CITATION: Magenta Capital Corporation v. Hills, 2016 ONSC 1105
COURT FILE NOS.: 15-65228, 15-64302
DATE: 20160212
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership (“Magenta”)
Plaintiffs/Defendants by Counterclaim (Moving Party)
– and –
Kristine Hills
Defendant (Responding Party)
Meghan E.W. O’Halloran, Counsel for Magenta
For herself
AND BETWEEN:
Kristine Hills
Plaintiff (Responding Party)
– and –
Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership
Defendants (Moving Party)
HEARD: February 10, 2016
REASONS ON SUMMARY JUDGMENT
A.D. kurkE j.
[1] Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership (collectively “Magenta”) seek Summary Judgment against Hills pursuant to Rule 20.01 of the Rules of Civil Procedure, for liquidated damages of $160,467.51 due under a mortgage registered against Hills’ property; pre- and post-judgment interest thereon at the contractual rate of 9.50 percent per annum from July 30, 2015; possession of the mortgaged property; dismissal of Hills’ Claim and Counterclaim; and costs.
[2] In 2010, Hills purchased for $23,000 property legally described as PT LT 23 CON 6 NORTH PLANTAGENET PT 1 & 4 46R5733; ALFRED/PLANTAGENET, and municipally known as 2369 Plantagenet Concession 7, Curran, Ontario, K0B 1C0.
[3] Hills engaged the services of Peter Rostocki with the Royal Bank of Canada, who applied in April and May 2011 for a mortgage on her behalf with Magenta first with plans to build a “straw bale” home and then instead, a pre-fabricated home on the property. Rostocki appears to have engaged Michael Romain, a certified appraiser, to prepare an appraisal for the proposed home, which was provided to Magenta. The appraised value of the property, with completed home, was to be $230,000. The appraisal assessed for a home with two bedrooms above grade, and a finished basement with two finished bedrooms and bathroom.
[4] Magenta was not involved in planning or appraising the home. They received the appraisal May 26, 2011, and approved Hills’ mortgage, based on Rostocki’s submission and that appraisal.
[5] Hills delivered a budget to Magenta on June 21, causing Magenta to explain to Hills that at the $230,000 valuation, she was only approved for 75% of the finished value of the home, less holdbacks and draw fees. Hills would only have the use of $158,917.50 until 45 days after confirmation of substantial completion. Magenta would not provide “take-out financing” (also called “roll-over financing”) once the home was completed.
[6] Hills signed the Mortgage Approval at the end of June 2011. The mortgage required that Hill pay $1,770.71 monthly to Magenta commencing August 6, 2011, and ending February 6, 2012. The mortgage accrued interest at 12% per annum. The Charge was registered on title July 6, 2011. The mortgage, which was subject to Standard Charge Terms, itself warned Hills that the loan value would change if the property value changed. There were provisions for interest after default, for adding various costs to the principal sum advanced, for power of sale, and for acceleration of principal and interest on default.
[7] Magenta advanced funds for the building pursuant to the terms of the mortgage, and under the belief that Hills was building a four bedroom home with a finished basement. In November 2011, Hills came to realize that the appraisal was inaccurate, as her intention had been to finish the basement over time, and not at the time of initial construction. In December, Hills instructed Rostocki to “revise” her mortgage to a two-bedroom with unfinished basement. Rostocki responded that the value would now be between $195,000 and $200,000. This caused Magenta to suspend payments on the budget, as payouts had now exceeded 75% of the revised budget. Hills scrambled, borrowed some money from family, and was able to achieve an occupancy permit.
[8] Hills was able to renew her mortgage with Magenta in February 2012, August 2012, August 2013, and September 2014, on a reduced interest rate from Magenta. Hills acknowledged the reduction and thanked Magenta for their support while she shopped around for alternate financing. In fact, in January 2012, Hills wrote Magenta that she did “not believe you are involved in this. You have been very good and supportive with anything that I have asked.” In November 2012, Hills asked Magenta to help her find alternate financing, but Magenta explained that they were not a brokerage.
[9] This is in sharp contrast to RBC and Romain, both of whom Hills quickly sued for their parts in this transaction. She sued initially in Small Claims Court in February 2012, claiming $25,000. This action was recommenced in Superior Court October 15, 2012. Hills’ Claim against Romain was dismissed August 9, 2013, and her appeal was also dismissed. Her Claim against RBC was dismissed January 28, 2015.
[10] By e-mails to RBC and Magenta in January 2012, Hills claimed that her problems began when Rostocki misunderstood her explanations to him about two bedrooms that she planned in the future to put into the basement, and when she was unable to open her e-copy of Romain’s appraisal, which prevented her from discovering that the appraisal had converted her future plans to current plans. Hills apologized to Magenta for the difficulties that this misunderstanding had caused, and indicated that she would look for a solution to cover the costs.
