2015 QCCQ 14870, 2015 QCCQ 14870

Landmark Financial Group Inc. c. Petruzzelli 2015 QCCQ 14870 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-141048-134 DATE: December 18, 2015 ______________________________________________________________________ BY THE HONOURABLE JEFFREY EDWARDS, J.C.Q. ______________________________________________________________________ LANDMARK FINANCIAL GROUP INC. Plaintiff v. SEBASTIEN PETRUZZELLI -and- JOHANNE PETRUZZELLI -and- CASSANDRA VINHAL -and- JOHN PARADIAS Defendants and MORTGAGE INTELLIGENCE INC.

Impleaded Party ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiff Landmark Financial Group Inc. (“ Landmark ”), mortgage broker, claims from Defendants Sebastien Petruzzelli, Johanne Petruzzelli and Cassandra Vinhal the amount of $5,063.03 as an amount due under a penalty clause for not proceeding with Landmark on an agreed mortgage. Landmark also sues Defendant John Paradias, another mortgage broker, on the basis of a civil fault that he would have commited in acting for Defendants also.

Procedural Background [ 2 ] Plaintiff’s claim was first instituted in the regular division of the Court of Quebec. As the amount was less than $7,000, upon Defendants’ request, it was transferred to the Small Claims Division of the Court. The proceeding was then amended by Plaintiff by adding an amount for punitive damages against Defendant John Paradias. On August 8, 2014, the claim for that additional amount was struck by Justice Marie Michelle Lavigne [1] in the regular division of the Court of Quebec, as being an abuse of procedure.

As a sanction for that abuse of procedure, Justice Lavigne ordered Plaintiff to pay $500. The legal proceeding was then transferred back to the Small Claims Division of the Court of Quebec.

Landmark’s Claim Under Penalty Clause [ 3 ] The claimed amount of $5,063.03 is one percent (1%), plus taxes of the mortgage amount, if approved, pursuant to a penalty clause contained in an “Exclusive Mandate” contract of Plaintiff (Exhibit P-4) that was signed by Defendants Sebastien Petruzzelli, Johanne Petruzzelli and Cassandra Vinhal. [ 4 ] According to the proof heard at the trial, at the time of signature of that contract, the existence of this penalty clause was not

explained or even mentioned to these Defendants. [ 5 ] According to the applicable regulation governing the Exclusive Mandate, it was the responsibility of the mortgage broker to ensure that these Defendants were aware of the important clauses in the agreement, and in particular, the stipulated penalty clause. [ 6 ]

Article 7 of the Regulation respecting Contracts and Forms [2] provides as follows: “7 . A licence holder must, before having a contract, a transaction proposal or a form that he or she has completed signed, allow the parties to take cognizance of its terms and conditions and provide all explanations and answers to questions that the parties may ask.” [ 7 ] In jurisprudence involving the same Plaintiff, the Court of Quebec has held that the appropriate sanction for the failure to respect that statutory obligation is the unenforceability of the penalty clause. [ 8 ] In Landmark Financial Group Inc. v.

Vashi , 2011 QCCQ 11497 , Justice David L. Cameron held: “[19] The regulations are a form of consumer-protection legislation. Such regulations should be taken seriously by members of the industry. Something as onerous as a penal clause should be clearly indicated with the proper headings in a script that is easy to read, and in language that is simple and clear.

The broker should, when having a client sign the document, bring the matter to his attention to ensure that he, in fact, understands that this is not a mandatory clause, and that he indeed consents to it. [20] The evidence, in the present case, is that these protective provisions of the regulations were not followed by the Plaintiff.

The effective sanction should be the unenforceability of the penalty clause.” [ 9 ] In the Court’s view, in the present matter, the lack of consent to the penalty clause relates to an essential element in the contract and therefore vitiates the consent of Defendants Sebastien Petruzzelli, Johanne Petruzzelli and Cassandra Vinhal with respect to that contract. Article 1400 (1) of the Civil Code of Quebec provides as follows: [ 10 ] “1400.

