NEWMARKET COURT FILE NO.: CV-13-116087-00

DATE: 20140627

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Raffaele Iemma, Pasqua Iemma and Mpire Credit Corporation, Applicants

AND:

Bindaas Capital Inc., Amneet Sandhu, Freilach Resorts Inc., Brostal Holdings (1999) Ltd., Hamant Patel, Antonio Matarazzo, MCAP Service Corporation, Respondents

BEFORE: THE HON. MR. JUSTICE P.H. HOWDEN

COUNSEL:
J. Vamvakidis, Counsel for the Applicants, Responding Parties

P. Mand, Counsel for the Respondents Antonio Matarazzo and Irma Matarazzo

M.A. Klaiman, Counsel for the Respondents Bindaas Capital Inc., Freilach Resorts Inc., Brostal Holdings (1999) Ltd.

HEARD: June 12, 2014

ENDORSEMENT

[1] Certain respondents brought a motion for an order vacating registration of a Certificate of Pending Litigation (“CPL”). The first issue was a request for an adjournment by the counsel for the applicants, responding parties on the motion. The material was prepared in January when Mr. Klaiman, counsel for the moving parties, the respondents Bindaas Capital Inc. (“Bindaas”), Freilach Resorts Inc. (“Freilach”) and Brostal Holdings (1999) Ltd. (“Brostal”), submitted a request to schedule a civil motion to the Newmarket trial Coordinator. The request contained suggested return dates from February 27, several in March and April and June 12, 17, 19, 24 and 26, 2014. He was given the return date of June 12, 2014. The motion material was served on February 27 on counsel for the applicants. On June 12, counsel for the applicants Mr. Vamvakidis requested an adjournment. Counsel for the moving parties was told of the adjournment request only the week before June 12. I dealt with the adjournment request early because the list was lengthy so that counsel would know whether it was to proceed later as a contested motion.

[2] Mr. Vamvakidis stated that he needed the adjournment because he had not cross-examined on the opposing affidavits and he had filed no material. He asked for two weeks. Mr. Klaiman was not available until late in July so the adjournment would have to be some six weeks. Mr. Vamvakidis could supply no reason why he had not done what he was now proposing to do during the 3.5 months since he was served. Mr. Klaiman opposed the request. First, he had wanted this motion returnable in February and no date was open until June 12. Second, the CPL remains a cloud on title, so the present owner who has mortgaged the property to Freilach and Brostal, wants to refinance the property at a better rate and cannot do so. Though Sandhu is not his client, the mortgagees are and the CPL is costing Sandhu money and Freilach and Brostal the opportunity to do business with him.

[3] I ordered the matter to proceed. Practitioners know well that motion dates in Newmarket are scarce in the short term and when service gives parties the opportunity for over 3 months to prepare for a motion, I see no valid reason for granting an adjournment because one side decided to simply do nothing, where there is prejudice to other parties. Though it was the first return, I could see no valid reason to offset the prejudice to the respondents and the owner of the property by adjourning for what would have to be a further six weeks. The adjournment request was denied.

[4] On the motion being heard later on June 12, Mr. Mand took no position on the motion; he attended on a watching brief only on behalf of the original third mortgagees Antonio and Irma Matarazzo.

[5] Mr. Klaiman argued for the respondents that the CPL lacks grounds for it to remain. He submitted that the applicants were second and fourth mortgagees on the property known as 10 Bostwick Crescent, Richmond Hill. Bindaas was the assignee of the first mortgage. The mortgage fell into arrears. Bindaas issued a notice under power of sale which was served on June 26, not on May 29 as Mr. Klaiman had first stated. The fourth mortgagees, the Iemmas, asked to make an offer. Mr. Iemma was sent an offer to purchase form but he never completed and submitted it. The property was sold prior to the closing date in the agreement of purchase and sale to Mr. Sandhu. This allegation was not disclosed on the ex parte CPL application; however in view of the lack of any objective evidence of that allegation, I do not feel the absence of full disclosure is a ground I can rely on because I cannot weigh the credibility of Mr. Kariah through an affidavit as to this one isolated “fact” and there is no affidavit from the real estate agent on whose information Mr. Karia’s allegation relies.

[6] Mr. Klaiman submitted that whether the cause of action is a defectively completed notice of sale or a sale too soon according to the time required by the Mortgages Act and the mortgage, or an improvident sale, despite the claims in the application to expunge the prior mortgages, the only remedy open to the applicants is a claim for damages. He submitted that the allegations of the applicants, if true and proven, provide no basis for the title remedy claimed. He submitted further that if there was something improper done by the solicitors for Bindaas in not providing a statement of the amount owing for the applicants to pay the first mortgage off and closing the sale under power of sale well before the date in the agreement of purchase and sale with Sandhu, again there is no question of title involved; but there is a remedy in damages. Finally he submitted that, on the authority of 572383 Ontario Inc. v. Dhunna (1987), 24 CPC (2d) 287 (Master, Ont. Sup. Ct.) and Waxman v. Waxman, [1991] O.J. No.89 (OGD), the analysis should begin with whether there is a reasonable claim to an interest in land; then one should consider the equities, particularly the eight factors in Dhunna. He submitted that, apart from the issue of a title-related remedy, which he submitted was not available in these circumstances, the application of the Dhunna factors militate toward the conclusion he urged, that the CPL should be vacated so that Brostal can accept repayment of its mortgage debt as it wants to (see M.R., Talsky aff., para. 5). The land is not unique; there is a remedy in damages and an accounting; there are two parties ready to refinance the property with advantages to both; and the prejudice to Brostal and Sandhu if the CPL is allowed to remain where no interest in land is involved outweighs whatever prejudice that the applicants would suffer by leaving on title a CPL that should not be there.

