Court File and Parties

COURT FILE NO.: CV-23-00000848-0000 DATE: 2023-10-13 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: CMI HIGH YIELD OPPORTUNITY FUND, Plaintiff AND: Kristiyan TODOROV, and Karen Alexandra PATINO-RAMIREZ, a.k.a. Karen PATINO RAMIREZ, Defendants

BEFORE: Kurz J.

COUNSEL: Cristina Internicola and James Butson, for the Plaintiff William Chapman, for Karen Patino-Ramirez

HEARD: September 21, 2023

Endorsement

[1] This is an urgent motion by the Defendant, Karen Patino-Ramirez to set aside four default judgments and stay the enforcement of those judgments. Three of those judgments are in cases that are not before me and were granted in jurisdictions other than Halton. As those other actions are not before me, I can only deal with this particular case. However, I comment on the applicability of this endorsement to those other proceedings below.

[2] The Defendant, Kristiyan Todorov, did not participate in this motion.

[3] For the reasons that follow, I dismiss this motion other than in regard to the propriety of certain administrative fees charged by the Plaintiff. I set out below the mechanism to resolve that issue.

Background

[4] Ms. Patino-Ramirez is the spouse of her co-Defendant, Kristiyan Todorov. Ms. Patino-Ramirez, along with Mr. Todorov, is the co-owner of two Oakville properties, 3168 Watercliffe Ct. and 446 Willis Dr.

[5] The 3168 Watercliffe Ct., Oakville property is Ms. Patino-Ramirez and Mr. Todorov’s matrimonial home (the “Home”).

[6] Ms. Patino-Ramirez and Mr. Todorov are also directors of a corporation, Real Estate Empires Inc. (“REE”), the owner of a third property, located in Penetanguishene, Ontario (the” Penetanguishene property”). Along with his two parents, Mr. Todorov co-owns a fourth property, a condominium unit in Toronto (the “Toronto condo”). Collectively I refer to the four properties cited above as the “Properties.”

[7] Ms. Patino-Ramirez, Mr. Todorov, REE and Mr. Todorov’s parents (collectively the “Borrowers”) granted mortgages on all of the Properties to either the Plaintiff (“CMI”) or a related corporation, CMI Balanced Mortgaged Fund Corp (“CMIB”). I refer to CMI and CMIH jointly as the “Lenders”.

[8] The Mortgages consist of the following:

a. A $960,000 first mortgage granted by REE to CMIB on the Penetanguishene property. Ms. Patino-Ramirez and Mr. Todorov signed guarantees of REE’s obligations under both that mortgage and the second mortgage on the same property described below.

b. $1,100,000 collateral second mortgages granted to CMI on all of the Properties. The collateral mortgages all secure the same $1,100,000 debt.

[9] The Mortgages went into default, resulting in the Lenders commencing power of sale proceedings which involved the four separate lawsuits cited above. In addition to this action, which concerned the two Oakville properties cited above, the other actions were as follows:

a. Oshawa Court File No. CV-23-493-000 brought by CMIB regarding the Penetanguishene first mortgage and the personal guarantees offered by Ms. Patino-Ramirez and Mr. Todorov on behalf of REE;

b. Oshawa court file No. CV-23-560-0000 brought by CMI regarding the Penetanguishene second mortgage and the personal guarantees offered by Ms. Patino-Ramirez and Mr. Todorov on behalf of REE;

c. Toronto court file no. CV-23-696584, brought by CMI against Mr. Todorov and his parents regarding the second mortgage on the Toronto condo.

[10] On May 23, 2023, the Borrowers and the Lenders entered into a Forbearance Agreement (the “Agreement”) regarding the enforcement of the Mortgages and the resolution of all four actions against the Borrowers. The Agreement included the following terms:

a. The Borrowers acknowledged that they owed the following amounts on the Mortgages:

i. $1,014,989 to CMIB for the first mortgage on the Penetanguishene property;

ii. $1,193,000 to CMI for the second mortgage on each of the Properties.

