Décision

[1]           The Court is seized with Gestion Nicotec Inc.’s Motion for forced surrender and taking in payment of two immovable properties hypothecated in its favour as security for a loan in the amount of $100,000 advanced to the Defendants, Joseph Anthony, Giacomo and Salvatore D’Agostino, on July 11, 2011.[1]

[2]           Nicotec contends that the Defendants are in default of their obligations pursuant to the loan.

[3]           The Defendants assert that the capital of $100,000 was paid on August 12, 2012 to Gestion Sentra Inc., as representative of Nicotec. They acknowledge that they owe to the Nicotec the sum of $8,750 representing seven months of interest from February 2012 to August 2012 inclusively. They request that Nicotec’s Motion be dismissed and that the Court authorize the judicial sale of only one of the two hypothecated properties in order to satisfy the sums which are due and owing.

A.   Background

[4]            Giacomo[2] was embarking in the business of exporting luxury cars to the Middle East and required financing. He approached Ugo Celli, a family friend related through marriage, to assist him to obtain the required operating capital.

[5]           Celli, together with Luigi Santoro, own Sentra, a company which is involved in money lending and other financial transactions. Santoro is the shareholder of Nicotec.

[6]           Celli was instrumental in the negotiation and the procurement of several loans for Giacomo. Giacomo did not have sufficient collateral to secure the loans and called upon his brother Joseph and his parents, Maria Giovanna Mungiovi and Salvatore D’Agostino, to sign as co-debtors on the various loans he obtained.

[7]           The first loan on July 26, 2010, in the amount of $425,000, was advanced to Giacomo by Entreprise Heragon Inc. et al. His parents co-signed the loan which was secured by way of a hypothec registered on the family residence located at 3161 Chevremont, Ile Bizard. By January 2012, the loan was in default.[3]

[8]            In July 2011, Giacomo called upon the assistance of Celli to obtain another loan of $100,000. This loan is the subject of the present litigation.

[9]           On July 6, 2011, a letter of intent was prepared by Sentra which provided the following terms:

[Emphasis our own]

[10]        On July 11, 2011, the Defendants attended the notary’s office to sign the deed of loan. The lender designated on the deed of loan is the Plaintiff Nicotec. However, no representative of the lender was present at the signing of the deed.

[11]        The deed of loan provides that the capital amount of the loan is $100,000 payable on the January 7, 2012. It bears interest at the rate of 15% per year. Two immovable properties were given as security for the loan, namely, 199 Des Cépages, Apartment 307, City of Laval, which is registered in the name of Joseph and 3940 Côte-des-Neiges, Apartment C21, City of Montréal, which is registered in the names of Joseph and Salvatore. The monthly interest payments contemplated by the deed of loan are in the amount of $1,250 per month. [5]

[12]        On July 12, 2011 the notary prepared a Statement of disbursements which is uncontested and makes no reference whatsoever to the name of the lender.[6]

MÉMOIRE DES DÉBOURS - REFINANCEMENT

Numéro de dossier:            11-0332

Emprunteur(s) :                    Giacomo D’AGOSTINO et Joseph Anthony D’AGOSTINO

Description :                          199, rue des Cépages, app. 307, Laval Québec et

                                                 3940, Côte-des-Neiges, app. C 21, Montréal

         Liste des débours

[13]        The Defendants made all interest payments with respect to the loan until January 2012. They failed to pay the capital sum of $100,000 on January 7, 2012, the whole as required in the deed of loan and made no further interest payments.

[14]        In August 2012, although Celli was aware that the Defendants were in default of the two loans he had obtained on their behalf, he secured a third loan, this time in the amount of $450,000[7].

[15]        On August 12, 2012,[8] a loan of $450,000 was advanced by Gestion Agolin Inc. to the Defendants.

  Liste des débours

[16]        Throughout 2012, negotiations ensued with Celli, Santoro and the Defendants with respect to the default payment and repayment of the loans due to both Heragon and Nicotec.

