CITATION: Romano v Sills, 2017 ONSC 6367 COURT FILE NO.: C-628-16
DATE: October 25, 2017
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Giuseppe Romano & Filomena Romano
Plaintiffs
– and –
Thomas Sills
Defendant
Domenic Saverino for the Plaintiffs
Dennis G. Crawford and Martin F.
Mahlstedt for the Defendant
HEARD: October 13, 2017
Corrected Corrected decision: The correction was made on November 2, 2017.
The following paragraph replaces the corresponding paragraph which
was added by way of a corrected decision dated November 1, 2017.
[78] In the event that the defendant has not paid the amount owing under my October 25, 2017 Judgment by November 25, 2017, the plaintiffs shall be entitled to possession of the property municipally known as 542 Halberstadt Circle, Cambridge, Ontario N3H 5J8.
Corrected decision: The correction was made on November 1, 2017.
A new paragraph [78] is added after paragraph [77] which reads:
[78] In the event that the defendant had not paid the amount owing under my October 25, 2017 judgment, the plaintiffs shall be entitled to possession of the property municipally known as 542 Halberstadt Circle, Cambridge, Ontario N3H 5J8.”, has been inserted after paragraph [77].
The Honourable Justice James W. Sloan
reasons for judgment
[1] This is a motion for summary judgment with respect to what amount, if any, is owing by the defendant on a mortgage.
[2] A mortgage commitment was signed by the plaintiffs on October 31, 2013, and by the defendant on November 1, 2013.
[3] The transaction closed on November 5, 2013, and was renewed for another year in November, 2014.
[4] In November, 2013, the defendant’s lawyer received $89,000 from the $100,000 advance after the deduction of a $3,000 lender fee and $8,000 on account of one year’s prepaid interest at the rate of 8%.
[5] Upon the renewal in November, 2014, the plaintiffs added a renewal fee of $4,950 to the then outstanding principal.
[6] The issues raised are as follows:
Is there a genuine issue requiring a trial in this matter? After a short discussion all counsel agreed that this matter should proceed as a summary judgment motion.
What was the contractually agreed-upon interest rate?
Did the defendant commence its counterclaim within the time frame set out by the Limitations Act? Since the defendant’s lawyers admitted, upon their recalculation, that the defendant has not overpaid the mortgage, this claim was withdrawn.
Are the plaintiffs entitled to additional fees including:
(a) a lender’s fee of $3,000,
(b) a renewal fee of $4,950, and/or
(c) an administration fee of $300 per month for late payments from December 1, 2014?
Was $2,000 paid by the defendant to the plaintiffs on or about November 14, 2014?
Was $82,991.08 or $86,184.68 paid to the plaintiffs on or about January 22, 2015?
Are the plaintiffs entitled to charge $2,000 pursuant to Section 17 of the Mortgages Act?
Are the plaintiffs entitled to be reimbursed for legal fees in the amount of $1,356 incurred before issuing their statement of claim?
What Was the Contractually Agreed-Upon Interest Rate?
The Plaintiffs’ Position
[7] The plaintiffs submit that the interest rate of .8%, rather than 8% was a typo and because there is no time frame mentioned such as monthly or semiannually after the numerical interest rate, it is ambiguous.
[8] They submit that the defendant was well aware that the interest rate was not .8% and that it was 8%, because he only got $75,610 from the mortgage advance of $100,000 and the trust ledger statement he received from his lawyer dated November 5, 2013, clearly states, that one year’s worth of interest at 8% had been deducted from the gross advance.
[9] Notwithstanding the above, the plaintiffs did not challenge anyone in any way shape or form about these deductions.
[10] The defendant clearly states at paragraph 20 of his affidavit: “I received funds in the amount of $75,610. I should have received $85,810 ($99,200, less fees per Trust Ledger Statement)”.
[11] They further submit that the defendant is a real estate investor and would be reasonably knowledgeable about how mortgages work and he only raised this issue when the court action started.
[12] They further submit that although there is no evidence showing that the defendant never got a copy of the mortgage, in all probability he did and certainly only had to ask his lawyer to obtain one if he did not.
[13] They rely on the 2016 Ontario Court of Appeal decision in Shewchuk vs. Blackmont Capital Inc. 2016 ONCA 912, where the court stated at paragraph 15:
In response to the respondent’s submission that the parties conduct subsequent to the making of the contract could only be considered in the event of ambiguity, the trial judge expressed the view, at para. 82, that, “if subsequent conduct demonstrates the mutual and objective intentions of the words in the contract, it is as valuable as any conduct pre-existing the making of the contract.”
