CITATION: Terziev v. Katebian, 2019 ONSC 939

COURT FILE NOS. 2904/18 and 2905/18

DATE: 020719

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Ivan Terziev and Elena Mechtcheriakova

Plaintiffs

– and –

Morteza Katebian

Defendant

Matthew Stroh, for Hazelton Homes Corporation

Scott Turton, for the plaintiffs

Peter Smiley, for the defendant

Jeffrey Kukla, for Home Trust Company

Heard: February 4, 2019

Bale J.:

REASONS FOR DECISION

[1]

Introduction

This motion is brought by Hazelton Homes Corporation, a non-party. Hazelton requests an order granting it leave to intervene as an added party, under rule 13.01, and an order setting aside the orders made on January 11, 2019, which granted the plaintiffs leave to issue writs of possession, in relation to 11 King High Drive, Richmond Hill, and 133 Boake Trail, Vaughan.

[2]

Background

Title to the properties is held in the name of the defendant. Hazelton alleges that the defendant holds them in trust for Hazelton. The defendant alleges that the trust agreements relied upon by Hazelton are forged. That dispute is the subject of litigation pending in the City of Toronto. A further complication is that the defendant is the subject of an investigation by the Ontario Securities Commission, and the properties are subject to certificates of direction which prohibit any dealings with the property, other than enforcement of mortgages held by the plaintiffs and Home Trust Company. I am advised that a motion will be brought shortly requesting an order that the Oshawa actions be consolidated, or otherwise proceed together with, the litigation pending in Toronto.

3The plaintiffs hold a second mortgage on each of the properties. Those mortgages have been in default since April 2018. Home Trust Company holds the first mortgage on each. Its mortgages have not been paid since May 2018, and have, in the meantime, matured. The plaintiffs’ judgments were obtained on December 7, 2018, and the orders granting them leave to issue writs of possession were made on January 11, 2019.

[4]

Positions of the Parties

Hazelton’s position is that under the trust agreements, it was the responsibility of the defendant to pay the mortgages, and that its principals did not receive notice of these proceedings until they received notices to vacate from the sheriff. Counsel for Hazelton argues that as a result of the trust agreements, Hazelton is a mortgagor, and entitled to bring the mortgages into good standing, pursuant to s. 23 of the Mortgages Act.

5Although the defendant did not provide affidavit evidence for use on this motion, his counsel advises that his position is that Hazelton’s motion should be dismissed, and that the properties should be sold under power of sale. If, as the defendant argues, the assignments were forged, one might wonder why he is so intent on losing the properties.

6The plaintiffs oppose the motion. They argue that Hazelton does not have standing to bring the motion; that there is no defence to the plaintiffs’ claims on the merits; that Hazelton will suffer no irreparable harm if the properties are sold under power of sale; that a stay is a discretionary order, and Hazelton does not come to court with clean hands; that there is no serious issue requiring a trial; and that there is a serious risk of fraudulent conduct on the part of Hazelton that would cause them irreparable harm.

[7]

Analysis

Hazelton argues that because under the terms of the trust agreements, the trusts may be terminated, it is a mortgagor within the meaning of s. 23 of the Mortgages Act. I disagree. According to the parcel register, the properties were conveyed to the defendant under power of sale, and then mortgaged to Home Trust, and to the plaintiffs. While it may be that Hazelton will end up on title if its litigation with the defendant is successful, the terms of the trust do not give it any rights as against the mortgagees.

8There is no basis for an order setting aside the orders granting leave to issue the writs of possession. The evidence filed by the plaintiffs, in support of the motions for leave, suggested that the defendant was in possession of King High, and that Boake Trail was occupied by someone by the name of “Alan Alijanpour”. According to the evidence filed by Hazelton on this motion, King High is occupied by Laila Alizadeh, the principal of Hazelton, and her daughter, and Boake Trail is occupied by her husband. However, even if King High was occupied by Ms. Alizadeh, she is not entitled to an order setting aside the order granting leave, because there is no evidence that she is a tenant (i.e. no evidence that she paid rent in exchange for the right to occupy the property), and no evidence that would support a claim in priority to the plaintiffs. With respect to Boake Trail, it appears from the plaintiffs’ evidence that the person known to them as “Alijanpour” was, in fact, Ms. Alizadeh’s husband, Arash Missaghi. The evidence of the plaintiff Terziev is that this “Alijanpour” knew that the actions had been commenced, and in fact, tried to talk him out of proceeding with them.

