CITATION: Royal Bank of Canada v. Modo, 2017 ONSC 1167

COURT FILE NO.: CV-14-513411

DATE: 20170222

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ROYAL BANK OF CANADA, Plaintiff

AND:

REJERT MODO and PROFIX AUTO COLLISION INC., Defendants

BEFORE: Madam Justice A.M. Mullins

COUNSEL: G. Bowden, for the Plaintiff

I. Andriessen, for the Defendant, Profix Auto Collision Inc.

HEARD: February 17, 2017

ENDORSEMENT ON MOTION FOR SUMMARY JUDGMENT

[1] The plaintiff brings this motion seeking summary judgment as against the defendant Profix Auto Collision Inc., for the sum of $79,931.66 together with prejudgment interest at 5.89% and costs. Default judgment has been given against the defendant Rejert Modo.

[2] On March 9, 2013, the defendant Modo entered into a Fixed Rate Conditional Sales Contract with the plaintiff, in respect of Modo’s purchase of a 2013 GMC Sierra truck from Applewood Chevrolet Cadillac for $79,931.66. Pursuant to the terms of the contract with RBC, Modo was obliged to pay $1,235.80 per month, from April 18, 2013 through March 18, 2020. Also by terms of the contract all right, title and interest in the vehicle was assigned to the plaintiff. In the event of default, the contract entitled the plaintiff to payment of all sums at once and to take possession of, or otherwise enforce its rights against the vehicle. Modo was prohibited under the contract to part with registered or unregistered ownership, possession, or other interest in the vehicle, without the plaintiff’s written consent.

[3] The plaintiff registered its interest in the motor vehicle under the Personal Property Security Act, R.S.O. 1990, c. P.10, on April 9, 2013.

[4] Modo ceased making payments.

[5] Profix carries on a business of towing and repair of motor vehicles. In response to this motion for summary judgment, the affidavit of Mr. Arkan Shlaimon, who runs the day-to-day operations of Profix, was filed. In an unorthodox arrangement, Profix had accepted Modo’s offer to take his vehicle in and have it used as part of Profix’s fleet. Modo was to receive 10% of the cost of repairs to vehicles towed by his truck. He was to be responsible for the purchase of the vehicle and the cost to convert it to a truck capable of towing. Profix was to licence, insure and maintain the vehicle.

[6] In due course, the vehicle was converted and insured by Profix under its fleet policy. The interest of RBC was reflected in the insurance. (Quite how Profix could insure a vehicle it did not own was not revealed in the evidence.)

[7] The affiant for the defendant Profix deposes that the defendant paid Razer Manufacturing the sum of $15,622.25, in cash, for the cost of converting the vehicle to a tow truck. There is an ‘invoice’ from Razer in the material, though it is undated and makes no reference to a particular vehicle.

[8] The defendant attests that in December 2013, Modo himself borrowed the vehicle and returned it in a damaged condition, causing Profix to have to repair it at a cost of $7,460.27. The plaintiff observes and the defendant acknowledges that there were no parts nor materials identified in the repair documents, only the cost of labour. A note to justify (sic) the costs relating to the conversion of the vehicle purportedly signed by Modo was tendered in evidence.

[9] The agreement between Modo and Profix, such as it was, was oral. Profix declined to produce any accounting to the plaintiff of the sums attributable to Modo for the use of the vehicle by Profix.

[10] In February of 2014, the plaintiff received a Notice of Intention to Sell the vehicle, pursuant to section 15(1) of the Repair and Storage Liens Act, R.S.O c. R-25, on behalf of the defendant Profix. Profix claimed a lien for repair costs, and storage fees of $60.00 per day for 60 days. In total they claimed $32,006.12 inclusive of Bailiff’s fees and HST.

[11] The Notice of Intention to Sell the vehicle was sent by registered mail to the plaintiff on February 7, 2014. Other than have a bailiff attend and look at the vehicle, the plaintiff took no steps to assert any rights under the Repair and Storage Liens Act.