The Defendant’s Position
[14] The defendant’s position is that the mortgage commitment is clear on its face and not ambiguous and should be enforced.
[15] He states that there are letters from his lawyer on November 5, 2013, suggesting an interest rate of 8% and on November 6, 2013, setting out an interest rate of 10%.
[16] He submits that the draft mortgages showing an interest rate of 10% annually are all dated November 5, 2013, and could not have been in front of the lawyer giving him independent legal advice, because he received that advice and signed those documents on November 1, 2013.
[17] He stated that the draft mortgages are supposed to be attached to the acknowledgement and direction that he signed while receiving independent legal advice and they were not, and that he never did see the mortgages prior to their being registered.
[18] With respect to whether or not there was a typo, he submits that the contra preferentem rule should apply on the basis, that the plaintiffs’ lawyer or agent drew the mortgage commitment document, however neither lawyer was able to assist the Court with respect to who may have drafted the mortgage commitment.
[19] The defendant submits that the parol evidence rule precludes the admission of evidence to try to vary or contradict a written contract. He relies on the Supreme Court of Canada case of Sattva Capital v. Creston Moly 2014 SCC 53, [2014] 2 R.C.S. 633, where the court at paragraph 59 stated:
It is necessary to say word about consideration of the surrounding circumstances and the parol evidence rule. The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing… To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties. The purpose of the parole evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract…
[20] With respect to the Shewchuk case, the defendant argues that the contract is not ambiguous and he did not do anything after the contract and therefore there is no conduct of his for the court to consider.
Plaintiffs’ Reply
[21] The plaintiffs referred the court to paragraph 60 of the Sattva which reads:
The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aide for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore the concern of unreliability does not arise.
Additional Lenders, Renewal and Administration Fees
Plaintiffs’ Position - lenders fee
[22] The plaintiffs submit that the lender fees are referred to both on the 1st and 3rd page of the mortgage commitment, where on the 1st page it states that the advance amounts are subject to “all applicable fees” and on page 3 where it states that the solicitor’s payout, will be subject to among other things lender/broker fees.
[23] They further point to the defendant’s lawyer’s November 5, 2013 trust statement that refers to a 3% lender fee.
[24] They further submit, that at paragraph 20 of his affidavit, the defendant admits that he is responsible for the fees as set out in his lawyer’s November 5, 2013 trust ledger statement which includes the lender’s fee of 3%.
Defendant’s Position – lenders fee
[25] On page 3 of the mortgage commitment form, it clearly contemplates that the approximate dollar amount of the charge is supposed to be set out in the statement and since the area is blank it means that there are no lender’s fees.
Plaintiffs’ Position – renewal fee
[26] The plaintiffs’ mortgage clearly contemplates that the chargor (defendant), may fail to repay the principal and interest outstanding on the maturity date of the mortgage, and the plaintiffs, may at their sole discretion automatically renew the mortgage and charge a processing fee of the greater of 2% of the outstanding principal balance or $4,950.
Defendant’s Position – renewal fee
[27] The defendant submits that this is not a standard term of a mortgage, was not in the mortgage commitment and it is an illegal charge.
[28] The defendant relies on the Ontario Court of Appeal case of P.A.R.C.E.L. Inc. v. Aquaviva 2015 ONCA 311, where the Court of Appeal determined that late payment charges and default pays fees on the mortgage in that case constituted fines or penalties prohibited under section 8 of the Interest Act. The court stated the following:
95 The respondent’s point to no evidence on the record before this court demonstrating that they incurred any actual losses as a result of late or missed payments under the mortgage, apart from the amount of the nonpayment itself. This is not a case where it is alleged that payments made by or on behalf of Parcel under the mortgage were returned “NSF” or otherwise rejected for payment, giving rise to administrative costs for the respondent.
96 In the absence of evidence that the charges in question reflect real costs legitimately incurred by the respondents for the recovery of the debt, in the form of actual administrative costs or otherwise, the only reason for the charges was to impose an additional penalty or fine, apart from the interest otherwise payable under the mortgage, thereby increasing the burden on the appellants beyond the rate of interest agreed upon in the mortgage. The courts have not hesitated to disallow similar charges on the basis that the offense s. 8 of the Interest Act…
97 Accordingly, I would set aside the impugned Late Payment Charges and Default Fees.
[29] The defendant argues that the automatic renewal fee is analogous to the default fees in Parcel.
