COURT FILE NO.: 8997/18
DATE: 2019 02 01
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ROBERT PACIONE, Plaintiff/Moving Party
AND:
MARIO PACIONE, LUCIANO PACIONE and 1884750 ONTARIO INC., Defendants/Responding Party
BEFORE: Conlan J.
COUNSEL: Sara Mosadeq, Counsel for the Plaintiff/Moving Party
Paul Mand, Counsel for the Defendants/Responding Party
ENDORSEMENT ON MOTION
I. Introduction
The Claim
[1] The Plaintiff, Robert Pacione (“Robert”), has sued his brothers, Mario Pacione (“Mario”) and Luciano Pacione (“Luciano”), and an Ontario corporation, 1884750 Ontario Inc. (“188”).
[2] Robert alleges that he loaned a total of $250,000.00 to Mario, at the latter’s request, in May 2016. Mario allegedly needed the money in order to pay out a mortgage that was held against a property that he owned at that time.
[3] There is a Promissory Note, signed by Robert and Mario, dated June 7, 2016, in the principal amount of $250,000.00, with regard to the alleged indebtedness.
[4] The Promissory Note expressly states that the $250,000.00 must be paid by Mario to Robert within 90 days, without interest or penalty, unless the parties agree to a structured repayment plan within those 90 days.
[5] The Promissory Note also expressly states that should Mario fail to make payments, he authorizes and consents to a third mortgage being placed against a property identified as 1890 Lawrence Avenue East in Scarborough (the “Property”).
[6] Further, the Promissory Note expressly states that the Property is owned by 188 and that Mario is the sole principal of that corporation.
[7] Mario did not pay back the money loaned to him by Robert. In addition, no mortgage has been placed against the Property because, as it turns out, Mario was not a director or officer of 188 at the time that the Promissory Note was executed.
[8] Robert has, therefore, sued both Mario and Luciano, and 188, for $250,000.00, plus interest and other relief. The Statement of Claim includes a request in the prayer for relief that a Certificate of Pending Litigation (“CPL”) be issued against the Property.
[9] It is alleged by Robert that he was effectively scammed (my word) by his two brothers. They both knew that Mario was signing a Promissory Note without any authority to bind 188 or the Property, says Robert.
[10] Two of the Defendants have defended the action. Mario has been noted in default.
The Motion to be Decided by this Court
[11] On notice to the Defendants, Robert moves for a CPL to be issued against the Property. The Motion is opposed by the Defendants.
[12] The Defendants raise four arguments: (i) a CPL is not necessary because Robert has claimed for monetary damages, (ii) Robert does not have a reasonable interest in the Property, (iii) because Robert knew in September 2016 (90 days after the Promissory Note was executed) that he was not getting paid and was not getting a mortgage against the Property, and because his Claim was not issued until October 2018 (more than two years after September 2016), his request for a CPL (or any interest in the Property) is out of time, and (iv) the Defendants will suffer undue prejudice if the CPL is granted because other secured creditors (mortgage holders) of 188 are taking enforcement steps against the Property, and the Defendants cannot refinance it if the CPL is on title.
[13] It is undisputed that two Notices of Sale Under Mortgage have been issued with respect to the Property.
[14] There was a fifth submission made by counsel for the Defendants orally at Court when the Motion was argued, namely, that Robert has not adduced any evidence that the loan funds were actually advanced to Mario, however, that point can be dealt with summarily. Mario has not even defended the action. Further, the texts between Luciano and Robert, contained in Robert’s Motion Record, are entirely consistent with the funds having been advanced. There is simply no credible basis to dispute that the loan funds were advanced by Robert and were received by Mario.
II. Analysis
The Burden and the Standard of Proof on the within Motion
[15] Robert must satisfy this Court, on a balance of probabilities, that he has met the test for a CPL to be granted against the Property.
The Issue to be Decided
[16] The question for this Court to resolve is simple: has Robert met the test for a CPL?
The Law
[17] The basic limitation period for a claim in Ontario is that it must not be commenced after the second anniversary of the day on which the claim was discovered: section 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Schedule B, as amended.
