2012 QCCQ 14826, 2012 QCCQ 14826

Geukers c. Geukers 2012 QCCQ 14826 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-124252-109 DATE: December 17, 2012 ______________________________________________________________________ BY THE HONOURABLE MICHEL A. PINSONNAULT, J.C.Q. ______________________________________________________________________ CATHARINA GEUKERS [...] The Netherlands and [...] Beaconsfield, Québec [...] Plaintiff v.

EMELINE GEUKERS [...] Ile Bizard, Québec [...] Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiff, Mrs. Catharina Geukers (“ Mrs. Catharina ”), is claiming from her niece, Mrs. Emeline Geukers (“Mrs. Emeline ”), $9,427 representing the unpaid balance of various loans totalling $35,000 made between 1990 and 1997. Plaintiff agreed to reduce her claim to $7,000 and renounced to claim the difference from Defendant. [ 2 ] The total amount of the loans is not contested by Mrs.

Emeline who claims that she repaid the loans in full in September 2008. In her written contestation, Mrs. Emeline referred to the agreement entered into with Mrs. Catharina as an “ entente familiale ” without clear terms and conditions. [ 3 ] As it will be more fully discussed hereafter, the parties essentially disagree on the imputation of the payments made by Mrs. Emeline over the years.

One claims that only the interest was paid throughout the years without ever touching the capital while the other maintains that each payment was a blended payment of capital and interest. [ 4 ] By letter dated September 1, 1990 (P-1), Mrs. Emeline undertakes to pay once a year the interest on a first loan of $6,000 at the rate of 6.5% ($390) and on a second loan of $12,000 at the rate of 8.0% ($960). The letter also stipulates: I agree to deposit this amount [$1,350] into your account each year on September 01.

I picked this date because it coincides with my mortgage and it allows me to get all my finances straight at one time. I hope that you agree to allow me to keep the money for five years at which time we will see if you would like to continue making the loan. [ 5 ] On November 1 st , 1993, Mrs. Emeline writes again to Mrs. Catharina. The letter P-2 refers to our financial arrangement

concerning the money you have loaned me towards the down payment of my condominium . The letter reveals that the first two original loans totaling $18, 000 are coming to maturity on September 30 th , 1995 and that a third loan of $9,000, made in September 1993, bears interest at the annual rate of 4.0% ($360 per year) and will come to maturity on September 30 th , 1994. The letter concludes as follows: […]I agree to pay you interest, in the amount of $1,710 on Sept. 30, 1994 ($390+$960+$360). At that time we will discuss new terms for the following year.

Thank you very much for allowing me to use this money. [ 6 ] Mrs. Catharina will make two more loans to Mrs. Emeline, one of $4,000 on May 29 th , 1996 and another of $4,000 on September 11 th , 1997. [ 7 ] By letter dated December 19 th , 1997 (P-3), Mrs. Emeline confirms, among other things, that with the last $4,000 borrowed a few days earlier, the total amount borrowed is $35,000. All amounts borrowed until then will now bear interest at 5% per annum . In her letter, Mrs. Emeline indicates that the $35,000 loans will therefore yield $1,750 from September 1 st , 1997 to September 1 st , 1998.

On September 1 st , 1998, the sum of $1,750 will be deposited in Mrs. Catharina’s bank account. [ 8 ] In her written demand letter of November 26 th , 2008 (P-4), Mrs. Catharina alleges that Mrs. Emeline is still indebted to her for $12,900, as at December 2008. In the letter, Mrs. Catharina mentions, inter alia : […] You have borrowed $35,000 from me over time (starting in 1990) and have only partially paid it back. You have also not paid all of the interest that you agreed to pay.

In every letter that you sent me over the years you agreed repeatedly, in writing, to the amount of the loan and the interest that you owed. From 1990 until 2006 you paid interest every year on the loan so you clearly agreed with the loan and the interest. In 2007 and 2008 you paid no interest at all. At any time if you did not need the $35,000 you could have simply terminated the loan and repaid the $35,000 together with the outstanding interest. […] As you know, I gave Paul [nephew of Plaintiff] all my letters and a copy of the bank book so that he could do an independent review of the loan.

