COURT FILE NO.: CV-14-516728
DATE: 20151027
CORRECTED DECISION RELEASED: 20151030
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JAYENDRA PATEL
Plaintiff
– and –
ANNA BORGES
Defendant
Lata Menon & Darrell Paul, for the Plaintiff
Rolf M. Piehler & Shaneka Taylor, for the Defendant
HEARD: October 21, 22, 23, 2015
CORRECTED REASONS FOR DECISION
Corrected decision: The text of the original judgment was corrected on October 30, 2015 and a description of the correction is appended
M. D. FAIETA j.
REASONS FOR DECISION
Introduction
[1] The Defendant, Anna Borges, is the sole registered owner of a house located at 23 Temple Bar Crescent, Toronto (the “Property”) on which a third mortgage in the amount of $165,000.00 was registered in favour of the Plaintiff, Jayendra Patel, on May 29, 2014 (the “Patel mortgage”). At that time there were two other mortgages registered against the Defendant’s property: a first mortgage in favour of the Royal Bank of Canada (“RBC”) and a second mortgage in favour of Xpert Credit Control. The Defendant states that the purpose of the Patel mortgage was to replace the second mortgage.
[2] The Plaintiff made five loans to the Defendant’s spouse, Mr. Borges, prior to the registration of the Patel mortgage as well as a sixth loan on the day that the Patel mortgage was registered. These loans total $146,500.00, inclusive of lender fees. The Plaintiff states that the purpose of the Patel mortgage was to secure those loans made to Mr. Borges as well as to secure a further loan to him.
[3] The Defendant did not make any payments under the Patel mortgage. The Plaintiff issued a Notice of Sale on October 5, 2014. The Plaintiff commenced this action on November 24, 2014. The Plaintiff claims $146,500.00 is owed under the mortgage. The Defendant states that she never met the Plaintiff prior to the commencement of this action and that she was unaware that the Plaintiff had made any loans to Mr. Borges.
[4] The Defendant submits that the Patel mortgage should be discharged rather than enforced against her for the following reasons: (1) the Plaintiff did not advance any funds to the Defendant under the Patel mortgage; (2) she did not consent to the Patel mortgage being given as security for loans that had been made to Mr. Borges; (3) there was no consideration given by the Plaintiff to the Defendant for the mortgage.
[5] In August 2015, the Plaintiff agreed to sell the Property to a third party. The sale of the Property is scheduled to be completed on October 29, 2015. The Defendant filed a Counterclaim for an Order discharging the Patel mortgage as well as damages arising from slander of title. The Defendant alleges that as a result of the Patel mortgage being registered on title, she incurred expenses as a result of being unable to close the sale of the Property which had been originally scheduled for October 9, 2015.
[6] For the reasons described below I order that the Plaintiff’s action be dismissed. I grant the Defendant’s counterclaim only insofar as requiring that the registration of the Patel mortgage be discharged from title to the Property.
Background
[7] The following witnesses testified at this trial:
- The Plaintiff;
- The Plaintiff’s solicitor, Rameshbhai Patel also referred to as Ramesh Patel (“Mr. Ramesh Patel”);
- The Plaintiff’s friend and adviser, Ashok Kumar Gera;
- Kevin Chen, Branch Manager, RBC;
- The Defendant;
- The Defendant’s spouse, Victor Borges; and,
- The Defendant’s solicitors, Martin Zaretsky and Robert Kligerman.
[8] The Plaintiff testified that his friend, Ashok Kumar Gera, introduced him to Mr. Borges. Both Mr. Gera and Mr. Borges are former real estate agents. Mr. Borges is also a former mortgage broker. Mr. Gera and Mr. Borges have known each other for about 15 years as they had once worked for different companies in the same building.
[9] Mr. Borges is a residential and commercial renovation contractor. Through Mr. Gera he met the Plaintiff in December 2013 or January 2014 for the purpose of obtaining a loan. Mr. Borges said that he sought the funds to support the cash flow needs of his renovation business operated under the name Matrix Retail Construction Inc. (“Matrix”). Mr. Gera stated that Mr. Borges sought the loans for purpose of attempting to purchase a property for re-development located at 1 Ardell Court, Toronto. Mr. Borges admitted that he had wanted to buy that property to build two homes for rental purposes, but states that he eventually did not proceed with the purchase as the project was not supported by the appraisal value of the property.
