ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 3813-11 SR
DATE: 20140430
B E T W E E N:
Bank of Montreal
Tony Van Klink, for the Plaintiff
Plaintiff
- and -
Sylvia Loyens a.k.a Sylvia Carruthers and William Loyens
Sandra L. DiMeo, for the Defendant, Sylvia Loyens
Defendants
HEARD: March 27, 2014
LEITCH J.
[1] The Bank of Montreal (the “Bank”) has moved for summary judgment on its claim against the defendant, Sylvia Loyens a.k.a. Sylvia Carruthers (“Sylvia”) for payment of the outstanding balances on two loans made by the Bank to her and the defendant, William Loyens.
[2] The Bank has obtained summary judgment against William Loyens (“William”) by order dated December 3, 2013.
[3] Sylvia has brought a cross-motion for summary judgment dismissing the Bank’s claim against her.
[4] The Bank’s motion and Sylvia’s cross-motion were heard together.
[5] Both counsel advised at the hearing of these motions that there were no material facts in contention and these circumstances are ones suitable for summary judgment. In other words, there was no issue that summary judgment should be granted either in favour of the Bank on its motion or in favour of Sylvia on her cross-motion.
Background Facts
[6] Sylvia and William were formerly married. They separated in January 2006. They were divorced in March 2010.
[7] Sylvia is a lawyer and was called to the bar in 1983.
[8] The Bank made two loans to Sylvia and William as joint borrowers: a $100,000 operating loan and a $60,000 revolving loan. Sylvia was very clear in her evidence on discovery that she signed the loan documentation, was aware of what the documents were, and her signature evidenced her agreement with their terms. Sylvia acknowledged on her cross-examination that she was aware when the loans were made that the bank would not have made the loans to her husband without her being a co-borrower.
[9] The operating loan was expressed to be payable on demand. The Bank made the operating loan available through the authorization of overdrafts on an account in William’s name only. Both William and Sylvia had signing authority on this account, but Sylvia never wrote any cheques on, or used, the account.
[10] Sylvia emphasized that the signing authority she had on William’s operating account was as his Power of Attorney and she did not have other signing authority. She also emphasized that the funds with respect to the operating loan were strictly used for the operation of William’s dentistry practice.
[11] The revolving loan was made available to William and Sylvia through an account in their joint names.
[12] The statements respecting the operating loan were sent monthly to William’s office as permitted by para. 9.02 of the Operating Loan Agreement.
[13] The statements for the revolving loan were sent once a year as of December 31 to both Sylvia and William at their home address. Sylvia deposed that she never received the annual statements relating to the revolving loan account and she noted that it was the evidence of William that he similarly never such statements.
[14] As of December 31, 2004, the revolving loan had been fully drawn down and June 14, 2004 was the last transaction date on the account.
[15] William had a dispute with the Canada Revenue Agency which prompted the transfer of the loans to the Bank’s “special loans” department in the fall of 2010. The transfer of the loans into special loans was not communicated to Sylvia.
[16] Payment on the loans was demanded on November 10, 2010. Sylvia deposed that the first notice she received that the Bank had concerns regarding either the revolving loan or the operating loan was the demand for payment.
[17] The issue on the summary judgment motion and Sylvia’s cross-motion is whether Sylvia is obliged to pay the Bank the outstanding balances on these loans.
[18] Sylvia’s position is that she was informed by William that she had been released by the Bank. She deposes in her affidavit, filed in response to the Bank’s motion at para. 21 as follows:
- Around the time of our separation in 2006, I began pestering Bill Loyens about having me released from the Operating Loan and the Revolving Loan. Initially, he simply indicated that he did not think that I was on the loans. I asked him to confirm with the Bank that I was not responsible to the bank for any loans and he later advised me that he had made inquiries and he had been told by Bank representatives that he was the only one on the accounts. I understand that Bill Loyens testified at his continued examination for discovery on September 30, 2013 that he did not recall these discussions because it was so long ago.
[19] Mr. Van Klink, as counsel for the Bank, is correct that Sylvia’s expression of Bill’s statement is not proof of the truth of what William told her. In any event, when William was examined for discovery on September 30, 2013, he had no memory of making any such statement:
Q. Do you recall ever being advised by anyone at Bank of Montreal that Sylvia had been released or is not longer (sic) responsible for the two loans?
