Director (FRO) v. Robert David George Markus, 2018 ONSC 2273
DIVISIONAL COURT FILE NO.: DC-17-641-00
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
R.S.J. MORAWETZ, J.A. THORBURN, E.R. TZIMAS, JJ.
BETWEEN:
Director, Family Responsibility Office Applicant/Respondent in Appeal
– and –
Robert David George Markus and Annie Mae Edwards Respondent
National Bank of Canada Appellant in Appeal
COUNSEL:
D. Nixon and H. Puchala, for the Director, Family Responsibility Office, Applicant/ Respondent in Appeal
J. S. Quigley, for the National Bank of Canada, Appellant in Appeal
HEARD: April 9, 2018
REASONS FOR DECISION
1The Appellant, National Bank of Canada (the “Bank”) appeals from the Order of Ray, J. (the “motion judge”) dated October 6, 2017. This order dismissed the Bank’s motion to set aside an earlier motion brought without notice, pursuant to Rule 38.11(1) – (3) and Rule 39.01(6) of the Rules of Civil Procedure.
2The Bank seeks to overturn Orders dated October 28, 2016, which ordered that funds paid into court to be paid out to the Director, Family Responsibility Office (“FRO”) and October 6, 2017, which dismissed the motion to overturn the original endorsement, and instead, make an order requiring the Director to pay the Bank the sums received under the Order of October 28, 2016. Additionally, the Bank seeks an order directing payment of remaining funds held by the court under court file no.: 15-718 and costs.
3The FRO requests that the appeal be dismissed with costs.
Facts
4The relevant facts are not in dispute.
5On October 14, 2015, the City of Pembroke sold real property owned by the Respondents, Robert Markus and Annie Edwards, to satisfy outstanding property tax arrears, in accordance with the Municipal Act, 2001, SO 2001, c. 25 (the “Act”).
6The surplus funds of $27,337.88 were paid into court, and the Treasurer of the City notified all interested parties of this fact. The Notice was provided by way of a Form 5, which both the Bank and FRO received. In addition to advising the parties that $27,337.88 had been paid into court, Form 5 advised the parties that any person claiming entitlement to any of the proceeds of sale may apply to the Superior Court of Justice, within one year of payment into court, for payment out of court of the amounts to which the person is entitled. The Form 5 also stated that the court shall, after one year has passed from the day payment is made into court, determine all of the entitlements to receive payment out of the proceeds of sale.
7The Bank held a first and second mortgage on the property, and was owed more than $93,000. Thus, the Bank was a secured creditor.
8FRO is an unsecured creditor of Mr. Markus pursuant to a writ of seizure and sale.
9Within the one year time frame referenced in Form 5, FRO brought an application for payment out of court to satisfy the debt owed to it by Mr. Markus for arrears stemming from a child support order made by Selkirk, J. in the amount of $19, 344.74 plus interest and costs. The FRO did not serve its application on the Bank.
10On October 28, 2016, the motion judge made an order that $19,344.74 plus interest and costs be paid out to the FRO. The Bank brought a motion on October 6, 2017 on the basis of the FRO application being made ex parte and without full disclosure. The motion judge dismissed the motion on the basis that the FRO had no obligation to put the Bank on notice of its application under the Act and that the Bank should have brought its own application. In support of his conclusion, the motion judge referenced Poplar Point First Nation Development Corp. v. Thunder Bay (City), 2016 ONCA 934.
11There is no indication in the record as to why the Bank did not bring an application for payment out of court to satisfy the debt owed to it. Counsel stated in argument that the matter slipped through the cracks at the Bank.
Issues
12The key issues identified by the parties on this appeal are:
Whether or not the provisions of the Act, specifically section 380 exempt an applicant bringing an application under that section from notice requirements in the Rules of Civil Procedure.
Whether the motion judge erred in finding the Bank failed to meet its obligations under the Act and should not receive the disputed funds.
13The appeal involves an order for payment of monies paid into court, which the parties seem to implicitly agree is a final order. Pursuant to the Courts of Justice Act, s. 19(1)(c) and 19.12 an appeal lies to the Divisional Court from a final order in cases such as this dismissing a claim for less than $50,000. We are satisfied that this is a final order and that this court does have jurisdiction to hear the matter.
Standard of Review
14Neither party made submissions on the standard of review. However, as set out in Housen v. Nikolaisen, 2002 SCC 33, questions of law are to be reviewed on a standard of correctness and findings of fact are not to be overturned absent a “palpable and overriding error”.
15Issued 1 and 3 give rise to questions of law requiring a standard of correctness. Issue number 2 is a question of fact, requiring a palpable and overriding error.
Law and Analysis
16For reasons set out below, we have concluded that the appeal must be allowed. A plain reading of s. 380 of the Act sets out the steps that are to be followed to determine all of the entitlement to receive payments out of the proceeds of sale. The motion judge erred in his interpretation of s. 380 of the Act and regardless of the appropriate standard of review, the orders below must be set aside.
17The relevant sections of the Act, in force at the time, were as follows: ss. 374(1), 379(1), 380(1) (2) (3) (4) and (5):
374(1) Within 60 days after the registration of a tax arrears certificate, the treasurer shall send a notice of the registration of the certificate to the following persons:
2 Where the land is registered under the Land Titles Act, every person appearing by the parcel register and by the index of executions for the area in which the land is situate to have an interest in the land on the day the tax arrears certificate was registered, other than a person who has an interest referred to in clause 379(7.1)(a) or (b).
