COURT FILE NO.: CV-21-00060004-000
DATE: 2022-12-13
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: NEW HAVEN MORTGAGE CORPORATION AND COMMUNITY TRUST COMPANY, Plaintiffs
AND:
EVANGELIA CODINA AND ANGELA CODINA, Defendants
BEFORE: The Honourable Robert B. Reid
COUNSEL: Jennifer Croswell, Counsel, for the Plaintiffs
Defendant Angela Codina personally and as estate trustee of the estate of Evangelia Codina, self-represented
HEARD: July 25, 2022
DECISION ON MOTION
Introduction and preliminary matters:
[1] The plaintiff, as successor chargee, sued the defendants under power of sale because of a default under a charge. Evangelia Codina was chargor and Angela Codina was guarantor. Angela Codina was formerly a lawyer in Ontario prior to her disbarment in 2002.
[2] Evangelia Codina died November 25, 2020. As of January 13, 2022, Angela Codina became the estate trustee for the estate of Evangelia Codina.
[3] The charge was redeemed on April 20, 2022.
[4] By motion, the defendants seek a declaration that the plaintiffs’ possession of the property was illegal. As well, the defendants seek a review and assessment of the funds that they paid to redeem the charge, and a reimbursement of any overpayment.
[5] By responding notice of motion, the plaintiffs seek an order dismissing the defendants’ counterclaim or in the alternative an order for security for costs, an order declaring that references to offers to settle in the affidavit of Angela Codina dated March 16, 2022 are inadmissible, an order prohibiting Angela Codina from making further motions without leave and a declaration that she is a vexatious litigant. An order to continue is sought, as is an order amending the title of proceedings to include alleged aliases of Angela Codina.
[6] There was agreement that an order to continue should be granted and that references to offers to settle are inadmissible. As well, and after submissions, I ordered that the title of proceedings be amended so that the aliases of Angela Codina are included.
[7] Angela Codina indicated that she was not prepared to make submissions on the other relief requested by the plaintiffs. I indicated that it is not the right of a party to decide what aspects of the other party’s motion are to be dealt with in court. That matter is in the discretion of the judge. However, I agreed that this decision on the defendants’ motion could influence whether the defendants continue to pursue the counterclaim and, as a result, it might be premature to deal with the other relief sought by the plaintiffs.
[8] Therefore, the matter of a vexatious litigant declaration, the dismissal of the counterclaim, security for costs and the prohibition of further motions by the defendant are adjourned, to be returned by either side on 10 days notice.
[9] Subsequent to the oral hearing before me on July 25, the Ontario Court of Appeal released its decision in Hume v. 11534599 Canada Corp., reported at 2022 ONCA 575. Since the trial decision in that case was referred to by both parties on the motion, I permitted the filing of brief written submissions by September 16, 2022 as to any impact of the Court of Appeal’s decision on this motion.
Issues to be determined:
[10] Submissions were made by both parties on the following:
a. whether the plaintiffs were entitled to possession of the charged property, and if not, the consequences of wrongful possession;
b. whether the provisions of the Mortgages Act (the “Act”) as to default and notice were complied with by the plaintiffs and if not, the effect of noncompliance on the proceedings; and
c. whether the fees and charges levied by the plaintiffs on redemption were valid and if not, the required amount of any reimbursement.
1. Were the plaintiffs entitled to possession?
[11] The charged property was owned by Evangelia Codina. Angela Codina was the guarantor. The charge went into default on December 1, 2020 and no payments were received from that time prior to the charge being redeemed about 16 months later.
[12] The property had been the shared residence of Evangelia Codina and Angela Codina. No one else lived in the property.
[13] On October 27, 2020, Angela Codina was incarcerated. On November 25, 2020, Evangelia Codina died.
[14] On March 18, 2021, a Notice of Sale was issued in the name of the plaintiffs and served by registered mail in accordance with the Act.
[15] The plaintiffs took possession of the property on April 26, 2021. At that time, no one had been in residence at the property for about five months, since at least November 25, 2020.
