Devincenzo v. Moir, 2017 ONSC 5122

CITATION: Devincenzo v. Moir, 2017 ONSC 5122

COURT FILE NO.: 416/16

DATE: 20170908

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Patrick Devincenzo

Plaintiff

– and –

Moir Luft Real Estate Appraisal Services Ltd., Sandy Moir, Reuben Bax and Bax Mortgage Group Inc.

Defendants

COUNSEL:

Ondrej Sabo for the plaintiff

Robert Brush, for the defendants Sandy Moir and Moir Luft Real Estate Appraisal Services Ltd.

Elizabeth Ackman, for the defendants Reuben Bax and Bax Mortgage Group Inc.

HEARD: June 21, 2017

l. c. leitch J.

REASONS FOR JUDGMENT

[1] The moving party defendants, Moir Luft Real Estate Appraisal Services Ltd. and Sandy Moir (the “Moir Defendants”), move for summary judgment. They seek to have the claim of Patrick Devincenzo (the “Plaintiff”) and the cross-claim of their co-defendants, Reuben Bax and Bax Mortgage Group Inc. (the “Bax Defendants”) dismissed. The Moir Defendants, who provided an appraisal to the Plaintiff in 2010, suggest that there is no genuine issue requiring a trial. In particular, they move for summary judgment on two grounds: (1) that the Plaintiff’s claim is barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B [Limitations Act] and (2) that the Plaintiff did not comply with the conditions of the appraisal and the Moir Defendants did not owe a duty of care to the Plaintiff.

[2] The Bax Defendants also move to dismiss the Plaintiff’s claim and the Moir Defendants’ cross-claim on the basis that the Plaintiff’s claim is statute-barred. In the event that the Plaintiff’s claim is not dismissed for being outside the limitation period, the Bax Defendants oppose the portion of the Moir Defendants’ motion for summary judgment that seeks a dismissal of the Plaintiff’s claim and the cross-claim of the Bax Defendants based on the assertion that the Moir Defendants did not owe a duty of care to the Plaintiff.

[3] The Plaintiff resists the motions made by the defendants.

Background facts

[4] The Moir Defendants were retained by the owners of 47253 Lyons Line, RR1 in Belmont, Ontario (the “Property”) to appraise the property. Their appraisal report is dated August 12, 2010 (the “Report”). The purpose of the Report was to estimate what the value of the Property would be after construction and renovations were completed to allow the Property to be used as an equestrian facility. The Report stated that the prospective market value of the Property as of August 4, 2010 was $950,000.

[5] The Report included a number of conditions, which limited the applicable uses of the Report (the “Conditions”). For example, the Report said “[t]he Intended Use is to assist in obtaining permanent, first mortgage financing. It is not reasonable for any person other than to whom this report is addressed to rely upon this appraisal without first obtaining written authorization from the client and the author of this report.” Further the Report said it had been prepared for the “exclusive (and confidential) use” of the recipient and for its specific purpose only. The Report also said that “neither all nor any part of the contents of this report shall be disseminated or otherwise conveyed to the public…without the prior consent and approval of the author as to the purpose, form and content of such dissemination, disclosure, quotation or reference.”

[6] In November 2010, the Bax Defendants advised the Plaintiff of an opportunity to advance a mortgage on the Property and provided the Plaintiff with the Report. The Plaintiff did not request a letter of permission from the Moir Defendants and did not communicate with them in any way. The Plaintiff only read portions of the Report and did not read or inquire about the Conditions. At the time, there was an existing mortgage of $225,000 registered on the Property. According to the Plaintiff based on the information in the Report, the Plaintiff lent $400,000 to the owners of the Property as a second mortgage. In other words, the Plaintiff alleges he relied on the Report in advancing his mortgage. The Plaintiff’s mortgage was registered on title on November 29, 2010.

[7] The Plaintiff’s mortgage was not repaid. This mortgage went into default in March 2011 and the Plaintiff issued Notices of Sale on November 17, 2011 and March 2, 2012. The Plaintiff obtained default judgment against the borrowers in the amount of $442,564.84 on January 8, 2013. The judgment remains unpaid.

