COURT FILE NOS.: CV-18-600176 CV-18-600122

DATE: 20191022

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SUB-PRIME MORTGAGE CORPORATION, Applicant

AND:

1219076 ONTARIO LIMITED, Respondent

BEFORE: Justice S. Nakatsuru

COUNSEL: Glenn E. Cohen, for the Applicant

Vladimira M. Ivanov, for the Respondent

HEARD: October 18, 2019

ENDORSEMENT

[1] These applications involve two properties: 29 Yeomans Road (“29 Yeomans”) and 335 Oakwood Avenue (“Oakwood”). The mortgages on both have gone into default. 1219076 Ontario Limited (“1219076”) holds the first mortgage on both properties. Sub-Prime Mortgage Corporation (“Sub-Prime”) holds the second mortgage on both properties. Sub-Prime wished to redeem and discharge both mortgages. This was not successful given the dispute about the amounts to be paid.

[2] Sub-Prime initially brought applications that were dismissed by Nishikawa J. on December 4, 2018. At the time, Sub-Prime had asked that the mortgages simply be discharged, and the amounts claimed on the discharge statements be determined later. Sub-Prime appealed the decision. The Ontario Court of Appeal dismissed the appeal but directed Sub-Prime to amend the applications so that the amounts could be properly adjudicated in the Superior Court: Sub-Prime Mortgage Corporation v. 1219076 Ontario Ltd., 2019 ONCA 581.

[3] I am grateful for the cooperation of the parties. At the hearing of the applications, the issues were considerably narrowed. Much of the orders can go on consent. I am left to deal with a few contentious issues.

A. 335 Oakwood Avenue

[4] The parties have agreed that certain amounts and charges found previously on the discharge statements should be dropped or reduced. The consent order will be for a principal, one renewal fee, and interest, in an amount totaling $497,628.58 to October 25, 2019. After that there will be a per diem amount of interest that 1219076 will advise. The parties have also agreed to: a statement fee of $100, legal fees for Marcos Associates of $923, and legal fees for Philip Dias of $2,000.

[5] The only outstanding issue has to do with 1219076’s legal costs in another proceeding. 1219076 has brought a summary judgment motion against the mortgagor for possession of Oakwood. This motion is to be heard December 16, 2019. It seeks the legal costs of this motion as a charge on the mortgage. Sub-Prime objects to this. It submits that these are costs in relation to a separate and independent action and argues that I have no jurisdiction to consider them as a part of this application. Sub-Prime argues that the issue was never before Nishikawa J. or the Court of Appeal and that I too should not consider it.

[6] I find Sub-Prime’s argument unpersuasive.

[7] Under the terms of the first mortgage held by 1219076, 1219076 is entitled to receive all legal fees incurred in the recovery of the possession of the property. While the disputed costs are not on the discharge statements, this is a contractual charge on the property. I am tasked to make a determination of the appropriate charges to be paid in order to discharge the mortgage. Thus, I find it within my jurisdiction to consider. I find it most proper to do so. To not consider this legal fee would not be fair and equitable. I have little doubt that 1219076 will likely be successful in their summary judgment motion. I have little doubt that 1219076 would receive its costs for bringing the proceedings to obtain possession. It would then have been able to recoup these legal costs. Now that the parties have come to an agreement on what must be paid in order to discharge the first mortgage, should Sub-Prime discharge the first mortgage before the date of the summary judgment motion, in the absence any order I may make, 1219076 will not be able to recoup these legal costs. Something they are contractually entitled to.

[8] Another fair solution would have been to adjourn this application to a date after the December 16, 2019 summary judgment motion in order to crystallize the legal costs owing to 1219076. When I raised it at this hearing, Sub-Prime did not urge this alternative solution upon me. I see no necessity in doing so given the circumstances.

[9] I have reviewed the Bill of Costs of 1219076 for the summary judgment motion. First of all, I appreciate that the mortgage terms call for solicitor-client costs to be awarded. That acknowledged, looking at all the appropriate factors, I find costs fixed in the amount $3,000 all-inclusive to be the right amount for the legal costs incurred by 1219076 for the summary judgment motion. As a result, this $3,000 will be an added charge to the amounts already agreed to above.

B. 29 Yeomans Road

[10] Regarding this property, the parties have come to an agreement on several items. The three-month interest charge, the NSF fees, the legal fees of Ross Barristers and the legal fees of Marcos Associates are gone. There will be a discharge statement fee of $750 and legal fees to Philip Dias in the amount of $1,500. The principal and interest have been re-calculated to November 1, 2019, as $738,148.90.

[11] 29 Yeomans has now been sold. The closing date is October 25, 2019. It is my understanding that there will be enough funds available to discharge both first and second mortgages.

[12] The issue in dispute is whether Sub-Prime lawfully tendered to discharge the mortgage on June 6, 2018, and the consequence of that on the interest payments. Mr. Walman, the solicitor and an officer of Sub-Prime, requested a discharge statement from the lawyer for 1219076 and received one on June 6, 2018, in the total amount of $675,937.73. On that same day, Mr. Walman couriered two certified cheques totally $676,067.21 which included per diem interest for one day. On or about June 14, 2018, the cheques were returned along with a letter from counsel for the Respondent stating that 1219076 did not wish to proceed with the transaction. On June 18, 1219076’s lawyer emailed Mr. Walman stating the NSF amount was not correct and that an “official” amended discharge statement was coming that afternoon which it did. Mr. Dias, a director and officer of 1219076, avers that 1219076 did not change its mind about discharging the mortgage but discovered mistakes in the discharge statement and requested the full outstanding amounts owing to be paid out before registering a discharge.

