2024 QCCS 122, 2024 QCCS 122

Jiang c. Wang 2024 QCCS 122 SUPERIOR COURT CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Nos: 500-17-110974-196 500-17-116407-217 DATE: January 18, 2024 ______________________________________________________________________ PRESIDING: THE HONOURABLE SERGE GAUDET, J.S.C. ______________________________________________________________________ File 500-17-116407-217 : Xihong Jiang Plaintiff vs. HONG PENG WANG And HONG YANG And WEI GING TANG Defendants

File 500-17-110974-196 : WEI QING TANG Plaintiff vs. HONG PENG WANG And HONG YANG Defendants And XIHONG JIANG Impleaded Party ______________________________________________________________________ JUDGMENT (reimbursement of loan; suretyship; taking in payment) [1] [ 1 ] I am seized with two files that have been joined for a common hearing. [ 2 ] In the first case, the Plaintiff, Ms. Jiang, is claiming the unreimbursed portion of a loan to the defendants Yang and Wang, plus various damages. She also claims the same amounts against Ms.

Tang who has signed the loan contract as a solidary debtor, but in the role of a guarantor (cf. Exhibit P-1). [ 3 ] The loan was made to the Defendants so that they could acquire, for investment purposes, a condo unit that was to be constructed in Montreal. Ms. Tang somehow acted as a “broker” of the sale of the unit to the Defendants. The Defendants’ plan was to sell the property upon its completion, reimburse the loan, and hopefully make a profit out of the operation.

I understand that such plan was defeated here as the unit was not ready in time and the loan was to be reimbursed to the Plaintiff before the condo unit was completed. The Defendants tried to obtain an extension of the loan from the Plaintiff but this was not possible as the “guarantor” rejected that possibility. [ 4 ] In the second case, Ms. Tang, as she is being sued by the Plaintiff as a guarantor of the debt, seeks indemnification by the Defendants Yang and Wang of the amount for which she could be liable to the Plaintiff Jiang.

Moreover, as per an undertaking signed by the Defendants Yang and Wang, she claims having the right, if the debt under the loan is not reimbursed by the Defendants in due time, to choose any one of the Defendants’ property and sell it while acting as a broker for same (Exhibit D-2). [ 5 ] This rather unusual combination of a broker who is a “guarantor” to a loan with a right, if he or she has to pay the debt in lieu of the debtor, to choose a property of the principal debtor and sell it while earning a commission as broker seems to be a recurring scheme, as similar questions were raised before Justice Céline Legendre of this Court last summer and regarding contracts for another loan but virtually identical to the ones at hand (cf.

Tang vs Yang , 2023 QCCS 2830 ). As explained in the present judgment, a contractual stipulation purporting to grant to the creditor the right to dispose of the debtor’s property in case on non-performance of the obligation is illegal as it contravenes the provisions of the Civil Code prohibiting the taking in payment or disposition of the debtor’s property to enforce an obligation, as the only way to achieve such a result is through the regime of legal or conventional hypothecs.

[6] The hearing was somewhat complicated by the fact that neither the Defendants Wang and Yang nor Ms. Tang were representedby a lawyer, and also because the testimonies were rendered in English and in Mandarin, with two interpreters one translating Mandarinto English and the other to French. [7] That said, the relevant facts were quite simple and the issues raised by the debate can be settled by the application of clear legalrules or settled caselaw.

i) File 500-17-116407-217 (Jiang vs Wang, Yang and Tang) [8] In the first case, the evidence reveals that the Plaintiff lent $100,000 to the Defendants Yang and Wang on November 8, 2016.The contract provides for 12% annual interest over two years payable in four installments. The capital must be reimbursed after twoyears, that is on November 7, 2018. The contract also provides that in case of late payment, a fine of 1% of the total loan per eachoverdue day is payable. [9] The interests of $24,000 were paid and the capital was reimbursed by an amount of $40,600, according to the Plaintiff’s owndeclaration.

The Defendants Yang and Wang do not contest that an amount of $59,400 is still outstanding under the loan. [10] The other heads of damages claimed by the Plaintiff cannot be granted for the following reasons. [11] As for the claim of $15,000 for moral damages, we are dealing here with a delay to pay a sum of money, in which case the onlydamages that can be claimed are the interest on the sum due, unless there is a stipulation in the contract that allows for other damages(cf. art. 1617(3) of the Civil Code).

As there is no such stipulation in the contract at hand, moral damages cannot be granted to thePlaintiff. [12] Insofar as the extrajudicial costs and other costs related to the case are concerned, for more than $20,000, they cannot begranted either as there is no convincing evidence of abuse by the Defendants in the way they conducted their defense, and thus neitherart. 51 and ff. or art. 342 the Code of civil procedure apply.

The case was somewhat complicated by the proceedings brought for by Ms.Tang, which have been joined to the Plaintiff’s proceedings, but this is not something for which the Defendants Wang and Tang can beheld responsibles and, in any event, this junction was in the interest of justice as the two cases were clearly connected.

In any event, noevidence was adduced by the Plaintiff at the hearing as to the legal fees paid by her to her lawyer, and, when this was raised by theCourt, she finally decided not to ask for a reopening of the case. [13] Insofar as the $30,000 claim based on the “penalty” provided for in the loan contract is concerned, this cannot be grantedbecause the said penalty is of 1% per day. This penalty equates to an interest rate of 365% per year which exceeds by more than six timesthe criminal interest rate in Canada, fixed at 60% as per art. 347 of the Canadian Criminal Code (RSC (1985, c. C-46).