[8] In April 2013, the Plaintiff obtained an appraisal report from Valco Consultants Ltd., which valued the Property at $650,000 (the “Valco Appraisal”).

[9] The Plaintiff highlights that the Valco Appraisal referred to water flooding in the basement of the Property, which he submits presumably impacted on the valuation of the Property.

[10] The Plaintiff obtained possession of the Property on July 31, 2013. In August 2013, the Plaintiff began making payments on the first mortgage and incurred other expenses related to the maintenance of the Property.

[11] In August 2013, the Plaintiff began to make efforts to sell the Property. He listed the Property for $679,900 on an “as is” basis without undertaking any repairs. He received one offer of $534,900. He later listed the Property for $575,000 on December 20, 2013. The Property did not sell.

[12] In September 2014, the Plaintiff decided to undertake repairs to the Property. He started the repairs in December 2014, spending in excess of $100,000. The Property sold in 2015 for $618,000.

[13] The Plaintiff commenced this action on February 10, 2016 seeking damages for negligence arising out of losses he alleges he sustained as a result of his reliance on the Report. The Plaintiff alleges he has suffered $700,000 in damages.

Summary judgment

[14] The main issue on a motion for summary judgment is whether there is a genuine issue requiring a trial with respect to a claim (Rules of Civil Procedure, R.R.O. 1990, Reg. 194, s. 20.04(2)). There will be no genuine issue for trial when the summary judgment process (1) allows the judge to make necessary findings of fact (2) allows the judge to apply the law to the facts and (3) is a proportionate, more expeditious, and less expensive means to achieve a just result (Hryniak v. Mauldin, 2014 SCC 7 at paras. 4, 49).

The issues on these motions

[15] 1. Is there a genuine issue requiring a trial in relation to the issue of whether the Plaintiff is barred by the Limitations Act from pursuing the claim against the defendants?

2. Is there a genuine issue requiring a trial in relation to the issue of whether the Moir Defendants owe a duty of care to the Plaintiff considering the existence of the Conditions in the Report?

The limitation issue

[16] The Plaintiff is barred from making a claim if he discovered the claim prior to February 10, 2014 (Limitations Act, s. 4). The date of discovery is the earlier of the date that he either knew, or that he should have known, that he had suffered losses; that the losses were caused or contributed to by an act of the defendants; and that, having regard to the nature of the loss, a proceeding would be an appropriate means to seek to remedy it (Limitations Act, s. 5).

[17] The Plaintiff takes the position that the limitation period did not commence until 2015, based on two grounds: (1) that the claim was not discovered until 2015 and (2) that even if the claim was discovered before then it was not until 2015 that a proceeding was the appropriate method of resolving the claim.

[18] The Plaintiff deposed in his affidavit filed in response to these motions that after he received the Valco Appraisal he “was in contact with” his cousin, who he “came to understand had dealings with Mr. Bax, the other defendant in these proceedings, and had been loaning money to the mortgagors and in fact, had been in some type of business with them”; that his cousin “kept reassuring” him there would be no loss because the mortgages were “in the process of refinancing”; that he finally gave up on the “reassurances from his cousin” and “when the Property did not sell” he thought he could “recoup” his investment by undertaking repairs; and that “it was only in late 2015”, after he had “fixed the premises up for sale” did he “realize” he “could not get” his “money out”. The Plaintiff emphasizes that he was not cross-examined on his affidavit.

[19] The Plaintiff’s position as summarized in paras. 36–38 of his factum is that the Valco Appraisal “did not signal to him that he would have a loss, only that he was surprised at the disparity between [the two appraised values]”; that the Plaintiff took note of the disparity, but also of the fact that there appeared to be significant disparity in the condition of the Property between the two appraisals; and that the Plaintiff believed “he had another avenue for recovery for his loss by, if necessary, repairing and restoring the premises, and selling it accordingly” and “it was only when he realized that avenue was not available did he realize his loss”.