[10] There is no dispute that the amounts below were paid by the Plaintiff and received by Mr. Borges (the “Loans”), in the presence of Mr. Gera, on the following dates and that some of those payments were supported by a promissory note:
Date
Loan
Payable to Whom?
Lender Fee
Promissory Note
Total Owed
January 6, 2014
$20,000
Matrix
$3,000
Promise to pay the Plaintiff $23,000 (inclusive of lender fee) by February 6, 2014. Signed by Mr. Borges.
$23,000
January 25, 2014
$7,500
Matrix
$1,000
Promise to pay the Plaintiff $8,500 (inclusive of lender fee) by January 30, 2014. Signed by Mr. Borges.
$8,500
February 21, 2014
$15,000
Mortgage Commitment
$15,000
February 26, 2014
$20,000
Matrix
$2,000
“To be paid back, March 7, 2014 from proceeds of 2nd mortgage advanced on 1 Ardell Avenue ($2,000 fee).” Signed by Mr. Borges.
$22,000
April 1, 2014
$30,000
Matrix
NIL
“Victor Borges and Anna Borges” promise to pay the Plaintiff $165,000 by October 9, 2014. Mr. Borges signed this document. The Defendant did not sign this document.
$30,000
May 2, 2014
$11,000 including $3,000 cash
Alex Serabian
NIL
Promise to pay the Plaintiff $11,000 by May 6, 2014. Signed by Mr. Borges.
$11,000
May 13, 2014
NIL
Mr. Borges
NIL
Promise to pay the Plaintiff $80,000 by July 30, 2014 with interest “at the rate of 15% to be paid on maturity”. Interest of $1,000 to be paid on May 30, 2014, June 30, 2014 and July 30, 2014. Upon default Plaintiff will “… enforce his right on the residential property at 1A and 1B Ardell Ave., Toronto or 23 Temple Bar Cres. Toronto”. Signed by Mr. Borges.
May 29, 2014
Charge registered on title to 23 Temple Bar Crescent, Toronto
May 29, 2014
$37,000
Mr. Borges ($35,000 placed into his personal bank account and $2,000 given to him in cash)
NIL
None. However, the Patel mortgage in the amount of $165,000 was registered against the Property.
$37,000
Total
$125,500 (A)
$21,000 (B)
$146,500
(A) +(B)
[11] There is no dispute that the Defendant did not attend any of the meetings between the Plaintiff, Mr. Borges and Mr. Gera where funds were exchanged or the above documents were signed. There is no dispute that the Defendant did not sign any of the above documents.
[12] The Plaintiff’s evidence is that all of the above funds were paid to Mr. Borges on a personal basis. The bank drafts were made payable to Matrix and Alex Serabian (a creditor of Mr. Borges) at Mr. Borges’ direction. Mr. Borges states that the amounts paid to Matrix were loans to Matrix rather than personal loans to him. Clearly the promissory notes contradict Mr. Borges’ assertion. He signed the promissory notes in his personal capacity and not in his corporate capacity. Further, Kevin Chen, a branch manager at an RBC branch in Toronto, confirmed that the $35,000 loan given to Mr. Borges on May 29, 2014 was deposited into Mr. Borges’ personal account by the Plaintiff. I find that the loans were given to Mr. Borges rather than to Matrix or anyone else. I accept the Plaintiff’s evidence that any loans given by the Plaintiff to Matrix or Mr. Serabian were made at the Plaintiff’s direction.
[13] The Defendant, Anna Borges, testified that she had been married to Mr. Borges for 24 years. They separated in January 2015 for personal and financial reasons. She had worked as a school teacher for 13 years and she was formerly a real estate agent. She stated that she has been under financial pressure for the last four years. She pays the first and second mortgages on the Property as well as the utilities and the debt owed on credit cards and Mr. Borges’ automobile.
[14] The Defendant states that she:
- never met the Plaintiff;
- never saw any of the promissory notes described above prior to being shown them recently by her counsel in this action;
- was unaware that Mr. Borges had borrowed money from the Plaintiff;
- never gave Mr. Borges permission to offer the Property as security for the loans made by the Plaintiff to Mr. Borges;
- would never agree to place a third mortgage on the Property as she could not afford to make any further payments given her salary.