I underline thatunder this provision, any penalty provided for by the contract of loan must be considered as being part of the interest rate, even thoughsuch a penalty is not normally considered interests. This is needed to prevent the parties to a loan contract to stipulate in effect criminalinterest rate by using all sorts of contractual devices which are not usually considered as being “interest” such as fees, payments to createor maintain a file for the client or, as is the case here, a penalty for late payment (cf. Garland c. Consumers’ Gas Co, (1998) (SCC), 3 SCR 112).

Therefore, at the expiry of the term of the loan the until then applicable 12% interest rate became aninterest rate of 365% per year which is obviously a criminal interest rate.

As per art. 347 of the Criminal Code, it is a criminal infraction,not only to enter into such an agreement providing for an interest rate exceeding 60% per year, but also to receive, even partially,payment of interests stipulated at such a rate. [14] As a consequence, no interest can be granted to the Plaintiff for the period after November 7, 2018, as this would be against theprohibition provided for in the Criminal Code to obtain, even partially, interests based on a contract stipulating interest exceeding thecriminal rate.

Article 1617 CCQ, which provides for the application of the legal interest rate (5%) on late payment for a sum of money isnot applicable in the situation at hand, as a provincial statute cannot authorize what is forbidden by a federal statute as per theparamountcy doctrine under the Canadian constitution (cf. Alberta c. Moloney, 2015 SCC 51 , 2015 3 SCR 327, par. 16).

If nointerest is payable, then no additional indemnity is payable under art. 1619 of the Civil Code as the purpose of the latter is to align theapplicable interest rate (legal or provided for by the contract) to the market interest rate. [15] Therefore, the only sum due by the defendants Wang and Yang is $59,400 without any interest or additional indemnity. This isalso the only sum that is due by Ms.

Tang as solidary codebtor or “guarantor” of the debt. [16] The latter argued that she should not be condemned to pay anything to the Plaintiff as the defendants Yang and Wang are theprincipal debtors and (as she stated) they have money to pay back the Plaintiff. This is not a valid argument as Ms. Tang signed thecontract as a solidary debtor and is therefore liable to the Plaintiff in the same manner as the other two defendants. It is only in herrelations with the other codebtors that Ms. Tang is to be considered a guarantor (art. 1537, al.2 CCQ). ii) File no. 500-17-110974-196 (Tang vs.

Wang and Yang) [17] In the second case, Ms. Tang is claiming from the defendants Yang and Wang the amounts for which she is sued as a guarantorunder the loan contract. She also concludes that she should be authorized to choose one of the immovable property of the Defendants andsell it (I suppose to obtain the funds to pay the debt to the Plaintiff[2]), while earning 5% as a broker on the said transaction. [18] This second request cannot be granted.

Article 1801 of the Civil Code deems not written any clause “by which a creditor, with aview of securing the performance of the obligation of his debtor, reserves the right to become the irrevocable owner of the property or todispose of it”. Clearly, the right to sell any immovable property of the defendants if they fail to repay the loan in due time, with a view ofprotecting Ms. Tang’s interests under the loan agreement, falls under the prohibition of that provision. The fact that the property that is to

be sold is not known in advance makes it even worse: if the taking in payment of a specific property (outside the hypothecary regime) is prohibited by law, then a fortiori the taking of payment of property not specified in the contract is illegal. [ 19 ] Consequently, the only right that can be asserted by Ms. Tang is to be indemnified by the Defendants Wang and Yang if she is called upon to pay in whole or in part the $59,400 still owed under the loan. This right is provided for by art. 2356 of the Civil Code.

It is clear in the present circumstances that the ultimate burden of that debt lies with the Defendants Yang and Wang with no contribution on the part of Ms. Tang, even though she is liable to the Plaintiff Jiang for the whole debt as she signed the loan contract as a solidary debtor (art. 1537, al. 2 of the Civil Code). [ 20 ] I add that, if it comes to existence, Ms. Tang’s recourse against the Defendants Yang and Wang would only be for their respective share of their contribution in the debt, which is presumed to be equal as no evidence suggests otherwise.

In other words, the obligation of the Defendants Yang and Wang to indemnify Ms. Tang if she is obliged to pay the remaining debt to the Plaintiff Jiang (in whole or in part) is not solidary, so that Ms. Tang’s claim for indemnification must be directed at each of them for 50% of the amount paid to the creditor Jiang (art. 1536 of the Civil Code). 0-0-0 [ 21 ] There will not be attribution of costs in the first file in view of the mitigated result obtained by the Plaintiff.

However, in the second file, the costs will be in favor of the Defendants Yang and Wang as the principal claim of the Plaintiff Tang against them (the selling of one of their properties) was dismissed.

FOR THESE REASONS, THE COURT: [ 22 ] CONDEMNS solidary the Defendant Hong Yang, Hongpeng Wang and Wei Qing Tang to pay to the Plaintiff Xihong Jiang the sum of $59,400, without any further interest or additional indemnity; [ 23 ] DECLARES that, as between the Defendants Yang, Wang and Tang, the contribution to the burden of the debt must be borne in the following manner: 50% for Defendant Yang, 50% for the Defendant Wang and 0% for the Defendant Tang; [ 24 ] DECLARES therefore the Defendants Yang and Wang are obliged to repay to the Defendant Tang, in equal shares, any amount that the said Ms.

Tang may pay to the Plaintiff under the first conclusion above, up to a maximum of $29,700 for each of them; [ 25 ] WITH COSTS in favor of the Defendants Yang and Wang in the file 500-17-110974-196; the parties, however, bearing their own judicial costs in the file 500-17-116407-217. __________________________________ Serge Gaudet, j.c.s. Me Kai MA Attorney for the Plaintiff Ms. Yang Mr. Wang and Ms. Tang Unrepresented Date of hearing: January 17, 2024