Plaintiffs’ Position - renewal fees – reply
[30] The plaintiffs state that the mortgage was renewed and therefore not in arrears so that Parcel does not apply.
[31] With respect to the Parcel case, they point to paragraph 11 of Ms. Romano’s affidavit dated July 26, 2017, which says that she lost $5,116.39 for lost investment opportunity.
Administrative Fees
[32] Both parties make similar arguments with respect to the administrative fees.
Did The Plaintiffs Receive $86,184.68 from the Defendant?
Defendant’s Position
[33] The defendant submits that he made the payment and directs the court’s attention to an affidavit from Marilla Grady who is a legal assistant at Mr. Saverino’s law firm. Attached to Ms. Grady’s affidavit is a copy of the certified cheque dated January 16, 2015, in the amount of $86,184.68 made payable to the plaintiffs’ lawyer.
[34] The defendant also points to the supplementary affidavit of Ms. Romano where, while she still denies receiving the above-mentioned funds, she attaches a client ledger from the plaintiff’s lawyer, showing clearly, that he received $86,184.68 and then paid $82,991.08 to the plaintiffs and $3,193.60 to the Town of Aurora.
Plaintiff’s Position
[35] The plaintiff maintains that she only received $82,991.08.
Did the Plaintiff Receive $2,000 from the Defendant
Plaintiffs’ Position
[36] The plaintiffs deny that they received a cheque in the amount of $2,000 from the defendant on or about November 14, 2014 or at any time.
Defendant’s Position
[37] The defendant presented a cheque made payable to the plaintiffs’ lawyer dated November 14, 2014, in the amount of $2,000.
[38] He also produced two pieces of correspondence between the plaintiffs’ law firm and his law firm dated January 14, 2015, one of which references $2,000 and states; “Also please deduct $2,000 from the legal fees as it was paid a month ago by Mr. Sills.”
Are the Plaintiffs Entitled to Charge $2,000 Pursuant to Section 17 of the Mortgages Act?
[39] Both parties agree that the timeframe of the interest will be 3 months and that the interest rate will either be .8 or 8%. What they do not agree on is the principal amount that the interest rate will applies to.
Are the Plaintiffs Entitled to Be Reimbursed for Legal Fees in the Amount of $1,356 Incurred before Issuing Their Statement of Claim?
[40] The defendant’s position is that there is no legal invoice attached the material and therefore no proof of fees being incurred.
[41] Mr. Saverino acknowledged that no legal invoice was attached, but stated to the court that the fees being charged where his fees, for preparing for and commencing notice of sale proceedings.
[42] He submitted that $1,356 was not exorbitant and Mr. Crawford did not to take issue with that statement.
Findings
[43] Although the people involved in drafting the mortgage commitment and doing the conveyancing aspect of this matter are not for the court, on the evidence that is before the court, it appears to be a sad commentary on their competency and attention to detail in the documents, while very high legal and other fees were being charged.
Interest Rate
[44] In 2013, an interest rate of .8% would have been exceptionally low for a 1st mortgage not to mention a 2nd mortgage.
[45] The defendant did not state, that he never got a copy of the mortgage document showing the interest rate of 8%.
[46] His affidavit is a silent about, what if anything he did after receiving substantially less money than he now claims to have been entitled to. This is a motion for summary judgment and the defendant is obligated to put his best foot forward. He has not done so.
[47] On the evidence before me I find that the defendant was always aware, that the interest-rate was 8%, not .8%.
[48] For a person involved in investing in real estate and therefore having some familiarity with mortgages he would have known that in 2013, no one would have given him a 2nd mortgage at .8% which would have been well below the 1st mortgage rate at the time.
[49] I find that it would have been obvious to anyone who saw the interest rate stated at .8%, that it would have been a typo.
[50] With respect to the parol evidence argument of the defendant, I prefer the reasoning in paragraph 60 of the Sattva case and when the surrounding circumstances of this case are looked at it, is obvious that the interest rate was to be 8%.
Lender’s fees
[51] Although the mortgage commitment form appears to contemplate that a dollar amount should be entered, none are. In this age of consumer protection, one wonders why they would not be put in, since it appears they the exact amounts were all known. It is difficult to come to any other conclusion, than to think that the amounts are not entered to keep the consumer, in this case, the defendant in the dark about what the true cost of his borrowing was going to be.
[52] To suggest after the fact, and after the money had been deducted from his mortgage advance, that he somehow consented or acquiesced to its payments is illogical.
[53] I therefore find that the lender’s fee should not have been deducted from the defendant’s mortgage advance.