[16] Additional Charge Terms to the charge provided in part as follows at para. 16:
Notwithstanding anything herein to the contrary, if default shall happen to be made of or in the payment of the principal amount or the interest payable thereon or any part of either thereof, as provided in this Charge… then and in every case it shall and may be lawful to and for the said Chargee to peaceably and quietly enter into, have, hold, use, occupy, possess and enjoy the land hereby charged….
[17] The defendants allege that the plaintiffs’ possession of the property was illegal because:
a. the plaintiffs did not comply with the three-month default notice required under section 17 of the Act;
b. the plaintiffs did not provide notice to the defendants prior to taking possession of the property contrary to section 33 of the Act;
c. the plaintiffs took possession of the property prior to the 35-day redemption period contrary to section 42 of the Act;
d. the plaintiffs took possession of the property when it was not vacant; and
e. the plaintiffs did not take “peaceable” possession of the property.
[18] Despite the allegations by the defendants, it is clear that contractually, the plaintiffs as chargees were entitled to take possession of vacant property without any order and without notice. This is consistent with the conclusion of the Ontario Court of Appeal in Royal Trust Corp. of Canada v. 880185 Ontario Ltd., 2005 CanLII 13910 (ONCA) at para. 33.
[19] The provisions of s. 17 of the Act are not applicable to the plaintiffs’ ability to take possession. They give the chargor, or person entitled to make such payment, the ability to pay the arrears together with three months interest on the principal or give the chargee at least three months notice in writing of an intention to make such payment (emphasis added). Neither of those events occurred in this case. Section 17 does not require a three-month default notice from the chargee.
[20] Section 32 of the Act states that notice of exercising a power of sale shall not be given until the default has continued for at least 15 days, and the sale shall not be made for at least 35 days after the notice has been given. Neither of those time frames were breached in this case.
[21] Section 33 of the Act deals with the giving of notice of exercising a power of sale. That notice is irrelevant to the taking of possession by the plaintiffs.
[22] In any event, notice by the plaintiffs to the defendants was given by registered mail dated March 18, 2021. It was given in accordance with s-ss. 33(1) and (5) of the Act which state that:
A notice of exercising a power of sale shall be given by personal service or by registered mail addressed to the person to whom it is to be given at the person’s usual or last known place of address, or, where the last known place of address is that shown on the registered instrument under which the person acquired an interest, to such address, or by leaving it at one of such places of address, or, where the mortgage provides for personal service only, by personal service, or, where the mortgage provides a specific address, to such address.
Where a person to be given a notice of exercising a power of sale has died, the notice shall be deemed to have been effectually given if given by registered mail in accordance with subsection (1), and, subject to paragraph 4 of subsection 31 (1), shall be deemed to be effectual notice to all persons who have any interest in the deceased’s estate.
[23] The provisions of s. 42 of the Act relate to power of sale proceedings, and not to the taking of possession. In the same way, paragraph 9 of the Standard Charge Terms, subtitled “Power of Sale” relate to those specific proceedings and not to the taking of possession after default.
[24] The defendants state that the plaintiffs were wrong to take possession of the property when it was not vacant. However, as the defendants themselves point out, there is nothing in the Standard Charge Terms that requires vacancy before taking possession. As such, the issue of how vacancy is defined is not relevant.
[25] It is acknowledged that no one was living in the property at the time possession was taken by the defendants. The property was clearly unoccupied by its owner because Evangelia Codina had died. Angela Codina, as guarantor, had no right to occupation and in any event, she was incarcerated. There is no allegation that anyone else resided at the property. The fact that the personal possessions of the deceased and Angela Codina were still in the premises does not negate the fact that it was unoccupied as distinct from, for example, the provisions of an insurance policy that specifically apply when a property is vacant.
[26] The additional charge terms contemplate that the chargee may “peaceably and quietly enter into” the premises. This is consistent with the implied covenant under s. 7(a)(iv) of the Act given by the chargor that provides, on default, that the chargee shall have quiet possession of the land, free from all encumbrances.
