



COURT OF APPEAL FOR ONTARIO

CITATION: Marshallzehr Group Inc. v. Callidus Capital
    Corporation, 2017 ONCA 371

DATE: 20170505

DOCKET: C62398

Doherty, Benotto and Trotter JJ.A.

BETWEEN

Marshallzehr Group Inc.

Applicant (Respondent)

and

Callidus Capital Corporation

Respondent (Appellant)

Stephen Schwartz, for the appellant

J. Greg Murdoch, for the respondent

Heard and released orally:  April 27, 2017

On appeal from the judgment of Justice D.J. Gordon of the
    Superior Court of Justice, dated June 13, 2016.

ENDORSEMENT

[1]

The parties agree that the application judge properly identified the
    applicable legal principles at para. 6 of his reasons.  The parties also agree
    that the application judge accurately summarized the relevant background facts.

[2]

The outcome on the application and indeed on this appeal turns on the
    application of the well-established legal principle to the entirety of the
    circumstances as revealed by the evidence on this application.

[3]

Counsel for the appellant (mortgagee) ably argues that the application
    judge misinterpreted the terms of the forbearance agreement, the crucial
    document in this case, and that he drew certain unreasonable factual inferences
    from the totality of the evidence.

[4]

We do not agree.  As counsel for the respondent (mortgagor) concisely
    put it, after the forbearance agreement was in place, the mortgagor had
    virtually no control over the property.

[5]

We do not accept that the application judge misread the forbearance
    agreement.  We read the agreement as he did and note, in particular, the
    following:

·

the mortgagee had control over the sale of the property;

·

the mortgagee had control over whether any capital improvements
    could be made on the property;

·

the mortgagee had effective control over the ongoing relationship
    with the tenant in the building; and

·

the mortgagee had control over the cash flow generated by the
    property.  Any funds received by the mortgagor were held in trust for the
    mortgagee under the terms of the forbearance agreement.  Those funds had to be
    deposited into the designated blocked account and at that point became the
    property of the mortgagee.

[6]

The application judges ultimate factual finding appears at para. 16:

The purpose of this forbearance agreement was for Callidus (the
    mortgagee) to obtain complete control of the property and the business
    operation of Cheese Factory and the related corporations.  The critical term of
    the agreement was the enhanced security not previously available to BMO.  I am
    not persuaded this was merely a situation of rent payments going to the
    mortgagee. Callidus controlled every decision, including lease renewal, repairs
    and marketing.

[7]

We see no error in the trial judges findings in para. 16.  Certainly,
    the effect of the forbearance agreement was to give the mortgagee total
    control.  The mortgagee proceeded to exercise that control.

[8]

In terms of the broader implications that counsel for the appellant says
    will flow from the application judges decision, we emphasize, as did the
    application judge, that the findings are limited or are based on the specific
    facts of this case.  The application judges ultimate conclusion was not based
    solely on the language of the forbearance agreement.  As he said, at para. 17,
    Not every forbearance agreement puts a mortgagee in control.  This agreement
    and the conduct of the parties does.

[9]

The appeal is dismissed.   The parties agree that the successful party,
    the respondent, should have its costs in the amount of $15,000, inclusive of
    relevant taxes and disbursements.

Doherty J.A.

M.L. Benotto J.A.

G.T.
    Trotter J.A.


