ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-07-497-00
DATE: 2014-03-06

BETWEEN:

FRANK SANTAGUIDA
Plaintiff

– and –

ENROUTE IMPORTS INC., and VINCENT PILEGGI and LUCIANA PILEGGI also known as LUCY PILEGGI
Defendants

Nick Ranieri, Counsel for the Plaintiff

Riccardo Del Vecchio, Counsel for the Defendants

AND

ENROUTE IMPORTS INC., and VINCENT PILEGGI and LUCIANA PILEGGI also known as LUCY PILEGGI
Plaintiffs by Counterclaim

– and –

VINCENT SANTAGUIDA and FRANK SANTAGUIDA
Defendants by Counterclaim

Riccardo Del Vecchio, Counsel for the Plaintiffs by Counterclaim
Nick Ranieri, Counsel for the Defendants by Counterclaim

HEARD: February 18 & 19, 2014

REASONS FOR JUDGMENT

Trimble J.

INTRODUCTION:

[1] This dispute is set in the speculation about $400,000 USD, in an “investment” scheme reminiscent of the Nigerian “419” scams of several years ago (see http://www.fbi.gov/scams-safety/fraud).

THE POSITION OF THE PARTIES:

[2] Frank Santaguida sues Vincent Pileggi, Lucinda Pileggi and Enroute Imports Inc. for their failure to repay a loan of $57,843.87. Pileggi says that Frank Santaguida paid the $57,843.87 to buy that portion of Pileggi’s investment in a foreign investment scheme.

[3] The Defendants counterclaim against Frank Santaguida and his brother, Vincent Santaguida, for various forms of relief arising from the failed foreign investment scheme. Pileggi asserts that Vincent and Frank Santaguida acted as agents for Anthony Porcielli and his company, Forex Trading Services (the purveyors of the foreign investment scheme), and hence, are liable to Pileggi and Enroute as agents for Porciell’s and Forex’s breach of contract.

[4] At the outset of trial, the Defendants abandoned their claims for fraud, constructive trust and conspiracy. The remaining claim is for the Santaguidas’ alleged breach of the “Foreign Investment Contract.” The Santaguidas deny that they acted as agents for the purveyors of the foreign investment scheme.

[5] The parties agree that the onus is on the Plaintiff to prove the loan, and on the Defendant to prove that Frank Santaguida paid the $57,843.87 to purchase a portion of Pileggi’s interest in the foreign investment scheme. Neither party takes the position that the $57,843.87 was a gift. Therefore, if I find that neither has proved their version of events, then it is open to the Court to hold that the Defendant holds the money in trust for the Plaintiff. The Defendant says that the onus is on the Plaintiff to prove the trust. The parties also agree that with respect to the counterclaim, the onus is on the Defendant. The standard of proof for anyone is on the balance of probabilities.

EVIDENTIARY MATTERS:

[6] As a preliminary matter, each of the Plaintiff and Defendant provided a book of documents (Exhibits 1 and 2). Both agreed that the Court could receive the documents in each book as being what they purported to be, without further proof. Since they would not agree that the documents could be accepted for the truth of their contents, I agreed to only look at those documents proved through witnesses.

THE PROBLEM:

[7] This case, involving the loss of almost $500,000.00 cumulatively, turns exclusively on the credibility of the Santaguida brothers and Pileggi. Notwithstanding the age of the parties and their business acumen (especially Pileggi’s), there is no documentary evidence to support the position of either as to the nature of the transactions at issue in the action. I am left deciding the fate of up to $500,000.00 between the two claims, based on the credibility of three people: Frank and Vincent Santaguida, and Vincent Pileggi.

THE TWO TRANSACTIONS:

[8] Much evidence in this trial is disputed. What is undisputed evidence is this as follows:

[9] By 2003, Frank and Vincent Santaguida, Anthony Porciello and Vince Pileggi had known each other for over 20 years. Their relationship was social, for the most part. The Santaguidas and Pileggi were friends, and even played cards with each other from time to time. Vincent Santaguida was godfather to one of Vincent Pileggi’s children. Porciello was more of a long-term acquaintance, more so with Vincent Santaguida than the others.