[17]        On March 4, 2013, when negotiations did not prove fruitful, Nicotec served upon the Defendants a prior notice alleging that the sum of $127,353.42 was due and owing and requested the forced surrender and taking in payment of the two immovable properties provided as security for the loan of $100,000 dated July 11, 2011.[9]

[18]        The Defendants contest Nicotec’s claim. They argue, among others, that the capital of the loan, namely $100,000 was, in fact, reimbursed to Nicotec from the proceeds of the loan disbursed by Gestion Agolin Inc. on August 12, 2012. They assert that only $8,750 remains due and owing representing the interest payments for the months of February 2012 until August 2012 [7 months at $1,250 per month] together with interest accrued to date.

B.   Issues

[19]         

a.    Have the Defendants reimbursed the capital sum of $100,000 due and owing to Nicotec?

b.    Should Nicotec be authorized to proceed with the forced surrender and taking in payment the Des Cépages and Côte-des-Neiges properties?

C.   Discussion and Analysis

[20]         

a.    Have the defendants reimbursed the capital sum of $100,000 due and owing to Nicotec?

[21]        The Court finds that the sum of $100,000 was paid to Sentra acting as representative of Nicotec.

[22]        The evidence in support of the Court’s finding is as follows:

[23]        The uncontradicted evidence is that the Defendants paid $100,000 to Sentra on August 12, 2012. The notary responsible for the preparation of the deed of loan and the Statement of disbursements for the Agolin loan confirmed that a payment of $100,000 was made to Sentra,

[24]        There is no evidence before the Court to support that any monies were due and owing to Sentra by the Defendants and no explanation whatsoever was provided to justify said payment.

[25]        The notary and Santoro could not provide any explanation as to the justification of such payment.

[26]        Santoro stated unequivocally that Sentra had not, at any relevant time, advanced any monies to the Defendants named in this matter.

[27]        All discussions and negotiations with respect to the loan of $100,000 were between Celli and the Defendants. The Defendants did not even meet Santoro until they were in default of their obligations under the loan. Celli and Santoro shared the same office space.

[28]        4. The letter of intent dated July 6, 2011 indicates that Sentra, not Nicotec, was prepared to lend the $100,000 to the debtors.  There is no mention that it was acting on behalf of Nicotec.

[29]        The terms of the loan dated July 11, 2011 are identical to those set out in the letter of intent provided by Sentra, except that Nicotec appears as the lender.

[30]        The testimony of the notary responsible for the preparation of the date of loan testified that he provided a “résumé” of the deed highlighting the critical terms, namely the amount of the loan, how it was to be paid when the capital sum was due and the guarantee provided for payment. The evidence indicates that the meeting was of exceptional short duration. There is no evidence that the Defendants were specifically informed of the change of lender from Sentra to Nicotec. No representative of Nicotec was present at the signing of the deed of loan. The evidence leads the Court to conclude that from the Defendants’ perspective, they were always dealing with Sentra and Celli, and that Sentra and Nicotec were one and the same.

[31]        Moreover, contrary to the Agolin loan, there is no specific mention of the lender on the Statement of disbursements. Why was it so clearly indicated with regards to the Agolin loan?

[32]        The evidence at trial together with the examinations on discovery of both Celli and Santoro reveal a very close relationship between Sentra and its various lenders. Celli indicated during his examination on discovery when discussing the nature of the operation “… We do the loans but we distribute them”. It appears that Celli and his partner Santoro had a financial interest in two of the three loans distributed to the Defendants.

[33]        Although Celli denied any ownership interest in Heragon, the Registre des entreprises indicates that he is a majority shareholder of Heragon. The Court also notes that during his examination on discovery he repeatedly refers to himself as one of the creditors. In particular, during the course of negotiations in 2012, he stated that he did not accept a proposal of settlement. He states “you reimburse me what you owe me write and I’ll sign…” He continues when justifying the decision to take in payment of the family residence. “Because he owes us the money”. (emphasis our own)

[34]        The Court finds that a capital payment of $100,000 was made by the Defendant to Sentra acting as representative of Nicotec.

