SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-13-480247
DATE: 20140718

RE: The Toronto-Dominion Bank, Plaintiff

AND:
Island Heat Tanning Centres Inc., Alaskan Sun Co. Ltd., Team Tan Inc., Joseph Infurna and Anthony Infurna, Defendants

BEFORE: Madam Justice Darla A. Wilson

COUNSEL:
Michael R. Kestenberg, Counsel for the Plaintiff

Luigi De Lisio, Counsel for the Defendants

HEARD: July 2, 2014

ENDORSEMENT

[1] This is a summary judgment motion brought by the Plaintiff arising from default under two lines of credit: one with the Defendant Island Heat Tanning Centres Inc. [“Island Heat”]; and another with the Defendant Alaskan Sun Co. Ltd. [“Alaskan Sun”]. Island Heat carried on business as a tanning salon and Alaskan Sun sold equipment for tanning salons. It is not disputed that the Defendants Infurna (Anthony is the father and Joseph is the son) operate the businesses in the Niagara region. At some point, Alaskan Sun ceased operating under that name and continued under the name “Team Tan”.

[2] The Defendants do not dispute that they secured financing through two lines of credit. The Island Heat line of credit was established on December 1, 2004 for $30,000, but was increased in February 2011 to $50,000. The Alaskan Sun line of credit was established on March 15, 1996 with a limit of $25,000, but was increased to $50,000 in 1998. The personal Defendants, Joseph and Anthony Infurna [“Joe and Tony”], acknowledge that they signed the loan applications and the guarantees but submit that they are not personally liable for the corporate debts because: (1) they did not read what they were signing and relied on representations made by representatives of the Plaintiff; (2) they were not advised they would be personally liable for the amount of the debt and were not advised to get independent legal advice; and (3) they never signed any guarantee, particularly with respect to Team Tan Inc.

[3] On the record before me on this summary judgment motion is the following evidence: the affidavit of Ruby Tam, the account manager with the Plaintiff bank, sworn July 31, 2013; the affidavit of Frank DeDonato, the former bank manager at the Plaintiff’s branch that the Defendants dealt with, sworn October 18, 2013; the affidavit of Gerald Brisson, the current branch manager at the bank in Fort Erie, sworn October 28, 2013; the affidavits of Joe and Tony, sworn October 6, 2013; and the transcripts from the cross examinations of Tony, Joe, Brisson and DeDonato on their respective affidavits, conducted May 7, 2013.

Analysis

[4] Rule 20.04 of the Rules of Civil Procedure provides that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial. In making this determination, the court shall consider the evidence submitted by the parties and may weigh the evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence.

[5] The recent decision of the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7 further defines what is meant by the phrase “no genuine issue requiring a trial”. This occurs when the judge is able to make the necessary findings of fact from the evidence, is able to apply the law to the facts and is able to achieve a just result through the summary judgment process as opposed to a trial. It is recognized that analysis of the evidence on a motion will never be as exhaustive as a trial; but the goal is to achieve a fair and just adjudication for the parties. This involves a consideration of whether proceeding to trial in the circumstances is necessary, proportionate, timely or cost-effective.

[6] In Hryniak, the Court sets out the procedure to be followed by the motions judge as follows: first, there must be a determination if there is a genuine issue requiring a trial based on the evidence, without using the new fact-finding powers; if there appears to be a genuine issue requiring a trial, the judge should then decide if a trial can be avoided by using the new powers under Rule 20.04(2.1) and (2.2). Of note, summary judgment must be granted if there is no genuine issue requiring a trial, but the decision to use either the expanded fact-finding powers or to call oral evidence is discretionary.[^1] In accordance with this directive, I must decide if there is a genuine issue requiring a trial on the case before me.

