr. Lean. She had the opportunity to do so. There is no evidence from Mr. Lean the lawyer to substantiate her allegation that he simply gave her a paper to sign without providing any explanation of the document or as to his knowledge of Mrs. Vrankovic’s ability in the English language. The guarantee and the 2002 credit agreement were signed at Mr. Lean’s office. No evidence of the signing of the 2009 agreement was provided by either party, yet I note Mrs. Vrankovic signed it as well. The affidavit of service would indicate that she was personally served with the statement of claim, but again she made no efforts or inquiries as to its effect, simply giving it over to her husband. I have no doubt that Mrs. Vrankovic expected her husband to handle the matter, but her reliance on him does not deprive Meridian of its rights against her.

[18] Accordingly, in these circumstances, I find the defence of non est factum does not raise an issue genuinely requiring a trial.

Innocent Misrepresentation

[19] The defence argues Mr. Vrankovic was an agent for Meridian in having the guarantee signed, and by Mr. Vrankovic failing to explain the possible consequences, for example the loss of her home, to Mrs. Vrankovic, there was an innocent misrepresentation by him which binds the bank.

[20] The circumstances of this case belie that argument. Where the credit union hands a document to a customer and tells him to get his wife’s signature upon it, such an argument could and in fact has succeeded. Here, firstly, Meridian, which stands only in a creditor debtor relationship with a customer, was approached by Cambridge to make the loan which offered the guarantees. Meridian simply accepted the security and the guarantee proposed by Cambridge. The customer had its own lawyer who completed the security on behalf of Meridian. Meridian had its own lawyer handle its part of the transaction. The defendants’ lawyer, Mr. Lean, was the one who witnessed the signature of Mrs. Vrankovic. In these circumstances, to find Mr. Vrankovic an agent of Meridian is not consistent with the facts.

Unconscionability

[21] The defence argues that Mrs. Vrankovic to their knowledge had no financial interest in Cambridge nor was she a director, officer or shareholder of that company. They argue that, as a result, it would be unfair and unconscionable to permit the plaintiff to rely upon the guarantee. I think it must be considered a stretch that the court find that Mrs. Vrankovic derived no financial benefit as a result of this transaction or any of the financial dealings by her husband. She owns a three million dollar home, although she has never been employed, other than menial labour 30 years ago. She was instructed on cross-examination not to explain how she purchased that home. She also owns a home in Florida. Consideration is set out in the guarantee itself and it is clear in law that no direct flow of funds to the guarantee must occur from the lender for a guarantee to have validity. In fact, the opposite is usually the case. Again, this case differs on the facts from the case law cited by her lawyer, specifically the case cited by National Bank v. Mboutsindis, 2002 CarswellOnt 1487, where undue influence was involved together with other extenuating circumstances. I find, therefore, that her guarantee was not unconscionable in the case nor is the enforcement of it.

Undue Influence

[22] Although argued as a defence, I have no evidence of the same in the material supplied. Mrs. Vrankovic “trusted” her husband but we have nothing to say that he bullied, coerced, or forced her to sign the document. There is no evidence that she did not have an operating mind. It was she who chose to rely solely on her husband and to fail to ask any questions, even when their lawyer was available to provide the answers. Meridian is entitled to presume in the absence of any evidence to the contrary that undue influence is involved. Meridian did not turn a blind eye to undue influence. There was no evidence of it. It was offered the guarantee of Mrs. Vrankovic and took it.

[23] There is no case law that requires independent legal advice to ensure that a guarantee is valid and enforceable.

[24] The guarantees, therefore, I find to be valid and enforceable against both the defendants who executed them. Accordingly, the plaintiff is entitled to judgment for the amount owed to it.

[25] If there is any issue as to the quantum of the judgment, I may be spoken to.

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

Tucker J.

Released: December 6, 2013

COURT FILE NO.: 1039/10
DATE: 2013/12/06

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Meridian Credit Union Limited

Plaintiff

• and –

Peter Vrankovic and Nada Vrankovic

Defendants

REASONS FOR DECISION

Tucker J.

Released: December 6, 2013