Loan - January 6, 2014
[15] The Plaintiff testified that he lent $20,000 to Mr. Borges by bank draft payable to Matrix on January 6, 2014. On that same day Mr. Borges signed a promissory note in favour of the Plaintiff. He promised to pay the Plaintiff the sum of $23,000.00 by February 6, 2014 as well as an administration fee on this note at the rate of 10% per month from February 7, 2014 until paid in full [emphasis added]. Despite the usurious rate of interest, Mr. Borges signed this promissory note.[^1]
Loan - January 25, 2014
[16] The Plaintiff testified that he lent $7,500.00 to Mr. Borges by bank draft payable to Matrix on January 25, 2014. On that same day Mr. Borges signed a promissory note in favour of the Plaintiff. He promised to pay the Plaintiff the sum of $8,500.00 by January 30, 2014 as well as an administration fee on this note at the rate of 120% per annum from January 31, 2014 until paid in full [emphasis added]. Once again, Mr. Borges signed this promissory despite the interest rate charged.
Mortgage Commitment – February 21, 2014
[17] A mortgage commitment dated February 21, 2014 was prepared by Mr. Ramesh Patel. He was called to the Bar three or four years ago. Amongst other things, the mortgage commitment states:
Lender: Jayendra Patel
Applicant (Mortgagor/Borrower): Anna Borges
Guarantor: Victor Borges
Subject Property Address: 23 Temple Bar Crescent, Toronto
Rank of Mortgage: 2nd
Closing date: On or before May 28, 2014
Principal Amount: $165,000.00
Interest Rate: 12% Annual
Term: 4 months
Amortization: 25 years
Lender’s Fee: $15,000 (included in principal)
Loan – February 26, 2014
[18] The Plaintiff testified that he lent $20,000.00 to Mr. Borges by bank draft payable to Matrix on February 26, 2014. On that same day Mr. Borges signed a note which states: “Received from Jayendra Patel. To be paid back, March 7, 2014, from proceeds of 2nd mtg. advancing on 1 Ardell Ave. ($2,000 fee)”.
Loan – April 1, 2014
[19] The Plaintiff testified that he lent $30,000.00 to Mr. Borges by bank draft payable to Matrix on April 1, 2014. There is not a promissory note associated with this loan. Mr. Borges signed and gave the Plaintiff a receipt for this amount on April 1, 2014.
[20] Mr. Borges also signed a “Promissory Note and Direction to Pay”, dated April 1, 2014, which states:
For value received, I Mr. Borges and Anna Borges, hereby agree and promise to pay Jayendra Patel the sum of $165,000
This loan is to be repaid by Certified cheque in the sum of $165,000…to Jayendra Patel no later than 6 p.m. on or before October 9, 2014 or earlier upon refinancing the property at 1A and 1B Ardell Ave., Toronto.
I/we agree to permit the registration of a 3rd mortgage on the property, known municipally as 23 Temple Bar Crescent, Toronto, ON.
If said mortgage is to be registered, all costs related to such registration will be the responsibility of the borrower. Interest on this mortgage will be at the rate of 15% per annum and will accrue until paid in full.
The mortgage will have pre-paid interest for 6 months in advance.
Lender further agrees to discharge the said mortgage against 23 Temple Bar Cres. at the borrower’s request at any time or times, provided that he registers a second against 1A and 1B Ardell Ave., Toronto.
[21] Mr. Gera testified that the above typewritten document was signed by Mr. Borges after the Plaintiff refused to provide any further loans to Mr. Borges unless he provided security. The words “and Anna Borges” were handwritten and initialed by Mr. Borges.
[22] Mr. Borges states that he told the Plaintiff and Mr. Gera that he was not the owner of the Property and could not place a mortgage on the Property without the Defendant’s consent. Despite the fact that the above document clearly states that Mr. Borges grants permission for the Plaintiff to place a third mortgage on the Property, Mr. Borges testified that he signed the document because he wanted $165,000.00 from the Plaintiff to discharge the second mortgage held by Xpert. I do not accept the evidence of Mr. Borges. In my view, Mr. Borges wanted further loans from the Plaintiff and he signed any document that they asked him to sign in order to continue receiving funds.
