CITATION: Kelly v. Cote, 2015 ONSC 1255
COURT FILE NO.: 19252/14
DATE: 2015/03/02
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JAMES KELLY and LILIANE KELLY
Jennifer M. Kelly, for the Plaintiffs
Plaintiffs
- and -
DENIS COTE and SARA DUBE
Leonard Ellery, for the Defendants
Defendants
HEARD: December 12, 2014
ellies j.
REASONS FOR DECISION
[1] The plaintiff mortgagees move for summary judgment in this action on a chattel mortgage in which they seek possession of the collateral, a mobile home, and an order for payment of the amount outstanding under the mortgage.
[2] For the following reasons, the plaintiffs’ request is granted with respect to their claim for possession. There is no genuine issue requiring a trial concerning the plaintiffs’ right to possession, as the defendants have admitted defaulting on payments due under the mortgage.
[3] I am also satisfied that there is no genuine issue for trial with respect to the entitlement of the plaintiffs to an order for payment of the principal and interest outstanding under the mortgage, including any amount they have paid for insurance on the mobile home. The defendant mortgagors do not challenge the validity of the mortgage, which permits the plaintiffs to pay for insurance on the collateral, to add the amount paid to the amount due under the mortgage, and to charge interest on that amount at the rate payable under the mortgage.
[4] However, the plaintiffs have failed to satisfy me that there is no genuine issue requiring trial with respect to:
(1) the number of monthly payments for principal and interest that the defendants failed to make;
(2) the date from which interest is payable on certain missed payments;
(3) the amount to be added to the mortgage for insurance premiums paid by the plaintiffs on behalf of the defendants;
(4) whether the plaintiffs are entitled to payment for lot rentals; and, if so,
(5) the amount the plaintiffs are entitled to be paid for lot rental payments.
[5] With respect to the missed monthly payments, the plaintiffs have failed to adduce sufficient evidence in support of their contention that 19 payments were missed. They have also failed to respond to the defendants’ allegation that an agreement was reached to “add” nine missed payments to the end of the mortgage.
[6] With respect to the lot rental payments, there is no right under the mortgage to add these to the amount due thereunder and the plaintiffs have not introduced any evidence to support their position that there was a verbal agreement reached with the defendants to that effect.
[7] Therefore, there must be a trial with respect to these issues.
BACKGROUND
[8] The defendants purchased a mobile home in April 2005 and entered into a chattel mortgage with the plaintiffs in order to do so. The mortgage secured the principal sum of $23,000, together with interest on that sum at the rate of 12 per cent per annum, for a term of eight years. The mortgage provided that the defendants were to pay the sum of $370.14 per month for principal and interest, commencing May 1, 2005, and continuing up to and including April 1, 2013 (the “expiry date”). The mortgage was registered pursuant to the provisions of the Personal Property Security Act, R.S.O. 1990, c. P.10.
[9] The defendants failed to make a number of monthly payments during the term of the mortgage. By the time the mortgage expired, there was still a considerable sum of money owing, according to the plaintiffs. The defendants made no further payments after March 21, 2013.
[10] The plaintiffs issued a statement of claim on September 2, 2014, in which they seek possession of the mobile home and payment by the defendants of the sum of $20,188.40, together with interest at the rate of 12 per cent to the date of payment. The statement of claim contains no breakdown of the amount sought for principal under the mortgage.
[11] The defendants have defended the action. They dispute the amount the plaintiffs allege they owe under the mortgage. As a result, the defendants contend that they have not been able to file a request to redeem.
ISSUES
[12] For the purposes of this motion, I will deal separately with the two main claims made by the plaintiffs. The issues, therefore, are:
(1) Are the plaintiffs entitled to summary judgment on their claim for possession?
(2) Are the plaintiffs entitled to summary judgment on the claim for payment of the amount alleged to be owing under the mortgage?
[13] Before I address these issues, however, I will discuss briefly the law as it has developed relating to summary judgments under Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, O. Reg. 194.
ANALYSIS
[14] Under rule 20.04(a), a court must grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or a defence. The onus of proving that there is no genuine issue requiring a trial is on the moving parties. There is no onus on the responding parties. However, if the moving parties demonstrate a prima facie right to the remedy, there is an evidentiary burden placed on the responding parties to support their position that a genuine issue requiring a trial exists: see Toronto-Dominion Bank v. 466888 Ontario Ltd., 2010 ONSC 3798, 103 O.R. (3d) 502, at para. 2.
