Court File and Parties
COURT FILE NO.: CV-19-00620260
DATE: 20210319
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DECO HOMES (RICHMOND HILL) INC. Plaintiff
- and -
ANTON O. SERIKOV and VIKTORIIA NAGIIEVA Defendants
Counsel: Emilio Bisceglia for the Plaintiff. Anton O. Serikov self-represented for himself and the Defendant Viktoriia Nagiieva.
HEARD: March 15, 2021
REASONS FOR DECISION
PERELL, J.
[1] The factual background to this summary judgment motion is a sad story that has frequently been retold in courtrooms across the land with the same tragic ending.
[2] In the commonplace retelling of the story, the plaintiff is a home builder. The defendant purchases a home to be built by the plaintiff. The defendant agrees to pay cash on closing. A year or so passes as the home is built. Shortly before the closing, the defendant goes to the bank to arrange a first mortgage to complete the purchase. Either the defendant overpaid for the property in the first place or during the year or so of construction, the real estate market has crashed or declined. The home is not worth what the defendant agreed to pay for it. The bank, constrained by Bank Act lending limits, will lend only a portion of the cash the defendant needs. The defendant scrambles to find a secondary lender. The defendant is unable to obtain the financing. The defendant fails to close the transaction. The plaintiff resells the property. The resale price is at a price less than the original price. The plaintiff sues the defendant for the difference in the sale prices plus the expenses of carrying the home in its inventory during the time between the abortive sale and the resale. The defendant defends by arguing that the plaintiff has not proven its damages or has failed to mitigate its damages. However, the onus is on the defendant to prove a failure to mitigate. The defendant fails to prove a failure to mitigate. The case is appropriate for a summary judgment. The court grants judgment to the plaintiff.
[3] In the immediate retelling of this sad story:
a. The Plaintiff is Deco Homes (Richmond Hill) Inc. It is a home builder and developer. It developed a residential subdivision project known as Richlands in the Town of Richmond Hill.
b. The Defendants are Anton Serikov and his now estranged spouse Viktoriia Nagiieva. Mr. Serikov has law degrees from law schools in the Ukraine and in the United States. He was called to the bar in Florida. In Ontario, he is a licensed paralegal employed at a personal injury law firm. Ms. Nagiieva has a degree in economics from a Ukrainian university. She is employed in the accounting department of a trucking company.
c. On June 25, 2017, Mr. Serikov signed an agreement of purchase and sale to purchase a home in the Richlands project. More precisely, he purchased an 1850-square foot residential townhouse (model type Stockwell (TH-03), elevation B2) to be built on Lot 278-1. The purchase price was $1,248,380 plus upgrades at a cost of $915.30, which he paid. The initial deposit was $30,000. Three additional $30,000 deposits were due on July 25, 2017, August 24, 2017, and, on September 23, 2017. Closing was scheduled for January 15, 2019.
d. Mr. Serikov paid all the required deposits.
e. On September 14, 2018, Deco Homes notified Mr. Serikov that the closing date was changed to March 12, 2019. It was later changed to March 15, 2019.
f. Relatively shortly before the scheduled closing of the transaction, Mr. Serikov attended to the matter of completing the arrangements for the first mortgage. For those arrangements to be made, he asked Deco Homes to amend the agreement of purchase and sale to add Ms. Nagiieva as a purchaser. On March 13, 2019 Deco Homes agreed and Ms. Nagiieva became a party to the contract.
g. On March 13, 2019, Mr. Serikov’s and Ms. Nagiieva’s conveyancing lawyer advised Deco Homes’ conveyancing lawyer that the first mortgagee had received an appraisal report indicating that the property was worth $300,000 less than the purchase price. Mr. Serikov’s and Ms. Nagiieva’s lawyer asked if Deco Homes would grant a vendor take back mortgage for $300,000.
h. There were negotiations between the parties, and after Deco Homes agreed to take back a $150,000 mortgage, Mr. Serikov and Ms. Nagiieva attempted - without success - to find a third mortgage lender to make up the balance of funds needed to close the transaction.