[35]         

b.            Should Nicotec be authorized to proceed with the forced surrender and taking in payment of Des Cépages and Côte-des-Neiges properties?

[36]        Article 2778 C.C.Q. provides if a debtor has discharged one half or more of the obligation secured by the hypothec at the time the creditor registers the prior notice of taking in payment, the creditor must obtain authorization of the Court to act on the notice.

[37]        The Court’s discretion under Article 2778 C.C.Q. must be exercised judicially having regard to such factors as the value of the property and the unpaid balance of the debt.[10]

[38]        Defendants suggest to the Court that the Côte-des-Neiges property be surrendered in payment for the amount owing to Nicotec, but requests that Plaintiff’s claim relating to Des Cépages be dismissed.

[39]        With respect to the unpaid balance of the debt, the Court concludes that the amount owing to Nicotec is $8,750 with interest at a rate of 15% per year, together with legal interest and special indemnity since February 2012.

[40]        The evidence in relation to the value of Des Cépages and Côte-des-Neiges properties is insufficient. In 2010, the Côte-des-Neiges property was purchased by Joseph and Salvatore for $366,000[11]. Joseph testified that the current estimated value is between $400,000 and $450,000 and that the current hypothec is $260,000, excluding any sum due to Nicotec. The evidence suggests that there is sufficient equity in the Côte-des-Neiges property to cover the balance due to Nicotec.

[41]        In view of the Court’s conclusion that the Defendants have paid $100,000 and that the amount still owing is only $8,750 plus interest, it would be inequitable to authorize the taking in payment of both immovable properties in order to satisfy the debt owing to Nicotec.

IN VIEW OF THE FOREGOING, THE COURT:

[42]        GRANTS, in part, Nicotec’s Motion for forced surrender and taking in payment;

[43]        DECLARES the amount owing to Nicotec by the Defendants is $8,750 with interest at a rate of 15% per year, together with legal interest and special indemnity since February 2012;

[44]        DISMISSES Nicotec’s claim for the forced surrender and taking in payment of Des Cépages  property, more fully described as:

“Un immeuble connu et désigné comme étant compose des lots 4 485 977 (lot d’habitation) et 4 485 939 (lot de stationnement) au Cadastre du Québec, circonscription foncière de Laval.

Avec bâtisse dessus érigée portant le numéro civique 199 des Cépages, appartement 307, en la ville de Laval, province de Québec, H7A 0C4 »

[45]        RESERVES the right of Defendants to request the radiation of the hypothec registered upon the Des Cépages property under registration no. 6591337;

[46]        ORDERS the defendants to surrender  the following immovable property within 15 days of the service of the present judgment:

“89% indivis d’un immeuble connu et désigné comme étant composé des lots 1 064 003 et 1064 015 au Cadastre du Québec, circonscription foncière de Montréal.

 Avec bâtisse dessus érigée portant le numéro civique 3940, Côte-des-Neiges, ayant l’usage exclusif de l’appartement numéro C21, en la ville de Montréal, province de Québec, H3H 1S2 »

[47]        In the event of the default of the Defendants to surrender the immovable property described in the present conclusion within the stated delay of 15 days, ORDERS the immediate forced expulsion of the Defendants from the property hereinabove described, together with all of their personal property and effects and AUTHORIZES the Plaintiff to proceed by bailiff to the expulsion of the Defendants or other possessors as may be found in the property;

[48]        ORDERS the Registrar of the appropriate Quebec Land Registry Office upon receipt of the appropriate requisition to register the present judgment in the appropriate real estate register against the properties described in the present conclusion;

[49]        The whole with costs.