LAMONT HI-WAY SERVICE LTD. Plaintiff - v. -, 2003 ABQB 297

Lamont Hi-Way Service Ltd. v. Bunning, 2003 ABQB 297 Date: 2003 0401 Action No. 0103 07431 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON BETWEEN: LAMONT HI-WAY SERVICE LTD. Plaintiff - and - EDWARD W. BUNNING AND GAIL E. BUNNING Defendants _______________________________________________________ REASONS FOR DECISION of M. FUNDUK , Master in Chambers _______________________________________________________ APPEARANCES: R. D. Gillespie for the Plaintiff B. R. Barnes Gledhill Larocque for the Defendants

[ 1 ] These are competing applications for

summary judgment. The Plaintiff seeks an order nisi. The surviving defendant, the wife, seeks

summary dismissal of the lawsuit. [ 2 ] What gives rise to this lawsuit starts in January 1992. The Defendants wanted to buy a house that was for sale but they had neither money or ability to get a mortgage. The end result was that the Plaintiff bought the house from the vendor. One of the Plaintiff’s principals first got title in his name and then took out a $45,600 first mortgage with a lender. Title then issued to the Plaintiff.

It sold the house to the Defendants for $60,000, with interest, broken down as follows: (a) $45,600 - mortgage (b) $14,400 - Plaintiff Title was transferred to the Defendants in July, 1992 but nothing turns on that. The Plaintiff did not register a caveat for a vendor’s lien at that time but nothing turns on that. The Land Titles Act is irrelevant as between the immediate parties. [ 3 ] The Defendants initially made combined payments to the Plaintiff to cover both the mortgage and the debt to the Plaintiff.

Later the payments changed to “house payments” only with the Defendants paying the mortgagee directly. [ 4 ] In April, 1993 an automobile was sold to the male Defendant. The contract is between Wayne Cholak as seller and the male Defendant as purchaser. The price is $12,000 with 12% interest to be paid over a three year period. Cholak says that the automobile was owned by the Plaintiff and that although he is the vendor he was just acting as “trustee and nominee” for the Plaintiff.

Although Cholak says that the automobile was sold to the Defendants the sale agreement shows only the male Defendant as purchaser. [ 5 ] In June 1996 the Defendants got a $5,200 loan from Yogi’s Pizza and Steakhouse Limited. They gave it a promissory note for $5,200 plus interest. The note says that the loan is secured against the house. Cholak says that Yogi’s is a “related company”, whatever that means. [ 6 ] In June 1999 a $500 loan was given to the Defendants. The cheque is by “Yogi’s Liquor Store”.

Cholak says the loan “was to be treated as funds of” the Plaintiff. [ 7 ] Then in September 1999 “Yogi’s Liquor Store” gave a cheque for $1,500 payable to the female Defendant. Cholak says that this too was a loan to the Defendants and, like the earlier loan, “was to be treated as funds of” the Plaintiff. [ 8 ] In December, 1999 both Defendants went into bankruptcy. In February 2000 the male Defendant died. Title to the house then passed to the female Defendant as the surviving joint tenant.

The Plaintiff registered a caveat claiming a vendor’s lien. [ 9 ] The Plaintiff filed a proof of claim with the trustee claiming to be a secured creditor. The trustee initially disallowed the claim because of lack of documents but on December 6, 2000 he accepted the claim: We hereby withdraw our notice of disallowance and confirm acceptance of your secured claim as we have received the documents requested in our letter dated September 26, 2000.

[ 10 ] In his s. 170 report in the wife’s bankruptcy the trustee says that the house is encumbered but he does not list the creditors in the attached statement of creditors.

He does, in his statement of receipts and disbursements, show the house as encumbered to both the mortgagee and the Plaintiff. [ 11 ] In his statement of receipts and disbursements in the husband’s estate the trustee also shows the house to be encumbered to both the mortgagee and the Plaintiff. [ 12 ] The Plaintiff started this lawsuit on March 16, 2001, six months after the wife got her absolute discharge. [ 13 ] The wife says the house debt was paid in full by October 1994 and that the Plaintiff has engaged in creative accounting.

She says that the debt which was owing at the date of bankruptcy (she admits that there was a debt) was the automobile debt and it is wiped out by the discharge.

She says that this lawsuit is just retaliation by the Plaintiff because the automobile debt is wiped out. [ 14 ] The amount of the debt shown by the wife in her statement of affairs as an unsecured debt is $10,747, which is quite similar in amount to the Plaintiff’s claim in this lawsuit as a secured creditor. [ 15 ] But for the bankruptcies the issue would be how the payments made over the years were appropriated by the Defendants, or by the Plaintiff, or by law. The law on that is discussed in Main Plumbing & Herating Supplies (Western) Ltd. v.

