2013 QCCQ 5826, 2013 QCCQ 5826

Crawford c. Kugachelvan 2013 QCCQ 5826 COUR OR QUÉBEC CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL « Civil Division » N° : 500-22-179958-114 DATE : April 10, 2013 ______________________________________________________________________ BY THE HONOURABLE MADAM JUSTICE MARIE MICHELLE LAVIGNE, J.C.Q. ______________________________________________________________________ Susan A. Crawford et John Dekker Plaintiffs Vs Sivasubramanian Kugachelvan Perinpanayagam Suloshini Defendants/Plaintiffs in warranty vs Parimalakantha (Kanthan) Vilvaratnam et Groupe Sutton-Accès Inc.

Defendants in warranty ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Did Defendants commit a fault by annulling their Promise to purchase Plaintiffs' residence after the inspection? If so, are Defendants in warranty, their real estate agent and its agency, responsible for Defendants' decision to withdraw from the Promise to purchase?

These are the main issues of this litigation. [ 2 ] At all relevant times, Plaintiffs were the owners of a property located on Beaurivage street, in Vaudreuil-Dorion. [ 3 ] Early in 2010, Plaintiffs decided to sell their residence. They retained the services of Mrs. Kathy Aspell of Re-Max Royal Inc. to sell the property. The asking price was $438,000.00 [1] . [ 4 ] At the same time, Defendants were also looking to sell their house in Pierrefonds. On March 23, 2010, Defendants mandated Mr.

Parimalakantha Kanthan Vilvaratnam from Groupe Sutton Accès Inc. to look for a residence they could purchase [2] after they sold theirs. [ 5 ] On April 17, 2010, Defendants accepted a Promise to purchase their house in Pierrefonds from a third party at the price of 275,000,00$. The deed of sale was to be signed before May 30 th 2010 [3] . [ 6 ] On April 27, 2010, Defendants visited Plaintiffs' house with Mr. Vilvaratnam.

Following this visit, Defendants presented a verbal offer to purchase Plaintiffs' house for $410,000.00, conditional upon mortgage approval for the prospective buyer of their house in Pierrefonds, a satisfactory inspection and the obtaining of the financing to purchase the house [4] . [ 7 ] Plaintiffs refused this offer. Defendants submitted a second offer to purchase, for $420,000.00 without the condition relating to the sale of their house in Pierrefonds [5] . At that time, Plaintiffs had accepted another offer and Defendants' last offer failed to go through.

[ 8 ] On May 5, 2010, Defendants were informed that the prospective buyer of their house in Pierrefonds had been approved by the bank. [ 9 ] Meanwhile, Plaintiffs' house came back on the market. [ 10 ] On May 13, 2010, Defendants presented another offer to Plaintiffs for $425,000.00 [6] conditional only upon Defendants obtaining an inspection and the appropriate financing. It is contended by Plaintiffs, that while presenting this offer, the Defendants' agent, Mr.

Vilvaratnam, indicated that Defendants had sold their property and were pre-approved for a new mortgage of $450,000.00. [ 11 ] Plaintiffs accepted Defendants' Promise to purchase on May 14th 2010 [7] , conditional upon: • An inspection of the property within six (6) days of the acceptance; • Obtaining of the required financing to buy the property within (10) days of the acceptance. The deed of sale was to be signed before June 18 th 2010. [ 12 ] On May 18, 2010, the property was inspected by Mr. Bobby Bourkas.

He produced a written report on the same day [8] . [ 13 ] The next day, on May 19, 2010, Defendants declared themselves dissatisfied with the inspection [9] and withdrew their Promise to purchase the Plaintiffs' house. Defendants informed Plaintiffs in these terms: P-5 Amendment and Notice of Fulfilment of Conditions M2.3 Following the inspection the buyer declares that they are not satisfied with the property.

Therefore the PP # 12434 and the related annexes shall become null and void. (Because of lot of holes and scratches in the 2 nd floor hardwood floors cracks on the garage cement floor, crack next to the sump-pump (see the report) and some other things are not satisfied by the buyer). [ 14 ] Upon receipt of this document, Ms. Kathy Aspell, Plaintiffs' agent, communicated with Defendants' agent, Mr. Vilvaratnam. It is alleged that during this conversation, Mr. Vilvaratnam mentioned that his clients' mortgage request had not been approved by the financial institution and therefore the sale could not go through.

He also mentioned that his client's children were allergic to dogs and that, since a dog had lived on the property, it was improper for his client's use. [ 15 ] On May 31, 2010, Defendants and their prospective buyer agreed to annul the Promise to purchase relating to Defendants' house in Pierrefonds. [ 16 ] On the same day, Plaintiffs sent Defendants a letter of demand in which they stated that Defendants justifications to cancel their Promise to purchase were unfounded and that their withdrawal caused them damages.

