2018 QCCQ 9814, 2018 QCCQ 9814

6629032 Canada Inc. c. Yoon 2018 QCCQ 9814 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL “Civil Division” No: 500-22-230985-163 DATE: November 20 th , 2018 ______________________________________________________________________ PRESIDING: THE HONOURABLE JULIE VEILLEUX, J.C.Q. ______________________________________________________________________ 6629032 CANADA INC. Plaintiff/Cross-Defendant v.

JUNG EUN YOON -and- BOK HEE CHO Defendants/Cross-Plaintiffs ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] 6629032 Canada inc. (Plaintiff), represented at the hearing by Mr.

Nirmalachandran, claims $35,127.89 following the purchase by Jung Eun Yoon and Bok Hee Cho (Defendants) of the assets of Marché Cholan, a mini market located at 905 14 th Avenue, in Montreal. [ 2 ] Defendants filed a cross-application in the amount of $40,570.55 on the grounds that the stock-in-trade purchased was expired and the equipment sold was not in good working condition. QUESTIONS IN DISPUTE - Is Plaintiff owed the balance of sale? - Is the cross-application well founded? CONTEXT [ 3 ] In 2014, Mr.

Nirmalachandran put an ad on Kijiji to sell his family business, Marché Cholan, owned by Plaintiff. [ 4 ] In January of 2016, he met with Defendants who visited his store. Negotiations took place in early February and the parties agreed that Defendants would buy Marché Cholan for $110,000 (for the furniture, the equipment and the good will) plus the inventory.

Defendants hired a company to conduct an inventory, but considering the condition of the store, the extent of the work to be done and the related costs, Defendants decided to evaluate the inventory themselves. [ 5 ] The parties further agreed that the price including the inventory would be $180,000. [ 6 ] On February 11, 2016, a Memorandum of Agreement (Memorandum) was signed. The following excerpts are relevant: 7.

THAT the Vendor is not aware of any complaints, infractions, warrants or threats of infractions by any governmental, municipal or regulatory body with respect to the premises in which the Vendor carries on its enterprise or the actual enterprise of the Vendor herein . 8. THAT the Vendor is not aware of any material facts which would, in any way, materially alter or change the volume of sales or expenses of the enterprise herein. 9. THAT the Purchasers declare having obtained a lease dated February 11th, 2016, for the premises and declare themselves content and satisfied therewith . 10.

THAT for the consideration herein mentioned the Vendor sells to the Purchasers hereto present and accepting all the assets,

furniture, fixtures, equipment, stock-in-trade, and the goodwill attached to the enterprise, the Vendor’s rights in and to the aforesaid firm name and style, the rights to the same telephone number subject to the regulations and tariffs of Bell Canada, which said furniture, fixtures and equipment are to be in good working order and condition , a detailed list thereof being annexed hereto as

Schedule A to form part hereof. … 13. THAT notwithstanding anything to the contrary the Purchasers shall not transfer or assign any or all of their rights in and to the lease for the said premises, nor shall they sublease or transfer or assign the said premises, in whole or in part, under any circumstances whatsoever, nor shall they sell any of the assets of the said enterprise, the whole without the prior written consent of the Vendor, until the entire amount due and payable by the Purchasers shall have been fully paid in capital and interest . … 18. THAT all adjustments such as rent, taxes, insurance, etc. shall be made as of the 11th day of February 2016. [ Emphasis added. ] [ 7 ] The

Schedule to the Memorandum listed the equipment sold, namely, fridges, freezers, shelves, etc. [ 8 ] Defendants paid $150,000 when the Memorandum was signed. The balance of sale in the amount of $30,000 was to be paid by 60 post-dated cheques of $552.50 to begin the following month. [ 9 ] Mr. Nirmalachandran was never given the said cheques.

In addition, he explained that Plaintiff paid a Hydro-Quebec bill and the rent for the entire month of February 2016, [1] even though $1,877.89 should have been paid by Defendants. [ 10 ] Defendant Cho explained that after the Memorandum was signed, she began operating Marché Cholan with her sister. She quickly realized that customers were returning merchandise because it had expired.

Three customers also testified on the expired goods they bought from Marché Cholan prior to the sale. [ 11 ] Defendant Cho also became aware shortly after the sale that equipment, such as the freezers and coolers, was either not functioning at all or not functioning properly. [ 12 ] In addition, she was informed of a petition signed six months earlier by 74 customers and sent to Mayor Claude Dauphin complaining, among other things, of the condition of the store and the goods for sale. [ 13 ] Considering the above, she decided not to pay the balance of sale and mandated her attorney to send a notice of default, which was sent to Plaintiff on March 9, 2016. [ 14 ] In their cross-application, Defendants filed bills dated June and August 2016 regarding repairs made to the Marché Cholan premises (staircase, washroom and ceiling), the replacement of one refrigerator, and repairs to other equipment. [2] There was also a claim for the sale and installation of an air conditioning unit ($6,898.50). [ 15 ] In addition, Defendants made a list of the expired goods they had to throw away (chocolate, perfume, frozen food, etc.) which, based on the sale price, totaled $28,394.21. [3] [ 16 ] Finally, Defendants filed a “Tableau de bord d’établissement concerning Marché Cholan” (Tableau de bord) from the City of Montreal which shows that between January 1, 2007, and September 13, 2018, the Service de l’environnement, inspection des aliments, made 22 visits, received 14 complaints, noted 6 infractions, and filed 2 prosecutions. [ 17 ] Recommendations made by the City of Montreal following inspections over a period of five years prior to the sale relate to the presence of rodents, expired stock and the dirty condition of the store.