High Park Investment Corporation Ltd., 1985 CanLII 1160 (AB KB) , 37 Alta. L.R. (2d) 394 (Q.B.) . [ 16 ] But the bankruptcies do exist.. The Plaintiff put in a claim to be a secured creditor and the trustee accepted the claim. The wife ignores that. [ 17 ] Bankruptcy is a legal process. A trustee assumes responsibility in two capacities, Direct Rental Centre (West) Ltd. v. A.C. Waring & Associates Inc., 2001 ABCA 233 (CanLII) , 97 Alta. L.R. (3d) 213 (C.A.) , para. 39 : It is significant that the trustee assumes responsibilities in two capacities: As the debtor’s (or bankrupt’

s) representative and, as well, as the creditors’ representative: A Marquette & Fils Inc. v. Mercure (1975), 1975 CanLII 195 (SCC) , [1977] 1 S.C.R. 547 (S.C.C.) . at 553. . . . [ 18 ] A trustee can serve a notice on a secured creditor to prove its security: s. 128(1). But a secured creditor need not wait for a demand by the trustee. It can file a proof of claim without a trustee’s demand: s. 124(1) and (5). [ 19 ] A trustee’s responsibility in dealing with proofs of claims or proofs of security is set out in s. 135 BIA. It says, in part: 135.

(1) The trustee shall examine every proof of claim or proof of security and the grounds therefor and may require further evidence in support of the claim or security. . . . . .

(2) The trustee may disallow, in whole or in part, (

a) any claim; (

b) any right to a priority under the applicable order or priority set out in this Act; or (

c) any security

. . . . .

(4) A determination under subsection (1.1) or a disallowance referred to in subsection (2) is final and conclusive unless, within a thirty day period after the service of the notice referred to in subsection (3) or such further time as the court may on application made within that period allow, the person to whom the notice was provided appeals from the trustee’s decision to the court in accordance with the General Rules.

(5) The court may expunge or reduce a proof of claim or a proof of security on the application of a creditor or of the debtor, if the trustee declines to interfere in the matter. [ 20 ]

Section 135 creates a two sided token. If a trustee disallows a creditor’s claim the creditor’s only remedy is that given by s.- s. (4). If a trustee disallows a creditor’s claim the only person adversely affected by the trustee’s decision is the creditor so s.-s. gives a right of appeal to it. If the creditor does not appeal a disallowance it cannot be allowed to commence or continue a separate lawsuit because the matter is barred by issue estoppel. The s.-s. makes it so, as is pointed out in Re Alloy Wheels International (Canada) Ltd., 15 C.L.R. (3d) 253 (Ont.

Reg.) . [ 21 ] If a trustee allows a claim other creditors and the bankrupt are adversely affected, so s.-s. (5) gives then a right to challenge the trustee’s decision. There is little case law on s.-s. (5). Houlden & Morawetz, Bankruptcy & Insolvency Act (The 2002 Annotated) say that “in effect” a motion under the s.-s is an appeal by a creditor or the bankrupt of the trustee’s allowance of a claim, p. 551. [ 22 ] Re Purdy, 1997 CanLII 2168 (BC SC) , 50 C.B.R. (3d) 225 (B.C.S.C.) is a motion by the bankrupt while still in bankruptcy to expunge a claim admitted by the trustee.

It refers to some of the limited case law. Re Marsuba Holdings Ltd., 1998 CanLII 5248 (BC SC) , 8 C.B.R. (4 th ) 268 (B.C. Reg.) is a motion by a creditor to have another creditor’s admitted claim expunged while the bankrupt was still in bankruptcy. [ 23 ] As I earlier noted, this lawsuit was not started until after both bankrupts were discharged and the trustee was discharged. [ 24 ] The wife now wants to litigate the very issue that the trustee decided. This is a collateral attack of the trustee’s acceptance of the Plaintiff’s claim.

The wording of ss. 124 and 135, the purpose of the sections and the availability of a de facto appeal of a trustee’s allowance of a claim negate against the wife. The trustee had jurisdiction to decide and decided. He did not decide something he did not have jurisdiction to decide and he did not exceed his jurisdiction in deciding. The jurisdiction to decide includes wrongly deciding as well as rightly deciding. Jurisdiction does not depend on the rightness of the decision. [ 25 ] Having said that, I do not say that the trustee’s decision was wrong. I say that the wife is bound by it.

She cannot take the benefits of the BIA without its burdens. [ 26 ] Parliament intended that the trustee decide and that his decision have a binding effect in law, subject to rights of appeal. [ 27 ] A vendor of land has a lien for whatever is owing to it. That is law. The issues the trustee decided were whether anything was still owing and if so what. Those are decisions of fact. [ 28 ] Regardless which label is used, issue estoppel, res judicata, or whatever, the wife is not free to ignore the trustee’s decision to accept the Plaintiff’s claim and as a secured creditor. [ 29 ] Mr.

Barnes also argues that the Plaintiff’s claim is limitation period barred. The simple answer is that in December, 2000 the trustee in writing accepted the Plaintiff’s claim to be a secured creditor so that must now be the starting point. Any argument that a creditor’s claim was limitation period barred before the trustee accepted it is just a collateral attack on the trustee’s decision. It is too

late. Any limitation period must now start with the written acknowledgement of the debt, being the trustee’s written acceptance of the claim. Decision [ 30 ]

Summary judgment is given to the Plaintiff, being an order nisi with a three month redemption period from the date of this decision. The amount is the amount accepted by the trustee updated to the date of this decision. [ 31 ] The Plaintiff will have full solicitor and client costs for redemption purposes only, the taxation to be adjourned sine die if the Plaintiff wishes. [ 32 ] The wife’s cross-application is necessarily dismissed. [ 33 ] Mr. Barnes left a packet of cancelled cheques with me. He can get them from the Masters’ secretary. HEARD on the 26 th day of February, 2003. DATED at Edmonton, Alberta this 1 st day of April, 2003. __________________________ M. FUNDUK M.C. C.Q.B.A.