[12] As it turns out, the defendant did not sell the vehicle, it remains in possession of it. The vehicle ownership was transferred to Profix on or about March 14, 2014.

Position of Moving Party

[13] Profix, by possessing, insuring, licencing and using the vehicle, became, in effect, the de facto owner of the vehicle. It cannot claim a lien for work done to its own vehicle. Nor can Profix otherwise demonstrate that it is entitled to a lien under the Repair and Storage Liens Act. Firstly, the work to convert the vehicle into a tow truck was not performed by Profix. It is not, therefore, the repair of the defendant, in the absence of a written assignment to them. In respect of this, the plaintiff relies on subsection 29 (1) of the Act and the decision given in VFC v. Tomax Corp., 2000 CarswellOnt 6153. According to these, there must be a written assignment as between Razer Manufacturing and Profix, in order for Profix to claim a lien for the conversion work.

[14] The burden of proof lies upon Profix to establish there was damage it repaired in the amount alleged. The evidence as to the repair of damage to the vehicle is scant and entirely unsupported by any corroborative materials such as an accident report or photographs. It is not reasonable to infer that a repair costing several thousand dollars would not have required parts in proportion to the labour expended.

[15] The Notice of Intention to Sell of Profix included a claim for storage fees of $60.00 per day for 60 days. Under no circumstance can it be found on the evidence that the vehicle was ever ‘stored’ by Profix.

[16] Profix took possession of the vehicle and converted it to its own use. There was no sale of the vehicle. Under section 17 of the Act, a party intending to keep a vehicle in lieu of sale of it, must give notice of the proposal to do so. Profix did not. Even if Profix had a bona fide lien under the Act, they did not follow the procedure prescribed by the Act to retain possession of it in satisfaction, rather than sell it.

[17] Profix has retained possession of the vehicle without statutory authority and thus converted the vehicle. It has taken and used the vehicle to its own use, to the exclusion of the rights of the plaintiff’s right of possession under its contract with Modo, notice of which had been given under the PPSA.

[18] Conversion is a tort of strict liability. Here the measure of damages should be the value of the vehicle at the time of conversion. Certainly, by the time the defendants delivered the purported Notice of Intention to Sell, in February of 2014, if not sooner, Profix must be taken to have incurred liability to the plaintiff for conversion. At that time, based on the expert’s evidence, the value of the converted property was as high as $68,085.11. Likewise, in the absence of a lien right, the defendant was unjustly enriched by the value of the vehicle, there being no juridical reason why the defendant would be entitled to retain possession to the exclusion of the plaintiff’s rights.

[19] There are no genuine issues requiring a trial. The jurisprudence calls for a cultural shift as to the traditional balance struck by extensive pre-trial processes and the conventional trial, where simplified and proportional procedures for adjudication may be favoured. Where a judge is able to make the necessary finding of fact and may apply the law to those facts, summary judgment may be a more proportional, expeditious and less expensive means to achieve a just result.

Position of Defendant

[20] Profix enforced its rights under the Act, and was neither unjustly enriched, nor is it liable in conversion to the plaintiff.

[21] Mr. Modo acknowledged both the cost to convert his vehicle and to repair it, submits Profix. The plaintiff’s agent attended to inspect the vehicle and review the documents in support of the claim for lien and signified that RBC did not intend to take an interest.

[22] A motion for summary judgment calls for two steps. First, the judge is to determine if there is a genuine issue requiring a trial, if so, then the court is to decide whether the issue(s) may be avoided by using the new powers under Rules 20.04(2.1) and (2.2).

[23] Profix was not the de facto owner of Modo’s vehicle. The circumstances are the same as those in Security National Insurance Co. v. Markel Insurance Co., 2012 ONCA 683, 112 O.R. (3d) 1 (Ont.C.A.).