[27] The defendants also assert that the plaintiffs did not act in accordance with clause 10 of the Standard Charge Terms. That clause provides as follows, under the subheading “Quiet Possession”:
Upon default in payment of principal and interest under the Charge or in performance of any of the terms or conditions hereof, the Chargee may enter into and take possession of the land hereby charged and where the Chargee so enters on and takes possession or enters on and takes possession of the land on default as described in paragraph 9 herein the Chargee shall enter into, have, hold, use, occupy, possess and enjoy the land without the let, suit, hindrance, interruption or denial of the Chargor or any other person or persons whomsoever.
[28] The taking of possession by the plaintiffs occurred on April 22, 2021 when the plaintiffs’ agent secured the property by way of changing the locks. Earlier in the day, the agent had attended and spoken to a person who was identified as a friend of the defendants’ family and who had been caring for the property. A cousin of Angela Codina also attended and advised that Angela Codina still resided at the house despite her being incarcerated. The cousin refused to surrender the keys and was told by the agent that she should remove any personal items because later that day, the locks would be changed. Eventually, the contents of the house were moved by the plaintiffs to a storage facility.
[29] Angela Codina asserts that the plaintiffs were guilty of breaking and entering into the premises and that by doing so, they did not take “peaceable” possession of the property.
[30] In Hume, the Ontario Court of Appeal considered the phrase “peaceable possession” and stated, at para. 59:
A review of the limited authorities on the issue suggests that what “peaceable” means depends on the circumstances of the case. At a minimum, taking peaceable possession means taking possession of a property without violence or the threat of violence; in other words, without engaging in behaviour that is contrary to the Criminal Code. Such conduct is self-evidently not peaceable. The meaning of peaceable possession may also depend on whether the property is occupied for residential purposes. In the case of residential properties that are occupied, the requirement that possession be taken peaceably may require something more than possession being taken without violence or the threat of violence. Otherwise, mortgagees could change the locks on a residence while the occupants are temporarily away which, while not involving the actual use or threat of violence, dispossesses the owners or occupants of their habitation and personal possessions without giving them an opportunity to make arrangements to move to another location. While such actions may not be violent, they are likely not peaceable.
[31] In this case, clearly there was no violence or threat of violence. The property had been occupied for residential purposes but at the time was unoccupied as it had been for several months. Given that the owner had died some five months prior, and since no estate representative had been appointed, neither the friend nor the cousin of Ms. Angela Codina had legal authority to oppose the plaintiffs’ taking of possession. There was no information about when Ms. Angela Codina (who in effect, had been a tenant) would be returning. The mere presence of personal effects was insufficient to demonstrate that the property was occupied or that the taking of possession was not peaceable. Arrangements were offered to preserve the defendants’ personal effects and ultimately those items were preserved by way of placement into storage. There was no dispossession of an occupant without the giving of an opportunity to make other arrangements.
[32] I acknowledge that determining whether the taking of possession was done peaceably and quietly is a decision to be made in all the circumstances of the case. Considering the factors that I have listed, I conclude on balance that possession was taken peaceably and quietly and as a result, I conclude that there was no illegality in the taking of possession of the property by the plaintiffs on April 22, 2021.
2. Did the plaintiffs comply with the Mortgages Act?
[33] The defendants submit that the plaintiffs’ possession of the property was not legal on the grounds that the provisions of the Act respecting default and notice had not been complied with.
[34] In my review of the plaintiffs’ entitlement to possession, I noted that the provisions of s. 17 of the Act give the chargor, or person entitled to make such payment, the ability to pay the arrears together with three months interest on the principal or give the chargee at least three months notice in writing of an intention to make such payment. Neither of those events occurred in this case. Section 17 does not require a three-month default notice to be given by the plaintiffs (as chargees) when a charge goes into arrears.
[35] The defendants assert that when the plaintiffs took possession of the property and subsequently removed and stored the household contents, there was a contravention of s. 42(1) of the Act which reads as follows:
Where, pursuant to any condition or proviso contained in a mortgage, there has been made or given a demand or notice either requiring payment of the money secured by the mortgage, or any part thereof, or declaring an intention to proceed under and exercise the power of sale therein contained, no further proceeding and no action either to enforce the mortgage, or with respect to any clause, covenant or provision therein contained, or to the mortgaged property or any part thereof, shall, until after the lapse of the time at or after which, according to such demand or notice, payment of the money is to be made or the power of sale is to be exercised or proceeded under, be commenced or taken until an order permitting the same has been obtained from a judge of the Superior Court of Justice.
