SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-14-501698
DATE: 20140408

Parties

JEAN-CLAUDE LUSINDE
Applicant

and

NEW HAVEN MORTGAGE INCOME FUND (1), INC. and MARIA PIRES
Respondents

BEFORE: F.L. MYERS J.

COUNSEL:
R.K. Achampong, for the moving party

M.D. Magonet, for the respondents

HEARD: April 8, 2014

ENDORSEMENT

[1] The applicant moves on an urgent basis to restrain the closing of the sale of a residential condominium unit that is scheduled for today. Only several hours’ notice was provided to counsel for the respondents who are the second mortgagees of the condominium unit and are selling it under power of sale.

[2] In light of the lack of time available, these reasons will be brief. The applicant claims that the sale should be restrained because he has raised a serious issue to be tried on two points:

a) That the Notice of Sale dated March 14, 2013 was void; and

b) That the respondents impeded his right to redeem the mortgage by, among other things, failing to prove timely discharge statements to the applicant.

[3] The applicant argues that the Notice of Sale was void because it was sent merely one week after the mortgage was placed. That fact, without more, counsel argues, should lead to a conclusion that the second mortgagees acted in bad faith and that the enforcement of the mortgage is fraudulent. The evidence of Blair C. Rose, the real estate counsel for the second mortgagees, is that one week after the second mortgage was placed, the applicant let the first mortgage fall into arrears. This is a breach of section 7 of the second mortgage terms. Mr. Achampong argued that a default provision that allows a default consequent upon a default under another instrument is an indicia of bad faith. I see no merit in that submission. Cross-default clauses are a normal commercial term.

[4] Arrears under the first mortgage were not confined to that one incident. They mounted through 2013. To protect their position, the applicant’s arrears under his first mortgage were paid by the second mortgagees. The applicant also let his condominium fees fall into arrears and these were also paid by the second mortgagees. The federal tax authorities have also filed a tax lien on the condominium unit recently seeking over $500,000 in tax arrears. It is not clear to me that the applicant has any equity in the property at this stage.

[5] As to enforcement, the second mortgagees obtained default judgment against the applicants on the second mortgage debt almost one year ago on April 24, 2013. They obtained a writ of possession in May, 2013. The applicant made several partial payments in 2013 but never for the full amount due. By email dated November 6, 2013, the applicant promised a further payment of $26,000 on November 13, 2013 to forestall enforcement. The respondents deferred a planned eviction of the applicant in light of this offer. The applicant defaulted. The Sheriff carried out an eviction under the writ of possession on November 28, 2013. The plaintiff claims that he did not know about the default judgment or the eviction until that happened. He has certainly known of the writ of possession and default judgment since November 28, 2013 and he has taken no steps to challenge the judgment or to regain possession of the condominium until today.

[6] The applicant claims that he has a mortgage commitment and could have paid the respondents had they been more cooperative. He now seeks time to try to do so. The commitment letter at Exhibit 12 to the applicant’s affidavit is highly conditional. Conditions include a lack of arrears on the first mortgage, condominium fees and taxes. The applicant cannot meet those conditions. There is also a completely subjective condition allowing the lender to resile if the condominium does not meet the lender’s “minimum property requirements”. That is, there is no binding commitment. The respondents also note that the applicant purported to sign the commitment after it had expired by its terms.

[7] The applicant says that his ability to redeem was impaired by the refusal of the respondents to send him timely discharge statements. Multiple discharges statements were indeed sent to the applicant and his counsel. However, the ones sent in January were sent to the HOTMAIL email account of the applicant. This is the email account that the applicant used as recently as November 6, 2013 to make his $26,000 offer noted above. But, by early this year, the applicant was using a GMAIL account and he says that he had stopped checking his HOTMAIL account regularly. Documents were also sent to the applicant’s prior lawyer on March 13, 2014 and again afterward. However on March 12, 2014, the respondents entered into an agreement of purchase and sale of the condominium unit with a third party purchaser. It was too late for the applicant to redeem by the time his lawyer received that set of documents and discharge statements.

[8] The agreement of purchase and sale was included in the documents that the respondents provided to the applicant’s counsel on March 13. The sale is to close today. The sale price is $510,000 which is within $5,000 of the applicant’s own appraisal based on comparables. (The applicant’s appraiser gave a final opinion of value of $523,000 although it is not clear why he increased the value drawn from comparables).

