NEGOTIABLE INSTRUMENTS AND BILLS OF EXCHANGE – Bills, checks and notes – Payment – Material alteration
Appeal by the plaintiff, a lawyer representing the lender, from a summary judgment dismissing his action for the compulsory execution of two promissory notes. The 2006 note was for a loan of $ 531,000 to Chedli and his wife. It was secured by a collateral mortgage on the couple’s house held solely in the name of the wife. The loan was due in 2007. A few months later, Chedli paid the appellant $ 531,000 and requested that $ 500,000 be paid to another law firm so that Chedli could invest the funds on other occasions. until the note expires. The appellant accepted. The loan was then extended until 2008 and was then converted from a term loan to a demand note. The second note, signed by Chedli alone, guaranteed a loan of $ 650,000 obtained in 2008. Both loans were in arrears at the end of the summer and in the fall of 2008. The last payment on the two loans was made. in March 2010. In March 2010, the appellant wrote to Chedli regarding the consolidation and review of the two loans. The letter stated that Chedli had made arrangements to obtain additional security for the loans and that the appellant was prepared to agree to various conditions. Chedli died in 2015. A demand was made for payment of the two loans in 2016. This action was brought in 2017. The motions judge found that when Chedli paid the appellant the $ 531,000, the first note was repaid, and the $ 500,000 loan was then re-advanced to Chedli only, as a new loan. As the first note was repaid, neither the first promissory note nor the collateral mortgage was enforceable by the appellant in this action. Two letters from the appellant referred to tickets becoming on-demand tickets. The motions judge considered six potential pieces of evidence to corroborate that Chedli had agreed to change the notes from the term notes to demand notes and dismissed all six. Finding that there was no independent corroborating evidence that Chedli had accepted the amendment of the notes, the Motions Judge concluded that the notes were set aside and not enforceable against the estate.
DECISION: Appeal allowed in part. The motions judge’s finding that the appellant, as representative of the lenders, had granted a new loan of $ 500,000 was unreasonable and was not on the record. There was no evidence that neither the appellant nor Chedli intended to start from scratch with a new loan of $ 500,000. It was clear from the appellant’s 2006 report letter that the appellant intended that Chedlis would continue to be bound by the note and that the collateral mortgage would continue to exist. There was no reference to a new loan. The first note was significantly amended by the appellant in his 2006 letter to the Chedlis when he reduced the principal amount of the note from $ 531,000 to $ 500,000, as well as the timing of interest payments on the new note. principal amount. The appellant acknowledged that Chedli’s wife never gave her consent to this modification or any subsequent modification to the first note. The first note was therefore void against the wife. Since the ancillary mortgage had only been granted by her as the sole holder of the couple’s residence, the mortgage was also unenforceable. There was two potentially compelling independent pieces of evidence to corroborate Chedli’s assent to the modification of the first note, including its conversion from a term loan to a demand loan as described in the 2008 letter from the appellant. The payment on the first note after 2008 was circumstantial evidence that corroborated Chedli’s assent to the modification of the first note, including its conversion to a sight note. The Motions Judge misinterpreted the evidence, reached an unreasonable conclusion and erred in law in failing to find that the payment of $ 30,000 by Chedli to the appellant after the appellant amended the first note and converting it to a demand note was independent corroborating evidence of his assent. There was, however, no similar corroborating independent evidence that Chedli consented to the conversion of the second ticket to a demand ticket. Although there was evidence of discussions, no payment was made after the appellant’s March 2010 letter which spoke of the conversion of the second note to a sight note.
James vs. Chedli,  OJ No. 4674, Ontario Court of Appeal, KN Feldman, D. Paciocco and SA Coroza JJ., September 9, 2021. Reports No. TLD-October42021010