9As part of their evidence, the plaintiffs filed copies of media reports detailing prior instances of mortgage fraud committed by Mr. Missaghi. The plaintiff Terziev deposes that these reports, and certain case reports provided to him by his counsel, caused him concern. Counsel for Hazelton argues that this evidence should be struck out because it is hearsay, and scandalous. However, while I agree that the media evidence is not admissible to prove the truth of its contents, it is admissible for the limited purpose of explaining Terziev’s concern with his mortgage security. In addition, the case reports are admissible to the extent that they contain findings by this court of fraudulent conduct on the part of Missaghi. Missaghi did not provide affidavit evidence for use on this motion.

10Based upon these reports, the plaintiffs’ primary concern is that Missaghi, or another corporation controlled by him, will pay out and obtain an assignment of the first mortgages, and wipe out their second mortgages, by making no payment on the first mortgages, selling the properties under power of sale, and then fraudulently claiming that the amount due under the first mortgages meets or exceeds the sale proceeds.

11I do not agree with the plaintiffs that if the properties are sold under power of sale, Hazelton will suffer no irreparable harm because its interest in the properties is monetary only, and will be compensated for by the proceeds of sale to which it will become entitled. A corporation, like an individual, may have non-monetary interests in property, such as in this case (if Ms. Alizadeh’s evidence is to be believed), an interest in providing living accommodation for the corporation’s principals and their families.

12The next question, then, is whether harm will result to the plaintiffs, if enforcement of the writs of possession is stayed, pending a determination of the dispute between Hazelton and the defendant. The plaintiffs, not being parties to that dispute, should not be allowed to suffer any significant harm as a result of it.

13If there had been no trust and Hazelton had taken title to the property in its own name, it would have been entitled to pay the arrears, and obtain a stay under s. 23 of the Mortgages Act. Similarly, if there is a trust, and Hazelton and the defendant were not at odds with one another, one would expect the defendant to apply for a stay. Accordingly, if I grant a stay conditional upon the mortgage arrears being satisfied, no harm will result to the plaintiffs.

14Similarly, since someone is or will be entitled to a stay based upon satisfaction of the arrears, it cannot be said that the possibility of the plaintiffs falling victim to a mortgage fraud is harm caused by the stay.

[15]

Disposition

In the end result, and in the unusual circumstances of this case, there will be an interim order granting Hazelton leave to intervene in these actions, pending disposition of the application relating to the validity of the trust agreement, and enforcement of the writs of possession will be stayed upon the following terms:

(i) that Hazelton pay to the plaintiffs all arrears of principal and interest under the second mortgages;

(ii) that Hazelton keep the second mortgages in good standing;

(iii) that when the second mortgages mature, Hazelton pay the entire principal and interest then due;

(iv) that Hazelton pay to the plaintiffs all costs previously awarded in these actions;

(v) that Hazelton pay to the plaintiffs their costs of this motion, and any costs thrown away as a result of the stay, on a substantial indemnity basis;

(vi) that Hazelton pay all amounts owed to the plaintiffs within 20 days of receiving a statement of account providing particulars of the amounts owed;

(vii) that Hazelton pay to Home Trust Company all arrears of principal and interest owing under the first mortgages as of the date those mortgages matured, and all interest accrued since that date;

(viii) that Hazelton pay to Home Trust Company all interest accruing on the first mortgages on an ongoing monthly basis;

(ix) that Hazelton pay to Home Trust Company all costs previously awarded in its actions to enforce the first mortgages;

(x) that Hazelton pay to Home Trust Company its costs of this motion, on a substantial indemnity basis; and

(xi) that Hazelton pay all amounts owed to Home Trust Company within 20 days of receiving a statement of account providing particulars of the amounts owed.

16In addition, there will be an order prohibiting any further registrations against the title to either of the properties, without further order of the court.

17In the event that there is any difficulty in carrying this order into effect, I may be spoken to. However, no dispute over the amounts payable by Hazelton will serve to extend the deadlines for payment set out above.

“Bale J.”

Released: February 7, 2019

CITATION: Terziev v. Katebian, 2019 ONSC 939

COURT FILE NOS. 2904/18 and 2905/18