Evidence re: Island Heat

[7] Joe and Tony do not dispute that they were officers and directors of Island Heat, or that in December 2004 they signed the credit application for the business line of credit in the sum of $30,000 for Island Heat. The credit agreement that they signed on behalf of the corporation indicated “guarantor must sign guarantee on page 4”, and each of them signed above the line that identified them as the guarantor. Further, the guarantee stated the following:

In consideration of the Bank dealing with or continuing to deal with the customer named on the front of the Credit Agreement attached to this Guarantee, you guarantee payment on demand of all of the present and future debts and liabilities of the Customer to the Bank incurred…Your liability under this Guarantee is CONTINUING, absolute and unconditional…

[8] In February 2011, Joe and Tony sought and obtained an increase in the business line of credit for Island Heat from $30,000 to $50,000. At this time, they completed credit applications that included their personal financial information. These applications were signed by Joe and Tony personally and on behalf of the company. The increase was approved and each of them signed a further credit agreement on February 11, 2011.

[9] Default occurred and a demand was made on April 30, 2013. It is not disputed that the default was not rectified.

Evidence re: Alaskan Sun Co. Ltd./Team Tan Inc.

[10] Joe and Tony do not dispute that they were also officers and directors of Alaskan Sun, and subsequently, of Team Tan. On March 15, 1996, they signed a Business Services Agreement to establish a business line of credit of $25,000. This amount was increased to $50,000 in November 1998. When they applied in 1996, they signed a guarantee that read as follows:

[T]his guarantee shall be a continuing guarantee and shall be operative and binding notwithstanding that at any time or times the Customer’s account with you may be closed…being understood that where the Customer is a partnership or corporation this guarantee is to extend to the person or persons or corporation for the time being and from time to time carrying on the business now carried on by the Customer, notwithstanding any change or changes in the name or membership of the Customer’s firm or in the name of the corporate Customer…

[11] The Guarantee stipulates that it is a continuing guarantee for existing and future indebtedness and liability of the Customer to the Bank. This Guarantee was signed by both Joe and Tony.

[12] It is not disputed that Alaskan Sun ceased operations and the identical business, including the same account number at the bank, was carried on by Team Tan. Default occurred and a demand letter was sent in April 2013. The default was not rectified.

Arguments of the Defendants

[13] It is Joe and Tony’s position that they did not read what they signed for the bank and were not aware they would become personally liable for the debts of the businesses. I do not accept these submissions for several reasons.

[14] First, the documentation does not support the Defendants’ position. The credit agreement for Island Heat [exhibit “C” to the Tam affidavit] specifically notes that the guarantor must sign the guarantee, which forms part of the document and makes it clear that the customer is liable personally. The language could not leave any doubt in the mind of the signatory that the small business credit agreement required the person signing to be personally liable for the full amount of the debt.

[15] Furthermore, both Joe and Tony signed the guarantee on December 1, 2004 [exhibit “D” to Tam affidavit] and initialed the box indicating that the liability was unlimited. There is a large section devoted to explaining the nature of the liability assumed.

[16] It is established law that the failure to read a document prior to signing it does not absolve a person from the effects of the agreement except in very limited circumstances, which do not exist here. Joe and Tony were not illiterate, inexperienced individuals with no knowledge of how loans operated. This is not a case where non est factum has any applicability and indeed, it is not raised by the solicitor for the Defendants. Rather, Joe and Tony were experienced businessmen who had an on-going relationship with the Plaintiff bank.

[17] In Fraser Jewellers Ltd. v. Dominion Electric Protection Co.,[^2] the Ontario Court of Appeal noted the following, at p. 10:

As a general proposition, in the absence of fraud or misrepresentation, a person is bound by the agreement to which he has put his signature whether he has read its contents or has chosen to leave them unread. Failure to read a contract before signing it is not a legally acceptable basis for refusing to abide by it. [Citations omitted.]

[18] The Defendants argue that the representative from the bank did not explain the consequences of signing the guarantees to them or suggest that they obtain independent legal advice. Both Joe and Tony testified at their cross examinations on their affidavits that no-one from the bank discussed what it meant to sign the guarantee clause. I do not accept this argument.