[20] The Plaintiff relies on Forestall v. Carroll, 2011 ONSC 410 and Fennell v. Deol, 2016 ONCA 249. In Forestall, the court held the injury to be analyzed for the purpose of the Limitations Act was not the injury arising from the car accident, but rather the injury arising from the fact that the plaintiff could not recover damages from the other party’s insurer. In Fennell, the Court of Appeal held the date of discovery was not the date of the accident but the date that the plaintiff realized the injuries were serious and permanent.

[21] The Plaintiff submits in the alternative, that even if the appraisal and offers received in 2013 did constitute a prima facie discovery of the claim, making a claim was not appropriate at the time as required by s. 5(1)(a)(iv) of the Limitations Act. The Plaintiff relies on a number of cases, including Presidential MSH Corporation v. Marr Foster & Co. LL, 2017 ONCA 325, to argue that a proceeding was not appropriate in 2013.

[22] In Presidential, the Ontario Court of Appeal reviewed a number of cases relied on by the Plaintiff (which included Brown v. Baum, 2016 ONCA 325 and Chelli-Greco v. Rizk, 2016 ONCA 489) to determine when a proceeding is not appropriate. The Court held that a proceeding is not appropriate in two circumstances. First, “resort to legal action may be ‘inappropriate’ in cases where the plaintiff is relying on the superior knowledge and expertise of the defendant, which often, although not exclusively, occurs in a professional relationship” (Presidential at para. 26). The second category is when “a plaintiff’s pursuit of other processes [has] the potential to resolve the dispute between the parties and eliminate the plaintiff’s loss” (Presidential at para. 28).

[23] The Plaintiff submits that legal action was not appropriate when he received the 2013 Valco Appraisal because he believed that once he repaired the Property it could be sold for an amount which exceeded the amount due on the first mortgage and the amount due on his judgment and it was only after he made the repairs and the Property was sold for less than the value in the Report did he discover the action against the defendants.

[24] In considering the position of the Plaintiff, I begin by noting that I agree with the position of the moving parties that the affidavit of the Plaintiff filed in response to this motion is a self-serving affidavit containing a bold denial and it cannot create a genuine issue requiring a trial. It is necessary to consider all of the evidence presented on these motions. Having done so, I conclude that the limitation period expired at least by the end of 2013.

[25] By April 2013, the Plaintiff knew the Valco Appraisal valued the Property at significantly less than the Report.

[26] It is clear from his examination for discovery that the Plaintiff believed that the Moir Defendants had “done something wrong” after he received the Valco Appraisal:

2726. MR. BRUSH: Q. This appraisal was done in April 2013. Correct? You have to say yes for the record.

A. Yes.

2727. Q. And that was more than two-and-a-half years after…

MR. LEDROIT: Whatever. We can…

2728. MR. BRUSH: Q. … the date of Mr. Moir’s report. Correct?

A. Yes.

2729. Q. And the appraisal, the appraised value there was $650,000.00. Correct?

A. Yes.

2730. Q. Were you surprised by that?

A. Yes.

2731. Q. Why?

A. Because I had received an appraisal for 950 three years prior to that.

2732. Q. Did it cause you to think that the first appraisal, Mr. Moir’s appraisal, was wrong?

A. Yes.

2733. Q. Did it cause…

A. Wrong or inflated.

2734. Q. So…

A. Inflated.

2735. Q. So what do you mean by inflated, that he intentionally inflated it?

A. I didn’t know what to think. I just thought, well, how, you know, how could there be a $300,000.00 difference in three years. So, I was…

2736. Q. So, what…

A. … a bit, I was a bit concerned there, it was a lot, there, there was a big difference between what I thought the property was worth and what a separate appraisal company said it…

2737. Q. Yeah.

A. … was worth. So…

2738. Q. So, so was it your conclusion then that, I want to understand inflated, that either he had been negligent, or he had intentionally inflated it?

A. I didn’t know whether he was negligent or whether he intentionally… I didn’t, I don’t know.

2739. Q. But either way you thought it was wrong and he’d…

A. It was…

2740. Q. … done something wrong.

A. Yeah, I, yeah, it was just too much of a difference. If it was a $50,000.00 difference…

2741. Q. Yeah.

A. … then I wouldn’t have, it wouldn’t have surprised me; not a $300,000.00 difference. That, it’s quite a bit. That’s like 33 percent, you know, or 30 percent, or what it is. It was quite a bit. I just thought it was a lot.

