SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PINA GRECO, Plaintiff
AND:
FRANCIS GRECO, Defendant
BEFORE: Sossin J.
COUNSEL: Adam Wainstock, Counsel for the Plaintiff
Mark Wiffen, Counsel for the Defendant
HEARD: July 17, 2019
REASONS FOR JUDGMENT
Overview
1The plaintiff, Pina Greco, brings this motion for summary judgment under Rule 20.03(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg 194 (“Rules of Civil Procedure”) with respect to her claim for amounts borrowed in the amount of $339,934.51, against the defendant, Francis Greco, her son.
2There is no dispute that Pina Greco provided a loan to Francis Greco in the amount of 425,958.00, secured by a promissory note in the amount of $413,000.00 dated October 1, 2013 (the “First Note”). This loan was taken out of a line of credit from Manulife which Pina Greco secured against her home in Witchita, Kansas.
3Francis Greco agreed to repay the loan, together with all the service charges against Pina Greco’s line of credit.
4Initially, Francis Greco made payments against the First Note, and on June 30, 2016, he provided a new promissory note to Pina Greco in the amount of $322,095.48 which would be due on demand (the “Second Note”) and which provided for payments every January, calculated as 20% of Francis Greco’s annual gross income.
5The Second Note included amounts which continued to be funded through the line of credit ($109,815.48) (the “first portion”) and amounts which would be compounded monthly at a rate of 5% per annum ($212,280.00) (the “second portion”). Pina Greco borrowed funds from Manulife for the second portion of the loan. Her contact at Manulife for the transaction was Rick Iannucci (“Iannucci”).
6Francis Greco made one payment on the Second Note in January, 2017, in the amount of $91,014.00, but failed to make the next scheduled payment in January, 2018 (which he asserts is due to financial issues arising from child support obligations) and has not paid back any further amounts subsequently.
7The relationship between Pina Greco and Francis Greco appears to have broken down by February, 2018, and the precise nature of Francis’ ongoing obligation to Pina Greco is a matter in dispute.
8Pina Greco alleges that Francis Greco agreed, in writing, by email, that the interest rate on the second portion of the Second Note would increase from 5% per annum to 10% per annum. She argues this was a binding agreement, and has added a further $31,053.07 to Francis Greco’s debt to her (as of the date of the hearing of this motion on July 17, 2019).
9Francis Greco alleges that there was a proposal involving the intervention of Iannucci in January and February of 2018, under which a portion of the debt would be deferred in exchange for the increase in the rate of interest from 5% to 10%, but that Pina Greco did not agree to this arrangement, and instead insisted on performance of the terms of the note.
10Francis Greco argues that since Pina Greco never agreed to the deferral of a portion of his debt, there was not an enforceable agreement to increase the interest rate on the second portion of the Second Note.
11At the hearing of the motion, the parties indicated that the only matter remaining in dispute as between them on the debt owing is the question of the increase of the interest rate.
12For the reasons set out below, the aspect of Pina Greco’s motion seeking post-judgment interest of 10% on the second portion of the Second Note based on the argument that there was an agreement that the interest rate increase from 5% to 10% after January 2018 is dismissed.
Analysis
13Rule 20.04(2)(a) of the Rules of Civil Procedure provides that summary judgment shall be granted where the judge is satisfied that “there is no genuine issue requiring a trial with respect to a claim or a defence.”
14Under Rule 20, the Court can where necessary weigh the evidence, evaluate credibility and draw reasonable inferences from the evidence in the record.
15The key issue on this motion is whether there was an agreement to increase the rate of interest on the second portion of the Second Note from 5% to 10%.
16Neither party in this case argues that there is a genuine issue for trial. Both rely on a record of emails from the key period in January-February, 2018.
17On January 29, 2018, Iannucci wrote to Francis Greco:
Hi Francis,
As we discussed, I was a little surprised last minute that the payout this year was lower than expected. The numbers we discussed just a couple of months earlier seemed like I’d be getting a chunk of repayment this year and Pina definitely needs her portion now.
She’s agreed to increase the rate to 10% even with the lien on the house still in tact, regardless of whether you pay her 10%.
If I’m waiting one more year, I’m most comfortable with this arrangement. … So if it really is all paid up next year then we’ll be fine for one more year with the current arrangement.