Plaintiffs agreed to remit the property on the market to limit their damages but informed Defendants they would be retaining the right to sue for damages should they sell the house at a price inferior to the one proposed by Defendants. [ 17 ] Plaintiffs put the house back on sale and immediately reduced the asking price to $400,000.00. On June 11 th , 2010, Plaintiffs accepted a Promise to purchase from a third party at the price of 400 000,00$ [10] .

The sale was concluded on July 30 th 2010. [ 18 ] On June 22, 2010 [11] , Defendants' attorney responded to the Plaintiffs' demand letter and mentioned that: • Plaintiffs had failed to disclose that a dog had lived in the property; • Defendants detected holes and scratches on the wood floor of the property; • The property had "major structural defaults" as shown by the presence of a crack on the concrete slab next to the sump pump; • There were no gutters around the perimeter of the property; and • The slope of the asphalt and the pavé uni near the garage needed repairs. [ 19 ] To this date, Plaintiffs contest the existence of such defects or that they "affected substantially the value of the house or its expenses ".

They believe the inspection did not reveal major defects to the house and that Defendants acted in bad faith by alleging unfounded reasons to withdraw from their obligations. [ 20 ] To prove their point, they retained the services of Mr. Michel F.

Coallier to provide an expert's opinion on the absence of any visible defects that would render the property unfit or that could substantially affect its potential market value [12] . [ 21 ] Following Defendants' withdrawal from their obligations and since they had accepted a Promise to purchase for a price lower than the one offered by Defendants, Plaintiffs are claiming the difference between their purchase price ($400,000.00), and the one offered by Defendants ($424,000.00), the costs relating to the house for the period of May 30 th until July 30 th and the cost of their inspection report.

Their claim totals $30,195.82. Analysis [ 22 ] The following questions need to be answered by the Court:

22.1. Did Defendants commit a fault by refusing to go though with their Promise to purchase? 22.2. If so, are Defendants in warranty responsible for Defendants fault? 22.3. Did Plaintiffs suffer damages because of the Defendants fault? What are these damages? Are Plaintiffs entitled to compensation?

Defendants' fault [ 23 ] Defendant's contractual obligations relating to the inspection are described in the Promise to purchase: B2.4 INSPECTION BY A PERSON CHOSEN BY THE BUYER This promise to purchase is conditional upon the BUYER being permitted to have the IMMOVABLE inspected by a building expert within a period of 6 days following acceptance of this promise to purchase.

Should this inspection reveal the existence of a factor relating to the IMMOVABLE and liable to significantly reduce the value thereof , reduce the income generated thereby or increase the expenses relating the reto, the BUYER shall so notify the SELLER in writing and shall give him a copy of the inspection report within four (4) days of the expiry of the above-mentioned deadline. This promise to purchase shall become null and void upon receipt by the SELLER of the notification together with a copy of the inspection report.

Should the BUYER fail to notify the SELLER within the time period and in the manner provided above, he shall be deemed to have waived this condition. [ 24 ] According to this section, Defendants could annul the Promise to purchase "if the inspection revealed the existence of a factor relating to the immovable and liable to significantly reduce the value thereof or increase the expenses relating thereto." [ 25 ] In the Notice of Fulfillment of conditions, Defendants mentioned that the inspection was unsatisfactory "because of holes and scratches in the second floor hardwood floors, cracks on the garage cement floor, crack near the sump-pump (see the report) and some other things". [ 26 ] The proof does not reveal the existence of holes and scratches on the hardwood floors such that this "would significantly reduce the value of the house". [ 27 ] As for the presence of cracks on the garage cement floor, the Bourkas' inspection report states: "12.

No visible foundation cracks at time of inspection. Monitor visible hairline cracks ." [ 28 ] In the absence of proof to the contrary, this cannot be considered as "something that could substantially affect the value of the house". [ 29 ] Concerning "cracks near the sump-pump (see report)", the report states: "31. …. Monitor the crack on the concrete slab next to the sump pump.

The crack should be monitored if it grows bigger than the actual 1/16" size it is now." [ 30 ] There is no proof that this situation was critical or that it would "substantially affected the value or the expenses relating to the house". [ 31 ] In their attorneys' response to the letter of demand [13] and in their testimony, the Defendants also raised the fact that a dog had lived in the house and that one of Defendants' children is severely allergic to dogs. [ 32 ] Plaintiffs testified that the dog had died many months prior to the sale of the house.

Defendants had the burden to prove that the past presence of a dog could have a substantial effect on their child's health and that this situation "would substantially increase the expenses for the house". They failed to do so. [ 33 ] The attorney's letter [14] also raised the fact that there were no gutters around the perimeter of the property. The Defendants made no attempt to evaluate of the costs of correcting this situation.

Therefore, it cannot be considered as "affecting substantially the value or the expenses of the house". [ 34 ] Finally, the letter states that the slope of the asphalt in the pavé-uni near the garage needed repairs. This does not appear from the Defendants' expert report and, again, Defendants did not prove that this would "substantially affect the value or the expenses of the house." [ 35 ] In his testimony, Defendant Sivasubramanian Kugachelvan added the following facts to justify his change of mind. He did not like the house. The fact that there was no railing made this house unsafe for his kids.

