



COURT OF APPEAL FOR ONTARIO

CITATION: D'Antonio v. Monaco, 2015 ONCA 274

DATE: 20150421

DOCKET: C57514

Sharpe, van Rensburg and Benotto JJ.A.

BETWEEN

Alvaro DAntonio

Plaintiff (Respondent)

and

Elio Monaco
, Roko Dzeko and 2167661
    Ontario Ltd.

Defendants (
Appellant
)

Micheal Simaan and Nathaniel Erskine-Smith, for the
    appellant

Rocco DiPucchio and Shaun F. Laubman, for the respondent

Heard: March 25, 2015

On appeal from the judgment of Justice Ruth E. Mesbur of
    the Superior Court of Justice, dated July 29, 2013, with reasons reported at 2013
    ONSC 5007, and from the costs order, dated October 1, 2013, with reasons
    reported at 2013 ONSC 6157.

Sharpe J.A.:

FACTS

[1]

The appellant Elio Monaco, the respondent Alvaro DAntonio and their
    friend Roko Dzeko entered into a business arrangement to acquire a property and
    to erect a large commercial sign on it. DAntonio could provide the financing,
    Monaco had experience in commercial real estate and Dzeko had some expertise in
    the commercial sign business.

[2]

The three men incorporated 2167661 Ontario Ltd. (216) to buy the
    property. They each acquired 100 shares, one third of 216s 300 issued shares.
    DAntonio provided $445,000 to 216. To secure that investment, Monaco and Dzeko
    signed promissory notes in favour of DAntonio for one third of that amount.
    They also signed Share Pledging Agreements as security for their promissory
    notes, giving DAntonio the right to forfeit their pledged shares upon written
    notice of default on the promissory notes. Finally, they each signed an
    Acknowledgment of Future Assumption of Unpaid Shareholders Loan (Assumption
    Agreement) promising to assume any unpaid debt to DAntonio of the other in exchange
    for receipt of the others shares. These agreements were executed in early
    April 2008.

[3]

In the initial stages, the project encountered legal and consequent
    financial difficulties and more funds were required from the shareholders.
    Dzeko was unable to satisfy those calls and, on December 13, 2008, he agreed to
    sign an Ownership Alteration Agreement in favor of DAntonio and Monaco. That
    agreement provided that if Dzeko failed to provide the funds to 216 by December
    15, 2008, 100% of his interest in 216 shall be transferred and be divided
    equally between DAntonio and Monaco. Dzeko failed to provide the funds and he
    was no longer involved in the business.

[4]

Monaco assumed responsibility for managing the property. He arranged a
    profitable lease for the erection of a commercial sign and another lease for a building
    on the land. DAntonio disputed Monacos management of the property and the
    management fees he was paying himself.

[5]

Of the $222,500 Monaco owed DAntonio - for the one third interest in
    216 that he acquired in the initial deal and for his half of Dzekos shares acquired
    pursuant to the Ownership Alteration Agreement - Monaco paid DAntonio $100,000
    on November 12, 2009, and a further $100,000 on March 2, 2010. He withheld
    payment of the remaining $22,500 he owed.

[6]

DAntonio commenced this action in December 2010 claiming, among other
    things, breach of fiduciary duty, oppression, and repayment of excessive
    management fees. He also sought a declaration that he was the sole owner of all
    the shares of 216, or, alternatively, the owner of two thirds of the shares.

[7]

The trial judge allowed the claims for breach of fiduciary duty and
    oppression, and made several specific remedial orders including ordering
    repayment of certain management fees. The trial judge rejected DAntonios
    claims for 100% or 66.67% ownership of the shares. She found that Monaco was
    only entitled to the shares he had paid for and accordingly declared DAntonio
    to be the owner of 55% of the shares. She also ordered a shot-gun buy-sell
    arrangement of 216s shares with Monaco making the buy-sell offer.

[8]

In a separate costs order, the trial judge ordered Monaco to pay costs
    fixed at $145,000 all inclusive.

ISSUES

[9]

The only issues raised by Monaco on appeal are the declaration as to
    ownership of the shares in 216 and a related issue as to costs of the trial.
    Monaco argues that the trial judge erred in failing to declare the parties to
    be 50% owners of the shares provided he (Monaco) satisfied the outstanding
    balance of his indebtedness, namely, $22,500. Needless to say, 5% of the shares
    of 216 now have a value substantially greater than $22,500.

ANALYSIS

[10]

Monacos
    argument is that he acquired half of Dzekos shares by virtue of the operation
    of the Ownership Alteration Agreement, and that the trial judge erred in law in
    finding that his failure to pay the outstanding $22,500 allowed DAntonio to
    forfeit or otherwise acquire more than 50% of the shares.

[11]

For
    the following reasons, I am unable to agree with that submission.