[36] That section of the Act is designed to allow anyone entitled to redeem to have the time specified in the notice of sale to do so without proceedings being taken which might hinder or prejudice the right of redemption or increase the cost of redeeming. I consider that the reference to further proceedings and actions refers to legal proceedings. Even if the taking of possession was a proceeding or action within the meaning of the Act, it was not such as would have affected the redemption which, as noted, did not occur until approximately one year later in April 2022.
[37] Finally, as to compliance with the Act, the defendants submit that the statement of claim herein was issued prior to the service of the notice of sale contrary to the provisions of ss. 31 and 42 of the Act. Accepting for the moment that issuing (rather than serving) a statement of claim was a further proceeding or action to enforce the charge and that the scheme of ss. 31 and 42 the Act are designed to give the chargor an opportunity to redeem without having to deal with simultaneous legal proceedings, the defendants do not appear to have been prejudiced in any way. Only when the statement of claim was served did it come to the attention of the defendants. At most, the issuing of the statement of claim prior to the expiry of the notice period under the notice of sale was a technical problem, which the Act allows to be addressed in s. 42 by a court order. I am prepared under these circumstances to make an order nunc pro tunc permitting the statement of claim to be issued in advance of expiry of the notice period under the notice of sale.
[38] Having found, as I have done, that the taking of possession by the plaintiffs was legal, and that there was no violation of s. 17 of the Act, and having validated the issuing of the statement of claim, there is no basis for the defendants’ allegation that the Notice of Sale was void and that any action taken under that notice was improper.
3. Were the fees and charges levied by the plaintiffs on discharge valid?
[39] The defendants seek a determination of whether the plaintiffs are entitled to the fees, costs and charges levied by them.
[40] As a matter of jurisdiction, the plaintiffs note that s. 43(3) of the Act provides that “[a] mortgagee’s costs of and incidental to the exercise of a power of sale … may be assessed by an assessment officer at the instance of any person interested”, and submit that the matter need not be determined by this court.
[41] Although an assessment officer could deal with the costs under s. 43 of the Act, the court does have jurisdiction and since the defendants have raised legal issues including a contravention of s. 8 of the Interest Act[^1], adjudication by this court is the more efficient option.
[42] The defendants challenge the fees, costs, and charges on the following bases:
a. the litigation costs should not have been payable because the plaintiffs did not have legal possession of the property;
b. property management and appraisal fees should not have been required because the plaintiffs did not have legal possession of the property;
c. the three months interest fee provided in the mortgage was contrary to s. 8 of the Interest Act;
d. the NSF/nonpayment charges and administrative fees were unreasonable;
e. the solicitor’s fees and disbursements related to the default were excessive;
f. disbursements for utility and insurance charges were not properly supported;
g. statement fees were not properly payable by the defendants;
h. demand/administration fees and processing fees were not properly payable by the defendants; and
i. discharge fees were duplicated.
[43] Based on the finding noted above that the plaintiffs were not illegally in possession of the property, the defendants’ objection to litigation costs and property management and appraisal fees on that basis is dismissed.
[44] Paragraph five of the Additional Charge Terms to the Charge provides as follows:
If the principal sum, accrued interest thereon and any of the sums which may be due hereunder is not repaid on the Balance Due Date, then the Chargor agrees to pay the Chargee in addition to the amounts required to obtain a discharge, three (3) months interest at the rate of interest chargeable hereunder on the principal amount outstanding on the Balance Due Date.
[45] The defendants allege that the provisions of paragraph five are contrary to s. 8 of the Interest Act which provides as follows:
No fine, penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.
However, case law supports the imposition of the three-month interest provision so long as it is calculated at the rate of interest defined in the mortgage[^2]. In this case, the three-month interest charge was correctly calculated and appropriately added to the defendants’ obligations when the mortgage was discharged.
