NEWMARKET

COURT FILE NO.: CV-13-115769

DATE: 20140319

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Elle Mortgage Corporation

Plaintiff/Defendant by Counterclaim

– and –

Nu-Port Homes Inc. and Giovanni Pugliese

Defendants/Plaintiffs by Counterclaim

Glenn Cohen, for the Plaintiff/Defendant by Counterclaim

Giovanni Pugliese, In Person for the Defendants/Plaintiffs by Counterclaim

HEARD: February 27, 2014

REASONS FOR DECISION

gilmore J.:

Overview

[1] This is the plaintiff’s motion for summary judgment for payment on a mortgage debt including pre-judgment and post-judgment interest, possession of the mortgaged premises, dismissal of the counterclaim, leave to issue a writ of possession against the mortgaged property and costs. The defendants seek an adjournment. The corporate defendant seeks an adjournment in order to obtain counsel once its charter has been reinstated. The personal defendant, Mr. Pugliese, seeks an adjournment so that he can obtain additional documentation as corroboration with respect to the information in his responding material, and his affidavit, sworn February 24, 2014.

Background

[2] The property secured by the plaintiff’s mortgage is a commercial condominium unit at 56 Pennsylvania Avenue, Unit 13, Vaughan, Ontario. Title is registered in the name of the defendant, Nu-Port Homes Inc. The defendant, Giovanni Pugliese (“Pugliese”), is the sole director and officer of Nu-Port Homes Inc. The premises is occupied by the entity Blue Peak Developments Inc. (“Blue Peak”) whose principal is Tony Vaccarello. Mr. Vaccarello attended court on the day this motion was argued on February 27, 2014, although he did not have any material before the court. He confirmed to the court that he was the principal of Blue Peak and that Blue Peak subleases the premises to KT Partners. Both Blue Peak and KT Partners were given notice of the motion for summary judgment by the plaintiff. Mr. Vaccarello supported the defendants’ request for an adjournment, or in the alternative he sought an order that leave to issue a writ of possession be stayed for a period of time, such that he could obtain legal advice. The plaintiff objects to any adjournment of this matter given that the motion materials were served on the defendants on February 12, 2014, and the non-defendants, Blue Peak and KT Partners, on February 12, 2014.

[3] The Ontario Corporations Branch has cancelled the charter of Nu-Port Homes Inc. as per the corporation profile report, dated November 14, 2013, which was attached as Exhibit A to the affidavit of Terry Walman, sworn January 16, 2014.

[4] Counsel for the plaintiff submitted that title to mortgaged premises is subject to mortgages in favour of TD Trust Company, a trustee, Depositors Mortgage Corporation Inc., and Laurentian Trust Canada Inc., in trust. Title is also subject to a lien for condominium common expense arrears, which are in excess of $10,000, and which has priority over all of the mortgages. Title is also subject to liens and/or executions in favour of The Queen in Right of Canada for $273,000, The Ontario Ministry of Finance for a judgment in the amount of $41,716, and a judgment in favour of Tarion Warranty Corporation in the amount of $261,340. All of the subsequent mortgagees are represented by Mr. Walman. In order to protect his clients’ interests from the consequences of a first mortgagee who might take enforcement proceedings, and being aware that the first mortgage was due to mature, Mr. Walman negotiated a payout of the first mortgage and an assignment to his client, the plaintiff. The first mortgage was therefore paid out and assigned in favour of the plaintiff on April 3, 2013. The payout totaled $99,341.

[5] The plaintiff notified Nu-Port Homes and Pugliese in writing by regular and registered mail of the transfer of the charge and made demand for payment.

