2023 QCCA 786, 2023 QCCA 786

Garcia c. Royal Bank of Canada 2023 QCCA 786 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-030090-229 ( 500-17-108652-192 ) MINUTES OF HEARING DATE: June 9, 2023 CORAM: THE HONOURABLE SUZANNE GAGNÉ, J.A. GENEVIÈVE COTNAM, J.A. GUY COURNOYER, J.A.

APPELLANTS COUNSEL jenner garcia luzdary manjarres m tre roxane fortin-lecompte ( Lavery, De Billy ) By videoconference Mtre JEAN LEGAULT ( Lavery, De Billy ) Absent RESPONDENT COUNSEL royal bank of canada Mtre gary rivard ( BCF ) By videoconference On appeal from a judgment rendered on May 3, 2022 by the Honourable Geeta Narang of the Superior Court , District of Montreal . NATURE OF THE APPEAL: Suretyship – Execution of an undertaking given to obtain credit Clerk at the hearing : Lesly Ramos Courtroom: Antonio-Lamer HEARING

9:37 Commencement of the hearing. Continuation of the hearing held on June 6, 2023. The parties were excused from appearing in Court. BY THE COURT: Judgment – see page 3. Conclusion of the hearing.

Lesly Ramos, Clerk at the hearing JUDGMENT [ 1 ] The judgment under appeal condemns the appellants, as sureties of 3477835 Canada Inc. (“3477”), to pay to the Royal Bank of Canada (“RBC”) $180,345.33, with interest at RBC’s prime rate, plus 5 %, calculated from May 23, 2019. [1] [ 2 ] In essence, the Court must determine whether, by means of an email the appellants sent on December 20, 2017, they terminated the suretyship for future debts of 3477 by giving RBC prior and sufficient notice. [ 3 ] In that email, appellant Jenner Garcia (“Garcia”) wrote the following with respect to loans reimbursed by 3477: Hi Stephane, As from today December 20th of 2017, you can withdraw directly from 3477835 Canada Inc.’s business account the money to reimburse the balance ($138,563.37) of the loan #[...]-007 (equipment) and the balance ($26,666.80) of the loan #[...]-008 (good will).

The balance of Line of credit is today zero ($0) and you can close it whenever you want. Please send us back a receipt from RBC and copy of immediate release of all securities, hypotheque or lien of equipment, movable and immovable assets, personal guarantees serving as collateral and securities of these loans . Jenner Garcia 3477835 Canada Inc. [Transcribed verbatim; bold added] [ 4 ] The very next day, RBC closed the loans and the line of credit and instructed its lawyers to cancel the movable hypothecs in question.

As regards the personal guarantees, RBC’s representative, Stéphane Péladeau (“Péladeau”), informed Garcia of the following: […] Also we have the following joint and several personal guarantees on file: - 160,000$ - 135,000$ - 300,000$ - 240,000$ For a total of 835,000$ However as explained in previous conversations/e-mails, the personal guarantee is limited to the amount owed to the Bank. As of today, the amount owed to the Bank is equal to: - VISA 30,000$. As of today, VISA outstanding due amount is 30,137.86$.

Would you kindly make a payment in order to respect the 30,000$ limit. - Lease facility: 143,412$ (includes interest revenue for the Bank until expiry date in May 2021) + taxes 21,511.80$ (15%) =

164,924.20$ - Car loan: 6,790.97$ (including accrued interest) - Term loan for building: 227,226.79$ (including accrued interest) For a total of 429,079.82$ […]. [Transcribed verbatim; bold added] [ 5 ] Péladeau subsequently proposed amendments to the agreement dated October 13, 2017 (signed on November 3, 2017). On January 22, 2018, Garcia acquiesced to most of these amendments.