[10] Sometimes, the relationships were economic. Porciello once purchased a small amount of goods from Pileggi, many years before the two transactions in 2003. Vincent Pileggi and Vincent Santaguida had a stronger economic tie. By 2003, most of Santaguida’s businesses were bankrupt or not functioning. When his businesses were solvent, however, Santaguida and Pileggi loaned each other cash when their cash cycles were low, in order to float each other’s businesses until the cash cycle turned around. There was no evidence of how frequently they did this, but the impression was that it was many times.

1. The Foreign Investment Opportunity

[11] In early 2003 (March, if you accept Vincent Pileggi’s evidence; May, if you accept the Santaguidas’) Anthony Porciello approached Vincent Santaguida with a foreign investment opportunity. The original approach was by phone. The two met later that day at a coffee shop. At that meeting, Porciello claimed to have $20,000,000.00 USD in a Spanish branch of Citibank, but needed to post $400,000.00 USD in bonds before he could transfer the money to the U.S. or Canada. He asked Vincent Santaguida if he wanted to invest in posting the bonds. Porciello promised that he would pay back double the investment by May 15, 2003. There were no documents to support this story.

[12] Vince Santaguida had no money as his business was in the process of failing. He offered to put Porciello in touch with Frank Santaguida and Vincent Pileggi. Vincent Satanguida called Pileggi. Pileggi joined them at the coffee shop, listened to the proposal, but made no commitment. In addition, Vincent Santaguida arranged a meeting with Frank Santaguida at their father’s home to discuss the proposal. Porciello made the same pitch. Again, there were no commitments.

[13] Eventually, Frank Santaguida, contributed $300,000.00 comprising $100,000.00 of his own money, approximately $50,000.00 from his brother-in-law Nick Nicodemo, and $150,000.00 borrowed from an acquaintance. Vincent Pileggi contributed either $192,000.00 (according to Vincent Santaguida) or $225,000.00 (according to Pileggi), but on his evidence, he only decided to invest once he saw that the others were committed.

[14] On May 8, 2003, all investors met Porciello at his bank, and in the parking lot gave Porciello the bank drafts. Frank Santaguida had already transferred his money by wire transfer. All money was paid to Forex, Porciello’s company. Aside from the documents confirming Frank Santaguida’s withdrawals and wire transfer to Forex, there is no documentation put into evidence from the others, including Pileggi, concerning their withdrawal or payment of funds to Porciello. All agreed that after Porciello emerged from the Bank, he showed the wire transfer document confirming the wire transfer to the ultimate recipient, the name of whom none could remember.

[15] In addition to the absence of documents, all parties testified that Porciello died, and his evidence was not recorded.

[16] By May 15, 2003, Porciello did not make the payments as agreed. While the evidence is not clear, there were assurances it would come and excuses as to why it did not. It has never been paid. Frank Santaguida is still repaying his brother-in-law and acquaintance for their $200,000.00 USD. Vincent Pileggi hounded Porciello and Vincent Santaguida about getting his money back. It must have been effective, as Forex repaid Pileggi $30,000.00 CND on May 16, since the deal was “oversubscribed” by that much.

[17] Pileggi says that he invested $225,000.00 in this investment opportunity. The evidence on this point is contradictory.

2. $57,843.87

[18] On May 16, 2003, Frank Santaguida withdrew GIC’s and emptied his bank account, realizing $57,843.87 in cash, which he paid, in two drafts, to Enroute, Pileggi’s company.

[19] Frank Santaguida says that he loaned Vincent Pileggi the $57,843.87 so that Pileggi’s company could pay for a delivery of edible oils. The loan was advanced because Pileggi had exhausted, or nearly exhausted his resources, because of the investment Pileggi made in the foreign investment scheme. Frank says that he heard about Pileggi’s tight circumstances from his brother, Vincent. This is consistent with Vincent Santaguida’s testimony that Pileggi said on several occasions that the investment had better come through as he needed to pay for a shipment of edible oils. Frank Santaguida says that the sum of $65,000.00 was to be repaid by May 23, 2003, with the excess over principal paid on account of interest on the loan, and lost interest and penalties Santaguida paid to liquidate his GIC’s to fund the loan.

[20] Each of Frank Santaguida and Pileggi have notes, which support their different versions of the purpose of the transfer of the $57,843.87, which they say were made contemporaneously.