[7] Mr. Vamvakidis recounted the history of the events leading to his clients’ inability to pay off the first mortgage before it was sold and the defects in the sale under power of sale to Sandhu. He said that the notice of sale was short-served, only allowing from June 26 to July 14 for redemption. He said that the notice of sale was defective in that the principal amount was increased by some $75,000 in the 4-month period from the assignment of the first mortgage to Bindaas. He traced, through correspondence from representatives of Mpire Credit and of Mr. and Mrs. Iemma including himself, several requests with ascending urgency for the correct first mortgage details from Bindaas without result. Only following the completion of the sale to Sandhu on August 9, some twenty-seven days before the closing date in the agreement, did he receive a reply. It was from Marvin Talsky dated August 12, 2013. The letter stated, in part, “Please be advised that the property was sold and the necessary accounting will be forthcoming from my client within a reasonable period of time.”

[8] By later correspondence, Mr. Vamvakidis threatened to report Talsky to the Law Society for “flagrantly breaching your ethical duties to opposing counsel”. Mr. Talsky replied, in part, that “(w)ith respect to your threat about the Law Society, I am prepared to meet that and deal with it”, and that Mr. Vamvakidis had ample opportunity to take appropriate steps to redeem the mortgage. No such complaint was brought.

[9] Mr. Vamvakidis concluded that the early closing plus the delayed reply to his letters requesting mortgage details and even sending to Mr. Talsky a cheque for $360,000, unknowingly four days after the Sandhu purchase closed, amounted clearly to a case of bad faith.

[10] In reply, Mr. Klaiman stated that regarding the amount shown as owing in the notice of sale, the possibility of arrears was not considered by the opposing submissions. He argued that if this was all a scam, the remedy is in damages, not in an interest in land claimed by a mortgagee lower in priority who wanted to redeem in order to gain priority and failed.

[11] As to the alleged defective notice under power of sale, an authoritative text on real property law states that an action on the covenant may be brought by a mortgagee to recover any deficiency on the sale. As to the form and time of the notice, there is authority for the proposition that a mortgagee may enter into a contract to sell the property before the power is exercisable provided the contract is not completed until after the power is exercisable, and if the property is sold for an undervalue, due to negligence or default, the mortgagee can be chargeable for what might have been received. As well, a sale may be restrained where unconscionability is raised and can be shown to be a triable issue. But after the power of sale is exercised, the power may not be exercised again and the mortgagee may not seek possession. Finally, where a power of sale is exercised properly, the interest of the mortgagor and of subsequent encumbrancers in the land is at an end. Anger & Honsberger Law of Real Property, (3d ed.), by A. W. La Forest (looseleaf); Canada Law Book Dec. 2013, vol.3, pp. 33-40 to 33-43.

[12] Mr. Vamvakidis provided no authority for his position that his clients had a reasonable claim to an interest in land arising from the circumstances of this case. As for the factors referred to in Dhunna, while I understand that this property had value for purposes of land consolidation or assembly as do many smaller pieces of land in or about commercial and institutional areas of the Greater Toronto Area, I heard nothing to indicate it had a uniqueness in the sense mentioned in Dhunna. The applicants do not fit the description of a shell corporation, one of the eight factors in Dhunna; however, I cannot find that on those factors, the balance favours the applicants. Much of the criticism of the notice under power of sale was known by them when the power was exercised and no action to restrain the sale was brought where the parties were all aware an agreement of purchase and sale was in place. There is authority, as I stated above, to take into account not only the period of notice prior to the sale agreement but also the period up to closing, in this case forty-four days, more than required by the Mortgages Act, RSO 1990, c. M.40.

[13] Regarding claims for deficiency in the price, negligence by Bindaas in accepting the Sandhu offer, or for the actions of representatives of Bindaas before and including the sale, in my view the remedy is in damages and/or an accounting. And finally, the prejudice of leaving on title the CPL outweighs the prejudice of removing it in view of my conclusion that a question of title or an interest in land is not raised and that damages would be the remedy for the applicants. The real complaint here is that a mortgagee low in priority was thwarted in the attempt to improve his priority. Under the land titles system which this and most urban land now has been brought, a mortgage simply acts as security and does not have the effect of transferring the legal estate or operating as a transfer of title. Anger & Honsberger, supra, vol.3, p. 33-16.

[14] For the reasons given, I accept the submissions of counsel for the moving parties (respondents in the application). It is ordered that the CPL registered against the land known municipally as 10 Bostwick Crescent, Richmond Hill described in Schedule A of the Notice of Motion.

[15] If counsel and the parties are not able to agree on costs, counsel may direct brief written submissions on costs to me at the Barrie Courthouse, the moving parties’ counsel within ten days and counsel for the responding parties within a further ten days.

HOWDEN J.

Date: June 27, 2014