b. In exchange for a registered discharge of the Mortgages:

i. REE, Mr. Todorov and Ms. Patino-Ramirez were to pay $1,014,989 to CMIB by August 10, 2023 on account of the first mortgage on the Penetanguishene property;

ii. REE, Mr. Todorov, Ms. Patino-Ramirez and Mr. Todorov’s parents were to pay $1,163,744.26 to CMI by August 10, 2023 on account of all of the remaining Mortgages.

c. The Lenders were entitled to immediate default judgments on all four of their actions for the full amounts claimed in their respective statements of claim;

d. The Borrowers consented to the immediate issuance of orders for writs of possession for all four of the Properties, with the Borrowers’ consent to those writs to be signed “their lawyer, Ram Tangri”;

e. If the funds owing, as set out in the Agreement were not paid by August 10, 2023, REE, Mr. Todorov and Ms. Patino-Ramirez were to deliver vacant possession of the Properties;

f. No further enforcement of the judgments or writs of possession cited above would occur if the funds cited above are paid by August 10, 2023.

[11] Each of Ms. Patino-Ramirez and her fellow Borrowers signed the Agreement.

[12] At the suggestion of Mr. Tangri, Mr. Todorov’s parents obtained independent legal advice before signing the Agreement. Ms. Patino-Ramirez states that Mr. Tangri made no such suggestion to her.

[13] The funds required to be paid under the Agreement were not paid by August 10, 2023 or to date. On May 29, 2023, CMI obtained a default judgment against Mr. Todorov and Ms. Patino-Ramirez in this action for $1,185,272.20 plus costs of $1,299.14 (the “Judgment”). The Judgment also required Mr. Todorov and Ms. Patino-Ramirez to deliver up possession of the Home. The Lenders have also obtained judgments and writs of possession against the Borrowers in the three other actions cited above.

Ms. Patino-Ramirez’s Motion

[14] On or about September 8, 2023, Ms. Patino-Ramirez brought this motion, asserting that it is urgent. In her supporting affidavit, Ms. Patino-Ramirez deposes:

a. Mr. Todorov retained Mr. Tangri to represent his interests in the four actions;

b. Mr. Todorov entered into the Agreement.

c. While the Agreement states that Mr. Tangri represented Ms. Patino-Ramirez, she did not obtain independent legal advice regarding the manner in which the Agreement would affect her interests. As such, she did not understand the “full ramifications” of the Agreement;

d. When she signed off on the Agreement, Ms. Patino-Ramirez was “under the impression that there would be a further opportunity to contest the damages and remedies requested by the Plaintiff under their Statements of Claim in the event of default of the Agreement. She does not offer the source of that impression;

e. Further, she “was not fully aware that by entering in the Forbearance Agreement [she] was permanently compromising [her] interest in several matrimonial properties, including the matrimonial home that is subject to within action”;

f. She is concerned that her position in forthcoming family law disputes with Mr. Todorov “may be permanently compromised” if CMI is able to enforce its judgment and writ of possession in this action.

g. Based in her “understanding of the original conversations between [Mr. Todorov and CMI]” she believes that CMI should be estopped from the relief they are seeking [i.e., enforcement of their judgments]. She offers no details of what she understands to be the content of those conversations, why CMI should be estopped from acting as it has to enforce its judgments, or what form of estoppel applies.

[15] Those arguments are disputed by CMI. In essence, CMI argues that: 1) the Mortgages were in default 2) they have not been brought into good standing, and 3) Ms. Patino-Ramirez knew what she was signing or was negligent about signing the Agreement. Regarding counsel, the Agreement referred to Mr. Tangri as her counsel and he acted in that manner in signing the consent to the writs of possession on the Properties. In any event, Ms. Patino-Ramirez did not require independent legal advice to be bound by the Agreement.

Applicable Authority to set Aside a Default Judgment

[16] The applicable authority to set aside a default judgment is found in Intact Insurance Co. v. Kisel, 2015 ONCA 205. There, Laskin J.A., citing Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, at paras. 48-49, writes the following for the Court of Appeal for Ontario at para. 15:

[14] On a motion to set aside a default judgment, on the other hand, the court considers five major factors, one of which is whether the defendant has an arguable defence on the merits. The five factors are

(a) whether the motion was brought promptly after the defendant learned of the default judgment;

(b) whether the defendant has a plausible excuse or explanation for the default;

(c) whether the defendant has an arguable defence on the merits;

(d) the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff should the motion be allowed; and

(e) the effect of any order the court might make on the overall integrity of the administration of justice.

