In Royal Bank of Canada v. Modo, the co-defendant, Rejert Modo entered into a Fixed Rate Conditional Sales Contract with the plaintiff, Royal Bank of Canada ("RBC"), in respect of Mr. Modo's purchase of a truck for $79,931.66. Pursuant to the terms of the contract, all right, title and interest in the vehicle was assigned to RBC. RBC registered its interest in the motor vehicle under Ontario's Personal Property Security Act.
Profix Auto Collision Inc. ("Profix"), co-defendant, carried on a business of towing and repair of motor vehicles. Profix had accepted Mr. Modo's offer to take his vehicle in and have it used as part of Profix's fleet. Mr. Modo was to receive 10% of the cost of repairs to vehicles towed by his truck. He was to be responsible for the purchase of the vehicle and the cost to convert it to a truck capable of towing. Profix was to license, insure and maintain the vehicle.
Profix subsequently sent RBC a Notice of Intention to Sell the vehicle pursuant to s. 15(1) of the Repair and Storage Liens Act ("Act"). Profix claimed a lien for repair costs, storage fees and Bailiff's fees. However, Profix did not sell the vehicle and remained in possession of it. The vehicle ownership was transferred to Profix.
RBC brought a motion for summary judgment as against Profix for the sum of $79,931.66. The Ontario Superior Court of Justice stated that the issues before it were whether: 1) Profix had a lien on the truck, 2) Profix's possession of the vehicle was an unlawful conversion or an unjust enrichment, and 3) RBC was entitled to damages from Profix in conversion or unjust enrichment.
Profix's claim for a lien was composed in significant part by the sum of $15,622.25 alleged to have been paid to another company for the cost of converting the vehicle to a tow truck. The Court held that, in accordance with subsection 29(1) of the Act, a written assignment was required for Profix to claim a lien for the conversion work which had not been performed by Profix. As a result, the Court concluded that Profix had not established that it had a right to possession of and title to the vehicle, regardless of whether it paid for the conversion, and/or repaired or stored the vehicle.
The Court held that Profix's failure to give notice of its intention to retain the vehicle in lieu of sale and the transfer of registered ownership were wrongful, and that its continued possession and use of the truck were acts of wrongful conversion to its own use. In addition, in the absence of a juridical reason, Profix's possession of the vehicle from shortly after its purchase financed by RBC was found to be an unjust enrichment.
Finally, the Court concluded that Profix was only liable in damages for its possession and taking ownership of the truck, not the cost of the towing equipment and conversion since these did not result in unlawful conversion or unjust enrichment. Consequently, the Court ordered Profix to pay the sum of $49,425.00 to RBC.
This case illustrates that damages may be recoverable from a third party who has unlawfully taken possession of financed personal property.
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