COURT FILE NO.: 554/08
DATE: 20090106
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
GEORGE FERNICOLA IN TRUST and CARRINGTON HOMES LTD.
Plaintiffs/Moving Parties
- and -
CREVIEW DEVELOPMENT INC. and MCAP FINANCIAL CORPORATION
Defendants/Responding Parties
Alan B. Dryer, for the Plaintiffs/Moving Parties
Marco Drudi, for Creview Developments Inc.
Ronald Birken, for MCAP Financial Corporation
HEARD at Toronto: January 6, 2009
Janet WILSON J.:
[1] This is a motion for leave to appeal from the discretionary interlocutory order made by Trotter J. on October 21, 2008. He denied the motion relief requested by the plaintiffs.
[2] The plaintiffs sought an order pursuant to s. 12(3) of the Mortgages Act, R.S.O. 1990, c. M.40 allowing the plaintiff to pay the disputed mortgage funds into court pending the hearing of a trial in this matter.
[3] Section 12(3) of the Mortgages Act provides as follows:
(3) When a mortgagor or any person entitled to pay off a mortgage desires to do so and the mortgagee, or one of several mortgagees, cannot be found or when a third mortgagee or the last surviving mortgagee is dead and no probate of his or her will has been granted or letters of administration issued, or where from any other cause a proper discharge cannot be obtained, or cannot be obtained without undue delay, the court may permit payment into court of the amount due upon the mortgage and may make an order discharging the mortgage.
[4] Trotter J. declined to exercise his discretion pursuant to s. 12(3), concluding that he had concerns about the validity of the plaintiffs’ claim. After considering the relevant caselaw, Trotter J. concluded that if a dispute arises with respect to amounts owing pursuant to a mortgage, although s. 12(3) may be available to provide relief, it is not automatically engaged. Rather, the motions court judge must consider the relative equities of the case to determine whether the relief should be granted. The core of Trotter J.’s reasons on this motion for leave to appeal are found at paragraph 7:
I doubt that s. 12(3) is meant to furnish a discharge to a mortgagor on the mere demonstration that a discharge is not forthcoming because of a dispute as to the amount owed. While the section protects the mortgagee by substituting one form of security (the mortgage) for another (payment into court), it also has the effect of depriving the mortgagee of actual payment on the mortgage while a court sorts out the dispute in the meantime. Nevertheless, it has been held that the Act is remedial and should be given a liberal interpretation: see Metroview Investment Corp. v. Araujo, [2000] O.J. No. 2403 (S..C.J.), at para. 13. Moreover, relief has been granted in circumstances comparable to this case: Schrittwieser v. Morris (1987), 1987 4174 (ON SC), 62 O.R. (2d) 177 (H.C.J.), at p. 178 and Metroview Investment Corp. v. Araujo, supra. The decision under s. 12(3) is discretionary and must be exercised judicially: Graystone Properties Ltd. v. Smith et al. (1982), 1982 1853 (ON CA), 39 O.R. (2d) 709 (C.A.). This, in my view, entails a consideration of all of the circumstances. In a case like this, in addition to establishing that a timely discharge is not forthcoming because of a dispute as to the amount owed, the mortgagor must also demonstrate that the relative equities of the case favour making an order under s. 12(3).
[5] In my view, this statement of the law on this issue by Trotter J. is correct. I do not accept the arguments made by counsel for the appellant. The decisions of Nordheimer J. in Metroview Investments and Rosenberg J. in Schrittwieser do not stand for the proposition that any time there is a dispute with respect to amounts owing the mortgagor may simply apply to have the funds paid into court pending the trial. Specifically at paragraph 18 of Metroview, Nordheimer J. notes:
…the fundamental consideration that must apply to these decisions and that is that the granting of relief under sections 12(3) and 12(6) of the Act is, when all is said and done, a matter of discretion to be determined on the individual facts of each case.
