COURT FILE NO.: CV-19-625619-0000
DATE: 2019/10/18
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
rOYAL cANADIAN mortgage iNVESTMENT cORPORATION
Applicant
- and -
MYLES MENDES and MYRA MENDES
Respondents
George Corsianos for the Applicant
Pathik Baxi for the Respondent Myra Mendes
Myles Mendes, self-represented
HEARD: October 8, 15, 2019
PERELL, J.
REASONS FOR DECISION
A. Introduction
[1] The Applicant, Royal Canadian Mortgage Investment Corporation (“Royal Canadian Mtg”), is a mortgagee in the process of completing a power of sale of a property registered to the Respondent, Myra Mendes, and municipally known as 685 Seneca Hill Dr. in the City of Toronto. The co-Respondent, Myles Mendes, who is Myra’s brother, has registered three Instruments against the title of the property. Royal Canadian Mtg’s mortgage went into default, and it exercised its power of sale. Neither Myles nor Myra exercised a right to redeem in the mortgage power of sale proceeding, and Royal Canadian Mtg. signed an agreement to sell the property to Eduardo Chen. The purchaser, Eduardo Chen, requisitioned the removal of the Instruments registered by Myles.
[2] In its Application, Royal Canadian Mtg seeks the removal of the three registered Instruments in order to complete the sale of the property. It also seeks an order authorizing the net proceeds from a mortgage power of sale to be paid into court.
[3] For the reasons that follow, I adjourn the Application until after the sale closes. Before the completion of the sale, the court does not have the jurisdiction to vacate the registered Instruments.
B. Factual Background
[4] On February 27, 2017, as security for a mortgage loan from Royal Canadian Mtg, Myra granted a second mortgage on the property. The mortgage was registered as Instrument No. AT4495770 in the Land Registry Office for the Land Titles Division of Toronto (No. 80). The mortgage secures the sum of $280,000 with interest at the rate of 12% per annum. The mortgage provides for monthly payments of interest only of $2,800.
[5] At no time has Royal Canadian Mtg had any notice that Myles was claiming an ownership interest in the Seneca Hill Dr. Property.
[6] In January 2019, the parties disputed who owned the Seneca Hill Dr. property. Myles registered a Caution and a Notice pursuant to s. 71 of the Land Titles Act,[^1] against the title of the property. Myles claimed $492,000 and an interest in the Seneca Hill Dr. property. Myra’s response was that Myles owed her $500,000 in repayment of loans. She also claimed that he had slandered the title to the property.
[7] Myles says that he purchased the property as a home for his parents and his sister. He says that he transferred the title to his sister without conveying his beneficial ownership in the property but in order for him to purchase a property of his own outside Toronto. He says that he continued to pay the mortgage and the realty taxes on the property in the years that followed, and that his family lived rent-free until his recent dispute with his sister, Myra. Myra’s version is that Myles’ interest in the property was purchased by her many years ago by a series of mortgage loans on the Seneca Hill Dr. property. She says the proceeds of the mortgages were used, in part, to pay Myles for his equity in the property and, in part, the proceeds were loans she made to Myles. What Myles says were mortgage payments to upkeep the property, Myra says were repayments of the money she lent him.
[8] The siblings, represented by lawyers, meet to negotiate a settlement, but when that effort failed, Myra sued Myles. She issued a Notice of Action. He plans by way of a counterclaim in Myra’s action to sue her for a constructive trust interest in the Seneca Hill Dr. property and for payment of decades of occupation rent.
[9] In March 2019, Myles brought a motion for a Certificate of Pending Litigation and Myra brought a motion for a court supervised sale of the property with the proceeds of sale to be paid into court pending the resolution of her claim and Myles’ counterclaim. Both motions were returnable on March 13, 2019.
[10] The parties and their respective lawyers met at the courthouse on March 13, 2019 and rather than argue the motions, they spent several hours negotiating a resolution that would see Myra consent to Myles’ motion for a Certificate of Pending litigation and he consent to her motion for a court supervised sale of the property.