Loan – May 2, 2014
[23] The Plaintiff testified that he lent $11,000.00 to Mr. Borges on May 2, 2014. He promised to pay the Plaintiff the sum of $11,000.00 by May 6, 2014. The note goes on to state: “In the event this promissory note [is] not paid in full by May 6, 2014 by Mr. Borges then there will be a penalty charge based on the lender fee calculated. Mr. Borges takes the full responsibility of paying this amount by May 6, 2014.” Mr. Borges agreed to pay a lender fee of $1,000.00. An interest rate is not specified. Mr. Borges directed that $8,000.00 be paid to Alex Serabian and that $3,000 be given to Mr. Borges in cash.
Advance of Funds – May 9, 2014
[24] Martin Zaretsky is a lawyer that was called to the Bar in 1978. He testified that about 50 percent of his practice is in the area of real estate and mortgage transactions. He has known Mr. Borges for about 12 years from the period when Mr. Borges was a mortgage broker. He was retained by Mr. Borges and the Defendant with respect to the registration of the Patel mortgage.
[25] On May 8, 2014 he received the mortgage commitment and the borrowers’ documents to be executed by the Defendant and Mr. Borges. The mortgage commitment indicated that the Patel mortgage would rank as a second mortgage. Mr. Zaretsky’s understanding was that the Patel mortgage was to rank as a second mortgage.
[26] According to the mortgage commitment, the closing of the mortgage was scheduled to occur on May 28, 2014. Mr. Zaretsky did not review the mortgage commitment with the Defendant until she came to his office with Mr. Borges on May 28, 2014.
[27] The Plaintiff provided a bank draft in the amount of $67,000.00 dated May 8, 2014, made payable to Mr. Ramesh Patel in trust .
[28] On May 9, 2014, Mr. Ramesh Patel deposited the sum of $65,680.22 to Mr. Zaretsky’s account.
[29] Mr. Zaretsky testified that Mr. Ramesh Patel asked for the return of the trust funds on May 9, 2014. Mr. Zaretsky wrote the following memo to file on May 9, 2014:
Borrowers documents provided by office of Ramesh Patel.
Copy of title search from Ramesh Patel shows a caution has been registered on title.
Copy of title search and copy of caution provided to Mr. Borges.
Ramesh Patel has requested the funds that were deposited to my account should be returned and re-deposited to his account.
Mr. [Ramesh] Patel has asked that documents be executed and returned to his office in order that he can register once caution is removed.
[30] Mr. Zaretsky thought that it was unusual that funds were sent in advance of his clients’ execution of the mortgage closing documents; however, he did not ask Mr. Ramesh Patel why he had sent the funds or an amount less than the face value of the mortgage ($165,000.00). He could not recall if he told the Defendant that these funds had been received from Mr. Ramesh Patel. Further, Mr. Zaretsky could not explain why he did not inquire why Mr. Ramesh Patel had only sent $65,000.00 rather than the face value of the mortgage, other than that closing was still a few weeks away and that he did not need to turn his mind to that issue at that early date. Given that the funds were returned within one day, I find Mr. Zaretsky’s explanation satisfactory.
[31] Mr. Ramesh Patel testified that he asked for the funds to be returned because the Defendant would not sign the mortgage documents that he had provided. He did not indicate how he knew that information. Further, his recollection is not reflected in any documents that he sent to Mr. Zaretsky nor is it consistent with Mr. Zaretsky’s documents or testimony. Given the existence of his memo to file, and the common sense explanation associated with it, I prefer Mr. Zaretsky’s evidence on this point.
[32] Mr. Zaretsky testified that:
- He did not know when the Patel mortgage would be registered given that there was a caution registered on title to the Property;
- The caution related to the second mortgage on the Property held by Xpert;
- He told Mr. Borges about the caution; Mr. Borges said he would follow up with Xpert to see if they could come to agreement on a discharge statement in order to remove their second mortgage from title;
- He assumed that the Patel mortgage would be registered once the caution was removed;
- Mr. Borges did not tell him that he had received loans from the Plaintiff.
Promissory Note - May 13, 2014
[33] On the Plaintiff’s behalf, Mr. Ramesh Patel prepared a promissory note that Mr. Borges signed on May 13, 2014. It required $80,000.00 to be paid by Mr. Borges to the Plaintiff by July 30, 2014. The document states:
For valuable consideration received…Victor Borges (“promissor”) promise to pay to the Order of Jayendra Patel or as it may direct in writing the sum of $80,000.00…with interest calculated thereon at the rate of 15% to be paid on maturity. The promissor will pay interest by three postdated cheques of $1,000.00 each starting from 30th May, 2014, 30 June 2014 and 30 July 2014.
