ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 8613/14
DATE: 2014-03-06
B E T W E E N:
2109075 Ontario Inc.
Duncan M. Macfarlane, Q.C., for the Applicant
Applicant
- and -
Northguard Capital Corp.
Luciano Butera, for the Respondent
Respondent
HEARD at Welland, Ontario:
March 5, 2014
THE HONOURABLE JUSTICE T. MADDALENA
JUDGMENT
[1] This is an application heard at Welland on March 5, 2014.
[2] The applicant seeks a declaration requiring the respondent Northguard Capital Corp to execute a discharge of mortgage upon payment of the proper amount determined under the terms of a mortgage with the respondent as mortgagee and the applicant as mortgagor.
[3] The parties negotiated between themselves an extension of mortgage from July 3, 2013 to July 3, 2014.
[4] This extension included the following prepayment provisions, which are at the heart of the dispute in this application.
[5] The prepayment provisions are as follows:-
(i.) The charge is closed to prepayment during the first 30 days of the extended term;
(ii.) It is open for prepayment in full thereafter for the entire amount by giving the lender in writing 75 days notice;
(iii.) Upon notice, the lender will be committing these funds to other borrowers and should the money not be repaid, the borrower is responsible for any and all damages caused as a result of non-payment;
(iv.) The borrower shall have this option every 30 days for the first six months of the term of this extension.
[6] These prepayment provisions were drafted by the respondent’s counsel and forwarded to the applicant for execution. The applicant accepted the terms and executed the prepayment provisions agreement.
[7] Pursuant to the prepayment provisions of the mortgage, the applicant provided notice to the respondent on January 3, 2014 that it would be exercising its option under the prepayment provisions and paying out the mortgage in full on March 19, 2014 (which the applicant states is 75 days from January 3, 2014).
[8] The respondent submits that the notice on January 3, 2014 was beyond the last date for the prepayment notice, which the respondent submits is December 30, 2013.
[9] The respondent submits that 75 days from December 30, 2013 is March 15, 2014. (However, this is a Saturday and not a juridical day under the provisions of the Rules.)
[10] Further, the respondent submits the applicant has violated the prepayment agreement by not giving 75 days notice and that it has acted in bad faith and in a reckless matter which has caused the respondent to back down from its commitment to other borrowers. As a result, it submits the court must declare the notice of prepayment to be null and void.
[11] The respondent submits that, firstly, the applicant has failed to provide proof that it has a commitment for funds and accordingly has violated the spirit of the agreement. It argues that it cannot commit to other lendors since it does not believe the applicant has any commitment from a financial institution to have the funds available for the discharge.
[12] The court notes that, nowhere in the mortgage agreement, or in the prepayment provisions, is there a term which requires the applicant to provide proof to the respondent, or any documents to the respondent, confirming its commitment from a financial institution. What is clear is that if the applicant fails to close the mortgage transaction on the date of discharge, there are very onerous costs and damages imposed on it, which term is not disputed by the applicant.
[13] Thus, I am not persuaded by the respondent’s position in this regard.
[14] Secondly, there are inconsistencies and ambiguities in the prepayment clauses, particularly regarding clauses (i) and (iv). Clause (i) states that the mortgage is not open for prepayment during the first 30 days. Clause (iv) permits the applicant to “have this option” every 30 days for the first six months of the term of this extension. Clause (i) clearly states no prepayment during the first 30 days whereas clause (iv) states this option (presumably to prepay?) may be exercised every 30 days for the first six months of the mortgage.
[15] It is clear that the extension commenced July 3, 2013 and is to conclude July 3, 2014. The prepayment privilege extends for six months from the beginning of the term of the extension; that is, six months from July 3, 2013 which therefore is January 3, 2014.
[16] The respondent submits that the prepayment privilege renews on every 30 days being on the following dates: August 2/13; September 1/13; October 1/13; October 31/13; November 30/13; or December 30/13.
[17] The difficulty with this interpretation is that clause (iv) gives the borrower “this option for the first six months of the extension”. Therefore, it is logical to conclude from this that the first six months of the extension for the prepayment concludes January 3, 2014, which is six months from July 3, 2013. No other interpretation is reasonable.
[18] Thus, I conclude that the notice of prepayment given by the applicant on January 3, 2014 is proper and in accordance with the terms of the extension agreement. The closing date for the payout of the mortgage is therefore March 19, 2014.
[19] The parties have agreed on the outstanding amount on March 19, 2014, inclusive of discharge fee, to be $6,484,267.45. This is the amount that is required to be paid by the applicant to the respondent in order to secure a discharge of the mortgage in question.
COSTS
[20] The applicant is entitled to its costs. The court notes that both counsel have claimed approximately the same amount in costs owing to them by the other.
[21] I fix costs to be paid by the respondent to the applicant in the amount of $7,382.00.
[22] I have signed the draft judgment provided with provisions added to paragraphs 3 and 4 as reflected herein.
Maddalena J.
Released: March 6, 2014
COURT FILE NO.: 8613/14
DATE: 2014-03-06
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
2109075 Ontario Inc.
Applicant
- and –
Northguard Capital Corp.
Respondent
JUDGMENT
Maddalena J.
Released: March 6, 2014