[11] On March 13, 2019 – on consent – Master Short made an Order granting leave to Myles to issue a Certificate of Pending Litigation. On March 13, 2019, - on consent – Master Short made an Order permitting Myra to list the Seneca Hill Dr. property for sale on a multiple listing service at an initial sale price of $1.2 million. Master Short’s Order, among other things, provided that no offer shall be accepted unless both parties accept the offer or the court approves the sale.
[12] On March 14, 2019, Myles registered the order granting leave to obtain a Certificate of Pending Litigation, being Instrument No. AT5094578 against the Seneca Hill Dr. Property. On March 15, 2019, Myles registered the Certificate of Pending Litigation, being Instrument No. AT5095131 against the Seneca Hill Dr. Property.
[13] Myra retained a real estate agent, but there is a dispute between the parties about that retainer and about the agent’s diligence, or lack of it, in marketing the property. It is not necessary to provide the details of this dispute. Suffice it to say, Myles seems to have been very unsatisfied with the sale process, and he was particularly unsatisfied because he believed that Myra was controlling the marketing and apparently controlling it poorly or not to Myles’ liking. He was unhappy with the Consent Order granted by Master Short.
[14] On April 15, 2019, Myles served a Notice of Appeal of Master Short’s Consent Order authorizing the court supervised sale of the property. In essence, Myles’ grounds of appeal are that his lawyer did not have instructions to agree to a listing and sale of the property. Myles says that he wanted his motion for a Certificate of Pending Motion and Myra’s motion argued on their merits. He says that he was under duress and browbeaten by his own lawyer into agreeing to the Consent Order, the import of which he did not appreciate or understand.
[15] Myles delivered his Notice of Appeal as a self-represented litigant, which he continues to be.
[16] On April 29, 2019, Myra brought a motion returnable before Master Short for an amendment of the listing price in the Consent Sale Order. Master Short declined to hear Myra’s motion to amend the Consent Sale Order because the original Order was under appeal.
[17] Also, on April 29, 2019, Myles, self-represented, and Myra’s lawyer attended in Civil Practice Court and a timetable was ordered for Myles’ Appeal of Master Short’s Order. Justice Kimmel scheduled the Appeal for May 27, 2019.
[18] Meanwhile, also in April, Myra failed to pay the monthly payment under the second mortgage to Royal Canadian Mortgage Investment Corporation that encumbered the Seneca Hill Dr. property, and no further payments have ever been received despite Royal Canadian Mtg’s demands that the mortgage be brought into good standing.
[19] In May 2019, Myra advised Royal Canadian Mtg that she could no longer make payments under the second mortgage and that she would voluntarily vacate the Seneca Hill Dr. property.
[20] Myles’ Appeal did not proceed on May 27, 2019, and rather the parties attended in Civil Practice Court on May 27, 2019 and again May 31, 2019. On May 31, 2019, the Appeal was rescheduled for September 27, 2019 peremptory for all parties. A timetable was ordered.
[21] On June 3, 2019, Myra signed an acknowledgment that she would vacate the Seneca Hill Dr. property.
[22] On June 10, 2019, Royal Canadian Mtg took possession of the Seneca Hill Dr. property.
[23] On June 14, 2019, Royal Canadian Mtg commenced mortgage power of sale proceedings with respect to the Seneca Hill Dr. property. The notice of power of sale was served on both Myra and Myles.
[24] On June 27, 2019, Royal Canadian Mtg was advised that the first mortgage was in default. The first mortgagee, Bridgewater Bank, demanded full payment of the first mortgage in the amount of $460,113.06 on or before July 2, 2019.
[25] On July 3, 2019, Royal Canadian Mtg paid out the first mortgage and the first mortgage was discharged from the title of the property on July 17, 2019. The Royal Canadian Mtg mortgage is now the first mortgage on the property with a greater indebtedness that combines the debt of the old first mortgage with the debt of the second mortgage.
[26] Neither Myra nor Myles exercised any right to redeem the mortgaged Seneca Hill Dr. property, and on July 23, 2019, Royal Canadian Mtg signed an agreement to sell the property to Eduardo Chen. The purchase price was $895,000.