[21] Pileggi says that the $57,843.87 is the sum that Frank Santaguida paid to purchase that amount of Pileggi’s interest in the foreign investment opportunity. Pileggi had invested a large amount in the foreign investment opportunity, although his evidence as to how much Pileggi invested varied from time to time. Pileggi speculates variously that Frank wanted to increase his share of the foreign investment because a) Frank was greedy, b) Frank was guilty about his brother bringing Pileggi into the foreign investment, and c) Frank wanted to help Vincent Santaguida.

LIABILITY OF LUCIANA PILEGGI aka LUCY PILEGGI:

[22] There is no doubt on all the evidence, that there was no sustainable cause of action against Luciana Pileggi. She was named because she is married to Vincent Pileggi. There was no evidence that she was involved in either of the two transactions. Indeed, it is uncontroverted that she did not find out about either of the two transactions until she was served with the Statement of Claim. The action against her is dismissed.

CREDIBITILITY & RELIABILITY OF WITNESSES:

The Law on Credibility Assessment

[23] At the outset of the hearing, I asked counsel for caselaw to guide me in my assessment of credibility. Neither provided any assistance.

[24] An assessment of a witness’ “credibility” involves an assessment of the credibility (truthfulness) and reliability (accuracy) of the witness. The following is a non-exhaustive list of factors the Court must consider in weighing the credibility of witnesses:

a) The demeanor of the witnesses – this is an important factor, although not the only factor. Findings of credibility should not be made on demeanour, alone.

b) Does the evidence make sense? - is the testimony in harmony with the preponderance of probabilities which a practical and informed person would find reasonable given the particular place and condition? See: Faryna v. Chorny, 1951 252 (BC CA), [1952] 2 D.L.R. 354 (B.C.C.A.).

c) Internal Consistency – does the evidence have an internal consistency and logical flow? R. v. C.H., 1999 18939 (NL CA), [1999] N.J. No. 273 (Nfld C.A.).

d) Prior inconsistencies – is the evidence consistent with prior statements (e.g. Discovery evidence)? How significant are the differences, and are they adequately explained? R. v. Dinardo, 2008 SCC 24, [2008] 1 S.C.R. 788.

e) Is there independent confirming or contradicting evidence? R. v. Khan, 1990 77 (SCC), [1990] 2 S.C.R. 531. (S.C.C.)

f) Interest in the outcome and a motive to lie – does the witness have such motivation? Motivation to win or lose the case is not sufficient. The interest must be beyond that. R. v. S.D, 2007 ONCA 243, 218 C.C.C. (3d) 323.

[25] None of these factors is determinative. In addressing the credibility and reliability of each of the three witnesses I have considered all of these factors as they apply to each witness. They all inform my views as to the credibility and reliability of the witnesses.

[26] As a preliminary matter, it is incredible that there are no documents concerning the foreign investment scheme and the $57,843.87. It is also incredible that generally sensible people would invest in what appears to be a get-rich-quick, fraud scheme. This reflects poorly on the credibility of the three.

1. Frank Santaguida

[27] Generally, I found Frank Santaguida to be relatively credible and reliable. I accept that he believed that he had loaned the $57,843.87 to Pileggi and his company. I say this for the following reasons:

[28] Santaguida’s demeanour was generally good. He appeared to be honest and forthright. He was nervous, although not inappropriately so for someone whose dealings with the Court are minimal. His responses were appropriate, generally. For example, he became agitated when discussing Pileggi’s failure to repay the loan. While his answers were vague, sometimes, there did not appear to be any prevarication.

[29] Frank Santaguida is not a sophisticated man, although he is intelligent. He is a contract administrator for a construction company, currently working in Fort McMurray, Alberta. He is employed, not self-employed. Based on this, and absent other evidence, one cannot expect of him the same level of sophistication as of Vincent Santaguida and Pileggi, both of whom are or were self-employed.