Upon default in payment of any instalment of principal and other payment the promise will enforce his right on the residential property at 1A and 1B Ardell Ave., Toronto ON or 23 Temple Bar Cres. Toronto.
[34] The Plaintiff suggests that the statement “will enforce his right” on the residential property at 23 Temple Bar Crescent suggests that Mr. Borges agreed to provide the Property as security.
Return of Funds – May 14, 2014
[35] On May 14, 2014, Mr. Zaretsky sent a fax to Mr. Ramesh Patel which stated: “As requested the loan advance of $65,680.22 has been re-deposited to your trust account. Enclosed is a copy of the cheque and deposit slip.”
Mortgage Acknowledgement and Direction – May 28, 2014
[36] On May 27, 2014, Mr. Ramesh Patel sent by fax documents to Mr. Zaretsky for the signature of the Defendant and Mr. Borges.
[37] On May 28, 2014, the Defendant and Mr. Borges met with their solicitor, Mr. Zaretsky. Mr. Zaretsky testified that he had never met the Defendant prior to this meeting.
[38] The Defendant and Mr. Borges signed an “Acknowledgement and Direction” addressed to Mr. Ramesh Patel. Mr. Borges signed as guarantor and consenting spouse. It provided their authorization for Mr. Ramesh Patel to register a charge against the Property. It authorized an escrow closing arrangement. It also authorized Mr. Ramesh Patel to indicate the Defendant’s consent on the Charge document for the Property.
[39] Mr. Zaretsky expected that the Patel mortgage would be registered once the caution had been removed from title to the Property. From his review of the mortgage commitment, Mr. Zaretsky’s impression was that the Patel mortgage would rank as a second mortgage on the Property. Mr. Zaretsky communicated this view to the Defendant.
[40] The Defendant stated that her understanding was that the Patel mortgage would be a second mortgage on the Property. The Defendant stated that Mr. Zaretsky called Mr. Ramesh Patel in her presence and received confirmation that the Patel mortgage would not be registered until funds had been advanced. The Defendant stated that she was led to believe by Mr. Borges that no funds had been advanced under the Patel mortgage because an acceptable discharge statement for the existing second mortgage had not yet been received from Xpert.
Mortgage Registration – May 29, 2014
[41] On May 29, 2004, Mr. Zaretsky sent a copy by fax of the following documents to Mr. Ramesh Patel:
- Mortgage Acknowledgement and Direction, signed May 28, 2014;
- Acknowledgement, “Second mortgage to Jayendra Patel”, dated May 27, 2014 and signed by the Defendant, directed to Ramesh Patel which indicated that the Defendant had received a copy of the Standard Charge Terms No. 200033 before signing the mortgage [underlining added];
- Two solemn declarations, dated May 28, 2014 and signed by the Defendant. One of the declarations stated, “I am not borrowing money from anywhere except the above mortgage [which references the mortgage from Jayendra Patel] and the existing first mortgagee.”
[42] The language described above found in the acknowledgement and solemn declaration support the view that the Defendant reasonably believed that the Patel mortgage was to rank as a second mortgage rather than as a third mortgage.
[43] Mr. Ramesh Patel testified that he received instructions from the Plaintiff to register the Patel mortgage despite the caution that was registered on title.
Loan – May 29, 2014
[44] The Plaintiff testified that he lent $37,000.00 to Mr. Borges on May 29, 2014. There is no promissory note associated with this loan. The Plaintiff stated that he deposited $35,000.00 into Mr. Borges’ personal bank account at RBC. He also gave him $2,000.00 in cash. On cross-examination Mr. Borges reluctantly admitted to being present at the RBC that day and to receiving these funds.
Notice of Sale – October 5, 2014
[45] Mr. Ramesh Patel issued a Notice of Sale in respect of the Patel mortgage on October 5, 2014. It stated that the sum of $165,000.00 was owed for principal as at December 1, 2013 and that the total amount of $167,956.00 was owed. It stated that unless the amount owed was paid by October 31, 2014, then he shall sell the property.