[9] Even if the email addresses used for the discharge statements could conceivably amount to an issue to be tried, the motion fails on other grounds. There is no irreparable harm in the sale of a condominium in downtown Toronto. There is no indication of it being unique as that term has come to mean. The applicant has not challenged his eviction that occurred last November. He has little or no equity in the unit currently. The mortgagees will all be required to account at law to those with interests in the property in accordance with their lawful priorities as may be determined down the line. All that is in issue is money that is readily compensable.

[10] I also find that the balance of convenience does not favour an injunction holding up the sale. Mr. Achampong asks for even one week to let the applicant try to raise money to pay out the respondents. He submits that the applicant has “a remarkable ability to raise funds”. Unfortunately that has not proven to be the case. He has not been able to pay out the respondents over the past year while increasing the respondents’ risk by falling more and more into arrears with his other, more senior, creditors. He has no available source of funds. Moreover, he offers no undertaking on damages which, in my view, is fatal on these facts. In light the applicant’s financial plight and his lack of equity in the condominium, without a secured undertaking on damages, he asks the court to expose the respondents to the loss of a sale at or near appraised value with no ability to obtain compensation if they succeed in the lawsuit. Yet if the applicant succeeds, the respondents will account for the sale proceeds to fully compensate him. Moreover, the applicant gives no heed to the interests of the third party purchaser who is asked to bear the cost of the applicant’s sleeping on his rights since last November at least. The applicant has taken no steps to set aside the default judgment before today. The judgment debt subsists.

[11] It is too late to redeem in any event. (See Logozzo v. The Toronto-Dominion Bank (1999), 1999 9313 (ON CA), 45 O.R. (3d) 737 (C.A). The statutory right of redemption ends when the mortgagee enters into an agreement to sell the secured property.

[12] The Notice of Sale is regular on its face and meets the technical requirements and timelines of the statute and the second mortgage. The fact that it was issued so fast after the mortgage was entered into no more compels an inference of fraud than an inference that the respondents were unhappy to see their debtor go into default on a superior facility so quickly after they refinanced him. The applicant’s counsel was quite liberal with allegations of bad faith and fraud against the respondents and, to a degree, against the respondents’ lawyer, Mr. Rose. Mr. Achampong asked me to infer that Mr. Rose misled the applicant to believe that there would be no enforcement of the mortgage. That is not consistent with the evidence that Mr. Rose enforced the eviction after the applicant defaulted on his promise last November and that thereafter Mr. Rose refused to even talk to the applicant in response to an offer by the applicant to pay a further $2,500. Mr. Achampong could not point to any evidence of his client relying on Mr. Rose or of Mr. Rose making any representation to the applicant. I do not think that the allegations of fraud and bad faith against the respondents or their counsel were appropriate at least not on the evidence that was before me today.

[13] In all, I am not satisfied that there is a serious issue to be tried that might disentitle the second mortgagees from proceeding with a sale of the secured property to pay the adjudged mortgage debt such as it may be today. The plaintiff will not suffer irreparable harm if the sale proceeds. Moreover, the balance of convenience favours allowing the sale to proceed so near to appraised value with the priorities and the rights and obligations among the interested parties to be resolved later.

[14] At the conclusion of the motion I indicated that for reasons to be delivered quickly, the motion would be dismissed. Mr. Achampong asked for $10,000 in costs on a full indemnity basis if the applicant succeeded on the motion but for costs to be in the cause if the respondents succeeded. Mr. Magonet sought $14,000 on a substantial indemnity basis under the mortgage. In my view, the motion should not have been held back to the last minute. Costs were incurred by the respondents preparing “on spec” for an urgent motion rather seeing materials and being able to tailor their response. There was ample communication between counsel over the past several weeks. This motion should not have been held to the last second and the notion that it might have been brought without notice was never appropriate. Mr. Magonet was provided with material after midnight this morning. Argument took most of the morning due to the lack of focus and the lack of factums both caused by artificial urgency. In my view, costs of $10,000 on a partial indemnity basis are proportionate and reasonable in the circumstances.

[15] The motion for an interlocutory injunction is dismissed with costs payable by the applicant to the respondents in the amount of $10,000 inclusive of disbursements and HST.

F.L. Myers, J.

Date: April 8, 2014