[24] Conversion is constituted by the ‘wrongful’ interference with the property of another, says the defendant, citing 372409 Alberta Ltd. v. Bank of Montreal, 2002 SCC 81 (S.S.C.) Modo consented to the adaptation and repair of his vehicle, wherefore there was no wrongful conversion by Profix. The plaintiff may have had a possessory interest in the vehicle, but it failed to exercise its rights under the Act following receipt of the Notice of Intention to Sell. It thereby impliedly, at the least, authorized the dealings by Profix. As to unjust enrichment, Profix, having followed the procedure under the Act, has a valid juristic reason for any enrichment.

[25] The defendant relies upon the decision given in Bank of Montreal v. Ernst & Young Inc. et al found at 2002 SCC 81. The tort of conversion is constituted by a wrongful interference with the goods of another and no action lies for consensual interference. The plaintiff’s deponent acknowledges having received the notice in February of 2014. The plaintiff received the notice of the defendant’s intention to sell, failed to respond to the notice by disputing the lien and, by its agent Kevin Richards signified it intended to do nothing, and did nothing. There was therefore, no wrongful interference.

[26] There was a business relationship between the defendants and this did not include Profix becoming the de facto owner of the vehicle. Mr. Modo consented to the adaptation of the vehicle to a tow truck and its repair once damaged, and as such there was no conversion of the vehicle giving rise to damages. Having received the defendant’s Notice of Intention to Sell the vehicle in February 2014, and not having done anything, the defendant says that the plaintiff impliedly authorized the transfer of the ownership of the vehicle.

[27] The defendant has a juristic reason to maintain possession of the vehicle because it has a valid interest pursuant to the Repair and Storage Liens Act.

[28] The expert evidence tendered by the plaintiff in support of the quantum of its claims for damages or unjust enrichment is insufficient. The expert has no qualification in the assessment of tow trucks. Better evidence is that of the value upon which Profix paid the taxes to transfer the vehicle. As well, account must be taken of the costs underwritten by Profix in relation to the conversion and repair of the vehicle.

Disposition

[29] The issues in this matter include questions as to whether: Profix had a lien on the 2013 Sierra; its possession of the vehicle is an unlawful conversion, or an unjust enrichment and; whether RBC is entitled to damages from Profix in conversion or unjust enrichment, and if so, what is the quantum. Do any of the issues require a trial?

[30] Profix’s claim for a lien is composed in significant part by the sum of $15,622.25 alleged to have been paid, in cash, to Razer Manufacturing for the cost of converting the vehicle to a tow truck. Section 29 of the Act allows for an assignment of any lien right that accrued to Razer, submits the plaintiff, but none was made. The defendant counters, that section 29 does not here apply, because by definition in section 1, subsection 2 of the Act, where an article has been forwarded by the person with whom it was left, the person with whom the article was left is deemed to have performed the services.

[31] Reframed, the question raised is whether Modo left the vehicle with Profix, for repair, storage or storage and repair, as defined by section 1(2) of the Act, wherefore no assignment to Profix from Razer was required for Profix to claim a lien.

[32] The evidence of Profix is that the vehicle was left with it for use in its fleet as a tow truck, in circumstances where the costs associated with that and the revenue generated would be shared with Modo. The costs of the conversion were to be paid by Modo to Profix, according to the evidence, but, clearly the vehicle was not ‘left’ with Profix ‘for’ repair, storage or storage and repair. The vehicle was left with Profix to give effect to the agreement Modo and Profix made for its use. To this extent, in the absence of an assignment, Profix has no lien for the sum alleged to have been paid in cash for the conversion of the truck to a tow truck.

[33] As to Profix’s claim for a lien for 60 days at $60.00 a day, there is no evidence whatsoever that supports this claim. The circumstances laid out in the evidence are simply not consistent with Profix applying a storage charge for a vehicle it has continuously used.

