Saved By Technology Rentals Inc. v. Thomas

[Indexed as: Saved By Technology Rentals Inc. v. Thomas]

71 O.R. (3d) 721

[2004] O.J. No. 2636

Docket No. C41075

Court of Appeal for Ontario,

McMurtry C.J.O., Gillese and Blair JJ.A.

June 18, 2004

Mortgages -- Limitations -- Mortgagee not having right of possession unless terms regarding notice and default have been complied with -- Ten-year limitation period for action for possession beginning to run only upon default under mortgage and not when mortgage was signed -- Land Registration Reform Act, R.S.O. 1990, c. L.4, s. 7 -- Limitations Act, R.S.O. 1990, c. L.15, s. 15.

A mortgage was entered into in November 1988. Default occurred in December 1999. The respondent mortgagee commenced an action for possession in February 2003. The trial judge rejected the appellant mortgagor's argument that the mortgage was extinguished by operation of the ten-year limitation period that applies to actions to recover possession and title on a mortgage, and granted the respondent possession. The appellant appealed, submitting that because there was no provision in the standard terms of the mortgage -- incorporated therein by virtue of the Land Registration Reform Act -- specifically granting the mortgagor quiet possession absent default, the mortgagee was entitled at common law to take possession at any time; therefore the limitation period should run from the time the mortgage was signed, not from the time of default.

Held, the appeal should be dismissed.

The trial judge was correct in holding that the only logical and sensible way to interpret s. 7 of the Land Registration Reform Act, and the Standard Charge Terms, is to presume that the mortgagee does not have the right of possession unless the terms regarding notice and default have been complied with. The respondent could only exercise a right to possession upon the default of the appellant. Therefore, the ten-year limitation period for an action for possession against the appellant began to run only upon its default under the mortgage in December 1999.

APPEAL by the mortgagor from a judgment of Karakatsanis J. (2004), 2003 72352 (ON SC), 68 O.R. (3d) 218, [2004] O.J. No. 343 (S.C.J.) for the mortgagee in an action for possession.

Cases referred to Saved by Technology Inc. v. Thomas (2004), 2003 72352 (ON SC), 68 O.R. (3d) 218, [2004] O.J. No. 343 (S.C.J.) Statutes referred to Land Registration Reform Act, R.S.O. 1990, c. L.4, s. 7 Limitations Act, R.S.O. 1990, c. L.15, s. 15 Short Form of Mortgages Act, R.S.O. 1980, c. 474

Martin G. Banach, for appellant. Thomas S. Kent, for respondent.

[1] Endorsement BY THE COURT: -- The appellant, Saved By Technology Rentals Inc., seeks to set aside the summary judgment granted by Justice Karakatsanis dated January 30, 2004, [page722] dismissing its claim that a certain mortgage was extinguished and granting the respondent, Reta Thomas, possession.

[2] The appellant argues the mortgage has been extinguished by operation of the ten-year limitation period that applies to actions to recover possession and title on a mortgage: see the Limitations Act, R.S.O. 1990, c. L.15, s. 15. It submits that because there is no provision in the standard terms of the mortgage -- incorporated therein by virtue of the Land Registration Reform Act, R.S.O. 1990, c. L.4 -- specifically granting the mortgagor the right to quiet possession absent default, the mortgagee is entitled at common law to take possession at any time; therefore the limitation period should run from the time the mortgage was signed, not from the time of default.

[3] In this case, the mortgage was entered into on November 23, 1988. Its terms [were] somewhat unusual in that it provided for no payment of principal or interest for at least ten years. Default occurred in December 1999. The action was not commenced until February 2003.

[4] The appellant's submissions are grounded in the difference between the standard terms governing mortgages in Ontario until 1984, under the Short Form of Mortgages Act, R.S.O. 1980, c. 474, and those governing mortgages since that time under the Land Registration Reform Act. The former contained terms expressly providing that until default, the mortgagor may have quiet possession and that upon default the mortgagee may do so. The latter only contains a stipulation that the mortgagee has the right of possession after notice and default.

[5] The effect of the appellant's argument is to deprive the mortgagee of any right to recover for default in payment of principal or interest because the limitation period, on its submission, would already have expired by the time any such default occurred. The law cannot be so absurd and nonsensical.

[6] In careful and thorough reasons Justice Karakatsanis rejected the appellant's arguments. She analyzed the legislation, and the common law history on the question, and concluded that (2004), 68 O.R. (3d) 218, [2004] O.J. No. 343 (S.C.J.), at para. 14:

The only logical and sensible way to interpret s. 7 of the LRRA, and the Standard Charge Terms, is to presume that the mortgagee does not have the right of possession unless the terms regarding notice and default have been complied with.

It followed that the respondent mortgagee could only exercise a right to possession upon the default of the appellant, and therefore that the ten-year limitation period for an action for possession against the appellant began to run only upon its default [page723] under the mortgage in December 1999. The action was not statute barred.

[7] We agree with the motions judge's interpretation and conclusion and the appeal is dismissed for the reasons she gave.

[8] The respondent is entitled to her costs of the appeal, fixed in the amount of $5,000 inclusive of fees, disbursements and GST.

Appeal dismissed.