SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-443007

DATE: 20140721

RE: Yordanys Frometa, Plaintiff

– AND –

Manuel Augusto Domingues Oliveira, Defendant

BEFORE: Justice E.M. Morgan

COUNSEL:
Ross Macdonald, for the Plaintiff

Richard E. Anka, Q.C., for the Defendant

Mark Ross, for Jose Soares Avila and Maria Liduina Avila (interested parties)

HEARD: July 19, 2014

ENDORSEMENT

[1] The Defendant seeks relief from forfeiture in a mortgage action on two grounds: a) he did not get notice of the foreclosure and sale of the property, and b) the sale of the property was for below market value.

[2] The subject property is located at 70 Borden Street, Toronto (the “Property”). The Defendant purchased this property in 1989 for $210,000. On May 20, 1994, he placed a first mortgage on the Property with Scotia Mortgage Corporation. That mortgage was transferred to Anthony and Franica Cacic on January 31, 2006, and then to Joseph and Franica Cacic shortly thereafter. At the time of the transfer, the charge was in the amount of $97,500. The Scotia mortgage was discharged on May 23, 2006.

[3] The Statement of Claim and supporting affidavit in the underlying foreclosure action indicate that the mortgage went into arrears on May 30, 2009. The Defendant has made no payments and has paid no realty taxes since that time. In fact, it appears from the evidence in the record that the Defendant had not paid taxes on the Property since 2007.

[4] In October 2010, the Plaintiff purchased this non-performing mortgage from the Cacics, and in early 2012 commenced the foreclosure action by Statement of Claim. The Defendant never served a Statement of Defence, and so on May 31, 2012 the Plaintiff brought a motion for default judgment.

[5] The final Order for foreclosure was granted by Brown J. on July 4, 2012. The Defendant alleges, however, that he never received notice of the foreclosure action. He seeks to set aside the Order.

[6] Much of this motion has centred on the service and notice question, with affidavits, cross-examinations, and factums, and oral argument all substantially aimed at establishing whether or not service of the Statement of Claim was effective. In my view, it is doubtful that the court has jurisdiction to set aside the Order of Brown J. on that basis, even if the Defendant is right. Section 60 of the Conveyancing and Law of Property Act, RSO 1990, ch. C.34, provides that, “[a]n order of the court under any statutory or other jurisdiction shall not, as against a purchaser, whether with or without notice, be invalidated on the ground of want of jurisdiction or of want of concurrence, consent, notice or service.”

[7] Brown J. was satisfied that she had jurisdiction to grant her Order, which would have included a determination that the Statement of Claim was properly served. That said, it is worth reviewing the evidence and arguments regarding service and notice, as it is the equitable jurisdiction of the court that has been invoked in this motion. Although I am of the view that Justice Brown’s order is in all respects final, a court of equity may retain the ability to intervene provided that “the equities in the mortgagor’s favour outweigh all that are against him or her”: Coast-to-Coast Industrial Development Co. v 1657483 Ontario Inc., [2009] OJ No 5212, at para 14.

[8] On January 2, 2011 the Statement of Claim was served on the Defendant at 21 Renoak Drive, Toronto. This was the address that the Plaintiff knew to be the Defendant’s home address. A person who identified himself as “John Santos” answered the door and received the document from the process server. The process server’s affidavit of service then states that as a follow-up to this delivery, the Statement of Claim was mailed to the Defendant at 21 Renoak Drive the next day, January 3, 2011.

[9] The service described in the process server’s affidavit complies with the requirements of alternative service under Rule 16.03(5) of the Rules of Civil Procedure:

(5) Where an attempt is made to effect personal service at a person’s place of residence and for any reason personal service cannot be effected, the document may be served by,

(a) leaving a copy, in a sealed envelope addressed to the person, at the place of residence with anyone who appears to be an adult member of the same household; and

(b) on the same day or the following day mailing another copy of the document to the person at the place of residence,

and service in this manner is effective on the fifth day after the document is mailed.

[10] The Defendant’s first affidavit in this motion states that, in fact, he resides at 72 Borden Street, the house next door to the Property that is subject to the mortgage in issue. That information apparently took the Plaintiff by surprise, and so Plaintiff’s counsel hired a private investigator to determine the Defendant’s place of residence. The investigator provided evidence that the Defendant actually lives at 21 Renoak Drive, where service had been effected.

[11] Upon receiving the investigator’s report in a responding affidavit by the Plaintiff, the Defendant served a supplementary affidavit correcting his previous statement about his place of residence. In his supplementary affidavit he conceded that he lives at 21 Renoak Drive, and that the misstatement in his first affidavit was due to difficulties with English and a miscommunication with his counsel.

[12] In any case, it is now certain that 21 Renoak Drive is the Defendant’s place of residence, and that the process server attended at, and subsequently mailed the pleading to, the correct address. Nevertheless, the Defendant deposes that he does not know who answered the door at his house, and that he does not know who John Santos is.

[13] Defendant’s counsel cross-examined the process server, Jeremiah McCarthy, on his affidavit of service. Mr. McCarthy stated that he took down the name “John Santos” when a person who identified himself that way answered the door at the Defendant’s residence. Mr. McCarthy testified that otherwise he does not have any independent recollection or knowledge of the individual who answered the door. That, of course, is not particularly surprising, since Mr. McCarthy is a professional process server and has no personal interest in the many deliveries he makes and the many services he effects on behalf of law firms. Mr. McCarthy also testified that he has no independent record of having mailed the Statement of Claim the next day, except that he noted it in his affidavit of service which was sworn that very day.

