Court of Appeal for Ontario

CITATION: Kloos v. Tangas, 2016 ONCA 149

DATE: 20160224

DOCKET: C59757

Gillese, Hourigan and Brown JJ.A.

BETWEEN

Sara Kloos

Plaintiff (Respondent)

and

Gus Constantine Tangas and Mary Dom

Defendants (Appellant)

Alfred Schorr, for the appellant

Constantine Alexiou and Ann Hatsios, for the respondent

Heard: February 22, 2016

On appeal from the order of Justice Frederick L. Myers of the Superior Court of Justice, dated November 21, 2014.

ENDORSEMENT

[1] Mary Dom appeals from the order of Myers J. dated November 21, 2014 which dismissed her objection to the confirmation of the Report of Master McAfee dated October 31, 2013. The Report dealt with the priority between two mortgages granted by Dom’s son, the defendant, Gus Tangas, on his residential property: a May 2001 second mortgage for $90,000 granted to his mother, Dom (the “Dom Mortgage”), and an August 2003 mortgage for $142,000 granted to the respondent, Sarah Kloos (the “Kloos $142,000 Mortgage”). The Master held that the Dom Mortgage was a fraudulent conveyance and fraudulent preference and therefore was void.

[2] Between 1999 and 2003, Tangas borrowed significant sums of money from Kloos. During that period, Tangas granted Kloos a series of mortgages on his residence: (i) a May 1999 second mortgage for $48,000 (the “Kloos 1999 Mortgage”); (ii) a June 2002 mortgage for $50,000; and (iii) the August 27, 2003 Kloos $142,000 Mortgage which consolidated his then outstanding debts to Kloos.

[3] In April 2001, Tangas executed a promissory note in favour of his mother for $90,000. One month later, on May 8, 2001, Tangas granted his mother a collateral mortgage on the residential property for $90,000. Tangas testified that he granted a mortgage to his mother in return for monies Dom had advanced to him over the years.

[4] As result of the discharge of the Kloos 1999 Mortgage, the $50,000 and $142,000 mortgages Tangas subsequently granted to her stood in third place on title, subordinate to a first mortgage to a bank and the $90,000 Dom Mortgage.

[5] The Master found that Tangas did not make a single payment to Kloos on her loans to him from 2001 onward.

[6] The Master found that the Dom Mortgage was a fraudulent conveyance and fraudulent preference and therefore was void. Dom did not challenge those findings on her motion to oppose confirmation, nor does she challenge them on this appeal.

[7] Dom advances two grounds of appeal. First, Dom submits that the motion judge erred in upholding the Master’s finding that Kloos was not estopped from raising the issue of the validity of the Dom Mortgage. Specifically, Dom argues that there was delay by Kloos in challenging the Dom Mortgage which amounted to acquiescence in its validity. As well, the delay by Kloos prejudiced Dom’s ability to defend the validity of the Dom Mortgage.

[8] Dom contends that when Kloos took mortgages from Tangas in 2002 and 2003, she knew those mortgages stood behind the Dom Mortgage. That knowledge, according to Dom, constituted acquiescence by Kloos in the validity of the second mortgage. In our view, that submission overlooks the more important issue of when Kloos first knew that no actual advances from Dom to Tangas underpinned the Dom Mortgage. At the hearing of the appeal, counsel for Dom conceded that Kloos did not become aware of such facts until during the discovery process in her 2010 mortgage enforcement action. Accordingly, there is no merit in Dom’s argument that Kloos’s silence before discovering those facts could amount to acquiescence in a mortgage which was a fraudulent conveyance and preference.

[9] We do not accept Dom’s submission that she suffered prejudice from the delay of Kloos in challenging the validity of the Dom Mortgage. Dom argues that by the time of the reference hearing, she was 89 years old, infirm and unable to testify about the circumstances that gave rise to the Dom Mortgage. The Master held that there was no evidence that documents which might have evidenced advances of money from Dom to Tangas had existed or had been destroyed. Tangas acts as his mother’s litigation guardian in this litigation, so it always has been open to him to locate banking records of the advances, if they existed. Moreover, Tangas testified that his family conducted their affairs on a cash basis, so it is unclear what documents Dom could have proffered. Finally, the Master did not accept Tangas’s evidence that he had borrowed money from his mother, and we see no basis upon which to interfere with that finding of fact.

[10] As her second ground of appeal, Dom argues that the motion judge erred in failing to find that Kloos’s delay in challenging the validity of the Dom Mortgage gave rise to laches. According to Dom, the silence of Kloos for six years on the validity of the Dom Mortgage constitutes delay which, in itself, can amount to laches, even in the absence of prejudice.

[11] We disagree. At the hearing, appellant’s counsel acknowledged that the timing of events in this case brought them within the analytical framework regarding laches described by this court in Perry, Farley & Onyschuk v. Outerbridge Management Ltd. (2001), 2001 CanLII 5678 (ON CA), 54 O.R. (3d) 131 (Ont. C.A.). In Perry, at para. 36, this court stated: “A party relying on the defence [of laches] must show a combination of delay and prejudice.” Accordingly, delay, standing alone, could not give rise to laches.

[12] The appeal is dismissed. The appellant shall pay the respondent her partial indemnity costs of the appeal in the amount of $11,000, inclusive of H.S.T. and disbursements.

“E.E. Gillese J.A.”

“C.W. Hourigan J.A.”

“David Brown J.A.”