ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE TORONTO-DOMINION BANK
Plaintiff/Defendant by Counterclaim
– and –
BETTY HAGEY also known as BETTY MAY HAGEY and KEVIN HAGEY also known as KEVIN SCOTT HAGEY
Defendants/Plaintiffs by Counterclaim
Chad Kopach, for the Plaintiff/Defendant by Counterclaim.
Larry Douglas, for the Defendants/Plaintiffs by Counterclaim.
HEARD: January 25, 2016
r. d. gordon, r. s. j.
Overview
1The Toronto-Dominion Bank (“TD”) has brought a motion for summary judgment seeking the following orders: (1) That two TD mortgages registered against the Defendants’ property be rectified to effect compliance with the Planning Act; (2) That its Notices of Sale be declared sufficient notice to the Defendants in compliance with the Mortgages Act; and (3) That it be granted possession of the mortgaged property with leave to obtain a writ of possession. In the event rectification is not granted, TD seeks by way of summary judgment a declaration that it holds an equitable mortgage over the properties.
Background Facts
2Mr. and Mrs. Hagey are the joint owners of two pieces of property in the Township of Strong in the municipality of Sundridge, Ontario. The legal descriptions for the properties are somewhat unique. Notwithstanding that the properties abut, one is registered under the Land Titles Act and the other is registered under the Registry Act.
3The property registered under the Land Titles Act is Lot 12, Concession 4 and is described as Parcel 25238 SEC SS. Its Property Identifier Number (PIN) is 52076-0176 (LT). This piece of land is approximately 100 acres and abuts lot 11 to the East. There are no buildings on this property. For ease of reference, I will refer to this piece of property as the “vacant property”.
4The property registered under the Registry Act is Part of Lot 11, Concession 4 and has a Property Identifier Number (PIN) of 5206-0501(R). This piece of land is approximately 97 acres and contains the home occupied by the Defendants. For ease of reference, I will refer to this piece of property as the “home property”.
5TD’s interest in these properties arises out of a loan transaction dating back to early 2011. In January of 2011, TD loaned the Defendants $269,250. As security for the loan, two mortgages were registered: one against the vacant property on January 28, 2011 and one against the home property on February 9, 2011. Both secured the same loan of $269,250 and were on identical terms. However, the mortgages were not registered simultaneously, nor did they contain terms cross-referencing one another to indicate that they were, in effect, a single mortgage being registered separately under the Land Registry and Land Titles systems.
6Accordingly, when the mortgage on the vacant property was registered, the Defendants were the owners of the abutting home property. Because it was not also mortgaged at that time, the mortgage on the vacant property was in breach of the Planning Act. Similarly, when the home property was subsequently mortgaged, the Defendants were the owners of the abutting vacant property. Because it was not also mortgaged at that time, the mortgage on the home property was also in breach of the Planning Act.
7The Defendants went into default on their loan in February of 2015. Eventually they were forced into bankruptcy. TD began enforcement proceedings issuing first a demand letter and then a separate Notice of Sale Under Charge for each property and beginning this action for judgment on the covenant to pay and for possession of the property. In the demand letter and Notice of Intention to Enforce Security, the vacant property was incorrectly referred to as Lot 12, Concession 3. This incorrect description was carried over into the original Statement of Claim in this action, which has since been amended.
The Applicable Law
The Test on Motion for Summary Judgment
8The motions before me are brought under Rule 20.04(2) of the Rules of Civil Procedure, which provides, inter alia, that a court shall grant summary judgment if satisfied that there is no genuine issue requiring a trial.
9In Hryniak v. Mauldin (2014) SCC 7, the Supreme Court of Canada said the following:
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 an proportionate, more expeditious and less expensive means to achieve a just result.
10In deciding whether there is a genuine issue for trial, I have the discretion to use enhanced fact-finding powers, unless it is in the interests of justice for such powers to be exercised only at a trial.
11It is also necessary that parties put their best foot forward at a motion for summary judgment and have before the court all of the evidence upon which they intend to rely upon at trial. It is not adequate to say that further or other evidence may later be adduced.
The Applicable Law Concerning Rectification
12Where the terms of a written agreement do not accord with the true agreement between the parties, rectification is an equitable remedy that allows the written agreement to be amended to reflect the true agreement of the parties. What is rectified is not a mistake in the transaction itself, but a mistake in the way in which the transaction has been expressed in writing. To succeed in a proceeding for rectification, the applicant must show the following: (1) that the parties had a common continuing intention prior to the making of the document alleged to be deficient; (2) that the intention remained unchanged or existed when the document sought to be rectified was signed; and (3) by mistake, the parties signed a document that did not accurately reflect their common intention. In determining the parties’ common intention, the court is to consider the relevant documents, the evidence of the parties, and the parties’ post-agreement conduct. The question that the court must answer is whether the totality of the evidence supports the conclusion on a balance of probabilities that an agreement was in place but that an error was made in recording it. This is an objective inquiry. [See McLean v. McLean 2013 ONCA 788, [2013] O.J. No. 5956 (C.A.)].