A. No.
Q. Did you ever ask Bank of Montreal to release Sylvia from the two loans?
A. Not that I’m aware of.
Q. Do you recall ever advising Sylvia that you had been told by Bank of Montreal that she was no longer responsible for the two loans?
A. Not that I’m aware of.
[20] It is Sylvia’s position that she believed that she had been released by the Bank and as a result, acted to her disadvantage in reliance on what William told her. Her belief was reinforced by the Bank’s internal documentation and certain representations made to her by Bank employees which I will refer to later in these reasons. First, however, I will deal with the limitations defence advanced by Sylvia.
Issue No. 1 – The Limitation Issue Respecting the Revolving Loan
[21] There is no issue that the applicable limitation period is two years from the date of the last acknowledgement of the debt (s. 4, Limitations Act, 2002, S.O. 2002 c.24).
[22] The Bank’s position is that its claim was made before the expiry of the limitation period; the last interest payment was made October 2010; the Bank demanded payment in November 2010; and this action was commenced in March 2011.
[23] The Bank references a series of cases which stand for the proposition that the payment of interest on a demand obligation has the effect of extending the limitation period (see St. Hilaire v. Kravacek 1979 1705 (Ont. C.A.); Hare v. Hare 2006 41650 (Ont. C.A.); Montreal Trust Co. of Canada v. Vanness Estate 2005 3577 (Ont. C.A.)).
[24] Sylvia’s position is that these circumstances are unique because the interest payments were automatically withdrawn from William’s account without a specific acknowledgement of debt by her or for that matter, by William either.
[25] Further, Sylvia asserts that the revolving loan is not a demand obligation because it is not a Bill of Exchange, and the limitation period expired two years after the last acknowledgement of the debt, and that was not done within two years of the action being commenced.
[26] Sylvia’s position was succinctly set out in para. 57 of her factum as follows:
The automatic payments of interest from the operating loan account were made without any prior notice to, or acknowledgement by, Sylvia Loyens. Furthermore, the operating loan account statements were addressed to Bill Loyens only and were sent to his dentistry office. At no time, did Sylvia Loyens see the operating loan account statements to verify their accuracy. Under these circumstances, it cannot be said that Sylvia Loyens acknowledged the indebtedness under the revolving loan when she had no knowledge of the automatic withdrawal of the interest payment from the operating loan account, and consequently, the action as it relates to the revolving loan account is statute barred having been commenced outside of the applicable limitation period.
[27] In my view, the Bank’s position on this issue must prevail. The operating loan and the revolving loan were both payable on demand according to their contractual terms. Also, according to the contractual terms of the loans, the Bank could debit William’s account for the interest payments.
[28] Therefore, the Bank’s position that the limitation period began to run as of October 2010 is consistent with the prevailing case law.
[29] I disagree with Sylvia’s position that in order for payment of interest to equate to an acknowledgement of debt, there must be knowledge of the payment by the person to whom the acknowledgment of the debt is being imputed. If that proposition would prevail, then there could be more than one limitation period in relation to various loans. I agree with the Bank that such a proposition is difficult to accept as a matter of common sense, and is inconsistent with the jurisprudence.
[30] Therefore, Sylvia cannot avoid liability to the Bank in reliance on a limitations defence. I will turn next to her “change of position” defence.
Issue #2 – The Change of Position Defence
[31] Sylvia points to “customer snapshots” which after her separation from William, and as of August 10, 2010 were in William’s name alone.
[32] The customer snapshots would explain why on two occasions, when Sylvia made an inquiry of Bank tellers, she was told that she did not have an account at the Bank.
[33] The Bank acknowledges the customer snapshots were in error, and further acknowledges that a Bank teller who reviewed the customer snapshot would form the impression that William was the only debtor on the revolving loan and operating loan accounts.
[34] As the Bank notes, Sylvia is asking that I infer from these snapshots that she must have been released. This inference is impossible to draw given that I am satisfied that the Bank did not actually release Sylvia.
[35] Sylvia also relies on another document which the Bank acknowledges was a mistake. It is an internal document respecting an unrelated mortgage application which showed that these debts were individual debts of William’s and not a joint debt with Sylvia.