[6] The defendants’ statement of defence alleges that the mortgagors made payments under the mortgage after the payout and up to and including June 30, 2013, and further, that the mortgage was renewed by the previous mortgagees. In response to that allegation counsel for the plaintiff communicated with the solicitors for the previous first mortgagees. He was advised by letter dated November 6, 2013, that there were no payments made up to June 30, 2013, nor were payments made after the assignment to the plaintiff. Further, the plaintiff was advised by the solicitors for the previous first mortgagee that Nu-Port Homes and Pugliese were informed that the former first mortgagee would not renew the mortgage, and that Pugliese was advised of this by letter delivered to him by hand on May 2, 2013. It is therefore untenable for Pugliese to submit that he was not aware of the transfer of the mortgage until June 2013. According to the plaintiff since no payments have been made by the defendants on the mortgage debt since it was acquired by them, and since the mortgage has matured and not been renewed, the statement of defence does not contain any element of truth. The mortgage debt is owed in full together with subsequent interest and three months interest compensation pursuant to section 17(1) of the Mortgages Act.

[7] The defendants allege that the notice of sale is invalid, to which the plaintiff responds that any such claim is irrelevant to its claim for payment and possession in the within action. In any event, the plaintiff submits that the notice of sale is valid and completely correct.

[8] In response to the statement of defence, the plaintiff submits that the enforceability of any other mortgages on title is irrelevant to the enforcement of the first mortgage and that there has never been any assignment to Jaybury Holdings Inc., and since any such assignment is not registered on title it is unenforceable as against the plaintiff. The defendants (plaintiffs by counterclaim) claim damages of $500,000 in their counterclaim. There is no basis for the damages pleaded according to the plaintiff and the relief sought is simply to avoid summary judgment under the matured first mortgage.

[9] The mortgaged premises is occupied and those in occupancy have been given notice of the within motion and the claim for a writ of possession.

The Positions of the Parties

[10] The plaintiffs submit that the defendants are, in effect, “professional” defendants who are overwhelmed by debt and simply attempting to delay the inevitable. The defendants raise an issue with respect to the assignment and claim that the plaintiff has failed to comply with section 53 of the Conveyancing and Law of Property Act in relation to notice of the assignment. Pugliese does not challenge the validity of the assignment but the fact that the purported notice did not come from the assignor, as the law requires, but from the assignee. The plaintiff argues that there is no difficulty with an assignee issuing a notice of sale and that notice need not be given by the original mortgagor, but may be given by an assignee. In support of his position the plaintiff relies on Manko Inc. v. Wojnowski [1998] O.J. No. 3857. In that case there was an issue as to whether proper written notice of the assignment was given to the defendant. A notice of sale under mortgage giving particulars of the assignment was sent by registered mail to the defendant. The court held that a notice of sale satisfies the notice requirement under section 53 of the Conveyancing and Law of Property Act and allows an assignee to maintain an action in its own name.

[11] The plaintiff also provides copies of letters, dated May 6 and June 5, 2013, with respect to the assignment and requesting payment of the condominium fees, as well as past due payments on the mortgage.

[12] The plaintiff raises the issue of the defendant Nu-Port’s charter being cancelled. Mr. Pugliese advises that an application has been made for revival of the charter. The plaintiff points out that there is no corroborating documentation for that and, in any event, it is anticipated that Pugliese would have difficulty renewing the charter given that financial statements and up-to-date tax filings must be provided, and there is no indication that such request for renewal would be granted. The plaintiff also relies on Exhibit L of Mr. Walman’s affidavit, sworn January 16, 2014, a letter, dated May 2, 2013, sent from Mr. Press, the solicitor of the previous first mortgagor, to Mr. Pugliese in which it is made clear to Mr. Pugliese that the previous mortgagor would not consider any request for a renewal. This letter is submitted in the face of what the plaintiff says are bald allegations by Pugliese that there was a renewal and payments made subsequent to the renewal. The plaintiff points out that Pugliese has not provided any evidence of documenting the renewal or the payments.

[13] The plaintiff reminds the court that the defendants must put their best foot forward on a motion for summary judgment and that this court should assume that the record before it is the one that would be before it at trial. This is required in order to enable the court to determine if there is a genuine issue for trial. The plaintiff argues that the defendant has failed to put its best foot forward by not providing the required documentation to support the allegations it makes in its affidavit material. The plaintiff submits it is therefore unjust to delay the matter any further and that summary judgment should be granted, with judgment for possession as well.

