Court File and Parties

Court File No.: CV 12-4823 Superior Court of Justice

Plaintiffs: STANBARR SERVICE LIMITED KEMPSTON GROVE CORP 617695 ONTARIO LIMITED EDDY GOLDBERG

v.

Defendants: HANS JORG REICHERT -and- MARIANNE REICHERT

Before: THE HONOURABLE MADAM JUSTICE F. VAN MELLE On: May 12, 2016, at BRAMPTON, Ontario

Appearances: M. Greenglass, Counsel for the Plaintiffs Hans Jorg Reichert, Not Present Marianne Reichert, Not Present

Reasons for Judgment

VAN MELLE J. (Orally):

At the outset of this trial, Ms. Reichert asked for an adjournment. I denied the adjournment because the issues she raised in her adjournment request were before Justice Daley when he granted an adjournment of the trial in February. He made it clear that the trial would proceed with or without counsel and he marked that it would be peremptory against Mr. Reichert.

Apparently, at the exit pre-trial on May 10th, Mr. Reichert had representation but fired the lawyer before he could file a Notice of Appointment. As well, it seems that a motion was returnable on May 10th but was not heard because it had not been confirmed and did not appear on the motions list. In any event, the defendants sought to consolidate three actions and move them to Toronto. For this to occur, the motion for transfer would have had to have been made to the Regional Senior Judge in Toronto.

This trial date, as I said, was peremptory to the defendant. I invited Ms. Reichert to remain for the trial and despite her no longer being a party to the action, said she could participate on her husband’s behalf. She declined and she left.

This lawsuit is a mortgage action. The plaintiffs advanced funds to Mr. Reichert by way of a second mortgage. Ms. Reichert was a defendant to the mortgage as the plaintiffs were claiming possession of the property against her as well. Possession was granted by Justice Bielby pursuant to a summary judgment motion.

This trial concerns the claim against Mr. Reichert on the covenant in the mortgage. The Plaintiffs are the holders of a second mortgage dated February 25, 2011 made between Hans Jorg Reichert, as mortgagor, and Marianne Reichert as spouse of the said mortgagor; and Stanbarr Services Limited, Kempston Grove Corp, 617695 Ontario Inc., and Sam Kishinevsky as mortgagees and registered in the Land Titles Division of York, Number 65 on February 25, 2011 as Instrument Number 1614716 under which the mortgagor mortgaged property in Schomberg for a term of one year securing the sum of $765,000 and interest on the sum at 11 percent per annum. The mortgage was payable interest only in the amount of $7012.50 per month. The first payment date was March 25, 2011 and it was payable monthly thereafter. The municipal address of the property is 13160, 11th Concession Schomberg.

The defence appears to be that Mr. Reichert and his wife were actually the tenants of the property and not the owners, and that the owner was actually the Jorg Trust for the Village. The issue for determination is whether or not Mr. Reichert is personally liable on the mortgage.

At the commencement of trial, Mr. Greenglass submitted a document brief. The document brief had been provided to Mr. Reichert long before trial. I am also satisfied that in March of this year, Mr. Greenglass wrote to Mr. Reichert detailing his witnesses and summarizing each witness’s testimony.

The first witness was Allan Page. Mr. Page is a chartered accountant. He is a trustee in bankruptcy and the president of Schwartz Levitsky Feldman Inc. His firm was appointed in 2013 by Madam Justice Donohue. His mandate was to take possession of the property and sell it. His firm was appointed the receiver of the property.

Mr. Page testified that it took a year to sell the property and then the property was sold for $1,850,000. Although he did not require court approval, he asked for it because Mr. Reichert kept claiming that the property was worth a lot more than $1,850,000. An application for court approval was made, and the approval was granted by Justice Tzimas. Once the property was sold and closed, the receiver’s accountant did a partial distribution and again applied to the court for an approval order. The accounting was approved by Justice Le May. This order was then appealed by Mr. Reichert. Just before the hearing of the appeal, it was abandoned and costs were ordered.

The next witness was Jerry Korman. He is a lawyer. He acts primarily in real estate matters. He was retained to act on the second mortgage by the mortgagees. He testified that this was a private mortgage so the borrowers, the Reicherts, needed to have a separate lawyer and they were represented by Peter Meyrick. Tab 9 of Exhibit 1, the document brief, was the electronic mortgage which was the mortgage which was registered to secure the mortgage debt. It lists Hans Jorg Reichert as the mortgagor.

