M. Bravar Custom Builders Limited v. Long Island Homes Inc.

CITATION: M. Bravar Custom Builders Limited v. Long Island Homes Inc., 2015 ONSC 6627

COURT FILE NO.: 13-59487

DATE: 2015/12/01

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

M. BRAVAR CUSTOM BUILDERS LIMITED

Plaintiff

• and -

LONG ISLAND HOMES INC.

Defendant

COUNSEL: Charles L. Merovitz, for the Plaintiff Martin Z. Black, for the Defendant

HEARD: October 15, 2015

REASONS FOR DECISION

Ellies J.

[1] On the surface, this is a motion for summary judgment in which the plaintiff, M. Bravar Custom Builders Limited (“Bravar Ltd.”), seeks judgment against the defendant, Long Island Homes Inc. (“Long Island”), on a mortgage that Long Island admits is in default.

[2] Under all the legal veneer, however, lies a bitter fight over money between two brothers, the only children of a man to whom both sons are greatly indebted. One son, William Bravar (“Bill”), who purports to be the president of his father’s company, owes the company $550,000. The other son, Larry Bravar (“Larry”), who is the sole shareholder of Long Island, owes his father’s company even more.

[3] Long Island raises two issues in defence of the motion:

(1) that the solicitor for Bravar Ltd. did not have proper authority to commence the action, as required by rule 15.02 of the Rules of Civil Procedure, R.R.O. 1990, O. Reg. 194, due to the father’s mental incapacity at the time he executed a Continuing Power of Attorney for Property in favour of Bill; and

(2) that Bravar Ltd. is precluded from enforcing the mortgage as a result of an oral agreement allegedly entered into between the father and Larry.

[4] For the following reasons, I conclude that the mortgage is enforceable. However, I grant a stay of the proceedings for 30 days, in order to allow Larry to commence the proper proceedings in which to challenge the power of attorney, failing which summary judgment shall issue in favour of Bravar Ltd.

BACKGROUND FACTS

[5] Bill and Larry are the only two children of Marino and Florina Bravar. Bill is three years older than Larry. Both are in their 50’s.

[6] Bravar Ltd. was founded by Marino in or about 1968. According to Larry, the original company owned by Marino merged with a company owned by Bill in the late 1990’s. However, Marino remained the sole shareholder of the new company, the plaintiff in this action.

[7] Marino is now in his early 80’s. Both he and Florina reside in a retirement home. Prior to that, they lived in their own home on David Drive, in the City of Ottawa. As I understand it, Larry also lived in the David Drive property, perhaps with his wife and his son. Marino and Florina moved into the retirement residence at the end of 2012 or the beginning of 2013.

[8] Between 2006 and 2013, there were two mortgages entered into between Bravar Ltd. and Long Island. The first was entered into on or about April 28, 2006 (the “2006 mortgage”). Pursuant to that mortgage, Bravar Ltd. loaned Long Island the sum of $300,000, being the principal amount of the mortgage.

[9] Between December, 2007, and June, 2008, Bravar Ltd. loaned Long Island an additional $500,000, bringing the total amount loaned under the 2006 mortgage to $800,000.

[10] On June 24, 2008, the 2006 mortgage was replaced with a new mortgage in the principal amount of $1,000,000 (the “2008 mortgage”). The 2008 mortgage was subject to certain standard charge terms. Both the 2008 mortgage and the standard charge terms provide that the mortgagee is entitled to possession in the event of default under the mortgage. They also provide that, upon maturity or default, the principal amount then outstanding under the mortgage becomes due and payable, together with all accrued interest thereon.

[11] The 2008 mortgage matured on April 29, 2013. However, Long Island failed to make payment of the full amount due and has been in default under the mortgage since April, 2012. As of December 3, 2014 the total amount owing is $869,477.79, with interest accruing at the rate of 2.5% per annum.

[12] On December 10, 2012, before the 2008 mortgage matured, Marino executed a Continuing Power of Attorney for Property in which he named Bill as his attorney. This is the power of attorney which is at issue in these proceedings.

[13] On or about July 2, 2013, Marino apparently resigned as Director, President and Secretary-Treasurer of Bravar Ltd. On the same day, using the Power of Attorney, Bill appointed himself as the sole director of Bravar Ltd.

