COURT OF APPEAL FOR ONTARIO

CITATION: CIBC Mortgages Inc. v. Mostafavi, 2015 ONCA 363

DATE: 20150528

DOCKET: C56178

Weiler, Epstein and Brown JJ.A.

BETWEEN

CIBC Mortgages Inc.

Plaintiff (Respondent)

and

Sayed Shahram Mostafavi and Ghasem Gil

Defendants (Appellant)

and

Ghasem Gil

Plaintiff by Counterclaim (Appellant)

and

CIBC Mortgages Inc. and Jacob O. Edeniyere

Defendants by Counterclaim (Respondent)

Patrick Di Monte, for the appellant

Daniel Waldman, for the respondent

Heard: February 11, 2015

On appeal from the judgment of Justice William Hourigan of the Superior Court of Justice, dated September 20, 2012.

Brown J.A.

Overview

[1] The appellant, Ghasem Gil, appeals from the judgment of Hourigan J., which granted summary judgment in favor of the respondent, CIBC Mortgages Inc. The judgment required Gil to pay the CIBC $814,318.26 under a mortgage on residential property located at 47 Tarmack Drive, Richmond Hill and to deliver up possession of the property to the CIBC.

[2] Gil advances two main arguments on this appeal. First, Gil submits that the motion judge erred in finding that no genuine issue requiring a trial existed concerning the principal amount of the mortgage assumed by Gil. CIBC contends that Gil assumed the principal amount of $587,623.44, whereas Gil takes the position he assumed only a principal amount of $502,000. Second, Gil submits that the motion judge erred in finding that the CIBC had properly applied the $113,825.87 paid by Gil in March, 2007, against the Mortgage.

[3] For the reasons set out below, I would dismiss the appeal.

Background

[4] In March 2007, the registered owner of the property was Sayed Shahram Mostafavi. On March 2, 2007, Mostafavi granted a mortgage in favor of the CIBC on the property. The Mortgage was for a principal amount of $588,147.06, at an interest rate of 5% per annum and had a five-year term. It was registered against title on March 5, 2007.

[5] On July 12, 2007, a transfer of the property from Mostafavi to Gil was registered against title. The transfer disclosed a nominal consideration of $2.00, but it had been made pursuant to a May 1, 2007, agreement of purchase and sale entered into between Gil and Mostafavi for a purchase price of $502,000. As part of that transaction, Gil executed a mortgage assumption agreement in favor of the CIBC dated June 1, 2007. In October, 2007, CIBC commenced this action against Mostafavi and Gil seeking possession of the property and payment from them of the amounts due under the Mortgage based upon a principal amount of $587,623.44.

[6] In his statement of defence and counterclaim, Gil took the position that he had only assumed a principal debt of $502,000 under the Mortgage and, in his counterclaim, he sought a declaration that his liability under the Mortgage was limited to that amount. In his counterclaim, Gil also sought a declaration that any indebtedness under the Mortgage in excess of $502,000 had been released by the conduct of the defendants by counterclaim, the CIBC and the lawyer who had acted on the transfer and mortgage assumption transaction, Jacob O. Edeniyere.

[7] In January 2008, CIBC gave Gil notice of sale under the Mortgage.

[8] In 2009, CIBC brought a motion for partial summary judgment. That motion ultimately was dealt by the July 28, 2010 order of M.G.J. Quigley J. (the “2010 Order”) under which Gil was required to pay the CIBC the sum of $95,093.06 on account of arrears of principal and interest owing under the Mortgage, together with the amount of $18,732.81 on account of municipal property taxes paid by the CIBC and owing pursuant to the terms of the Mortgage. The 2010 Order also required Gil to make monthly mortgage payments of $2,517.13 commencing August 1, 2010. Gil appealed that order to this court.

[9] As will be described in more detail below, in March 2011 the parties ultimately agreed to set aside the 2010 Order on the basis that Gil would pay to the CIBC the amount of $113,825.87, which he did on March 25, 2011. Gil made no further payments under the Mortgage.

[10] In July 2012 the CIBC brought a further motion for summary judgment against Gil seeking payment of all amounts due under the Mortgage, together with possession of the property. The motion judge granted the summary judgment requested.