[15] In 2010, Rule 20 was amended to expand the powers of a court hearing a motion for summary judgment. Under rule 20.04(2.1), a judge may weigh the evidence, evaluate the credibility of a deponent, and draw reasonable inferences from the evidence, unless it is in the interest of justice that such powers be exercised only at trial.
[16] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada defined the circumstances in which there will be no genuine issue requiring a trial. The Court held, at para. 49:
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[17] The Supreme Court in Hryniak held that there is a two-stage process involved in a summary judgment motion under rule 20.04. Karakatsanis J. explained the process as follows, at para. 66:
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.01) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole. [Emphasis in original.]
[18] In this case, as I will explain, I am unable to resort to the powers granted to me under rule 20.04(2.1) with respect to certain issues because the evidence does not permit me to fairly and justly adjudicate the dispute on those issues.
Whether there is a Genuine Issue Requiring a Trial on the Claim for Possession
[19] The chattel mortgage at issue in this case is a “security agreement” and the plaintiffs are “secured parties” within the meaning of the Personal Property Security Act (“PPSA”). Section 59(1) of the PPSA provides that, where a debtor is in default under a security agreement, a secured party has the rights and remedies provided in the security agreement and under the PPSA. Section 59(2) of the PPSA provides that the secured party may enforce the security interest by any method permitted by law.
[20] The right of a mortgagee to possession of the mortgaged property is a prima facie right at common law that arises when the mortgagor breaches any covenant of the mortgage, including the obligation to pay: see Prudential Assurance Co. (Trustee of) v. 90 Eglinton Ltd. Partnership (1994), 1994 CanLII 7256 (ON SC), 18 O.R. (3d) 201 (Ct. J. (Gen. Div.)), at p. 207.
[21] The right to possession is also provided for in s. 62 of the PPSA and was specifically granted by the terms of the mortgage in question. The relevant portion of the mortgage reads:
AND ALSO THAT IN CASE DEFAULT SHALL BE MADE IN THE PAYMENT of the said sum of money … THEN and in every such case the whole of the money secured by this Indenture shall, at the option of the Mortgagee, immediately thereon become due and payable, and it shall and may be lawful for the Mortgagee … to enter in or upon any lands and premises wheresoever and whatsoever where the said goods and chattels … may be for the purpose of taking possession of and removing said goods and chattels…
[22] The defendants have not challenged the validity of the mortgage or the enforceability of this term.
[23] Further, there is no doubt that the defendants have defaulted in their monthly obligation to pay under the terms of the mortgage both before and after March 21, 2013. The defendants have admitted that they missed nine payments before the expiry date and they do not contest the evidence adduced on behalf of the plaintiffs in this motion that the defendants failed to make any payments beyond March 21, 2013.[^1]
[24] For this reason, I am satisfied that there is no issue that the plaintiffs are entitled to possession and therefore, no genuine issue requiring a trial of that portion of their claim.
Whether there is a Genuine Issue Requiring a Trial on the Plaintiffs’ Claim for Payment under the Mortgage
[25] The mortgage clause set out above provides that, upon default by the defendants in their monthly obligations under the mortgage, the entire amount secured under the mortgage becomes due.
[26] Therefore, there is no genuine issue for trial with respect to the entitlement of the plaintiffs to payment of the amount due under the mortgage for principal and interest. The only issue raised is with respect to the amount of that payment. Before I deal in detail with that issue, however, I wish to address an argument made on behalf of the plaintiffs with respect to the defendants’ right to redeem under the mortgage.
[27] The defendants allege that they did not file a request to redeem because they dispute the amount that the plaintiffs allege is owed to bring the mortgage into good standing. They argue that this part of the plaintiffs’ claim must proceed to trial, so that they can know what must be paid to redeem the mortgage.
[28] The plaintiffs deny that the defendants have any right to redeem. They argue that mortgagors, such as the defendants, only have a right to redeem where a mortgagee seeks to sell the collateral or to foreclose on it to enforce the mortgage. As the plaintiffs seek only an order for possession and judgment for payment of the amount owed, they submit that there is no right to redeem. The plaintiffs further argue that, as there is no right to redeem, there is no genuine issue requiring a trial. I am unable to agree. The defendants have a right to redeem because the plaintiffs have taken steps to enforce their security.