[14] On August 22, 2013, on Bill’s instructions, Bravar Ltd.’s solicitors served Long Island with a Notice of Sale under the 2008 mortgage and commenced the action in which this motion is brought.

ISSUES

[15] As I indicated, there are two issues in this motion:

(1) whether the power of attorney under which Bill purports to act on behalf of Bravar Ltd. is invalid, thereby invalidating any instructions he gave to commence this action; and

(2) whether Marino agreed on behalf of Bravar Ltd. not to enforce the mortgage.

[16] Ordinarily, I would deal with these issues in the order in which I have listed them because it might not be necessary to deal with the second issue if Long Island succeeds on the first. However, there is evidence that Marino and Florina may soon require the funds secured by the 2008 mortgage for their daily living expenses. Therefore, I believe it is important to resolve the issue of an alleged verbal agreement not to enforce the mortgage, so as to avoid unnecessary further delay, should Larry fail to commence the proceedings necessary to challenge the power of attorney within the time allotted.

ANALYSIS

Issue 1: Is Bravar Ltd. precluded from enforcing the 2008 mortgage as a result of an oral agreement with Long Island?

[17] Larry deposes that, before the 2008 mortgage matured, he and Marino spoke often about the mortgage. He alleges that his father told him “repeatedly” that he did not wish to be repaid the principal and that he was content to continue the mortgage at the rate of 2.5% per annum for as long as Long Island could afford it, “until (Larry) wished to repay the mortgage, if ever”. I do not accept this evidence, for several reasons.

[18] First, I do not find Larry to be a creditable witness, even on paper.

[19] Rule 20.04(2.1) permits a court hearing a summary judgment motion to weigh evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence, unless it is in the interest of justice for such powers to be exercised only at trial. In my view, Larry’s evidence suffers to such an extent that it is unnecessary to have a trial for the purpose of assessing his credibility. I will highlight some of the more significant shortcomings:

(a) Larry deposes that there is “no doubt in [his] mind that [his] parents are not aware of Bill’s actions and especially his animus towards [Larry]” (para. 16 of his December 22, 2014 affidavit). This contradicts Larry’s earlier sworn evidence in which he deposes that (para. 5 of the same affidavit):

My father has told me repeatedly that he and my mother would not be leaving anything to Bill in their Wills, and I should be aware of Bill becoming upset and vengeful if or when he learned that he had been effectively being [sic] disowned.

Larry concludes this paragraph by referring to an unsigned copy of his father’s 2006 will, attached as an exhibit, in which Bill is not named as a beneficiary. How or why Larry obtained a copy of this will is unexplained.

(b) Larry says that Marino has been suffering from varying degrees of dementia/Alzheimer’s disease since 2009 (para. 9 of the December 22, 2014 affidavit). He deposes that Marino did not have the requisite mental capacity to execute the power of attorney in December, 2012, upon which Bill now relies (para. 15). Yet, Larry admits that he tried to get Bill to act on that power of attorney to agree to extend the mortgage on Marino’s behalf before having to defend these proceedings (para. 31).

(c) Despite Larry’s evidence that his father’s mental faculties have been suffering since 2009 and his further evidence that his father appears “more and more” confused every time Larry sees him (para. 14), Larry admits that he had his father sign another Continuing Power of Attorney for Property in March, 2013, this time naming Larry as attorney. Larry says that he had no intention of relying on the power of attorney and that the fact that Marino signed it simply shows how easily his father can be influenced. However, there are many less empowering documents he could have used in order to prove this point.

(d) Despite the allegedly progressive state of Marino’s confusion, Larry admits that he went to the trouble of having a lawyer attend upon his father with him in 2014 (the year after he had the power of attorney signed) for the purpose of “documenting an extension of the 2008 mortgage” (February 25, 2015 affidavit, at para. 16). Larry further deposes that after approximately 30 minutes, the lawyer told him that neither he nor anyone else could obtain the required instructions from Marino, as Marino was clearly not mentally competent to provide the same. However, there is no affidavit from the lawyer. Furthermore, it is difficult to understand why Larry would go to the trouble of bringing a lawyer to visit with his father for the purpose of determining his father’s capacity in light of Larry’s earlier evidence that his father clearly lacked capacity a year earlier. It is even more difficult to understand why Larry would bring the lawyer for the purpose of obtaining an agreement to extend the mortgage unless it was Larry’s belief that his father had the capacity to enter into such an agreement.