[18] There is another limitation period in Ontario which deals with real property claims, however, for the purpose of the within decision it is unnecessary to discuss that. This Court will give to the Defendants the benefit of assuming that Robert’s claim as it relates to an interest in the Property is the subject of a two-year limitation period.
[19] The statutory authority for this Court to issue a CPL is found in section 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, and Rule 42.01 of the Rules of Civil Procedure.
[20] Both sides have filed several authorities on the test for the granting of leave to register a CPL, however, there is nothing complicated or even uncertain about the test. Fairly recently, Justice Petersen, in 2254069 Ontario Inc. v. Kim, 2017 ONSC 5003, at paragraph 21, referred to the leading jurisprudence and subsection 103(6) of the Courts of Justice Act and put the question to be decided this way, which I adopt: is there a triable issue in respect of the moving party’s claim to an interest in the property?
[21] I pause to note that both sides filed and rely upon the said decision of Petersen J.
The Law as Applied in our Case
[22] This is not a close call. The test for a CPL has most certainly been met in this case.
[23] The Promissory Note speaks for itself and establishes, without anything else, that Robert has a reasonable claim to an interest in the Property.
[24] None of the arguments put forward by the Defendants is persuasive.
[25] The fact that Robert has requested both monetary damages and a CPL in his Claim is in no way a bar to the success of the within Motion. If it was, no mortgage holder who sues the debtor could ever get a CPL.
[26] Counsel for the Defendants is correct that an equitable mortgage, by itself, will not always give rise to a successful bid for a CPL, but here no reasonable observer looking at the Promissory Note and knowing that Mario failed to pay the money back within its terms would conclude that Robert has no interest in the Property against which the mortgage was to be registered.
[27] That Mario may have had no lawful authority to bind 188 and the Property in June 2016 does not defeat Robert’s interest in the Property as there is no evidence that Robert in any way knew or suspected that Mario lacked any such authority. Mario and/or Luciano cannot benefit from his/their own alleged misrepresentation.
[28] Assuming that the claim for a CPL had to be made within two years of the discovery date, there is a triable issue as to whether the clock started to run in September 2016, as alleged by the Defendants. Surely, it is reasonable to allow Robert some time to recognize the default, make a demand on the loan, and, failing payment, make a demand that the third mortgage be registered.
[29] In addition, there is no dispute that Mario, in early 2017, paid something against interest owing to Robert. Arguably, that restarted the limitation period clock and, if so, means that the Claim was issued within the two years.
[30] Finally, any alleged prejudice to the Defendants in not being able to refinance the property in order to satisfy the hawks swirling around who want their mortgages paid must surrender to the very significant prejudice that will be suffered by Robert if the CPL is not registered against the Property. Once the Property is dealt away, most likely Robert is simply out $250,000.00, plus.
[31] The balance of convenience clearly favours the granting of the CPL.
III. Conclusion
[32] For these reasons, the Motion by Robert is allowed. Leave is granted to register a CPL against the Property.
[33] We can deal with costs without the need for any further delay. Robert’s counsel asks for $10,543.42 on a partial indemnity basis, supported by a Costs Outline filed at Court when the Motion was argued. Counsel for the Defendants did not file a Costs Outline but was permitted to make submissions and requested something less than $6000.00 (that figure representing estimated full indemnity).
[34] Costs are presumed to follow success. There is nothing to change that presumption in this case. Thus, costs will be awarded to Robert.
[35] Quantum of costs is largely discretionary. The objective is to award something that is fair, just and reasonable in all of the circumstances. The Court should consider the costs factors outlined in the Rules, the principle of proportionality and the prudent expectations of the losing side.
[36] In my view, $7500.00 is reasonable for partial indemnity costs on a relatively straight-forward, though hotly contested, motion for a CPL.
[37] The Defendants shall, within thirty days, pay to Robert costs in the total all-inclusive amount of $7500.00.
[38] One final observation. Counsel for the Defendants mentioned, only in passing during oral argument, that conditions can be placed on the granting of a CPL. If the Defendants wish to revisit that issue, they may bring a motion. That will not delay the registration of the CPL, however, which may proceed immediately.
[39] This was a short Motion argued in less than one hour and presented well, in writing and orally, by both lawyers. The Court is appreciative of that.
Conlan J.
Date: February 1, 2019