Court File and Parties

Court File No.: 888/15 Date: 2018-06-19 Superior Court of Justice - Ontario

Re: Deutsche Bank A.G., Canada Branch, Plaintiff And: Mieszko Properties Inc., Zbigniew M. Serek, and Mariusz Biniarz, Defendants

Before: Grace J.

Counsel: Christopher J. Staples, for the plaintiff Zbigniew M. Serek self-represented

Heard: April 9, 2018 and by written submissions

Endorsement

[1] On May 8, 2015 Deutsche Bank A.G., Canada Branch (the "Bank") commenced this action for the balance due under a charge/mortgage of land registered electronically on March 11, 2010 as instrument number CE416092 (the "Charge") and relating to lands municipally described as 666-678 Mercer Street, Windsor, Ontario (the "Lands").

[2] The Bank is the transferee of the Charge. It sued Mieszko Properties Inc. as chargor. The claim named two individuals as defendants: Zbigniew M. Serek and Mariusz Biniarz. They were alleged to have guaranteed the obligations of the chargor.

[3] The Bank obtained default judgment against the chargor and Mr. Biniarz. Mr. Serek defended the action and, through counsel, filed an amended Statement of Defence on May 30, 2016.

[4] The Bank asks for summary judgment against Mr. Serek. It seeks payment of the balance owing after sale of the Lands being $114,866.41 on account of principal, $4,091.47 on account of interest as at December 14, 2015 with daily interest accruing thereafter at the rate of $12.79.

[5] Mr. Serek responded with a cross-motion of his own. In addition to the already granted order allowing him leave to amend his Statement of Defence, Mr. Serek asked the court to grant summary judgment dismissing the action against him. Alternative relief is also sought.

[6] An affidavit sworn May 12, 2016 was filed in support of Mr. Serek's motion. In it Mr. Serek raised these issues:

(a) first, he alleged that although named as "guarantor" in the Charge, he did not actually sign a guarantee;

(b) second, he deposed that he did not recall receiving notice of the transfer of the Charge to the Bank; and

(c) third, Mr. Serek maintains that the Lands were sold improvidently by the Bank.

[7] The applicable legal principles are well established. The court is required to grant summary judgment if satisfied that there is no genuine issue requiring a trial with respect to a claim or defence: rule 20.04(2)(a) of the Rules of Civil Procedure.

[8] The requirements of the Rule will have been met if the material assembled for the motion allows the motion judge to make the required findings of fact, allows the judge to apply the law to the facts as found and is a proportionate, more expeditious and less costly means to achieve a just result: Hryniak v. Mauldin, 2014 SCC 14 at para. 49.

[9] In my view, this is such a case. The balance of this endorsement explains why I have reached that conclusion.

[10] Two of Mr. Serek's arguments are easily dealt with. I start there. First, the standard charge terms incorporated by reference into the Charge permitted the original chargee to assign the Charge without consent. Furthermore, the transfer had no impact on any of the defendants. The Charge matured. It was not renewed. The Bank's solicitors made a demand for payment the following month (on April 22, 2015). The interest of the Bank in the Charge was expressly communicated in that demand letter.

[11] Second, the allegation that the Bank did not act in a commercially reasonable manner in relation to the sale of the Lands is convincingly refuted by paragraphs 10 through 18 of the affidavit of the Bank's Asset Recovery Specialist, Sandra Oliveira, sworn July 25, 2017 and by the exhibits she appended.

[12] The chargor had listed the property for sale shortly before the Charge matured. Its effort to sell same failed. Subsequent appraisals obtained by the Bank demonstrated that the listing price set by the owner was far too high.

[13] The progression of the listing price while the property was subject to the Bank's direction was well-supported as was the reasonableness of the ultimate sale price. Mr. Serek's position on this point lacks an evidentiary foundation. The issue of improvident sale is not a genuine one requiring a trial.

[14] That leaves the execution of a guarantee issue. Some additional background information is required.

[15] In times gone by, a charge/mortgage of land would bear original signatures of the chargor and any guarantor. That has not been the case for many years. The Charge registered in this instance is no exception.

