KMA(I) Inc. v., 2011 ABQB 322

Court of Queen ’ s Bench of Alberta Citation: KMA(

I) Inc. v. 1390236 Alberta Ltd., 2011 ABQB 322 Date: 20110512 Docket: 1003 09677 Registry: Edmonton Between: KMA (

I) Inc. Plaintiff - and - 1390236 Alberta Ltd. Defendant _______________________________________________________ Memorandum of Decision of W.S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This application raises the issue of the effect of a foreclosing mortgagee excepting certain interests from a Final Order for Foreclosure. In this case, the mortgagee wishes to except a leasehold interest from the Final Order but on the condition that a lien filed against the leasehold interest be removed. The lienholder argues that if the lease stays the lien should stay as well.

The lienholder concedes that the lien interest would not remain against the fee simple, only against the interest of the tenant. Counsel could not find any authority directly on point. [ 2 ] Typically, a Final Order for Foreclosure forecloses the owner’s interest and provides that title issue free from any encumbrances subsequent to the interest of the foreclosing mortgagee. However, in some instances, the ‘burden’ of an encumbrance is really seen as a benefit and the foreclosing mortgagee wishes to except it from the interests cleared from title. Our Court of Appeal in Manufacturer’s Life Insurance Company v.

J.K.P. Holding Company Ltd. (1986) 44 Alta. L.R. (2d) 390 , 1986 ABCA 98 shows that

this is possible. [3] Whether the foreclosing mortgagee enjoys privity of contract or estate with the exempted tenant raises interesting factualquestions. See Lavalin Services Inc. v. National Life Assurance Company of Canada, 1984 ABCA 106 , 1986 42 Alta. L.R.(2d) 28 (C.A.). Excelsior Life Insurance v. Canadian Imperial Bank of Commerce et al, (1988) 1988 ABCA 158 , 59 Alta.L.R. (2d) 107 (CA) (a case argued by J. B. Hanebury, as she then was). Manufacturers Life Insurance v. Toronto Dominion Bank,(1988) 1988 ABCA 351 , 63 Alta. L.R. (2d) 80 (CA) and Integrated Building Corp. Ltd. v.

Macil Group Ltd. (1989), 1989ABCA 278 , 71 Alta L.R. (2d) 225. However I need not decide that issue here. [4] The ability of a foreclosing mortgagee to exempt an interest does not include a power to ‘clean it up’ to the prejudice ofparties whose claims depend on that interest. cf. Manufacturers Life Insurance Company v. Toronto Dominion Bank (above) at p. 83. Accordingly, a foreclosing mortgagee who exempts an interest must that interest as it finds it, warts (or liens) and all. [5] The parties will bear their own costs of this application. Heard on the 4th day of May, 2011.

Dated at the City of Edmonton, Alberta this 12th day of May, 2011. W.S. Schlosser M.C.C.Q.B.A. Appearances: Gary Yasinski Shtabsky & Tussman LLP for the Plaintiff J. Delqardo Bishop & McKenzie LLP for leaseholder, 1453171 Alta Inc., operating as the Treasury Bryan Maruyama Parlee McLaws LLP for the lienholder, Sierra Lane Construction Ltd.