BARRIE COURT FILE NO.: CV-17-768-00 DATE: 20190228 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
CIBC MORTGAGES INC. Plaintiff – and – ARTHUR ALATCHATCHIAN and MARY FATIMA DE MELO Defendants
Counsel: Christopher Staples, for the Plaintiff Elliott Birnboim, for the Defendant, DeMelo
HEARD: February 26, 2019
REASONS FOR DECISION
VALLEE J.:
Nature of the Motion
[1] The defendant Mary Fatima DeMelo brings a motion for an order that some of the proceeds from the sale of her home in the amount of $488,348.75 be disbursed to her and that a writ of possession in favour of the plaintiff CIBC Mortgages Inc. be suspended for seven days after the release of the proceeds.
Background
[2] The defendant owned a home located at 331 Binns Avenue, Newmarket. It was a matrimonial home. She lived there with her husband. The defendant and her husband also owned another property located at 32 Greenvalley Circle, Stouffville.
[3] The defendant and her husband separated and are engaged in matrimonial litigation. The mortgage on the Binns property went into default. The property was sold. The net proceeds were $779,829.93.
[4] There was an issue with respect to a Bank of Montréal line of credit secured against the Binns property. On November 17, 2017, the Bank of Montréal obtained what the parties refer to as a “freezing order” which states that all of the proceeds of sale from the Binns property were to be held in trust by counsel for CIBC except for funds required to pay out and discharge the first mortgage held by CIBC. The freezing order also states that if a final order has not been made in the Bank of Montréal’s application on or before April 30, 2018, CIBC is authorized and directed to pay the surplus proceeds into court.
[5] The defendant obtained possession of the Greenvalley property and lived there after separation. The husband was ordered to pay the mortgage payments but did not. That mortgage also went into default. CIBC obtained judgment in the amount of $691,347.27. It obtained possession of the property in June, 2018. A construction lien is registered against this property in the amount of $1,692,175.
[6] After it obtained judgment, CIBC filed a writ for the amount of the judgment against the Binns property. When the Binns property was sold, there were three executions against it: two in favour of the Bank of Montréal for $26,137.86 and $237,466.35 respectively and one in favour of the CIBC in the amount of $691,347.21.
[7] The CIBC listed the Greenvalley property for sale at the end of January, 2019. The listing price is $2,700,000. When CIBC took possession of the property, it was under construction. An occupancy permit has not been granted. There are a number of deficiencies.
The Defendant’s Position
[8] The defendant states that CIBC has not complied with its duty of good faith with respect to the Binns and Greenvalley properties. It continues to hold the proceeds from the sale of the Binns property despite the freezing order requiring that the funds be paid into court. Holding the funds in trust is not the same as paying them into court. If they were paid into court, the defendant could bring an application for payment out. The disposition of the funds would no longer be in CIBC’s discretion.
[9] CIBC is exercising its writ regarding judgment on the Greenvalley property while it is holding $520,000 of the defendant’s money. This would have discharged the Greenvalley mortgage. There is ample equity in the Greenvalley property to cover the mortgage. It is listed for $2,700,000. Even if it sold for only $900,000, CIBC would be made whole.
[10] An arrangement was worked out with the Bank of Montréal in 2017 that it would be content if the amounts of its executions were released to the bank.
[11] The defendant states that CIBC is holding double security. The Greenvalley property will easily sell for more than the amount of CIBC’s judgment. Nevertheless, CIBC is holding all of the funds from the sale of the Binns property pursuant to the writ relating to the judgment on the Greenvalley property.
[12] The defendant states that the Greenvalley lien claimant has agreed to a distribution upon the sale of the property such that $184,000 will be paid as lien holdback because that is the portion of the lien that has priority over CIBC’s interest, $692,000 will be paid to CIBC with respect to its judgment arising from the mortgage and that the balance will be held with respect to the lien claim. There is no barrier with respect to CIBC’s releasing any funds from the Binns proceeds. CIBC has full security.
[13] The defendant relies on Armanasco v. Linderwood Holdings Inc., 2016 ONSC 1605 at para 47 where the court states, “The determination of whether the duty of care of the mortgagee exercising the power of sale has been breached is highly contextual and will depend on the facts of the particular case.” The defendant states that while holding full security for its first mortgage, CIBC evicted her from the Greenvalley property. It was already holding proceeds sufficient to cover its mortgage. This is prima facie oppressive and was done in bad faith.
[14] With respect to her request for an order lifting CIBC’s writ, the defendant relies on 16024 Canada Inc. v. Donley Investments Ltd., 2011 ONSC 5199, para 24, in which the court stated, “The court clearly has jurisdiction to lift a writ in circumstances where the principles of equity and fairness apply, and where to not do so will cause prejudice to one or more of the parties.”
[15] The defendant states that CIBC could release to her $488,000 from the Binns proceeds. CIBC would still retain adequate funds to pay out the Bank of Montréal’s writs. Alternatively, CIBC could have taken $150,000 of the Binns proceeds and used it to put the Greenvalley mortgage into good standing. The defendants would have been required to refinance the property but it is worth $2,000,000. CIBC should have done this because it has a duty to act in good faith and in the interests of the mortgagors.
