Lyons v. Baldwin, 2012 ABQB 12

Court of Queen ’ s Bench of Alberta Citation: Lyons v. Baldwin, 2012 ABQB 12 Date: 20120106 Docket: 1004 00404 Registry: Grande Prairie Between: Christina Lyons Plaintiff - and - Alvin William Baldwin and Derek Gavin Van Tassell Defendants _______________________________________________________ Memorandum of Decision of L. A.

Smart, Master in Chambers _______________________________________________________ Application [ 1 ] The Defendant Alvin William Baldwin ( “ Baldwin ” ) applies to have this action struck as against him on grounds that it is an abuse of the process of the court or is otherwise frivolous and vexatious, or alternatively, that there is no merit to the claim or any portion of it as against Baldwin. Background

[ 2 ] John Stephen Lyons ( “ Steve ” ) assaulted Baldwin. Baldwin obtained a judgment against Steve for personal injuries arising from the assault on November 7, 2001. He had registered a writ of execution against lands owned by Steve (the “ Lands ” ) on January 13, 2006. On February 13, 2006 Steve assigned in to Bankruptcy. Baldwin was appointed an inspector in Steve ’ s bankruptcy. [ 3 ] Based on the value of the Lands and the balance outstanding under the mortgage on the Lands, it was determined by Steve ’ s trustee in bankruptcy that there was no exempt equity for creditors in the estate.

On December 28 th , 2006 the house located on the Lands was destroyed by fire. Steve held a fire insurance policy with respect to the house and its contents with the Alberta Motor Association Insurance Company ( “ AMA ” ). The mortgagee demanded repayment of its mortgage in full in April, 2007 as the house had not been rebuilt and the value of the land alone if realized upon was insufficient to cover the mortgage indebtedness. By registration of a transfer of land dated May 11, 2007 on May 24, 2007, the Lands were transferred to Christina Lyons ( “ Christina ” ).

Also on May 24, 2007, Baldwin obtained leave of the Bankruptcy Court to enforce his judgment. [ 4 ] Sometime in mid-2007 Christina entered into a contract to have the house reconstructed. Pursuant to an arrangement reached among Steve, Christina, Baldwin, AMA and the Trustee in bankruptcy, funds were advanced by AMA to the Toronto Dominion Bank for payment to the building contractor directly rather than through either Steve or Christina.

Attached to the Affidavit of Christina sworn in these proceedings on September 15, 2010, is the body of the affidavit of Rick Douglas sworn November 24, 2008 and filed in the Steve ’ s bankruptcy proceedings on November 26, 2008. Mr. Douglas is a claims Examiner with the AMA. He stated in that affidavit that AMA had advanced $432,987.66 in insurance proceeds to rebuild the home and that there were additional proceeds of $103,140.44 to be advanced.

The purpose of his affidavit was to in effect inter-plead the additional proceeds as Baldwin was then seeking to enforce his writ due to a breakdown in the arrangement previously made among the parties. [ 5 ] In September 2007, Christina sent Baldwin a notice to lapse writ to the Land Titles address being the address of the law firm that filed the writ on Baldwin ’ s behalf. The law firm did not receive the notice as it had moved to a new location and the envelope containing the notice was returned to Christina.

Notwithstanding, in accordance with Land Titles practice, Baldwin ’ s writ was lapsed and discharged from title in October 2007. [ 6 ] Baldwin brought an application on July 28, 2008 to restore the writ to the title. I ’ ve been provided with a copy of the transcript of those proceedings. Justice Wilkins determined that Christina had agreed that the writ could stay on title on the understanding that Baldwin would permit insurance funds to be advanced to complete construction of the house.

Furthermore, he was of the view that Christina knew that Baldwin was not in receipt of the notice to lapse and that in the face of the agreement, it was appropriate to restore the writ to the title. He observed that the writ would attach only to Steve ’ s interest and not to any interest of Christina as she did not owe the debt. It is plain from reading the transcript of the proceedings that he made no determination as to whether or not Steve had any interest in the Lands.