Rick
18On February 12, 2018, Pina Greco wrote to Francis Greco with respect to this proposal:
Francis,
Rick called me early this morning, reminding me again that his loan is between me and him and that if he got involved talking with you was only for the purpose of helping me (he is witness of the hard time I have been having). This has to stop … each year is the same thing.
The reason for the promissory note is to agree on a schedule for the repayment of this loan, so we wouldn’t have to repeat this every year.
Therefore, I am asking you again to honour the terms of the note and send me 20% of your total income for 2017 and also provide a copy of your tax return for the year. Please do this right away as we are already in the middle of February.
Mom
19Later that same day, Francis Greco responded to Pina Greco:
Mom,
I dispute your characterization of this as a circumstances that is repeated every year. I have paid to you in connection with this loan $3,000 (2014)m $51,500 (2015), $74,386 (2016) and $91,014 (2017) for a total of $219,900.
Your receiving ~$78,000 instead of $150,000 has no impact on your financial situation as in either case, the remaining balance of the monies you lent me plus the $50,000 you paid to Rick would be fully repaid. Thereby, any monies above the ~$78,000 would be going to Rick leaving him the only party impacted by the reduced payment. As such, I contacted him and secured his agreement that ~$78,000 would be paid now and the balance retired in January 2019, when it would be fully retired irregardless of my paying ~$78,000 or $150,000 now. Thereby, the only difference between the two payment amounts is the outstanding amount of the obligation to Rick until January 2019. In light of this resulting impact from the reduced payment, he and I agreed that I would compensate him for this ~$72,000 difference by increasing his interest rate from 5% to 10% for the year on the entire amount of the balance owed to him… representing an incremental $11,000 in interest.
All this said and in light of the position you’ve communicated to date, I believe it is reasonable for you provide me with your written assurance that you will not object to the repayment of the balance of the loan under these terms.
Francis (Emphasis added.)
20Finally, Pina wrote back to Francis concluding their exchange:
Francis,
I agree with the figures you send of your total payments, leaving a balance of $291,293.29 as of Jan/31/2018. However, what you don’t understand is that Rick’s loan is my loan not yours. It effects me because I cannot take any money from the bank which I already owe over $80,000.00 because of the lean [sic], and I have a lot of expenses accumulated. The promissory note is between you and I and therefore, discussing with Rick is of no value. (Emphasis added.)
21In her factum, Pina Greco relies on the fact that on January 29, 2018, Francis agreed to the increase in the interest rate.
22In light of Francis Greco’s stated belief, however, that the interest rate shift was an agreement with Iannucci which would be in exchange for a delay in the timing of repayment, and Pina Greco’s stated belief that an agreement between Francis Greco and Iannucci would not alter her existing arrangements with Francis, I find that there was never any actual agreement between Pina Greco and Francis Greco to alter the interest rate.
23In order to form a contract, there must be mutual agreement as to the terms of the contract. A party cannot pick and choose the elements of a purported contract to agree to and disregard the rest; Copperthwaite v. Reed et al., 2016 ONSC 1824 at paras. 11-18.
24As Professor McCamus has written in The Law of Contracts (Toronto: Irwin, 2012) at p.53, “[t]here is no meeting of the minds or consensus ad idem unless the acceptance is a mirror image of the offer.”
25In this case, Francis agreed with Iannucci to raise the interest rate from 5-10% on the relevant portion of the loan in exchange for a delay in the payment terms. Pina Greco, however, stated that Iannucci had no authority to negotiate arrangements on her behalf, and she never agreed to any delay in the payment terms. Indeed, she insisted Francis Greco comply with the original terms.
26Francis Greco was clearly in breach of the terms of the promissory note when he failed to make the disclosure of income and payments required in January, 2018, and Pina Greco was entitled to insist the original terms of the agreement be fulfilled. That agreement, however, stipulated the interest applicable to the portion of the Second Note at issue was 5%.
27Therefore, Pina Greco’s entitlement to the funds she is owed will continue to be calculated at an interest rate of 5% on second portion of the Second Note, and the aspect of her motion requesting post-judgment interest of 10% on the second portion of the Second Note is dismissed.
Costs
28If the parties cannot agree on costs, brief submissions of no more than 3 pages, together a bill of costs, may be submitted within 30 days of this judgment.
Sossin J.
Date: 2019-08-22