Again, these factors are not rigid rules. The court has to decide whether, in the particular circumstances of the case, it is just to relieve a defendant from the consequences of default: Mountain View Farms Ltd. v. McQueen (2014), 119 O.R. (3d) 561, [2014] O.J. No. 1197, 2014 ONCA 194, 372 D.L.R. (4th) 526, at paras. 48-50.

[17] I will review the applicability of each of the five factors below and then consider this matter within the particular circumstances of this case.

a. Whether the motion was brought promptly after the defendant learned of the default judgment

[18] While this issue is not conceded, it was not seriously contested by CMI.

b. Whether the defendant has a plausible excuse or explanation for the default

[19] Ms. Patino-Ramirez claims that her failure to defend this action lies at the feet of Mr. Tangri because of her non est factum defence described in greater detail below and her view that she need not have taken any steps until the Agreement had expired on August 10, 2023. While CMI concentrated its argument on the merits of Ms. Patino-Ramirez’s defence rather than this issue, it denies her non est factum argument. It also points to the plain wording of the Agreement to contradict her view of what was required of her under its terms.

c. Whether the defendant has an arguable defence on the merits

[20] This issue, which is central to any motion to set aside a default judgment, was the subject of the greatest dispute between the parties. In oral argument, counsel for Ms. Patino-Ramirez raised the following points:

a. She need only show an arguable defence on the merits. This is not a summary judgment motion;

b. She did not obtain independent legal advice from Tangri. He acted only for her husband, Mr. Todorov.

c. She did not fully understand the terms of the Agreement. This is her non est factum argument;

d. While her affidavit does not speak to it, there are a number of manifest problems with the administrative fees charged by CMI. They include the following concurrent and improperly overlapping fees, in addition to actual costs of this action:

i. a renewal fee of $8,075 when the mortgage on the Home was not renewed;

ii. a three-month penalty fee of $20,576.77;

iii. a default administration fee of $1,500;

iv. a Mortgagee’s payment processing fee of $900;

v. a default proceedings fee of $1,500; and

vi. a Mortgagee’s default enforcement fee of $6,000.

Those figures add up to $38,550.77.

e. She argues, without reference to the evidence, that CMI should be estopped from enforcing the mortgages when there was discussion about renewing it.

[21] CMI pointed out that Ms. Patino-Ramirez signed the Agreement, which referred to Mr. Tangri as her lawyer. In her affidavit, she states that Mr. Todorov retained Mr. Tangri but says nothing about whether she retained him at the same or any other time. Other than her word, Ms. Patino-Ramirez has provided no evidence that Mr. Tangri failed to act on her behalf, including evidence from Mr. Tangri.

[22] CMI adds that Ms. Patino-Ramirez was not simply a consenting spouse to the second mortgages on the two properties which are the subject of this action. She was a co-owner of them. Thus, she received the benefits of both the mortgages on those properties the forbearance called for in the Agreement, Furthermore, the alleged lack of independent legal advice, on its own, is not fatal to a claim on based on an agreement, absent undue influence, unconscionability, fraud, misrepresentation or evidence supporting a defence of non est factum.

[23] Further, any failure to understand the clear wording of the Agreement could only have resulted from a want of care in reading the document.

[24] Regarding the administrative fees set out in the judgment in this action, CMI is willing to adjust the judgment to deal with the concerns raised by Ms. Patino-Ramirez. It agrees to an order varying the judgment by $41,797.49 to reflect any reductions or double counting of the three-month interest penalty, the renewal fee, the default fee, the administration fee and the default enforcement fee.

d. the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff should the motion be allowed

[25] Ms. Patino-Ramirez argues that one of the properties subject to this action, the Home, is her matrimonial home. She also vaguely refers to the risk of her “position in any forthcoming family law disputes with my husband [i.e. Mr. Todorov]” being compromised if the judgment and writ were allowed to stand against the Home.

