Chisos Investment Company v. 790572 Ontario Limited

Chisos Investment Company v. 790572 Ontario Limited Collection Decisions of the Court of Appeal Date 2000-09-08 Docket numbers C31860 Judges Catzman, Marvin Adrian; Carthy, James Joseph; Feldman, Kathryn N. Subject Civil Decision Content DATE: 20000908 DOCKET: C31860 COURT OF APPEAL FOR ONTARIO CATZMAN, CARTHY and FELDMAN, JJ.A. BETWEEN: CHISOS INVESTMENT COMPANY ) Steven Gaon, for the ) respondent (Respondent) ) ) –and– ) ) 790572 ONTARIO LIMITED, NORMAN ) Norman Campbell, CAMPBELL and HAROLD McKAY ) the appellant in person ) (Appellant) ) ) Heard: June 8, 2000 On appeal from the judgment of The Honourable Mr. Justice Antoine de Lotbinière Panet, sitting without a jury, dated February 24, 1999. CATZMAN J.A.: The appeal [1] A numbered company owned a shopping mall. It gave a mortgage on the property. The appellant guaranteed the mortgage. The mortgage fell into default. The mortgagee sued both the numbered company and the appellant. Default judgment was granted against the numbered company. After a trial, Panet J. granted judgment against the appellant on his guarantee. This is an appeal from that judgment. The facts [2] The numbered company owned the Kemptville Mall on property located south of Ottawa. In November, 1989, it mortgaged the property for $7,900,000. Payment was guaranteed, to a limit of $1,000,000 each, by the appellant, Norman Campbell [1] and by Harold McKay [2] . [3] The principal sum was repayable on December 1st, 1990. With the consent of the guarantors, an amending agreement extended the date for repayment of the mortgage to April 1st, 1991. The principal amount was not repaid on that date or at any time after that date. [4] In September, 1990, in anticipation of the due date of the mortgage the following April, the owner listed the property for sale. An offer to purchase for $7,800,000 was received in November, 1990, but the owner did not accept it and it was allowed to expire. In March, 1991, a second offer to purchase for $8,200,000 was received, but it too was rejected by the owner. [5] The property was eventually sold by the respondent under power of sale in September, 1996, for $5,315,000. The amount then outstanding for principal, interest, taxes and expenses was over $10,000,000. [6] The numbered company was noted in default and judgment was granted against it for a sum just over $5,000,000. The action proceeded to trial against the appellant, who did not dispute the amount owing under the mortgage and who acknowledged his guarantee. The grounds of appeal [7] The appellant appeared in person at the trial and on this appeal. He argued three grounds in support of his appeal, expressed in his factum as follows: (a) the respondent failed to act in a judicious manner with respect to the sale of the property in a timely and reasonable manner, thus releasing the appellant from his obligations as a guarantor; (b) the respondent’s conduct in respect to offers presented after default and after notice of power of sale constituted a material alteration to the mortgage and guarantee so as to release the appellant’s obligations under his guarantee; and (c) the past association between the appellant and the trial judge constituted such bias or appearance of bias as to have required Panet J. to excuse himself from hearing the trial. The first and second grounds of appeal [8] In his reasons for judgment with respect to the first and second grounds of appeal, Panet J. said: Campbell does not dispute the amount owing under the mortgage and acknowledges the guarantee given by him in the Charge, which is limited to $1,000,000 together with accrued interest. He argues however that the plaintiff or its predecessors did not take adequate action to sell the property in a timely fashion, that they did not accept either of two offers for the property and had they done so the proceeds would have been sufficient to pay off the outstanding mortgage. Campbell has pointed to two offers received on the property, the first for $7,800,000 and the second in the amount [of] $8,200,000 and states that First City [the original mortgagee] advised against accepting either of these offers. He states that First City indicated that new financing would be available to pay off the present mortgage and as a result these offers were not accepted. However, Campbell acknowledges that both offers pre-dated the agreed upon date of default, April [1], 1991, and acknowledges that these offers were made to the Company, as the owner of the property, and not to First City and that the Company had the right to accept such offers. Campbell further acknowledges that First City was not a shareholder nor was it involved in