[emphasis added]
[6] Trotter J. considered at paragraph 8 of his decision the arguments raised by the plaintiff that there was a vendor’s undertaking to adjust the Statements of Adjustments and as well that the Agreement of Purchase and Sale contains a price adjustment clause that does not merge on closing.
[7] He went on to consider at paragraph 10 the relative equities in light of the facts of this case. He stated that he was far from convinced that the plaintiff had an arguable case based on the facts and the history of the transaction in question.
[8] I reviewed with counsel in some detail the underlying facts and documents in the history of this transaction that were before Trotter J.. His conclusions are supported by the evidence.
[9] This transaction involves the purchase of lots for development. The mortgage in question that is disputed secured 75% of the purchase price. The appellant argues that there were undisclosed, improper adjustments made to the purchase price prior to closing and therefore the amount owing on the mortgage is some $317,000.00 less than the amount registered against the remaining unsold lots.
[10] It is clear that when the Agreement of Purchase and Sale was signed in June, 2005 that the subdivision agreement had not yet been registered. The transaction matured over time. The number of lots that were sold changed. The appellant relies on the schedule to the Agreement of Purchase and Sale that specifies prices for lots with 36 or 40 feet of frontage. After the registration of the subdivision agreement in September 2005, there were adjustments to the price with respect to certain individual lots that exceeded the lot size as outlined in the Agreement of Purchase and Sale. It is this price adjustment that founds the basis of the plaintiffs’ claim.
[11] Trotter J. noted that the plaintiff had signed individually the transfers with respect to the 74 lots in question that were purchased which stipulate the various individual prices of each lot in question based upon frontage. He notes that the plaintiff is a sophisticated business developer and that he was represented by counsel throughout. A document was prepared with the adjusted prices based upon frontage of each of the lots, which underpins the adjusted purchase price and the mortgage. The plaintiff asserts that he failed to read this document, as well as the 74 individual transfers that he signed.
[12] I conclude that there is no reason to doubt the correctness of the decision of Trotter J. It is a discretionary decision and his findings are reasonable and supported by the evidence. His reasons are not determinative of the outcome of the action, but reflect fairly his assessment of the equities based upon the material before him. I do not accept the appellant’s argument that there are there conflicting cases requiring clarification by the Divisional Court. Trotter J. correctly confirms the principles in Metroview and Schrittwieser but concludes on the facts and equities of this case that it was not appropriate for him to exercise his discretion pursuant to section 12(3) of the Mortgages Act. He therefore declined to grant the relief sought.
[13] I conclude that neither s. 62.02(4)(a) nor (b) of the Rules of Civil Procedure are engaged by the facts of this case.
[14] The motion for leave to appeal is therefore dismissed.
COSTS
[15] I heard counsels’ submissions with respect to costs. The costs must be reasonable, in proportion to the amount in dispute and within the reasonable expectations of the losing party. A standard award for costs on an unsuccessful motion for leave to appeal is in the vicinity of $3,500.00. This would be such a standard motion for leave to appeal. However, the parties were aware that the terms of the mortgage provided for substantial indemnity costs. The respondents seek substantial indemnity costs in excess of $10,000.00. In my view, in these circumstances, the costs payable by the appellant should appropriately be in the amount of $8,000.00, payable to each defendant, inclusive of GST and disbursements. This is a reasonable amount having regard to the expectations of the losing party and in light of the terms of the mortgage document. This sum is in addition to the award made by Carnwath J. on December 10, 2008.
JANET WILSON J.
Date of Release: January 9, 2009
COURT FILE NO.: 554/08
DATE: 20090106
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
GEORGE FERNICOLA IN TRUST and CARRINGTON HOMES LTD.
Plaintiffs/Moving Parties
- and -
CREVIEW DEVELOPMENT INC. and MCAP FINANCIAL CORPORATION
Defendants/Responding Parties
REASONS FOR JUDGMENT
JANET WILSON J.
Date of Release: January 9, 2009