i. Mr. Serikov and Ms. Nagiieva were unsuccessful in their efforts to raise the closing funds. Deco Homes tendered performance. The transaction failed to close.
j. On May 17, 2019, Deco Homes commenced an action for specific performance with damages in the alternative.
k. On February 15, 2020, Deco Homes advised Mr. Serikov and Ms. Nagiieva that it had elected to re-sell the property. On February 15, 2020, Deco-Homes re-sold the property at a purchase of $980,880.00 (i.e., $268,415.30 less than the original purchase price).
l. Deco Homes moves for a summary judgment of $215,459.46 plus costs. The breakdown of the damages claim is as follows:
Difference in sale prices $268,415.30
Hydro expense $648.78
Water expense $388.61
Gas expense $1,583.30
Property taxes $1,693.57
Snow removal $2,000.00
Grass maintenance $350.00
Interest on CIBC loan of $1,044,235.53 $61,295.20
Subtotal $336,374.76
Deposits paid ($120,915.30)
TOTAL DAMAGES CLAIM $215,459.46
[4] The case at bar is an appropriate case for a summary judgment. There have been numerous summary judgments in straightforward and even quite complex abortive real estate transaction cases.[^1]
[5] No useful purpose is served by reviewing the law of summary judgment motion. Suffice it to say that in each individual case, the motion judge is required to assess whether the attributes of the trial process are necessary to enable him or her to make a fair and just determination[^2] and if a judge is going to decide a matter summarily, then he or she must have confidence that he or she can reach a fair and just determination without a trial; this will be the case when the summary judgment process: (1) allows the judge to make the necessary findings of fact; (2) allows the judge to apply the law to the facts; and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.[^3]
[6] In the immediate case, I am satisfied that the case is appropriate for a summary judgment.
[7] With respect to the issue of mitigation, the onus is on the defendant to prove any failure to mitigate, but the plaintiff must prove his or her calculation of damages. Thus, the plaintiff must adduce evidence of the contract price and of the market price or resale price upon which he or she relies in establishing the loss of bargain and then the onus is on the defendant to show, if he or she can, that if the plaintiff had taken certain reasonable mitigating steps, then the innocent party’s losses would be lower.[^4]
[8] Where it is alleged that the plaintiff has failed to mitigate, the burden of proof is on the defendant, who needs to prove both that the plaintiff has failed to make reasonable efforts to mitigate and that mitigation was possible.[^5]
[9] In assessing the innocent party's efforts at mitigation, the courts are tolerant, and the innocent party need only be reasonable, not perfect; in deciding what is a reasonable way to mitigate the effects of a breach of contract, the innocent party is not to be held to too nice a standard; it need only act reasonably, using what it knows then, without hindsight, and it need not do anything risky.[^6]
[10] In my opinion, it was not a failure to mitigate when Deco Homes failed to change the all-cash transaction to one in which it would agree to take back a mortgage to close the transaction.
[11] The Court of Appeal dealt with a similar situation in Azzarello v. Shawqi,[^7] where the Court held that it was not a failure to mitigate when an innocent vendor refuses the defaulting purchaser’s revised terms to purchase the property at a lower price.[^8] In Azzarello v. Shawqi, Justice Feldman writing for the Court of Appeal stated at paragraphs 37-40:
However, even if the appellant had made an offer to pay 10% less for the property and not be released from his obligation under the agreement of purchase and sale, I would reject the suggestion that the duty to mitigate obliges a vendor to accept an offer from the defaulting purchaser for less than the agreed price and then to have to sue the purchaser for the difference from the original agreed price.
While a vendor may choose to accept such an offer, for example in a declining market, the vendor cannot be obliged to do so.
The duty to mitigate is derived from the proposition that the wronged party cannot recover from the defaulting party for losses that could reasonably have been avoided: S.M. Waddams, The Law of Contracts, 7th ed. (Toronto: Thomson Reuters, 2017), at p. 529. It cannot be reasonable for a vendor to be obliged to reduce the loss it claims from the defaulting party by reselling the property to that party, then suing him or her for the difference. This would offer no financial advantage to the defaulting party as that party would be obliged to pay the same amount, either way. Yet the defaulting party would secure a significant tactical and procedural advantage over the innocent vendor.