any way with the Company and that he, Campbell, was the President of the Company at the time. Campbell states that he was unable to accept the offer by himself as two signatures were required for execution of a document by the Company. He acknowledges that the Company continued to be the owner of the property until its sale in 1996. The plaintiff submits that the offers referred to by Campbell both pre-date the date of default, the first offer being dated November 19, 1990 and the second dated March 26, 1991. At that time, the Company was the owner of the property and indeed First City had no right to sell the property to any purchaser at that time. It further submits that any difficulty or inability that Campbell experienced in obtaining a second signature was a problem within the numbered company and was not the responsibility of First City. Quite simply, the plaintiff submits that the decision not to accept either one of these offers was that of the Company and no responsibility or liability for the failure to accept such offers can be attributed to First City. I agree with that position. The plaintiff further submits that after the agreed upon date of default, April [1], 1991, the Company as the owner of the property always had the right to sell the property on its own initiative up to the date of its sale in 1996. It refers to the decision in AGF Trust Co. v. Clark (1993) O.J. No. 2995 as authority for the proposition that a mortgagee exercising a power of sale has a duty to sell the mortgaged land at its fair market value. It submits that the decision is also authority for the proposition that if a guarantor of a mortgage is dissatisfied with the manner in which the mortgagee is exercising the power of sale, his course of action is to pay the balance owing and then exercise the power of sale himself. Having failed to honour his guarantee, the guarantor cannot now fairly complain about the mortgagee’s delay in selling the property. While there may well be qualifications in certain instances to this general proposition, no evidence was given by Campbell to support his argument other than the two referenced offers. As both of the offers were made to the Company, as the owner of the property, prior to the agreed upon date of default, any decision not to accept either of these offers was the responsibility of the Company, of which Campbell was the President. No liability or responsibility can be attributed to First City. There is no evidence before me with respect to the conduct of the plaintiff or its predecessors from the date of default to the date of the sale of the property on September 13, [1996] which would in any way support the position or contention of Campbell. [9] The facts stated in these passages are accurate and in accord with the evidence adduced at trial. The conclusions of law reached by the trial judge on those facts are unexceptionable. I see no merit in the first and second grounds of appeal. _____ The third ground of appeal [10] The third ground of appeal was bias or, more accurately, reasonable apprehension of bias. The appellant asserted that Panet J., at some time before his appointment to the bench, had been the solicitor for the corporation that in turn was a shareholder of the numbered company that gave the mortgage in question and that he had been consulted on a number of occasions by the appellant, who was president of that corporation. [11] The appellant concedes that he made no objection and expressed no concern when he found that Panet J. was to be the judge trying this action. In his factum, he asserts that he did so because he was “surprised and filled with anxiety” and that his “confusion and lack of knowledge” prevented him from raising any objection. [12] I have read, with considerable care, the transcript of the evidence taken at the trial. The transcript reveals no suggestion either that Panet J. recognized the appellant or the numbered company or that Panet J. acted with any bias or partiality. The reasons for judgment make no findings of credibility and dispose of the issues as questions of law that do not turn on disputed facts. [13] The manner in which this ground of appeal was advanced is significant. Panet J.’s reasons for judgment were delivered on February 24th, 1999. The appellant’s notice of appeal, dated March 22nd, 1999, made no reference to this ground of appeal. It first surfaced in the appellant’s factum, which was filed on November 25th, 1999. It was not supported by any sworn evidence; it was simply adverted to in two paragraphs of the factum. Those two paragraphs read: 16. Judge Panet, presiding judge, was, in fact, the solicitor at one time for the corporation, Caneel Developments Limited, that was 50% shareholder of the Corporation 790572 Ontario Limited. The Appellant was the president of the Corporation Caneel. It was because of the Appellants involvement with Caneel that the Appellant guaranteed the First City Mortgage. The Appellant consulted with Judge Panet prior to his appointment to the bench on numerous occasions and he was the drafter of Caneel’s Shareholders’ Agreement. In addition the Appellant has used the law firm of Perley-Robertson, Panet Hill and McDougall (Judge Panet’s former law firm) on numerous occasions for other matters. 