[46] The Defendant stated that she did not receive a copy of the Notice of Sale. Mr. Ramesh Patel stated that he sent it to the Defendant and Mr. Borges at the Property; however, there is no evidence that the Defendant received a copy. There is no signature card or other evidence to show that the Defendant received the Notice of Sale.
Closing – October 9, 2015
[47] Mr. Kligerman testified that the sale of the Property did not close because the Defendant was unable to provide clear title to the purchaser given the mortgage and executions registered on title to the Property. He stated that he did not have discharge statements from the second or third mortgagee showing their broad claims. He sent an email dated October 6, 2015 to Mr. Ramesh Patel requesting the Plaintiff’s consent to discharge the Patel mortgage in exchange for the net proceeds of sale, after the discharge of the first mortgage, being held in trust so that the disputes related to the second and third mortgage could be resolved after closing. Mr. Ramesh Patel did not respond to this email.
[48] Mr. Kligerman testified that the purchaser tendered his closing documents on October 9, 2015. The Defendant and the purchaser agreed to postpone the sale of the Property to October 29, 2015 on condition that the Defendant pay $40.00 per day for each day that the closing was postponed.
[49] The Defendant stated that she moved from the Property to another home at the beginning of October 2015 in anticipation that the closing would occur on October 9, 2015. She paid rent for one year in advance in the amount of $1,800.00.
ISSUE #1: SHOULD THE PATEL MORTGAGE BE DISCHARGED?
[50] Two issues arise: (1) Was the purpose of the mortgage to secure loans made by the Plaintiff to Mr. Borges or was it to refinance the existing second mortgage? (2) If the purpose of the mortgage was to secure loans made to Mr. Borges, did the Defendant agree to the Patel mortgage for that purpose?
Was the Patel mortgage made for the purpose of securing the loans to Mr. Borges or to replace the existing second mortgage?
[51] The Plaintiff submits that the Defendant is bound by the Patel mortgage. He submits that the Defendant knew that the Patel mortgage would rank as a third mortgage against the Property and that the purpose of that mortgage was to secure loans made by the Plaintiff to Mr. Borges. The Defendant thought that its purpose was to replace the second mortgage held by Xpert. The Defendant disputes that the purpose of the Patel mortgage was to secure the loans that had been advanced to Mr. Borges.
[52] The Plaintiff and Mr. Ramesh Patel testified that the purpose of the Patel mortgage was to secure the loans that were made to Mr. Borges as well as to provide security for a further loan to Mr. Borges.
[53] However the evidence does not show that the mortgage documents reflected this purpose. Nor was this purpose communicated to the Defendant or the Defendant’s lawyer, Mr. Zaretsky.
[54] If the Plaintiff wanted his loans to Mr. Borges to be secured by the Property, then the mortgage documents that he provided to the Defendant should have stated that the purpose of the mortgage was to primarily secure past unsecured loans made to Mr. Borges. The Mortgage Commitment stated that the security sought was a second mortgage, not a third mortgage, on the Property thus suggesting that the funds would be used to discharge the existing second mortgage held by Xpert. Further, as noted above, the Acknowledgement dated May 27, 2014 and signed by the Defendant indicated that the Patel mortgage was a second mortgage, not a third mortgage. In addition, the solemn declaration signed by the Defendant on May 28, 2014 indicated that there would only be two mortgages registered against the Property after the Patel mortgage was registered, thus implying that the Patel mortgage would be a second mortgage.
[55] The Plaintiff suggests the conduct of Mr. Borges and the Defendant after the Authorization and Direction and the other closing documents described earlier were signed on May 28, 2014 shows that the Defendant was aware that the purpose of the Patel mortgage was to secure the loans that the Plaintiff had made to Mr. Borges. The Plaintiff relies on the fact that Mr. Borges obtained a loan of $37,000.00 from the Plaintiff on May 29, 2014 as supporting this link. However, the Defendant denied that she was aware of the further loan made on May 29, 2014 to Mr. Borges. There is also no evidence which suggests that she was aware of that loan at any time until sometime after this action was commenced.
[56] Accordingly, I find that the purpose of the Patel mortgage was to rank as a second mortgage and to pay off the balance of the existing second mortgage.
