ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-15-535665
DATE: 20151019
BETWEEN:
CLAUDIO POSOCCO
Applicant
– and –
FELICE BATTISTA, DOMENIC BATTISTA, CASIMIRO HOLDINGS INC. and JUSTAM HOLDINGS LIMITED
Respondents
R. Birken, for the Applicant
A. Habas and C. Reed, for the Respondents
HEARD: October 8, 2015
s.a.Q. akhtar j.
[1] The applicant applies for a declaration that his personal guarantee of 22 December 2011 (“the Guarantee”) is void and unenforceable. He also asks for a declaration setting aside the judgment of Master Hawkins dated 21 February 2014 ordering payment of $794,471.41 pursuant to the guarantee. Finally he asks that all Writs of Seizure and Sale filed pursuant to the order be set aside.
[2] The applicant argues that since Battista, who had been granted the First Mortgage in a chain of mortgages granted by the applicant, postponed that mortgage without his knowledge or consent, the Guarantee is void and unenforceable. The applicant relies upon Manulife Bank of Canada v. Conlin 1996 182 (SCC), [1996] 3 S.C.R. 415, for the proposition that a guarantor is released from liability under a guarantee when a creditor materially alters the terms of the contract governing the debt.
[3] The respondent agrees with that principle of law but argues that guarantors have the ability and freedom to contract out of their common law rights of protection. If that occurs, the guarantor continues to be liable under the guarantee even if the creditor materially alters the contract.
[4] Support for this argument is found in Manulife Bank of Canada at paras. 4 and 22. There, the court emphasised that “[t]he issue as to whether a surety remains liable will be determined by interpreting the contract between the parties and determining the intention of the parties as demonstrated by the words of the contract.” See also: Royal Bank of Canada v. Samson Management and Solutions Ltd., 2013 ONCA 313.
[5] There is no argument that, at common law, the alterations made by the respondents in the loan arrangements would result in the applicant’s discharge of liability under the guarantee. The central question in this application is whether the terms of the Guarantee operate to override the common law protections.
[6] The relevant Guarantee provisions are to be found at paragraphs 2(ii) and (iii) which state:
2 (ii) As between the Creditor and the Guarantor, the Guarantor is and shall continue to be liable as principal debtor under all the covenants and terms and conditions as agreed upon between the Creditor and the Borrower from time to time, notwithstanding any transaction which may take place between the Creditor and the Borrower of any neglect or default of the Creditor which might otherwise operate as a discharge, whether partial or absolute, of the Guarantor if it were a surety only of the Borrower, and without restricting the generality of the foregoing, notwithstanding the releasing in whole or in part of any security held by the Creditor from time to time or the granting of time or other indulgences to the Borrower;
(iii) The Creditor, in its absolute discretion and without diminishing the liability of the Guarantor, may grant time or other indulgences to the Borrower or any other person or persons liable to the Creditor in respect of the principal sum and interest and may give up, modify, vary, exchange, renew or abstaining from, perfecting or taking advantage of any Promissory Note, or any security in whole or in part, and may discharge any part or parts or accept any composition or arrangement or realize upon the Promissory Note or any security when and in such manner as the Creditor or any officer thereof may think expedient, and in no case shall the Creditor be responsible for any neglect or omission with respect to any such security. Any accounts settled or stated by or between the Creditor and the Borrower or admitted by or on behalf of the Borrower may be adduced by the Creditor and shall in that case be accepted by the Guarantor as conclusive evidence that the balance or amount thereof thereby appearing is due by the Borrower to the Creditor;
[7] Under the terms of the Guarantee, the applicant undertook liability notwithstanding “any neglect or default of the creditor which might otherwise operate as a discharge, whether partial or absolute, of the Guarantor if it were a surety only of the Borrower”: para. 2(ii) of the Guarantee. The applicant also explicitly contracted to allow the creditor to vary any security, in whole or in part, without the creditor being responsible “for any neglect or omission with respect to any such security”: para. 2(iii) of the Guarantee.
[8] The language used in the Guarantee indicates that the intention of the parties was to ensure that the applicant’s liabilities remained extremely broad even if the mortgage arrangements were altered in a material fashion. The terminology contained in para. 2(iii) permitting the creditor to “vary any security in whole or part” must be read to include the subordination or postponement of the mortgages. It follows therefore that I reject the applicant’s argument that the terms “postponement” and “subordination” were required to be expressly stipulated in these paragraphs before the applicant could be held to have contracted out of his common law protection. By agreeing the terms of the Guarantee, the applicant, agreed to forgo his common law rights.
[9] In light of this finding, I see no need to address the respondent’s alternative argument that, as the applicant was also a principal debtor, the common law protection provided to his as guarantor did not absolve him of his obligations in his dual role.
[10] Accordingly, the application is dismissed.
[11] Counsel have come to an agreement with respect to the costs payable in this case. Accordingly, I order that costs shall be fixed in the amount of $4,000.00 to each set of respondents for a total of $8,000.00. Those costs shall be payable forthwith.
S.A.Q. Akhtar J.
Released: October 19, 2015
COURT FILE NO.: CV-15-535665
DATE: 20151019
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CLAUDIO POSOCCO
Applicant
– and –
FELICE BATTISTA, DOMENIC BATTISTA, CASIMIRO HOLDINGS INC. and JUSTAM HOLDINGS LIMITED
Respondents
REASONS FOR JUDGMENT
S.A.Q. Akhtar J.