However, he asked, among other changes, that “the amount in paragraph g) [the suretyship and the subordination of claims in the amount of $300,000] should be changed to $255,000”. [ 6 ] The next day, Péladeau proposed the following compromise: For the personal guarantee it is the same thing I cannot ask you to pay more than what you owe me however considering you respected our repayment agreement, I am willing to delete entirely d),

e) and

f) and keep only

g) and live with the small shortfall (300K vs 391K outstanding) [Transcribed verbatim] [ 7 ] Indeed, the amended agreement signed by the appellants on February 15, 2018 contains the following provision: The Agreement is amended as follows: […] 5. Under the Security section, paragraphs a), b), d), e),

f) and

k) are deleted in their entirety. [ 8 ] One must conclude that the suretyship and subordination of claims in the amount of $300,000 mentioned in paragraph g) of the October 13, 2017 agreement remained in effect, including for future debts. [ 9 ] Admittedly,

article 2362 of the Civil Code of Québec provides the possibility for a surety to terminate a suretyship contracted with a view to covering future or indeterminate debts: 2362. Where suretyship is contracted with a view to covering future or indeterminate debts, or for an indeterminate period, the surety may terminate it after three years, so long as the debt has not become due, by giving prior and sufficient notice to the debtor, the creditor and the other sureties. This rule does not apply in the case of a judicial suretyship. 2362.

Le cautionnement consenti en vue de couvrir des dettes futures ou indéterminées, ou encore pour une période indéterminée, comporte, après trois ans et tant que la dette n’est pas devenue exigible, la faculté pour la caution d’y mettre fin en donnant un préavis suffisant au débiteur, au créancier et aux autres cautions. Cette règle ne s’applique pas dans le cas d’un cautionnement judiciaire. [ 10 ]

Section 6.1 of the Suretyship and Subordination of Claims is to the same effect: 6.

TERMINATION OF THE SURETYSHIP 6.1 REVOCATION Each Guarantor may, by written notice to the manager of the branch or agency of the Bank which has received this suretyship agreement, terminate its liability under this suretyship with respect to future Obligations, but not with respect to the Obligations existing on the date of receipt of such notice, even if such Obligations are not exigible at such time; furthermore, notwithstanding the receipt of such notice, the Bank has the right to comply with the demands of the Client based on express or tacit agreements entered into prior to the receipt of such notice and any Obligation resulting therefrom shall be covered by this suretyship. […]. [Bold and italics in the original] [ 11 ] The creditor’s notice, however, must be drafted in terms that leave no room for ambiguity.

The ruling in Dickson v.

Royal Bank of Canada provides a good example of the clear language requirement: A guarantor is not in my view required to use any set form of words in exercising the right to determine his liability under such a guarantee and reference to s. 4 of that document does not appear to be an essential ingredient of such a notice, but commercial rights are not normally exercised by the mere expression of a wish or preference and where, as here, it was obviously of first importance that the Bank should not be left in any doubt, I do not consider that the equivocal terms of the letter in question constituted a determination of the guarantee and, in my view, the Bank was fully justified in proceeding on the basis that the necessary notice had not been given.

I can find no evidence in the correspondence and the accounts of telephone conversations prior to August 20, 1969 which can be taken as strengthening the position taken, on behalf of the appellant, in the original letter. [2]

[ 12 ] That is also the case here. The December 20, 2017 email does not express a clear decision on the part of the appellants to terminate the suretyship for future debts, and, indeed, the subsequent communications, particularly the signing of the amended agreement, demonstrate the contrary. [ 13 ] The Court concludes that the December 20, 2017 email did not terminate the suretyship contracted by the appellants for the future debts of 3477.

Thus, it is immaterial that the sums RBC claims essentially relate to debts that became exigible after this date. *** [ 14 ] Finally, the appellants argue that RBC failed to prove its claim for legal fees. According to them, “[b]y simply filing a bunch of invoices and reducing the amount of its claim for legal fees from $76,568.74 to $30,000, RBC did not meet the burden of proof that would support such a claim”. [3] [ 15 ] The trial judge based her decision on the detailed invoices submitted to RBC by its attorneys.

She concluded that the reduced amount of $30,000 was reasonable given, in particular, the value of RBC’s claim ($150,000). In other words, she accepted the amount as determined by RBC. The appellants have shown no reviewable error committed by the judge on this point. FOR THESE REASONS, THE COURT: [ 16 ] DISMISSES the appeal, with legal costs. SUZANNE GAGNÉ, J.A. GENEVIÈVE COTNAM, J.A. GUY COURNOYER, J.A.