CITATION: 552439 Ontario Limited v. Forbes Building Material Limited, 2015 ONSC 6124
COURT FILE NO.: 15-61
DATE: 2015/10/06
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
552439 Ontario Limited
Applicant
– and –
Forbes Building Material Limited
(formerly Land Traders of America Incorporated)
Respondent
(Applicant under 14-618, 14-619, 14-620, 14-621, 14-622)
Katrina M. Anders, counsel for the Applicant
Connie L. Lamble, counsel for the Respondent
HEARD: September 28, 2015
REASONS FOR JUDGMENT
LALIBERTE, J.
INTRODUCTION
[1] The Court is dealing with an Application under paragraph 380(4) of the Municipal Act, 2001.
[2] The Applicant, 552439 Ontario Limited, claims an entitlement to the remaining proceeds generated by the sale of lands by the municipality for unpaid taxes.
[3] Its submissions are that it has an interest in the subject lands and therefore, has priority of payment over the Respondent who is the registered owner.
[4] The Respondent, Land Traders of America Incorporated, opposes this claim and argues that the Applicant has no interest in the lands and therefore is entitled to the money as owner.
[5] The remaining amount of proceeds is $70,118.32. This sum was paid into the Superior Court of Justice on June 20, 2014 as provided for under paragraph 380(2) of the said Act.
[6] The issue for the Court therefore revolves around competing claims raised by the Applicant and Respondent to the above noted remaining proceeds of sale.
THE FACTS
[7] The lands subject of this Application are located in the Township of South Stormont and consist of five lots described as lots 12, 13, 14, 15 and 18 on Plan 397, South Stormont.
[8] While there is debate in regards to a number of significant facts, the evidentiary record allows for findings on the following uncontested relevant facts:
− The lands were owned by the Applicant corporation;
− William Buchanan is and has always been the president and sole shareholder of the Applicant corporation;
− The Respondent corporation Forbes Building Material Limited was formally known as Land Traders of America Incorporated;
− On July 15, 1993, a transfer/deed of land was registered for each individual lot transferring same from the Applicant to the Respondent;
− Each transfer/deed of land indicates that the consideration is $20,000.00;
− The Affidavit of residence and value of the consideration sworn by Barry Forbes (who is identified as the president of the Respondent corporation) states that the total consideration for the transactions is allocated as follows:
a) Monies paid or to be paid in cash…………………………..………..$2,600.00
b) Mortgages
i) Assumed (show principal and interest to be credited
against purchase price)………………………………………………...NIL
ii) Given back to vendor…………………………………………...$17,400.00
− There were never any vendor take back mortgages registered on title in favour of the Applicant;
− Prior to the July 15, 1993 transfers and up to municipal tax sale in May 2014, there were two mortgages registered on the lands, namely:
i) $316,000.00: registered on October 5, 1989 in favour of 119348 Canada Inc.;
ii) $25,000.00: registered on November 22, 1989 in favour of Donald Henry.
− The Parcel Registers reveal that Gunther Sachs was granted liens on the lands for having paid outstanding taxes on three separate occasions, namely September 20, 1996, August 21, 2001 and June 10, 2009;
− The lands were sold by the municipality for unpaid taxes in May and June 2014; the particulars of these are:
• Lot 12: sold on June 12, 2014
Remaining proceeds of sale: $15,068.47
• Lot 13: sold on June 12, 2014
Remaining proceeds of sale: $15,054.61
• Lot 14: sold on June 12, 2014
Remaining proceeds of sale: $15,014.31
• Lot 15: sold on May 15, 2014
Remaining proceeds of sale: $15,088.50
• Lot 16: sold on May 28, 2014
Remaining proceeds of sale: $9,892.43
− The total amount of remaining proceeds of sale for the lands which was paid into Court is $70,118.32.
[9] There are a number of significant facts which are disputed by the parties.
[10] The Applicant relies on the following disputed facts:
− The balance of $17,400.00 per lot was to be secured by vendor take back mortgages;
− The solicitor for the Respondent was supposed to register these mortgages on title;
− The understanding between the parties was that the lots were to be developed by the Respondent and the balance of the purchase price, which was secured by the mortgages, was to be paid, without interest, at the time that each lot was sold;
− There was no development activity or sale of the lots for 20 years;
− The first notice it received that anything was amiss in regards to the land was when a letter was received by William Buchanan on November 6, 2013 from lawyer Mr. Horner advising that the lots were to be sold by the municipality for tax arrears.
