ONTARIO

SUPERIOR COURT OF JUSTICE

THE TOWNSHIP OF ARMOUR, 2013 ONSC 7221

COURT FILE NOS.: CV-12-61 and CV-13-011

DATE: 20131121

B E T W E E N:

DARLENE GEORGE and

TERRY ARGIROPOULOS

And MOISHE WALLACH

Owen Thompson, for George and Argiropoulos

Glenn R. Solomon, for Wallach

Applicants

• and -

THE MUNICIPAL CORPORATION OF THE TOWNSHIP OF ARMOUR

Respondent

HEARD: November 4, 2013

D E C I S I O N

WILCOX, J.

Background

1This matter involves competing applications for the payment out of court of funds pursuant to s. 380 of the Municipal Act.

2Maynard Connelly and Mary Connelly aka Marry Argiropoulos were the owners of various properties. The properties were subject to three mortgages. The Hipmans held the first mortgage (the Hipman mortgage), Moishe Wallach (Wallach) held the second (the Wallach mortgage) which was registered in 2003 and Darlene George and Terry Argiropoulos (George) held the third mortgage (the George mortgage).

3Wallach redeemed the Hipman mortgage and took over first place.

4Wallach then sold the subject properties under power of sale with the exception of two parcels (the tax sale lands). The Municipal Corporation of the Township of Armour (the Township) then sold the tax sale lands on January 4, 2012 and paid the surplus funds into court on February 15, 2012. $16,972.03 was paid in under court file CV-12-014 and $17,903.52 was paid in under court file CV-12-015, for a total of $34,875.55.

5Both Wallach and George filed applications regarding these funds, George on July 11, 2012 and Wallach on February 13, 2013. George filed a Responding Application Record in response to Wallach’s application, and Wallach filed a supplementary affidavit responding to that. The Respondent Township did not appear and took no part in the matter of these applications.

6In his application, Wallach seeks payment out of all the moneys paid into court and all interest thereon. George contests that, and seeks a declaration that George has a first priority, payment out of all funds paid into court and any interest thereon, and costs.

7An execution creditor of the Connellys, James David Baker, also filed an application, more about which will be said below.

Statutory Framework

8S. 380 of the Municipal Act reads as follows:

Application of proceeds

380. (1) The proceeds of a sale under section 379 shall,

(a) firstly, be applied to pay the cancellation price;

(b) secondly, be paid to all persons, other than the owner, having an interest in the land according to their priority at law; and

(c) thirdly, be paid to the person who immediately before the registration of the tax deed was the owner of the land. 2001, c.25, s. 380(1).

Payment into court

(2) The treasurer shall pay the proceeds of sale, minus the cancellation price, into the Superior Court of Justice together with a statement in the prescribed form outlining the facts under which the payment into court is made. 2009, c. 33, Sched. 21, s. 6(35).

Notice

(3) Within 60 days after making a payment into court under subsection (2), the treasurer shall send a copy of the statement to the Public Guardian and Trustee and to the persons to whom the treasurer sent notice under subsection 379(1). 2001, c. 25, s. 380(3).

Payment out of court

(4) Any person claiming entitlement under clause (1)(b) or (c ) may apply to the Superior Court of Justice within one year of the payment into court under subsection (2) for payment out of court of the amount to which the person is entitled. 2001, c.25, s. 380(4).

Same

(5) The court shall, after one year has passed from the day the payment was made into court, determine all of the entitlements to receive payments out of the proceeds of sale. 2001, c. 25, s. 380(5).

George's Position

9GEORGE’S POSITION

10But for his clients’ claim, George’s counsel acknowledged that Wallach would be entitled to the moneys in court. George’s claim in this matter was based on two grounds. One was that Wallach had allegedly dealt with the lands in question in a manner that was detrimental to the interests of other creditors of the landowners and had not provided an accounting regarding those dealings. Secondly, George’s counsel argued that all parties that had filed applications in this matter should be entitled to costs regardless of the result.

11Regarding the first point, George’s counsel argued that Wallach had overpaid when buying out the Hipman mortgage. There had been a dispute over the costs involved, but Wallach had not pursued it, choosing just to pay the Hipmans instead. If Wallach had pursued this, the argument went, there may have been some money for George from the land sales after the debts with priority to theirs were paid off. Indeed, however, Wallach’s lawyer pointed out that documents filed in the applications showed that Wallach had pursued the matter to the extent of getting about $17,000 back from Hipmans.

12George’s counsel alleged that Wallach had allowed the tax sale lands to be sold for taxes rather than, as mortgagee in possession, paying the taxes and selling the properties for more money, and that this had been to the detriment of other creditors.

13Furthermore, he alleged that there had not been a proper accounting of the costs paid when Wallach redeemed the Hipman mortgage. It was his impression that an accounting would show money owing to his clients.

14Wallach’s Supplementary Affidavit of September 10, 2013 contains a document entitled “Accounting on Sale of Pickerel Lake Road” indicating that the deal closed on September 30, 2009. This had been sent by Wallach’s real estate lawyer, Raymond Grosberg, to the then lawyer for George, Bram Zinman, on November 29, 2009. George’s counsel indicated that the first time that he had seen that accounting was when he saw Wallach’s supplementary affidavit, and his clients had thought that they had not received an accounting. In any event, it was clear from the filings that there had been correspondence among lawyers for the previous owners (the Connellys) and the mortgage holders, including the Hipmans, from about 2005. More particularly, George’s lawyer, Zinman, had written to Wallach’s lawyer on October 19, 2009, raising the same sorts of concerns about Wallach’s dealings with the mortgage properties that George’s counsel raised in the hearing. Wallach’s lawyer’s letter of November 29, 2009 to Zinman enclosing the above-mentioned accounting and other documents had been in response to Zinman’s letter.

