Summary
41144
Kordel Korf v. Canadian Mortgage Servicing Corporation
(Saskatchewan) (Civil) (By Leave)
Keywords
Contracts — Commercial contracts — Guarantees — Whether court of appeal erred in interpreting guarantee — Limitation of actions — Whether respondent’s action statute-barred
Summary
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The applicant’s personal corporation borrowed money from the respondent. The applicant personally guaranteed the loan. The guarantee provided that the applicant was personally bound to any agreements collateral to the original commitment letter, and that each of the corporation’s defaults in respect of the loan gave rise to a new cause of action.
The corporation was unable to repay the loan on the maturity date, and the respondent demanded repayment by January 2, 2018. When the corporation defaulted, the corporation and respondent entered into a series of forbearance agreements. The applicant did not execute these agreements in his personal capacity. The last forbearance agreement expired on December 31, 2019, at which time the indebtedness was still outstanding. The respondent commenced an action against the applicant based on the guarantee on June 2, 2021. The applicant argued that because he did not execute the forbearance agreements personally, the two-year limitation period in respect of the guarantee expired on January 2, 2020 and the claim on the guarantee was statute-barred.
The trial judge dismissed the action, holding that the obligations of the corporation and the applicant as guarantor were distinct, and that there was no evidence that the applicant intended to bind himself personally to anything but the original covenant.
The Court of Appeal held that the applicant’s later intentions were irrelevant, since the terms of the original guarantee bound the applicant personally to future, collateral agreements concerning the debt, and provided that defaults under those future agreements give rise to fresh causes of action. Failing to give effect to these relevant contractual terms is an error of law. The last cause of action against the applicant therefore arose on December 31, 2019. The appeal was allowed.
Lower Court Rulings
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