[11] The Respondent relies on the following disputed facts:
− The Respondent did not provide vendor take back mortgages to the Applicant;
− The take back mortgages noted in the Land Transfer Tax Affidavit of July 15, 1993, refer to mortgages assumed by the Respondent which were already registered on title;
− The Applicant would have received three prior notices of potential tax sales for arrears in 1996, 2001 and 2009;
− The Applicant was not in a position to enforce its alleged rights prior to the beginning of the tax sale since it only revived itself in May 2015.
POSITIONS OF THE PARTIES
Applicant
[12] The Applicant corporation claims an interest in the five lots subject of this Application.
[13] This interest is based on both a legal interest as a mortgagee in a mortgage back and in equity pursuant to a vendor’s lien and/or unjust enrichment.
[14] It argues that the intention of the parties was to transfer title for the sum of $20,000.00 with the amount of $2,600.00 paid in cash in addition to a mortgage in the amount of $17,400.00 on each of the properties.
[15] The Affidavits of Residence and of Value of the consideration signed by the president of the Respondent Corporation, Barry Forbes, are written confirmation of the agreement between the parties.
[16] While the mortgages were not registered on title, these affidavits form part of the transfer documents and clearly identify the mortgages back in the sum of $17,400.00.
[17] The ten-year limitation period provided for in section 23 of The Real Property Limitations Act has never been triggered since the agreement provided that the balance of the purchase price was to be paid, without interest, at the time that each lot was sold by the Respondent. None of these lots were developed and sold by the Respondent.
[18] The Applicant also relies on principles of equity, namely “vendor’s lien” and “unjust enrichment”.
[19] The vendor’s lien forms part of the consideration which the purchaser gave in place of payment and full payment of the purchase price which has never occurred.
[20] The Applicant argues that the doctrine of unjust enrichment would also support its claim. The reasoning is that the Respondent received and retained a benefit while the Applicant suffered a corresponding deprivation. There is no juristic reason for this enrichment.
Respondent
[21] Counsel for the Respondent argues that there were no mortgages back as consideration for the purchase of the lots.
[22] The intention of the parties was for the Respondent to assume mortgages which were already registered on title.
[23] The reference to mortgages back in the Affidavits of Residence and of Value of the Consideration signed by the president of the Respondent Corporation was done by mistake and is not reflective of the intent of the parties.
[24] The Respondent further submits that even if there were mortgages back, it is statutorily barred by The Real Property Limitations Act.
[25] In regards to the Applicant’s claim in equity, it is barred by the defences of acquiescence and laches. In 23 years, it never made a demand or a claim nor paid the municipal taxes.
THE LAW
[26] In deciding this matter, the Court is guided by the following relevant legal principles:
- Priority over Proceeds of Sale
The proceeds of sale of land by a municipality for unpaid taxes shall be distributed in accordance with paragraph 380(1) of the Municipal Act, 2001 which provides:
380(1) The proceeds of a sale under section 379 shall,
(a) Firstly, be applied to pay the cancellation price;
(b) Secondly, be paid to all persons, other than the owner, having an interest in the land according to their priority at law; and
(c) Thirdly, be paid to the person who immediately before the registration of the tax deed was the owner of the land.
- Statute of Frauds
− To be enforceable, section 4 of the Statute of Frauds requires that a mortgage be in writing or confirmed by a memorandum or note signed by the mortgagor or someone authorized to do so. The section reads:
“4. No action shall be brought to charge any executor or administrator upon any special promise to answer damages out of the executor’s or administrator’s own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person, or to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.”
− No rigid or precise form of memorandum is prescribed by the Statute of Frauds. The entire contract is not required to be contained in the writing. As stated in Bale-Eze Industries Inc. v. Metso Minerals Canada Inc. [2003] O.J. No. 3284:
“23. To satisfy the formal requirements of the Statute of Frauds, all essential terms of a concluded agreement must be disclosed in the memorandum or note, expressly or by necessary inference, and the document must show that the parties have agreed to those terms.”
− Section 4 of the Statute of Frauds does not deal with the validity of the contract but with the evidence of its existence.
-Harrie v. Gibbons (1980) 1980 ABCA 38, 109 D.L.R. (3d) 559.