[14] During the course of the motion the plaintiff provided a calculation of the outstanding amount owing on the judgment, being the sum of $107,208.56, inclusive of interest to February 27, 2014, and the three month interest penalty of $2,202.98 pursuant to section 17 of the Mortgages Act. With respect to occupation of the mortgaged premises, the plaintiff points to Exhibit N of Mr. Walman’s affidavit which contains two letters from Blue Peak, one dated September 16, 2013, and the other dated September 18, 2013. In the September 18, 2013, letter Blue Peak indicates that they have sublet a portion of the main floor to KT Partners. Mr. Vaccarello signed both letters and threatens to obtain an injunction restricting the plaintiff from changing the locks while the subsequent mortgages are being litigated. The plaintiff submits that it is clear that Blue Peak has received notice of the plaintiff’s intention to seek possession, and that they were subsequently served with the summary judgment motion material in early February 2014. It is improper for them to now request an adjournment so that they can obtain legal advice. They have known about the plaintiff’s intentions to enforce since September 2013.

[15] The plaintiff submits that the counterclaim is a sham and completely unsupported. With respect to the defendants’ allegation that they have obtained a default judgment on the counterclaim, again, they have filed no proof of this, while the plaintiff has provided a copy of their reply and defence to counterclaim in their motion record, which is dated December 6, 2013. The plaintiff seeks dismissal of the defendants’ counterclaim as part of the relief in their motion. The plaintiff argues that if the noting in default took place as alleged, their defence was filed two weeks after and they received no notice of it. Even if they have been noted in default, the court has jurisdiction to grant leave nunc pro tunc to file the reply and defence to counterclaim as the matter is an administrative one at this stage, and would come under the heading of other relief that they have requested in their notice of motion. The defendants argue that as a result of the noting in default, the plaintiff has no standing to bring their motion without leave, and they have not sought leave. As such, the motion should be dismissed.

The Defendants’ Request for an Adjournment

[16] The defendant Pugliese sought an adjournment so that he could obtain counsel. He is in the process of reinstating the charter for Nu-Port Homes and this will take approximately three to five weeks. At that time, Nu-Port will have proper legal representation and it should be entitled to pursue its claims on this basis.

[17] Mr. Pugliese also sought an adjournment so that he could file additional documentation in support of the allegations in his affidavit. He told the court that he had proof of the documentation related to the reinstatement of the Nu-Port charter and other documents he wished to file.

[18] The plaintiff’s counsel opposed the adjournment for the following reasons:

(a) Plaintiff’s counsel had no notice of the adjournment request. The materials filed by Mr. Pugliese indicate nothing but that he intended to proceed and defend the motion for summary judgment on February 27, 2014;

(b) If there had been contact with counsel regarding the reinstatement of the charter or anything else for that matter, such correspondence could easily have been attached to Mr. Pugliese’s material and it was not;

(c) It is highly prejudicial to the plaintiff to experience a further delay. No payments have been made on the mortgage since May 2013. With respect to the defendants’ argument that the mortgage was in good standing at the time of assignment, that is completely irrelevant for the purposes of this motion. The fact remains that the mortgage is in default, notwithstanding it may have been in good standing at a previous time. The defendants have still not dealt with other relevant debts. For example, the condo lien has priority over the first mortgage and has not yet been paid;

(d) The defendants have given no undertaking to pay or any good faith payment. They are abusing the system as expert defendants. Even if they gave an undertaking to pay it would be meaningless given their secured debt and the liens in favour of Tarion, the Government of Ontario and the Government of Canada; and,

(e) Generally, adjournment requests can be compensated by costs but in this case any requirement that the defendants pay costs would be meaningless. There is no indication that the defendants have the ability to pay any costs and a review of their indebtedness at this point makes any costs order somewhat futile.

