Court File and Parties

COURT FILE NO.: CV-24-00715949-00CL DATE: 20240719 ONTARIO - SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST

IN THE MATTER OF SECTION 243(1) OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, C. B-3, AS AMENDED, AND SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 C. C.43, AS AMENDED

RE: Ivano Pegoraro, Applicant AND: In Touch Retirement Living for Vegetarians/Vegans Inc., Respondent

BEFORE: Peter J. Osborne J.

COUNSEL: David P. Preger and Vanessa L. Ford, for the Court-Appointed Receiver Elaine Lindo, Principal of the Respondent, the Property-Owner, self-represented

HEARD: July 19, 2024

Endorsement

[1] The Receiver of the property owned by In Touch Retirement Living for Vegetarians/Vegans Inc. seeks an Administration Order approving the First Report dated July 4, 2024 and the activities of the Receiver described therein and granting sealing relief in respect of appendices to the First Report, consisting of a Property appraisal, summary of offers received and the agreement of purchase and sale dated May 27, 2024 (the “APS”), and authorizing and directing the Receiver to distribute the proceeds of sale upon closing of the Transaction to satisfy the mortgage indebtedness of the Debtor to the mortgagee, Ivano Pegoraro (“Pegoraro”) in full.

[2] The Receiver also seeks an approval and vesting order to sell the Property according to the terms of the APS and vest title in the Purchaser.

[3] This matter was before me on a scheduling case conference on July 5, 2024. As reflected in my Endorsement of that date, the Debtor did not oppose the appointment of the Receiver and did not appear to oppose the motion.

[4] However, the sole officer and director of the Debtor, Ms. Elaine Lindo, appeared and advised that she intended to oppose the motion on the basis that she is apparently a guarantor under the first mortgage owed to Pegoraro and also on the basis that she was apparently the holder of a second mortgage on the Property.

[5] Notwithstanding the submission of the Receiver to the effect that it was anticipated that the net proceeds of sale would pay out the first mortgage in full, such that there would be no residual exposure on the guarantee, and notwithstanding the submission of the Receiver to the effect that there was no second mortgage registered on title, I adjourned the matter until today to permit Ms. Lindo an opportunity to get legal advice, as I strongly urged her to do, and, with or without legal advice, to provide whatever materials she stated she had in respect of this apparent second mortgage, to the Receiver and its counsel. I explained to her, and she understood, that the motion would proceed today.

[6] The Receiver relies on the First Report.

[7] Ms. Lindo appears today again in her personal capacity and not on behalf of the Debtor, which does not oppose the relief sought. She does not oppose the administration order, but seeks an adjournment of the motion for approval of a sale for another three weeks in order to retain counsel. The Receiver opposes a further adjournment and submits that the APS, which was previously extended as a result of my first adjournment, would expire if a further adjournment were granted.

[8] A court reporter was present today.

[9] Ms. Lindo has not filed any materials. Nor has she provided any materials, even on an informal basis, to the Receiver or its counsel.

[10] For the reasons below, I denied the adjournment request and granted the approval and vesting order as well as the administration order.

[11] The Receiver was appointed on April 16, 2024. The Property, located on King Street in Toronto, is owned by the Debtor. It is designated as a historical site.

[12] The receivership was granted on the application of Pegoraro who is the first mortgagee of the Property in connection with the loan granted in the principal amount of $800,000. It matured on September 19, 2023 and has not been repaid. Monthly interest continues to accrue at a rate of 7.99% per annum. Ms. Lindo does not dispute the indebtedness or the fact that the mortgage is in default.

[13] The Receiver has taken control of and attended at the Property, confirmed insurance coverage, cleaned up the property, engaged an appraiser, engaged a listing agent, supervised the marketing and sale efforts by the listing agent, communicated with Ms. Lindo, reviewed offers and negotiated and entered into the APS.

[14] The Property was listed and exposed to the market, on MLS, with a listing price of $1,349,000. The marketing and sales efforts are fully set out in the First Report. They generated four offers in total. Three were conditional, and the remaining offer, the one that is now represented in the APS, was the only unconditional offer. It was also the highest offer received.

[15] On May 29, 2024, the Receiver and the proposed Purchaser entered into the APS, which was subsequently amended. It provides for the sale of the Property on an “as is, where is” basis with no representations and warranties from the Receiver. The Receiver is holding the deposit of 10% of the purchase price and closing is to take place five days following the granting of an approval and vesting order.