− The doctrine of part performance is an equitable exception to the requirement of a writing, note or memorandum. It applies in cases where the party seeking to enforce the oral agreement has partly performed it.
− The Courts have identified four factors to consider on whether to enforce the agreement on the basis of part performance, namely:
i) The Court must be satisfied that it is more probable than not that the alleged acts of part performance are such that they are referable to the alleged contract and they are referable to no other title;
ii) The Court must be satisfied that the acts of part performance are such as to render it fraud if the defendant were to take advantage of the contact not being in writing;
iii) The alleged contract must, in its own nature, be specifically enforceable by the Courts in equity;
iv) There must be proper parol evidence of the contract, which is admissible because of the acts of part performance.
− Bale-Eze Industries Inc. v. Metro Minerals Canada Inc. op. cit.
- Real Property Limitations Act
− Paragraph 23(1) of the Real Property Limitations Act provides for a ten-year limitation period for the enforcement of a mortgage. It reads as follows:
23(1) “4. No action shall be brought to recover out of any land or rent any sum of money secured by any mortgage or lien, or otherwise charged upon or payable out of the land or rent, or to recover any legacy, whether it is or is not charged upon land, but within ten years next after a present right to receive it accrued to some person capable of giving a discharge for, or release of it, unless in the meantime some part of the principal money or some interest thereon has been paid, or some acknowledgment in writing of the right thereto signed by the person by whom it is payable, or the person’s agent, has been given to the person entitled thereto or that person’s agent, and in such case no action shall be brought but within ten years after the payment or acknowledgment, or the last of the payments or acknowledgments if more than one, was made or given.”
− It is the nature of the mortgage which will determine when the ten-year period is triggered. The limitation cannot pass before the mortgagee has any right to enforce. The limitation runs from the earliest time at which repayment can be required.
− While there are exceptions, on a demand mortgage, the cause of action accrues upon execution of the mortgage.
Mortgage Insurance Co. of Canada v. Grant 2009 ONCA 655, [2009] O.J. No. 3769
Alter v. Csontos [2004] O.J. No. 1590
Cioccio v. Cioccio [2005] O.J. No. 1182
− If the terms of the mortgage provide for payment upon the happening of a specific contingency, then the cause of action arises upon the happening of the contingency. Thus, the ten-year statutory limitation does not run until the contingency is satisfied.
Re Gould Ex Parte Garvey 1940 89 (ON CA), [1940] O.R. 250 (Ont. C.A.)
Canada Mortgage and Housing Corp. v. 447136 British Columbia Ltd. [2014] B.C.J. No. 497
- Vendor’s Lien
− A vendor’s lien is an equitable lien securing any part of the purchase price. It arises by operation of law and is founded on the principle that a purchaser will not be able to keep the property without payment.
• Freeborn v. Goodman 1969 23 (SCC), [1969] S.C.R. 923
− The Ontario Court of Appeal in Silaschi v. 1054473 Ontario Ltd 2000 3021 (ON CA), [2000] O.J. No. 1399, states the following at paragraph 9:
“9. The principle to be followed in giving application to a vendor’s lien was fully expressed by Spragge V.-C. in Boulton v. Gillespie (1860), 8 Gr. 223 at p. 228:
Prima facie, certainly the lien exists, and it lies upon the grantee to rebut it. It is the vendor’s “natural equity,” as it has been termed, to have a lien on his estate until he has been paid for it; but the vendee may show, I apprehend, that under the circumstances of the purchase it is not equitable that such a lien should be retained, and if he can shew that the retention of such lien would defeat or even materially interfere with the known object of the purchase, so as to clog it with difficulties which it is reasonable to conclude that the parties could not have intended that the purchase should be encumbered with; then I think he rebuts the vendor’s prima facie equity and establishes a state of things under which the retention of a lien would be the reverse of equitable. It is sometimes put -- that the parties indicate an intention that the lien should not be preserved
--sometimes that the intention to retain a lien is negatived; but inasmuch as the right to a lien does not grow out of contract or intention, but out of the natural equity if the vendor, it seems to follow that whenever it can be shewn to be more equitable that the purchaser should have his land free from the lien, than that the vendor should retain it, no lien for unpaid purchase money can exist, for the equity against it outweighs the equity in favour of it…”
− The Court may find that, on a proper interpretation of the agreement and considering all the surrounding circumstances, there is no intention to retain the lien or that it would be inequitable to enforce the lien. It can also be abandoned. The onus of proving that there is no lien on the basis of the parties’ intent, waiver abandonment and/or inequities rests on the party claiming that there is no lien.