He finally observed that the writ would sit there until Christina sold or otherwise disposed of the Lands. [ 7 ] Following restoration of the writ to the title, Baldwin proceeded under the provisions of The Civil Enforcement Act, RSA 2000, c.C-15 to recover his judgment against the Lands. A Notice of Intention to Sell Land dated October 27, 2008 was sent to Christina by registered mail.

It is unclear exactly when but ostensibly not long before Christina paid out the amount under the writ, a realtor attended at the Lands and advised Christina that the Lands were being put up for sale so that proceeds could be used towards satisfaction of the Baldwin writ. On questioning of Mr. Baldwin, he denied having any knowledge of a realtor having instructions to take such steps. This is not particularly surprising as the process for sale once a bailiff is instructed is in the hands of the bailiff.

It is likely safe to speculate that is the case here. [ 8 ] In light of these steps being taken, Christina obtained funds to pay Baldwin. On payment a Satisfaction Piece together with discharges of all related registrations were provided as a condition. No express release was exchanged between Christina and Baldwin. Christina then commenced this action in April, 2010 which was later amended on July 27, 2010. Discussion [ 9 ] The substance of the allegations against Baldwin are set out in paragraphs 13-15 of the Amended Statement of Claim.

Baldwin as an inspector in the Bankruptcy knew or ought to have known that Steve had no non-exempt equity in the Lands when it was transferred to Christina. It is also alleged this was affirmed by Justice Wilkins at the application to restore the writ when he observed the writ did not attach to Christina ’ s interest.

[ 10 ] Baldwin argues that the action should be struck as there can be no duty owed by him, his solicitors, or his agents to Christina as a party adverse in interest. To proceed with this action amounts to a collateral attack of the Order of Justice Wilkins to restore the writ. Finally, he argues that based on the facts of this case the action ought to be dismissed summarily. [ 11 ] Dealing first with Justice Wilkins ’ Order, it is clear from the transcript of the proceedings that he was not determining the validity nor the degree to which the writ attached to the Lands.

The writ was restored to reflect the agreement among certain parties most particularly Christina and Baldwin, and because the lapsing of the caveat was done in a “ sharp ” manner, that is, by sending the Notice to Lapse to an address with the apparent knowledge it was no longer current. Although it is the Order that speaks, it cannot be read in a vacuum in an attempt to give it an affect which was not addressed in the application.

There is no collateral attack when looking to the substance of the Wilkins ’ Order. [ 12 ] Authorities are clear that parties in circumstances such as these do not owe one another a duty. However, this is not a typical direct debtor/creditor relationship. The allegation in this case is that Baldwin knew that the writ against Steve, regardless of whether or not it had been re-registered by court order, attached to no equity in the Lands.

It is argued on behalf of Baldwin that if there was an issue over exemptions or otherwise that it was open to Christina to object pursuant to the provisions of the Civil Enforcement Act (the “ Act ” ). The Act contemplates judgment debtors having the right to raise entitlement to exemptions within the prescribed waiting period. Others with an interest have a procedure to object when served with the notice of method of sale but no such notice was given in this case.

I do not see anything that would prevent an action being taken against a judgment creditor or his agents for improper conduct when realizing on assets. Christina says that even though Baldwin knew there was no equity to attach, he set about a course of conduct directly or through his agents whereby she was improperly threatened with the sale of her home. Her response was to find the money to pay the judgment creditor to stop the process and now she sues to recover those moneys.

Although somewhat novel, surely such conduct if proven to be true is not a question so clearly beyond doubt that it ought be struck as disclosing no cause of action. [ 13 ] The final consideration is whether or not

summary judgment dismissing the action is appropriate in the circumstances. Rule 7.3 of the Alberta Rules of Court sets out the test for

summary judgment:

(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds:

a) there is no defence to a claim or part of it;

b) there is no merit to a claim or part of it;

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) have been met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single and undivided debt, do one or more of the following:

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount;

b) if the only real issue to be tried is the amount of the award determine the amount or refer the amount for determination by a referee;

c) if judgment is given for part of a claim, refer the balance of the claim to trial or for determination by a referee, as the circumstances require. [ 14 ] The Rule operates in the same manner and follows the same legal principles as Rule 159 of the immediately previous version of the Rules: Kwan v. Superfly Inc. , 2011 ABQB 343 .

