Chapin Estate v. Drum Head Estates Ltd., 2010 NSSC 447

SUPREME COURT OF NOVA SCOTIA Citation: Chapin Estate v. Drum Head Estates Ltd., 2010 NSSC 447 Date: 20101201 Docket: Hfx No. 262472 Registry: Halifax Between: George E. Mills, Jr., Trustee of the Estate of Stephen Beal Chapin, a bankrupt Plaintiff and Drum Head Estates Limited, Celia McClure, and Angela Chapin Defendants LIBRARY HEADING Judge : The Honourable Justice C. Richard Coughlan Heard: December 1, 2010 (in Chambers), in Halifax, Nova Scotia Decision: December 1, 2010 (Orally) Written Release of Decision: January 25, 2011

Subject: Limitation of Actions - Disallowance of Defence

Summary: Mr. Chapin and his wife entered into a separation agreement. Mr. Chapin defaulted and his wife entered judgment against him in New York. On August 14, 1996 a document purporting to be a promissory note in which Drum Head Estates acknowledged an indebtedness to Mr. Chapin was signed. On August 27, 1999 Mr. and Ms. Chapin entered into an agreement settling matters between them. Ms. Chapin was subsequently informed Mr. Chapin had assets in Nova Scotia, and she commenced action against Mr. Chapin in Nova Scotia. The Nova Scotia action was stayed pending the outcome of an action between Mr. and Ms.

Chapin in New York. In March, 2003 the New York action was concluded. Mr. Chapin made a voluntary petition in bankruptcy in Florida on February 12, 2004, which listed the promissory note as personal property of Mr. Chapin. The trustee in bankruptcy commenced an action in this Court on February 14, 2006, claiming payment of the promissory note. A defence was filed and an amended defence filed in September, 2010 pleading the Limitation of Actions Act . Issue: Should the limitation of actions defence be disallowed? Result: Motion allowed.

Considering the facts of the case, the factors set out in s. 3(4) of the Limitation of Actions Act and the degree to which the plaintiff and defendants are prejudiced by disallowing the time limitation, this is a proper case to disallow the defence based on the time limitation. THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET . SUPREME COURT OF NOVA SCOTIA Citation: Chapin Estate v. Drum Head Estates Ltd., 2010 NSSC 447 Date: 20101201 Docket: Hfx No. 262472 Registry: Halifax Between: George E.

Mills, Jr., Trustee of the Estate of Stephen Beal Chapin, a bankrupt Plaintiff and Drum Head Estates Limited, Celia McClure, and Angela Chapin

Defendants Judge: The Honourable Justice C. Richard Coughlan Heard: December 1, 2010 (in Chambers), in Halifax, Nova Scotia Decision: December 1, 2010 (Orally) Written Release of Decision: January 25, 2011 Counsel: Geoffrey A. Saunders and Marc Dunning, for the plaintiff G. F. Philip Romney, for the defendants Coughlan, J. : (Orally) [ 1 ] George E.

Mills, Jr., trustee of the estate of Stephen Beal Chapin, a bankrupt, moves for an order pursuant to s. 3(2) of the Limitation of Actions Act, R.S.N.S. 1989, c. 258, to disallow the defence of Drum Head Estates Limited, Celia McClure and Angela Chapin, based on time limitation. [ 2 ] Stephen Beal Chapin signed a voluntary petition in bankruptcy in the State of Florida, United States of America, on February 12, 2004. In

schedule “B” to the petition is listed as personal property of Mr. Chapin, “Promissory Note from Drum Head Estates ($463,000.00 Canadian)”. [ 3 ] Mr. Chapin and Ann Chapin were married January 29, 1969. They separated and entered into a separation agreement dated May 15, 1986. Mr. Chapin defaulted under the terms of the separation agreement and Ms. Chapin obtained judgment in the amount of $296,118.21, together with interest, in the Supreme Court of the State of New York on November 14, 1994. [ 4 ] On August 14, 1996, Mr.