[30] He withstood cross-examination well. He admitted what was expected to be admitted. He knows what contracts are and why they were important. As a contract administrator, he has experience with construction contracts. He also has experience with his mortgage, and understands why one has contracts for loans and purchases of goods. He admitted that it would have been better, in retrospect, to have a contract for the $57,843.87 loan, but explained that it was a gentlemen’s agreement – a loan to a friend, which, at the time, did not require writing. In any event, he testified that Pileggi said that as friends, they didn’t need anything in writing regarding the loan. He admitted that loan terms did not include an interest rate or specific term, but that this was accounted for in the $65,000.00 repayment sum. He admitted that the first written demand for repayment was his lawyer’s letter of January 9, 2007 (Exhibit 2-D) and that he did not know how his lawyer concluded that interest was at 12%.

[31] Defence counsel challenged Santaguida’s evidence that he first heard of the foreign investment opportunity in May by pointing out that he said on Discovery that he first heard of it in March. Santaguida readily conceded that March must be correct. He volunteered (as opposed to being questioned to admit) that his memory at the time of the Discovery was probably better than at trial. He was also cross-examined on his Discovery transcript with respect to how he knew that Pileggi needed money to buy a shipment of edible oil for his business. His trial evidence on the point was not shaken. He said that Vincent Santaguida told him in the few days before May 15, that Pileggi had said several times that the foreign investment pay-out had to come soon as he needed money to buy the oil. This evidence is supported by the evidence of Vincent Santaguida.

[32] There is internal consistency and logic to Frank Santaguida’s evidence. His story is more consistent with what one would expect in a transaction between friends. For example, Frank says that when he visited Pileggi on May 16th (the day after the foreign investment failed to pay), he offered the money as a loan. As they discussed the loan, Pileggi never insisted that the money was a buy out of a portion of Pileggi’s investment. Santaguida made notes of the terms of the loan (Exhibits 1-7) that were agreed to. Frank says that he asked Pileggi to sign his notes but says that Pileggi said that since they were friends, there was no need to sign any document. As to the allegation of the loan not having an interest term or a term for the loan, Vincent says that the repayment amount of $65,000 was intended to account for interest on the loan, and lost interest and penalties incurred in cashing out the GIC’s, and it was to be repaid in a week.

[33] Pileggi’s position is that Frank paid $57,843.87 to purchase a portion of Pileggi’s interest in the foreign investment scheme because Frank was greedy, and wanted a bigger share of the foreign investment opportunity. This makes no sense. Both Frank and Pileggi said that by late afternoon on May 15th each thought that there was little prospect that they would get their money back (let alone the doubling of their money) from the foreign investment scheme. Frank said that by the close of business on May 15th, he was depressed and embarrassed. He had lost $100,000.00 of his own money and $200,000.00 he borrowed from others, which he could not pay back.

[34] Pileggi also testified that by late afternoon on May 15th he thought that he had lost his investment, and that there was little likelihood of seeing any return. I cannot see why Pileggi thinks why Frank’s expectation should be any different than his own. There was no evidence to support this opinion. Santaguida’s evidence as to his belief late in the afternoon of May 15th that his money was lost, makes sense, and therefore so too does it make sense that he would not have been interested in any further purchase of interest in the foreign investment opportunity.

[35] Not all of Frank Santaguida’s evidence is pristine and sensible. Counsel for the Defendants put it to him that he wanted a larger stake in the foreign investment opportunity, and purchased that share of Pileggi’s interest that he could afford. Santaguida responded that if he wanted a greater share, he would have purchased it from Porciello, not Pileggi. Frank Santaguida knew, however, that Porciello was oversubscribed. The only person with an interest in the foreign investment opportunity was Pileggi. Vincent Santaguida says that there was another investor, MacDonald, who had $69,000.00 CDN in the deal. He could have been approached.

[36] That there was no written demand for repayment until January, 2007, is not surprising, given the nature of the loan agreement, as he alleged. Santaguida says he went to see Pileggi numerous times, to demand payment, beginning on May 23.

2. Vincent Santaguida

[37] In terms of his demeanour, Vincent Santaguida was generally a good witness. However, for the reasons that follow, I do not find him credible or reliable, except where supported by other corroborating evidence. The exception to this is with respect to his role, if any, with Porceilli and Forex. I make my credibility ruling for the following reasons.

