Court File and Parties

COURT FILE NO.: 162/21 DATE: 20210216 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Drew Reid, Plaintiff

– and –

Ganaraska Credit Union Ltd., 2734100 Ontario Inc. o/a Re/Max Professionals North Brokerage, John Alexander, and Peter DeGraff, Defendants

Counsel:

In person (for the Plaintiff) Barry Rubinoff, for Ganaraska Credit Union Ltd. Maria Bursey, for the defendants 2734100 Ontario Inc., John Alexander, and Peter DeGraff

Heard: February 11, 2021

Reasons for Decision

S.T. Bale J.

[1] The plaintiff moved for the following orders:

• that enforcement of Ganaraska Credit Union Ltd.’s mortgage against 1056 Flanagan Trail, Kilworthy, Ontario, be quashed, rescinded, vacated or stayed;
• that his personal possessions at the property be accounted for and delivered to him; and
• that the defendants be held in contempt of a lien registered against the property by Canada Revenue Agency.

[2] Ganaraska opposed the motion in its entirety. Alexander, DeGraff and 2734100 Ontario Inc. took no position with respect to enforcement of the mortgage, but took the position that they had never been in possession of personal property belonging to the plaintiff, and that there was no order of which they could be found in contempt.

[3] I dismissed the motion for the following reasons.

Factual and Procedural Background

[4] On March 17, 2016, a first mortgage between Drew Reid, as mortgagor, and Ganaraska, as mortgagee, securing the sum of $973,000.00 and bearing interest at the rate of bank prime plus 2.20% per year, was registered against the property. The term of the first mortgage was five years and required blended monthly payments of $5,163.97, plus $835.00 per month for property taxes, for a total of $5,998.97.

[5] On the same date, a second mortgage between Reid, as mortgagor, and Ganaraska, as mortgagee, securing the principal sum of $26,653.17 and bearing interest at the rate of 5.99% per year, was registered against the property. The term of the second mortgage was five years and required blended monthly payments of $295.77.

[6] There is a third mortgage for $220,000.00 in favour of 975393 Ontario Inc. which was registered against the property on March 18, 2016, as well as a fourth mortgage for $15,000.00 in favour of Khawar Mian, which was registered against the property on December 15, 2017.

[7] On May 8, 2019, Canada Revenue Agency registered a lien against the property in the amount of $507,121.93. The notice of lien indicates that it is in respect of outstanding GST that is owed by Reid.

[8] Ganaraska received monthly payments under the first mortgage until August 1, 2016 (five in total) at which time it went into default. Ganaraska received monthly payments under the second mortgage until September 1, 2016 (six in total) at which time it also went into default. Both mortgages remain in default.

[9] On April 11, 2017, Ganaraska issued a notice of sale under mortgage in respect of the second mortgage. On June 21, 2017, it issued a statement of claim against Reid seeking, among other things, possession of the property and payment of the outstanding balance due under the second mortgage.

[10] On February 1, 2018, Ganaraska obtained summary judgment against Reid for the amount owed under the second mortgage and for possession and sale of the property. In granting judgment, Wood J. stated, among other things:

Both the defendant’s material and his submissions make it clear that his principle aim in defending this motion has been to prolong the bargaining process with counsel for the plaintiff. His desire is to somehow obtain further time to redeem the mortgage and negotiate a figure for costs well below those to which the standard mortgage clauses entitle the plaintiff. Unfortunately, this process affords him no basis for that relief.

[11] During argument on the summary judgment motion, Reid stated that he expected to have sufficient funds to settle the action, by February 15, 2018. In order to give him an opportunity to do so, Wood J. stayed enforcement of the judgment to that date. Apparently, however, the “expected” funds never materialized.

[12] In further attempts to stop Ganaraska from recovering possession of the property, Reid:

• filed a notice of stay of proceedings with the Farm Debt Mediation Service representing himself to be a farmer (the stay was subsequently lifted);
• appealed the judgment (there is no evidence that the appeal was ever heard);
• moved for an order staying the judgment pending the hearing of the appeal (the motion was dismissed in March 2018); and
• moved a second time for an order staying the judgment pending the hearing of the appeal (the motion was dismissed in June 2018).

[13] In dismissing the first motion for a stay pending appeal, MacFarland J.A. found that there was no serious issue to be tried, that there was no evidence to support a finding that Reid would suffer irreparable harm if the stay were not granted, and that as for balance of convenience, the evidence disclosed that the property was falling into disrepair, and that equity in the property was seriously eroded. In dismissing the second motion for a stay pending appeal, Benotto J. simply noted that no review of the order on the first motion had been sought and that there was no basis to revisit it.