Standard of review

[11] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada held that absent an error of law, the exercise of powers by a motion judge under rule 20 of the Rules of Civil Procedure attracts deference. Whether a genuine issue requiring a trial exists is a question of mixed fact and law. Where there is no extricable error in principle, findings of mixed fact and law should not be overturned, absent palpable and overriding error: Hryniak, at para. 81.

First Issue: The Principal Amount Assumed by Gil

[12] Gil admits that he assumed the Mortgage granted by Mostafavi to the CIBC, but he submits that a genuine issue requiring a trial exists as to whether he assumed the full principal amount of $587,623.44, or the lesser amount of $502,000. In dealing with this argument, the motion judge wrote, at para. 21:

Turning first to the argument that Mr. Gil only agreed to assume a mortgage of $502,000, there is no dispute that Mr. Gil executed the Assumption Agreement. The CIBC is entitled to rely on that agreement, the effect of which when coupled with s. 20 of the Mortgages Act, is that Mr. Gil became responsible for all obligations under the mortgage.

[13] Ample evidence supported that finding. Gil did not dispute that he had signed the June 1, 2007, Assumption Agreement. Under the Assumption Agreement, Gil agreed to pay all sums due under the Mortgage, which was identified as a mortgage dated March 5, 2007, and registered as Instrument YR955870. That was the Mortgage granted by Mostafavi to the CIBC. On its face, the Mortgage recorded the principal amount as $588,147.06, at an interest rate of 5% per annum.

[14] Although Gil deposed that under his transaction with Mostafavi he would acquire the property and assume a mortgage debt to the CIBC “quantified at $502,000.00 at 2.2% per annum,” those terms do not appear in the May 1, 2007, agreement of purchase and sale entered into between Gil and Mostafavi. Under that agreement, Gil agreed to acquire the property for $502,000, and Schedule A to the agreement stated that the offer was conditional upon Gil’s “arranging to his satisfaction a new first mortgage within five business days of the acceptance of this agreement.” In the result, Gil did not arrange a new first mortgage. Instead, he signed the Assumption Agreement, which referred only to the mortgage terms contained in the Mortgage granted by Mostafavi to the CIBC. Further, Gil did not depose that the CIBC had made any representation to him that his obligations under the Mortgage would be limited to a principal amount of $502,000.

[15] Gil pleaded that his liability to the CIBC should be limited by reason of the conduct of Edeniyere. Gil deposed that Edeniyere never told him that under the Mortgage he might be liable for the amount of $587,623.44. Instead, Gil “believed the debt being assumed was $502,000…no one…told me otherwise.”

[16] The motion judge rejected Gil’s submission that, in the circumstances of this case, Edeniyere’s alleged conduct excused Gil from some of his liability to the CIBC, writing, at para. 22:

Even accepting for present purposes that Mr. Edeniyere was negligent, that does not impact on the obligations of Mr. Gill to the CIBC. In short, all of the allegations made regarding Mr. Edeniyere, including his failure to explain that there was a variable interest rate, amount to a solicitor’s negligence claim. This is not a case of fraud, as no fraud is alleged.

[17] In my view, two aspects of the facts of this case support the motion judge’s conclusion that the CIBC was entitled to summary judgment on the Mortgage debt notwithstanding Gil’s allegations against Edeniyere. First, there was no evidence that Edeniyere had made any misrepresentation to Gil about the terms of the assumed Mortgage. Nor was there any evidence from Gil that Edeniyere had remained silent in the face of Gil’s description of his purported incorrect understanding of the terms of the assumed Mortgage. Indeed, Gil’s own evidence was that he never met personally with Edeniyere and he never had anything explained to him by a lawyer.

[18] Second, although in resisting liability for the principal amount of $587,623.44 Gil relied heavily on his assertion that his deal with Mostafavi only required him to assume a mortgage in the amount of $502,000 at an annual rate of interest of 2.2%, Gil provided no explanation about how the agreement of purchase and sale changed from one in which Gil would arrange a new first mortgage for the property into one under which Gil assumed the Mortgage. Moreover, Gil adduced no evidence that either the CIBC or Edeniyere had been involved in his decision to make that change in his purchase transaction with Mostafavi.

[19] In sum, I see no reviewable error by the motion judge in respect of his finding that Gil assumed the Mortgage with the CIBC with a principal amount of $587,623.44.