[38] Santaguida is a sophisticated, although not wholly successful, business man. Up to 2003, he appears to have owned two companies: Paramount Restoration (a home renovation contracting company) and 1483430 Ontario Ltd. (of uncertain purpose). Both he and Pileggi said that each loaned the other money from time to time, to assist the other with cash flow, when the cash cycle was low. This was not an infrequent thing. By 2003, however, Santaguida’s companies were in trouble. In light of Santaguida’s sophistication, it is incredible that he would have accepted Porciello’s representations about the foreign investment scheme, let alone recommended it or introduced it to his brother or his friend of 40 years (on his evidence).

[39] Much of his evidence makes no sense and was vague. For instance, his role in the foreign investment scheme remains a puzzle. At one point, he described his role as minimal; one of merely bringing the parties together. He denied any business, employment or agency relationship with Forex or Porciello. He admitted in cross- examination that Porciello offered him a position with Forex, but said that Porciello offered everyone positions with his company when the foreign investment paid off, none of which Santaguida believed. He denied in examination in-chief that he was paid money to endorse Forex, Porciello or the foreign investment scheme.

[40] Notwithstanding this purportedly limited role, Santaguida’s actions indicate a much higher involvement. Santaguida was at most of the meetings involving Porciello, Frank Santaguida and Pileggi. For periods of time, Vincent Santaguida was the main contact and conduit between Pileggi and Porciello. Santaguida says, however, that he had no money. At these meetings, he merely listened.

[41] In June or July, 2003, with the foreign investment opportunity still not paid out, Santaguida went to Africa with Porciello to “keep tabs on him”. Porciello had a currency deal in Africa, which if completed, would put Porciello into funds to permit partial return of the investors’ money. Santaguida says that Pileggi asked him to “keep tabs” on Porceillo, to make sure he didn’t leave the country, or abscond with money. Pileggi denies he made this request. Rather, he says that the fact that Vincent Santaguida accompanied Pileggi to Africa is evidence that Santaguida was aligned with Porciello. Santaguida’s evidence on this point makes no sense. How was he supposed to keep Porciello from leaving the jurisdiction or absconding with money? Santaguida’s cross-examination raised many questions about why Santaguida was at most of the meetings between Pileggi and Porciello, but provided little by way of answer.

[42] Vincent Santaguida was also prone to exaggeration. It is both his and Pileggi’s evidence that after Santaguida’s business folded in early 2003, Pileggi allowed Santaguida to store equipment and inventory at Pileggi’s premises. In exchange, Santaguida said he helped around Enroute’s plant. In both his evidence in-chief and in cross-examination, Santaguida left the impression that he was at Enroute’s premises frequently helping by making deliveries, repairing and cleaning plant and machinery, and helping organize and conduct Enroute’s move to new premises in the summer of 2003. Pileggi says that the assistance was minimal, usually limited to doing deliveries from time to time.

[43] Santaguida’s evidence was often inconsistent. For example, he said in examination in-chief, at least twice, that he knew Pileggi made an investment of $192.000.00 CND, yet admitted later that he did not really see the draft that Pileggi brought to the May 9th meeting in the bank parking lot.

[44] Pileggi testified on two occasions that Santaguida told him that Santaguida was entitled to a $2 million commission from the foreign investment scheme, once it closed – a commission for bringing investors. I asked counsel for the Defendants and the Plaintiff, if I should receive this evidence, and if so, to what use could it be put. Pileggi’s lawyer argued that I should accept this evidence in support of his position with respect to the counterclaim. I decline to do so. Santaguida said in examination in-chief that he did not receive any money to endorse the foreign investment scheme, nor was he employed by or an agent for Porciello or Forex. Pileggi’s counsel only cross-examined Vincent Santaguida on whether he was an agent for or employee of Porciello or Forex. Santaguida’s evidence in cross-examination was consistent with his evidence in-chief.

[45] Counsel for the Santaguidas did not object to Pileggi’s evidence about the commission, but I did. Defence counsel’s failure to cross-examine Santaguida on the alleged commission, then his leading it through his own witness after the Plaintiff closed his case, is a violation of the rule in Browne v. Dunn (1893), 6 R.67 at paras. 70-71. That rule requires that if a cross examiner intends to impeach the credibility of a witness by means of extrinsic evidence of a contrary set of facts, the witness must be given notice of that intention, and given the opportunity to explain it (see Sopinka, Lederman, The Law of Evidence in Canada. 3rd (Toronto, LexisNexis, 2009) at 16.179 – 16.182) The issue of a commission was never put to Vincent Santaguida notwithstanding Santaguida’s evidence that he received no commission; yet Pileggi gave evidence of the commission (although hearsay) and it was argued in Pileggi’s closing argument.