[57] Given my conclusion, there is no need to address the issue of whether any consideration was given to the Defendant for the Patel mortgage other than to note that a mortgagee is only secured for monies actually advanced to the mortgagor.[^2] There is no dispute that the Plaintiff did not advance any funds to the Defendant under the Patel mortgage nor did he advance funds at the express direction of the Defendant to Mr. Borges or anyone else. Accordingly, the Patel mortgage is unenforceable against the Property and should be removed from title to the Property.
If the purpose of the mortgage was to secure loans made to Mr. Borges, did the Defendant agree to the Patel mortgage for that purpose?
[58] Alternatively, if had I found that the purpose of the Patel mortgage was to secure the loans made to Mr. Borges, the Defendant argued, without averting to it by name, that the defence of non est factum applied because the Defendant did not know or consent to the registration of the Patel mortgage as a third mortgage in order to secure loans made to her spouse.[^3] The following elements must be proven to establish non est factum: (1) the absence of consent; (2) the absence of carelessness; (3) the signed document is fundamentally different from the document that the Defendant believed she had signed.
[59] There is no evidence that the Defendant consented to the Patel mortgage for the purpose of securing loans made to Mr. Borges. The Defendant testified that she would not have consented to a third mortgage being placed on the Property as she could not afford the further payments associated with it.
[60] It makes little commercial sense that the Defendant would agree to place a mortgage of $165,000.00 on the Property and thereby grant security to the Plaintiff for all past unsecured loans made to her spouse, which she had not guaranteed, in order to have the Plaintiff lend her spouse an additional $37,000.00.
[61] I also find that the Defendant was not careless in signing the Patel mortgage. There was no indication in the language used in the mortgage documents that the Patel mortgage would rank as a third mortgage or that the funds secured by the mortgage had largely already been advanced. Further, she reasonably relied upon the advice of her lawyer, Mr. Zaretsky, who was also under the impression that the Patel mortgage would rank as a second mortgage.
[62] The Plaintiff submitted that the Defendant should have known that the purpose of the Patel mortgage was not to discharge the existing second mortgage given that the Patel mortgage only secured a loan of $165,000.00. I accept the Defendant’s evidence that at the time she signed the Mortgage Authorization and Direction, she thought that the $165,000.00 being advanced by the Plaintiff would be sufficient once certain unreasonable charges in the discharge statement provided by Xpert were resolved and removed. At that time, the Defendant was disputing the addition of a $315,000.00 unsecured loan that had been added to the discharge statement for the second mortgage. The unsecured amount was eventually removed from a discharge statement issued in September 2015 by Xpert. Further, she thought that the mortgage would not be registered nor funds advanced by the Plaintiff until Xpert’s disputed discharge statement had been resolved. This expectation accords with the terms of the Mortgage Authorization and Direction which states that the Plaintiff’s lawyer was only authorized to enter into an escrow closing arrangement.
[63] Given the circumstances described above, I find that the Defendant did not understand that the purpose of the mortgage transaction was as suggested by the Plaintiff. This is confirmed by the Acknowledgement, dated May 27, 2014 and the Solemn Declaration, dated May 28, 2014, both referenced earlier, that the Defendant signed.
Other Matters
[64] In addition to the reasons given above, having failed to inform the Defendant that the mortgage was to provide security for funds already given to her spouse, it would be unconscionable to allow the Plaintiff to enforce the Patel mortgage against the Defendant.[^4]
[65] Finally, the Plaintiff submitted that the Defendant learned of the true purpose of the Patel mortgage after it was registered and that she acquiesced to it ranking as a third mortgage on the Property. However, the Defendant’s evidence was that she only became aware of the registration of the Patel mortgage after this action had been commenced. The Plaintiff suggested that the Defendant received the Notice of Sale addressed to “Victor Borges and Anna Borges” at their home. However, this allegation is without foundation. There is no evidence of the Defendant’s signature for receipt of the Notice of Sale or sworn evidence that the Notice was personally served upon her. In my view, there is no evidence to suggest that the Defendant acquiesced to the Patel mortgage being registered as a third mortgage against the Property.
ISSUE #2: SHOULD DAMAGES FOR SLANDER OF TITLE BE GRANTED?
[66] The Defendant also asks this Court to award damages for slander of title arising from the registration of that mortgage.