ANALYSIS Is Plaintiff owed the balance of sale? [ 18 ] The following articles of the Civil Code of Québec ( C.C.Q. ) are relevant: 1401. Error on the part of one party induced by fraud committed by the other party or with his knowledge vitiates consent whenever, but for that error, the party would not have contracted, or would have contracted on different terms. Fraud may result from silence or concealment. … 1407.

A person whose consent is vitiated has the right to apply for annulment of the contract; in the case of error occasioned by fraud, of fear or of lesion, he may, in addition to annulment, also claim damages or, where he prefers that the contract be maintained, apply for a reduction of his obligation equivalent to the damages he would be justified in claiming . [ Emphasis added. ]

[ 19 ] Shortly after the sale, Defendants realized that expired goods were being returned by customers and that equipment was not properly functioning. In addition, it later became clear that there had been many complaints by customers and even infractions related to Marché Cholan’s operations prior to the sale. [ 20 ] Defendants agreed to pay Plaintiff an amount of $180,000 for the assets of Marché Cholan and the equipment listed in the

Schedule following the representations made by Mr. Nirmalachandran. The Court finds that their consent was vitiated by these representations, namely with respect to the following issues: -

Section 7 provides that Plaintiff is not aware of any complaints, infractions, warrants or threats with respect to either the premises or the enterprise operated by Plaintiff. However, the evidence adduced at the hearing instead establishes that there were complaints and infractions linked to Plaintiff’s business activity; -

Section 10 provides that the equipment detailed in the

Schedule is in good working order and condition. However, the evidence instead reveals problems with one refrigerator and one cooler a few weeks after the sale. -

Section 8 provides that Plaintiff is not aware of any material fact which would change the volume of sales. The petition was not disclosed although its content very clearly established the customers’ dissatisfaction only a few months earlier. [ 21 ] From the Court’s standpoint, the false representations by Plaintiff’s representative related to key issues for Defendants.

Considering the evidence adduced regarding the value of the expired goods together with the bills paid for the repairs/replacement of some of the equipment, the Court finds that Defendants do not owe the balance of sale claimed by Plaintiff. [ 22 ] The evidence adduced by Plaintiff with respect to the payment for the entire month of February 2016 is an excerpt of its bank account ending on February 11, 2016.

This evidence does not establish, on a balance of probabilities, that Plaintiff was not reimbursed by the landlord considering Defendant Cho’s testimony that a new lease was signed as of February 11, 2016. [ 23 ] In addition, the claim for the Hydro-Quebec bill is dismissed considering that the evidence adduced at trial relates to a statement of account from January 6 to February 10, 2016, which is prior to the sale. Is the cross-application well founded? [ 24 ]

Article 2803 of the C.C.Q. reads as follows: 2803. A person seeking to assert a right shall prove the facts on which his claim is based. [ 25 ] The remaining expenses incurred by Cross-Plaintiffs and claimed in the cross-application relate to repairs made to the staircase, the washroom, the ceiling of the premises and the cost of the air conditioning unit and its installation. [ 26 ]

Section 9 of the Memorandum specifically refers to the fact that Defendants declared that they were content and satisfied with the premises. Plaintiff should not be responsible for any claim they may have whatsoever regarding the condition of the premises, considering the wording of the Memorandum. As for the air conditioning unit, it was Defendants’ choice to have it installed and Plaintiff should not be held liable for said choice. [ 27 ] Finally, the expenses related to the sign repair cannot be reimbursed as the sign is not listed in the

Schedule to the Memorandum and, therefore, there was no representation with respect to its condition. FOR THESE REASONS, THE COURT: DISMISSES 6629032 Canada inc.’s application against Jung Eun Yoon and Bok Hee Cho; THE WHOLE , with costs; DISMISSES Jung Eun Yoon and Bok Hee Cho’s cross-application against 6629032 Canada inc.; THE WHOLE , without costs. _______________________________ JULIE VEILLEUX, J.C.Q. Date of hearing: September 20, 2018 Mtre Tom Markakis For the Plaintiff/Cross-Defendant

Mtre Myer M. Stern For the Defendants/Cross-Plaintiffs