Real Estate Guarantees by Family Members
By Brian Madigan LL.B.
(Ontario Real Estate Source)
Quite frequently, husbands and wives will sign, co-sign and use each other's credit in order to acquire property.
If a spouse signs something that they didn't understand, whose fault is it? In many cases, these are simply institutional loans. A spouse then executes the documents. What is the role of the bank? Do they have to explain the documents fully? Do they have to caution the spouse not to sign? Do they have to ensure that the spouse obtained independent legal advice? Not always!
Here's an interesting case decided in 1998 in Ontario.
In Bank of Montreal v. McCabe the defendant had been asked by her husband to go into the Bank of Montreal and sign some documents, which he told her were merely a formality and would not result in any liability to her.
She went into the bank and signed the documents given to her without question and without reading them.
Mrs. McCabe signed:
1) a promissory note,
2) a loan proceeds cheque and
3) an acknowledgment and direction.
The motions court Judge held that there was:
1) no obligation on the bank to explain the documents to the defendant, and
2) no obligation to ensure she had independent legal advice.
The Judge relied upon the case of Marvco Colour Research Limited V. Harris (1982) Supreme Court of Canada, and decided the defendant had been careless in signing documents which were obviously meant to have legal effect without reading them and granted summary judgment to the bank.
Comment
You will appreciate that it was silly for Mrs. McCabe to conclude that the documents meant nothing. That doesn't make common sense.
It was also foolhardy for vher to believe that she had no liability as stated by her husband.
I suppose, if there is a culprit here, it would be Mr. McCabe. He was the one who induced his wife to sign.
However, if you don't read the documents, ask that they be explained or otherwise make comment, then you are simply responsible for your own carelessness.
The court simply decided that "business is business", and there would be "no special favours" here for Mrs. McCabe, otherwise, no one else could get a bank loan.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com
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