[26] CMI answers in a two-fold manner. First, Ms. Patino-Ramirez fails to articulate the particular prejudice she would suffer in regard to any family law dispute. Not only does she fail to offer particulars of the dispute or the purported prejudice, Ms. Patino-Ramirez fails to even confirm that she is presently in the midst of a matrimonial dispute.

[27] Second, CMI points out that Ms. Patino-Ramirez is in no different position than every other party who is subject to a default judgment on a mortgage. All are “prejudiced” to the extent that they risk losing their home. But the mortgagee, who lent the money, is entitled to be paid and to seek legal redress when payment is not made. Here the parties sorted out their equities with the Agreement.

e. the effect of any order the court might make on the overall integrity of the administration of justice

[28] In regard to this factor, Ms. Patino-Ramirez repeats her previous arguments as does CMI with its previous arguments.

Analysis

[29] As stated above, the key factor in this motion is whether Ms. Patino-Ramirez raises an arguable defence to the merits. She is correct that the law applicable to a summary judgment motion is inapplicable to a motion to set aside a default judgment: 40 Park Lane Circle (Receiver of) v. Aiello, 2020 ONCA 33, at para. 33. Unlike a summary judgment motion, a party moving to set aside a default judgment party need not put their “best foot forward”: ibid at para. 32. Rather, the moving party need only prove that their defence has an air of reality: Mountain View at para. 51. In such a motion it is not the role of the motion judge to make findings of fact and assess whether the defence will succeed: 40 Park Lane Circle, at para. 34.

[30] Other than with regard to the administrative fees charged by CMI, Ms. Patino-Ramirez fails to prove that her defence raises an air of reality.

[31] This action is based on a mortgage default not a default of the Agreement. The statement of claim in this action makes no reference to the Agreement. If one ignores or even sets aside the Agreement, they are still left with a mortgage in default and a lack of a defence offered for that default which raises any air of reality. Thus, the Agreement is in many ways a red herring.

[32] Further, for the reasons cited by CMI, even if Mr. Tangri did not act for Ms. Patino-Ramirez, that fact alone does not make the Agreement invalid: ClearFlow Commercial Finance Corp. v. Trigger Wholesale Inc., 2021 ONSC 3422, citing RBC v. 164393, 2019 ONSC 5145 at para. 54, and Bank of Montreal v. Featherstone, 58 D.L.R. (4th) 567 (Ont. C.A.). I have been presented with no evidence of undue influence, unconscionability, fraud, or misrepresentation.

[33] In addition, I see no merit at all to a non est factum argument. The plea of non est factum applies when a party claims that their mind did not follow their hand when executing a document: Marvco Colour Research v. Harris, [1982] S.C.J. 98 (“Marvco”), at para.4. At para. 4 of Marvco, the Supreme Court of Canada adopted this statement of Cartwright J. in dissent in Prudential Trust Co. Ltd. et al. v. Cugnet, [1956] S.C.R. 914:

... generally speaking, a person who executes a document without taking the trouble to read it is liable on it and cannot plead that he mistook its contents, at all events, as against a person who acting in good faith in the ordinary course of business has changed his position in reliance on such document.

[34] While Ms. Patino-Ramirez deposes that she did not understand the full ramifications of the Agreement, she fails to say what ramifications she did understand and why. Rather, she relies on what she describes as her “impression” of the clear wording of the Agreement. That clear wording states that CMI is entitled to immediate judgment and a writ of possession. Further, Ms. Patino-Ramirez claims to have been under the impression that if she breached the Agreement, she would still be able to defend this action. Yet, she offers no reason for her impression and certainly no reference to a term of the Agreement that would leave her with that impression. No such term exists in the Agreement.

[35] Ms. Patino-Ramirez does not claim to be illiterate, ill-educated or even unable to understand documents in the English language. CMI states, without contradiction, that Ms. Patino-Ramirez has experience in the world of business and contracts. She is a mortgage agent and a former manager of a car dealership.

[36] Even more to the point, Ms. Patino-Ramirez offers no defence at all regarding the actual cause of action set out in the statement of claim: that she and Mr. Todorov were (and remain) in breach of the terms of the CMI second mortgages that are the subject of this action. Ms. Patino-Ramirez does not deny signing those mortgages, understanding their terms or receiving the mortgage funds. She does not claim to have kept the mortgages in good standing or to have brought then into good standing. In fact, the mortgages have, in any event, matured.