379(1) If the cancellation price remains unpaid 280 days after the day the tax arrears certificate is registered, the treasurer, within 30 days after the expiry of the 280-day period, shall send to the persons entitled to receive notice under section 374 a final notice that the land will be advertised for public sale unless the cancellation price is paid before the end of the one-year period following the date of the registration of the tax arrears certificate.
380(1) The proceeds of sale under section 379 shall,
(a) firstly, be applied to pay the cancellation price;
(b) secondly, be paid to all persons, other than the owner, having an interest in the land according to their priority at law; and
(c) thirdly, be paid to the person who immediately before the registration of the tax deed was the owner of the land.
(2) The treasurer shall pay the proceeds of sale, minus the cancellation price, into the Superior Court of Justice together with a statement in the prescribed form outlining the facts under which the payment into court is made.
(3) Within 60 days after making payment into court under subsection (2), the treasurer shall send a copy of the statement to the Public Guardian and Trustee, to the Minister responsible for the administration of Forfeited Corporate Property Act, 2015 and to the persons to whom the treasurer sent notice under subsection 379 (1).
(4) Any person claiming entitlement under clause (1) (b) or (c) may apply to the Superior Court of Justice within one year of the payment into court, under subsection (2) for payment out of court of the amount to which the person is entitled.
(5) The court shall, after one year has passed from the day the payment was made into court, determine all of the entitlements to receive payments out of the proceeds of sale.
18Pursuant to s. 379(1), the required Form 5 notice was sent to the Bank, FRO, Mr. Markus and Ms. Edwards.
19Pursuant to s. 380(4), FRO applied to the Superior Court of Justice for payment out of court of the amount to which the person is entitled [emphasis added].
20Pursuant to s. 380(5) the court shall, after one year has passed from the date the payment was made into court, determine all of the entitlements to receive payment out of the proceeds of sale. [emphasis added]
21At the time of the public sale, the Bank had, by virtue of its first and second mortgage, priority at law over the execution creditor FRO.
22Section 380(1) mandates that the proceeds of sale under s. 379 shall firstly be applied to pay the cancellation price and secondly, to be paid to all persons other than the owner, having an interest in the land according to their priority at law and thirdly, be paid to that person who immediately before the registration of the tax deed was the owner of the land [emphasis added].
23In this case, FRO was the sole party to apply. The Bank did not take any steps pursuant to the provisions of s. 380 to obtain payment out of court. However, as counsel to the Bank submitted, the language of ss. 380(4) and (5) does not require the Bank to make any such application. Rather, the permissive language in s. 380(4) entitles the party that applies to court to apply for payment out of court of the amount to which the person is entitled. In this case, based on the amount paid into court and the amount owed to the Bank as first and second mortgagee, and taking into account the mandated distribution of proceeds based on priority at law, as set out in s. 380(1), the amount that FRO is entitled under s. 380(4) is nil.
24With respect to the interpretation of s. 380(5), the court is mandated to determine all of the entitlements to receive payments out of the proceeds of sale. Again, there is no requirement in this subsection that the Bank apply to court. The obligation on the court is to determine all of the entitlements to receive payment out of the proceeds of sale. A plain reading of this section leads to the conclusion that the FRO has no entitlement to receive any proceeds of sale. In our view, the failure of the motion judge to take into account the entitlement of the Bank to receive payment out of the proceeds of sale was an error of law.
25The Bank has priority at law to the position of the FRO and notwithstanding its inaction, it is legally entitled to the monies that have been paid into court.
26With respect to arguments raised in relation to s. 380(6) of the Act, in our view, this subsection is not engaged. Section 380(6) only has application if no person makes an application under ss. (4) within the one year period referred to in that subsection. In this case, FRO made such application. Insofar as s. 380(6) is not engaged, this case is distinguishable from Poplar Point.
Disposition
27In the result, we have concluded that the motion judge erred in his interpretation of s.380 of the Act with the result and effect that he wrongly reversed the priorities as between the Bank and FRO. This was an error of law. The standard of correctness applies. The orders below must, accordingly, be set aside and substituted for an order that the Director, FRO, pay to the Bank forthwith all funds received by the FRO under the order of the motion judge and an order directing the payment of all remaining funds held by the court under File No. 15/718 to the Bank.
28In arriving at this conclusion, we have taken into account that the FRO will suffer no prejudice as a result of the order of the motion judge being set aside. The FRO was not entitled to “jump the queue” and receive the surplus funds in the face of the Bank’s priority at law over the position of the FRO. To hold otherwise would result in a windfall to the FRO at the expense of the Bank.
29The Bank, as the successful party, is entitled to its costs in the agreed upon amount of $5,000.00 inclusive of disbursements and applicable taxes.
G.B. Morawetz, R.S.J.
J.A. Thorburn, J.
E.R. Tzimas, J.
Released: April 23, 2018
CITATION: Director (FRO) v. Robert David George Markus, 2018 ONSC 2273
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
R.S.J. MORAWETZ, J.A. THORBURN, E.R. TZIMAS, JJ.
BETWEEN:
Director, Family Responsibility Office Applicant/Respondent in Appeal
– and –
Robert David George Markus and Annie Mae Edwards Respondent
National Bank of Canada Appellant in Appeal
REASONS FOR JUDGMENT
Released: April 23, 2018