17. The Appellant was unaware that Judge Panet was going to hear this case until he walked into the courtroom the day of the trial. He was surprised and filled with anxiety. The trial was very short. In addition the Appellant’s confusion and lack of knowledge prevented him from raising objection to Judge Panet hearing the trial at that time. [14] On the basis of these two paragraphs, the appellant argued that “the past association between the appellant and Judge Panet constituted such a bias or appearance of bias as to have required Judge Panet to excuse himself from hearing the trial”. [15] The appellant voiced no objection to Panet J. The transcript discloses no hint of bias or partiality. The notice of appeal did not raise the issue. The record contains no affidavit or other evidence to support the appellant’s position. This court cannot act on assertion and allegation; it can act only on evidence. I see no merit in this ground of appeal. The refinancing defence [16] In addition to the three grounds of appeal set out above, Mr. Campbell in his oral submissions advanced a further defence, namely, that he should have been relieved of his liability as guarantor because the mortgagee had repeatedly dissuaded the mortgagor, by conducting discussions regarding refinancing that ultimately foundered, from accepting offers that were submitted to purchase the property (the “refinancing defence”). [17] The refinancing defence did not appear in the statement of defence delivered in the action by Mr. Campbell’s solicitors on his behalf. [18] In his defence at trial, Mr. Campbell filed as an exhibit an affidavit sworn by him in support of an interlocutory motion made some six years before the trial. In his argument before us, Mr. Campbell submitted that Panet J. incorrectly precluded the introduction of evidence in support of the refinancing defence when he ruled in favour of an objection by respondent’s counsel to the admission of certain exhibits to this affidavit. [19] In my view, this submission is completely answered when one has regard to the exchange that took place between Panet J. and Mr. Campbell when, and after, that ruling was made. Respondent’s counsel made no objection to the admission into evidence of Mr. Campbell’s affidavit because “the affidavit he can give [as] his own evidence. He can read it in if he wishes to. It is the same effect”. Respondent’s counsel then went on to indicate the nature of each of the exhibits to the affidavit and made his objection to them because “it is hearsay evidence. … The authors of them will not be here today before you”. Panet J. ruled that “the affidavit is basically your evidence. … you can either read in your affidavit … or simply adopt it as your evidence”. Following further discussion, Panet J. permitted Mr. Campbell to file the affidavit as an exhibit and adopt it as his evidence. By the end of the exchange, it was clear that the affidavit, but not the exhibits, would be admitted into the record and that, if Mr. Campbell wanted to introduce the documents themselves, he would have to call their authors to give evidence about them. He did not call such evidence. [20] At the conclusion of Mr. Campbell’s testimony, this further exchange took place: THE COURT: All right. Does that complete your evidence Mr. Campbell? THE WITNESS: Yes, Your Honour. THE COURT: You have nothing further to add? THE WITNESS: No. THE COURT: Thank you, Mr. Campbell. [21] In summary, Mr. Campbell invited this court to give effect to a defence that was not contained in the pleading delivered by his solicitors on his behalf and in respect of which he led no evidence at the trial, although it was clear to him that he was entitled to do so. In these circumstances, I see no merit in the refinancing defence. Disposition [22] For the foregoing reasons, the appeal is dismissed with costs. Released: MAC SEP 08 2000 Signed: “M.A. Catzman J.A.” “I agree J.J. Carthy J.A.” “I agree K. Feldman J.A.” [1] Mr. Campbell was, at all material times, the president of the numbered company. [2] Mr. McKay made an assignment in bankruptcy in 1993, and the action did not proceed against him.