COURT FILE NO.: CV-21-87382
DATE: 14/02/2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FISGARD CAPITAL II CORPORATION
Applicant
– and –
BONNIE JEAN MONTGOMERY
Respondent
Spencer Jones for the Applicant
No one appearing for the Respondent
James Butson appearing as a friend of the court
HEARD: February 10, 2022
JUDGMENT ON APPLICATION FOR mortgage remedies
Justice Sally Gomery
[1] Fisgard Capital II Corporation has brought this application as the holder of a second mortgage on property located at 122 Greenhill Lane, in Belleville. The property is owned by Bonnie Jean Montgomery. She borrowed $105,000 from Fisgard in 2020, secured by a mortgage registered against the property in October 2020. The loan was supposed to be repaid in 12 monthly installments. Fisgard alleges that Ms. Montgomery defaulted on the mortgage loan in March 2021 and did not respond to the letters and notices its lawyers subsequently sent to her.
[2] On the application, Fisgard seeks:
(i) an order requiring Ms. Montgomery to deliver vacant possession of the property;
(ii) leave to have a writ of possession issued if Ms. Montgomery fails to deliver up vacant possession of the property;
(iii) an order and direction to the local sheriff to enforce any writ of possession issued;
(iv) an order requiring Ms. Montgomery to provide Fisgard with any leases relating to the property; and
(v) judgment for $138,498.26, representing the balance owed by Ms. Montgomery on Fisgard’s loan to her, plus interest, fees, and legal fees.
[3] Ms. Montgomery did not respond to the application and did not appear at today’s hearing.
[4] For the reasons that follow, I am granting the application in part. Fisgard is entitled to an order for possession of the property, an order requiring Ms. Montgomery to provide it with any leases relating to the property, and judgment for the amounts claimed. On the record before me, it is not entitled to leave to have a writ of possession issued.
Analysis
[5] The standard loan terms in the contract between Fisgard and Ms. Montgomery provide that, if she is in default for at least 15 days, Fisgard may enter on and sell the property on 35 days’ notice to her. Provisions of the Mortgages Act, R.S.O 1990, c. M.40, the Bankruptcy and Insolvency Act, RSC 1985, c. B-3, and the Family Law Act, R.S.O. 1990, c. F-3, establish other notice requirements to protect the interests of the mortgagor, the mortgagor’s spouse, and any secured creditors. Through an affidavit by Victoria Gifford, a law clerk, Fisgard has proved the existence of the loan and the mortgage; the standard loan terms; Ms. Montgomery’s default; and delivery to her all required notices. It therefore contends that it is clearly entitled to the orders sought on the application.
[6] There are two questions I must address:
(1) Can Fisgard obtain the orders sought via an application as opposed to an action?
(2) Is Fisgard entitled to the orders sought on the record before me?
(1) Can Fisgard obtain the orders sought via an application as opposed to an action?
[7] Much of the hearing was devoted to the question of whether it was appropriate for Fisgard to proceed by way of an application as opposed to an action. Fisgard says that there are not any material facts in dispute requiring a trial, and that proceeding by way of an application is accordingly permitted under subr. 14.05(3)(h) of the Rules of Civil Procedure. It relies on Resolute Land Bank Ltd. et al v. Helmut J. Sieber et al, and Resolute Development Inc. v. Juravinski et al., 2010 ONSC 5977. In that case, Justice Ricchetti granted an application for possession. Although the respondents had argued otherwise, he held that the claim could be brought under subr. 14.05(3)(e), which permits an application to be brought for a “declaration of an interest in or charge on land, including the nature and extent of the interest or charge or the boundaries of the land, or the settling of the priority of interests or charges”.
[8] The lawyer acting for the first mortgage holder appeared at the hearing. Mr. Butson recognized that his client had no formal standing on the application but queried whether Fisgard was obliged to proceed by way of action. He raised concerns about a risk that tenants might not receive adequate notice and about whether a mortgagee could use r. 14.05(3) to circumvent the usual process of enforcing mortgage rights under r. 64.04.