[29] At common law, the mortgagor’s right to redeem arises whenever the mortgagee resorts to the right to realize on the security of the mortgaged property: see Walter M. Traub, Falconbridge on Mortgages, 5th ed., loose-leaf (Toronto: Canada Law Book, 2014) at §29:30.
[30] In Shankman v. Mutual Life Assurance Co. of Canada (1985), 1985 CanLII 2196 (ON CA), 52 O.R. (2d) 65 (C.A.), Cory J.A. explained that there are two situations where the actions of the mortgagee constitute resorting to the security, at para. 19:
First, when a mortgagee gives a notice of sale pursuant to the power of sale provisions contained in the mortgage, he takes a step that constitutes resorting to the security. Secondly, a mortgagee who takes possession in the course of seeking to collect the entire amount of the principal and interest owing on the mortgage is also taking a step that constitutes resorting to the security.
[31] By virtue of s. 72 of the PPSA, these common law principles apply to security agreements, unless they are inconsistent with the PPSA. They are not. A review of the provisions of the PPSA confirms that the principles are the same under each.
[32] Section 59(3) of the PPSA provides that a debtor in default under a security agreement has the rights and remedies provided in the security agreement and provided for under the PPSA.
[33] Section 63(1) of the PPSA permits the secured party upon default under a security agreement to dispose of the collateral. However, before doing so, the secured party must provide notice by virtue of s. 63(4) of the PPSA. Section 63(5) of the PPSA sets out what is required in the notice.
[34] The plaintiffs in this case provided the notice required under s. 63(4) of the PPSA. In a document entitled “Notice of Intention to Enforce Security”, dated September 12, 2013, they provided exactly the information required by s. 63(5). By doing so, the plaintiffs took steps to enforce their security under s. 63.
[35] Section 66 of the PPSA provides for a right of redemption where this occurs, as follows:
At any time before the secured party, under section 63, has disposed of the collateral or contracted for such disposition or before the secured party under subsection 65(6) shall be deemed to have irrevocably elected to accept the collateral, any person entitled to receive notice under subsection 63(4) may, unless the person has otherwise agreed in writing after default, redeem the collateral by tendering fulfilment of all obligations secured by the collateral together with a sum equal to the reasonable expenses referred to in clause 63(1)(a) incurred by the secured party, but if more than one person elects to redeem, the priority of their rights to redeem shall be the same as the priority of their respective interests.
[36] Therefore, the defendants have a right to redeem and the plaintiffs’ argument that the motion must succeed because there is no right to redeem must fail.
[37] Nonetheless, it is still necessary to consider whether there is a genuine issue requiring a trial with respect to the amount the plaintiffs seek by way of a judgment against the defendants under the mortgage and, by corollary, the amount required to redeem.
[38] Read liberally, the defendants raise four defences to the claim for payment. In particular, they dispute:
(1) the amount owing for principal and interest as of May 16, 2012, and thereafter, without taking into account any payments made to third parties by the plaintiffs on behalf of the defendants;
(2) that they should pay any “penalty”;
(3) that the plaintiffs paid for insurance on behalf of the defendants and, if so, that those payments may be added to the amount outstanding on the mortgage; and
(4) that the plaintiffs made four lot rental payments on their behalves and, if so, that those payments may be added to the amount outstanding on the mortgage.
[39] The plaintiffs argue that none of these defences raise issues that require a trial. If there is any issue, the plaintiffs say that it relates to quantum, and not to entitlement. Therefore, they submit that, at most, the court should grant judgment in their favour and order that a reference be held regarding the amount owed, pursuant to rule 20.04(3): see Deutsche Bank AG, Canada Branch v. O’Keefe, 2012 ONSC 3910, [2012] O.J. No. 3144, aff’d 2013 ONCA 422, [2013] O.J. No. 2837; and Claremont Investment Corp. v. Massey, [1956] O.W.N. 827 (Master).
[40] I am unable to agree with the plaintiffs’ submission with respect to all but one of the defences raised by the defendants. I will deal with each defence separately.
