Resmor Trust Company v. Rahman, 2011 ABQB 725

Court of Queen ’ s Bench of Alberta Citation: Resmor Trust Company v. Rahman, 2011 ABQB 725 Date: 20111123 Docket: 1001 18821 Registry: Calgary Between: Resmor Trust Company Plaintiff - and - Muhammad Zia-Ur Rahman and Saira Mumtaz Khan Defendants _______________________________________________________ Reasons for Judgment of K.R. Laycock, Master in Chambers _______________________________________________________ [ 1 ] This foreclosure action was commenced December 21, 2010 in the Judicial District of Calgary in relation to lands located in St. Paul, Alberta.

The plaintiff alleges that the mortgage was granted under the terms of the National Housing Act and that as of December 21, 2010 the defendants were indebted to the plaintiff in the sum of $293,581.12. The plaintiff seeks various foreclosure remedies and a judgment against the defendants for the amount outstanding on the mortgage loan. [ 2 ] A preservation order was granted based on evidence that the property was vacant when inspected on December 13, 2010.

[3] On January 10, 2011, the defendants’ solicitor filed a demand of notice on their behalf. [4] The plaintiff’s appraiser attended the property on June 23, 2011 and conducted an inspection of the property. The appraiserestablished the fair market value of the property at $295,000. [5] On September 12, 2011 the plaintiff’s employee swore an Affidavit of Default which indicated a total outstanding of$300,064.84, made up of principle, interest and outstanding fees. On September 23, 2011, the plaintiff filed its application document fora hearing scheduled September 28, 2011.

The plaintiff applied for an order allowing it to purchase the property at fair market value andfor deficiency judgment against the defendants. The application was adjourned from September 28, 2011, to October 5, 2011. [6] The defendant Ms. Khan swore an affidavit setting out a course of conduct and dealings between the parties. She deposesthat she and the co-defendant used their joint resources to purchase the property which was initially registered in the name of Mr.Rahman only. On August 10, 2010 the property was transferred into Ms. Khan’s name only. On August 27, 2010 Mr.

Rahman’s spouse,Houda Chakir, filed a Matrimonial Property Certificate of Lis Pendens against the title. [7] In September 2010 the defendants contemplated selling the property and had it appraised at $325,000. There is no evidenceas to what steps the defendants took to try to market the property, but by December, 2010, they resolved to vacate the property andinformed the plaintiff. The plaintiff’s solicitor forward a demand letter to Mr.

Rahman along with a Notice of Intention to EnforceSecurity pursuant to the Bankruptcy and Insolvency Act. [8] The defendants offered to transfer the land to the plaintiff, which was not acceptable to the plaintiff and accordingly thisproceeding was commenced.

After the defendants’ counsel filed a demand of notice, a proposal was made to transfer the property to theplaintiff for its appraised value of $325,000 or any reasonably appraised value. [9] On January 31, 2011 the defendants’ lawyer tried to contact the plaintiff’s lawyer with respect to the offer, without success.On February 4, 2011 the defendants’ counsel wrote to the plaintiff’s counsel requesting a response to their earlier proposal.

On March 8,2011, the defendants’ counsel again wrote to the plaintiff’s counsel requesting a response to their proposal. [10] On July 28, 2011, the plaintiff’s counsel forwarded a copy of its appraisal and suggested the property be transferred by thedefendants to the plaintiff at the fair market value of $295,000. On August 8, 2011, the defendants’ counsel confirmed that thedefendants were prepared to transfer title of the lands to the plaintiff provided there were no further obligations to the plaintiff. [11] On August 10, 2011, Mr.

Bond took charge of the file and responded that because of the existence of the Certificate of LisPendens a transfer of the land was not acceptable. In addition, he pointed out that the mortgage was a high a ratio insured loan which thedefendants would be liable for any deficiency. No further proposals were exchanged. At the time of hearing of this application thedefendants complained about a prejudicial delay in the process caused solely by the plaintiff. [12] The plaintiffs delay in proceeding in a foreclosure context has been considered on numerous occasions by the court: YorkshireTrust Company v.

Armwest Development Ltd. [1985] A.J. No. 688, North American Life Assurance Co. v. Greater EdmontonDevelopment Corp. [1994] A.J. No. 853, Royal Trust Corporation of Canada v. 371890 Alberta Ltd. [1993] A.J. No. 867, AlbertaMortgage and Housing Corporation v. Maplewood Properties Ltd. [1988] A.J. No. 365, Morguard Trust Corporation v. 371890Alberta Ltd. (AB QB), Alberta Home Mortgage Corporation v. Castle Ridge Apartments Ltd.(AB QB), Morguard Trust Company v. Schneider [1993] A.J. No. 67, Wood v.

Wood Enterprises Limited (Oral decision August 23,1991) Supreme court of Nova Scotia, Servus Credit Union Ltd. formerly known as Community Credit Union Ltd. v. Bardenhagen(Oral Decision) Action No. 0900108 ABQB (Master), upheld on appeal (Oral decision) September 21, 2011 ABQB (Justice). [13] The Alberta Court of Appeal in Yorkshire Trust held that in the case of an Order for Sale to the lender, the value should befixed on the date when the lender was first entitled to apply for such an order, or the day when the order is obtained, whichever is thehigher.

In Royal Trust Corporation of Canada v. 371890 Alberta Ltd., Master Funduk commented about this decision at paragraph 50:

The end result of the decision is that if the mortgagee unnecessarily drags the action on, the mortgagor should not be prejudiced because of a drop in market value. To do so would be an abuse of the judicial process. Without more, mortgagees who commenced foreclosure proceedings should prosecute the action with reasonable dispatch... [ 14 ] In Maplewood Properties Ltd., Quigley J. reduced the amount of the plaintiff’s claim because of a delay in proceeding. The plaintiff first applied for a Rice Order in April, 1985, and did not proceed with the application.