[13] Sub-Prime argues that since it properly tendered on June 6, 2018, 1219076 is not entitled to recover interest accruing or costs incurred thereafter: Falconbridge on Mortgages, 5th Ed. S. 29.60.

[14] 1219076 in response, submits that Sub-Prime did not tender on June 6, 2018. Rather it was Elle Mortgage Corporation. Mr. Walman avers that it was Elle Mortgage Corporation that tendered. The correspondence at the time indicated it was Elle Mortgage Corporation. The evidence does not specifically make a connection between Elle Mortgage Corporation and Sub-Prime. This led Nishikawa J. to conclude there was insufficient evidence to make a finding as to whether lawful tender was made by the proper mortgagee.

[15] While this argument was advanced before Nishikawa J., the Ontario Court of Appeal makes no mention of it. It treated Sub-Prime as the entity that lawfully tendered the amount on the mortgage. Furthermore, the record reveals that 1219076 has been willing to allow Sub-Prime to discharge the mortgage since the involvement of Mr. Walman without distinguishing between Elle Mortgage Corporation and Sub-Prime. Nevertheless, I will say that despite the approach taken by the Ontario Court of Appeal, it is an open question whether Sub-Prime tendered on June 6, 2018 as opposed to Elle Mortgage Corporation. Like Nishikawa J., I too find that the record is less than clear what relationship Elle Mortgage Corporation, Sub-Prime, and Mr. Walman have in relation to each other. That said, I note that Mr. Dias, in his affidavit, treats Sub-Prime as the entity that requested a discharge statement in June and the entity that has since refused to pay the total outstanding amount.

[16] While this is not an insignificant question since Mr. Walman’s affidavit specifically states he was tendering on behalf of Elle Mortgage Corporation and the documentation corroborates this, I find that it is not necessary for me to determine this given my conclusion below.

[17] The parties do not dispute that where an error is made in a discharge statement, the parties are not bound by it. This was the conclusion of the Court of Appeal in this case though they did not foreclose Sub-Prime from arguing the issue before me. They stated:

19. In addition, we are of the view that the respondent was not bound by the errors in its discharge statement with respect to the second property. The appellant was not prejudiced by the correction, and could have paid the updated amount to discharge the mortgage. However, the appellant is at liberty to argue in the Superior Court, as it appears it wants to do, that the failure to accept tender reduces the interest that can be charged or otherwise impacts the amount owingIf the issues of costs cannot be resolved between the parties.

[18] Sub-Prime agues that no mistake was made on the facts here. It submits that the agreed to resolution on this application regarding the inappropriate fees and interest charged on June 6, 2018, results in an amount owing which is less than what was tendered to 1219076. If this argument is accepted, Sub-Prime acknowledges that any interest or fees saved will not benefit Sub-prime but the mortgagor. However, Sub-prime strongly contends that a message needs to be sent by the court in order to deter other mortgagees from attempting to claim such inappropriate interest, fees, penalties, or fines.

[19] I do not accept Sub-Prime’s position. Having looked at the whole of the record, I find that 1219076 did make errors or a mistake in the first discharge statement. It was entitled to not accept the tender and to submit the second discharge statement. I have no reason to reject Mr. Dias’ evidence on this. It was not substantially impeached on cross-examination. The history shows that soon after the first discharge statement, 1219076 communicated that there were mistakes in the statement and soon issued another version. There was not an insignificant monetary difference between the two discharge statements. Put another way, I do not find that 1219076 either outright refused to accept a valid tender or somehow manufactured an excuse to get out of the discharge of the mortgage. This fact distinguishes the case at bar from the authority of Chun Kit Cheung et al. v. Moskowitz Capital Mortgage Funds II Inc., 2018 ONSC 1322 relied upon by Sub-Prime.

[20] The fact that 1219076 has on this application conceded the validity of what Sub-Prime argues to be inappropriate charges and interest, does not change the fact that 1219076 made bona fide errors in the first discharge statement. The result is that they were not bound to accept the tendered cheques. The fact that this application has since determined more accurately what was owing does not fundamentally alter this. The whole purpose of an application such as this is to resolve those disputed amounts.

[21] Furthermore, Sub-Prime has not suffered any prejudice from the failure of 1219076 to provide an accurate initial discharge statement. This lack of prejudice was noted by the Ontario Court of Appeal. There is sufficient equity in the property that both Sub-Prime and 1219076 can be paid what they say is owing under the mortgages. To deny 1219076 their interest would only benefit the mortgagor who is not a party to this proceeding and who has defaulted on the mortgage and has not made any payments for some time. In addition, to deny 1219076 their interest would deny 1219076 the time value of the money. As a result, I conclude that principal and interest to November 1, 2019, to be $738,148.90 should Sub-Prime wish to discharge the first mortgage.

[22] Declarations in accordance with these reasons will go accordingly.

[23] I would urge the parties to come to an agreement on costs. If that is not possible, I will entertain costs submissions. Nothing should be taken from the order in which they are to be provided to me. Further, the Bill of Costs and the submissions should distinguish between what the costs are for the applications before Nishikawa J. and for the hearing before me as the Ontario Court of Appeal has referred both costs decisions to be determined by me. Costs submissions will be limited to four pages not including attachments. 1219076 will have seven days from the date of this decision. Sub-Prime five days thereafter. No reply submissions without leave.

Justice S. Nakatsuru

Released: October 22, 2019