[16] The contents of the Charge were consistent with a January 28, 2010 Mortgage Commitment Mr. Serek and Mr. Biniarz signed as "applicant". That document contained a number of conditions. One of them read:

Zbigniew M. Serek and Mariusz J. Biniarz have been approved to sign as Guarantor/Covenantor on this mortgage. (Solicitor).

[17] Mortgage instructions were provided by the lender to a solicitor. They included the following under the heading Guarantors:

... In Ontario, in the case of electronic registration, the guarantor's section of the Acknowledgement/Direction and Guarantee should be completed and executed ...

[18] Included within the Bank's motion record was an Acknowledgement and Direction dated March 9, 2010. Three names and signature lines were provided. Mieszko Properties Inc. was shown as chargor. Mr. Serek signed on its behalf. The words "I have authority to bind the corporation" appeared underneath his signature. Mr. Serek and Mr. Biniarz were shown as guarantors. The latter placed his signature on the line provided. The former did not.

[19] The Acknowledgement and Direction referred to a Charge of the Lands. It provided, in part, as follows:

The effect of the Documents has been fully explained to me/us, and I/we understand that I/we are parties to and bound by the terms and provisions of the Document to the same extent as if I/we had signed them ...

[20] All three defendants were named in the Charge that was registered the following day, including Mr. Serek as guarantor. It incorporated by reference standard charge terms registered in Ontario as number 200633.

[21] The standard charge terms include clauses dealing with the promises of a "Covenantor". The definition includes a guarantor. That person promised to pay the amount secured by the Charge when due and agreed, among other things, that their liability was not affected by the sale of the Lands: see articles 21.1(a) and 21.2(g).

[22] The absence of a signed guarantee raised, in my mind, s. 4 of the Statute of Frauds, R.S.O. 1990, c. S.19. In part it provides:

No action shall be brought ... to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person ... 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 ...

[23] In this case, the evidence establishes the parties' contemplated transaction: a loan of the net sum of $168,430.30 on the covenant of the chargor and two guarantors to repay it and supported by the security of the Lands.

[24] However, the guarantors did not sign a guarantee, although Mr. Biniarz executed the form of Acknowledgement and Direction and in so doing agreed to be bound by the Charge and the standard charge terms to which it referred. As noted, Mr. Serek did not do so, although a line for signature was provided for that purpose.

[25] Where does this leave the parties? At my request, written submissions were filed concerning s. 4 of the Statute of Frauds. The Bank notes, fairly, that the legislation was not raised in the amended Statement of Defence filed on Mr. Serek's behalf by his former counsel. The Bank submitted, accurately, that the Statute of Frauds renders a guarantee unenforceable if not complied with, not void. The legislation is an affirmative defence that must be specifically pleaded: Noble Jewellery and Merchandising Co. v. Epic International Fine Jewellery Inc., 2012 ONSC 7359 (S.C.J.) at para. 40; Severin v. Vroom (1977), 1977 CanLII 1037 (ON CA), 15 O.R. (2d) 636 (C.A.) at para. 7; McGuiness, K., The Law of Guarantee, 3rd ed. (Markham: LexisNexis Canada Inc., 2013) at p. 217 ("McGuinness"). See too, rules 25.07(4) and (5) of the Rules of Civil Procedure.

[26] Nonetheless, it seems to me that Mr. Serek raises a more fundamental issue. While the documents that do exist (the Mortgage Commitment, the instructions to solicitor, the Acknowledgement and Direction and the Charge) clearly evidence an intention by the chargee to receive and of Mr. Serek to provide a guarantee, such an agreement was never signed by Mr. Serek.

[27] I return to the pleadings. In the Statement of Claim, the Bank seeks payment by Mr. Serek "pursuant to a guarantee in writing dated March 9, 2010": para. 2(a).

[28] In para. 6 of the Statement of Claim, the Bank provided specifics of the document relied upon:

The plaintiff's claim is on a charge/mortgage dated March 9, 2010 made between MIESZKO PROPERTIES INC., as chargor, and ZBIGNIEW M. SEREK and MARIUSZ J. BINIARZ, as Guarantors ...

[29] At para. 12, the Bank added:

The said defendants, ZBIGNIEW M. SEREK and MARIUSZ J. BINIARZ, entered into a guarantee in writing ... whereby ZBIGNIEW M. SEREK and MARIUSZ J. BINIARZ did covenant with the Plaintiff to pay the amount of monies falling due under the Charge ...

