Court of Appeal for Ontario

Date: 20211108 Docket: C68760

MacPherson, Simmons and Nordheimer JJ.A.

Between:

Joseph Maloney and Heather Maloney Applicants (Respondents)

and

Rick Goodman personally, and in his capacity as executor of the Estate of Leo Goodman, deceased Respondents (Appellants)

Counsel: Darryl Singer and Nadia Condotta, for the appellants Todd Storms and Kerri Malcolm, for the respondents

Heard: November 2, 2021 by video conference

On appeal from the order of Justice Graeme Mew of the Superior Court of Justice, dated October 1, 2020 with reasons reported at 2020 ONSC 5948.

Reasons for Decision

[1] The issues on appeal arise out of the respondents’ application to discharge several mortgages registered against two farm properties they own. The mortgages were originally held by Leo Goodman as mortgagee. Leo Goodman (“Mr. Goodman Sr.”) assigned the mortgages to his son, Rick Goodman (“the appellant”) [1], in 2010. Mr. Goodman Sr. died in 2017 at the age of 102.

[2] Because of poor record keeping and the confusing state of the record, the application judge was unable to resolve the question of whether the mortgages had been fully paid. However, he made four findings in an effort to assist the parties in resolving that question. The appellant appeals the application judge’s second and fourth findings. We dismissed the appeal at the conclusion of the appeal hearing for reasons to follow. These are our reasons.

Background

[3] The respondents originally owned three properties that were subject to mortgages in favour of Mr. Goodman Sr.: the two farm properties referred to above and a property referred to as the Donald Street property. The mortgages fell into arrears. In 2008, Mr. Goodman Sr. sold the Donald Street property under power of sale.

[4] In an effort to resolve matters, the respondents applied for a mediation under the Farm Debt Mediation Act, S.C. 1997, c. 21. The September 15, 2008 mediation resulted in an arrangement under s. 19 of that Act (the "FDMA Agreement"). Under the FDMA Agreement the parties agreed on the amounts owing under each of the mortgages, including the Donald Street property mortgage, as of various dates in 2006. However, the agreed upon amounts were subject to verification of certain figures. Further, the parties agreed that additional adjustments could be made.

[5] Commencing in January 2009 and continuing until about April 2019, the respondents made monthly payments of $2,703.05 to the appellant or his father on account of their indebtedness.

The Application Judge’s Second Finding – the $60,000 Promissory Note

[6] The application judge’s second finding relates to a $60,000 promissory note (the “Promissory Note”) signed by the respondents on March 28, 2008 in favour of Mr. Goodman Sr. The Promissory Note stipulated that it was due and payable on March 1, 2010.

[7] The appellant's position on the application was that the Promissory Note was paid with the proceeds of sale of the Donald Street property and that $60,000 should therefore be added to the total owing on all the mortgages as set out in the FDMA Agreement.

[8] The application judge rejected the appellant’s position. Among other things, he noted that, assuming the Promissory Note was a genuine obligation, applying proceeds from the sale of the Donald Street property to pay it in priority to obligations secured against the property would have violated s. 27 of the Mortgages Act, R.S.O. 1990, c. M.40. In any event, if the Promissory Note reflected a genuine obligation, an action on a promissory note that was payable on March 1, 2010 would be statute barred.

[9] The formal order arising from the application stipulates that the Promissory Note “is not enforceable, due to its being statute barred.”

[10] On appeal, the appellant states that he and his father reasonably believed the Promissory Note was paid off with the proceeds of the Donald Street property. He submits that the application judge erred in holding that an action on the Promissory Note is statute barred because the fact that the Promissory Note could not properly be repaid from the Donald Street power of sale proceeds was only discovered when the application judge made his finding. Accordingly, the limitation period should run from the date of the application judge’s reasons, being the date on which the appellant discovered the Promissory Note was in fact unpaid.

[11] We reject the appellant's submissions. As a starting point, the application judge made it clear in his reasons that he was not convinced that the Promissory Note was a genuine obligation. Further, it is unclear how any amount that may ever have been owing on the Promissory Note could be added to the balance owing on the mortgages on the farm properties for which the respondents seek a discharge. Most importantly however, the Promissory Note stipulated it was due and payable on March 1, 2010. The two-year limitation period for suing on the Promissory Note runs from its maturity date, March 1, 2010. The appellant is not entitled to rely on his own, or his father’s, purported mistake in applying the proceeds of sale of the Donald Street property to resurrect a claim that became statute barred in 2012.

The Application Judge’s Fourth Finding – the December 31, 2008 Account for Legal Fees

[12] The application judge’s fourth finding was that an account from Leo Goodman's lawyer dated December 31, 2008 for legal fees relating to mortgage enforcement proceedings should not be added to the amount owing on the mortgages for which the respondents seek a discharge.

[13] The appellant submits that the application judge erred in holding that the respondents were “entitled to infer that any claim for reimbursement of legal expenses was extinguished by the [September 2008] FDMA Agreement.” The account was dated December 31, 2008, which was after the FDMA Agreement was made and states, in part, “[t]his is the amount that should be added to Maloney’s mortgage.” Further, the appellant notes that the parties agreed that additional adjustments were to be made to the FDMA Agreement figures, that the FDMA Agreement was silent on the subject of legal fees and that the mortgages all provided for enforcement fees to be added to the balance owing.

[14] We do not accept the appellant’s submissions. Mr. Goodman's lawyer confirmed that the December 31, 2008 account related to work done prior to the mediation. The application judge found that the first communication to the respondents about this claim was a letter dated May 28, 2015, which the appellant sent on behalf of his father. In our view, the application judge’s finding was open to him on the record and was reasonable. The fact that the formal account pre-dated the mediation does not mean the fees were not taken into consideration at the mediation in calculating the balance owing on the various mortgages. Had legal fees not been taken into account on the mediation, the respondents were entitled to receive notice of the claim much sooner than six-and-a-half years after the fact.

Costs of the Appeal and Further Relief

[15] Costs of the appeal are to the respondents on a partial indemnity scale fixed in the amount of $10,000 inclusive of disbursements and applicable taxes.

[16] As noted by the application judge, if necessary, the parties are at liberty to request a case conference in the court below if further directions or orders are required to finally resolve the application.

“J.C. MacPherson J.A.”

“Janet Simmons J.A.”

“I.V.B. Nordheimer J.A.”

[1] As the assignments of mortgage were never registered, the parties agreed in the court below that the estate is not a necessary party to this proceeding. Mr. Goodman Jr. is not, in any event, the estate trustee of Mr. Goodman Sr.’s estate.