Gutters had to be installed. The porch needed to be redone and presented a risk of falling in the swimming pool. [ 36 ] Once again, Defendants did not introduce proof that these facts "substantially affect the value of the house or the expenses related thereto" . They had the burden to do so. The Court concludes that Defendants' withdrawal from the Promise to purchase was not justified and did not respect the terms of

section B2.4 of the Promise to purchase. [ 37 ] This being said, the offer to purchase was conditional upon another occurrence. In order to claim damages from Defendants, Plaintiffs had to prove that, if not for the unjustified reasons relating to the inspection, the sale of the house would have been concluded. On that point, Plaintiffs do not succeed. [ 38 ] The sale was conditional upon two events: a satisfactory inspection of the house and Defendants obtaining the appropriate financing to proceed with the sale.

[ 39 ] Sections A4.1 to A4.3 relating to the financing read as follows:

Section A4.1 TERMS AND CONDITION. The BUYER undertakes to take in good faith, as soon as possible and at his expense, all steps necessary to obtain a loan of $375 000, secured by a first rank hypothec, that loan shall bear interest at the current rate, which shall not exceed 4.8 % per year (calculated semi- annually and not in advance) and shall be payable in instalments of not more than 1833.85 (combining principal and interest), calculated according to an amortization plan of 35 years, the balance becoming due in 5 years.

A.4.2 UNDERTAKING The BUYER undertakes to supply to the SELLER within a period of 10 working days following acceptance of this PROMISE TO PURCHASE, a copy of the undertaking by a hypothecary lender to grant the BUYER such a loan. The receipt of such an undertaking within that period shall have the effect of fully satisfying the conditions set out in A4.1 and A4.2. A4.3 ABENCE OF UNDERTAKING In the absence of proof of such an undertaking, the SELLER may, within a period of 5 days following the expiry of the period provided for in A4.2 or following receipt of a notice of refusal, notify the BUYER, in writing: (

a) that he is requiring the BUYER to file immediately and at his expense with a hypothecary lender designated by the SELLER, a new application for a hypothecary loan conforming to the conditions set out in A4.1. Should the BUYER not succeed in obtaining , within the period stipulated in the SELLER's notice, a written undertaking from that hypothecary lender to grant the BUYER the loan applied for, this PROMISE TO PURCHASE shall become null and void. However, the receipt of such an undertaking within that period shall have the effect of fully satisfying the conditions of this division; or (

b) that he renders this PROMISE TO PURCHASE null and void. Where the SELLER does not avail himself of the provisions of paragraph (

a) or (

b) above within the period stipulated, this PROMISE TO PURCHASE shall become null and void. …. [ 40 ] Defendants had 10 working days following the acceptance of the Promise to purchase to supply Plaintiffs with an undertaking from a Bank for a loan $375,000.00 $. Defendants did not obtain an undertaking for such loan and Plaintiffs never required Defendants to file an application. [ 41 ] Moreover, Defendants did not sell their house in Pierrefonds. Their prospective buyer testified to problems relating to the insurance of the property.

That, in itself, would have prevented the Defendants from obtaining the appropriate financing to purchase Plaintiffs' house. [ 42 ] There is no proof that Defendants had the financial capacity to buy a house of $425,000.00 or that a financial institution would have provided a financing had Defendants applied for one. [ 43 ] According to

Section A4.3 of the Promise to purchase, if Defendants do not succeed in obtaining a written undertaking from a hypothecary lender to grant a loan, the Promise to purchase becomes null and void. [ 44 ] Hence, one of the two conditions for Defendant's purchasing the house was not fulfilled.

Notwithstanding the unfounded reasons for refusing the inspection report, there is no proof that Defendants would have obtained financing to purchase the Plaintiffs' house. [ 45 ] Since the Court concludes that Defendants were not bound by their Promise to purchase Plaintiffs' house, it is unnecessary to examine the liability of the Defendants in warranty. [ 46 ] It is also unnecessary to address the question of the Plaintiffs' damages if not to underline the fact that Plaintiffs are claiming the difference between the price offered by Defendants ($424,000.00) and the actual sale price ($400,000.00) and it is Plaintiffs who willingly reduced the asking price to $399,000.00 as soon as Defendants' offer fell through.

FOR THESE REASONS, THE COURT: DISMISSES Plaintiffs' action against Defendants; THE WHOLE with costs. DISMISSES the action of Defendants/Plaintiffs in warranty against Defendants in warranty; THE WHOLE with costs.

__________________________________ MARIE MICHELLE LAVIGNE, J.C.Q. Me Alain Mongeau Alain Mongeau Avocats Attorney for Plaintiffs Me Harvey Lazare Lazare & Altschuler Attorney for Defendants and Plaintiffs in warranty Me Stéphanie Roy Me Gabrielle Brochu Langlois Kronström Brochu Attorneys for Defendants in warranty Dates of hearing : November 28 and 29, 2012