3. Vincent Pileggi

[46] As with Vincent Santaguida, I find that Vincent Pileggi is not credible or reliable, except where his evidence is supported by other corroborating evidence. I make this finding for the following reasons:

[47] Pileggi’s overall comportment in the witness box was poor. His answers were often broad, sweeping, vague and positional. His overall demeanour suggested ego and distain. He avoided making admissions that were obvious. He sparred with counsel about the meaning of the “due diligence” that he ought to have exercised before entering into the foreign investment scheme. When asked about his lack of due diligence, rather than admitting he did none (which was obvious) he kept replying that he ‘trusted Vince’.

[48] Pileggi obfuscated. He denied that Frank Santaguida showed him the notes that Santaguida says he took during the May 16th meeting, and denies there was discussion about signing them. Pileggi produced notes of his own, recording the gist of what he says transpired at the May 16th meeting when the $57,843.87 was advanced (Exhibit 2-A). He was asked at least three times when those notes were made, and whether he showed them to Frank Santaguida or was in the room when Pileggi made his notes. His response to Plaintiff’s counsel was first, that he made the notes as soon as Frank left, then changed his answer to the effect that he made them to as Frank was leaving. I was left with the impression that Pileggi was arranging this evidence to leave open the argument that Frank could have seen or did see Pileggi’s note. Ultimately, a sophisticated business person ought to have known that a contract was preferable to notes he made after Frank left but did not show Frank.

[49] Some of Pileggi’s answers were conveniently remembered. For instance, through his examination in-chief, he maintained that there was never any paperwork presented in respect of the foreign investment scheme. It was not until into his cross-examination, when asked if he ever asked for written documentation (having said he never did so), he said “I did, actually”, but never received it. Another example of a convenient recall in cross-examination concerns his due diligence. In his examination in-chief, he indicated that the only due diligence he performed was to rely on Vincent Santaguida’s representations about the deal. In cross-examination on his due diligence on the foreign investment, he said “I remember reading somewhere, something about bonds” being used in circumstances such as those contemplated in the foreign investment scheme. He also asked an unspecified number of unidentified stock brokers about the use of bonds in such circumstances as the foreign investment, and they supported their use.

[50] Pileggi’s language was sometimes intemperate, conclusory, and unsupported by evidence. He said at least twice that Frank Santaguida was motivated by “greed” when he purchased $57,843.87 worth of Pileggi’s interest in the foreign investment scheme. He also referred to Vincent Santaguida as “the ringleader” and “orchestrator” of the foreign investment opportunity, when on all evidence, that role belonged to Porcielli.

[51] Pileggi’s evidence lacked overall logic and consistency. His actions are not what one would expect from a like person in similar circumstances. Pileggi is a very experienced business person, more so that Vincent Santaguida and far more so than Frank Santaguida. He came close to finishing a degree in Business at York University. He became a licenced real estate broker. He then joined his father’s construction company. Since leaving his father’s construction company in 1986, he has operated, often simultaneously, a number of businesses.

[52] Pileggi founded Enroute on April 3, 1986. Enroute imports foodstuffs in bulk and repackages them under licence or under his own labels. The distribution of these re-packaged goods is both wholesale and retail. The business is successful.

[53] As a successful business person, Pileggi is aware of the need for and benefit of written agreements. He is aware of the need for and benefit of performing due diligence. He admitted that when he bought the premises into which he moved his business in the summer of 2003, he had his lawyer perform the due diligence necessary to buy a property.

[54] Pileggi’s version of his conduct in respect to the two transactions makes no sense, objectively or in the particular circumstances. That a business person of Pileggi’s sophistication would advance $225,000.00 (on his evidence) to Porciello or Enroute, without so much as a written I.O.U. is remarkable. That he would have advanced $225,000.00 on an investment that he admitted in-chief was “too good to be true” to Porciello, whose credibility he doubted and he referred to as “Rambo” in a suit, without anything in writing, and without any due diligence, is astounding. Pileggi explained several times that he made the investment out of love, friendship and respect to Vincent Santaguida, a friend whose business and marriage were failing. For reasons expressed elsewhere, I have some doubt about this, but it still does not explain why Pileggi would not paper the transaction properly.

