ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-17191
DATE: 2012-07-06

B E T W E E N:

Centurion Farms Ltd.

William P. Dermody and Angela L. Papalia, for the Plaintiff

Plaintiff

• and -

Citifinancial Canada Inc.

Kevin D. Sherkin and Robert A. Gold, for the Defendant

Defendant

HEARD at Hamilton, Ontario: June 15, 2012

The Honourable Justice C. A. Tucker

ENDORSEMENT

Background

[ 1 ] The plaintiff held a mortgage on property municipally described as 4198 Corrine Court, Burlington, Ontario. The principal amount of the mortgage was $35,000.00 when it was registered on April 30, 2003. By February 2009 the principal amount was increased to $91,673.42 as a result of additional advances to the mortgagor. The plaintiff postponed its mortgage twice; first to Effort Trust, and then to Citifinancial Canada Inc. (“Citifinancial”). The Effort Trust mortgage had a principal sum of $431,250.00 while the Citifinancial mortgage was for $132,233.95. At the time of postponement, accordingly, Centurion Farms Ltd. (“Centurion”) was the third mortgage behind $563,483.95 worth of mortgages.

[ 2 ] The Citifinancial mortgage went into default and was brought into good standing. The Effort Trust mortgage in 2009 went into default. Citifinancial paid off the Effort Trust mortgage in the amount of $445,527.37 and obtained a discharge of it. Citifinancial conducted a power of sale and sold the property for $617,500.00 after listing it for $629,000.00. Citifinancial suffered a shortfall of approximately $25,000.00 on the sale.

[ 3 ] Centurion commenced an action against Citifinancial claiming that the sale was improvident, seeking an accounting, and damages in the amount of $101,150.68.

[ 4 ] Citifinancial is seeking an order dismissing that action under Rule 20.01(3). Centurion resists that motion.

Issue

[ 5 ] Is Citifinancial entitled to summary judgment dismissing the plaintiff’s claim? Is there a genuine issue requiring a trial or will the summary judgment process in the circumstances of this case provide an appropriate means for effecting a fair and just resolution of the dispute before the court?

The Positions of the Parties

[ 6 ] The defendant argues that this is a document driven case which requires no weighing of credibility and, accordingly, no need for oral testimony and few contentious factual issues. The defendant submits that in law, pursuant to the terms of its mortgage and in equity, it is entitled to add the debt owing under the Effort Trust mortgage to its mortgage. Citifinancial also obtained appraisal for the property and listed and sold the property at a price justified by the appraisals and, as such, the sale is not improvident. It has provided an accounting to Centurion fulfilling its obligation in that regard. Finally, Citifinancial points out that the third mortgage failed to obtain an appraisal which would provide evidence of a sale at an undervalue, and failed to pay out Effort Trust itself to secure its position. It is Citifinancial’s position that the failure to do so was evidence that the plaintiff knew the property’s value did not support the mortgages on it.

[ 7 ] The plaintiff points to a litany of errors in the process used in the power of sale proceedings as exercised by Citifinancial which it claims renders the sale a nullity. The notice period was too short, and the amount owing under the Effort Trust mortgage was not added to the Citifinancial debt in the notice, even though the payout was happening at about the same time. In addition, the property was marketed and sold during the notice period, which is prohibited by the Mortgages Act . It argues that Citifinancial cannot take Effort Trust’s position having obtained a discharge instead of an assignment of that mortgage and, as such, the third mortgage becomes a second and is entitled to be paid in priority to the Effort Trust debt. Centurion argues that no term of the Citifinancial mortgage allows it to increase its mortgage by payment of the first mortgage. The plaintiff says the value of the property was $700,000.00 and that the sale therefore was improvident in being sold at an undervalue, and sold too quickly without proper market exposure.

Analysis and Decision

[ 8 ] Citifinancial had appraised the mortgaged property five times before September 11, 2008 and July 28, 2009, the latter being just prior to the power of sale being issued and the property being sold. These appraisals showed a decline in the value of the property from $700,000.00 in 2008 to $592,000.00 in June 2009. The plaintiff only produced a curbside appraisal done in November 2009, but estimating a value as at the time of the sale of $700,000.00. It is clear that the sale price received by the defendant was within the range of the appraisals that they obtained. The test for finding the sale improvident would be I find that the property had been sold at such undervalue so as to amount to bad faith and fraud. That did not occur here. There is evidence that Citifinancial maintained the property while it occupied it. The only offer received for the property was the one it accepted.

[ 9 ] The many deficiencies in the power of sale, which I acknowledge, does not assist the plaintiff in its argument. The sale occurred and the plaintiff is not seeking to set it aside or add the purchasers as parties.

[ 10 ] I find that the terms of the mortgage held by Citifinancial would allow it to add its payout to Effort Trust to its mortgage and to recover the same. The Effort Trust mortgage was in default and Citifinancial was entitled to protect its position by advancing sums to do so. In addition, based upon the case law, in equity, the defendant would be entitled to receive an equitable mortgage for its advance in priority to the plaintiff or have the title rectified to receive an assignment of the Effort Trust mortgage.

[ 11 ] I recognize that I must apply the full appreciation test. I find given the fact that this is a document case where the facts are not in conflict for the most part, it is an appropriate one to deal with by way of summary judgment.

[ 12 ] For the reasons set out above, I grant the request of the defendant and dismiss the plaintiff’s action.

[ 13 ] If the parties are unable to agree upon costs, I may be spoken to.

Tucker J.

Released: July 6, 2012

COURT FILE NO.: 10-17191
DATE: 2012-07-06

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Centurion Farms Ltd. Plaintiff - and – Citifinancial Canada Inc. Defendant ENDORSEMENT Tucker J.

Released: July 6, 2012