[11] Magenta repeatedly wrote Hills and her lawyer from February to April 2012, to find out whether they would be named as defendants in the actions she directed at RBC and Romain. Hills wrote to her counsel and officers of Magenta April 26, 2012, assuring them that she had no intention of involving them in the litigation.
[12] In June 2014 Magenta Mortgage Investment Corp. assigned its mortgage over Hills’ property to the defendant companies.
[13] By September 2014, Hills owed monthly payments on the mortgage of $1,447.77. Her interest rate was 9%. She appears to have paid them up to around April 2015. That month, Hills wrote to Magenta to advise “that I will no longer be making mortgage payments to you.” On May 6, 2015, Hills went into default on the mortgage. Magenta gave Hills until June 24, 2015 to bring the mortgage into good standing. Hills has made no further payments since before May 6, 2015.
[14] Magenta claims the following amounts, that are provided for in the Mortgage and Standard Charge Terms:
a. Principal and interest as at July 17, 2015 $153,414.80
b. Interest to July 30, 2015 5,066.93
c. Returned/late payment fee 675.00
d. Default proceedings 975.00
e. Property Tax 200.18
f. Occupancy Check 135.60
g. Total $160,467.51
[15] Magenta issued a Notice of Sale for the property August 18, 2015, giving Hills until September 28, 2015 to redeem the mortgage. Hills made no payments. Hills remains the registered owner in possession of the property.
[16] On May 13, 2015, Hills filed her Statement of Claim against Magenta, and an Amended version in October of that year. On July 31, 2015, Magenta commenced their action against Hills on the mortgage default; Hills refused through her counsel to allow Magenta to issue its mortgage claim as a Counterclaim to Hills’ action. Hills delivered her Statement of Defence and Counterclaim October 6, 2015.
Summary Judgment
[17] Pursuant to Rule 20.01, the Court shall grant Summary Judgment if it is satisfied that there is no genuine issue requiring a trial. No trial is necessary if a Summary Judgment can achieve a fair and just adjudication, and if it permits a judge to make necessary findings of fact, to which the law can be applied. In such circumstances, a motion for Summary Judgment permits a more expeditious, efficient and less expensive means to achieve justice than does a trial, thus enhancing the important principle of proportionality: Hryniak v. Mauldin, 2014 SCC 7, [2014] S.C.J. No. 7, at paras. 4-5, 41 (hereafter “Hryniak”).
[18] Accordingly, the Supreme Court of Canada, in Hryniak [para. 49], defined that there will be no genuine issue requiring a trial when the process:
a. Allows the judge to make the necessary findings of fact;
b. Allows the judge to apply the law to the facts; and
c. Is a proportionate, more expeditious and less expensive means to achieve a just result.
[19] If the judge on a motion for Summary Judgment is unable to determine whether there is a genuine issue requiring a trial based only on the evidence before him or her, the judge may resort to fact-finding powers in Rule 20.04(2.1), including a) the weighing of evidence; b) evaluating the credibility of a deponent; and c) drawing any reasonable inference from the evidence: Hryniak, at para. 66.
[20] The Court may grant Summary Judgment in favour of Hills on Magenta’s motion for Summary Judgment, notwithstanding that Hills has not herself moved for Summary Judgment: Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922, at paras. 50-52. I agree with this position.
[21] In my view, there is no genuine issue requiring a trial in this case. Magenta’s Claim must succeed, and Hills’ Claim and Counterclaim must be dismissed, for the following reasons.
Analysis
[22] I am satisfied on the evidence presented on this Motion, that Magenta, pursuant to a mortgage agreement for a building loan, advanced the principal in question to Hills for the purpose of building her home, and that the accrued interest arises from the original contract or its renewals. The other amounts, and Magenta’s right to possession of the charged property are generated by standard charge terms. Hills plainly went into default, after announcing her intention to do so.
[23] Hills asserted breach of contract and several torts in her pleadings, but has only advanced negligence/negligent misrepresentation and the contract claim at this hearing. I will say at this point that on the evidence before me I find no deceit or fraudulent conduct towards Hills, and no intentional infliction of any kind of harm on Hills on the part of Magenta or its officers or employees. Rather, within the boundaries of an enterprise intent on profiting from the lending of money, Magenta seems to have done what it could to accommodate Hills’ difficulties, as even Hills acknowledged at the time.