Chapin, David Cameron, president of Drum Head Estates Limited, and Nancy Sherwood, secretary of Drum Head Estates Limited, signed a document purporting to be a promissory note, wherein Drum Head Estates Limited acknowledged an indebtedness to Mr. Chapin in the approximate amount of $463,000.00. [ 5 ] On August 27, 1997, Mr. and Ms. Chapin executed a stipulation of settlement, settling matters between them. On August 21, 1998, Ms. Chapin was informed Mr. Chapin had assets in Nova Scotia and she commenced action against Mr. Chapin in August, 1998.

The Nova Scotia action was stayed pending a determination of an action in New York State determining the validity and enforceability of the stipulation of settlement agreement. In an affidavit filed in the stay application, Mr. Chapin stated: 31. Over the years I have injected approximately $484,000.00 into Drum Head. Included in such monies have been the closing funds

for the Ovens, the “Burns” and “Cook” lots, legal fees, operating costs, etc. Such sum does not include interest at 10 percent per annum. 32. Attached hereto and marked as Exhibit “C” is a true copy of a Promissory Note dated the 14th of August, 1996, executed by Cameron, Sherwood and me. The said Promissory Note was prepared and witnesses by Brock Junkin, C.A. (“Junkin”), the accountant for Drum Head. [ 6 ] In his decision regarding the stay, Hall, J. stated: In

summary, the application for a stay pending a determination of the validity and enforceability of the stipulation of settlement agreement and the New York judgment by the Supreme Court of the State of New York is granted, subject to the condition that the applicant shall not divest himself of or further encumber his Nova Scotia assets, in particular, any interest he has in Drum Head Estates Inc., and the Ovens Park, until further order of this Court. [ 7 ] Eventually on March 26, 2003, the New York proceeding concluded and the stipulation of settlement was set aside. [ 8 ] The trustee in Mr.

Chapin’s bankruptcy commenced an action in this Court on February 14, 2006, claiming payment of the promissory note from Drum Head. The originating notice (action) and statement of claim were amended October 24, 2006. A defence was filed and an amended defence filed in September, 2010. In the amended defence, the Limitation of Actions Act , supra, is pleaded as a defence and, in particular, s. 2(1) (e). [ 9 ] The trustee brings this motion to disallow the limitation defence. [ 10 ] The Limitation of Actions Act , supra, provides: Limitation periods 2

(1) The actions mentioned in this

Section shall be commenced within and not after the times respectively mentioned in such Section, that is to say: . . . . (

e) all actions grounded upon any lending, or contract, expressed or implied, without speciality, or upon any award where the submission is not by specialty, or for money levied by execution, all actions for direct injuries to real or personal property, actions for the taking away or conversion of property, goods and chattels, actions for libel, malicious prosecution and arrest, seduction and criminal conversation and actions for all other causes which would formerly have been brought in the form of action called trespass on the case, except as herein excepted, within six years after the cause of any such action arose; . . . . Disallowance or invocation of time limitation 3

(1) In this Section, (a) “action” means an action of a type mentioned in subsection (1) of

Section 2;

(b) “notice” means a notice which is required before the commencement of an action; (c) “time limitation” means a limitation for either commencing an action or giving a notice pursuant to (

i) the provisions of

Section 2, (ii) the provisions of any enactment other than this Act, (iii) the provisions of an agreement or contract.

(2) Where an action is commenced without regard to a time limitation, and an order has not been made pursuant to subsection (3), the court in which it is brought, upon application, may disallow a defence based on the time limitation and allow the action to proceed if it appears to the court to be equitable having regard to the degree to which (

a) the time limitation prejudices the plaintiff or any person whom he represents; and (

b) any decision of the court under this

Section would prejudice the defendant or any person whom he represents, or any other person. . . . .

(4) In making a determination pursuant to subsection (2), the court shall have regard to all the circumstances of the case and in particular to (

a) the length of and the reasons for the delay on the part of the plaintiff; (

b) any information or notice given by the defendant to the plaintiff respecting the time limitation; (

c) the extent to which, having regard to the delay, the evidence adduced or likely to be adduced by the plaintiff or the defendant is or is likely to be less cogent than if the action had been brought or notice had been given within the time limitation; (

d) the conduct of the defendant after the cause of action arose, including the extent if any to which he responded to requests reasonably made by the plaintiff for information or inspection for the purpose of ascertaining facts which were or might be relevant to the plaintiff’s cause of action against the defendant; (

e) the duration of any disability of the plaintiff arising after the date of the accrual of the cause of action; (

f) the extent to which the plaintiff acted promptly and reasonably once he knew whether or not the act or omission of the defendant, to which the injury was attributable, might be capable at that time of giving rise to an action for damages; (

g) the steps, if any, taken by the plaintiff to obtain medical, legal or other expert advice and the nature of any such advice he may have received.

