Court File and Parties
COURT FILE NO.: CV-21-656250
DATE: 20220713
ONTARIO SUPERIOR COURT OF JUSTICE
RE: KVM INVESTMENTS LIMITED, Plaintiff
-and-
GINO ISABELLA, Defendant
BEFORE: FL Myers J
COUNSEL: Zachary Pringle, for the Plaintiff
J. Dannial E.S. Baker, for the Defendant
HEARD: July 12 ,2022
ENDORSEMENT
[1] The plaintiff moves for summary judgment for repayment of a loan. On the admitted facts, the plaintiff has established from the defendant’s mouth, that there is no genuine issue requiring a trial concerning the defendant’s liability.
[2] The defendant’s attempts to raise a defence are speculative at best and are not supported by evidence.
[3] The defendant is a paralegal who does motor vehicle liability work. The plaintiff lends money to lawyers and paralegals to fund their disbursements and litigation costs such as medical assessments and expert reports.
[4] By written loan agreement dated April 25, 2016, the defendant borrowed $100,000 from the plaintiff. The loan was repayable in one year with 15% interest.
[5] The defendant requested a six-month extension of the maturity date to October 25, 2017 and then a further six-month extension to April 25, 2018. In agreeing to the latter extension, the parties agreed to increase the interest rate to 19% per annum.
[6] The defendant sought five further extensions of the due date for repayment of the principal amount of the debt through to June 30, 2020. Each extension was granted by the plaintiff and was evidenced by a written agreement signed by both parties.
[7] The defendant agrees that he received the advance and he made all monthly interest payments for almost four years from April, 2016 until January, 2020. He missed the interest payment due February 1, 2020 and has paid nothing since then. At the time, Mr. Isabella told the plaintiff that he was having a hard time coming up with the monthly interest payments required.
[8] The defendant says that he is not liable to repay his debt, or at least the interest component of it, because of the involvement of a lawyer named Sergio Grillone. I am told that Mr. Grillone is not practising law at present and he may be the subject of other lawsuits.
[9] The defendant says that Mr. Grillone was his lawyer over the years and owed him money. I am not told how that debt arose. In 2016, Mr. Grillone told Mr. Isabella that while Mr. Grillone could not repay his debt, he could arrange a loan for Mr. Isabella to sign and for which Mr. Grillone would make the necessary payments. In that way, Mr. Isabella would get the money that he was owed by Mr. Grillone and Mr. Grillone would pay the plaintiff.
[10] Mr. Grillone told Mr. Isabella that he had a good relationship with the plaintiff whom he used to finance his disbursements in his law practice as well as to assist clients with personal loans during litigation.
[11] Mr. Isabella says that Mr. Grillone provided him the form of loan agreement and he relied on Mr. Grillone to be looking out for his interest. Mr. Isabella did not read the loan agreement that he signed.
[12] Mr. Isabella says that Mr. Grillone made payments through him until April, 2019 when Mr. Grillone stopped paying Mr. Isabella. Mr. Grillone told Mr. Isabella that he was being investigated by the Law Society of Ontario and that he would make up the arrears when the investigation was done.
[13] Mr. Isabella continued to pay his monthly interest. He says he “covered for” Mr. Grillone until he could not do so any more in early 2020.
[14] Mr. Isabella testifies in his affidavit:
I am not suffistigated [sic] in regards to finances and rely on professionals to assist me. I relied on Sergio as to the Agreement.
Subsequent to the execution of the Agreement I tried to get the Plaintiff to rent space at my 2570 Eglinton Avenue West, Toronto location. Luigi Mauro informed me and I verily believe that the Plaintiff wouldn't because the Plaintiff had an arrangement with Sergio and Sergio's brother Vince Grillone in regards to the Plaintiff's business location.
Subsequent to the execution of the Agreement, I learned through conversations with Sergio and Luigi Mauro, and verily believe, that the Plaintiff paid for many meals consumed by Sergio, gave Sergio clothing, gave Sergio Raptor Basketball tickets and paid for trips which included Sergio. It is my belief that this was done to obtain referrals by Sergio in regards to clients of Sergio and myself. It is my position that such inducements amount to a secret profit and consideration obtained and givent [sic] to Sergio by the Plaintiff.
It is my position that the above amounts to a breach of Sergio's legal duty to his clients.
It is my position that the above renders the Agreement and its extensions a nullity or other wise unenforceable pursuant to the Laws of Equity.
[15] On cross-examining the plaintiff’s affiant Luigi. Mauro, the defendant learned that Mr. Grillone had been counsel to Mr. Mauro and had helped him obtain a significant damages award in a motor vehicle case. Mr. Grillone then helped the plaintiff incorporate and set up its business plan to use the damages award to make litigation loans to Mr. Grillone’s and others’ clients.
[16] Mr. Baker submits that the loan is unenforceable because Mr. Grillone was in a conflict of interest when he proposed it to Mr. Isabella. He speculates that Mr. Grillone’s clients pay above-market interest to the plaintiff and he says that there should be a full investigation of all of the plaintiff’s loans to Mr. Grillone’s clients to determine if the plaintiff’s entire business was unlawful.