[37] Ms. Patino-Ramirez’s affidavit makes vague reference to estoppel arising out of a conversation that her husband, Mr. Todorov, had with CMI. But she no offers details of that alleged conversation or any other evidence that would support an estoppel claim. It is not even clear from her affidavit what the source of the estoppel may be. While her counsel did attempt to offer submissions regarding the facts she relies on to make her estoppel claim, they were not based on the evidentiary record before me. Thus, I cannot rely on them.

[38] Ms. Patino-Ramirez’s affidavit also makes no reference to any defence regarding the quantum of the claim set out in the statement of claim. However, her counsel orally raised concerns with double or improperly charged administrative fees set out on the face of the statement of claim. He did so, raising the points set out at para. 19(d) above, without reviewing each of the charges made by CMI.

[39] CMI concedes that argument in part. It is willing to allow the amendment of the judgment in this action to reflect the concessions that it offered during oral argument. It proposed a figure of $41,797.49 as the appropriate reduction of its judgment. That is more than the figure at para. 19(d), which was not presented by Ms. Patino-Ramirez’s counsel as a complete calculation of the improperly charged administrative fees. By my calculation, all of the administrative fees charged in the statement of claim amount to $46,651.77. That does not mean that all of the administrative fees claimed in the statement of claim are improper.

[40] In sum, it is not clear which administrative fees were improperly charged and which were properly charged. I will require further evidence and submissions on that issue.

[41] Looking to the issue of prejudice, Ms. Patino-Ramirez’s prejudice as the co-owner and presumably occupier of a matrimonial home is no different than that of any other person owning a home whose mortgage to a third party goes into default. Her status as a spouse and co-owner does not elevate her rights against a third-party lender. Further, Ms. Patino-Ramirez fails to articulate any details of her matrimonial dispute with Mr. Todorov. She does not even explicitly state that she and Mr. Todorov are separated, although that is the implication of her affidavit.

[42] Regarding the effect of any order the court might make on the overall integrity of the administration of justice, CMI is entitled to repayment of its Mortgages. When the Mortgages went into default and CMI launched power of sale proceedings, it was willing to forbear on its enforcement for a time, upon strict terms. In argument, it is willing to amend its judgment in this action to reflect the fact that some administrative fees claimed in the statement of claim were excessive. The proper quantum of those fees is the only issue in this action that has an air of reality.

Conclusion and Order

[43] In considering all of the factors cited above, it is clear that there is no air of reality to the defences raised by Ms. Patino-Ramirez other than the issue of the propriety of the administrative fees charged by CMI. I do not find that it is just in the circumstances to relieve Ms. Patino-Ramirez from the consequences of default other than with regard to those fees. Rather, than set aside the judgment in this action, I am open to varying it under Rule 19.08(1), which allows the court to do just that.

[44] However, in order to consider the manner in which to vary the judgment in this matter, I will require better evidence and submissions as to the propriety of the administrative fees charged by CMI in this action.

[45] Ms. Patino-Ramirez will serve and file an affidavit setting out her objection to any of the administrative fees claimed in the statement of claim within seven days of the date of release of this endorsement. CMI will respond within a further seven days. In addition, the parties shall exchange any bills of costs or costs outlines and place them on Caselines before the return of this motion as set out below.

[46] The parties will arrange to appear before me by Zoom to make brief submissions, only on the issues of the propriety of the administrative fees and the costs of this motion. They may arrange that attendance by contacting the trial office at SCJHaltontrialoffice@ontario.ca.

[47] The balance of this motion is dismissed. However, I stay enforcement of the judgment and writ of possession on the Home until the issue of the variation of the judgment is resolved.

The Other Actions Cited Above

[48] While I have dealt with only one action and one mortgage, I assume that the findings I have made apply to the other mortgages in question. The parties may wish to discuss whether the other three judgments on the Mortgages should be varied in the manner cited in this endorsement.

[49] I thank both counsel for their helpful submissions.

Justice Marvin Kurz Date: October 13, 2023