15George’s counsel raised questions at the hearing regarding the accounting, based on a presumption he made about some of the entries which would imply that the costs were inflated.

16George’s counsel and his clients’ documents frequently use words like “presumed”, “may” and “impression” and other indicators of conjecture and uncertainty as the basis for his submissions. However, when asked if he was seeking a better accounting, he stated he was “seeking equity” for the subsequent encumbrancers, that he was in the court’s hands, and that he wanted the court to revisit the matter of the mortgages and see if the court felt that there were costs charged to the detriment of others when Wallach redeemed the Hipman mortgage.

17Neither counsel expressed any interest in adjourning the matter, which would have been necessary for George’s counsel to undertake any investigations to obtain better information.

Analysis

18With respect, the court is unable to accede to George’s counsel’s request. This hearing is not a forum in which the many questions and allegations about the dealings with the lands that preceded the tax sales could be dealt with. George’s then counsel, Mr. Zinman, had that opportunity at the time of the transactions. Indeed, he did make inquiries in 2009 as we have seen, and received answers. Perhaps he was satisfied; there is no indication that anything more was done. For a court to grant the relief that George’s counsel requests, there would at least have to be better information. Perhaps counsel could have sought to cross-examine on the affidavits. In any event, the court is not in a position to perform a forensic accounting. Nor will it make a ruling based on a party’s conjecture or impressions. If Wallach’s conduct with respect to the sale of the lands gave rise to a cause of action recognized at law, the others could have taken the appropriate court proceedings to deal with that and determine the issues of liability and damages. That has not been done. Here, there is speculation and accusation but no proof that Wallach did anything for which he would be liable to others. Counsel reported a dearth of case law with respect to matters under s. 380. However, it appears to me that resolving these matters is beyond the scope of it.

19Regarding George’s counsel’s second point, the Municipal Act provides a one year period from the date of payment into court for claimants to apply for payment out. His clients filed within four to five months. Wallach filed only on the last day. George’s counsel had not received the aforementioned accounting, and so had to prepare this application. He said that the process in these matters is difficult and flawed. Each claimant has to do a separate application. There is no provision to keep these together, but for court staff posting notes in the files. He feared that he would file, that someone else would also file and that the applications would be dealt with separately because the court dealing with one would not know of the other. Consequently, he said that he spent a lot of time communicating with the court office to avoid this and with Wallach’s counsel and Baker to exchange materials for review and to coordinate this trial date. He took the position, therefore, that in any event of the ruling, those who put in applications should be awarded costs.

20He had found no cases on how to deal with costs in this process, but saw that costs would be paid from the moneys in court. This is an important point. In proceedings under s. 380, the court is to determine the entitlement to receive the moneys in court according to their priorities at law. To pay costs to all applicants, however unsuccessful, out of that fund of money would penalize the successful party or parties. Also, there would be no source of money to pay the successful parties their costs. That is contrary to the usual presumption that successful parties get their costs paid by the unsuccessful ones. Absent some clear statement of law on point, I respectfully disagree with George’s counsel’s submissions on this point and decline to award costs to all applicants, however unsuccessful.

Wallach's Application

21WALLACH’S APPLICATION

22Turning to Wallach’s Application, the accounting that was previously referred to indicated that the balance owing to him as of September 30, 2009 was $63,231.40 plus interest at 11.75 percent. That principal amount alone well exceeds the amounts paid into court. His affidavit material indicates that, as of August 20, 2013, he was owed $91,517.80.

23In view of the above, I grant Wallach’s application for payment out of court to him of the moneys paid in and all interest earned or accrued thereon in court file CV-12-014 and CV-12-015.

24It follows that the George application is dismissed.

25Wallach did not ask for costs. Each party shall bear their own costs.

Other Matters

26OTHER MATTERS

27The court received a message on the hearing date from one of the previous owners, Mary Connelly/Argiropoulos seeking an adjournment because her husband, the other previous owner, Maynard Connelly, had had a seizure that morning and they were unable to attend. Although the court sympathizes, it denies the adjournment request. These people had not filed applications, nor any documents in this matter, were out of time to do so and had no standing.

28As noted above, James David Baker was an execution creditor of the previous landowners, the Connellys. He obtained a writ of seizure and sale in 2007 in a Small Claims Court action. He then filed his Small Claims Court documents and other documents under the cover of a document entitled Application to Superior Court of Justice on December 11, 2012, with reference to s. 380 of the Municipal Act. His application was within time. Unlike the applications of Wallach and George, a new court file was not opened. The documents were simply filed in one of the files, CV-12-014 under which the proceeds of sale of some of the tax sale lands had been paid into court. Baker appeared for the hearing. In the circumstances, it is not necessary to decide whether the Baker application was properly brought. Wallach’s claim had priority and exhausted the funds that were in court. The Baker application is therefore dismissed.