Lee-Chen v. Petra Corp., 2011 ABQB 387

Court of Queen ’ s Bench of Alberta Citation: Lee-Chen v. Petra Corp., 2011 ABQB 387 Date: 20110620 Docket: 1003 02758 Registry: Edmonton Between: Bueben Lee-Chen and Chung Pin Chen, Also Known As Ben Chen Plaintiffs - and - Petra Corp. and Daniel Corns Defendants _______________________________________________________ Memorandum of Decision of L.A.

Smart, Master in Chambers _______________________________________________________ Background [ 1 ] The Defendant Petra Corp. is a land investment company in the business of purchasing lands and buildings and, thereafter, improving those lands and buildings and/or reselling those lands and buildings to other persons. The Defendant Mr. Corns is the sole shareholder, officer and director of Petra Corp. Both Petra Corp. and Mr. Corns have become well known to the Court. [ 2 ] An Investment Agreement was entered into with the Plaintiff Bueben Lee-Chen on May 22, 2007 (copy attached).

The term of the investment was subsequently extended in a second agreement from August 23, 2007 to February 23, 2008 but otherwise it

remained the same in all other respects. Petra Corp. had purchased a multi-unit building which was operating as an apartment under a single certificate of title. The Investment Agreement stated that the invested money was being secured with the property described as 10140 – 151 Street, Edmonton. A legal description was set out in the agreement. The Plaintiff Lee-Chen ostensibly observed that the legal description was over only two of the three lots on which the building was located and requested an amendment to include the third lot. The property was in the name of Petra Corp.

The evidence is that the Investment Agreement was prepared by Petra Corp. No formal mortgage, other security or like document was prepared and provided to the Plaintiff Lee-Chen. No caveat or other notification was registered against the title. [ 3 ] In keeping with the form of investment scheme in this instance, the multi-unit building was divided under a condominium plan into19 individual units on December 17, 2007. Units 2- 4, 7, 8, 11-16, 18 and 19 were sold to third parties consequently free of any claim by Lee-Chen due to the failure to register.

Those units have now found their way back into Buckingham Holdings Inc., a company in which Mr. Corns is also the sole shareholder, officer and director. No evidence was presented with respect to units 1, 5, 6, 9, 10, and 17 but ostensibly these units were also sold to third parties free of any mortgage claim to Lee-Chen and title remains with those third parties or their successors. The Application [ 4 ] Although some interest was paid the principal balance was not. The Plaintiffs Lee Chen and Ben Chen commenced an action for recovery of their investment. The application before the Court is for

summary judgment against both Defendants. The parties do not dispute the test for

Summary Judgment. Suffice it to say that I must find that beyond doubt there is no genuine issue for trial. The action claims entitlement under the Investment Agreement and on the basis of misrepresentations by the Defendants. The Plaintiff Ben Chen is not a party to the Investment Agreement and consequently he cannot establish on a

summary basis entitlement to a judgment against the Defendants. Petra Corp. does not seriously dispute receipt of the funds and its obligation to repay the same under the agreement with Lee Chen. Accordingly, she will have

summary judgment against Petra Corp. for return of her investment. The Contest [ 5 ] The real contest for determination is whether or not Lee- Chen can obtain a judgment summarily against Mr. Corns personally under the terms of the Investment Agreement or for negligence. The agreement states that the “Investor”, has agreed to invest $250,000 with Petra Corp., hereinafter referred to as the “Borrower” (emphasis added). When referring to the property it states “this property will be used as security for the loan and will be personally guaranteed by Dan Corns, a 100% shareholder in Petra Corp.” (emphasis added).

Finally it is signed as follows: “ DATED BY THE BORROWER, DAN CORNS , AS OF THIS 23 rd DAY OF MAY, 2007 . . . “(emphasis added). Mr. Corns did indeed execute the agreement above a signature line with his name only below it. It is witnessed by another person. [ 6 ] It is argued that Petra Corp. is described as the Borrower and therefore the execution of the agreement by the Borrower, Dan Corns can only be in reference to Petra Corp. In fact, it is argued that it is plain and obvious and beyond doubt that Mr.Corns is not a party. Finally it is argued that on cross examination Lee-Chen acknowledged that Mr.

