Court of Appeal for Ontario

CITATION: Isaacs v. Royal Bank of Canada, 2011 ONCA 88

DATE: 20110201

DOCKET: C52454

BEFORE: O’Connor A.C.J.O., MacPherson and Cronk JJ.A.

BETWEEN

Angelita Isaacs

Plaintiff/Appellant

and

Royal Bank of Canada

Defendant/Respondent

AND BETWEEN

Royal Bank of Canada

Plaintiff by Counterclaim

and

Angelita Isaacs and Mark Anthony Forrest

Defendants to the Counterclaim

COUNSEL:

Avrum D. Slodovnick, for the plaintiff/appellant /defendant to counterclaim, Angelita Isaacs

Leigh Ann Sheather, for the defendant/respondent/plaintiff by counterclaim

Heard and released orally: January 28, 2011

On appeal from the judgment of Justice Anne M. Molloy of the Superior Court of Justice, dated June 17, 2010.

ENDORSEMENT

[1] Angelita Isaacs (the “appellant”) appeals from the motion judge’s ruling on a summary judgment motion dismissing her action and granting the respondent Bank’s counterclaim for damages in respect of monies owed under a residential mortgage.

[2] The central issue is who, as between two allegedly innocent victims of mortgage fraud (the appellant and the Bank), should bear the loss occasioned by the fraud. The appellant contends that, in this case, the Bank was in the superior position to avoid the fraud and therefore should bear its own loss. The motion judge rejected this argument, holding that it was the appellant who was in the best position to detect and prevent any fraud.

[3] We agree. A simple review by the Bank of the mortgage documents submitted by or on behalf of the appellant could not and did not reveal any prospect of fraud to the Bank. In sharp contrast, as the motion judge found, had the appellant taken the simple precaution of reading the many documents she signed, the fraudulent nature of the mortgage transaction would have been immediately apparent. There was ample evidence on this record to support the motion judge’s finding that the appellant was in the best position to detect and prevent the fraud.

[4] Moreover, contrary to the appellant’s submission, this is not a case involving two equally innocent parties. The appellant was not entirely innocent of any wrongdoing. She agreed to serve as an accommodation mortgagor for a stranger, for compensation, without disclosure to the Bank of the nature of the transaction.

[5] The motion judge found that, in so doing, the appellant “assisted the fraudsters to perpetuate the fraud even if she did not know the particulars of the transaction”. This finding was open to the motion judge on the evidence.

[6] The Bank’s conduct, at its highest, was careless. But the appellant’s conduct was more than careless. It involved affirmative action on her part that facilitated the fraud. This is a significant distinction between the nature of the parties’ conduct.

[7] This factor also distinguishes this case on the facts from Marvco Colour Research Ltd. v. Harris, [1982] 2 S.C.R. 774, where two innocent parties fell victim to fraud by third parties. In this case, as we have said, both parties were careless. However, both parties were not innocent of any wrongdoing. On these facts, where the carelessness of one party involves active participation in the fraudulent scheme and results in the wrongdoing being able to inflict the loss, that party must bear the burden of the loss.

[8] Further, as the motion judge found, the appellant in the end got what she bargained for. She received $6,000 for her assumption of the risk of making payments on the mortgage. That is the risk that eventually materialized.

[9] The appellant relies on several “deferred indefeasibility” cases to argue that, as the Bank’s carelessness in this case was at least equal to that of the appellant, the Bank should not be permitted to “escape” all contributory liability for the outstanding mortgage debt.

[10] In our view, these cases do not assist the appellant. They involve theft of the identities of persons who had no involvement in the fraudulent activity that effected the frauds. In contrast, as we have indicated, in this case the appellant’s participation was part of the fraudulent scheme itself. Her actions directly contributed to the Bank’s advance of funds to its detriment.

[11] In all these circumstances, the motion judge did not err in concluding that there was no genuine issue requiring a trial in this case.

[12] The appeal is therefore dismissed. In our view, this is not an appropriate case for an award of the costs of the appeal.

“Dennis O’Connor A.C.J.O.”

“J.C. MacPherson J.A.”

“E.A. Cronk J.A.”