[27] The Court of Appeal in Hamilton (City) v. Metcalfe & Mansfield Corporation, 2012 ONCA 156 at para. 32 stated that for the purpose of negligent misrepresentation claims, “damage is the condition of being worse off than if the defendant had not made the misrepresentation.” As the court made clear at para. 54, “Damage is the loss needed to make out the cause of action. Insofar as it relates to a transaction induced by wrongful conduct, … damage is the condition of being worse off than before … Damages, on the other hand, is the monetary measurement of the extent of that loss”.

[28] It is also important to note that as the court stated in Hamilton at para. 61:

The authorities make it very clear that “some damage” is sufficient for the cause of action to accrue and to start the limitation period. The Supreme Court of Canada set out the discoverability principle in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 18:

Once the plaintiff knows that some damage has occurred and has identified the tortfeasor (see Cartledge v. E. Jopling & Sons Ltd., [1963] A.C. 758 (H.L.), at p. 772 per Lord Reid, and July v. Neal (1986), 1986 CanLII 149 (ON CA), 57 O.R. (2d) 129 (C.A.)), the cause of action has accrued. Neither the extent of damage nor the type of damage need be known. To hold otherwise would inject too much uncertainty into cases where the full scope of the damages may not be ascertained for an extended time beyond the general limitation period.

[29] The Plaintiff knew he was “worse off” when he received the Valco Appraisal in April 2013. Even if it was possible to conclude that the Valco Appraisal did not provide the Plaintiff with enough information to determine that he had suffered some damage, the facts establish that a reasonable person in the Plaintiff’s circumstances (a businessman who had retained counsel in relation to his mortgage investment and then again in relation to his power of sale proceedings against the mortgagors) ought to have known he had sustained a loss by the end of 2013. Multiple sources of information that demonstrated that he had suffered a loss include the following:

• the Valco Appraisal valued the property $300,000 less than what was listed in the Report;

• the Plaintiff had made a loan of $400,000, which was second in priority to another mortgage, and he was aware that there was $220,000 still outstanding on the first mortgage;

• the Plaintiff had obtained a judgment in January 2013 against the mortgagors in the amount of $424,564.84 with an interest rate of 12% a year which had not been satisfied;

• the Plaintiff had spent an additional $11,899 to maintain the Property; and

• the Property was likely worth between $534,900 and $575,000 considering the one offer to purchase the Plaintiff received after listing the Property for sale in August 2013 (at $534,900) and the price at which he listed the Property for sale in December 2013 ($575,000).

[30] This conclusion is consistent with the court’s conclusion in Mortgage Investment v. Szpivak, 2014 ONSC 2261, where the court at para. 25 found the fact that “the plaintiffs agreed to reduce the listing price of the property to $289,000.00 in February 2010 and further reduced the listing price to $279,000.00 in May 2010 ought to have triggered to them the nature of the defendants’ misrepresentation in valuing the property at $430,000.00”. As a result, the Court held that in May 2010, the Plaintiff knew he had suffered damages and found that the plaintiffs had “sufficient knowledge of the damage incurred to trigger commencement of the limitation period” (Szpivak at para. 25).

[31] The Bax Defendants provided a helpful summary of the financial losses that would have been sustained by the Plaintiff at different points of time in 2013 on pages 25–26 of their factum. Even if the Plaintiff sold the Property in April 2013 at the value appraised by Valco, he would have sustained a loss.

[32] As in Szpivck the Valco Appraisal, the amount of the list price of the Property in August 2013 and the fact the list price was lowered further in December 2013, ought to have “triggered” the Plaintiff to know he had incurred damage by the end of 2013.

[33] I note that these circumstances are quite distinct from the circumstances in Forestall where the plaintiff had made a personal injury claim against another party, but on realizing the party was uninsured sought to add another insurer and in Fennell where the plaintiff did not know that his injuries were permanent and serious until his appointment with a specialist. In other words, the discovery that a driver is uninsured and the discovery that injuries are permanent are not analogous to learning that repairs made to a property will not compensate for a decline in market value.