Error vitiates the consent of the parties or of one of them where the error relates to the nature of the contract, to the object of the prestation or to any essential element that determined the consent.” [ 11 ] Furthermore, the preponderance of the proof indicates that at a meeting on April 15, 2013, held at the offices of Landmark, Mr. Chouman, its representative, stated and agreed that he would waive the charge of 1%. [ 12 ] Accordingly, since Defendants did not consent to the penalty clause and since Defendant agreed to waive it, the Court declares that it is not binding upon Defendants.

Plaintiff’s claim with respect to such clause will therefore be dismissed. Landmark’s Claim Against John Paradias [ 13 ] Plaintiff also sues Defendant John Paradias for an alleged extra contractual fault on the basis that he would have lured away defendants Petruzzelli and Vinhal. Plaintiff claims as damages an amount equivalent to the 1% penalty clause, plus an additional amount of punitive damages of $2,500. Mortgage Intelligence Inc., the Impleaded Party, is the employer of Mr. Paradias. [ 14 ] Based upon the proof, including the exhibits and the testimony, there is no evidence of any act of Mr.

Paradias that would constitute a civil fault under

article 1457 C.C.Q. and that would give rise to his liability. On the contrary, the proof indicates that Mr. Paradias was acting in good faith with the sole objective of helping the other Defendants reduce their financing obligations, nothing more.

[ 15 ] As such, Landmark’s claim against Mr. Paradias will be dismissed, with judicial costs of $75.25. Cross-Demand of Johanne Petruzzelli [ 16 ] By way of Cross-Demand, Johanne Petruzzelli claims for payment by Landmark of two amounts: $3,330.30 based on the 4% interest overcharge and $1,998.57 for administrative charges. She claims these amounts were not due but were paid by her under the previous mortgage agreement. [ 17 ] According to the uncontradicted proof, Mr.

Chouman agreed at a meeting which took place on April 15, 2013 that Defendant Johanne Petruzzelli was overcharged 4% interest on her past payments. On behalf of Plaintiff, Mr. Chouman agreed to pay that amount to her. [ 18 ] That commitment to pay the amount based on the 4% overcharge was confirmed by Mr. Chouman in an e-mail on behalf of Landmark (Exhibit D-7).

Accordingly, that amount will be granted to Johanne Petruzzelli pursuant to a contractual obligation given by Landmark (Article 1458 C.C.Q). [ 19 ] However, there is insufficient proof to support the claim of Johanne Petruzzelli for the amount claimed relating to administrative charges. [ 20 ] On the contrary, the other witnesses heard by the Court, and who were present at the meeting of April 15, 2013, do not support the allegation that Mr. Chouman also agreed to pay that additional charge. As such, the Court will not condemn Landmark to pay that amount. Cross-Demand of John Paradias [ 21 ] Mr.

John Paradias claims by Cross-Demand $3,500 as damages for alleged abusive proceedings on the basis of the claim of punitive damages taken against him by Landmark. [ 22 ] The additional amount of punitive damages was the ground for increasing the total initial amount claimed by Landmark and transferring the original proceeding from the Small Claims Division to the regular division of the Court of Quebec. [ 23 ] Landmark has already been condemned for that abusive conduct by the judgment rendered by Justice Lavigne. [3] That claim pre-existed the judgment of Justice Lavigne and Landmark should not be punished and sanctioned twice for the same abusive act.

Therefore, Mr. Paradias’ Cross-Demand will be dismissed, without costs. FOR THESE REASONS, THE COURT: DISMISSES Landmark Financial Group inc.’s claim; WITHOUT COSTS . GRANTS Johanne Petruzzelli’s Cross-Demand for the amount of $3,330.30, with legal interest of 5% per year, plus the additional

indemnity provided at

Article 1619 of the Civil Code of Quebec , starting from the date of the Cross-Demand, namely January 20, 2014; WITH JUDICIAL COSTS of $81.75 in favour of Johanne Petruzzelli. DISMISSES Plaintiff Landmark Financial Group Inc.’s claim against John Paradias; WITH JUDICIAL COSTS of $75.25 in favour of Mr. Paradias. DISMISSES John Paradias’s Cross-Demand; WITHOUT COSTS . __________________________________ Jeffrey Edwards, J.C.Q. Date of hearing: December 18, 2015