[24] Hills asserts in her Claim that Magenta was negligent in not determining that the assessment of her home, on which Magenta based its determination to lend her money, should have been well below the $230,000 originally put forward by Romain, and more in line with Romain’s $202,000 reappraisal of December 2011. On Hills’ argument, Magenta should have determined this from the prefabricated house plans provided to Magenta, among other things.
[25] Additionally, Hills submits that Magenta should have been able to determine that she only qualified for a $150,000 mortgage based on the financial information that she provided to Rostocki. She submits that Magenta, had it conformed to its standard operating procedures, should have been able to determine that she had not made the downpayment of some $100,000 claimed by Rostocki in Hills’ application materials, and that all she had paid was the $23,000 for the property.
[26] On this claim, as a result of Magenta’s negligence in not making these determinations, it improvidently advanced funds to Hills, and promised even more, but then breached its contract with her by “high-handedly” cutting off those funds once the property was properly re-evaluated downwards. Further, Magenta was negligent and breached its contract with her by refusing to provide to Hills a roll-over mortgage upon occupancy, and was negligent in not advising her that she would not qualify for a roll-over mortgage. According to Hills, a roll-over mortgage was her pre-condition to entering the contract, and she reasonably believed, based on Magenta’s payout of funds to her, that they had accepted that term from her. And so she proceeded with the project. On this construction, it appears that the payout of funds was the representation to complete the tort of negligent misrepresentation.
[27] I am unable to accept the positions advanced by Hills.
[28] Hills attributes fault to Magenta for relying on misstatements provided to it by her agents, as ratified by her signature on mortgage application and agreement and her failure to correct those misstatements until monies had been advanced by Magenta. Rostocki and Romain were not employees or agents of Magenta. If Magenta did not follow its standard operating procedure, it may now find itself unable to fully realize amounts due and owing to it, but that provides no defence to Hills against Magenta’s claim and no claim for Hills against Magenta for Hills’ own consequential losses.
[29] I find, on the evidence at this motion, that Magenta warned Hills that the money it was prepared to lend her was based on the assessed value of the completed home, and that the amount of that money could change, depending on assessment. Therefore, when the assessed value declined by some $28,000, and Magenta cut off further funding to Hills, it did not breach its contract with her, though she necessarily went into arrears with her builders. I also find that, contrary to Hills’ claim, her agreement with Magenta clearly required it of her, as her own duty under the contract, to secure roll-over financing. Indeed, her request of Magenta in November 2012 to help her secure alternate financing, without any assertion by her of their duty to do any such thing, shows that Hills did not at that point consider a roll-over mortgage to be Magenta’s responsibility.
[30] I find that Hills could not reasonably rely on the payout as any guarantee that Magenta would secure for her a roll-over mortgage, and that Hills cannot rely on Magenta’s alleged negligence in not verifying false information provided to it by her agents. She cannot satisfy the test for negligent misrepresentation: Lucien Groulx & Son Planing & Saw Mill Ltd. v. Nipissing Forest Resource Management Inc., 2007 ONCA 801, at paras. 3-4.
[31] But I further find that, even if the claims advanced by Ms. Hills could be said to have any merit, they are barred by operation of the Limitations Act 2002. Sections 4 and 5 of the Limitations Act 2002 state:
Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
(1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
(2) A person with a claim shall be presumed to have known of the matters referred to in clause 1(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
[32] On her submissions, Ms. Hills’ claims arose at the points in time that Magenta advanced her money in July 2011, or when they cut off funding at the end of that year.
[33] Discoverability requires some consideration.
[34] Hills asserts that she only became aware that the fault was Magenta’s in January 2015, when her claim against Rostocki (RBC) was dismissed. The presiding Justice, in comments at that proceeding, at which Magenta was not a party or even present, suggested that the fault might lie with them. That obiter opinion is the new information relied upon by Hills in purporting to start the two-year clock from January 2015.
[35] I do not accept that view. Discoverability of a claim is a fact-based analysis. At issue is whether the prospective plaintiff knows enough facts on which to base an allegation. If so, then the claim is “discovered”: Lawless v. Anderson, 2011 ONCA 102, [2011] O.J. No. 519 (C.A.), at paras. 21-23. Hills always had it within her power to consult a legal professional and present the known facts of the case to that person to determine against whom she should bring a claim. Hills had the wherewithal to consult a lawyer; she plainly had consulted with one on her claims against RBC and Romain, and has again done so on this proceeding. Hills was apprised of the facts on which a reasonable person could have made a determination whether or not to sue Magenta; the off-hand opinion of a jurist about these facts on a case involving different parties is not a “material fact” that altered the date to be assigned for “discovery”: cf. Investment Administration Solution Inc. v. Silver Gold Glatt & Grossman LLP, 2011 ONCA 658, at paras. 14-15.