The Applicable Law Concerning Equitable Mortgages
13The concept of an equitable mortgage seeks to enforce a common intention of the mortgagor and mortgagee to secure property for either a past debt or future advances, where that common intention is unenforceable under the strict demands of the common law. Included in the situations when an equitable mortgage may arise, are when an instrument which is intended to operate as a legal mortgage fails to do so for want of some formality and when an agreement has been signed in which the parties have agreed to execute a legal mortgage but they subsequently fail to do so. However, an equitable mortgage cannot be found if to do so would result in the contravention of the Planning Act. [See Elias Markets Ltd. (Re), 2006 CanLII 31904 (ON CA), [2006] O.J. No. 3689 (C.A.)].
Analysis
14As a preliminary matter, the Plaintiff asks that any stay of proceedings resulting from the Defendants’ assignment in bankruptcy be lifted so as to permit it to proceed with these motions. The Defendants did not argue to the contrary. Strictly speaking, it is not necessary for the Plaintiff to lift the stay to allow it to realize upon its security [see Section 69.3(2) of the Bankruptcy Insolvency Act].
15As a further preliminary matter, the Plaintiff has asked that there be an order temporarily lifting the stay of proceedings with respect to the Defendants’ counterclaim so that it could request dismissal by way of summary judgment. In my view, the Bankruptcy Insolvency Act does not act to stay proceedings of a debtor such as the counterclaim in this matter. Rather, Rule 11 of the Rules of Civil Procedure results in a stay of the proceeding until an order to continue is obtained. As no order to continue has been obtained, the counterclaim remains stayed and the Plaintiff’s motion for summary judgment cannot proceed.
16On a substantive basis, the central issue in the Plaintiff’s claim for rectification is whether or not there was a common intention to mortgage both properties.
17The Defendants take the position that this presents a genuine issue requiring a trial. In support of their position, Kevin Hagey filed an affidavit in which he swears that his understanding was that the mortgage was to attach only to the home property. His explanation for the mix-up is as follows:
That he and his wife applied to the Plaintiff for credit and were told by Linda Lutecki (the Plaintiff’s commercial loan officer) that collateral would be required on their residence at 859 Muskoka Road in Sundridge.
That they were subsequently asked to attend at a branch of the Plaintiff on January 21, 2011 to sign a mortgage document entitled “MORTGAGOR’S ACKNOWLEDGEMENT AND DIRECTION RESIDENTIAL MORTGAGE OF LAND”. This document described the property to be mortgaged as PIN: 52076-0176 (LT) with municipal address of 859 Muskoka Road, Sundridge, with legal description of PCL 25238 SEC SS; LT 12 CON 4 STRONG; DISTRICT OF PARRY SOUND.
That he pointed out that although the municipal address was correct, the legal description was wrong in that it should be Lot 11, Concession 4, not Lot 12 as indicated. He also pointed out that Lot 11, Concession 4 also contains a second older residence with a municipal address of 881 Muskoka Road that should be reflected on the document.
That the document was amended to reflect the second municipal address and by listing both Lot 12 Concession 4 and Lot 11 Concession 4, which he thought reflected the legal description for the two residences.
That about one week later he and his wife were asked to attend at the bank again to sign a new mortgage document. This time they signed the mortgage on PIN 52076-0501 (R), which is Lot 11, Concession 4, which is the home property. When they signed on January 28, 2011, he says they were advised that the previous documents could not be registered and that this replaced the previous mortgage document.
18Oddly, the Small Business Banking Rural Property Mortgage Credit Agreement, which is the loan approval document that should describe the property and the terms of the mortgage was not signed until January 28, 2011, a week after the first mortgage documents had been signed, and contained no description of the property to be mortgaged.
19The Plaintiff is of the view that the Defendants have not raised an issue which requires a trial. In its view, the materials filed by the Defendants are ex post facto attempts by Mr. and Mrs. Hagey to fabricate evidence of intention that is contradicted by an Environmental Questionnaire completed by them and the Statement of Affairs delivered by them in their bankruptcy proceedings after the close of pleadings in this action.
20In my view, although the Defendants have raised a genuine issue, it is not an issue that requires a trial. The only reasonable inference to be drawn from the evidence is that all parties intended there to be a mortgage legally enforceable over both properties as security for the money advanced by the Plaintiff. I come to this conclusion notwithstanding the affidavit evidence of Mr. Hagey for the following reasons.
