Court File and Parties
COURT FILE NO.: CV-21-660895 DATE: 2023-01-04 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1470760 Ontario Inc., Plaintiff/Appellant AND: Del Terrelonge, 1586091 Ontario Limited and Monk Development Corporation and Sarah Terrelonge, Defendants (Sarah Terrelonge, Respondent)
BEFORE: W.D. Black J.
COUNSEL: Kevin Sherkin, for the Plaintiff/Appellant Dimitrios Mylonopoulos, for the Defendant/Respondent Sarah Terrelonge
HEARD: November 14, 2022
ENDORSEMENT
The Appeal
[1] This is an appeal from the decision of Associate Justice Josefo dated June 30, 2022, in which he ordered that Sarah Terrelonge be added as a party defendant, and refused to grant the plaintiff’s motion for a writ of possession.
The Property, the Parties, and History of Relevant Proceedings
[2] The claim relates to a residential property at 97 Boulton Drive in the City of Toronto (the “Property”).
[3] The defendant Del Terrelonge is the sole owner of the Property, and the plaintiff has a default judgment against Mr. Terrelonge, providing for Mr. Terrelonge to deliver vacant possession of the Property to the plaintiff, which judgment was signed on March 22, 2022.
[4] The plaintiff sent a notice demanding possession together with the default judgment to the defendants (at that time not including Ms. Terrelonge who was not yet a party) on March 30, 2022.
[5] It is not disputed, and Associate Justice Josefo found, that in addition to defaulting on the mortgage(s) (about which more below), the defendants have made no payments to the plaintiff since the Order for default judgment, have failed to deliver vacant possession of the Property, and have not paid water bills or property taxes since 2019.
[6] Ms. Terrelonge is the spouse of Mr. Terrelonge, although there is some question about whether or not they (and their minor son) have continuously lived together (and whether or not they do so currently). The plaintiff also raises questions about the legitimacy and status of Family Law Act, R.S.O. 1990, c. F.3 proceedings involving the Terrelonges. A process server on behalf of the plaintiff determined earlier in 2022 that the Property did not appear to be vacant.
[7] In April of 2022, the plaintiff brought a motion for a writ of possession. On April 22, 2022, Ms. Terrelonge, then still a non-party, served on the plaintiff a Notice of Objection to the Proposed Method of Hearing (at that stage proposed to be in writing) together with a factum.
[8] On May 18, 2022, Associate Justice Graham ordered that the motion for the writ of possession should be brought on notice on a court date to be set, given Ms. Terrelonge’s position, and seized himself of the matter.
[9] On June 14, 2022, Associate Justice Graham issued a further Order confirming that he was no longer seized of the matter, which was then to proceed on June 19, 2022.
[10] Mr. Terrelonge, the owner of the Property, has not brought a motion to set aside the default judgment.
[11] It is important, in order to understand the context for the appeal before me, to note that 1470760 Ontario Inc. (“147”), the plaintiff/appellant, acquired the first mortgage on the Property (the “First Mortgage”), from the previous first mortgagee Diversified Capital Inc. (“Diversified”).
[12] In 2021, I decided a dispute between Diversified and the holder of the second mortgage (the “Second Mortgage”), CVC Ardellini Investments Inc. (“CVC”), concerning the status of the First Mortgage and whether or not Mr. Terrelonge was in default thereunder.
[13] At that time, I found among other things, that neither Mr. Terrelonge nor Ms. Terrelonge had paid the interest under the First Mortgage as required, and that neither of them had ever paid the taxes on the Property.
[14] I concluded that upon payment to Diversified of a specified amount, CVC was entitled to payment of the amounts secured by its Second Mortgage together with accrued interest.
[15] It appears, although I do not know the details of this, that this result led to 147, a company related to CVC, acquiring the First Mortgage (and this claim) from Diversified. 147 obtained an Order to Continue on February 17, 2022, and took the steps described above.
[16] 147 notes that the default judgment that it obtained on March 22, 2022, remains in full force and effect, and that 147 requires possession in order to complete the power of sale proceedings commenced over a year ago by Diversified.