[27] Mr. Chen’s lawyer delivered a requisition letter that contained the requisitions that on or before closing, Royal Canadian Mtg produce and deliver: (a) production and delivery of an application to delete Instrument No. AT5068314 (the Notice registered on title); (b) production and delivery of a good and valid discharge of the Certificate being Instrument No. AT5094578 (Application for Certificate of Pending Litigation); and (c) production and delivery of a good and valid discharge of the Certificate being Instrument No. AT 5095131 (Certificate Pending Litigation).
[28] On August 20, 2019, there was another attendance in Civil Practice Court, this time initiated by Royal Canadian Mtg. The purpose of the attendance was to schedule an application to vacate the two Certificates of Pending Litigation that Myles had registered. Justice Dow scheduled Royal Canadian’s Mtg’s Application for September 19, 2019. Mr. Chen and Royal Canadian Mtg agreed to extend the closing date.
[29] On September 9, 2019, there was a further attendance in Civil Practice Court. Myles asked Justice Archibald for additional time to deliver responding materials to Royal Canadian Mtg’s Application. Justice Archibald rescheduled the hearing of Royal Canadian Mtg’s Application to September 27, 2019, which was the date scheduled for the Appeal from Master Short’s Order.
[30] The Application and the Appeal were not heard on September 27, 2019 because on September 24, 2019, there was yet another attendance in Civil Practice Court and Justice Archibald made the following file direction:
Mr. Mendes is begging the court for a bit more time. These are serious issues. I have granted him an additional two weeks to respond. Motions to be argued on October 8, 2019 (3 hours) peremptory to Mr. Mendes. Both motions to be heard. All counsel have been advised of this date.
[31] The Application and the Appeal was before me on October 8, 2019. By this time, Myles had not perfected his Appeal from the Order of Master Short. Nor had he filed material to respond to Royal Canadian Mtg’s Application. However, he appeared in court with his materials for the Appeal and for the Application. He had not served the material on Myra or on Royal Canadian Mtg, and he did not bring copies. He requested an adjournment. I instead recessed the motions for several hours to allow him to make copies of the materials, and then, I granted the adjournment until October 15, 2019. Once again, there was an agreed extension to the closing of the power of sale proceeding.
[32] On October 15, 2019, the Appeal and the Application came on for hearing. After reserving judgment, I dismissed Myles’ Appeal.[^2] What follows are my Reasons for Decision in Royal Canadian Mtgs’ Application.
C. Discussion and Analysis
[33] The purpose of Royal Canadian Mtg’s Application is to remove Instruments Nos. AT5068314, AT5094578, and AT5095131 because of a title requisition made by Mr. Chen, the purchaser pursuant to a mortgagee’s power of sale.
[34] In accordance with the Mortgages Act[^3] that governs mortgage power of sale proceedings, Royal Canadian Mtg’s Application to vacate these instruments against the Seneca Hill Dr. Property is unnecessary because of the operation of s. 35 of the Act. Section 35 states:
- Subject to the Land Titles Act and except where an order is made under section 39, a statutory declaration by the mortgagee, or the mortgagee’s solicitor or agent as to default, a statutory declaration proving service, including production of the post office receipt of registration, if any, and a statutory declaration by the mortgagee or the mortgagee’s solicitor that the sale complies with this Part and, where applicable, with Part II, is conclusive evidence of compliance with this Part and, where applicable, with Part II, sufficient to give a good title to the purchaser.
[35] This section enables a mortgagee (or his or her lawyer or agent) to prove by means of a statutory declaration, that a power of sale was properly exercised and to give effect to the power of sale. The concluding words of s. 35 give effect to the power of sale by making the statutory declarations “sufficient to give a good title to the purchaser”. This section forecloses or extinguishes the equities of redemption of those persons who were given notice of the exercise of the power of sale. It does not, however, expunge the registered Instruments; that is not necessary. If the mortgagee forecloses or if the mortgagee exercises a power of sale, then the equities of redemption, if any, of the subsequent encumbrancers, claimants, or owners will be extinguished by operation of law.