[34] The third component of the claim for a lien is the $7,460.27 Profix says it paid itself for labour costs to effect repairs to the vehicle caused by Modo when he borrowed it on one occasion. There is no independent evidence of such damage having occurred nor the particulars of the damage or repair.

[35] Under Rule 20.04(2.1), the court shall consider the evidence, and may weigh it, evaluate credibility and draw any reasonable inference.

[36] Profix declined to disclose its records, if any, of accounts in relation to the use of Modo’s vehicle. Without these, submits the plaintiff, correctly in my view, there is no way to determine what sums to which Profix was entitled as between it and Modo, given their putative revenue sharing agreement, at any given time.

[37] Even if Profix had a lien for some or all of the entitlements it has claimed, it failed to take the requisite assignment, or give notice to retain the item in lieu of sale, having given notice of its intention to sell. A public sale of the item would have been required under the Act for a purchase by Profix and clearly Profix was not entitled to convey the registered ownership to itself as and when it did. On the basis of this reasoning, I do not consider that Profix has established that it has the right to possession of and title to the vehicle, regardless of whether it paid for the conversion, and/or repaired or stored the vehicle.

[38] At the time of Profix’s insuring of the vehicle in March 2013 and certainly by the time it delivered Notice of Intention to Sell on February 10, 2014, it was aware of RBC’s interest in the vehicle. Profix failed to give notice of its decision to retain possession in lieu of sale, as required under the Act. Even assuming it had a bona fide lien, it did not comply with the Act and has registered itself as the owner of the vehicle, retained possession of the vehicle and has failed to account for any funds generated. By its conduct, funds that may have been generated upon sale and distributed to RBC have not.

[39] A lien claimant is liable in damages for non-compliance with the requirements prescribed for sale or other disposition, under section 21.

[40] I consider that Profix’s failure to give notice of its intention to retain the vehicle in lieu of sale and the transfer of registered ownership were wrongful. Its continued possession and use of the vehicle are acts of wrongful conversion to its own use.

[41] In the absence of a juridical reason, Profix’s possession of the vehicle from shortly after its purchase for the $79,265.82 financed by RBC, has been an unjust enrichment. They did not comply with the requirements under the Act to claim a lien for the cost of conversion to a tow truck, or for storage, or for repair nor to retain the vehicle rather than effect its sale.

Damages

[42] Profix was obliged to pay taxes upon a deemed fair market value of the vehicle of $35,000 when it transferred ownership to itself on March 14, 2014.

[43] The vehicle has been appraised by Maurice Bramhall. According to Mr. Bramhall’s CV, he has been engaged in the appraisal of automobiles, trucks and motorcycles since at least 1991, before which he was engaged in vehicle restoration and sales. To value the vehicle, he considered the Canadian Black Book wholesale values, to which he added the value of the towing equipment on a depreciated basis. As of February 14, 2014, the value of the vehicle (excluding the towing equipment) was between $49,425.00 and $51,375.00.

[44] I consider that Mr. Bramhall does have sufficient expertise, at the least in reading black book values of comparable vehicles, if not more.

[45] Whatever the true cost of the towing equipment and conversion, the defendant Profix ought not to be obliged to pay damages to the plaintiff for this, as they have not ‘wrongfully’ converted these components to their own use nor been unjustly enriched. They are only liable in damages for their possession and taking ownership of the truck not the improvements they either paid or for which they were liable to pay.

[46] I assess the damages to which the plaintiff is entitled from the defendant to be the sum of $49,425.00. The plaintiff shall have prejudgment interest at the prescribed rate under the Courts of Justice Act from the date of service of the statement of claim. There is no reason Profix should be liable for the contractual interest rate incurred between Modo and RBC in the circumstances.

[47] The motion for summary judgment is therefore granted. The parties may make brief submissions as to costs, within 10 days for the plaintiff and 20 for the defendant.

Madam Justice A.M. Mullins

Date: February 22, 2017