. . . .

(6) A court shall not exercise the jurisdiction conferred by this

Section where the action is commenced or notice given more than four years after the time limitation therefor expired.

(7) This

Section does not apply to an action where (

a) the time limitation is ten years or more; or (

b) the time limitation is contained in the Mechanics’ Lien Act . R.S., c. 258, s. 3. [ 11 ] In this case the “promissory note” was executed August 14, 1996 and the action commenced by the trustee February 14, 2006 - more than six years after execution of the note, but less than 10 years. Therefore, I must determine, considering all of the circumstances of the case, the degree to which the time limitation prejudices the plaintiff and the prejudice to the defendants and, in particular, the items set out in s. 3(4) (

a) to (

g) of the Limitation of Actions Act . Section 3(4)(a) - the length of and the reasons for delay on the part of the plaintiff [ 12 ] Mr. Chapin made a voluntary petition into bankruptcy on February 12, 2004. At that time, the trustee was aware of the promissory note. The claim was filed February 14, 2006. From August 14, 1996 to February 12, 2004, Mr. Chapin took no action to enforce the debt. Of course, he was involved in litigation with Ann Chapin in which Ms. Chapin was attempting to realize on the judgment she had against Mr. Chapin.

The trustee commenced the action approximately two years after being aware of the claim, which is not an inordinate delay. Section 3(4)(b) - any information or notice given by the defendant to the plaintiff respecting the time limitation [ 13 ] The defendants did not provide any information or notice to the plaintiff respecting the limitation until the amended defence was filed in 2010.

Section 3(4)(c) - the extent to which, having regard to the delay, the evidence adduced or likely to be adduced by the plaintiff or the defendant is or is likely to be less cogent than if the action had been brought or notice had been given within the time limitation [ 14 ] As a result of the various court proceedings in Nova Scotia and New York, evidence has been preserved which in this case lessens the impact of the passage of time.

Section 3(4)(d) - the conduct of the defendant after the cause of action arose, including the extent if any to which he responded to requests reasonably made by the plaintiff for information or inspection for the purpose of ascertaining facts which were or might be relevant to the plaintiff’s cause of action against the defendant [ 15 ] On January 11, 2008 an order was issued requiring the defendants to file their list of documents by February 8, 2008. An order was granted on August 15, 2008 requiring the defendants answer the plaintiff’s interrogatories dated March 19, 2008 by August 29, 2008.

On September 15, 2010 an order was issued ordering the defendant, Angela Chapin, to attend at a discovery on September 22,

2010. The plaintiff has had to obtain orders of the court to move this matter forward. Section 3(4)(e) - the duration of any disability of the plaintiff arising after the date of the accrual of the cause of action [ 16 ] This factor does not apply to this proceeding.

Section 3(4)(f) - the extent to which the plaintiff acted promptly and reasonably once he knew whether or not the act or omission of the defendant, to which the injury was attributable, might be capable at that time of giving rise to an action for damages [ 17 ] As I previously stated, the trustee commenced the action in a timely manner after becoming aware of the claim.

Section 3(4)(g) - the steps, if any, taken by the plaintiff to obtain medical, legal or other expert advice and the nature of any such advice he may have received [ 18 ] The trustee took the necessary steps to commence and prosecute the action, and obtain the necessary advice required to deal with the claim. [ 19 ] The evidence does not show the defendants will suffer prejudice if the time limitation defence is disallowed. [ 20 ] Considering the facts of this case, the degree to which the plaintiff and defendants are prejudiced by disallowing the time limitation defence, and the factors set out in s. 3(4) of the Limitation of Actions Act , supra, I find this is a proper case to disallow the defence based on the time limitation. [ 21 ] The motion is allowed. [ 22 ] I award the applicant costs in the amount of $750.00 in the cause. __________________________ Coughlan, J.