Renewal Fee
[54] The automatic renewal fee was not part of the mortgage commitment and on the evidence before me, was never brought to the attention of the defendant at any time.
[55] The charge for automatically renewing the mortgage appears to be incredibly high.
[56] There is no evidence whatsoever, of the administrative cost to the plaintiffs to renew the mortgage. The clause could also lead to incredible abuse, the plaintiffs could under the clause as it appears to be written, renew the mortgage for one month, increase the interest rate to 15% calculated monthly above bank prime going forward, and then take action against the chargee at a new exorbitant interest rate, after having padded the principal owing by almost $5,000.
[57] I therefore find the renewal fee is clearly a type of penalty and one controlled entirely by the plaintiffs. I therefore disallow this charge.
Administrative Fees
[58] The losses referred to in Ms. Romano’s affidavit are not the costs that the court talked about in the P.A.R.C.E.L.
[59] Based on that case and because there is no evidence before the court of what expenses the plaintiffs incurred and taking into account, that interest at the rate they bargained for would continue on any unpaid balance of the mortgage, I dismiss the claim for administrative fees.
Did the Plaintiff Receive $86,184.68 from the Defendant?
[60] The evidence is overwhelming that the plaintiffs did receive this money, even based on exhibits to their own material.
[61] It appears that they did nothing about checking with their own lawyer, as to why he made a payment to the Town of Aurora.
[62] For the plaintiffs to deny that they received this money, has simply been a waste of time and money.
Did the Plaintiffs Receive $2,000 from the Defendant?
[63] Although it appears that $2,000 was paid for something, it is not clear that the $2,000 was paid on the subject mortgage.
[64] Why the defendant has not appended material from the law firm involved in the transfer of the cheque is unknown.
[65] I am not convinced on the material before me, that the $2,000 referred to in the defendant’s affidavit was paid on account of the subject mortgage.
Section 17 of the Mortgages Act
[66] The plaintiffs are entitled to 3 months interest on the principal sum of $97,000 at 8% which equals $1,939.99.
Amount Owing
[67] The principal amount of the mortgage of $100,000 plus 3 months interest of $1,939.99 equals $101,939.99.
[68] Credits to the defendant based on my findings:
a) $3,000 for the lender’s fee.
b) 8% of $8,000 for one year based on the fact ,that when interest is paid in advance, it is higher than 8%, if the 8% were paid at the end of the year after the defendant actually had the use of the money. I therefore credit the defendant with one year’s interest on $8,000 at 8% which equals $640.
c) 8% of $3,000 from November 5, 2013 to January 15, 2015 at 8% which equals $287.34.
d) $86,184.68 for the payment made on January 15, 2015.
e) Therefore the total credits equal $90,112.02.
[69] Therefore the defendant owes to the plaintiff $11,826.98. ($101,939.99 -$90,112.02).
Legal Fees
[70] The plaintiff commenced her claim on June 10, 2016 claiming $38,291.84.
[71] This is substantially higher than the award of this Court and falls within the monetary jurisdiction of the Small Claims Court.
[72] I am therefore not prepared to allow the plaintiffs their legal fees to enforce the mortgage when the court has found that they were claiming almost four times what they were entitled to.
Summary
[73] The defendant’s counterclaim is dismissed.
[74] The defendant shall pay to the plaintiffs the sum of $11,826.98 plus interest at 8% on the $11,826.98 from January 15, 2015, to date of payment.
[75] Upon receipt of payment the plaintiffs shall forward a discharge of mortgage/charge in the appropriate form.
[76] If the parties require anything further I may be spoken to.
[77] If the parties are unable to agree on costs, Mr. Saverino shall forward his brief submissions on costs to me by October 31, 2017. Mr. Crawford shall forward his brief response to me by November 7, 2017. Mr. Saverino shall then forward his reply, if any, to me by November 10, 2017. Cost submissions may be sent to my attention by email, care of Kitchener.Superior.Court@ontario.ca.
[78] In the event that the defendant has not paid the amount owing under my October 25, 2017 Judgment by November 25, 2017, the plaintiffs shall be entitled to possession of the property municipally known as 542 Halberstadt Circle, Cambridge, Ontario N3H 5J8.
“J.W. Sloan”
J.W.Sloan,J.
Released: October 25, 2017
CITATION: Romano v Sills, 2017 ONSC 6367 COURT FILE NO.: C-628-16
DATE: October 25, 2017
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Giuseppe Romano & Filomena Romano
– and –
Thomas Sills
REASONS FOR JUDGMENT
J.W. Sloan, J.
Released: October 25, 2017