A further motion was to be heard on May 15, 1985, and did not proceed. On November 12, 1986, the defendant filed a Notice of Admission of Facts, acknowledging the plaintiff’s claims. The motion for a Rice Order did not proceed until October 6, 1987. The court selected November 15, 1986 as the date to calculate the mortgage balance because it was a date immediately following the defendant’s admission of liability. [ 15 ] The most recent decision is the decision of Servus Credit Union where the owners moved out of the property in the summer of 2008, having ceased making mortgage payments in March, 2008.

The second mortgagee commenced a foreclosure action, obtained a preservation order and in November 2008 decided not to proceed further. The plaintiff commenced its foreclosure action on its first mortgage and eventually obtained an appraisal of the property in the summer of 2009 when the property was valued at $130,000. An order nisi was obtained on June 8, 2010 at which time the debt was approaching $123,000.

In the summer of 2011, with a new appraisal in hand, the plaintiff applied to purchase the property for $71,000 and for a deficiency judgment of approximately $80,000. [ 16 ] Master Hanebury concluded that the lender could have obtained the property when it was valued at $130,000.00, a value slightly greater than the debt, rather than allowing the debt to run and allowing the property to deteriorate. The second issue was the lender’s claim to ongoing interest, maintenance costs and solicitor client fees.

Master Hanebury referred to the Schneider decision and Maplewood Properties Ltd. , where Quigley J. stated in part: ...while litigants may choose to delay proceedings in hope of anticipated favourable changes, in certain circumstances, [the] total amount recovered may be curtailed where fairness to the debtor requires it. [ 17 ] Master Hanebury concluded that where a lender is foreclosing in a situation involving personal liability, the lender has an obligation to proceed in a reasonably expeditious fashion.

The Master determined that the lender failed in its obligation and restricted the interest, maintenance costs, legal fees and tax adjustment to October 8, 2010. [ 18 ] At the appeal, heard on September 21, 2011 Burrows J. upheld Master Hanebury’s decision. [ 19 ] The first question is whether there was an inordinate delay in the prosecution of this action. From the time of the defendants offer in January 2011 until the plaintiff obtained an appraisal report in June 2011 there is no evidence of the plaintiff doing anything to advance this action or respond to the settlement proposal.

In January, 2011, it should have been obvious to plaintiff’s counsel that a transfer of land would be unacceptable to the plaintiff, given the existence of the Matrimonial Property Certificate of Lis Pendens registered on the title. This impediment was not recognized until Mr. Bond took control of the file in August, 2011. [ 20 ] Given that the defendants were willing to cooperate in giving title to the plaintiff, the only issue would have been the valuation of the property.

Therefore, if the plaintiff did not wish to accept the defendants’ appraisal, it should have ordered its own appraisal by the end of January 2011. At that time it would have been apparent to the plaintiff that there was a small deficiency when recoverable solicitor client costs and interest were added to the principal balance. The plaintiff could have been in a position to have made their application for a Rice order by the end of February, 2011. The interest and costs to maintain the vacant property would have been minimized.

The plaintiff’s unexplained and inexcusable delay was prejudicial to the defendants. [ 21 ] To be clear it is not every delay which can be seized upon by a defendant to argue prejudice. Actions may be delayed for any number of valid reasons. There may be ongoing negotiations, which the court would encourage. A deponent may be absent and unable to complete an affidavit. People, who are essential to the character the action, may be ill or on holidays. Appraisers may be delayed in obtaining access to the property. A four or five month gap in a foreclosure may well be justified.

It is the lack of explanation in this case, in the face of the complaint by the defendant, that is a cause for concern. [ 22 ] There are, of course, decisions which have been critical of the plaintiff commencing a proceeding too quickly or continuing a

proceeding where there is minimal arrears. The court, in its supervisory role, may stay proceedings or order costs against the overzealous plaintiff. Conversely an unexplained gap in proceedings which is prejudicial to the defendant must also be remedied. The remedy must be measured and appropriate to the facts of each case. [ 23 ] The plaintiff has applied for an order allowing it to purchase the property at the appraised fair market value. The only evidence of value available to the court is the affidavit of value filed by the plaintiff which establishes the fair market value of the property at $295,000.

There is no evidence that the property depreciated in value during the period of delay from February to June, 2011. The reference in the defendants affidavit to a prior appraisal is not acceptable evidence of the value of the property in establishing fair market value in this proceeding. It would be necessary for the appraiser to have filed an affidavit of value and thus be subject to questioning. [ 24 ] The date for the calculation of the mortgage indebtedness shall be February 28, 2011.

This is a reasonable date by which the plaintiff, on the facts of this case, should have been in court applying for a Rice order. The plaintiff would have been entitled to an order for immediate possession since the property was vacant and would have been entitled to its costs of preserving and maintaining the property until that date. Since there have been no unnecessary steps taken by the plaintiff, it shall be allowed its solicitor client costs, which shall be fixed by a Review Officer, on notice to the defendants counsel. Heard on the 05 th day of October, 2011.

Dated at the City of Calgary, Alberta this 23 rd h day of November, 2011. K.R. Laycock M.C.C.Q.B.A. Appearances: Tyler Bond Gowling Lafleur Henderson LLP for the Plaintiff Mercy A. Amanoh Amanoh Law Firm for the Defendants