2011 ONSC 3384, 2011 ONSC 3384

CITATION : Furniture Brands International v. The Upper Room Home Furnishings , 2011 ONSC 3384 COURT FILE NO.: 09-46567 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: ) ) FURNITURE BRANDS INTERNATIONAL, INC. and BROYHILL FURNITURE INDUSTRIES INC. )) Nancy Brooks, Blake, Cassels & Graydon LLP for the Plaintiffs ) Plaintiffs ) ) - and - ) ) ) THE UPPER ROOM HOME FURNISHINGS INC. and ALLAN NOLAN ) ) ) Marcia A. Green, Brazeau Seller LLP, for the Defendants ) Defendants ) ) ) ) HEARD: May 31, 2011 ENDORSEMENT KEALEY J. 1 . The Plaintiffs move for

summary judgment against the Defendants arising from their commercial contractual relationship. Under a dealer agreement, the Plaintiffs, from October 2003, supplied furniture products to the Defendant Company which was required to sell exclusively, the Plaintiffs products, in its retail store designated as a “Broyhill Home Collections Store”. The Defendant, Allan Nolan was at all material times, the President of the Defendant Company, Upper Room Furnishings Inc. in its predecessor corporation Upper Room Alliance Group Limited.

Broyhill Furniture Industries Inc. is a subsidiary of its co-Plaintiff, Furniture Brands International Inc. 2 . Upper Room apparently encountered financial difficulties and by the month of May 2008, its account with the Plaintiffs was seriously delinquent. It owed the sum of $2, 213, 129.91 for products ordered and received.

A dispute arose between the parties as to actual amount owing and negotiations to settle their differences took place over the summer and fall, resulting in a resolution of the Plaintiff’s claims which was detailed in a Letter Agreement dated November 24, 2008 in which the parties agreed as follows: 1. The Plaintiffs would waive repayment of the amount of U.S. $870,341.98 leaving the total amount owing to the Plaintiffs U.S. $1,342,787.93. This was referred to in the Letter Agreement as the account balance which was made up of:

a) The portion of the account balance already past due as of October 31, 2008 in the amount of U.S. $823.237.39 described as the past due account balance.

b) Amounts invoiced by the Plaintiff but which as of the date of October 31 had not yet become past due, equal to $519,550.54 described as the current account balance. 2. Upper Room and Mr. Nolan jointly and severely were liable to pay the past due account balance in consecutive weekly installments of at least $75,000.00 U.S be paid completely by January 23, 2009. 3. The current account balance was to be paid within 60 days of the date of each invoice. 4. Upper Room was to follow the standard credit procedures for requesting credits in respect of damage or defective products ordered after November 24, 2008. 5.

Upper Room was to deliver financial statements to Furniture Brands on a quarterly basis. 6. The Upper Room Alliance Group, its director’s officers and employees, and Nolan waived any and all claims alleged claims they may have against Broyhill or Furniture Brands. 7. The Plaintiff agreed that it would continue to extend credit to the Defendant Company. 3 . Thereafter, the Plaintiffs’ applied all payments received from Upper Room, in accordance with their instructions.

As directed, payments would be applied against current account balance invoices before the past due account balance was fully paid, and as per Upper Rooms’ instructions against new purchase invoices before either the past due account balance or the current account balance was fully paid. 4 . The Defendants failed to pay the past due account balance in full by January 23, 2009 and also, failed to pay the current account balance as it came due. They were advised of their breach of the Letter Agreement.

Nevertheless, in late January 2009, in an effort to continue the commercial relationship and expressly without prejudice to their rights under the Letter Agreement, the Plaintiffs agreed to continue business with the Defendants on the condition that they made weekly payments of at least $25,000.00 to be applied to the past due account balance. At this point, Upper Room was entitled only to make new purchases in the amount its weekly payments exceeded the minimum $25,000.00.

Upper Room made weekly payments in the above amount for most weeks between January 23 and April 20, 2009, however, contrary to the parties, a dealership agreement, the Plaintiffs learned that Upper Room began to sell furniture from other suppliers in its store. As a result after discussions, the parties terminated their commercial relationship by April 30, 2009. 5 . The record before me discloses the details of all invoices posted after the Letter Agreement and monies received. Thus, the method of calculating the amounts claimed by the Plaintiffs in this motion is clear. 6 .