[36] However, Sylvia emphasizes the Bank’s internal documents and her lack of participation in the Bank’s annual review process.
[37] Sylvia asserts that because of the representations made by the Bank tellers that she did not have any loans or accounts with the Bank, she materially changed her position.
[38] The Bank asserts that it did not lead Sylvia to believe that she was released by its conduct.
[39] I agree with the Bank’s position that these facts go to the issue of whether there had been an actual release in favour of Sylvia and they do not amount to representations to her that she had been released.
[40] Part of the contractual loan documentation provided that notification could go to one borrower.
[41] The statements of account with respect to the revolving loan were in both Sylvia and Bill’s names and went to the farm where they lived.
[42] The terms of the loan were not amended after 2002.
[43] I note further that there is no evidence from Sylvia that the Bank ever refused to communicate with her or respond to her inquiries.
[44] Her evidence on cross-examination was clear that it was William’s statement to her that caused her to believe that she never had any responsibility for the loans.
[45] It is important to note that it was William’s statement to her which led to her belief that she was released by the Bank.
[46] As Mr. Van Klink notes, the Bank cannot establish what was, or was not told to her by the tellers.
[47] As a result, the issue is whether Sylvia can resist being liable to the Bank on the basis of her assertion that she changed her position.
[48] Sylvia relies on the Supreme Court of Canada decision in Garland v. Consumer’s Gas Co., 2004 SCC 25.
[49] However, the difficulty with Sylvia’s position is that the Bank’s claim against her is not based on unjust enrichment but rather, it is a claim on a contract.
[50] The Supreme Court of Canada in Ryan v. Moore, 2005 SCC 38 set out the elements of estoppel by representation.
[51] I agree with the Bank’s submission that these elements cannot be established here.
[52] The Bank was only aware through rumours that she and William had separated.
[53] There is no evidence to suggest that the Bank’s conduct amounted to a representation that relieved her from her liability.
[54] Sylvia cannot attach to the statements from the tellers an importance that they were never intended to have.
[55] At the time the statements were made, she did not rely on them.
[56] Unfortunately for Sylvia, she believed her former husband and relied on what he told her.
[57] The remaining issue is Sylvia’s assertion that the Bank breached its duty of good faith that was owed to her.
Issue No. 3 – Did the Bank Breach its Duty of Good Faith
[58] Sylvia asserts that the Bank owed her a duty of good faith in relation to the administration and management of the operating and revolving loan and it breached this duty when:
- It dealt with William to her exclusion.
- It failed to communicate concerns about the loans.
- She was not provided with account statements.
- It registered a security interest in her personal property.
- It released security given by William without her consent.
- It failed to communicate during annual reviews.
[59] With respect to this issue, I agree with the Bank’s contention that there are no facts which take this relationship out of the ordinary debtor-creditor relationship giving rise to a fiduciary duty.
[60] It was open to the Bank, according to its contract, to deal directly with William.
[61] The account statements were mailed by the Bank.
[62] Sylvia did not establish any prejudice in relation to the Bank’s registration.
[63] The fact that the Bank released shares owned by William does not reduce her liability.
[64] Sylvia’s issue with respect to the annual reviews also does not amount to any breach of good faith.
[65] Essentially, Sylvia expected that she would be communicated with by the Bank once she and William had separated.
[66] Sylvia acted as if she was not responsible for the indebtedness to the Bank, but that is insufficient for her to be relieved of the legal liability established by the contracts she signed.
Conclusions
[67] The Bank’s motion for summary judgment is allowed and Sylvia’s cross-motion is dismissed.
[68] The Bank is granted summary judgment in the amount of $178,467.43, plus $19.61 per day from March 25, 2013 on account of interest.
[69] As Mr. Van Klink noted, it is open to Sylvia to obtain an assignment of the Bank’s security if she repays its indebtedness.
[70] The Bank will also be entitled to its costs of its motion. I trust that the issue of costs can be resolved between counsel but failing such agreement, counsel may make brief submissions on costs, in writing, within the next 30 days.
“Justice L. C. Leitch”
Justice L. C. Leitch
Released: April 30, 2014