[46] The plaintiffs added charges for NSF cheques, nonpayment charges and administrative fees. They relied on the Additional Charge Terms under the heading “Fees and Costs” which permit the chargees to levy fees for a variety of items including missed payments, processing fees for changes in the mortgage account file, insurance default fees, default proceedings and administration, as well as maintenance of and security for the property in the chargee’s possession.
[47] The charges appear to be consistent with the contractual terms of the Charge to which the defendants agreed. However, if the charges are not related to a genuine pre-estimate of damages to be incurred by the charge, they may constitute an unenforceable penalty at common law and may mask what is in effect increased interest charged on a mortgage default in violation of s. 8 of the Interest Act.
[48] As set out in the statement for discharge purposes dated September 1, 2021, the plaintiffs charged $500 on eight occasions for administrative fees on the CTC mortgage for a total of $4,000. The plaintiffs provide no rationale for those fees to have been repeated monthly once the mortgage was in default. One administrative fee at $500 could have been reasonable but repeated charges amount to a penalty rather than a pre-calculation of damages and are in violation of s. 8 of the Interest Act.
[49] As set out in the statement for discharge purposes dated February 2, 2022, the plaintiffs charged $250 per month for 10 months as nonpayment fees on the NHMC mortgage. A further $250 per month was charged for 12 months as nonpayment fees on the CTC mortgage. Also included in a group of expenses shown as “unpaid charges” were three further amounts of $250 shown as NSF payment charges. Those items totalled $6,250. No reason was given to support the monthly repetition of the nonpayment fees once the mortgages were in default. The repeated charges amount to a penalty rather than a pre-calculation of damages and are in violation of s. 8 of the Interest Act.
[50] The plaintiffs charged $250 when a statement was requested. There were apparently six such requests by the defendants, and six fees were charged. As well, there was a fee of $339 shown as a CTC statement and execution fee. The common law recognizes that for good business reasons such costs can be estimated in advance and fixed in a contract. The charges made in this case were consistent with the charge terms and not unreasonable.
[51] The defendants submit that they were overcharged for discharge fees, in that statements for discharge purposes dated September 1, 2021 and February 2, 2022 show an anticipated fee of $840 plus a disbursement of $77.62 as compared with the discharge statement of April 1, 2022 which shows an anticipated amount of $1,800 (inclusive of disbursements) for legal fees rendered between March 16 and April 1, 2022. The legal services to be rendered during the period referenced in the April 1 statement were not restricted to discharge fees, but presumably included them. Therefore there was no proven duplication of discharge fees as between the earlier and the later discharge statements.
[52] The defendants challenge charges made by the plaintiffs for administrative, processing and default fees. The discharge statements of September 1, 2021 and February 2, 2022 included a demand/administration fee of $350, a processing fee of $350, and a mortgagees default proceedings fee of $750. There was no evidence of the basis for any administrative or other costs incurred by the plaintiffs to support those fees and the plaintiffs relied entirely on the Standard Charge Terms and the Additional Charge Terms. There was ample evidence of substantial legal fees being charged separately by the plaintiffs as rendered by both their solicitor and litigation counsel as set out below.
[53] In the absence of evidence justifying the administrative, processing and default fees charged in the amount of $1,450, they must be disallowed as a penalty rather than a pre-calculation of damages and are a violation of s. 8 of the Interest Act.
[54] The plaintiffs charged the defendants for legal fees and disbursements. They were entitled to do so in accordance with paragraph 12 of the Additional Charge Terms to which the defendants were contractually bound and which state as follows:
It is agreed that all costs and expenses of the Chargee incurred in endeavouring to collect any money overdue under this Charge, including all legal costs on a solicitor and client basis, whether legal proceedings are instituted or not, shall be added to the principal and be payable forthwith by the Chargor.