[36] I am not aware of any jurisdiction that would empower the court to vacate Instruments Nos. AT5094578 and AT5095131 at the instance of a mortgagee during the process of completing a mortgage power of sale proceeding. Royal Canadian Mtg. relies on the law about vacating a certificate of pending litigation, but that law concerns the parties to a dispute about the ownership of land; i.e., in the immediate case, it concerns whether Myra could have the Certificate of Pending Litigation vacated. Royal Canadian Mtg is not a party to that litigation.
[37] Myles was legally entitled to register the various Instruments that he registered. As a result of his registration of those Instruments, he was given notice of the power of sale proceedings, which provided him with an opportunity to redeem, which he did not exercise.
[38] Royal Canadian Mtg. ought not to have brought this Application, and it ought rather to have responded to Mr. Chen’s requisition letter by advising him that good title would be conveyed pursuant to s. 35 of the Mortgages Act. If Mr. Chen accepted that answer, he could proceed to close the transaction, in which case, Mr. Chen would engage the additional protection of s.36 of the Mortgages Act. Section 36 is a curative provision that states:
- Where a notice has been given in professed compliance with this Part and, where applicable, with Part II, the title of the purchaser is not liable to be impeached on the ground that the provisions of this Part or, where applicable, Part II respecting default and the provisions of this Part respecting notice, have not been complied with, but any person damnified thereby has a remedy against the person exercising the power of sale.
[39] Myles lost his right to redeem, which there is no evidence that he did or could exercise, when Royal Canadian Mtg signed an agreement of purchase and sale with Mr. Chen. Absent exceptional circumstances, once a binding contract of sale has been entered into by a vendor under a power of sale, the mortgagor has lost his right to redeem or sell the property.[^4] However, the extinguishment of the mortgagor’s interest in land will occur pursuant to s. 35 of the Mortgages Act, which, in the immediate case, has yet to occur.
[40] All Royal Canadian Mtg could and did achieve by bringing its Application is to make problems for itself. It unnecessarily compelled itself to argue prematurely or preemptively the legal principles that are associated with the extinguishment of Myles and his sister’s interest in the Seneca Hill Property - before those interests have actually been extinguished.
[41] Similarly, it is premature to order the proceeds of the mortgage power of sale to be paid into court before the sale is completed.
[42] Thus, I am adjourning Royal Canadian Mtg’s Application. The adjournment of the Application is without prejudice to its rights under s. 35 and s. 36 of the Mortgages Act. Once section 35 has become operational, the court may have the power to declare and expunge the Instruments.
[43] I am not seized of this matter. If the Application is not brought back on within 60 days, it shall be deemed withdrawn or abandoned.
D. Conclusion
[44] For the above reasons, I adjourn the Application until after the sale closes.
Perell, J.
Released: October 18, 2019
COURT FILE NO.: CV-19-625619-0000
DATE: 2019/10/18
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
rOYAL cANADIAN mortgage iNVESTMENT cORPORATION
Applicant
- and -
MYLES MENDES and MYRA MENDES
Respondents
REASONS FOR DECISION
PERELL J.
Released: October 18, 2019
[^1]: R.S.O. 1990, c. L.5. [^2]: Mendes v. Mendes, 2019 ONSC * [^3]: R.S.O. 1990, c. M. 40. [^4]: Re Mission Construction Ltd. and Seal Investment Ltd., 1973 CanLII 396 (ON SC), [1973] 2 O.R. 190 (H.C.J.); Toronto Dominion Bank v. Pallett Developments Ltd. (1984), 1984 CanLII 2062 (ON SC), 47 O.R. (2d) 251 (Div. Ct.); 618469 Ontario Ltd. v. Szanto [1990] O.J. No. 2407; Logozzo v. Toronto Dominion Bank (1999), 1999 CanLII 9313 (ON CA), 45 O.R. (3d) 737 (C.A.); Hornstein v. Gardena Properties Inc., [2005] O.J. No. 3302 (S.C.J.), aff’d. 2006 CanLII 23142 (ON CA), [2006] O.J. No. 2757 (C.A.); Stone v. Stewart, [2009] O.J. No. 1674 (S.C.J.); 1175945 Ontario Ltd. v. Michael Wade Construction Co., 2010 ONSC 3732.