Bank of Montreal v. Landry, 2012 ABQB 775

Court of Queen ’ s Bench of Alberta Citation: Bank of Montreal v. Landry, 2012 ABQB 775 Date: 20121219 Docket: 0901 06478 Registry: Calgary Between: Bank of Montreal Plaintiff - and - Andre R. Landry and Patricia A. Landry Defendants _______________________________________________________ Reasons for Judgment of J.B. Hanebury, Master in Chambers _______________________________________________________ [ 1 ] This is an application for

summary judgment in an action to enforce the terms of a conditional sales contract assigned to the Bank Montréal. [ 2 ] On June 18, 2003, the defendants, Andre and Patricia Landry, purchased a used motor home from Leisure RV. They signed a conditional sales contract for the consumer purchase for the sum of $56,468.16 with interest at 7.65% per annum. [ 3 ] On July 4, 2005, Leisure RV assigned its rights under the consumer sales contract to the Bank of Montréal.

[ 4 ] The Landrys made the payments under the consumer sales contract of $460.10 per month from July 18, 2003, to June 18, 2008. [ 5 ] In June, 2008, there was approximately $49,000 outstanding and the Bank agreed to renew the contract for further 60 months at a reduced interest rate with monthly payments due on the 18 th day of each month commencing mid-September, 2008 and continuing until August, 2013. [ 6 ] The conditional sales contract notes at the top that it is for a consumer purchase.

It provides that the buyers will not “part with possession or control of the goods or sell or transfer any interest in the goods without the merchant’s express written consent…” The contract also contains an acknowledgment that it will be assigned from the merchant (Leisure RV) to the Bank [ 7 ] On the same date as they signed the conditional sales contract the Landrys signed a Full-Service Recreational Vehicle Management Agreement with Leisure RV. It allowed the company to rent the vehicle out during a one-year term with a further one-year renewal.

It should be noted that the same contract referred to a second RV that appears to have been financed by the Alberta Treasury Branches. [ 8 ] It is at this point the evidence of the applicant Bank and the Landrys diverges. The Landrys state that several months later, in October, they cancelled the rental arrangement with Leisure RV as permitted under clause 4.01, and used the vehicle only for their own personal use. [ 9 ] The Bank of Montréal states that it believes the motorhome continued to be rented out for five or more years with the Landrys receiving ongoing cheques.

In support of its belief, the Bank’s representative attaches a corporate search showing that the Landrys established a partnership for the purpose of RV rentals in July of 2003. As well, the Bank attaches a copy of a cheque payable to the Landrys’ partnership for over $4000 for “August and September 2007" from Arnold Donszelmann. Mr. Donszelmann has been the subject of judicial comment for his involvement in various RV rental schemes: Bank of Montréal v. Southcombe 2012 ABQB 20 .

The Bank Montréal chose not to cross-examine the Landrys on their affidavits with the result that there is no clear evidence of the connection between the RV at issue in this proceeding and the cheque from Mr. Donzelmann. [ 10 ] On September 30, 2008, the Landrys signed a voluntary surrender agreement with the Bank of Montréal and surrendered the RV.

The Landrys state that, at the time of the surrender of the vehicle, they were told by a representative of the Bank that they would have no further liability. [ 11 ] Despite this alleged assurance, the Bank has sued the Landrys and now seeks approximately $50,000, the sum remaining after the sale of the RV. [ 12 ] The Landrys have defended the action against them and raised a number of defences. They rely on the alleged representation that they would have no further liability made by the Bank. They argue that no demand for payment has been proven.

Finally, they argue that the contract is a consumer purchase and comes within the provisions of the Law Property Act (the Act), 2000 R.S.A. c. l- 7, specifically s. 53 (4) which provides that if goods are surrendered by a debtor to the secured party with the secured party’s consent, the debt is extinguished. In essence the lender is limited to the goods. Section 53(6)(

a) provides that this limitation only applies to goods that were acquired from the seller for use as consumer goods. [ 13 ] To determine the meaning of ‘consumer goods’ the Act says that one must turn to the definition found in the Personal Property Security Act , 2000 R.S.A. c. P-7. It defines “consumer goods” as “goods that are used or acquired for use primarily for personal, family or household purposes”. The Landrys argue that the goods were used primarily for personal purposes. [ 14 ] Therefore, putting the wording of s. 53(6)(

a) in the Act together with this definition, the apparent question to be determined is: whether the goods were “acquired from the seller for use as” consumer goods being “goods that are used or acquired for use primarily

for personal, family or household purposes.” [1] [ 15 ] This definition of consumer goods indicates that there are two types of goods that can come within that definition: goods acquired for use primarily for personal purposes or goods used primarily for personal use. However, as s. 53(6)(

a) of the Act speaks of goods acquired for use as consumer goods , the only

interpretation that makes sense in that context is that the goods must have been acquired at the time the contract was executed primarily for personal use. If that test is met and the goods are surrendered, the lenders’ remedies are limited to the goods. [ 16 ] Therefore, the real question is what was the primary use for which the goods were acquired: personal or commercial use? To answer this question the intention of the purchaser is of importance. [ 17 ] No questions have been asked of the purchasers as to their intentions.

While there is evidence of an initial agreement for rental, it was quickly ended as was allowed under the agreement. While there was a partnership set up for RV rentals that received funds in 2007, there is no evidence that any funds came from the rental of this RV. In fact, there is evidence that the RV was used only for personal purposes from October, 2003 for almost five years, until it was relinquished. [ 18 ] Without more evidence, the Landrys have raised a triable issue as to whether they acquired the RV primarily for personal use, or not.

This court cannot determine the matter at this time. [ 19 ] This may require a trial of an issue, or it may only require a cross-examination on the affidavit evidence or a discovery in the hope of obtaining the necessary admissions. [ 20 ] The application is dismissed and the defendants are entitled to their costs. Heard on the 3 rd day of December, 2012. Dated at the City of Calgary, Alberta this 18 th day of December, 2012. J.B. Hanebury M.C.C.Q.B.A. Appearances: Justine Mageau Witten LLP for the Plaintiff / Applicant

Monique Morin Shea Nerland Calnan LLP for the Defendants / Respondents [1] For a description of the history and rationale behind this restriction on the remedies available in relation to a consumer purchase see Enforcement Remedies of Creditors , R.J. Woold (1996) 34 Alta. L.Rev. 783,

part VI. A.