[9] Resolute Land Bank supports Fisgard’s position, to a certain extent. It establishes that, notwithstanding r. 64.04, there is no absolute bar to commencing certain types of mortgage claims by way of an application. However, the application in Resolute Land Bank was brought pursuant to a different part of r. 14.05(3) than the provision that Fisgard relies on here. The facts in that case were also distinguishable from those here. Justice Ricchetti found that only the mortgagor would have standing to dispute possession and the amount owed under the mortgage. As it happened, the owner of the property and the mortgagor in Resolute Land Bank were companies controlled by the same person. There was also some urgency justifying an application rather than an action. It was in these circumstances that Justice Ricchetti concluded that there was no basis to require the applicant to proceed by way of an action.
[10] Having noted these differences, I nonetheless see no principled reason why a mortgagee cannot proceed by way of application to obtain an order for possession of the property, judgment on a mortgage loan and other related relief. Rule 64 sets out specific procedural rules for foreclosure actions, sale actions, redemption actions, and mortgage references. It is not a comprehensive procedural code for the full variety of claims that may be made under a mortgage. In particular, it does not mention claims for possession and judgment on a mortgage loan, the claims at issue in this case.
[11] Rule 13.1.01(3) also supports the proposition that a mortgage claim can be made by application and that some mortgage claims are not governed by r. 64. It provides that:
In the case of an originating process, whether it is brought under Rule 64 (Mortgage Actions) or otherwise, that contains a claim relating to a mortgage, including a claim for payment of a mortgage debt or for possession of a mortgaged property, the proceeding shall be commenced in the county that the regional senior judge of a region in which the property is located, in whole or in part, designates within that region for such claims.
[12] This Rule refers to “an originating process” rather than an action, and recognizes that a mortgage claim, specifically the types of claims that Fisgard is making (claim for payment of mortgage debt and possession), may be brought otherwise than under r. 64.
[13] Proceeding by way of an application may make a great deal of sense, in appropriate circumstances:
• Unlike a statement of claim, a notice of application must be supported by a detailed affidavit. This allows a responding mortgagor to understand the evidence in support of the mortgagee’s claim, which puts them in a better position to make an informed decision about whether or not to contest the mortgagee’s claim.
• If the parties do not dispute the material facts giving rise to the claim but simply disagree about the legal consequences that flow from them, they will likely get a hearing more quickly if they proceed by way of application. If there is a dispute about material facts, the respondent can seek a conversion of the application to an action under r. 38.10.
• An application may cost significantly less than an action. This will be to everyone’s advantage since a mortgagor will usually be contractually liable for enforcement costs if the claim succeeds.
[14] I conclude that a mortgagee can proceed by way of application to make certain claims and that, since there are no material facts in dispute in this case, it was appropriate for Fisgard to proceed by way of an application rather than an action.
(2) Is Fisgard entitled to the orders sought on the record before me?
[15] With respect to its claim for possession, Fisgard has complied with the notice requirements in the mortgage loan agreement, the Mortgages Act, the BIA, and the Family Law Act. Ms. Montgomery has had ample notice of its intentions and a reasonable opportunity to seek more time to pay off the loan or to make some other arrangement with Fisgard. She has not done so. Fisgard is therefore entitled to possession of the property.
[16] I likewise see no reason why Fisgard should not obtain judgment, on the application, for the amount owed by Ms. Montgomery on the loan, along with interest and fees. I will return to the question of Fisgard’s legal fees shortly.
[17] Fisgard asks for an order requiring Ms. Montgomery to disclose any leases in respect of the property. This is information that Fisgard will need to ensure that the rights of any tenants are respected while it is in possession and if and when the property is sold to pay her outstanding debts to Fisgard and others. The proposed order is therefore appropriate.
[18] I cannot, however, grant leave for the issuance of a writ of possession. The problem is not r. 64.04 but r. 60.10. It provides as follows:
(1) A writ of possession (Form 60C) may be issued only with leave of the court, obtained on motion without notice or at the time an order entitling a party to possession is made.
