Mortgage Broker

CMB MAGAZINE cmba-achc.ca winter 2018 | 29 The recenT new Brunswick case of Pirie Potato Company v Forco Ventures et al, 2017 NBQB 124 demonstrates some of the key points of the previous article. whaT happened? Pirie Potato Company (Potato Company) sued to enforce two outstanding loans, jointly against Forco Ventures and Pat Hill (Hill). Under the first loan, Potato Company advanced $200,000 to Forco Ventures. The written agreement provided for monthly payments, with the balance to be paid upon the completion and sale of a house. Hill provided a personal guarantee/ covenant as follows: All obligations and performance thereof under this agreement be and are hereby guaranteed by Patrick Hill in the same manner and to the same extent as if he was a covenantor hereunder. Under the second loan, Potato Company advanced $205,000 to Forco Ventures. There was no written agreement. The parties agreed that all promises in the first loan would apply as well to this agreement, except for Hill's personal guarantee/covenant. Forco Ventures failed to repay the loans as required. Mr. Pirie (Pirie), on behalf of Potato Company, demanded payment of the loans by: n going to Hill's residence and asking for his money. (Hill indicated that he could not pay but he told Pirie that "he would cut off his left leg before letting anything happen to your (Potato Company) investment.") n speaking with Hill's wife on another occasion and saying he needed money. (Hill never got back to Pirie about the debt.) n again going to Hill's home and indicating to him "I want my money." (This was apparently after an auction had been held to sell Forco Venture's equipment.) The loans were not paid off and Potato Company asked the Court to enforce the obligations of Forco Ventures and Hill. In making orders against Forco Ventures, the Court made the following comments about guarantees. decision A guarantee obligation can be any legally enforceable obligation imposed by law or contract that is owed to a creditor if the principal fails to perform that obligation as required. Hill guaranteed the first loan but not the second. Generally, a demand for payment must be made under a guarantee before the contractual obligation (that is, the guarantee) can be enforced. Regardless, in this case the guarantee did specify that a demand was required for the guarantor to pay the debt owing. Pirie made the verbal demand to Hill. The demand must be clear and unequivocal. The demand in this case was clear and unequivocal. When Pirie found out that the assets of Forco were being auctioned, he did make a demand for payment in full to Hill and he described clearly how upset he was at that point. Where the guarantee agreement does not specify that a written demand for payment is required, a verbal demand is sufficient. Although the demand in this case was not eloquent and was made in anger, it satisfied the criterion of a verbal demand. The Court said that Forco Ventures was liable concerning both loans; Hill was liable for his personal guarantee under the first loan; and Hill was not personally responsible for the second loan. $ the language in the agreement should be consistent in establishing the obligation of the third party as those of either a guarantor or a covenantor.

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