[19] Under the amended Summary Judgment rule, the court on a motion can weigh evidence and evaluate the credibility of deponents. In this case, I do not find the explanation offered by Joe and Tony to be one that is credible. I prefer the evidence of Frank DeDonato, the branch manager of the Plaintiff at the time. Mr. DeDonato swore an affidavit on this motion and was cross examined. It is Mr. DeDonato’s evidence that he recalls having a discussion with the personal Defendants at the time of the signing of the agreement in which he advised them that they would not be able to secure the line of credit without signing a personal guarantee. Further, he testified that he made it clear to them that they would be responsible for debts both current and future. I prefer the evidence of the bank manager, as it accords with the documentary evidence filed on this motion and seems to me to be more credible.

[20] With respect to the submission that there was a requirement for the bank to ensure the personal Defendants had independent legal advice, I reject this argument. It is not supported by the law in Ontario. In Bank of Nova Scotia v. Antech Electric Ltd.,[^3] Mulligan J. reviewed the general principles dealing with independent legal advice in similar circumstances. He noted the following, at paras. 28-29:

It is well settled that guarantors who are officers and directors of a corporation are not required to obtain independent legal advice. There is no evidence that the Defendant Mr. Di Palma was subject to any undue influence or fraud prior to signing the agreement. [Citations omitted.]

[21] Similarly, in the case before me, there is no evidence that there was any undue influence exerted on Joe or Tony prior to their signing the agreement. In my opinion, based on the evidence on the motion, I can make the proper findings of fact, and there is no genuine issue requiring a trial.

[22] Finally, the Defendants argue that the debt of Alaskan Sun was discharged because the bank sent a letter to that effect and also because Alaskan Sun was closed down and they never signed a new guarantee for the new company. A review of the evidence does not support this argument.

[23] Both Joe and Tony signed the guarantee for Alaskan Sun [exhibit “K” to the Tam affidavit] that specifically stipulated that the guarantee was continuing, even if the corporate name was changed or the account closed. It is not disputed that Alaskan Sun was shut down and Team Tan became the new company that carried on the same business using the same bank account. There can be no dispute that the guarantee continued.

[24] With respect to the suggestion that the letter of November 27, 2012 confirmed that the debt to the bank had been discharged, a plain reading of that letter does not support this contention. Rather, the letter [exhibit “A” to Tony’s affidavit] refers to a PPSA registration for which arrangements had been made to discharge. If there was any uncertainty about this, it is clarified in the affidavit of Gerald Brisson, in which he deposes that the bank agreed to discharge the PPSA registration on certain equipment, but denies that there was ever any discussion or agreement about releasing Joe and Tony from their liability under the guarantees they signed. Again, in order to make a finding of fact on this issue, a trial is not required. I have the necessary evidence before me on this motion to make this factual determination.

Conclusion

[25] There is no genuine issue requiring a trial on the evidence before me. The Plaintiff’s motion for summary judgment is granted. There shall be judgment against the Defendants Alaskan Sun Co. Ltd, Team Tan Inc. and Joseph and Anthony Infurna in the amount of $51,559.89 plus interest at 3 per cent. There shall be judgment against the Defendants Island Heat Tanning Centres Inc. and Joseph and Anthony Infurna in the sum of $51,297.50 plus interest at 3 per cent.

[26] The Defendants shall pay to the Plaintiff its costs on a partial indemnity scale, which I fix in the sum of $20,337.30. The solicitor for the Defendants takes no issue with this amount.

[27] I would like to express my appreciation to counsel for their professionalism and civility demonstrated to each other and to the court during their submissions. Each counsel used the court’s time economically and efficiently, and is to be commended for doing so.

D.A. Wilson J.

Date: July 18, 2014

[^1]: Hryniak, at para. 68.

[^2]: Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (1997), 1997 4452 (ON CA), 34 O.R. (3d) 1 (C.A.).

[^3]: Bank of Nova Scotia v. Antech Electric Ltd., 2010 ONSC 6362.