[16] I accept the submission and strong recommendation of the Receiver that the transaction should be approved. The Property was widely exposed and generated four offers, as noted above. The transaction will generate a full recovery for the first mortgagee and the Receiver does not believe that further marketing would result in a superior realization. There is no evidence in the record to the effect that further exposure to the market would generate a higher price.

[17] The Receiver has obtained an independent legal opinion regarding Pegoraro’s security confirming that it is valid and enforceable in accordance with its terms, such that the Receiver proposes to distribute sufficient net proceeds to fully satisfy the first mortgage indebtedness.

[18] The Receiver relies on section 249 of the BIA. It also relies on section 137(2) of the CJA in respect of the sealing relief sought, which is sought pending closing of the transaction.

[19] The Receiver has also filed a title abstract dated one day before the hearing of this motion, which reflects that there is no second or subsequent mortgage registered on title in favour of Ms. Lindo or anyone else. Ms. Lindo concedes that there is no other mortgage registered on title.

[20] As noted above, Ms. Lindo does not challenge the indebtedness to Pegoraro, the mortgage security or the default. Indeed, after I denied the adjournment request, she was clear and candid in her submission that she did not oppose the sale but submitted that she hoped that the proceeds could be sufficient to pay out, in addition to the Pegoraro mortgage, a second mortgage that she explained he held in the amount of $375,000, and, if I understood her correctly, a further mortgage in the amount of $200,000. It is unclear to whom that mortgage is owed.

[21] I was clear with Ms. Lindo, as was Ms. Ford, counsel to the Receiver, that while the Receiver anticipated that the net proceeds of sale would be sufficient to pay out the first mortgage in favour of Pegoraro which Ms. Lindo had guaranteed, and further that it was anticipated that there would be some surplus funds available for distribution to creditors of the estate of the Debtor, the company owned by Ms. Lindo, there was absolutely no assurance whatsoever as to the quantum of those surplus funds, and what other obligations of the Debtor, if any, it would be sufficient to cover.

[22] Ms. Lindo made extensive submissions, some of which were, at times, challenging for the Court to follow, particularly in the absence of any materials. Ms. Lindo was unable to explain who the parties were that were owed the money under these purported subsequent mortgages, to whom funds were advanced, which advances were secured by these mortgages, or precisely what amounts were owing.

[23] Ms. Lindo made submissions to the effect that there had been some involvement of a mortgage broker, there were allegations of misconduct against that mortgage broker and others, all of which Ms. Lindo stated she wished to pursue. I encouraged her in the strongest possible terms to retain counsel to assist her in the investigation of whatever these claims might be against whatever parties they might be asserted. I explained, however, that whether she had some claim against a mortgage broker or anyone else in respect of some apparent debt obligation, none of that changed the fundamental challenge for her that the first mortgage, properly registered, remained in default and the mortgagee wished to recover the funds.

[24] Notwithstanding these allegations suggested by Ms. Lindo, the record is clear and Ms. Lindo conceded, that there is no relationship between these other claims or matters, and the Pegoraro mortgage which in any event is due and owing as confirmed by the security opinion obtained by the Receiver. It is the only mortgage registered on title to the property and ranks in first position. There is no basis in the record before me to justify why that mortgage is compromised, why the proposed sale should not be approved, and why a distribution to the mortgagee should not be authorized.

[25] Ms. Lindo then made a suggestion, again without evidence, to the effect that she wondered whether there was a non-arm’s-length relationship between Pegoraro, the holder of the first mortgage, the mortgage broker against whom she purported to have various allegations, and/or the proposed Purchaser. The Receiver advised that to its knowledge, there was no such relationship, that the Property had been exposed widely to the market and listed on MLS, and the proposed Purchaser simply submitted the highest offer and the only unconditional offer.

[26] For all of these reasons, I approved the transaction and granted the approval and vesting order. Ms. Lindo understands that the transaction is scheduled to close within five days of that order being granted.

[27] The administration order is also appropriate, and the First Report, the activities referred to therein, and the corresponding fees of the Receiver and its counsel are appropriate, were accretive to the outcome here, are reasonable, and all are approved.

[28] Finally, the sealing order is also appropriate and is granted. The confidential materials sought to be sealed relate to the appraisal, the other offers, and the financial terms of the APS. Sealing those materials pending the closing of the proposed transaction or further order of the Court will ensure the integrity of a sales process in the event that the transaction does not close, and the Property must be re-marketed. The order therefore has clear temporal limits. It is also limited in scope. I am satisfied that the test set out by the Supreme Court of Canada in Sierra Club and Sherman Estate has been satisfied.

[29] Approval and vesting order and administration order to go in the form signed by me today. Both orders have immediate effect without the necessity of issuing and entering.

Osborne J.