[14] Counsel for the Defendant contends that the veracity of Mr. McCarthy’s affidavit of service is in question. He submits that in this day and age, a process server should take a digital photograph of every person he serves in order to later prove who it was that took delivery of the documents. He also submits that as a process server Mr. McCarthy should have an independent record of the Canada Post follow-up mailings required for alternative service under Rule 16.03(5)(b).

[15] With respect, nothing in the Rules of Civil Procedure or more generally in the law of evidence requires a process server to take the steps that Defendant’s counsel submits are necessary. For a process server to snap a picture of each person being served strikes me as unnecessarily aggressive. As I suggested to counsel at the hearing, such a proposal would potentially put a process server in a precarious position. It is no doubt difficult enough to personally deliver a pleading to an unhappy person on the receiving end of a law suit; it would considerably exacerbate a process server’s jeopardy for him or her to have to take the further invasive step of aiming a camera at the recipient’s face.

[16] As for Defendant’s counsel’s suggestion that Mr. McCarthy should have kept an independent record of having put the pleading in the mail, that strikes me as requiring a redundant amount of backup for a simple, mechanical task. The same day as he placed the Statement of Claim in the mail, the process server swore an affidavit of service that evidenced this step. The affidavit of service itself is evidence that the mailing was done. To require further evidence in support of the evidence would be to unduly complicate the procedure.

[17] I have no reason to doubt the credibility of Mr. McCarthy’s affidavit and cross-examination. He has no interest in this litigation and his evidence can be taken as objective and truthful. I find that the Statement of Claim was properly served pursuant to the Rules of Civil Procedure. There was no failure of service, and there is no reason to set aside the foreclosure Order on that alleged ground, if indeed this court even has the jurisdiction to do so.

[18] The Plaintiff took title to the Property pursuant to the Order of Brown J. He then sold it to Jose Soares Avila and Maria Liduina Avila on December 20, 2012 for $300,000. The Defendant has obtained letters from two real estate agents that state that the Property should have sold for somewhere in the range of $700,000. The Avilas, as interested parties, have provided a report from a qualified real estate appraiser indicating that the market value of the Property, in its present state of disrepair, is in the range of $300,000.

[19] Real estate agents are not qualified to provide expert opinions of value to the court, while real estate appraisers are so qualified. On that basis alone, I would reject the position taken by the Defendant and accept that the Avilas are bona fide purchasers for value. Moreover, there is no evidence that the Avilas are non-arm’s length purchasers.

[20] The Defendant submits at para 15 of his factum that “more consideration was paid by the Avilas to Frometa but not disclosed to avoid, among other things, payment of dual land Transfer Tax to the Province of Ontario and the City of Toronto.” That allegation is unsupported by any evidence, and strikes me as so unduly speculative as to be specious. It is also unsupportive of the Defendant’s position; it suggests that the Avilas actually paid closer to what the Defendant says is the market value of the Property than they have let on. In other words, it is an argument that appears designed to tarnish the Avilas for no other purpose than to make them look bad.

[21] Counsel for the Defendant submits, and I agree, that the sale of the Property by the mortgagee is not an insuperable barrier to an application for relief where special circumstances require the court’s interference: Babbie v Petryczka (1975), 1975 562 (ON CA), 8 OR (2d) 718, at para 9 (Ont CA). However, “the Court will not lightly disturb the title of a bona fide purchaser and will want to be satisfied that the interests of such purchaser will not be unduly prejudiced: Babbie, at para 9, citing Gram et al. v Geddes et al., [1949] OWN 655.

[22] While the court retains an equitable jurisdiction to intervene even where the mortgaged property has been sold, that jurisdiction exists only in “exceptional circumstances”: 618469 Ontario Ltd. v. Szanto (1990), 16 RPR (2d) 100, at 102 (Gen Div). There must be extraordinary evidence of a defective foreclosure or sale process for equity to intervene subsequent to a sale of the Property: 1224948 Ontario Ltd. v 448332 Ontario Ltd. (2000), 2000 16927 (ON CA), 141 OAC 100, at para 1 (Ont CA).

[23] There are no such special circumstances requiring the court’s intervention here. In fact, there is no defect in the process at all. The Defendant was in default for years before the foreclosure action commenced, and never made any attempt to bring it current or to redeem the property. The gist of the Defendant’s position is set out succinctly at paras 3 and 5 of his July 10, 2014 affidavit:

In the months preceding the mortgage going into default, my landscaping business which produced my primary source of income went into decline and I was unable to make the payments on the mortgage and pay the realty taxes to the City of Toronto on the property… I now come forward and ask this Honourable Court to allow me to redeem the property. I now have the financial means to do so.

[24] In seeking relief it is necessary for the moving party to show that he has the financial ability to redeem the mortgage. But that is not in itself a ground for seeking such relief. Otherwise, every final Order for foreclosure would be tentative, subject to being set aside whenever the defaulting mortgagor comes into some money. The special circumstances which will prompt equity to intervene must reflect an error or defect in the foreclosure or sale process, and not just a later change in the defaulting mortgagor’s economic circumstances.

[25] There is nothing special in the Defendant’s situation on which to base equitable intervention. The fact that the Defendant may have money now but did not have it when he was foreclosed upon provides no ground for relief from forfeiture.

[26] The motion is dismissed.

[27] Counsel for the Plaintiff and counsel for the Avilas have both provided me with Costs Outlines. Counsel for the Defendant has assured me that he will provide me with his Costs Outline by Thursday of this week. He is invited to accompany that Costs Outline with brief written submissions of no more than 3 pages, if he wishes to do so. Counsel for the Plaintiff and counsel for the Avilas may, if they wish, provide me with equally brief responding submissions within a week thereafter.

Morgan J.

Date: July 21, 2014