He also comes to the conclusion that you still have an outstanding debt to me (Paul told me that he has emailed you a copy of the letter he sent to me with his analysis). […] [ 9 ] As no further payments were made by Mrs. Emeline, the present legal proceedings were instituted on July 7 th , 2010 in virtue of which Mrs.

Catharina applied the alleged September 1 st , 2007 payment of $25,573 against the capital only without ever mentioning any of the other payments that would have been made between 1991 and 2008 by her niece. [ 10 ] In a written statement made in lieu of testimony dated October 12 th , 2012 (article 294.1 of the Code of civil procedure ), Mrs. Catharina, who did not attend the trial, wrote that on September 1 st , 2007, Mrs. Emeline reimbursed $25,573 towards the principal of the $35,000 loan (paragraph 4). Then, at paragraph 6, Mrs. Catharina prays act of the admission made by Mrs.

Emeline that she reimbursed $27,029 on September 18 th , 2008 leaving an outstanding debt of $7,971 . Yet, in her written demand, Mrs. Catharina alleged that the September 1 st , 2007 payment of $25,573 constituted a renunciation on the part of Mrs.

Emeline of any prescription that may have occurred before and then claims that the September 1 st , 2007 payment of $25,573 was applied exclusively against the then outstanding capital of $35,000 leaving an unpaid principal balance of $9,427 subsequently reduced to $7,000. [ 11 ] With all due respect, the written statement when taken into consideration with the written demand is somewhat difficult to follow. However, the evidence offered at trial enabled the Court to better understand what exactly occurred over the years in terms of payments. [ 12 ] The evidence will reveal that in reality, Mrs.

Emeline did not make a payment of $25,573 on September 1 st , 2007. In fact, between 1990 and December 27 th , 2006, Mrs. Emeline made various payments totalling $24,476, not $25,573. From Mrs. Catharina’s standpoint the $24,476 was applied in partial reduction of the accrued interest exclusively, a position contested by her niece. [ 13 ] In any event, for the purpose of the present proceedings, Mrs. Catharina nevertheless chose to apply the said single September 1 st , 2007 payment of $25,573 against the $35,000 capital, leaving an unpaid balance of $9,427 that will be reduced to $7,000.

ANALYSIS [ 14 ] By document dated August 26 th , 2010 (D-1) which essentially contains her grounds of defence, Mrs. Emeline confirms having borrowed an amount of $35,000 from Plaintiff in the past. The premise of her agreement with her aunt who was, at all relevant times, living in Holland, was to be a win-win arrangement :

- Mrs. Catharina wanted to keep her money out of Holland and avoid paying income tax on the same while earning interest from her niece; - Mrs. Emeline needed to borrow money in order to purchase a condominium unit in 1990. The loans enabled her to benefit from money with a better interest rate than what she would have been called upon to pay to a traditional mortgage creditor. [ 15 ] Over the years (1991-2008), Mrs. Emeline paid to Plaintiff $51,505 on the $35,000 loans with a final payment of $27 029 made on September 18 th , 2008 after Mrs. Catharina requested payment of the loans in August 2008. Mrs.

Emeline further argues that prior to her final payment, she had already reimbursed the sum of $24 476 by way of annual blended payments of capital and interest, not just interest. Based on the demand, these payments were not accounted for by Plaintiff. This can be easily explained by the fact that being limited to $7,000, Plaintiff chose to focus on the unpaid capital which exceeded, in her own calculations, the maximum amount allowed for filing a claim before the Small Claims Court.

Claiming the unpaid interest became moot, under the present circumstances although no further recourses can be exercised in virtue of the aforesaid loans due to Mrs. Catharina’s decision to reduce her claim to $7,000 and renounced to the right to claim the balance from her niece. [ 16 ] Mrs. Emeline insists that the borrowed money was used as an informal mortgage loan for the purchase of her condominium unit.

As such loans typically carry a repayment by way of blended payments and in capital and interest, the amounts that she reimbursed annually did not only cover the accrued interest but also a portion of the capital, thus reducing the capital at the same time. Based on the foregoing approach, her final payment of $27,029 made in September 2008 covered all outstanding amounts owing until then in capital and accrued interest. [ 17 ] Mrs. Emeline will add that in 1996, as the interest rates were going down and her own financial situation was improving, she no longer needed the loans. However, the Court notes that Mrs.

