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Toronto-Dominion Bank c. Wise, C.S. Montréal 500-05-017477-967, 2000-05-24, AZ-50076264, B.E. 2000BE-908, juges John H. Gomery (4 p.).
1. Plaintiff claims $96,434.60 from the Defendant, alleged to be the amount of an overdraft in Defendant's bank account. Defendant denies owing any amount to Plaintiff and asks by way of cross-demand that the Bank be condemned to pay him $20,000.00, on the grounds that he estimates that he overpaid that amount when he discharged a loan that he had contracted. 2. The relationship between the parties goes back many years; Defendant was one of the principal officers and shareholders of Wise Stores Inc., an important customer of Plaintiff until its failure in 1995. In addition to the corporate account, Defendant and members of his family had personal bank accounts at the branch with which the business dealt. Defendant's personal account is evidenced by a signature card signed by him on October 7, 1982. 3. Plaintiff produces into the court record copies of the monthly statements sent to Defendant starting in January 1992; earlier records have apparently been mislaid or destroyed. In January 1992 Defendant is shown by the statement to be indebted to the bank by way of overdraft in the sum of $39,445.97, and each month thereafter the overdraft increases by the amount of the interest accrued on the overdraft and service charges. In February 1993 Defendant is shown by the statement to owe Plaintiff $42,592.03. 4. On February 26, 1993 Defendant borrowed $1,200,000.00 from the Bank to buy a residence. The loan was evidenced by a promissory note and was secured by certain securities registered in the name of Friskgesco Inc., Defendant's holding company, which were hypothecated in the Bank's favour. In subsequent months the overdraft in Defendant's bank account increased rapidly since the interest payments on the loan, as well as the interest on the overdraft, were charged to the account. 5. On April 30, 1993, one of the securities owned by Friskgesco Inc. matured, and the proceeds amounting to $281,189.35 were deposited in Defendant's bank account so as to reduce the loan by $225,000.00, the balance being applied to extinguish the overdraft. Accordingly, as of May 3, 1993, Defendant owed the bank the balance of the loan, $975,000.00, and there was no overdraft shown on the bank statement, but a credit balance of $2,189.35. 6. However, in the following months a new overdraft accumulated, representing the monthly interest payments due on the loan. Further payments in 1994 received from Friskgesco Inc. reduced the loan balance to $663,830.89. On January 30, 1995 the Bank received, as a result of the liquidation of a Friskgesco security, the sum of $680,544.00, which was applied to discharge the capital of the loan and to reduce the overdraft. For reasons that are unexplained, the Bank chose to impute these proceeds to the capital of the loan rather than to the payment of the interest that had accrued, treated as an overdraft, but nothing in the evidence suggests that the Bank intended to release Defendant from his obligation to pay the overdraft. A creditor is entitled to impute payments to capital rather than to interest; a debtor requires the consent of the creditor to do so (Article 1570 C.C.Q.). 7. In July 1995 Plaintiff called upon Defendant to pay the overdraft, and on April 9, 1996 it commenced the present action. 8. Defendant testifies that the overdraft in his bank account prior to 1992 arose in circumstances that have never been satisfactorily explained to him by Plaintiff, in spite of repeated requests. Eventually he decided to let the matter drop. He says that in recent years he did not even bother to open the monthly statements being sent to him in the mail. As far as he is concerned, when the bank loan of $1,200,000.00 was paid off in January 1995, he considered that he did not owe anything further to Plaintiff. He denies that the question of the overdraft was raised with him by officers of the Bank, or that he ever acknowledged owing it. 9. Defendant's testimony in this regard is contradicted by that of two bank officers, Denis Veilleux and Catherine Rychel, both of whom testify that annually they reviewed both the corporate account of Wise Stores and his personal accounts with Defendant, and that they specifically brought the overdrafts in his personal account, and in the accounts of members of his family, to his attention. According to their testimony, Defendant did not on these occasions protest that he was unaware of this indebtedness, or contest it. 10. The Court believes the testimony of the Bank's witnesses, and has serious reserves about the credibility of the Defendant. He must have known that he owed interest on the loan of $1,200,000.00. Since he did not pay it, interest was accruing to the Bank's credit, and would have to be paid eventually. 11. Since the bank statements show that the pre-existing overdraft was extinguished on April 30, 1993, the only sums owed by Defendant after that date, other than the capital of the loan, were for interest, or for interest on interest. Plaintiff's entitlement to recover interest was founded upon the promissory note signed by Defendant in February 1993. Although the note was remitted by Plaintiff to him when the capital of the loan was discharged, the obligation to pay interest on the loan was not extinguished in the absence of evidence of payment or that Plaintiff intended to release Defendant from that obligation. The Bank's records concerning the overdraft do not support an inference that such a release was given or intended. 12. Section 29(1) of the Canada Evidence Act (1985) R.S.C. chap. C-5, provides that the records of financial institutions shall be admitted as evidence of the accounts therein recorded, in the absence of evidence to the contrary. In other words, if bank statements are not shown by the bank's customer to be in error, they make proof of their contents: see Banque Nationale du Canada c. Simpson (1990) R.J.Q. 932 (C.A.). 13. In Crawford and Falconbridge Banking and Bills of Exchange, 8th edition, Toronto, Canada Law Book Inc. (1986) Vol. 1 at page 772, the authors write: 14. "It is well established that entries made by banks in passbooks and statements of account are not conclusive evidence of the facts set out in them. Rather, they have the same legal effect as any receipt: that is, they are prima facie evidence of the true state of the accounts between t he parties but may be challenged and shown by better evidence to be incorrect by either the customer or indeed, the bank. But if after such inquiry, nothing appears to require any change, the bank's statement of account should be confirmed. Some courts have laid special emphasis upon the fact that bank records are notoriously reliable." 15. Applying those principles to the present case, the Court concludes that the Defendant has not shown by persuasive evidence that the Plaintiff's records of the state of Defendant's indebtedness to the Bank are unreliable or incorrect. 16. Defendant also pleads that Plaintiff's recourse is prescribed. However the amounts claimed are for interest accruing from and after April 30, 1993. Since Plaintiff's action was commenced less than three years after that date, the claim is not prescribed (Articles 2925 and 2898 C.C.Q.). 17. FOR THESE REASONS, Plaintiff's action is maintained and Defendant is condemned to pay Plaintiff the sum of $96,434.60 with interest from the date of service, and costs.
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