(2) The court may grant leave to issue a writ of possession only where it is satisfied that all persons in actual possession of any part of the land have received sufficient notice of the proceeding in which the order was obtained to have enabled them to apply to the court for relief. (…)
[19] Drawing on Jamort Investments Ltd. v. Fitzgerald, 1968 CanLII 371 (ON SC), [1968] 1 O.R. 541 (Master), the authors of Falconbridge on Mortgages, 5th ed. (Toronto, Thomson Reuters, 2021) describe at pt. 22-6 the type of evidence that must be brought to satisfy a court that proper notice has been given pursuant to r. 60.10(2).:
An affidavit must be provided which identifies all parties in possession of the mortgaged property, the nature and tenure of their possession, information relating to the relationship between those in occupation and the mortgagee to allow the court to determine priorities, and evidence that notice of the intended eviction has been given to the person who will be evicted with proof of service. It should also state that the property is not a residential rental property. The mortgagee may not be entitled to possession against the following persons:
(a) prior tenants;
(b) subsequent tenants, if
(i) consented to, or
(ii) there is a non-disturbance agreement.
Once the judgment for possession is obtained written notice must be given to all persons in possession of the property in order to obtain a writ of possession.
[20] Fisgard has not proved that it has given appropriate notice to “all persons in actual possession of any part of the land”. Ms. Gifford’s affidavit is silent on the existence of any person in possession (aside from Ms. Montgomery herself, who accepted service at the property), on the nature and extent of their possession, and on the current use of the property. The affidavit is silent because Fisgard has no idea who else may be in possession of the property. That is why Fisgard seeks an order requiring Ms. Montgomery to provide it with any leases relating to the property.
[21] Fisgard argues that I should not be concerned about notice to tenants who may be on the property, because para. 3 of the proposed judgment limits the way in which the writ could be enforced. The proposed order directs that the sheriff shall not, in enforcing the writ, “interfere with the possession of any tenant presenting a written lease for the Lands”. During oral argument, Fisgard’s counsel suggested that enforcement of a writ could be further limited to remove the requirement that the tenant have a written, as opposed to an oral, lease.
[22] The wording of the proposed order does not make up for the lack of compliance with r. 60.10. A party may be in actual possession of a property without being a tenant. Even if the only persons in possession are tenants, a direction to the sheriff not to interfere with their possession does not amount to notice.
[23] I see no basis for allowing Fisgard to ignore the mandatory language in r. 60.10(2). It requires a party seeking leave for the issuance of a writ of possession to give potentially affected parties an opportunity to apply for relief in the context of the proceeding in which the order for leave was granted. Notice after the fact is not enough.
[24] I return now to the issue of legal fees, which are claimed as a component of the judgment to which Fisgard is entitled on the mortgage. Fisgard seeks recovery of $12,878.90, the actual fees and disbursements it has incurred in enforcing its rights under the mortgage. I have considered whether this amount ought to be reduced to reflect that it has not obtained all of the orders it sought in the application. Having reviewed the costs outline submitted, I conclude that this is unnecessary.
[25] Fisgard’s legal fees and disbursements to date are reasonable. The decision to proceed by way of application was appropriate and has not, in my view, caused Fisgard to incur legal costs that it would not have had to incur had it proceeded by way of an action. It could theoretically have attempted to obtain the information sufficient to give notice under r. 60.10 prior to bringing the application. The record shows, however, that Ms. Montgomery has failed to respond to Fisgard’s attempts to engage her on the issue of the mortgage. There is no reason to assume that she would have volunteered the required information absent court intervention.
Disposition
[26] The application is granted for possession and judgment in favour of Fisgard on the mortgage debt, including the balance owed, interest, fees, and $12,878.90 for legal costs. I am also ordering Ms. Montgomery to provide Fisgard with any leases in respect of the property within thirty days of this judgment. An order for leave for the issuance of a writ of possession is denied, without prejudice to Fisgard’s right to move for this relief in future, if necessary, on a record that complies with r. 60.10(2).
Justice Sally Gomery
Released: February 14, 2022
COURT FILE NO.: CV-21-87382
DATE: 14/02/2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FISGARD CAPITAL II CORPORATION
Applicant
-and-
BONNIE JEAN MONTGOMERY
Respondent
REASONS FOR JUDGMENT
Justice Sally Gomery
Released: February 14, 2022