Valentine v. Toronto-Dominion Bank, (2002) 163 O.A.C. 66 (CA)

• Judge: Finlayson, Doherty and MacPherson, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: May 22, 2002
• Jurisdiction: Ontario
• Citations: (2002), 163 O.A.C. 66 (CA)

Valentine v. TD Bk. (2002), 163 O.A.C. 66 (CA)

MLB headnote and full text

Temp. Cite: [2002] O.A.C. TBEd. SE.031

The Toronto-Dominion Bank (defendant/plaintiff-by-counterclaim/appellant) v. Margaret Valentine and the Estate of Peter Valentine, by its personal representative, Margaret Valentine (plaintiffs/defendants-by-counterclaim/respondents)

(C34591)

Indexed As: Valentine v. Toronto-Dominion Bank

Ontario Court of Appeal

Finlayson, Doherty and MacPherson, JJ.A.

September 13, 2002.

Summary:

A bank gave a couple a line of credit secured by a mortgage on their home. A life insurance policy on the line of credit provided that it would terminate upon the bank demanding full payment. The line of credit was exhausted and went into arrears. The bank demanded full payment. The wife subsequently made a payment and the line of credit was reinstated. The husband died. The insurer denied coverage on the basis that the bank's March 1991 demand had terminated the policy. The wife and the husband's estate sued for a declaration that any amounts owing under the line of credit had been discharged as against them or, in the alternative, damages in an amount sufficient to discharge those debts. The bank counterclaimed for payment of the debt.

The Ontario Superior Court, in a decision reported at [2000] O.T.C. 531, granted the declaration and ordered the bank to discharge the collateral mortgage. The bank appealed.

The Ontario Court of Appeal, Finlayson, J.A., dissenting, dismissed the appeal.

Banks and Banking - Topic 707

Duties of banks - General - Duty re insurance - A bank gave a couple a secured line of credit - A life insurance policy on the line of credit provided that it would terminate upon the bank demanding full payment - The line of credit was exhausted and went into arrears - In March 1991, the bank demanded full payment of the line of credit - The wife subsequently made a payment and the line of credit was reinstated - The husband died in August 1991 - The insurer denied coverage on the basis that the bank's March 1991 demand had terminated the policy - The Ontario Court of Appeal held that the bank had a duty to inform the couple that the insurance coverage related to the line of credit had terminated when the bank demanded repayment - See paragraphs 42 to 49.

Banks and Banking - Topic 708

Duties of banks - General - Duty respecting independent legal advice - A couple obtained a secured line of credit - In July, the wife signed the agreement in her lawyer's presence - The next day, her lawyer wrote to the bank explaining that the couple's marriage contract required, inter alia, two signatures on each cheque drawn on the line of credit - In August, the couple executed a new form of the agreement that was substantially similar to the July agreement - This time the wife did not have independent legal advice - The Ontario Court of Appeal held that the trial judge erred in holding that the wife was not bound by the agreement - The bank was not in a conflict of interest with respect to the wife because she accepted that some of the line of credit would be used to repay the husband's pre-existing debts - Further, the lawyer's letter did not assist the wife - She signed the July agreement in her lawyer's presence - The letter was sent the next day - The conditions were not in the August agreement and the wife knew that the bank did not accept them, but she signed the agreement - Finally, in the circumstances, the bank did not have to ensure that the wife had independent legal advice before signing the August agreement - See paragraphs 24 to 32.

Banks and Banking - Topic 1446

Liability of banks to customers - Duties of bank - Duty to inform - [See Banks and Banking - Topic 707 ].

Banks and Banking - Topic 5538

Loans - Line of credit - Collection of or payment on loan - A bank gave a couple a secured line of credit for $75,000 - The line of credit agreement provided that the minimum monthly payment was "any accrued and unpaid interest" - However, from August to December 1990, the bank collected three per cent of the balance on the line of credit at the end of each month - Soon the line of credit was exhausted and went into arrears - The bank demanded full payment of the line of credit - A life insurance policy on the line of credit provided that it would terminate upon the bank demanding full payment - In early July, the wife made a payment and the line of credit was reinstated - The husband died in August 1991 - The insurer denied coverage on the basis that the bank's demand had terminated the policy - The Ontario Court of Appeal held, inter alia, that the bank breached the agreement by collecting more than it was entitled to - This breach led to the demand which terminated the insurance - Therefore, the bank was liable for the benefit of the life insurance policy - See paragraphs 35 to 41.

Banks and Banking - Topic 5538

Loans - Line of credit - Collection of or payment on loan - [See Banks and Banking - Topic 708 ].

Cases Noticed:

Twardy Estate v. Humboldt Credit Union Ltd. (1985), 41 Sask.R. 217; 34 C.C.L.T. 140 (Q.B.), refd to. [para. 41].

Counsel:

Laurence A. Pattillo, for the appellant;

William J. Burden and Robert B. Cohen, for the respondents.

This appeal was heard on May 22, 2002, by Finlayson, Doherty and MacPherson, JJ.A., of the Ontario Court of Appeal. The decision of the Court of Appeal was released on September 13, 2002, when the following opinions were filed:

MacPherson, J.A. (Doherty, J.A., concurring) - see paragraphs 1 to 51;

Finlayson, J.A., dissenting - see paragraphs 52 to 95.