[17] 147 points out that Ms. Terrelonge filed an affidavit in the matter in which I previously heard the motion described above, CV-16-553774, acknowledging the validity of the First Mortgage.
[18] 147 also emphasizes that CVC is not (and has not been) a plaintiff or other party in the current action, and that it is 147 and not CVC that owns the First Mortgage.
[19] It points out that, accordingly, much of Ms. Terrelonge’s evidence, including paragraphs 2-13 of her affidavit in this matter, thus deal with a separate mortgage owned by an entity separate from 147.
[20] It claims that the amount currently outstanding on the First Mortgage, including up-to-date enforcement costs and unpaid taxes exceeds $2.1 million. There are before me no calculations confirming the outstanding amount, nor any contrary submissions explaining how the amount is overstated. In any event, the amount does not change the question of which party holds the First Mortgage and the entitlement to enforce that charge.
The Decision Under Appeal
[21] In the motion from which this appeal is taken, Associate Justice Josefo found:
Given the related nature of the holders of the first and second mortgage, however, in my view it would be contrary to prior decision-making involving the second mortgage and enforcement action for me to today grant leave for a writ of possession to issue. In that regard, I reference the January 26, 2016 disposition of Justice Gibson as pertains to a summary judgment motion brought against Sarah, which Justice Gibson dismissed. The court concluded that there remained genuine issues for trial, which indeed, is why there is the long-pending enforcement action for the second mortgage, now to be held in Toronto… .
I accept that section 43 of the Family Law Reform Act corresponds to section 22 of the Family Law Act, as regarding a spouse’s right of possession and relief against forfeiture. To date, there is no order for possession against Sarah. Applying Gauthier, the plaintiff is not currently entitled to a writ of possession.
The Appellant’s Submissions
[22] The appellant first cites, in its legal argument, the relevant provisions of r. 60.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, in particular the provisions ensuring that persons in actual possession receive sufficient notice of the proceeding in which a possession Order is obtained to enable them to apply to the Court for relief.
[23] It then cites leading cases making clear that:
- “A mortgagee, acting in good faith and without fraud, will not be restrained from a proper exercise of its power of sale, except upon tender by the mortgagor of the principal moneys due, interest and costs” (Arnold v. Bronstein et al., 1970 CanLII 245 (ON SC), [1971] 1 O.R. 467 (S.C.), at para. 4); and
- “The Court of Appeal’s decision in Ont. Loan & Debenture Co. (….) clearly establishes that the court has no inherent jurisdiction to order a stay, after judgment, unless the mortgagor pays the full amount of the judgment, even where the amount includes accelerated payments.” (Canada Trustco Mortgage Co. v. McLean (1983), 1983 CanLII 3050 (ON SC), 143 D.L.R. (3d) 101 (Ont. S.C.), at para. 28).
[24] 147 argues that in the within case, there has never in fact been any dispute involving the owner (Mr. Terrelonge) and his spouse (Ms. Terrelonge), with respect to the First Mortgage. It asserts that Ms. Terrelonge succeeded in confusing the Court about this fact, as evidenced in the following passage from Associate Justice Josefo’s decision:
Rule 60.10 is discretionary, yet that does not mean open-ended discretion. Rather, it means applying discretion judiciously, as well as judicially, balancing competing rights and interests. I thus attempt to find that balance and come to a fair conclusion which both gives Sarah a chance to present her defence, yet which also does not leave the plaintiff, in essence, “Waiting for Godot” in that regard. Overall, as discussed above, it is my conclusion that, given the relationship now in place between the first and second mortgage holders, it would be unjust to today immediately grant leave to issue the writ of possession. Doing so would thwart the purpose of an enforcement trial on the second mortgage, which Justice Gibson concluded was necessary as pertains to enforcement of that mortgage. It would upend the process for trial and summarily dispose of most if not all of the case, which is again, contrary to what was previously Ordered.
[25] 147 says that “With respect, the Court is confused.” It points out that Gibson J. precluded the enforcement of the Second Mortgage pending a trial concerning that Second Mortgage. Justice Gibson did not deal with the First Mortgage, which was not in issue before him. The plaintiff/appellant here reminds the Court that it is standing in the shoes of Diversified, and holding the First Mortgage which Ms. Terrelonge has specifically acknowledged is valid.