The effect of endorsing the proposition advanced by the appellant would be to undermine the sanctity of the bargain by encouraging purchasers to default, particularly in a falling market, and to offer a lower price for the same property, leaving vendors with the risk and expense of recovering the balance of the original contract price in an action. The duty to mitigate does not go that far.
[12] Deco Homes has met the onus of proving its damages save for the interest on the CIBC loan, which I am not satisfied on the balance of probabilities is connected to the subject property.
[13] Mr. Serikov and Ms. Nagiieva have not met the onus of proving that there has been a failure to mitigate. The evidence, such as it is, rather confirms that Deco Homes resold the property at its then current market value and took reasonable efforts to remarket the home.
[14] Accordingly, I grant Deco Homes a judgment of $154,164.26 plus post-judgment interest and costs.
[15] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Deco Homes’ submissions within twenty days of the release of these reasons for decision, followed by Mr. Serikov’s and Ms. Nagiieva’s submissions within a further twenty days.
Perell, J.
Released: March 19, 2021
COURT FILE NO.: CV-19-00620260
DATE: 20210319
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DECO HOMES (RICHMOND HILL) INC. Plaintiff
- and -
ANTON O. SERIKOV and VIKTORIIA NAGIIEVA Defendants
REASONS FOR DECISION
PERELL J.
Released: March 19, 2021
[^1]: For recent examples, see: Malik v. Attia, 2020 ONCA 787, aff’g 2019 ONSC 4395; Country Wide Homes Upper Thornhill Estates v. Ge, 2020 ONCA 400; Malatinszky v. Miri, 2020 ONSC 16; Fortress Carlyle Peter St. Inc. v. Ricki’s Construction and Painting Inc, 2019 ONSC 1507, affd. 2019 ONCA 866; Azzarello v. Shawqi , 2019 ONCA 820; Mohsin v. Empire Communities (Mount Pleasant) Ltd. 2019 ONSC 852; Time Development Group Inc. (In trust) v. Bitton, 2018 ONSC 4384.
[^2]: Hryniak v. Mauldin, 2014 SCC 7 at paras. 51-55; Wise v. Abbott Laboratories, Ltd., 2016 ONSC 7275 at paras. 320-336; Drywall Acoustic Lathing and Insulation Local 675 Pension Fund (Trustees of) v. SNC-Lavalin Group Inc., 2016 ONSC 5784 at paras. 122-131.
[^3]: Hryniak v. Mauldin, 2014 SCC 7 at paras. 49 and 50.
[^4]: Gamoff v. Hu 2018 ONSC 2172; Cuervo-Lorens & Zabek v. Linda L. Carpenter, 2016 ONSC 4661, aff’d 2017 ONCA 109; Main Street Ltd. v. W.B. Sullivan Construction (1978), 1978 1630 (ON CA), 20 O.R. (2d) 401 at para. 78 (C.A.).
[^5]: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51 at paras. 23-25; Miller v. Wang, 2018 ONSC 7668; Asamera; Evans v. Teamsters Local Union No. 31, 2008 SCC 20 at para. 30; Red Deer College v. Michaels, 1975 15 (SCC), [1976] 2 S.C.R. 324.
[^6]: DHMK Properties Inc. v. 2296608 Ontario Inc., 2017 ONSC 2432 at para. 73; Janiak v. Ippolito, 1985 62 (SCC), [1985] 1 S.C.R. 146 at para. 28; Banco De Portugal v. Waterlow & Sons, Ltd., Banco De Portugal v. Waterlow & Sons, Ltd., [1932] AC 452 (H.L.).
[^7]: 2019 ONCA 820.
[^8]: Azzarello v. Shawqi, 2019 ONCA 820 at paras. 39-40; Arista Homes (Kleinburg) Inc. v. Igbinedion, 2019 ONSC 7086; Forest Hill Homes v. Ou, 2019 ONSC 4332 at para. 25; Bang v. Sebastian, 2018 ONSC 6226 at para. 43, aff’d 2019 ONCA 501.```