[14] Following the dismissal of the second stay motion in June 2018, Ganaraska obtained possession of the property.

[15] In August 2020, Reid indicated that he intended to refinance the property and that he was satisfied with the discharge statement provided by Ganaraska. He said that his lender was reviewing the statement and would provide an updated commitment and closing date. For whatever reason, the refinancing was never completed.

[16] Ganaraska listed the property for sale on January 25, 2021, for $1,200,000, and subsequently sold the property for $1,361,500, with a closing date of March 5, 2021.

[17] As of January 28, 2021, the total owed to Ganaraska under its mortgages was $1,427,227.31.

Analysis

[18] The stated grounds for the plaintiff’s motion are the following:

• that Ganaraska erroneously proceeded with a “fire sale” of the property “in deliberate Defiance and in Contempt of a duty registered super priority Lien registered by The Canada Revenue Agency on the property”;
• that in relation to the CRA lien, the plaintiff “is in open court before the TAX COURT OF CANADA and The DEPARTMENT OF JUSTICE and the CANADA REVENUE SERVICE in due process”;
• that the CRA lien “precludes and inhibits against any and all enforcement, until a decision is ordered from the Tax Court of Canada and Department of Justice, whereby the actions of the Defendants are consequently disentrancing, prejudicing, grievously violation the Plaintiff’s Legal Rights, and Risk Substantial Irreparable Financial Harm”; and
• that he “has full means by way of financing to fully redeem the property … to close and pay out the REDEMPTION upon the REQUIRED final ruling from the Tax court of Canada.”

[19] Based upon those grounds, the plaintiff argued that the sale of the property should be stayed, pending disposition of his appeal to the Tax Court of Canada. I disagreed, for the following reasons.

[20] First, given the history of this matter, the impugned sale can hardly be said to be a “fire sale”, and there is no evidence to support a claim that the sale is for an undervalue.

[21] Second, despite the plaintiff’s protestations to the contrary, CRA does not claim priority over Ganaraska’s mortgages. The notice of lien provides only that the lien “has priority over all encumbrances or claims registered or attaching to the subject property subsequent to the registration of this notice.” Further, prior to listing the property for sale in January 2021, Ganaraska’s counsel confirmed with CRA by telephone that it was not claiming priority over the Ganaraska mortgages.

[22] Third, even if the CRA lien did have priority over the mortgages, Ganaraska would not be precluded from exercising its power of sale.

[23] Fourth, on this third attempt to stay enforcement of the mortgage, the plaintiff’s case is no stronger than it was on the first two attempts. In fact, it is has no merit, given the subsequent sale of the property.

[24] Subject to a mortgagor’s right to bring a mortgage into good standing or to redeem, pursuant to sections 22 and 23 of the Mortgages Act, a mortgagee acting in good faith and without fraud will not be restrained from a proper exercise of his or her power of sale, except upon tender of the amount outstanding: Armanasco v. Linderwood Holdings Inc., 2016 ONSC 1605, at para. 45. In the present case, the plaintiff has not tendered the amount outstanding, fraud is not alleged, and there is no evidence of bad faith.

[25] In addition, a mortgagor does not have the right to bring a mortgage into good standing or to redeem, where the property has been sold. In this context, a property has been “sold” where an offer to purchase has been accepted: Armanasco, at paras. 51-58. In the present case, the property is subject to an unconditional agreement of purchase and sale.

[26] The plaintiff also argued that that the defendants should be found to be in contempt of court “for wilfully continuing to proceed with and defy, a known registered super priority Lien registered by the Canada Revenue Agency …” Again, I disagree. For a person to be found in contempt, they must have knowingly breached an order requiring that something be, or not be, done. The CRA lien is not such an order.

[27] Finally, the plaintiff asked for an order for an accounting of, and return of, personal property. No such order is required. He received and approved an accounting in August 2020 and has been invited to make arrangements to retrieve the property from Ganaraska’s property managers.

Disposition

[28] For these reasons, I dismissed the plaintiff’s motion.

[29] If the parties are unable to agree on costs, I will consider brief written argument provided that it is delivered to monica.mayer@ontario.ca, no later than March 5, 2021.

“S.T. Bale J.” Released: February 16, 2021