[26] Associate Justice Josefo also appears to have been swayed, 147 suggests, by Ms. Terrelonge’s invocation of the Family Law Act as somehow protecting her from the power of sale proceedings.
[27] 147 maintains that this conclusion is contrary to the law related to the defences available to the enforcement of a mortgage.
[28] That is, ss. 22(1) and (2) of the Family Law Act provide:
22(1) When a person proceeds to realize upon a lien, encumbrance or execution or exercises a forfeiture against property that is a matrimonial home, the spouse who has a right of possession under section 19 has the same right of redemption or relief against forfeiture as the other spouse and is entitled to the same notice respecting the claim and its enforcement or realization.
Service of Notice
(2) A notice to which a spouse is entitled under subsection (1) shall be deemed to be sufficiently given if served or given personally or by registered mail addressed to the spouse at his or her usual or last known address or, if none, the address of the matrimonial home, and, if notice is served or given by mail, the service shall be deemed to have been made on the fifth day after the day of mailing.
[29] As is evident, and as 147 argues, the purpose of these provisions is to provide a spouse notice so that they have an opportunity to redeem the mortgage if they choose to do so. In a case, as here, where the spouse consents to the original mortgage, 147 submits that notice is all that is required so that the spouse has the opportunity to take steps to pay out the mortgage. 147 fairly points out that the caselaw has been divided as to whether the non-titled spouse has to be a party or if adequate notice is sufficient. Either way, 147 argues, the Court’s exercise of discretion in the present case goes beyond what is contemplated, and is “clearly wrong.”
[30] 147 relies on the decision in Munn v. Lainscek, 2012 ONSC 2009, wherein after finding that sufficient notice had been given to all persons in possession of the property, the Court allowed the application for a writ of possession.
[31] It also places weight on this Court’s decision in 235 Grandravine Drive Inc. v. Tereshko, 2014 ONSC 5523, in which the Court granted leave to issue a writ of possession where (among other factors), the defendant was given a fair and reasonable chance to cure the default.
[32] Finally in this section of the argument, 147 points to McQuaid v. Pellegrini, 2001 CarswellOnt 440 (S.C.), involving an appeal from a Judgment under r. 60.10, in which the Court held that it is not necessary under r. 60.10 for a spouse to be added as a party, but rather that adequate notice be given. 147 says that it is notable that in that case, in addition to finding that the spouse had had notice of the action and judgment for many months in advance of the motion before it, the Court said that even if it was wrong in making such inferences, the spouse in any event retained rights for relief under ss. 22 and 23 of the Mortgages Act, R.S.O. 1990, c. M.40.
[33] Against that backdrop, 147 points out that Ms. Terrelonge has had notice of the power of sale proceedings for well over a year, which notice was provided to Mr. Terrelonge, the registered title owner of the Property. Mr. Terrelonge was served with the statement of claim, constituting actual notice of the proceeding under r. 60.10(2).
[34] In addition, both Mr. and Ms. Terrelonge were given notice of the power of sale proceedings for the Property in April of 2021, (the notice having been addressed (in part) to “The Spouse of Del Terrelonge”).
[35] Mr. and Ms. Terrelonge were also provided a copy of the default judgment in this action.
[36] As such, Ms. Terrelonge has had well over a year to redeem the mortgage but has taken no steps to do so and has continued to live in the premises, making no payments, despite having acknowledged the validity of the mortgage.
[37] 147 argues:
Sarah Terrelonge has long had notice of the within action, and her newest motion to add herself as a party was brought approximately a year after she received notice and shortly after default judgment was granted against the owner (her husband). This was simply one of many attempts to frustrate attempts for possession and to collect on the mortgage. The moving party has failed to articulate and tender facts that could demonstrate a plausible defence. Further, she has no standing to move to set aside the judgment against her husband. The Court in its decision does not even address the fact that Sarah Terrelonge fails to articulate what exactly the defence could be to a mortgage to which she consented. One of the fundamental tenets of the ability to set aside default judgment or participate in a claim would be to demonstrate a defence on the merits. In this case, no evidence was led in that regard, and when asked Sarah Terrelonge refused to articulate what that defence was.