[55] It makes no sense that Pileggi, the most business savvy of the three individual litigants would even enter the foreign investment scheme of this nature. He admitted that he thought it was “it was too good to be true.” He admitted that he did not trust Porcielli and would not “lend him a dime’. He said that he was always suspicious of the foreign investment scheme (even after he contributed to it), but only joined the venture because a) others were doing it, which gave him comfort, b) he was doing it to help Vincent, and c) because of Vincent Santaguida’s guarantees.

[56] None of this makes sense. With respect to the wisdom of entering the deal, Pileggi said that up until the time he made his contribution, he had no real confirmation about the nature of the deal. To invest $225,000.00 in a suspicious transaction, put together by a fellow to whom Pileggi said he would not ‘lend a dime’ to, merely ‘to help a friend’, but without appropriately papering the transaction, is almost incredible.

[57] Pileggi insisted, both in-chief and cross-examination that in addition to wanting to help Vincent Santaguida, he relied on Santaguida’s guarantees with respect to the returns on the foreign investment opportunity. Indeed, his crossclaim against the Santaguidas relies on these guarantees. This too, makes no sense. Why would a sophisticated businessman like Pileggi rely on guarantees from a man whose business and marriage he knew to be failing, and whom he knew to be living with his father. Further, the “guarantees” that Pileggi says Vincent Sanataguida gave him are so incredible that Pileggi ought not to have relied on them, even if Santaguida had assets sufficient to stand behind them. Pileggi said several times that Santaguida gave a “5,000%” guarantee that Pileggi would make double his money on the foreign investment scheme.

[58] With respect to the $57,843.87 transaction, Pileggi has every interest in not entering a written agreement. As an experienced business person, he must have been aware that having no paper concerning this transaction allowed him a great deal of flexibility in the position he might take in response to Frank. Without paper defining the nature of the transaction, he creates uncertainty as to his obligations, which he can use to his advantage later on, for example, in this law suit.

[59] There was much questioning on whether Pileggi/Enroute, were in financial difficulty, and required the loan from Frank Santaguida. Frank conceded that his only information was that which he received from his brother. Pileggi said that he was not in financial difficulty, that he was managing well, and could afford the oil shipment. As evidence, he pointed out that he had just bought a new building for his business.

[60] From Pileggi’s own evidence, there is doubt as to his financial liquidity. He said himself that in his business “cashflow is king”, that he operated his business off his line of credit throughout the month, that his oil shipments were either cash on delivery or on 30 days net basis. He also admitted that his contribution to the foreign investment scheme exhausted about half of the limit of Enroute’s line of credit. He agreed that moving the business was also a cash drain. From his own evidence, there is reason to think that Pileggi and Enroute were in a cash crunch, and that there is some semblance of reason behind the suggestion that Frank’s payment of $57,843.87 was a loan.

[61] Pileggi’s evidence with respect to the amount of the investment is not consistent. At trial, he said the original investment was $225,000.00, taken from his company’s line of credit, which represented about 50% of the total line. He produced no documentary evidence of this withdrawal or the bank draft he made payable to Forex or Porciello. He said he lost the documents, and had changed banks. This is not believable.

[62] In paragraph twelve of the Statement of Defence and Counterclaim, Pileggi states that his initial investment was $200,000.00. At his examination for Discovery (Exhibit 5, ques. 15-20) he said that his initial investment was $190,000.00. Further, in his Discovery he did not mention the $30,000.00 repayment (Exhibit 2-B) that he received on May 16th. In light of this evidence, I am left not knowing what Pileggi’s/Enroute’s contribution was. The only supported evidence is that Pileggi’s/Enroute’s counterclaim should be reduced by the $30,000.00 refund from Forex (Exhibit 2-B), and Frank Santaguida’s $57,843.87 (assuming it was paid to purchase some of Pileggi’s interest in the foreign investment scheme.

FINDINGS

1. $57,843.87

[63] Where an oral contract is alleged, the Court must examine all relevant facts to the alleged agreement. The Court cannot make a contract for the parties if they have not agreed upon its material terms (Picavet v. Clute, 2012 ONSC 2221, para. 9 to 13).