Emeline nevertheless borrowed $4,000 in 1996 and again in 1997. Why? [ 18 ] Commencing in 1998, Mrs. Emeline approached her aunt repeatedly to tell her that she did not need her money anymore. The latter would tell her that she did not need the money and that she could keep it. This statement was flatly denied by Mrs. Catharina in her written statement, without any further comments. [ 19 ] Mrs. Emeline stopped paying interest on the loans after 2006, as she had no further need for the loans that allegedly her aunt did not want back yet. The funds were causing her more inconvenience than anything else.

If that was really so, then why not simply return the funds into Mrs. Catharina’s Canadian bank account? No one prevented her from doing so. [ 20 ] It is opportune to reproduce herein in extenso the letter written on September 15 th , 2008 (D-4), by Mrs. Emeline to Mrs. Catharina to understand better how the latter arrived at her $27,029 final payment. This letter reveals exactly her frame of mind and what was her approach in determining the final payment of the loans: September 15th, 2008, Dear Tante Tineke, We are doing well and I hope that this reply finds you well. The kids have started back in school.

Melanie in grade 4 and Martin beginning kindergarten. I received your letter dated august 27th about the loans dating back to 1990. As you mentioned it is our wish to terminate the loans, as it has been for numerous years. I actually asked you about returning your placement in 1998 while visiting you in Hilversum and you mentioned that you wished the money stay put. I inquired once again during our trip to Holland in 2002 and your reply was the same. Keep the money as is. We have been mortgage free for many years on both our condo and house.

We always made a priority of paying down all of our mortgages at an accelerated rate and only held on the money you had placed with us thinking that this was more of a favour to you as it a safe, trouble free placement of your money. In 2007 and 2008 we stopped making payments on the money you placed with us as this was simply becoming a burden that we did not want to continue with. We are therefore pleased to finalize this situation with you.

On your placements which were staggered between September 1990 and December 1997 and which totalled $ 35000.00 you have already received from us in interest and capital payments of $24476.00 which were reinvested in your account. At this point we are including a final payment in the amount of $ 27 029.00 which represents a combination of interests and capital remaining (based on a 25 year amortization and an average 4% interest rate. Although we in our minds put an end to the payment of interest in 2006, we have based our calculations to include 2007 and 2008.

As you have requested this money will be put in your account at the Royal bank Transit number xxxxxxxxx. It is nice for me to know that the money you placed with me so many years ago was safe for you and that you realized a trouble free, safe return. Sincerely,

Your niece Emeline [ 21 ] Basically, although Plaintiff and Defendant agree that $35,000 were borrowed from time to time, they differ of view on the exact terms and conditions of the loans made and more particularly, on the imputation of the annual payments made by Mrs. Emeline from 1991 until 2008. On the one hand, Mrs. Catharina argues that the only annual payments made by her niece covered the accrued interest exclusively. On the other hand, Mrs. Emeline favours a different approach.

The latter considers that these loans were a form of mortgage loan and that all payments made were, like in usual mortgage loans, blended payments of interest and capital. [ 22 ] The evidence will show that Mrs. Emeline arrived at the final payment of $27,029 by applying to all the amounts borrowed a 25 year amortization with an average 4% annual interest rate. [ 23 ] Mr. Paul Geukers (“ Mr. Paul ”), a nephew of Mrs. Catharina and a cousin of Mrs. Emeline testified. In 2008, he was asked by his aunt to verify all payments made over the years by Mrs. Emeline in connection with the loans. Mrs.

Catharina disagreed with her niece that the $27,029 payment could not be final. She gave her nephew access to her Canadian bank account as well as all other relevant documentation. Mr. Paul came to the conclusion that the loans had not been entirely repaid, contrary to Mrs. Emeline’s claim. [ 24 ] On October 12 th , 2008, Mr. Paul wrote to Mrs. Emeline to convey to her the fruits of his analysis. The letter (P-6) came with all supporting documentation and detailed statements of account, one showing how Mrs. Emeline was able to determine the final payment as $27,029. [ 25 ] The Court notices that Mrs.