[67] I am not satisfied on the evidence that the Defendant has suffered any damages as a direct result of the registration of the Patel mortgage. There is no evidence that the second mortgagee, Xpert, would have agreed to discharge its mortgage from title to the Property in order to allow the sale to close on October 9, 2015 in exchange for having the proceeds of sale held in trust until the amount owed to it had been agreed upon or otherwise resolved. Accordingly, I am not persuaded that the damages claimed by the Defendant (namely, $40.00 per day from October 9, 2015 to October 9, 2015, plus the cost of rental accommodation for the month of October, 2015 and utilities) would not have been incurred but for the registration of the Patel mortgage.
[68] Accordingly, I dismiss the counterclaim for damages for slander of title.
CONCLUSIONS
[69] I dismiss the Plaintiff’s action and the Defendant’s counterclaim except to the extent that I order that the Patel mortgage be discharged from title to the Property forthwith.
[70] The Defendant claims costs in the amount of $41,570.65 that she actually incurred. The Defendant submits that she made an offer to settle this action, dated September 14, 2015, on the basis that the Plaintiff consent to a dismissal of the action with the Plaintiff paying the $5,000 in costs to the Defendant. This offer expired one second after the commencement of the trial. No mention is made of the Counterclaim in the offer. In any event, this offer it is not clear that the Defendant’s offer is better given that this Judgment includes costs of trial, and not just costs up to the commencement of trial. Accordingly, I find that Rule 49.10 of the Rules of Civil Procedure does not apply to the Defendant’s Offer to Settle. The Defendant suggested that the trial could have been substantially shortened had the Plaintiff agreed to a Request to Admit delivered by the Defendant in late September 2015. However, most of the admissions sought by the Request to Admit were inconsistent with the Plaintiff’s theory of the case. In my view, the Plaintiff’s conduct of this action was not reprehensible and, accordingly, there is no basis to award substantial indemnity costs to the Defendant. The Plaintiff correctly notes that the Defendant’s accounts contain many items that relate to work associated with the action related to the Xpert mortgage action in whole or part. The Plaintiff claims that its actual costs of this action amounted to $21,224.80.
[71] Having regard to section 131 of the Courts of Justice Act, Rule 57.01 of the Rules of Civil Procedure as well as the principle that the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay as well as proportional (see Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616), I hereby order that the Plaintiff pay the amount of $17,000.00, inclusive of interest and taxes, to the Defendant within 30 days of today’s date.
Mr. Justice M. D. Faieta
Released: October 30, 2015
Corrected decision: In paragraphs [7] and [24] “Mark Zaretsky” was changed to “Martin Zaretsky”. The amount of $18,000.00 in paragraph [49] was changed to the amount of $1,800.00. In paragraph [70] the following sentences were replaced “However I do not have a copy of the Request to Admit and cannot assess its significance. Further, the Plaintiff’s conduct was not reprehensible and, accordingly, there is no basis to award substantial indemnity costs to the Defendant.” The sentences now read “However, most of the admissions sought by the Request to Admit were inconsistent with the Plaintiff’s theory of the case. In my view, the Plaintiff’s conduct of this action was not reprehensible and, accordingly, there is no basis to award substantial indemnity costs to the Defendant.”
COURT FILE NO.: CV-14-516728
DATE: 20151027
CORRECTED DECISION RELEASED: 20151030
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JAYENDRA PATEL
Plaintiff
– and –
ANNA BORGES
Defendant
REASONS FOR DECISION
Mr. Justice M. D. Faieta
Released: October 30, 2015
[^1] Criminal Code, R.S.C. 1985, c. C-46, s. 347. This provision makes it an offence to enter into an agreement for, or to receive, interest at a rate exceeding 60 percent per year.
[^2] See Ialongo v. Serm Investments Ltd., 2007 CanLII 6242 (ON SC), [2007] O.J. No. 789, para. 34.
[^3] See Joseph E. Roach, The Canadian Law of Mortgages, Second Edition, LexisNexis Canada, 2010, pages 352-356. Also see Marvco Color Research Ltd. v. Harris, 1982 CanLII 63 (SCC), [1982] 2 S.C.R. 774, at 785 (S.C.C.).
[^4] See Canadian Imperial Bank of Commerce v. Ohlson (1997), 1997 ABCA 413, 154 D.L.R. (4th) 33 (Alta. C.A.).