Corns was signing on behalf of the Borrower although on a redirect she clarified that she understood the Borrower was Dan Corns and Petra Corp. Mr. Corns in his evidence says that he never intended that he be a party to the agreement. [ 7 ] Furthermore, Mr. Corns says at no time did he ever represent to the Plaintiffs that he would provide them with a personal guarantee within the meaning of the Guarantees Acknowledgment Act . In Mr. Corns written brief counsel says that the Plaintiffs simply say in their Affidavit that Mr. Corns promised to “personally guarantee” the loan and Mr.

Corns did this as is evident from the Agreement. Counsel went further in oral argument saying that the sentence referencing the guarantee should be read that the property is personally guaranteed. He concedes, admittedly, that the phrase becomes nonsensical if interpreted in that fashion and he has no idea what it would mean if read that way. Finally he argues simply because something is “personally guaranteed” does not mean that there is an intention to give a Guarantee as defined under the Guarantees Acknowledgment Act . Interestingly on cross-examination of Mr.

Corns after giving his opinion in his Affidavit as to what the wording didn’t mean, his counsel objected to the question, “...what do you think you were committing to?”, on grounds that he would be interpreting the document and his intention. Counsel then observes, “The agreement says what it says.” I do not disagree with that position. Discussion

[8] The object in construing this written agreement is to discover the intention of the parties. This intention is to be ascertainedfrom the document itself. That is not to say it is to be read in a vacuum but assistance may be had from the context of the particularsurrounding circumstances. Words are to be given their plain and ordinary meaning unless such an

interpretation would involve anabsurdity. The intention is to be collected from the whole of the agreement, that is, one is to take the whole agreement and to collect themeaning of the words and phrases from their general context and try to give effect to every part of it. [9] It is proper to start with the important surrounding circumstances. Petra Corp wholly owned by Corns wishes to proceed witha real estate development consistent with its usual business activities. Funds are required and Lee-Chen is prepared to invest funds forthat purpose and enters into the Investment Agreement.

The agreement provides that once the investment is ready to be repaid, interest at3% per month will be added to the initial investment. Ostensibly, the investment would be ready to be repaid once enough units are sold,development expenses have been paid and surplus funds become available. This arrangement is distinguishable from a simpledebtor/creditor relationship. [10] Mr. Corns is a venturer looking to make a profit through Petra Corp. He had prepared for Petra Corp a form of InvestmentAgreement to be signed by investors. Words of guarantee are used.

There is possible ambiguity in the agreement as to the meaning ofthose words and by the manner of execution. The drafter of the words must not induce another to contract on the supposition that hiswords will be taken to mean one thing but hoping the Court will adopt another construction by which they would mean another thingmore to his advantage. The language of the words used in such a fashion must be construed against the party using them. [11] I agree with Mr. Corns that he did not intend to give a guarantee as it may be understood to be under the terms of theGuarantees Acknowledgment Act.

Rather, on examining the whole of the agreement, noting the unusual method of execution, andrecognizing the transaction as one of a venture, I have concluded that Mr. Corns intended to provide an indemnity. Mr. Corns as the soleshareholder had a vested interest in having Lee-Chen invest. He meets the “interest” test as it is described by Master Funduk inKrasniuk v. Osborne, 1998 ABQB 322 in reference to Kamitomo v. Pasula, (AB KB), 29 Alta. L.R. (2d) 375 (QB).

Itis consistent with and provides a logical and rational explanation for the description of Mr.Corns, as borrower in the execution of theagreement as he clearly was binding his and Petra’s performance under the Investment Agreement. Conclusion [12] It is without doubt on a plain and ordinary reading of the Investment Agreement that both Petra Corp.and Mr. Corns intendedto take the benefit of Lee-Chen’s investment and become liable to perform the obligations of the “borrower”. Accordingly the PlaintiffLee-Chen will also have judgment against Mr. Corns.

There remains the issue of interest payable under the agreement as it fails toprovide for an annualized rate. Therefore under the Canada Interest Act she is only entitled to 5% per annum on the investment. Interestwill be granted at that rate from the date of the advance to payment less any amounts paid previously on account of interest. The Plaintiffshall have her costs of the action. Heard on the 31st day of August, 2010. Dated at the City of Edmonton, Alberta this 20th day of June, 2011. L.A. Smart M.C.C.Q.B.A.

Appearances: Amie W. Heil Odishaw & Guido for the Plaintiffs Jonathan Hillson Fraser Milner Casgrain LLP for the Defendants