The Defendants contend that the November 24 th Letter Agreement did not resolve all outstanding disputes regarding payments owed and suggest that it was signed by the Defendants due to economic duress. In my view, it is rather obvious that the Letter Agreement settled the amounts owing by the Defendants to the Plaintiffs, and resolved all outstanding claims between them as of October 31, 2008, and I so find. Furthermore, there is no basis for the suggestion that economic duress was present on the facts for the following reasons: 1.

There was a clear waiver by the Defendants to the Plaintiffs of any outstanding claims up to October 31, 2008. 2. Mr. Nolan read and signed the Letter Agreement. 3. He had prior independent legal advice and had proposed certain changes to the contents of the agreement but these were not accepted by the Plaintiffs. 4. It is obvious on the record that for some time the Defendants abided by the terms of the agreement which was in place.

5. The Defendants took no action to claim the agreement was not valid until they did so after the within action was commenced. 6. Both parties were experienced in business dealings and negotiated the agreement in question with independent legal advice. 7 . The Defendants argued that there was an issue about credits due to them in relation to the post-Letter Agreement period. They alleged that substantial credits had not been received. Apparently, Mr. Ghosh, on behalf of the Plaintiffs, asserted a claim for $420,520.63 being owed in post-Letter Agreement credits.

The total of new purchases in that same period was $561,020.84. I agree with the suggestion by the Plaintiffs that such a claim was not credible. On May 15, and then later in July, the Plaintiffs received two boxes of documents which were the basis for the credits outstanding, as suggested by the Defendants. As explained by Ms. Becker, the operations manager for Furniture Brands, she and another employee painstakingly went through all of the documents in the boxes which had been received and identified the following: 1. The amount of $283,204.39 related to pre-Letter Agreement inventory. 2.

Credits had been requested in the amount of $151,134.23 relating to new purchases. 3. Most were unsupported by the appropriate documentation or related to deluxing services or damages not attributable to the Plaintiffs. 4. Even though the proper procedure with respect to the credit policy was not followed, she identified that out of the boxes, there was a total of $9, 538.60 and these were deducted from the total amount claimed in the

summary judgment. 5. She also identified that there were duplicate claims arising from the information in the boxes which totaled $21, 681.46. 8 . Considering the affidavit evidence in the record and the cross-examinations on that evidence, I am of opinion that it is reasonable to infer that there is no triable issue with regard to the suggested post-letter agreement credits made after the termination the parties’ relationship. 9 . A question arose as to whether the Defendants had received credits for Vantana product. Ms.

Becker was asked whether credit memos in regard to this company had been forwarded to the Defendants. An undertaking was given to produce copies of the credit memos, and the record indicates it was fulfilled, and that credits for Vantana product in the amount of some $48,000.00 were issued to the Defendants between July 2008 through March 30, 2009. Thus the record clearly negates the submission that there was some issue outstanding in regard to such a claim. 10 . For the aforesaid reasons, the Plaintiff’s motion for

summary judgment is granted: 1. The Plaintiff shall have judgment against the corporate Defendant in the amount of $733,825.80 in U.S. funds. 2. The Plaintiff shall have judgment against Allan Nolan in his personal capacity, jointly and severally with the corporate Defendant for the amount of $114,141.61 U.S funds. 3. There shall be pre-judgment interest on the amounts set out in 1 and 2, calculated at the rate of 5% per annum from November 24, 2008 and, post-judgment interest on the said amounts at the same rate from the date of judgment. 11 .

The Plaintiffs shall have their costs of the motion and, in the event that the parties cannot agree on same, I will fix the costs payable including the claims for attendance money after receiving the parties submissions in this regard which shall be no more than five pages in length and received on or before June 24 th next.

___________________________ Mr. Justice Roydon Kealey Released : June 14, 2011 CITATION : Furniture Brands International v. The Upper Room Home Furnishings , 2011 ONSC 3384 COURT FILE NO.: 09-46567 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: FURNITURE BRANDS INTERNATIONAL, INC. and BROYHILL FURNITURE INDUSTRIES INC. Plaintiffs - and – THE UPPER ROOM HOME FURNISHINGS INC. and ALLAN NOLAN Defendants REASONS FOR JUDGMENT Mr. Justice Roydon Kealey

Released : June 14, 2011