[55] Detailed accounts dated between August 3, 2021 and April 20, 2022 were provided for services rendered by litigation counsel Crosswell Law to Blair Rose who was the solicitor for the plaintiffs. The matter was complicated by the several discharge proposals and the lack of clarity created by the false information received from Angela Codina about her capacity to represent the estate of Evangelia Codina. On one occasion, a motion was adjourned because Angela Codina was incarcerated and unable to attend. On another, a Certificate of Pending Litigation (granted ex parte) was set aside when it was determined that she did not have the capacity to deal with the property. She brought an emergency motion in an unsuccessful attempt to amend the order vacating the CPL. On review of the legal accounts, they are not demonstrably excessive and as such are appropriate to have been rendered for payment by the defendants pursuant to the Additional Charge Terms. Likewise, nothing in the legal accounts rendered by Blair Rose relating to the default and subsequent proceedings dated between April 27, 2021 and April 1, 2022, including the amounts charged, appear disproportionate to the work required.
[56] In the affidavit of Blair Rose, sworn June 21, 2022, at paragraphs 66 through 86, he deposes to the detail of disbursements made for property maintenance including insurance, utilities and supervision. In addition, copies of the receipts for disbursements were filed. On review, I am satisfied that all the disbursements charged were appropriate.
Summary:
[57] There will be an Order to Continue, permitting the claim to proceed despite the death of the defendant Evangelia Codina. The title of proceedings will be amended to replace “Evangelia Codina” with “Angela Codina, in her personal capacity and as Trustee of the Estate of Evangelia Codina”.
[58] All references to any Offers to Settle contained in the affidavit of Angela Codina sworn March 16, 2022 are struck.
[59] The Title of Proceedings is amended to include the aliases of Angela Codina as listed in the affidavit of Blair Rose sworn June 21, 2022, being Angie Marie Codina, Angie Maria Codina, Angela Marie Codina, Angela Maria Codina, Angele Marie Codina, Angele Maria Codina, Angelina Marie Codina, Angelina Maria Codina, Angeliki Marie Codina, Angeliki Maria Codina, Angie Marie Kontina, Angie Maria Kontina, Angela Marie Kontina, Angela Maria Kontina, Angele Marie Kontina, Angele Maria Kontina, Angeliki Marie Kontina, Angeliki Maria Kontina, and Angelique Codina.
[60] There will be an order nunc pro tunc validating the issuance of the Statement of Claim herein prior to service of the Notice of Sale.
[61] The defendants’ motion for an order that the plaintiffs were not entitled to possession of the charged property is dismissed.
[62] The defendants’ motion for an order that the provisions of the Mortgages Act were not complied with by the plaintiffs as to default and notice is dismissed.
[63] The defendants’ motion for an order that the fees and charges levied by the plaintiffs on discharge were invalid is dismissed with the exception of disallowing administration, processing, default and nonpayment fees in the amount of $11,700 which is to be reimbursed by the plaintiffs to the defendants within 30 days following any costs order made on this motion.
[64] The balance of the relief claimed in the plaintiffs’ motion including the matter of a vexatious litigant declaration, the dismissal of the counterclaim, security for costs and the prohibition of further motions by the defendants are adjourned, to be returned by either party on 10 days notice.
Costs:
[65] The parties are encouraged to resolve the issue of costs of the motion between themselves. If they are unable to do so, they may submit Bills of Costs and make written submissions, consisting of not more than three pages in length according to the following timetable:
• The defendants are to serve their Bill of Costs and submissions by December 23, 2022;
• The plaintiffs are to serve their Bill of Costs and submissions by January 10, 2023;
• The defendants are to serve their reply submissions, if any, by January 17, 2023;
• All submissions are to be filed with the court and uploaded to CaseLines by January 18, 2023, with a copy to my judicial assistants at St.Catharines.SCJJA@ontario.ca.
[66] If no submissions are received by the court by January 18, 2023 or any agreed extension, the matter of costs will be deemed to have been settled.
Reid J.
Date: December 13, 2022
[^1]: RSC, 1985, c. I-15
[^2]: See for example P.A.R.C.E.L. Inc. v. Acquaviva, 2015 ONCA 331, Elle Mortgage Corporation v. Sihota, 2021 ONSC 1593, and 1539339 Ontario Inc. v. First Source Financial Management Inc., 2020 ONSC 5082.