Emeline took the total payments made before the final payment, namely $24,476. Regardless of the different interest rates agreed to between her aunt and her over the years, Mrs. Emeline simply applied an average rate of 4% per annum to the loans and considered that all payments were blended payments with the result that in September 2008, after deducting the $24,476 payments, she still owed $9,158 in accrued interest and $17,871 in outstanding capital; thus, the figure of $27,029. [ 26 ] Mr. Paul made a second statement of account.

This time with the benefit of his aunt’s banking records, he took into consideration all the payments made over the years by Mrs. Emeline. The first finding that he made was that all payments matched exactly the interest that Mrs. Emeline had agreed to pay to her aunt on the 1 st day of September every year. The payments also evidenced that various interest rates were applied and that they matched those that were confirmed in the various letters exchanged between Mrs. Emeline and Mrs. Catharina. [ 27 ] The Court was able to appreciate the accuracy of Mr. Paul’s findings.

Clearly, the payments correspond to the agreed upon interest from time to time as they accrued annually as at September 1 st of any given year. The interest payments stopped in 2006 and were not made in 2007 and 2008. The sum of $24,476 represents interest paid by Mrs. Emeline until 2006 as agreed upon. Mrs. Emeline never paid any capital before the September 18 th , 2008 “final” payment of $27,029. [ 28 ] Mr. Paul determined that as at September 30 th , 2008, the unpaid capital of $35,000 with the accrued unpaid interest for the previous two years totalled $37,856.

He then deducted the September 18 th , 2008 “final” payment of $27,029 leaving an unpaid balance of $10,827. [ 29 ] By simply reducing the unpaid capital of $35,000 as at September 18 th , 2008 without the accrued unpaid interest, there remains an outstanding balance of $7,971. [ 30 ] With all due respect, it is difficult for the Court to comprehend Mrs. Emeline’s reasoning to contest her aunt’s claim. If Mrs. Emeline did not need the funds from 1996, why did she continue to borrow more funds afterwards?

Moreover, why not reimburse the loans by simply depositing the necessary funds into the Canadian bank account of her aunt, the same account used to deposit the annual interest? Mrs. Emeline did not need her aunt’s permission to do so. [ 31 ] In her written grounds of defence dated August 26 th , 2010 (D-1), Mrs. Emeline mentioned: […] This family matter [the loans] always remained uncertain and the lack of clear indication and comments from my aunt created an awkward situation.

The renewal of the original terms was never clearly agreed upon as time went on. […] [ 32 ] Again with all due respect, despite the absence of terms and conditions regarding the renewal of those loans, one thing remained certain, the parties had clearly agreed that only the accrued interest would be payable annually in September. This is exactly what Mrs. Emeline did year after year. The latter could not modify those terms and conditions unilaterally and convert retroactively interest payments into blended payments made on loans amortized over 25 years with an average interest rate of 4% per annum .

This does not reflect the reality. [ 33 ] There is no evidence that Mrs. Catharina ever accepted such terms and conditions that are simply not supported by the proof. [ 34 ] The Court comes to the conclusion that on September 18 th , 2008, Mrs. Emeline Geukers did not reimburse in their entirety the loans totaling $35,000. Mrs. Catharina Geukers established her right to claim from Mrs. Emeline Geukers an amount of $7,971 excluding accrued interest.

[ 35 ] Although the written demand requests an interest at 6.5% per annum , the evidence does not show that this rate was the agreed upon rate in September 2008. In fact, the statement of account prepared by Mr. Paul shows that since 2001, Mrs. Emeline was paying an interest of 4% per annum . He even used that specific rate to calculate the interest that accrued after the final payment of September 18 th , 2008. The Court will apply this interest rate. FOR THOSE REASONS, THE COURT: FINDS in favour of Plaintiff, Mrs. Catharina Geukers; CONDEMNS Defendant, Mrs. Emeline Geukers, to pay to Plaintiff, Mrs.

Catharina Geukers, the sum of $7,000 with interest at the rate of 4% per annum together with the additional indemnity of

article 1619 of the Civil Code of Quebec from November 26 th , 2008, date of the demand for payment, Exhibit P-4; THE WHOLE , with judicial fees of $159.00 payable by Defendant, Mrs. Emeline Geukers, to Plaintiff, Mrs. Catharina Geukers. __________________________________ MICHEL A. PINSONNAULT, J.C.Q. Date of hearing: October 23 rd , 2012