Court of Appeal for Ontario

Date: 2018-03-12 Docket: C63987

Judges: Simmons and Pepall JJ.A. and Fragomeni J. (ad hoc)

Between

Muriel Holmes Plaintiff (Respondent)

and

The Estate of Robert White Stockton, Joanne Tait-Stockton and John Robert Stockton Defendants (Appellants)

Counsel

Todd D. Storms, for the appellants Allen Wilford, for the respondent

Heard and released orally: March 12, 2018

On appeal from: the judgment of Justice B.A. Glass of the Superior Court of Justice, dated May 30, 2017.

Reasons for Decision

[1] The appellants appeal from a summary judgment granted by Glass J., dated May 30, 2017. In very brief and conclusory reasons, the motion judge granted far-reaching relief in favour of the respondent. We are of the view that the bulk of the relief ordered cannot stand. We reach this conclusion for the following reasons.

[2] The amounts found owing to the respondent by the appellants, the Estate of Robert White Stockton and Joanne Tait-Stockton ("Tait-Stockton"), on account of a 1994 second mortgage and a 1997 judgment on the covenant in the 1994 second mortgage are duplicated in the judgment. More importantly, the underlying 1994 second mortgage was extinguished by power of sale proceedings, and the underlying debt on the 1994 second mortgage was extinguished by the bankruptcies of the deceased, Robert White Stockton (the "deceased"), and Tait-Stockton.

[3] In the latter regard, we observe that neither the parties nor the court, in agreeing to, or making, the 1994 consent judgment in the matrimonial proceeding under which the 1994 second mortgage was mandated, had authority to alter the relative priorities under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. Accordingly, we disagree with the motion judge's conclusions that the 1994 second mortgage remained a secured debt in favour of the respondent and that the mortgage debt was not subsequently extinguished by the bankruptcies of both the deceased and Tait-Stockton.

[4] Further, in relation to the finding of a fraudulent conveyance from the deceased to Tait-Stockton of the property subject to the 1994 second mortgage (the "Property"), the respondent continued to hold her second mortgage following the impugned transfer. Further, and in any event, the Property was subsequently transferred under power of sale proceeding by the first mortgagee on December 20, 1996 – which was after the impugned conveyance to Tait-Stockton – with no payout to the respondent on the 1994 second mortgage or to Tait-Stockton. The respondent did not advance a claim of improvident sale or otherwise challenge the propriety of the first mortgagee's conduct of the power of sale. The first mortgagee obtained appraisals, and there was no evidence that the first mortgagee lacked independence. In all the circumstances, we fail to see the basis for any finding that the impugned conveyance was made with an intention to defeat, hinder, delay, or defraud creditors.

[5] In any event, we observe that the respondent knew of the conveyance of the deceased's interest in the Property prior to the bankruptcies of both the deceased and Tait-Stockton. The respondent could and should have raised any challenge to the impugned conveyance in the bankruptcy proceedings so that any fruits of any improper transfer could have been available to be shared rateably with other unsecured creditors.

[6] As for the respondent's claim to the proceeds of sale of farm equipment sold by the deceased, the respondent's claim is statute-barred.[1]

[7] Lastly, the respondent's claim for child support of $22,500 plus interest, together with unpaid costs awards relating to child support totalling $1,750 plus interest, survived the deceased's bankruptcy. The respondent shall have judgment for the principal amounts, as noted, plus interest at the prejudgment rate prevailing at June 4, 1999 in relation to the child support of $22,500; at July 8, 1993 in relation to the $1,000 costs award; and at September 15, 1999 in relation to the $750 costs award.

[8] The motion judge's order is set aside. The above judgment is substituted together with orders dismissing the balance of the respondent's action and setting aside the orders of Gunsolus J. renewing and authorizing the re-issuance of writs of seizure and sale (which related to amounts claimed to be owing on the 1994 second mortgage). There will be no order as to costs of the motions below or of this appeal.

"Janet Simmons J.A."

"S.E. Pepall J.A."

"Fragomeni J. (ad hoc)"

Footnotes

[1] The only evidence of this claim that the respondent could identify in the appeal record was a financial statement in the 1990's matrimonial proceedings between the respondent and the deceased.