[64] In this case, I have considered all circumstances relevant to the advancement of the $57,843.87. Given my findings on credibility, I find that Frank Santaguida has met his burden of proof, on a balance of probabilities, that his advance to Enroute was a loan and the terms of the loan were as set out in Santaguida’s note Exhibit 1-7, to be paid back by May 23rd at $65,000.00. The difference between the principal and the repayment amount was for interest and penalties Santaguida incurred in cashing in his GIC’s early.

[65] The loan was to Enroute, not Pileggi. Pileggi was merely the operating mind of Enroute. The action against Pileggi is dismissed.

[66] I find that Pileggi has failed to prove on a balance of probabilities that the advance was a purchase of $57,843.87 of Enroute’s share of the foreign investment. Based on my credibility findings, I cannot accept Pileggi’s characterization of the advance, and can only conclude that Pileggi, too, knew that the advance was a loan.

[67] Where a contract does not specify a term, it is a demand loan: see C.E.D., Debtor & Creditor, II, title 4, “Debt Repayment”, para. 74.

[68] I also accept that a demand was made, if not orally, then by January, 2007 (Exhibit 2-D). The date of the demand is of no moment since the repayment amount was a flat amount. The Plaintiff is entitled to judgment at $65,000.00 against Enroute. Since there is no proof of a guarantee by Pileggi, and since the evidence indicates that Pileggi was acting on behalf of the corporation, and in no personal capacity, the action against him is dismissed.

[69] If I am wrong in finding that the advance was a loan, and since I reject Pileggi’s reason for the advance, I must find that there was no meeting of minds with respect to the advance. Where a transferee transfers money to a transferor, without consideration for the transfer, a resumption arises that the money is held by the transferee, in trust, for the transferor (Nero v. Nero, 2006 28336 (ONSC) at para. 16). In this case, there is such a transfer, and Enroute holds the $57,843.87 in trust for the Plaintiff. Interest shall run from the date of demand (January 9, 2007) at standard pre-judgment interest rates.

COUNTERCLAIM

[70] The counterclaim fails.

[71] The Defendants plead that Frank and Vincent Santaguida are liable for $284,310.26 for “breach of the Foreign Investment Contract (Statement of Defence and Counterclaim, para. 28a). Aside from costs and interest, the Defendants abandon all other claims.

[72] In order to succeed in this claim, the Defendants must show that the Santaguidas acted as agents for Porcielli and Forex, and that the principals breached the contract.

[73] In my view, the Counterclaim is without merit.

[74] First, the Defendants produced no law on the issue of the liability of principal and agent. Their legal submissions all pertained to the issue of the oral contract.

[75] Second, the Defendants have failed to discharge their onus to prove on a balance of probabilities that either of the Santaguidas were agents for, or could bind Porciello or Forex.

[76] The evidence of any relationship between Vincent Santaguida and Porciello and Forex, is limited. That relationship is vague and suspicious, but this does not meet the balance of probabilities of proving the agent/principal relationship and that the agent had actual or ostensible authority to bind the principal.

[77] Further, I also doubt that the foreign investment opportunity amounted to a contract. All parties thought it was suspicious. All parties called it an “investment”, not a contract. The guarantees that were given (e.g. a “5,000% guaranteed” return), if given, were probably not representations that a reasonable business person ought to have relied upon, but classic “puffery”. I do not think that it was reasonable for the Defendants to have relied upon them.

[78] Finally, even if the legal relationship and breach had been established, damages have not been established. As indicated above, Pileggi gave varying versions of what the initial investment was, and could not produce any documents to support it. To say he “lost” the bank statement or his copy of the bank draft, without saying how, is not acceptable. To say that he changed banks as an excuse for not providing evidence is not acceptable. To say that an unspecified number of phone calls, made in 2008, did not result in any documents from the bank, strains credulity. Financial institutions maintain records for seven years, generally.

COSTS:

[79] If counsel cannot agree, within 30 days of the date of these reasons, on the disposition as to costs each shall deliver cost submissions of not more than three single spaced pages, addressing by whom and in what amount costs should be paid.

Trimble J.

Released: March 6, 2014