[38] 147 also asserts that it is not appropriate to allow the defendants (now including Ms. Terrelonge), to continue to prejudice the plaintiff’s rights and position by continuing not to pay the water bills and property taxes on the Property.
[39] Accordingly says 147, Associate Justice Josefo’s Order should be set aside and possession of the Property, for which the plaintiff has obtained default judgment, should be granted to the plaintiff to allow it to attempt to recover the monies owed to it under the First Mortgage.
[40] 147 argues that the present circumstances, if allowed to stand, would have a chilling effect on mortgage collectability if spouses can, without articulating a valid defence to a mortgage proceeding and without paying amounts due under the mortgage in question (or utilities or taxes), simply delay a mortgagee’s ability to seize properties.
[41] Finally, as noted above, 147 questions the legitimacy of the alleged Family Law Act issues asserted by Ms. Terrelonge.
[42] It says that despite the fact that the parties claim to be separated, no divorce proceedings have been finalized (despite Mr. Terrelonge having been noted in default in the Family Law proceedings).
[43] It points out that in materials filed by Ms. Terrelonge with the Court in those proceedings, she claims to be paying the mortgage and taxes on the Property. It is clear, says 147, that this is simply and demonstrably untrue.
[44] As such, 147 queries if the separation is “just a ruse to create the appearance of a family law issue where none really exists”.
Appellant’s Apparent Position on Standard of Review
[45] The appellant’s written submissions do not address the question of the standard of review applicable to this appeal. Reading the substance of those submissions, however, I think it is fair to interpret the appellant’s position as an argument that the Associate Justice made palpable and overriding errors in his alleged failure to appreciate and differentiate between the First Mortgage and the Second Mortgage. By focusing on the ongoing proceedings relative to the Second Mortgage, says 147, His Honour conflated that mortgage and those proceedings with the First Mortgage, when in fact the First Mortgage can and should be seen in isolation and gives rise to the clear and unavoidable outcome that the appellant urges.
The Respondent’s Submissions
[46] Ms. Terrelonge’s factum does spend considerable time discussing the ongoing enforcement proceedings brought by CVC with respect to the Second Mortgage.
[47] It notes that a trial in that proceeding – which was recently transferred from Milton to Toronto – is pending.
[48] It acknowledges that the issue that remains to be determined in that trial, “pertains to the validity and enforceability of the Second Ranked Mortgage on the Property as against Sarah”.
[49] In answer to my questions about why the Second Mortgage and those proceedings matter in terms of my assessment of 147’s claim to enforce the First Mortgage and to obtain a writ of possession thereunder, the submission was that, in effect, the evidence and circumstances concerning the First and Second Mortgage are inextricably linked, such that there is considerable overlap and a need for the two mortgages to be considered and determined together.
[50] More particularly, relying on evidence from Ms. Terrelonge in her June 1, 2022 affidavit, (sworn in support of her opposition to the writ of possession sought by 147 and in support of her requests to be added as a party), Ms. Terrelonge’s submissions are that the enforcement proceeding relative to the Second Mortgage has been significantly delayed. Her evidence and argument asserts that, while it has always been her intention to redeem the First Mortgage, the pending enforcement proceeding relative to the Second Mortgage has prevented her from doing so.
[51] While the precise impediment caused by the proceedings relative to the Second Mortgage, purportedly preventing Ms. Terrelonge from redeeming the First Mortgage, is not specified in her evidence or her argument, the impression with which I was left is that the ongoing proceedings have created financial hardship and limitations.
[52] Proceeding on that assumption, in my view the case law would not support delaying a writ of possession on that basis. The Canada Trustco Mortgage Co. case, at para. 13, in particular, provides clear and specific guidance that “hardship caused to the defendants-mortgagors by the plaintiff mortgagee enforcing his right to possession cannot be considered on an application for leave to issue a write of possession”.
