Cwalina (Estate) v. Parkland (County), 2012 ABQB 430

Court of Queen ’ s Bench of Alberta Citation: Cwalina (Estate) v. Parkland (County), 2012 ABQB 430 Date: 20120629 Docket: 1103 18941 Registry: Edmonton Between: Dan Beaudreau, Executor of the Estate of Franz Cwalina, deceased, Guenther Glaesing and Fred Hartman Applicants - and - Parkland County and 1260582 Alberta Ltd. Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.H. Goss _______________________________________________________ I.

Introduction [ 1 ] The Applicants entered into Lease-Option to Purchase Agreements with Lake Eden Resorts Ltd. for “lots” in an unsubdivided area. Each filed caveats and built cottages. The land was subsequently sold in a tax sale. The Applicants did not receive

notice of the tax sale because Parkland County sent the required notices to old addresses on file at the Land Titles Office in relation to the caveats. [ 2 ] The Applicants now seek a declaration that the tax sale was unlawful because the County was negligent in failing to give them notice, and breached its duties to them under ss. 412 and 421(4) of the Municipal Government Act, RSA 2000, c M-26 (MGA). II.

Facts [ 3 ] In 1958 and 1959, each of the Applicants, Franz Cwalina (Boudreau is a party as Executor for the Estate of Cwalina), Glaesing, and Hartman, entered into “Lease-Option to Purchase Agreements” (the Agreements) with Lake Eden Resorts Ltd. for “Lot 1”, “Lot 2” and “Lot 3” of an unsubdivided part of Lake Eden property. They built cottages which have been used by them continuously since that time.

In 1967, they registered caveats against the property claiming a leasehold interest under the Agreements, and each exercised their option to purchase. [ 4 ] Litigation over the Agreements led to a 1978 judgment by Justice A.J. MacDonald declaring that Cwalina was the equitable owner of his lot, but that legal title could not transfer because there was no plan of subdivision filed at the Land Titles Office and the lands had not yet been subdivided. (Cwalina was a representative litigant for the other two Applicants.

By agreement the judgment was binding on Glaesing and Hartman.) [ 5 ] The Applicants did not change the nature of their interest under the caveat to claim equitable title following MacDonald J.’s decision. The land has never been subdivided and Lots 1, 2, and 3 do not actually exist. [ 6 ] The Applicants paid their share of municipal taxes on the land, first by forwarding payment to the landowner, who was the party legally responsible for paying all taxes on the property.

Later, at the Applicants ’ request, the Respondent, Parkland County (the County), provided each Applicant with a letter outlining a tax breakdown as a courtesy (the Courtesy Letters). The breakdown was based on the assessed values of the cottages, not the values of the lots, since the property had not been subdivided.

While they paid a share of the property taxes, paying directly to the County after 1985, they were never the parties who owed the taxes, as they were not fee simple owners of the properties. [ 7 ] In 1988, each of the Applicants filed a change of address for service in relation to their caveats, but did not change the substance of the caveat.

That address is not the current address for any of the Applicants. [ 8 ] The Applicants provided change of address notices to the County Assessment Services from time to time as their addresses changed, and they continued to receive the Courtesy Letters, but they did not change the addresses in the Change of Address for Service at the Land Titles Office in relation to the caveats. [ 9 ] The County gave evidence through its officer, Pat Vincent. Mr. Vincent explained that the County has three separate and distinct departments: (

a) Assessment Services assesses property values; (

b) Finance Services is responsible for providing Official Tax Notices and issuing receipts for tax payment; and (

c) Legislative and Administrative Services is responsible for the collection of tax arrears through tax recovery proceedings; [ 10 ] The Finance Services Department sends out Official Tax Notices to the fee simple owners based on the owner ’ s address in its

database, updated regularly through the Alberta Land Titles Office. To notify caveat holders of tax recovery proceedings, the Legislative and Administrative Services rely on the Finance Services Department database for addresses; that database relies in turn on the addresses received from Alberta Land Titles, being the addresses that appear on the caveats on the Certificate of Title.