[12]

The
    interpretation of the relevant agreements and the intentions of the parties was
    a question of mixed fact and law and deference is owed to the decision of the
    trial judge:
Sattva Capital Corp. v. Creston Moly Corp
., 2014 SCC 53, [2014]
    2 S.C.R. 633, at para. 50. In my view, the trial judges interpretation and the
    result she reached were entirely reasonable in the circumstances of this case.

[13]

Monaco
    argues that the Ownership Alteration Agreement simply states that one half of
    Dzekos shares were transferred to him upon Dzekos default and that there is
    nothing else in that agreement that permits DAntonio to forfeit all or any of
    those shares for non-payment of the promissory notes. Monaco concedes that when
    he acquired Dzekos shares by virtue of the Ownership Alteration Agreement it
    was an implied term that he assumed responsibility for 50% of the debt which
    Dzeko owed to DAntonio, but he submits that the Share Pledging Agreement and
    the forfeiture provisions in that agreement do not apply to the shares assigned
    by Dzeko. Monaco also submits that, in any event, DAntonio did not give the written
    notice required to trigger forfeiture under that agreement.

[14]

I
    am unable to accept Monacos submission that it is possible to read the
    Ownership Alteration Agreement as a stand-alone contract that confers rights
    unqualified by the Share Pledging Agreements and the Assumption Agreements. I
    agree with what is implicit in the trial judges assessment of this issue,
    namely, that the Ownership Alteration Agreement is simply one piece of a larger
    contractual matrix that includes the promissory notes, the Share Pledging
    Agreements and the Assumption Agreements.

[15]

The
    most obvious point is that the Ownership Alteration Agreement makes no
    reference to the indebtedness associated with Dzekos shares. As I have
    mentioned, Monaco concedes that it was an implied term of the Ownership
    Alteration Agreement that he assumed responsibility for half of Dzekos debt to
    DAntonio. The terms of that debt could only be determined by reference to the
    promissory notes, the Share Pledging Agreements, and the Assumption Agreements.
    I find it impossible to see how Dzekos shares could be transferred pursuant to
    the Ownership Alteration Agreement unburdened by the security afforded by the
    Share Pledging Agreements. DAntonio had bargained for security for the debt
    attributable to the shares and there is nothing in the dealings between the
    parties or in the wording of the Ownership Alteration Agreement to support the
    contention that DAntonio surrendered that security.

[16]

In
    other words, to understand all the rights and obligations pertaining to the
    shares in 216, it is necessary to read all of these agreements as a whole.
    Monaco acquired Dzekos shares by operation of the Ownership Alteration
    Agreement, but he was obliged to pay for those shares by the Assumption
    Agreement and the shares were subject to DAntonios security for the debt by
    virtue of the Share Pledging Agreement.

[17]

Monaco
    relies on para. 45 of the trial judges reasons, where she stated:

The Ownership Alteration Agreement did not provide for any
    requirement that Monaco pay for Dzekos shares, or any timetable for his doing
    so. It seems to me there would be no legal basis for DAntonio simply to assert
    that he now owned all of Dzekos shares.

[18]

The
    trial judges rejection of DAntonios claim to all Dzekos shares as being
    inconsistent with the contractual documents does not dispose of the very
    different claim being advanced by Monaco on appeal. Nor should this portion of
    her reasons be read in isolation or without regard to the position taken by
    Monaco at trial. Both in his statement of defence and in his evidence, Monaco
    admitted that he made the $200,000 of payments pursuant to the Acknowledgement
    of Debt and promissory note. In my view, there is nothing in para. 45 of the
    trial judges reasons inconsistent with the proposition that Monaco acquired
    the Dzeko shares subject to the burdens imposed by the Share Pledging Agreement,
    which gave DAntonio the right to retain shares that had been pledged in the
    event of non-payment.

[19]

I
    see no basis to interfere with the trial judges finding that the statement of
    claim amounted to written notice sufficient to trigger the forfeiture provision
    of the Share Pledging Agreement. This was a factual finding which attracts
    deference on appeal. The statement of claim gave unequivocal notice that
    DAntonio claimed forfeiture of the shares. Monaco made no attempt to pay the
    $22,500 owing for more than two years. The trial judge reasonably found, at
    para. 113 of her reasons, that while Monaco was entitled to a reasonable period
    of time to make the payment after receiving written notice, more than two years
    was beyond a reasonable period.

[20]

The
    appeal as to costs is contingent upon success on the substantive issue and as I
    would dismiss the substantive appeal, I would also dismiss the costs appeal.

DISPOSITION

[21]

Accordingly,
    I would dismiss the appeal and award costs to the respondent in the agreed
    amount of $22,000, inclusive of disbursements and taxes.

Released: April 21, 2015

(RJS)                                                                      
    Robert J. Sharpe J.A.

I
    agree K. van Rensburg J.A.

I agree M.L. Benotto J.A.