Summary judgment may be granted to a Defendant if the court is satisfied there is no merit to the claim. The test is also expressed as: the action is bound to fail; the claim does not raise a genuine issue for trial; or that the claim has no reasonable prospect of success.

[ 15 ] In my view, this action turns on one question, that is, could Baldwin reasonably believe that Steve had an interest in the Lands when steps were taken to sell the Lands pursuant to the provisions of the Civil Enforcement Act . Christina takes the simple position that at the time the Lands were transferred by Steve to her there was no non-exempt equity in the Lands available for creditors. The analysis done is based on the representations from Steve and Christina that at the time there was approximately $235,000 owing under a mortgage.

The residual land value was $70,000 and the insurance amount was $201,000. (Note: these figures vary among the various Affidavits of Steve and Christina but all serve to illustrate equity below the $40,000 exemption amount). Although no explanation is given it would appear the reference to $201,000 would be a cash payment if made by the insurer. [ 16 ] Although compelling it is plainly an over simplification of the circumstances. Inextricably connected to the Lands were the proceeds arising from the policy of insurance that Steve was entitled to receive for rebuilding of the home.

Based on evidence filed by Christina in this action AMA advanced $432,987.66 for rebuilding and paid in to court a further almost $50,000 also earmarked for rebuilding. Baldwin, in effect, postponed his writ to allow funds to be advanced by AMA for that purpose. It is true that Christina was the registered owner when rebuilding took place but that did not entitle her to receive the improvements arising from insurance proceeds. That benefit was and remained with Steve as the holder of the insurance policy. The writ against Steve ’ s interest would attach to his interest in the Lands.

Based on the events and their timing, it would not be unreasonable to conclude Steve had a continuing interest in the Lands. The exact extent of his interest would be difficult to ascertain and confounded by contributions made by Christina and the “ rebuilding ” of a home that was markedly different from the original structure but the Civil Enforcement Act only requires there to be some interest. It contemplates enforcement proceedings can be taken against land in the face of exemptions being available to execution debtors. The steps taken were to recover against Steve ’ s interest.

Steve was aware that the steps were being taken. When the notice of intention was served on him, he did not claim entitlement to an exemption. Conclusion [ 17 ] It was argued by counsel for Christina that this action finds its basis in deceit. Baldwin as an inspector in Steve ’ s bankruptcy knew or perhaps ought to have known of the conclusions reached by the trustee in 2006 but he was dealing with substantially different circumstances when enforcing his writ almost 3 years later.

The facts known to him when the enforcement proceedings were at the point where a notice of method of sale would be served, would lead him to reasonably believe that Steve continued to have an interest in the Lands. In my view, whether or not Steve ultimately would have been found to have an exigible interest is of no moment. It could be that at that point both Baldwin and Christina were mistaken as to their respective legal rights and obligations. That dispute could have been determined in the context of the Civil Enforcement Act or a separate action seeking declaratory relief.

Christina chose to take a different tact. She paid out Baldwin. Christina received resolution of the claim against the Lands by Baldwin and a discharge of Steve ’ s judgment which each separately but most certainly collectively amounted to good consideration for the payment. [ 18 ] Accordingly, the application is granted and the action by the Plaintiff against the Defendant Baldwin is hereby dismissed. Dated at the City of Edmonton, Alberta this 6 th day of January, 2012. L. A. Smart M.C.C.Q.B.A.

Appearances: Pierre G. Asselin Durocher Simpson Koehli Erler for the Plaintiff, Christina Lyons P. Smith Emery Jamieson LLP for the Defendant, Alvin Baldwin