(e) Although Larry deposes that his father had no more mental capacity to execute a new power of attorney in 2013 in favour of Larry than he did when he signed the power of attorney in 2010 in favour of Bill (para. 15 of his December 22, 2014 affidavit), Larry contradicts himself when he deposes that, when he talked to his father in December of 2012, his father “cried on the phone as he told (Larry) that he did not want to sign a General Power of Attorney… in Bill’s favour” (para. 10). If true, this would show that Marino knew what he was signing, contrary to Larry’s assertion.

[20] The second reason for which I reject Larry’s evidence about the verbal agreement is that it is inconsistent with the actions of Marino before Bill began acting on his behalf. Before that date, Marino seemed to be careful to document the transactions he had with both his sons. For example:

(a) According to Larry, in 2005, Marino transferred title to the David Drive home from himself alone to that of Marino, Florina and Larry, as joint tenants. Larry deposes that this was done in recognition of the fact that the home was Larry’s principal residence.

(b) Marino caused Long Island to enter into the 2008 mortgage after Bravar Ltd. had advanced money beyond the principal amount of the 2006 mortgage.

(c) In addition, although it is not expressly mentioned in the evidence, Marino must somehow have documented the change of interest under the 2008 mortgage from 4% to 2.5%. Otherwise, like most of the rest of the evidence, one would expect there to be disagreement between Larry and Bill on this point.

[21] Even if Larry, and not Marino, was the driving force behind the documentation of such things as the change in title to the David Drive home or the lowering of the interest rate, one would have expected Larry to ensure that such a favourable agreement was somehow reduced to writing. This is especially so given the acrimony that appears to have existed between Larry and Bill since at least 2006.

[22] Lastly, I reject Larry’s evidence on the basis that it is at odds with the uncontradicted evidence of Bill about the state of Marino’s financial affairs. Larry deposes that, during these conversations he had with Marino about the 2008 mortgage, Marino “would say that he had no other use for the funds” (para. 27, December 14, 2014, affidavit). That would be a very naïve thing for such an experienced business man as Marino to say in light of his financial circumstances. As Bill deposes, the 2008 mortgage is the largest asset owned by Bravar Ltd. The company had approximately $313,000 in cash as of February 5, 2015, and Marino and Florina had only about $69,000 in cash as of November, 2014, excluding the value of their interest in the David Drive home. Yet, their monthly living expenses are in excess of $11,000 per month, including expenses associated with the David Drive property. There is not enough cash in either Bravar Ltd. or in Marino and Florina’s personal holdings to sustain them for any significant length of time. In truth, Marino and Florina will soon need the funds that Larry says Marino was prepared to live without.

[23] Even if I accepted Larry’s evidence about the agreement not to enforce the mortgage, I would grant the summary judgment motion on this issue.

[24] Agreements relating to interests in land must be reduced to writing, pursuant to s.4 of the Statute of Frauds, R.S.O. 1990, c. S.19, which reads:

4. No action shall be brought to charge any executor or administrator upon any special promise to answer damages out of the executor’s or administrator’s own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person, or to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.

[25] Even a partial variation of an agreement governed by the Statute of Frauds must, itself, be in writing. Relying on the decision in Goss v. Nugent (1833), 5 B. & Ad. 58, 110 E.R. 713, Kellock J. stated the principle plainly in Shook v. Munro, 1948 CanLII 8 (SCC), [1948] S.C.R. 539, [1948] 3 D.L.R. 652 at p. 543, as follows:

Assuming that the parties to the mortgage verbally agreed to extend the time of payment until the mortgagor should be able to pay, that agreement cannot, by reason of the Statute of Frauds, be permitted to be proved for the purpose of varying the terms of the mortgage.