[30] In response, in the Amended Statement of Defence, Mr. Serek pleaded, at para. 5:

The said defendant denies that he entered into a guarantee in his personal capacity ...

[31] I have already referred to the Bank's employee Sandra Oliveira and her July 25, 2017 affidavit. In an earlier affidavit sworn February 28, 2016, Ms. Oliveira deposed, in para. 5, that Messrs. Serek and Biniarz had executed the Acknowledgement and Direction dated March 9, 2010 "as guarantors". A copy of the document was appended as an exhibit. As mentioned, same was signed by Mr. Serek on behalf of the company but not in his personal capacity.

[32] Ms. Oliviera's supplementary affidavit attempted to address Mr. Serek's sworn statement that he did not sign the Acknowledgement and Direction or any other document as guarantor. Her focus moved from the Acknowledgement and Direction to other, earlier documents including those I have mentioned and also a cost of borrowing disclosure statement, an Ontario borrower disclosure statement, a client identification form and a direction to solicitor. None of those documents were referred to in the Statement of Claim by date, title or content.

[33] To be clear, by affidavit the Bank has attempted to revise the basis for its claim against Mr. Serek. The liability of Mr. Serek is, as pleaded, said to arise from a March 9, 2010 document (the Acknowledgement and Direction) he did not sign. That writing is the one that refers to and incorporates the provisions of the Charge and the standard Charge terms referred to therein.

[34] No other document – even those referred to in Ms. Oliveira's supplementary affidavit - contains any of the terms of the guarantee set forth in the standard charge terms. What obligations are guaranteed? When does an obligation to pay them arise? Those matters – and others – are addressed in the standard charge terms but nowhere else.

[35] The Bank does not allege the existence of any oral agreement. In its written submissions, the Bank relies on the doctrine of part performance. That doctrine was not pleaded in the statement of claim. In any event, none of the cases relied upon by the Bank deal with guarantees. McGuiness, supra, explains why at pp. 234-235:

The doctrine of part performance...is not applicable in the case of a guarantee.

[36] In any event, the doctrine is designed to overcome inequity in the application of s. 4 of the Statute of Frauds: McGuinness, supra at p. 235. The problem here is a more fundamental one. Mr. Serek did not execute the document that was designed to bind him to the promises contained in the standard charge terms.

[37] In my view, this matter is analogous to the one facing the Court of Appeal in Imperial Bank of Canada v. Nixon (1926), 1926 CanLII 399 (ON CA), 59 O.L.R. 538 (C.A.). In that case, however, the guarantee was signed. A key component: the name of the principal debtor, was lacking. At p. 540 Riddell J.A. said in part:

This is not a case in which the plaintiff sets up mistake in reducing the contract to writing or appeals to the equitable doctrine that equity looks upon that as done which ought to have been done. Had this been the case, it is possible other considerations would arise. But the plaintiff bank places the case, both in the pleadings and in argument, squarely and exclusively upon the document actually signed. If there are any rights outside of or beyond those given by that document, they are not dealt with here.

[38] Here the Bank relied on a document it expected Mr. Serek would have signed. However, he did not do so. In its motion material, the plaintiff tried to modify the basis for the claim by relying on additional records. Assuming the Bank can deviate from its pleading in that manner, even when cobbled together the foundational documents do not constitute a contract of guarantee. The Bank also raised the doctrine of part performance. However, same does not apply to a situation such as this one. No other basis for recovery was advanced.[^1]

[39] No genuine issue requiring a trial with respect to the claim against Mr. Serek exists. I agree with Mr. Serek that as pleaded and as argued the Bank has no basis for recovery against him. The Bank's motion for summary judgment is dismissed. Mr. Serek's motion for summary judgment is granted. The action is dismissed.

[40] In the event the parties are unable to resolve the issue of costs by agreement, short cost submissions not exceeding three pages may be served and filed within fifteen and thirty days of the release of this endorsement by Mr. Serek and the Bank respectively.

"Justice A. D. Grace"

Justice A. D. Grace

Date: June 19, 2018

[^1]: The importance of the pleadings has recently been emphasized: Davies v. Davies Smith Developments Partnership, 2018 ONCA 550 at para. 14.