• Freeborn v. Goodman, op. cit.
• 4345142 Ontario Inc. v. Access Self Storage Inc. [2008] O.J. No. 2752
• Central Mortgage and Housing Corp. v. Co-Operative College Residences Inc. 1975 636 (ON CA), [1975] O.J. No. 2639
− The test of waiver is an objective one, to be determined from the parties’ agreement. Given the importance of the lien and its equitable nature, there should be clear evidence or a manifest inference that the parties intended to exclude or waive the lien.
• 4345142 Ontario Inc. v. Access Self Storage Inc., op. cit.
− The waiver of a vendor’s lien cannot be inferred simply from the fact that the vendor took back a purchase money mortgage or that payment of the purchase price is not due yet.
• 4345142 Ontario Inc. v. Access Self Storage Inc. op. cit.
• Silaschi et al v. 1054473 Ontario Ltd. 2000 3021 (ON CA), [2000] O.J. No. 1399
- Unjust Enrichment
− As explained by the Supreme Court of Canada in Kerr v. Baranow 2011 SCC 10, [2011] 1 S.C.R. 269:
“At the heart of the doctrine of unjust enrichment lies the notion of restoring a benefit which justice does not permit one to retain.”
− The party claiming relief based on unjust enrichment must establish three elements:
a) That the other party was enriched by the giving of a tangible benefit which was received and retained;
b) The enrichment corresponds to a deprivation suffered by the party who gave the benefit;
c) The absence of a juristic reason for the enrichment which means that there is no reason in law or justice for the retention of the benefit.
- Laches Doctrine
− The Supreme Court of Canada in M.(K.) v. M.(H.) 1992 31 (SCC), [1992] 3 S.C.R. 6, adopts the following discussion found in Meagher, Gummow and Lehane, [Equity Doctrines and Remedies (1984)] as being a good discussion of the doctrine of laches.
“It is a defence which requires that a defendant can successfully resist an equitable (although not a legal) claim made against him if he can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant’s conduct or (b) caused the defendant to alter his position in reasonable reliance on the plaintiff’s acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb…”
− The Court goes on to indicate:
“Thus there are too distinct branches to the laches doctrine, and either will suffice as a defence to a claim in equity. What is immediately obvious from all of the authorities is that mere delay is insufficient to trigger laches under either of its two branches. Rather, the doctrine considers whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable. Ultimately, laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine.”
DISCUSSION
[27] Firstly, the Court will deal with the Applicant’s claim of a priority interest based on the existence of a mortgage back.
[28] Properly articulated, the question for the Court is whether the Applicant has established, on a balance of probabilities, that it was granted a mortgage by the Respondent as security when the lots were transferred on July 15, 1993.
[29] The Court finds that the Applicant has met this onus. It is more probable then not that the intent of the parties to these transactions was to provide the Applicant with a mortgage given back to the vendor as security for each lot.
[30] In arriving at this conclusion, the Court has considered the following:
− The Affidavits of Residence and Value of the consideration sworn by Barry Forbes, the president of the Respondent corporation, is supportive of the Applicant’s position as to the substance of the agreement;
− This sworn document is seen as satisfying the requirements of section 4 of the Statute of Frauds since it is a written document, signed by a person having lawful authority to do so and contains the essential terms of the agreement;
− The suggestion made by counsel for the Respondent that the reference to a mortgage back as oppose to the assumption of an existing mortgage is as a result of an error by the lawyer who prepared the said Affidavits is not supported by the evidence;
− The Respondent’s position that the intent was for it to assume the mortgages already registered on title is contradicted by the sworn document signed by its president Barry Forbes.
[31] Therefore, the Court finds that the Applicant has an interest in the lands as a mortgagee based on mortgages given back as security for the balance of the purchase price for such lots, specifically $17,400.00.
[32] The Court accepts the Applicant’s version in relation to the terms of the mortgages since it is consistent with the affidavit sworn by Barry Forbes. Thus, the Court finds that the intent of the parties was that the Respondent was to develop the lots and pay the balance of the purchase price, without interest, at the time that each lot was sold.