The Amount Owing on the Mortgage for Principal and Interest
[41] In a letter sent to the defendants, dated May 16, 2012, the plaintiff, James Kelly, set out in detail how the amount owing under the mortgage at that time was calculated. In his letter, Mr. Kelly alleged that the defendants had failed to make 17 monthly payments between May 2006 and March 2012 and that two other payments failed because cheques written for those payments were not honoured by the defendants’ bank.
[42] In both their statement of defence and in an affidavit sworn by the defendant, Sara Dube, the defendants indicate that they disagree with the amount sought by way of principal and interest. They contend that they missed only nine payments before the expiry date of the mortgage. Attached to Ms. Dube’s affidavit are copies of receipts, cheques, and bank statements in support of the defendants’ position. In argument, counsel for the defendants also submitted that if one adds up the payments set out in the detailed records attached to Mr. Kelly’s affidavit, the shortfall in payments is much less than that alleged by the plaintiffs.
[43] I am unable to resolve the contradiction in the evidence on this issue in the motion. The evidence on both sides is less than satisfactory. I have no real sworn evidence on the point from Mr. Kelly, only a copy of an unsworn letter and ledger sheets of some kind which appear to be of his own creation. Nor do I have any guidance through the mass of paper attached to the affidavit of Ms. Dube.
[44] Therefore, although there is no issue with respect to entitlement, the plaintiffs have failed to satisfy me that there is no genuine issue requiring a trial with respect to the amount owed for principal and interest.
Penalty
[45] In her affidavit, Ms. Dube deposes that there was a verbal agreement with Mr. Kelly that there would be no penalty with respect to the payments missed under the mortgage. She deposes that Mr. Kelly said that “he would simply add the missing payments to the end of the term of the mortgage”.
[46] As far as I can tell from the evidence adduced on the motion, no penalty is being sought by the plaintiffs and Ms. Dube does not specifically refer to any in her affidavit. There is no clause in the mortgage calling for the imposition of any penalty, no amount by way of a penalty is set out in the Notice of Intention to Enforce Security, nor has any been referred to by Mr. Kelly in his evidence.
[47] This leads me to believe that Ms. Dube was not referring to a penalty in the sense that the term is usually used in mortgage transactions. Instead, she seems to be referring to an agreement whereby Mr. Kelly agreed not to charge interest on missed payments until after the expiry date of the mortgage. This interpretation is borne out by Ms. Dube’s evidence that the defendants are prepared to pay a sum equivalent to the nine missed payments, “plus some interest”.
[48] This agreement was also pleaded by the defendants in their statement of defence. Despite that pleading, there is nothing in Mr. Kelly’s affidavit specifically addressing the existence of any such agreement. Nor did the plaintiffs file any affidavit evidence in reply to that of Ms. Dube.
[49] For these reasons, I am unable to grant summary judgment with respect to this issue.
Insurance
[50] In his letter of May 16, 2012, Mr. Kelly indicated that the plaintiffs had paid for insurance on behalf of the defendants in the amount of $699.
[51] In their statement of defence, the defendants dispute the claim for insurance payments. In her affidavit, Ms. Dube deposes that she is unclear if the plaintiffs’ claim includes lot rentals and home insurance payments, but if it does, she deposes that there was no agreement that the plaintiffs were to make these payments on behalf of the defendants.
[52] While I can sympathise with Ms. Dube’s uncertainty about whether these things are included in the plaintiffs’ claim, her position is not correct with respect to the insurance payments. These are provided for specifically on page 2 of the chattel mortgage, which states:
AND FURTHER that the Mortgagor will during the continuation of this Mortgage and any and every renewal thereof insure and keep insured in some Insurance Company authorized to transact business in Canada and approved by the Mortgagee the goods and chattels herein before mentioned against loss and damage by fire…
PROVIDED that if the said insurance is not effected or kept duly renewed and default be made in payment of the said premiums or sums of money by the Mortgagor, the Mortgagee may pay the same and such sums of money shall be added to the debt hereby secured and shall bear interest at the same rate from the day of such payment, and shall be repayable with the moneys next falling due under these presents;
[53] As a result of the explicit language contained in the mortgage, there is no genuine issue requiring a trial of this defence. The plaintiffs are entitled to add insurance payments made on behalf of the defendants to the amount owing under the mortgage and to charge interest thereon.