[34] With respect to when the Plaintiff knew or ought to have known that a legal proceeding is appropriate, I agree with the Moir Defendants that the reasons in Presidential are not applicable to these circumstances because the two categories of circumstances where a proceeding may not be the appropriate means to seek a remedy are not applicable to the Plaintiff’s claim. As the Moir Defendants note, this is not a claim arising out of a professional’s wrongdoing where the professional can resolve the issue himself or herself and the Plaintiff cannot engage in an administrative or other time-defined process that would qualify the Plaintiff for the second category in Presidential.

[35] The Plaintiff also relied on the Ontario Court of Appeal’s decision in 407 ETR Concession Co. v. Day, 2016 ONCA 709, which held that a civil action addressing unpaid 407 toll fees only became appropriate when the 407 ETR had reason to believe it would not be paid—in other words when the usually effective licence plate denial process has run its course (para. 39). The Plaintiff argued that similar to 407 ETR, even if there was a discoverable claim against the defendants at the time of the Valco Appraisal, litigation was not at the time “appropriate” given that the plaintiff had not yet taken possession of the property to make the needed repairs. I reject this argument because taking possession of property to make repairs to hopefully avoid a loss is not equivalent to the licence plate denial process in 407 ETR. Such an approach does not provide a definitive and easily ascertainable “end” so as to determine when a limitation period will commence.

[36] Additionally, in a case cited by the Plaintiff, Perell J. noted that “there must be a juridical reason for the person to wait, i.e. there must be an explanation rooted in law as to why commencing a proceeding was not yet appropriate” (see Pepper v. Sanmina-Sci Systems (Canada) Inc., 2017 ONSC 1516 at para. 65). The Plaintiff’s suggestion that completing renovations in the hopes of selling at a higher price is sufficient to assert that making a claim was not appropriate is not supported by the reasoning in Pepper, because such an explanation for the delay is neither “juridical” nor “rooted in law”.

[37] The Plaintiff’s decision to complete repairs/renovations before attempting to sell the Property constitutes mitigation efforts, which cannot suspend the commencement of a limitation period (see Webb v. TD, 2016 ONSC 7153), relying on Unegbu v. WFG Securities of Canada Inc., 2015 ONSC 6408, aff’d 2016 ONCA 501). Mitigating losses cannot stall the commencement of a limitation period, because there is no bar to a plaintiff seeking to limit his or her losses and recovering the lost funds by commencing a legal action at the same time—something the Court said that a reasonable person ought to know and consider (see Unegbu at para. 23; Webb at para. 154).

[38] For these reasons, the summary judgment motions brought by the Moir Defendants and the Bax Defendants are granted based on the Limitations Act.

The duty of care issue

[39] Though I have granted summary judgment to the defendants on the basis that the claim is statute-barred, I will still address the issue of duty of care.

[40] It was not contested that generally a duty of care arises when an opinion is given on an appraisal. However, the Moir Defendants contend that they did not owe the Plaintiff a duty of care because the Conditions listed in the Report restricted any duty owed to third parties. The Moir Defendants rely on a number of cases where a duty of care was not found between appraisers and third parties who had relied on appraisals, because the appraiser had included limiting conditions (Wolverine Tube (Canada) Inc. v. Noranda Metal Industries Ltd., 1995 CarswellOnt 980 (CA); Royal Bank v. Burgoyne, 1996 NSCA 135; Capital Direct Lending Corp. v. Howard & Co. Real Estate Appraisers and Consultants Inc., 2015 ABQB 410.)

[41] The Moir Defendants emphasize an appraiser’s risk of indeterminate liability if the Conditions are ignored.

[42] The Plaintiff has produced an expert opinion of Mr. Ben Lansink, an appraiser (“the Lansink Opinion”). According to Mr. Lansink it is common practice for any appraiser giving an opinion of value on property for mortgage financing purposes to allow anyone, who is intending to lend money to the owner, to rely on the opinion.

