Dutil, Gagnon, Hardy

Appeals from a judgment of the Superior Court dismissing an application for an amount of money and to call in warranty. The principal appeal is allowed ($177,927) and the incidental appeal dismissed.

In 2014, the appellant and 9296-8858 Québec inc. signed a contract of leasing concerning a harvester and a Waratah “head”. These two pieces of equipment were voluntarily given to the appellant in 2018 due to the financial difficulties of 9296, which subsequently made an assignment of its property. The outstanding balance at the time was $262,000. The appellant sold the two pieces of equipment and credited their net sale price to the respondents, then claimed the unpaid balance ($153,237) from them based on the suretyship securing 9296’s obligations. The trial judge rejected all of the respondent’s defences except for the one claiming that the suretyship had been extended beyond the limits for which it had been contracted (art. 2343 Civil Code of Québec (S.Q. 1991, c. 64) (C.C.Q.)). The judge noted that 9296’s ability to pay had been altered by the addition of new leasing contracts, which increased the respondents’ risk. The judge therefore released them from their obligations under the suretyship.

In this case, the suretyship applied only to the contract of leasing signed in 2014, which concerned only two pieces of equipment. The financing granted to acquire the equipment covered by the new leasing contracts did not amplify the obligation secured. The suretyship was therefore not extended beyond the limits for which it had been contracted. Rather than increasing, the risk agreed to by the respondents had decreased.

The judge also did not find that their obligations under the suretyship had been extended due to a fault by the appellant in performing its obligations under the contract of leasing. No fault was alleged against the appellant and its good faith was not questioned, even with respect to the subsequent financings. The respondents’ arguments that the cross-guarantee agreement extended the suretyship beyond the limits for which it had been contracted or, at the very least, increased their risk and changed, to their disadvantage, the rules for imputing payments received for the various equipment financed by the appellant should also be rejected. Moreover, as the appellant states, article 2343 CCQ was misinterpreted. Therefore, the Court need not rule on the ground of appeal that the appellant had a duty to advise.

The respondents have failed to identify any palpable and overriding error by the judge regarding their ground concerning the duty to inform. Nothing proves that they would have been in a better position had the appellant reminded them of what they could not have been unaware, that the suretyship had never been cancelled. As to the extrajudicial fees of $24,690 the appellant asks to be reimbursed under a clause in the leasing contract, the case law establishes that these clauses are enforced provided the fees claimed are reasonable, which they are in this case.

Legislation interpreted: article 2343 CCQ

Text of the decision: http://citoyens.soquij.qc.ca