[33] As such, the mortgages are not found to be demand mortgages. Payment was contingent on the occurrence of a specific event, namely the development and sale of the lot. The Applicant could not request payment before this event.
[34] The end result is that the ten-year statutory limitation provided for under section 23(1) of the Real Property Limitations Act was never triggered since the evidence is that the lots were never developed and sold by the Respondent.
[35] Therefore, the Applicant’s interest in the lands through the mortgage back is not frustrated by the passage of the ten-year limitation period.
[36] The Court is of the view that the Applicant’s claim of an interest in the lands is also supported by principles of equity.
[37] Again, much turns on the terms set out in Barry Forbes sworn evidence as to the terms of the agreement.
[38] The agreement provided for a total consideration of $20,000.00 for each lot. The evidence is that $2,600.00 was paid. The balance of $17,400.00 was secured by a mortgage. The balance was never paid.
[39] As already discussed, a vendor’s lien serves to secure the unpaid portion of the purchase price. It arises by operation of law and is founded on the principle that a purchaser will not be able to keep the property without payment.
[40] The evidence before the Court is that the Applicant was never paid the balance of the purchase price.
[41] The onus rests on the Respondent to rebut the vendor’s lien on the basis of waiver, abandonment and/or inequities. There is no clear evidence or manifest inference that the parties intended to exclude or waive the lien at the time of the transfers.
[42] Nor does the Court find the passage of time to be a basis to dismiss the Applicant’s lien in equity.
[43] Quite simply, equity and fairness do not favour the Respondent’s position in this matter.
[44] The reality is that the Respondent has paid $13,000.00 out of the total $100,000.00 purchase price for the five lots.
[45] While it paid some of the municipal taxes, the evidence is that some other individual paid for the tax arrears in 1996, 2001 and 2009. Ultimately, the taxes remained unpaid which resulted in the tax sales.
[46] It never paid the $87,000.00 balance of the purchase price to the Applicant.
[47] The Respondent’s suggestion is that the Agreement was that it was assuming the two mortgages ($316,000.00 and $25,000.00) which were already registered on title. Even if the Court was to accept this, the fact remains that the Respondent did not discharge these mortgages since they remained on title until the tax sales. The equities do not favour the Respondent.
[48] This reasoning would also serve to support an equitable claim based on unjust enrichment. The circumstances are such that it would be unjust to allow the Respondent to maintain the benefit of the proceeds generated by the tax sale.
[49] To allow the Respondent to be so enriched would correspond to a deprivation for the Applicant in that it would not receive the balance of the purchase price which is 87% of the amount agreed upon by the parties. There is no reason in law or justice for the retention by the Respondent of such a tangible benefit.
[50] Finally, the Court rejects the Respondent’s submission that the Applicant’s claim should be dismissed on the basis of “laches” and/or “acquiescence”.
[51] The evidence before the Court is that William Buchanan, the president of the Applicant corporation had not been notified of the unpaid tax issues prior to November 6, 2013 when a letter from lawyer Mr. Horner was received. There is no evidence proving otherwise on the record before the Court. The Respondent’s evidence amounts to an assumption that the Applicant would have received notice.
[52] Be that as it may, the Applicant’s inaction does not translate into any equitable consideration for the Respondent. There is no evidence to suggest that it relied in any way on the Applicant’s acceptance of the status quo or otherwise permitted a situation to arise which would be unjust to disturb.
CONCLUSION
[53] Therefore, the Court orders that the sum of $70,118.32 which was paid into the Superior Court of Justice on June 20, 2014 by the Township of South Stormont in regards to the tax sales of lots 12, 13, 14, 15 and 18 on Plan 397 is to be paid to the Applicant Corporation, 552439 Ontario Limited.
[54] The parties are asked to resolve the issues of costs for this Application. If unable to do so, the parties may file brief submissions with the Court on or before October 23, 2015.
Justice Ronald M. Laliberte Jr.
Released: October 6, 2015
CITATION: 552439 Ontario Limited v. Forbes Building Material Limited, 2015 ONSC 6124
COURT FILE NO.: 15-61
DATE: 2015/10/06
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
552439 Ontario Limited
Applicant
– and –
Forbes Building Material Limited
(formerly Land Traders of America Incorporated)
Respondent
(Applicant under 14-618, 14-619, 14-621, 14-622)
REASONS FOR JUDGMENT
Justice Ronald M. Laliberte Jr.
Released: October 6, 2015