[36] And Hills had all of the information she needed by the end of 2011. She was aware that her agent Rostocki used a figure of $96,025 for a downpayment on her earlier loan application for the “straw bale” home, and had argued with him that there was no such downpayment; she should have checked the submitted document on the prefabricated home for accuracy on this score. Having discovered in late 2011 that Rostocki and/or Romain had inaccurately upgraded her house plans towards her mortgage application, Hills told Magenta by e-mail of January 14, 2012, “If I had known that the appraised value was not consistent with the approved plans and budget provided to [Rostocki], I would never have proceeded with the construction. I am assuming that you would have taken a similar position.” At that point, Hills had sufficient awareness that Magenta may not have performed its “due diligence” about its loan to include them in any action she intended on these facts. She had access or should have had access to the documentation concerning the mortgage, as Rostocki and Romain were her agents. And yet, more than three years passed before she launched her claim against Magenta.
[37] Rather than consider Magenta as a defendant, or look into that as a possibility, Hills specifically absolved them of responsibility for what had occurred, and repeatedly renewed her mortgage with them. Indeed, Magenta’s repeated requests of Hills and her lawyer through April 2012 to advise whether they would be defendants, all but invited Hills to turn her mind to that issue, and to seek to look into their documentation about the mortgage. On this motion, Hills complains that once she filed her claim against Magenta in 2015, Magenta could not locate for disclosure a document that she considered important to her claim. Indeed, that inability is one of the driving forces behind the Limitations Act; over time prejudice accrues as witnesses and evidence disappear.
[38] Hills presents as neither unintelligent nor incompetent. She worked to secure a loan from Magenta. She agreed to their terms for that loan. She received and used Magenta’s money on her project. She went into default in mid-2015 and has paid nothing since that time. Magenta is entitled to its money back.
[39] For the above Reasons, I find for Magenta on its Claim, and dismiss Hills’ action and Counterclaim.
Costs
[40] As I have explained above, I am of the view that the merits of Magenta’s Claim were overwhelming, while there were many reasons to doubt the viability of Hills’ action and Counterclaim.
[41] Hills’ refusal in July 2015 to consent to consolidation of her action against Magenta with a Counterclaim by Magenta relating to the mortgage default resulted in work for two lawyers for Magenta on two claims. This position was unnecessary, as demonstrated by Hills’ agreement on this motion that both suits be dealt with at one time.
[42] The parties provided me with cost outlines. Magenta’s costs for fees and disbursements range from $9,500 on a partial indemnity scale to some $13,500 for substantial indemnity, to $14,750 for full indemnity. Hills’ own submission is similar, as she includes fees for work performed for her by counsel and by her sister, totalling some $14,400 for what amounts to full indemnity.
[43] It is apparent to me that a heavy costs award will be extremely onerous for Hills, whose straitened circumstances have been explored by her at this hearing.
[44] In these circumstances, taking into account all of the factors referred to above, a fair and balanced costs award on a partial indemnity scale would be $10,000, inclusive of disbursements and HST.
Orders
[45] I make the following Orders:
[46] Judgment is granted to Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership, as against Kristine Hills, for liquidated damages in the sum of $160,467.51 due under a mortgage registered against property owned by Kristine Hills and held by Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership, together with pre-judgment and post-judgment interest thereon at the contractual rate of 9.5% per annum, calculated semi-annually, not in advance, from July 30, 2015 to the date of payment.
[47] Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership are granted leave to issue a Writ of Possession on the mortgaged property legally described as PT LT 23 CON 6 NORTH PLANTAGENET PT 1 & 4 46R5733; ALFRED/PLANTAGENET, and municipally known as 2369 Plantagenet Concession 7, Curran, Ontario, K0B 1C0.
[48] Kristine Hills’ Claim and Counterclaim against Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership are dismissed.
[49] Costs payable by Kristine Hills to Magenta Capital Corporation and Magenta Mortgage Investment Limited Partnership are fixed at $10,000, inclusive of disbursements and HST.
February 12, 2016 ______________________________
A.D. Kurke J.
CITATION: Magenta Capital Corporation v. Hills v. Hills, 2016 ONSC 1105
COURT FILE NOS.: 15-65228, 15-64302
DATE: 20160212
ONTARIO
SUPERIOR COURT OF JUSTICE
Magenta Capital Corporation and
Magenta Mortgage Investment Limited Partnership
– and –
Kristine Hills
AND BETWEEN
Kristine Hills
– and –
Magenta Capital Corporation and
Magenta Mortgage Investment Limited Partnership
REASONS ON SUMMARY JUDGMENT
A. D. KURKE J.
Released: 20160212