The mortgage, as I said, secured $765,000 with interest at 11 percent. The mortgage designates Mr. Reichert as mortgagor. The property is registered under Land Titles and the registrar had designated that Mr. Reichert was in fact the owner of the property. This was disclosed as well when Mr. Korman’s office searched the title abstract for the property. Mr. Korman answered these questions in response to the concern that had been raised in the defence that it was actually the trust that was the owner of the property and not Mr. Reichert personally. Mr. Korman pointed to the fact that on the documentation, Mr. Reichert was the chargor and that Mrs. Reichert signed as a spouse who had consented to the transaction. Mr. Korman pointed out that under the Family Law Act the spouse must only sign when the property is a matrimonial home. Accordingly, this corroborated the representation that it was Mr. Reichert who owned the property and that it was in fact occupied as Mr. and Mrs. Reichert’s matrimonial home.

Further, page 2 of the documentation of the actual transfer document indicated that no land transfer tax was payable because the transferors and their child were the beneficiaries of the trust and so was a transfer from the owner to the same parties. As such, no land transfer tax was payable. It would have been payable had it been a bona fide transaction from a transferor to a trust.

As I stated, being a private mortgage they were required to have independent legal advice. They retained Mr. Meyrick who met with them and performed that service. He confirmed on the documentation that he provided to Mr. Korman that Mr. Reichert was the owner and the mortgagor. He also forwarded to Mr. Korman Mr. Reichert’s acknowledgement of the standard charge terms that were incorporated as part of the mortgage registered as a separate document in the Land Titles office.

Paragraph 4 of the standard charge terms warrants that the chargor is the absolute owner of the property and that it is not limited by a trust. Mr. Korman testified that at no time was he notified that any portion of the charge terms were not applicable. As well, Mr. Korman produced and identified the post-dated cheques that had been received in connection with the second mortgage, and all the cheques were drawn on the personal bank account of Mr. and Mrs. Reichert.

Further, there was a letter from Chubb Insurance that showed that the property was owned by the insured, Mr. Reichert. Mr. Korman never received a change or notice regarding the insurance or any indication that Chubb had been told that the Jorg Trust was in fact the insured.

Peter Meyrick testified. He acknowledged that he had in fact been retained by Mr. and Mrs. Reichert to provide them with independent legal advice in connection with this mortgage. He acknowledged that the chargor was Mr. Reichert and that there was never any acknowledgement or direction regarding a trust. He acknowledged that he had never advised Mr. Korman that there was in fact a trust. Mr. Meyrick acknowledged that Mrs. Reichert signed spousal consent to the transfer. He acknowledged as well that when there is a matrimonial home and only one spouse is the owner, the other spouse must consent. On the other hand, if the registered owner was a company or a trust and the property was in fact occupied by tenants, you would not need spousal consent. Mr. Meyrick signed the certificate of independent legal advice and he certified that the Reicherts were the borrowers and the owners of the property. He testified that he got that information from the title search. He acknowledged sending the letter, which was Exhibit 3 to the trial, to Mr. Korman and that there was no reference to the Jorg Trust.

Finally, Eddy Goldberg, also known as Edward Goldberg, one of the plaintiffs in this matter testified. He owned part of the mortgage through his company, Kempston Grove Corporation, and he also took over Mr. Kishinevsky’s portion of the mortgage. He testified that he had never been told about the Jorg Trust and further that he had done a calculation for the February trial date to show how much money was outstanding under the mortgage.

Section 62(2) of The Land Titles Act makes it clear that:

The owner of a freehold or a leasehold land or of a charge being described as a trustee, whether the beneficiary or object of the trust is or is not mentioned, shall be deemed not to be a notice of a trust within the meaning of this section, nor shall such description impose upon any person dealing with the owner the duty of making any inquiry as to the power of the owner in respect of the land or charge or the money secured by the charge, or otherwise, but, subject to the registration of any caution or inhibition, the owner may deal with the land or charge as if such description had not been inserted.

This backs up Mr. Greenglass’s submission that a trustee cannot be a registered owner of a property.