21To begin with, when the Plaintiff was first considering loan arrangements with the Defendants, it required them to complete an environmental questionnaire as part of the overall credit analysis of their farm business. The Defendants completed this questionnaire and identified both Lot 11, Concession 4 (comprised of 97 acres) and Lot 12, Concession 4 (comprised of 100 acres) as the properties owned by them. This correlates with the amendment made by them to the “MORTGAGOR’S ACKNOWLEDGMENT AND DIRECTION RESIDENTIAL MORTGAGE OF LAND” and indicates that their intention in making the amendment was to include all 197 acres of property.
22Secondly, in completing their Statement of Affairs (dated August 27, 2015) in their bankruptcy proceedings, the Defendants identified property known municipally as 859 Muskoka Road in Sundridge as owned by them and identified the mortgage owing to the Plaintiff. However they did not show or report any real property owned by them which remained unencumbered. Had the Defendants truly believed that the vacant property was not included in the mortgage to the Plaintiff their sworn Statement of Affairs should have reflected that they owned 100 acres free and clear of encumbrances. It did not.
23Thirdly, the Defendants did not raise this issue in the Statement of Defence and Counterclaim filed in this action. Although they did deny the allegation made by the Plaintiff that its loan was secured by a mortgage on Lot 12, Concession 4 they did not plead a version of facts on that issue that was different than the Plaintiff.
24Fourthly, notwithstanding the critical nature of Mr. Hagey’s evidence that he was told that the documents signed on January 21, 2011 could not be registered and that the new documents he was signing was to replace the previous mortgage documents, he provided no information about who he met with or who told him this.
25Fifthly, although the “MORTGAGOR’S ACKNOWLEDGMENT AND DIRECTION RESIDENTIAL MORTGAGE OF LAND” may not be the definition of accuracy in terms of property description, what is abundantly clear is that it was amended with the consent of Mr. and Mrs. Hagey to reflect that the mortgaged property was to include both Lot 12, Concession 4 and Lot 11, Concession 4. There has been no reasonable explanation offered of why this document was amended to show both properties, particularly when it is clear from the Environmental Questionnaire completed by the Defendants that they knew these constituted two properties with different legal descriptions.
26Lastly, there is no significant corroboration for the facts alleged by Mr. Hagey. It is not corroborated by the documents, it is not corroborated by the evidence of anyone he dealt with at the bank, and it is not even corroborated by Mrs. Hagey. This is to be contrasted with the position of the Plaintiff which is corroborated by the documentation as noted above.
Conclusion
27The parties had a common continuing intention prior to the making of the two individual mortgages to have the Defendants’ loan secured by a lawful mortgage covering both properties. That intention remained unchanged when the two mortgages were signed. By mistake the mortgages as signed did not include wording that would render them compliant with the Planning Act. It is appropriate that the mortgages be rectified by including the appropriate property descriptions for both properties. Accordingly, an order shall issue for rectification on the terms set out in the Plaintiff’s prayer for relief contained in its Supplementary Motion Record dated December 21, 2015.
28The Plaintiff issued separate notices of sale for the properties. Both were signed and mailed the same day. Although it would have been preferable to have a single notice of sale including both properties, there has been no suggestion by the Defendants that they were misled in any way. In the circumstances it is appropriate to order that the notices of sale as issued July 20, 2015 by the Plaintiffs constitute sufficient notice to the Defendants and are deemed to comply with the Mortgages Act.
29Given my finding with respect to rectification, it is not necessary to determine whether an equitable mortgage existed.
30With rectification, the Plaintiff’s mortgage is effectively validated. Clearly the mortgage is in default and just as clearly the Plaintiff is entitled to possession. Accordingly judgment for possession shall issue against both properties and leave is granted to the Plaintiff to obtain a writ of possession.
31The Plaintiff’s motion to dismiss the counterclaim of the Defendants is dismissed without prejudice to its right to bring the motion anew once an order to continue has been obtained.
32If the parties are unable to agree on costs they may make written submissions to me, not to exceed four pages plus attachments each, within 45 days of the release of this decision.
R. D. GORDON, R. S. J.
Released: February 16, 2016
CITATION: The Toronto-Dominion Bank v. Hagey et. al., 2016 ONSC 1100
COURT FILE NO.: CV-15-023
DATE: 20160216
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE TORONTO-DOMINION BANK
Plaintiff/Defendant by Counterclaim
– and –
BETTY HAGEY also known as BETTY MAY HAGEY and KEVIN HAGEY also known as KEVIN SCOTT HAGEY
Defendants/Plaintiffs by Counterclaim
decision on motion for
summary judgment
R. D. GORDON, R.S.J.
Released: February 16, 2016