COURT OF APPEAL FOR ONTARIO

CITATION: Sturino v. Crown Capital Corporation, 2016 ONCA 688

DATE: 20160919

DOCKET: C61310

Hoy A.C.J.O., Lauwers and Benotto JJ.A.

BETWEEN

Frank Sturino

Applicant (Respondent in Appeal)

and

Crown Capital Corporation, Canada Investment Corporation and Fenfam Holdings Inc.

Respondent (Appellant in Appeal)

Richard P. Quance, for the appellant

Wojtek Jaskiewicz, for the respondent

Heard and released orally: September 14, 2016

On appeal from the order of Justice Jamie K. Trimble of the Superior Court of Justice, dated October 22, 2015.

ENDORSEMENT

[1] The appellant, Canada Investment Corporation, argues that the motion judge erred in his interpretation of a provision contained in the order appointing the respondent, MNP Ltd., as receiver over certain real property. We disagree and, for the reasons that follow, dismiss the appeal.

[2] Crown Capital Corporation (the “Owner”) acquired the property at issue (the “Property”). The appellant subsequently acquired an assignment on the first mortgage on the Property. On the same date, it assigned the first mortgage to Fenfam Holdings Inc., as security for a loan. The loan was for a principal amount less than the principal amount of the first mortgage. Within months, the Owner defaulted under the second mortgage. The second mortgagee, Frank Sturino, issued a Notice of Sale but the Owner made no attempt to make payment.

[3] The second mortgagee applied for the appointment of a court-appointed receiver over the Property. He deposed to facts that suggested that the Owner and the appellant may be related and that the director, president and secretary of the Owner was linked to allegations of mortgage fraud.

[4] A draft of the order appointing the receiver was circulated to all affected stakeholders.

[5] The appellant did not oppose the application and, on July 31, 2014, Murray J. appointed the respondent as receiver pursuant to s. 243(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended and s. 101 of the Courts of Justice Act. His endorsement concludes, “Order to go as per draft filed.” The appointment order grants the respondent a first charge over the Property to secure its reasonable fees and expenses, subject and subordinate only “to the interest of Fenfam, as transferee, of the mortgage registered against the Property as Instrument No. YR1610466 (the “Fenfam Interest”).”

[6] The Property was sold, and the respondent sought an order for the distribution of funds. It submitted that only the amount secured by the assignment of the first mortgage to Fenfam – some $493,800.30 – should be paid to Fenfam before payment of the fees and expenses secured by the respondent’s charge.

[7] The appellant argued that the entire first mortgage, and not just the amount that secured the loan from Fenfam, ranked in priority to the respondent’s charge under the appointment order.

[8] The motion judge rejected this argument.

[9] He concluded that the provision in the appointment order making the respondent’s fees and expenses subordinate only to the “interest of Fenfam, as transferee, of the mortgage …” meant that the respondent’s charge was subordinate only to Fenfam’s financial interest in the first mortgage. He reasoned that if the intent were to make the respondent’s fees subordinate to the entire first mortgage, the words “… the interest of Fenfam, as transferee, of …” were entirely unnecessary. Further, those words “must have some meaning”. In his view, it was clear that the transfer to Fenfam was as security for a loan, and not a complete transfer to Fenfam of the first mortgage. Since the transfer to Fenfam was limited to its interest in the remaining amounts to be paid under its loan to the appellant, the respondent’s charge was subject only to that interest.

[10] We agree with the motion judge that the transfer to Fenfam was as security for a loan and not a complete transfer of the mortgage. The charge terms specifically provide that the appellant assigned the mortgage to Fenfam as security for the loan. We also agree with the motion judge’s interpretation of Murray J.’s appointment order.

[11] As the appointment order addresses the respondent’s fees and expenses, there is no order as to costs.

“Alexandra Hoy A.C.J.O.”

“P. Lauwers J.A.”

“M.L. Benotto J.A.”