Having due regard to all the evidence before me, and I include the exhibits, I am satisfied that Mr. Reichert is bound by the covenant. He signed the acknowledgement of the standard charge terms and he is bound by all the paragraphs including paragraphs 5 and 8.

Mr. Greenglass gave me at Tab 15 of Exhibit 1, the calculation sheet pertaining to quantum owing. This was calculated as of February 22, 2016 with a per diem subsequent to that date of $260.72. As of today, some 80 days later, the judgment is for $1,293,734.54 plus costs, which I do grant of the $26,000 that is being requested.

Mr. Greenglass made it clear that in his claim for the cost leading up to trial, he was not making any claim for costs that had already been ordered and I am satisfied that that is in fact the case.

The judgment includes the amount due under the mortgage for principle and interest. It also includes amounts that were paid by the second mortgagees to keep the first mortgage in good standing.

I do want to note at this time that throughout these proceedings there have been a number of cost awards made against Mr. and Mrs. Reichert. I am going to detail those because it was another consideration for me when I declined to grant an adjournment today.

My concern was that if I awarded to Mr. Greenglass costs thrown away for preparation up until today, he would never be able to collect that amount. And, so, I detail as follows, and I am going to try to limit it just to the instant case because there are some other cost orders relating to some other cases involving these parties.

1. In March of 2013, Justice Barnes granted an adjournment of the summary judgment motion and ordered the Reicherts to pay costs of $200;
2. On April 18, 2013 when Mr. Justice Bielby granted partial summary judgment, the Reicherts were ordered to pay costs of $4000;
3. On August 19, 2013 when Madam Justice Donohue appointed Schwartz Levitsky Feldman Inc. as court appointed receivers, she ordered the Reicherts to pay costs of $9104.62;
4. On October 2, 2013 the Court of Appeal in dismissing the Reicherts’ appeal from the judgment of Mr. Justice Bielby ordered them to pay costs of $9230.85;
5. On November 12, 2013 the Reicherts brought an emergency motion seeking an injunction to restrain the receiver from carrying out the mandate in taking possession of the mortgage premises and causing same to be sold. Mr. Justice Mackenzie dismissed the motion and ordered Mr. Reichert to pay costs in the sum of $4000;
6. On January 13, 2014, the Court of Appeal fixed the costs of the successful motion to quash the appeal brought from the order of Madam Justice Donohue in appointing the receiver, in the amount of $2,500 in favour of the plaintiffs;
7. In June of 2015, the Ontario Court of Appeal fixed costs of another abandoned appeal from the order of Justice Le May, in the amount of $7804.38.

These costs, of course, are all in addition to the costs that I have ordered for today.

Is there anything else you would like me to add?

MR. GREENGLASS: Well, the final result is you grant a judgment ...

THE COURT: Yes.

MR. GREENGLASS: ...in the amount requested, and you fixed cost...

THE COURT: Plus twenty six thousand.

MR. GREENGLASS: ... I think you have to include that the judgment bears interest at the mortgage rate, which would be on because the costs get added to the mortgage so that....

THE COURT: At the rate of 11 percent?

MR. GREENGLASS: Eleven percent per annum. And just to let you know, even though the mortgage requires the – the compounding of interest, that calculation was done on a simple interest basis, again to the benefit of the Reicherts.

THE COURT: All right. Mr. Greenglass, thank you. The amount of my judgment will bear interest at the mortgage rate of 11 percent per annum.

THE COURT: For oral reasons:

Ms. Reichert’s request for an adjournment is denied. Judgment for plaintiffs in the amount of $1,293,734.54 plus costs all inclusive of $26,000. The award bears interest at the rate of the mortgage at 11 percent per annum. Approval as to form and content dispensed with.

...WHEREUPON THIS MATTER WAS CONCLUDED

Certification

FORM 2

CERTIFICATE OF TRANSCRIPT (SUBSECTION 5(2))

Evidence Act

I, Mary Gabriele-De Rose certify that this document is a true and accurate transcript of the record Stanbarr Services Ltd, et al. v. Hans Jorg Reichert, et al. in the Superior Court of Justice held at 7755 Hurontario Street, Brampton, Ontario taken from Recording 3199_401_20160512_080239_30_VANMEL F.dcr, which has been certified in Form 1.

Date Mary Gabriele-De Rose Authorized Court Transcriptionist ACT # 7181875571 (416) 200-4103