Second Issue: Payments by Gil under the Mortgage

[20] The second main ground of appeal Gil advances is that the motion judge failed to treat properly two payments Gil had made under the Mortgage, specifically a cheque in the amount of $15,336.03 the CIBC had received from him on November 8, 2007, as well as the amount of $113,825.87 Gil had paid to the CIBC’s lawyers by cheque dated March 25, 2011. Gil submits that the CIBC wrongfully returned the first payment and mis-applied the second payment to the Mortgage by failing to allocate a sufficient portion of the payment to the reduction of the Mortgage principal. According to Gill, had the CIBC properly applied both payments, the Mortgage would have been brought into good standing in November 2007 and March 2011.

[21] The motion judge did not accept those submissions, writing, at para. 25:

The arguments with respect to whether money should have been applied against the mortgage also do not provide a defence given that the mortgage has now matured. In any event, I accept the evidence of Lanning Abramson that the payment of $15,336.03 was insufficient to bring the mortgage into good standing.

[22] As to the payment of $15,336.03, Lanning Abramson, a lawyer acting for the CIBC, had filed an affidavit on the summary judgment motion that explained, in detail, why the November 2007 payment of $15,336.03 had not covered the arrears of principal, interest and taxes then outstanding. In light of that evidence, the motion judge did not commit any palpable and overriding error of fact when he concluded that Gil’s November 2007 payment was insufficient to bring the Mortgage into good standing.

[23] As to the payment of $113,825.87, on March 25, 2011, uncertainty about the explanation contained in the appeal record about how the CIBC had applied that amount against the Mortgage led the panel to write to counsel on February 12, 2015, requesting clarification of the actual allocation of that amount. By letter dated March 26, 2015, counsel for the CIBC provided the requested information which clarified evidence already in the record. Gil’s counsel filed responding submissions dated May 25, 2015, which enclosed some correspondence that had passed between counsel in the period March to June, 2011 concerning the settlement of the appeal of the 2010 Order.

[24] From the record, it is clear that the March 25, 2011, payment by Gil originated in the 2010 Order. In granting that partial summary judgment, the court had ordered Gil to pay $95,093.06 on account of arrears of principal and interest, and $18,732.81 on account of municipal property tax arrears paid by the CIBC. Gil appealed that order. His appeal was dismissed for failure to perfect it within time. By order dated March 3, 2011, Simmons J.A. set aside the registrar’s dismissal of the appeal, set a timetable for the perfection of the appeal, and ordered Gil to pay counsel for the CIBC the amounts ordered by Quigley J.

[25] Andrina McMillan, a Risk Manager at the CIBC, deposed on the summary judgment motion that the parties had agreed to set aside the 2010 Order on the basis that the $113,825.87 paid by Gil would be applied to reduce the Mortgage debt in accordance with the terms of the Mortgage, and not as directed in the 2010 Order. Ms. McMillan deposed that, as a result of that agreement, only $3,187.39 of the amount Gil paid went to reduce the principal owing under the Mortgage, with the rest applied against accumulated interest, legal fees and property tax arrears.

[26] The written submissions requested by the panel included correspondence between counsel dated May 12, 2011, and June 2, 2011, which confirmed that the $113,825.87 would be applied to the Mortgage debt in accordance with the terms of the Mortgage. As well, the March 26, 2015, correspondence from CIBC’s counsel provided the details about the allocation of the $113,825.08 to principal, interest, taxes and legal fees.

[27] The evidence therefore supported the finding that the CIBC’s application of the $113,825.87 did not bring the Mortgage into good standing.

Disposition

[28] For these reasons, I see no basis upon which to interfere with the motion judge’s grant of summary judgment in favor of the CIBC. Accordingly, I would dismiss the appeal.

[29] As to costs, the CIBC submits that it should be awarded substantial indemnity costs in the amount of $17,805.24. Gil submits that costs of only $7,500, all in, should be awarded to the successful party. Although by the terms of the Mortgage the CIBC is entitled to substantial indemnity costs, I consider unreasonable its request to recover costs for both senior and junior counsel in this relatively straight-forward appeal. Accordingly, I would order Gil to pay the CIBC its reasonable substantial indemnity costs fixed in the amount of $14,000, inclusive of disbursements and HST.

Released: May 28, 2015 (GE)

“David Brown J.A.”

“I agree K.M. Weiler J.A.”

“I agree Gloria Epstein J.A.”