[43] The Moir Defendants submit the Lansink Opinion should be disregarded because the Court does not require expert evidence to determine the effect of the Conditions. The position of the Moir Defendants was succinctly stated in para. 30 of their factum: “[an] opinion of a real estate appraiser that third parties intending to lend money should be able to rely on any appraisal prepared for the purpose of financing is irrelevant and unnecessary for the Court to determine [the effect of the Conditions]. It is not any practice in the industry that is in issue but the effect of the limiting conditions”.

[44] The Moir Defendants have provided the expert opinion of Oliver Tighe (the “Tighe Opinion”), for the assistance of the court if I find that such an expert opinion useful. According to the Tighe Opinion, appraisers are concerned about liability to third parties and regularly limit their liability to third parties through conditions in their reports and require third parties to seek permission to use the report, especially in situations involving second mortgages.

[45] The Bax Defendants point to a number of admissions made by Mr. Moir on his examination for discovery, including his admission that he knew the parties who ordered the appraisal were going to use his report to obtain financing and, in such circumstances, he knows his client provides his appraisal report to mortgage lenders and brokers.

[46] The Bax Defendants submit that a real estate appraiser owes a duty of care not only to the client, but also to all other persons to whom the appraisal report may be shown and who might be expected to rely on it citing a case from British Columbia for this contention (see Esselmont v. Harker Appraisals Ltd., 1979 CanLII 355 (BC SC), 1979 CarswellBC 228 (SC)).

[47] The Bax Defendants also rely on my decision in Austin v. Knowles, Lambert, Canning & Associates Ltd., 2002 CarswellOnt 1239 (Sup Ct) to support the submission that a non-reliance limiting condition may not be effective to negate or limit an appraiser’s duty of care when the appraisal requested for the purposes of obtaining financing was reasonably relied on by someone within a known class of people contemplated by the appraiser, a private mortgagee. The Bax Defendants also note that in Austin, I did not find any policy reasons for finding there should not be a duty of care. The Bax Defendants also refer to a similar case with the same outcome from British Columbia (see Grey Mortgage Investment Corp v. Campbell & Pund Ltd., 2002 BCSC 685).

[48] The Plaintiff concedes that it is ultimately for the Court to determine the appropriateness of the Plaintiff’s reliance on the Report. However, the Plaintiff and the Bax Defendants submit that there is at the very least a triable issue as to whether the Plaintiff’s alleged reliance on the Report was reasonable. They submit that summary judgment is not generally appropriate in cases involving conflicting expert reports and cite Frame v. Watt, 2016 ONSC 718, Paul v. Oliver Fuels, 2012 ONSC 978, Hunt v. Toronto (City), 2016 ONSC 2433, and Maracle v. Mascarin, 2016 ONSC 537 for support.

[49] The Plaintiff also points out that there has been no cross-examination of the experts with regard to their opinions, and references the cases of Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 and Muralla v. Qazi, 2017 ONSC 2339 where at para. 8, the Court cited the following passage from Baywood at para. 44:

While summary judgment can operate as a timely, fair, and cost-effective means of adjudicating a civil dispute, it has its limits. Not all civil disputes are amenable to a final adjudication on the merits by summary judgment. In certain cases, adjudication exclusively on a written record poses a risk of substantive unfairness. Great care must be taken “to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial”.

[50] If I had not concluded that the action was statute-barred, considering the evidentiary record on these motions, including Mr. Moir’s admissions and the conflicting expert evidence, I would have agreed with position of the Plaintiff and the Bax Defendants that there is a genuine issue requiring a trial as to whether the Plaintiff is precluded from relying on the Report because the Plaintiff did not comply with the Conditions and did not obtain authorization from the Moir Defendants to do so.

Disposition

[51] For these reasons, the summary judgment motions brought by the Moir Defendants and the Bax Defendants based on the Limitations Act are granted and orders may go dismissing the claims and cross-claims against them. I would expect that the issue of costs can be resolved by counsel however, failing such agreement brief written costs submissions may be made within 30 days.

“Justice L. C. Leitch”

Justice L. C. Leitch

Released: September 8, 2017