Ruling on the Adjournment Request

[19] I decline to allow the defendants an adjournment for the following reasons:

(a) The defendants have been given adequate notice of this proceeding. Not only was the material served on them on February 12, 2014, but the demands for payment on the mortgage were made in May and June 2013;

(b) The plaintiff was given no notice of the request for an adjournment. I agree with plaintiff’s counsel that the tenor of the material filed by the defendants was such that the plaintiff had every right to expect that the defendants would proceed on the scheduled motion date;

(c) There is extreme prejudice in allowing the matter to languish any further. The mortgage is in default. It has not been renewed or paid out. There have been no payments or an undertaking to pay. I accept that any further delay is only prejudicial to the plaintiff;

(d) I agree with plaintiff’s counsel that any costs order made to compensate the plaintiffs for prejudice may also be meaningless in this case given the indebtedness of the defendants and the likelihood that Nu-Port Homes Inc. is not even a valid entity against which the plaintiff could enforce any costs order; and,

(e) The material filed by the defendants raises legal issues which in my view are beyond the knowledge of someone without either legal training or experience in the legal system. Issues are raised with respect to conveyancing and assignment of mortgages which require some degree of knowledge or specialization. It is therefore not credible that the defendants ask for additional time or legal representation at the last moment, given what I consider to be their sophistication in matters related to secured financing.

[20] Given all of the above I decline to allow the adjournment.

Ruling on the Plaintiff’s Motion

[21] The plaintiff’s motion for summary judgment is allowed. I do not find that the defences raised by the defendants are tenable. I am satisfied that the issues raised by the defendants with respect to the assignment should not interfere with this court’s ability to grant summary judgment. Even if the defendants renewed the mortgage or made payments on it, the letter from Mr. Press indicates the complete opposite. Further, there is no documentary proof filed by the defendants to prove that any renewal had taken place or any payment made subsequent to that renewal. The fact remains that the mortgage is in default and no payments have been made since the mortgage was assigned. I accept that the case law presented by the plaintiff confirms that notice of the assignment by way of the notice of sale is acceptable notice.

[22] I agree with the plaintiff that the defendant must put its best foot forward on a motion for summary judgment. If they had documentary evidence or proof of the allegations made in their affidavit now is the time to provide that proof. Asking for an adjournment to do so without any notice to the plaintiff is unacceptable and inappropriate.

[23] I also reject the defendants’ argument that the plaintiffs have no standing to proceed on the basis that they have been noted in default with respect to the counterclaim. First, no evidence was presented that the plaintiffs have actually been noted in default. The plaintiffs never received notice of this either. Second, there is evidence that the plaintiffs filed a reply and defence to counterclaim as that material was contained in their motion record. Even if they were noted in default and the reply and defence to counterclaim was therefore filed two weeks later, I grant leave nunc pro tunc to the plaintiffs to file their reply and defence to counterclaim in the circumstances of this case.

[24] Possession of the mortgaged premises is also granted. However, with respect to leave to issue a writ of possession, such leave shall be delayed for thirty days from the date of this judgment to allow Blue Peak and KT Partners to properly vacate the premises.

[25] The defendants shall not be required to approve the draft judgment in this matter as to form and content. The plaintiffs shall serve a copy of this judgment on Blue Peak at the address for service which was given by its representative, Mr. Vaccarello, while in court, namely, 5596 Lockengate Court, Mississauga L5R 3M8. KT Partners shall also be served with a copy of this judgment at the address of the mortgaged property since Mr. Vaccarello confirmed that space at the subject mortgaged premises is sublet to KT Partners.

[26] If the parties cannot agree on costs, I will receive written submissions on a seven day turnaround, commencing with the moving party, followed by responding submissions, then reply submissions, if any, commencing fourteen days from the date of release of this endorsement. Cost submissions shall be no more than two pages in length, exclusive of any costs outline or offers to settle. All costs submissions shall be delivered via email through my assistant at alissa.livesey@ontario.ca. If no submissions are received by thirty-five days from above date, the issue of costs will be deemed to have been settled as between the parties.

Justice C.A. Gilmore

Released: March 19, 2014