[17] Mr. Baker also submits that Mr. Grillone must have had some involvement in the plaintiff’s business because he set it up for free and helped the plaintiff establish his business plan. From this, and Mr. Isabella’s evidence that the plaintiff paid for meals, clothes, Raptors tickets, and went to a stag in Las Vegas with Mr. Grillone, Mr. Baker submits that there is a genuine issue requiring a trial as to whether the loan is invalid because Mr. Grillone and the plaintiff are joint participants in giving and receiving secret commissions in breach of the Criminal Code.
[18] But the fact that Mr. Grillone was personally interested in the loan was known by the defendant throughout. The whole purpose of the loan was to use the plaintiff’s money to satisfy Mr. Grillone’s debt to Mr. Isabella. If anyone could be unhappy on this version of the story, it should be the plaintiff from whom Mr. Isabella and Mr. Grillone may have hidden the fact that Mr. Grillone was the actual borrower.
[19] Mr. Isabella says that he did not need a loan from the plaintiff. In fact, he has other assets that he could have pledged for a loan at a much better interest rate if he needed one. This was all to facilitate Mr. Grillone.
[20] None of this bears on the fact that Mr. Isabella took on the debt vis-à-vis the plaintiff. What Mr. Isabella facilitated was Mr. Grillone finding a way to pay Mr. Isabella. Mr. Isabella received the plaintiff’s money. To do so he pledged his personal covenant knowing that Mr. Grillone had undertaken to keep him whole.
[21] The fact that a lawyer has a relationship with a lender who funds his disbursements and wines and dines him is unremarkable. The allegation that Mr. Grillone has some hidden interest in the lender or passes on unconscionable interest rates to his clients in breach of the Rules of Professional Conduct (a) is no business of Mr. Isabella; and (b) is not supported by a shred of evidence. Neither would it make Mr. Isabella’s loan agreement unenforceable.
[22] Mr. Isabella plainly recognized his personal involvement in seeking extensions and in continuing to pay interest after Mr. Grillone stopped indemnifying him. He told the plaintiff that he stopped paying because he did not have the money.
[23] Mr. Isabella speculates that the plaintiff knew of the involvement of Mr. Grillone. If that is so, it makes even less sense. If the plaintiff knew it was lending to Mr. Grillone, why would it need Mr. Isabella involved? In any event, there is no evidence at all to even raise an issue about the plaintiff being in cahoots with Mr. Grillone or knowing of Mr. Isabella’s arrangement with Mr Grillone.
[24] I agree with Mr. Pringle that the defendant has failed to raise an issue requiring a response. The plaintiff has the burden to establish that there is no genuine issue requiring a trial. But it does not have to negate defences that are not raised in evidence.
[25] Mr. Baker says that the defendant only learned of Mr. Grillone’s involvement in the plaintiff’s business plan during the cross-examination of Mr. Mauro in April of this year. However, the defendant pleaded the business plan issue in its Statement of Defence last October. But pleading is not evidence. The defendant failed to obtain an affidavit from Mr. Grillone. It did not examine him as a witness to the pending motion under Rule 39.03. If the defendant says that Mr. Grillone is liable for the loan, he has yet to commence a third party claim against him. In the three months since learning more at the cross-examination (assuming that to be so) the defendant has not sought leave to take any further step or to adduce further evidence.
[26] Instead, Mr. Baker says his client needs examinations for discovery to investigate the plaintiff’s entire loan portfolio and Mr. Grillone’s involvement. He relies on public policy as a basis to avoid the contract and specifically relies on case law that provides that contracts to do an act that is prohibited by law are void. But, if Mr. Grillone took a secret commission on the defendant’s loan (for which there is no evidence at all) that would not make the loan void or the interest or the increased interest to which the defendant agreed void. The contract is not a contract to pay an illegal secret commission. Mr. Isabella did not agree to anything illegal.
[27] It is not the role of a civil action to conduct a judicial inquiry into a lawyer’s or a lender’s allegedly unethical practices unbridled from the pleadings and issues in the proceeding. If Mr. Grillone took some kind of finder’s fee and it is unlawful, Mr. Isabella may well have a claim against Mr. Grillone. But with no evidence of that happening or of the plaintiff having any knowledge of, or involvement in any wrongdoing at all, there is no viable defence pleaded on which to conduct examinations for discovery.
[28] Mr. Isabella borrowed the plaintiff’s money knowing that he was borrowing and liable to pay. He took the risk of Mr. Grillone’s covenant that the plaintiff apparently was not willing to take. There was no reason to involve Mr. Isabella if Mr. Grillone could have just borrowed the money himself and used it to repay Mr. Isabella. Whatever business Mr. Grillone and the plaintiff may do with Mr. Grillone’s clients has no bearing on the defendant’s liability for his debt.
[29] On the evidence of Mr. Isabella, I see no genuine issue requiring a trial. This is an efficient and affordable process to make the necessary findings and to apply the law to the facts as found.
[30] The plaintiff is entitled to judgment as sought including interest at the contracted rates. The plaintiff is also entitled to full indemnity for its costs under the terms of the loan agreement. The costs include the entire collection effort and not just this motion. The plaintiff claims $43,238. I have reviewed the Bill of Costs and am satisfied that the rates claimed and hours expended are reasonable and well within market. Accordingly, the defendant is ordered to pay costs to the plaintiff fixed at $43,238.
F L Myers, J.
Date: July 13, 2022