David M. Gottlieb, Professional Corporation v. Olympia Trust Company, 2011 ABQB 317

Court of Queen ’ s Bench of Alberta Citation: David M. Gottlieb, Professional Corporation v. Tymkow, 2011 ABQB 317 Date: 20110511 Docket: 0901 05263 Registry: Calgary Between: David M. Gottlieb, Professional Corporation and Olympia Trust Company Plaintiffs - and - Lance Dean Tymkow Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D. Macleod _______________________________________________________ Introduction [ 1 ] Blair and Nick Nikiforuk bring an application to set aside, vary or discharge my previous order made on December 17, 2010.

That Order was to disperse funds from the proceeds of the sale of the foreclosed Lands to various interest holders on title, including the Respondent McEwan Fuels & Fertilizers Inc. [ 2 ] The Applicants argue that they were not given notice of the previous hearing and that they hold interests that have priority over other interests that were ordered to be paid in my December 17, 2010 Order, including that of the Respondent.

[ 3 ] On January 26, 2011, I stayed the application of my December 17, 2010 Order pending a re-hearing of the matter. [ 4 ] The Respondent argues that the Applicants do not hold valid interests or if they do that these interests are lower in priority to its interest. Facts [ 5 ] On June 20, 2005 the Lands were transferred to the Defendant, Lance Dean Tymkow. [ 6 ] On October 4, 2006, in exchange for the sum of $286,000 the Defendant allegedly executed a promissory note and agreement charging the Lands in favour of Sandra Joy Lamoureux.

A caveat was filed by Lamoureux on November 7, 2006 (the Lamoureux Caveat) to protect this interest. [ 7 ] On July 24, 2007, in exchange for the sum of $46,181.98, the Defendant allegedly executed a promissory note in favour of Joan Tymko. A caveat was filed on August 13, 2007 to protect this interest (the Tymko Caveat). [ 8 ] On or about September 9, 2008, the Defendant mortgaged the Lands to Federal Mortgage Corporation Ltd. (Federal) in exchange for funds in the amount of $28,614.34 (the Federal Mortgage).

The mortgage was registered against title on September 9, 2008. [ 9 ] On September 30, 2008, the Respondent’s mortgage for $70,000 was registered against title. [ 10 ] On or about March 28, 2010, in consideration of the sum of $200,000 paid to her, Lamoureux transferred the Lamoureux Caveat, Tymkow transferred the Tymkow Caveat for the sum of $15,000, and on the next day Federal transferred the Federal Mortgage to the Applicant, Blair Nikiforuk. Issues [ 11 ] The issue is whether the Applicants hold valid interests in the caveats and mortgage?

And if they do, whether these interests have priority over the interest of the Respondent? Law and Analysis Priority of a transferred caveat [ 12 ] The Respondent argues that ss. 135 and 136 of the Land Titles Act , R.S.A. 2000, c.

L-4 [the Act] should be read to mean that a transferee must register the transfer in order to attain the priority of the original transferor. [ 13 ] Sections 135 and 136 of the Act state: 135 So long as a caveat remains in force, an instrument registered subsequent to the caveat and purporting to affect the land, mortgage or encumbrance in respect of which the caveat is lodged is subject to the claim of the caveator.

136(1) A caveat may be transferred by a caveator, or by the caveator’s agent where the caveat is signed by the agent, and on registrationof a transfer of the caveat, the transferee has the same priority as if the transferee were the original caveator.

(2) On registration of a transfer of caveat, the transferee becomes entitled to all rights granted by this Act to the caveator and subject toall liabilities imposed by this Act on the caveator.

(3) A transfer of caveat shall specify an address at which notices and proceedings relating to the caveat or the subject-matter of thecaveat may be served. [14] The Respondent’s

interpretation of the Act is not supported by long standing case law. It is not necessary for the transferee toregister the transfer. When a caveated interest is transferred, the transferee can rely on the priority established by the original caveator:Gas Exploration Company of Alberta Limited and Lee v. Cugnet, (1954) (SK KB), 12 W.W.R. 177 (SKQB); cited withapproval in Calford Properties Ltd. V. Zeller’s (Western) Limited, 1972 ALTASCAD 50 , [1972] 5 W.W.R. 714 (ABCA) at p.723. [15] While it is not necessary to register a transfer, s. 136 permits it and it is prudent for the transferee to do so.

The purpose of s.136 is to permit the transferee to register the transfer while maintaining the priority right that has been established by the originalcaveator. An obvious reason to do so would be to ensure that the address for service is updated to avoid having the caveat lapse due tothe failure to respond to an application to have the caveat discharged: see ss. 138 and 141 of the Act. Another would be to protect againstthe risk that the original caveator makes a subsequent transfer of the interest to an innocent purchaser.

Yet another is what happenedhere; the Applicants did not receive notice of an application made by other interest holders to have the sale proceeds of the Lands paidout. Therefore, while registering the transfer of a caveat is not necessary, s. 136 permits it and a transferee is prudent to do just that. Validity of the Applicant’s caveats [16] The filing of a caveat warns the world that an interest against the land is claimed but the caveat is not proof of the interestclaimed: Canada Trustco Mortgage Company v. Wycott, 2002 ABQB 399; C.P.R. v. Disctrict Registrar, (1956) (BCSC), 14 D.L.R. 333, 5 W.W.R. 201 (Man.

Q.B.). The caveat is only proof of priority. [17] The Applicant has presented some evidence going to the proof of the caveated claims: 1. Tymkow Caveat: Exhibit E of the December 15, 2010 affidavit of Blair Nikiforuk is a copy of the Tymkow Caveat which includesa copy of the promissory note signed by Lance Dean Tymkow for a debt in the amount of $46,181.98; 2.

Lamoureux Caveat: Exhibit A of the February 9, 2011 affidavit of Yolande Burneau is a copy of an acknowledgement ofindebtedness signed by Lance Dean Tymkow signed in March, 2010 in respect to the alleged promissory note charging the land datedOctober 4, 2006. [18] The Federal Mortgage was registered on title, rather than merely recorded on title by way of caveat. Therefore, the FederalMortgage does not need to be proved. Its registration on title is proof of the interest: ss. 53 and 54 of the Act.

There is, however, noevidence as to the amount left remaining under the Federal Mortgage and I will not disburse funds to the Applicants without suchevidence. [19] In respect to the Tymkow and Lamoureux Caveats, I do not believe it is fair to either party to make a determination as to theirvalidity when there has not been a formal hearing on validity. In particular, the Applicants’ materials are primarily tailored to show thatthey have caveats, rather than proving their validity.

The Respondent, presumably having no access to disclosure, has relied entirely onthe Applicants’ lack of evidence to argue that the Applicants have not satisfied the burden of proof. In this circumstance, fairnessdemands that the parties

schedule another hearing to determine the validity of the caveats and what amounts are currently owed inrespect to these caveats, if they are valid.

Conclusion [ 20 ] I adjourn the matter sine die with the expectation that the parties promptly

schedule another hearing before me to determine the outstanding issues. [ 21 ] As I have yet to make a ruling in this matter, costs will follow the next hearing. Heard on the 21 st day of April, 2011. Dated at the City of Calgary, Alberta this 11 th day of May, 2011. A.D. Macleod J.C.Q.B.A. Appearances: Sean M. Stepchuk Fraser Milner Casgrain LLP Edmonton, AB for the Respondent McEwan Fuels & Fertilizers Inc. Mark H. Demas Duncan & Craig LLP Edmonton, AB for the Applicants Blair Nikiforuk and Nick Nikiforuk