[26] Even where the original agreement need not be, but is, reduced to writing, the parole evidence rule precludes the proof of an oral agreement which is inconsistent with the terms of the written agreement: Canadian Imperial Bank of Commerce v. Mitchell, 2010 ONSC 2227, at para. 19, citing Chant v. Infinitum Growth Fund Inc., 1986 CanLII 2740 (ON CA), [1986] O.J. No. 584 (Ont. C.A.).

[27] For these reasons, I am satisfied that there is no genuine issue requiring a trial with respect to the liability of Long Island for the amount owing under the 2008 mortgage. However, as I will now explain, I do have concerns about the validity of the instructions provided to the plaintiff’s solicitors to enforce that mortgage.

Issue 2: Are the instructions provided to Bravar Ltd.’s solicitors valid?

[28] In contrast to the issues surrounding the alleged agreement not to enforce the mortgage, Long Island has satisfied me that there is a genuine issue regarding the validity of the power of attorney pursuant to which Bill purports to bring this lawsuit as the director of Bravar Ltd.

[29] Rule 15.01(2) of the Rules of Civil Procedure requires that a corporation that is a party to a proceeding be represented by a lawyer, except with leave of the court. Pursuant to Rule 15.02(1), a party who is served with an originating process may request that the individual named as the lawyer for the plaintiff deliver a notice declaring whether his or her client authorized the commencement of the proceeding.

[30] The record is not clear as to whether a formal request was ever made on behalf of Long Island under Rule 15.02(1). However, on or about May 26, 2015 the lawyers for Bravar Ltd. produced a copy of a corporate resolution signed on behalf of the plaintiff by Bill. The resolution is dated May 26, 2015, i.e. after the action was commenced on December 13, 2013. Such a resolution may operate retrospectively to authorize the commencement of a lawsuit, assuming a formal resolution is, in fact, necessary: Pembroke Planing Mill Co. v. Wagga Wagga Investments Ltd. (1999), 86 A.C.W.S. (3d) 530 (Ont. Ct. (Gen. Div.)).

[31] However, the jurisprudence supports the notion that an opposing party is free to challenge the validity of the authorization by virtue of which plaintiff’s counsel was instructed to commence a lawsuit: Salisbury v. Sun Life Assurance Co. of Canada, 2013 ONCA 180. Long Island has done that in this case. Attached to a supplementary affidavit sworn by Larry on February 25, 2015, are copies of hospital records relating to Marino. In a discharge summary pertaining to an admission on November 29, 2012, the following typewritten notation appears:

Cognition – He had a previous diagnosis of dementia although not sure when/by whom it was diagnosed … he has features consistent with vascular dementia (RF and CT Head) although a mixed vascular/alzheimer’s could not be ruled out.

[32] In addition, as counsel for Long Island points out, there are contradictions between Bill’s evidence that his father is lucid enough to continue to instruct him concerning the mortgage enforcement action and the evidence that Bill was required to sign the necessary documents on Marino’s behalf by virtue of which he assumed control of the corporation.

[33] In my view, this evidence raises a genuine issue surrounding the validity of the instructions provided to Bravar Ltd.’s lawyers. However, I do not believe that this issue ought to be resolved within the context of this action. Because the issue turns on the validity of the power of attorney given to Bill, I believe that it should be the subject of an application under the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”).

[34] The SDA sets out a comprehensive scheme within which to resolve issues surrounding a person’s capacity; both the capacity to manage one’s own affairs and the capacity to grant a power of attorney. The SDA contains safeguards to protect the interests of those whose capacity is challenged, for example, by making them a party to the proceeding and by providing for the appointment of the Public Guardian and Trustee to represent them, where necessary.

[35] In his December 22, 2014 affidavit, Larry deposed that he was in the process of commencing an action for the appointment of an institutional guardian and to challenge Bill’s alleged appointment as attorney (para. 22). Later, in his February 25, 2015, affidavit, Larry deposed that he had not done so for two reasons. First, he deposed that he had not been able to obtain information and documentation regarding his parents’ affairs as a result of “Bill’s interference and restrictions”. I do not accept this as a valid reason not to commence the appropriate proceedings. During cross-examination on his affidavits, Larry admitted that he had made no requests of Bill for documents relevant to an application for guardianship.