CIBC’s Position
[16] CIBC states that section 27 of the Mortgages Act, R.S.O 1990 c. M.40, sets out how proceeds from a sale pursuant to power of sale proceedings are to be distributed. First, all expenses are to be paid. Second, interest and costs are to be paid. Third, the mortgages are to be paid and discharged. Fourth, subsequent encumbrancers are to be paid. Anyone who files a writ is entitled to share in the proceeds. CIBC has judgment on the debt with respect to the Greenvalley property. It is entitled to a pro rata share in the proceeds from the Binns property because it filed a writ against that property. While the defendant says that CIBC should have paid the proceeds to the sheriff, CIBC was not required to do this. If the funds had been paid to the sheriff, the sheriff would have paid the funds to CIBC.
[17] The defendant essentially states that because CIBC has security with respect to the Greenvalley property, it has no entitlement to the writ with respect to the Binns property. CIBC should withdraw its writ now because it is certain to be paid in the future. There is no obligation to do this. CIBC is a secured creditor. This is incorrect. CIBC can execute against any of the defendants’ assets. The total of the three executions is $957,000 but the proceeds from the Binns sale was $779,000. There would be a shortfall if the executions had been paid out. The bank has not insisted on payout on a pro rata basis because this would be unfair to the defendant. She was the sole owner of the Binns property but owned the Greenvalley property jointly with her husband. If the proceeds from the Binns property were applied to the judgment against the Greenvalley property, the wife would unfairly assume a larger burden of the debt in contrast to her husband.
[18] CIBC states that the defendant seeks to penalize it because it is waiting to sell the Greenvalley property while at the same time holding funds from the proceeds of the Binns sale. CIBC states that it should not have to give up its rights to the proceeds from the Binns sale. The motion brought by the defendant is premature. The Greenvalley property should be sold first. The Greenvalley property has deficiencies. No one can say that the property will sell for $2,700,000. It will have to be sold as is.
[19] CIBC states that it has acted reasonably. It provided two mortgages on two different properties. Both went into default. Both properties had liens registered against them. CIBC had to take proceedings. It did require that the defendant vacate the Greenvalley property because it cannot otherwise sell the property. In previous proceedings, CIBC has agreed to release approximately $50,000 to the defendant from the Binns proceeds. If CIBC was not entitled to its writ regarding the Binns property and something unexpected occurred with respect to the Greenvalley property, the bank would have no further recourse to the proceeds.
[20] With respect to the freezing order, CIBC states that paying the Binns proceeds into court is essentially the same as holding them in trust.
[21] There is no authority for the defendant’s position that CIBC should not be paid out the amount of its writ just because it has an interest in another property.
[22] The sale of the Greenvalley property is necessary to fund the payout of the proceeds to which the Greenvalley lien claimant has agreed. Upon sale of the Greenvalley property, the bank would be paid out in full and its writ can be withdrawn.
Analysis
[23] The defendant is in a very difficult position. She states that she was married for 27 years and has been a stay-at-home mother. She raised three children. The matrimonial litigation is acrimonious. On January 15, 2016, Jarvis J. noted in his order that the husband was found guilty of conspiring to traffic a controlled substance. He was sentenced to 28 months in jail in the United States. The party who liened the Greenvalley property is a friend of the husband. The husband was paying him cash for work that he did. The timing of the registration of that lien is suspicious. The husband was ordered to deposit $417,334, which were proceeds from sale of a condominium, into his solicitors trust account but most of these proceeds were used to fund business inventory purchases. There was no evidence to show that any of that money resulted in revenue to the husband’s company or income to him.
[24] Jarvis J. ordered the husband to pay $12,000 per month for spousal support and to pay the realty taxes and mortgage payments regarding the Greenvalley property, among other things. The husband has obviously not made the mortgage payments because the mortgage went into default.
[25] CIBC was entitled to initiate power of sale proceedings. It obtained judgment. Sadly, it had to insist that the defendant vacate the property so that it can be sold. Regrettably, negotiations were ongoing for some time before the defendant was allowed back into the property to gather up her possessions.
[26] No doubt the defendant’s difficulties would be eased significantly if CIBC was ordered to pay her $488,000 from the proceeds of the Binns sale. With regret, I must conclude that upon obtaining judgment on the mortgage on the Greenvalley property, CIBC was entitled to file a writ. It is entitled to execute that writ against any assets owned by the husband and the defendant. While it may seem unfair, CIBC’s holding the sale proceeds from the Binns property which would partially satisfy its writ does not constitute in bad faith. CIBC lent the money and is entitled to have it repaid. While the Greenvalley property may well sell for more than is owed to CIBC, that cannot be determined now. A secured creditor is not required to take a chance that it will be repaid, even if the probability is high. Accordingly, the defendant’s motion is dismissed.
Costs
[27] CIBC requested costs of $5,651.56 to defend this motion. It had to prepare a responding motion record, a supplementary responding motion record to provide an update with respect to the status of the matter and a factum. In comparison, the defendant requested costs of $7,500 if she was successful.
[28] Ultimately, in fixing an amount for costs, the overriding principles are fairness and reasonableness. See Boucher v. Public Accountants, 71 O.R. (3d) 291.
[29] In my view, a fair, reasonable and proportionate costs award for this motion is $5,651.56, all inclusive, which the defendant shall pay to the plaintiff. These costs shall be payable from the proceeds of the sale of the Greenvalley property, once those proceeds have been received.
Madam Justice M.E. Vallee