[53] While Ms. Terrelonge has certain rights under the Family Law Act, her relevant rights in the circumstances at hand are a right to notice of enforcement proceedings and a right to redeem.
[54] Ms. Terrelonge has had considerable notice of these proceedings, (over a year) and has taken no steps to redeem.
[55] As set out above, Ms. Terrelonge’s position is that the ongoing enforcement proceedings in relation to the Second Mortgage have somehow prevented her from taking steps to redeem the First Mortgage.
Respondent’s Evidentiary Deficiencies
[56] Apart from not specifying exactly what the problem is, (and leaving me to infer, as I have above, that the problem is financial hardship), Ms. Terrelonge has other evidentiary problems.
[57] As noted, in addition to failing to specify the problem created by the proceedings relative to the Second Mortgage, she has also not identified, in her affidavit or even in argument, what affirmative defence she has or will offer in response to the enforcement of the First Mortgage. She expresses broad concerns about the amount claimed outstanding under the First Mortgage, but again provides no details in that regard.
[58] She has also not explained why, in addition to paying no amounts against the First Mortgage (not even into Court), she has also made no payments for some years on account of property taxes or water bills.
[59] Ms. Terrelonge’s factum makes the bald assertion, in paragraph 24, that “CVC’s entitlement to the First Ranked Mortgage rests entirely on the validity and enforceability of the Second Ranked Mortgage which has yet to be determined due to CVC’s reluctance and complacence in moving the Mortgage Enforcement Action to trial”.
Discussion of Enforceability of First Mortgage
[60] With respect, I cannot see how the enforceability of the First Mortgage in any way depends on the validity and enforceability of the Second Mortgage.
[61] While there is evidence that Mr. Donato Ardellini is involved in the management of both CVC and 147, and while it is alleged in Ms. Terrelonge’s affidavit in her Supplementary Appeal Record, that he is the controlling mind for both corporations, there is no evidence on the basis of which I could pierce the corporate veils, nor any evidence to suggest that 147’s acquisition of the First Mortgage was for less than a provident price nor otherwise somehow improper.
[62] It is perhaps helpful to hypothesize for a moment that the holder of the First Mortgage would be not 147, but a well-known Canadian bank, and that the hypothetical bank had acquired the First Mortgage from Diversified for a fair price.
[63] In that circumstance there would, I believe, be no conceivable defence to the bank’s enforcement proceedings, nor any basis to refuse a writ of possession.
[64] In my view there is no compelling evidence in this record to show, certainly not to the level of balance of probability, that the conclusion changes simply because the plaintiff is 147 rather than a well-known bank.
Conclusion
[65] I find that the decision from which this appeal is taken does conflate the First and Second Mortgages, and that the underlying assumption that the two are related, and that the validity of one cannot be determined independent of the other, is not borne out by the evidence in the record.
[66] In my view, this amounts to a palpable and overriding error, and the Associate Justice’s refusal to issue a writ of possession cannot stand.
[67] While it potentially becomes academic, I do not have the same concerns about the Associate Justice’s decision to add Ms. Terrelonge as a party defendant. While I do not think it was necessary in the circumstances, I also see no error in that conclusion.
[68] I also note that Ms. Terrelonge has provided evidence to respond to the suggestion that she has misrepresented the status of the Family Law proceedings and to the suggestion that she has misrepresented to the Court that she was paying mortgage charges and taxes. On the latter point, she notes that this was true when she provided the affidavit some years ago. While there is no real effort – as discussed above – to explain why she is no longer paying those items, her failure to do so does not amount to a misrepresentation let alone “defrauding the Court”, and I put no stock in these allegations in coming to the conclusions that I have.
[69] I also have no reason to conclude that Ms. Terrelonge is fabricating the Family Law Act proceedings; as I say above, the important consideration in that regards relate to notice and opportunity to redeem, both of which Ms. Terrelonge has had.
[70] So in conclusion, an Order is to issue overturning the Associate Justice’s refusal to issue a writ of possession, and substituting an Order granting a writ of possession to the plaintiff/appellant.
W.D. Black J.
Date: January 4, 2023