[36] Larry also deposed in his February, 2015, affidavit that he was reluctant to burden his parents with the fees charged by commercial trustees, such as the Canada Trust Company. Once again, I do not view this as a legitimate reason not to commence proceedings under the SDA. It seems to me that, if Larry is truly concerned that Bill is not acting in the best interests of his parents, the costs associated with a commercial guardian would be well worth the benefits to Marino and Florina. Moreover, should the guardian determine that all of the monies owing by both Bill and Larry to Marino ought to be repaid, the funds would be more than sufficient to justify the fees.

CONCLUSION

[37] I am satisfied that there is a genuine issue with respect to the validity of the power of attorney pursuant to which Bill purports to act in this lawsuit. However, the lawsuit is not the appropriate proceeding for a determination of that issue. Instead, a proceeding should be commenced under the SDA.

[38] Nonetheless, I am concerned that Larry has raised the issue of the validity of the power of attorney for his benefit, and not for that of his father. He has taken no steps to challenge the power of attorney, except in defence of his own company.

[39] Lastly, I am concerned about Marino and Florina’s dwindling resources and the effect of delay on their financial well-being.

[40] For these reasons, I am granting a stay of the motion for summary judgment for a period of 30 days, to permit Larry to commence the appropriate proceedings. In the event that the appropriate proceedings are not commenced by Larry within that time, or that the said proceedings do not result in the power of attorney being set aside, the motion may be returned before the court for the purpose of granting summary judgment in favour of Bravar Ltd. In that event, Bravar Ltd. shall provide the court with evidence indicating the current amount owed for principal and interest under the mortgage.

COSTS

[41] The issue of costs is a difficult one. Success in the motion is, at present, mixed. If the outcome of the SDA proceedings is that the power of attorney is set aside, the motion will ultimately fail. If not, Bravar Ltd. will have been entirely successful.

[42] Ideally, it would be best to await the outcome of the SDA application before deciding the issue of costs. However, that is likely to prove impractical, as it could be some time before those proceedings are completed, even if commenced within the time I have allowed.

[43] Moreover, despite the fact that Bravar Ltd. was not entirely successful on the motion, I believe that it ought to be awarded its costs of the motion to this point. Had Larry commenced the SDA proceedings that he recognized he needed to commence, it seems unlikely that this motion would ever have been brought. If it had been, it would have been restricted to the single issue of the alleged verbal agreement, with respect to which Bravar Ltd. has been successful.

[44] Therefore, I propose to address only the costs related to the motion and to leave the issue of the costs of the action for another day.

[45] I have now opened and reviewed the sealed costs outlines that were provided to me by counsel at the conclusion of the motion. The lawyers for Bravar Ltd. have set out their costs for the motion as follows:

(1) $41,770.28, on a full indemnity basis;

(2) $36,682.21, on a substantial indemnity basis, and

(3) $25,870.01, on a partial indemnity basis.

[46] Given these amounts, one might be forgiven for assuming that Bravar Ltd. was seeking its costs for both the motion and the action. However, I can see nothing in the costs outline that makes this clear.

[47] The lawyers for Bravar Ltd. seek their client’s costs on the basis of the standard charge terms, pursuant to which the mortgagor is required to pay the legal fees and expenses of the mortgagee “on a solicitor client basis”. Under the Rules of Civil Procedure, these are now referred to as “substantial indemnity” costs. Even costs on a substantial indemnity basis, however, must be reasonable: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.). If the figures set out above pertain only to the motion, then I do not believe that any of them can be called reasonable. Further, it would seem to me that, under the standard charge terms, the mortgagor ought only to be obliged to pay costs incurred with respect to a successful mortgage enforcement action. This one has not yet succeeded.

[48] For these reasons, I would not award costs in any of the amounts set out above. Instead, I assess Bravar Ltd.’s costs for the motion in the amount of $15,000, exclusive of disbursements and HST on both fees and disbursements. I believe that this amount is fair and reasonable for a motion of this type.

[49] In the event that this matter is returned to court by Bravar Ltd. for the purpose of obtaining summary judgment, either because Larry has failed to commence proceedings under the SDA within the time allotted or because the power of attorney given to Bill remains intact following those proceedings, Bravar Ltd. shall be at liberty to seek its costs of the action and any additional costs incurred in returning the motion.

Ellies J.

Released: December 1, 2015