[54] However, the plaintiffs have failed to satisfy their onus under Rule 20 with respect to the amount of the insurance premium that should be added to the mortgage. There is no sworn evidence with respect to the insurance premium. There is nothing in the affidavit of Mr. Kelly about it. The only evidence that has been adduced is the letter of May 16, 2012, and another document attached to Mr. Kelly’s affidavit entitled “Customer Balance Detail”, in which the word “insurance” is handwritten next to the figure of $699. No documents to or from the insurer, for example, have been provided. Nor has any explanation been given for the failure to produce such documents.
[55] For this reason, although I am satisfied that the plaintiffs are entitled to add insurance premiums paid with respect to the mobile home to the amount due under the mortgage, I am not persuaded that summary judgment should be granted with respect to the amount sought for those premiums.
Lot Rental Payments
[56] In his letter of May 16, 2012, Mr. Kelly wrote to the defendants that the plaintiffs had paid lot rentals which were not reimbursed for the period from August 1, 2005, to November 1, 2005. The detailed statements attached to Mr. Kelly’s affidavit show that four payments in the amount of $243 each were made in that period, totalling $972.
[57] Unlike the insurance payments, however, there is nothing in the chattel mortgage that permits the plaintiffs to pay these lot rentals and to have them added to the amount owing under the mortgage. In argument, counsel for the plaintiffs conceded this. However, she submitted that the parties had reached a verbal agreement to permit the plaintiffs to add the lot rental payments to the mortgage.
[58] Once again, however, there is no mention of this in Mr. Kelly’s affidavit. As is the case with the insurance payments, there is no sworn evidence relating to the lot rental payments. The only reference in the evidence to lot payments is, like the insurance payments, found in the attachments to Mr. Kelly’s affidavit.
[59] Therefore, I am not persuaded that summary judgment should be granted entitling the plaintiffs to add the lot rental payments to the mortgage. Nor am I satisfied on the evidence as to the amount the plaintiffs might be entitled to recover for these payments.
[60] For these reasons, there is a genuine issue with respect to the right of the plaintiffs to seek repayment of the moneys paid for the lot rentals and in what amount.
CONCLUSION
[61] An order will issue, granting the plaintiffs’ possession of the subject property.
[62] In addition, an order will issue entitling the plaintiffs to judgment with respect to principal and interest owing under the mortgage, including amounts paid for insurance on the mobile home, and interest thereon.
[63] If the only issue to be determined was the amount payable under the mortgage for insurance premiums, principal and interest to which the plaintiffs were clearly entitled, I would direct that a reference be held to determine those amounts. In Dioguardi v. 1010277 Ontario Inc., [1996] O.J. No. 1133 (Ct. J. (Gen. Div.)), Binks J. held, at para. 18:
It is clear that on a motion for summary judgment where the only issue is the amount to which the moving party is entitled, the court may grant judgment with a Reference to determine the amount.
[64] However, that is not the situation in this case. There must be a trial to determine the entitlement of the plaintiffs to interest on certain missed payments and to reimbursement of amounts paid for lot rentals. In those circumstances, it makes sense to have the trial judge determine the amounts due for those items, as well.
COSTS
[65] Unless the parties are able to agree on the issue of costs, they may make written submissions with respect to that issue as follows:
(1) The plaintiffs shall be entitled to make written submissions, limited to five typewritten pages, excluding attachments, within 20 days of the date of these reasons;
(2) The defendants shall be entitled to make written submissions, similarly limited in length, within ten days of the receipt of the plaintiffs’ submissions; and
(3) The plaintiffs may make any reply, similarly limited in length, within ten days of the date of receiving the defendants’ written submissions.
Ellies J.
Released: March 2, 2015
CITATION: Kelly v. Cote, 2015 ONSC 1255
COURT FILE NO.: 19252/14
DATE: 2015/03/02
ONTARIO
SUPERIOR COURT OF JUSTICE
JAMES KELLY and LILIANE KELLY
Plaintiffs
– and –
DENIS COTE and SARA DUBE
Defendants
REASONS FOR DECISION
Ellies J.
Released: March 2, 2015
[^1]: Following argument on December 12, 2014, I ordered that the defendants resume making monthly payments in the amount of $307 pending the release of these reasons.