Legislative and Administrative Services does not ask Assessment Services about alternative addresses. [ 11 ] Pat Vincent advised that in this case, Legislative and Administrative Services relied on the addresses listed on the Certificate of Titles to send notices to the caveat holders.

Further, he stated that the Courtesy Letters were not official requests for payment of taxes, but rather information provided to the Applicants at their request as part of the Agreements with the original property owner. [ 12 ] The Applicants had personal contact with the County at various times over the years: one of the Applicants attended a public hearing called by the County in August 1991, where he spoke about his and the interests of two others in the property, a comment noted in the Minutes of the Council meeting; one of the Applicants attended a Development Appeal Hearing in 1991 in which he filed a written brief describing the MacDonald J. judgment and the leaseholders' concerns; and one of the Applicants had several discussions with a County assessor between 2007 and 2009. [ 13 ] On August 18, 2010 the Property was sold in a tax sale to the Respondent, 1260582 Alberta Ltd. (the new owner).

The County had sent a letter on July 14, 2010 to the Applicants at their old addresses as shown on the caveats filed against the Certificate of Title, and not the address to which the Courtesy Letters had been sent, and so the Applicants did not receive notice of the tax arrears or the sale.

As a result of the tax sale, all encumbrances on title were removed, including the Applicants' caveats, and a new title was issued to the new owners. [ 14 ] On June 29, 2011, the new owners issued Notices to Vacate to the Applicants. [ 15 ] On October 13, 2011, the Applicants, Hartman, Glaesing, and Boudreau registered caveats against the new title claiming an interest as beneficial owners. III.

Legislation [ 16 ] The MGA provides: 412(3) The municipality must notify the persons who are liable to pay the tax arrears that a tax arrears list has been prepared and sent to the Registrar. ... 413(1) The Registrar must endorse on the certificate of title for each parcel of land shown on the tax arrears list a tax recovery notification. ... 417(1) Not later than the August 1 following receipt of a copy of the tax arrears list, the Registrar must, in respect of each parcel of land shown on the tax arrears list, send a notice to (

a) the owner of the parcel of land, (

b) any person who has an interest in the parcel that is evidenced by a caveat registered by the Registrar, and

(

c) each encumbrancee shown on the certificate of title for the parcel. ...

(3) The notice must be sent to the address shown on the records of the Land Titles Office for each person referred to in subsection (1). ... 421(4) Not less than 4 weeks before the date of the public auction, the municipality must send a copy of the advertisement referred to in subsection (1)(

a) to (

a) the owner of each parcel of land to be offered for sale, (

b) each person who has an interest in any parcel to be offered for sale that is evidenced by a caveat registered by the Registrar, and (

c) each encumbrancee shown on the certificate of title for each parcel to be offered for sale. ... 423(1) A person who purchases a parcel of land at a public auction acquires the land free of all encumbrances, except (

a) encumbrances arising from claims of the Crown in right of Canada, (

b) irrigation or drainage debentures, (

c) caveats referred to in section 39(12) of the Condominium Property Act , (

d) registered easements and instruments registered pursuant to

section 69 of the Land Titles Act , (

e) right of entry orders as defined in the Surface Rights Act registered under the Land Titles Act , (

f) a notice of lien filed pursuant to

section 38 of the Rural Utilities Act , (

g) a notice of lien filed pursuant to

section 20 of the Rural Electrification Loan Act , and (

h) liens registered pursuant to

section 21 of the Rural Electrification Long-term Financing Act . ... 428(1) A person may apply to the Court of Queen's Bench for an order declaring that the person is entitled to a part of the money in the account referred to in section 427(1) [the money paid for a parcel of land at a public auction] … [ 17 ] The Land Titles Act, RSA 2000, c L-4 provides:

131(1) Every caveat filed with the Registrar ... shall state some address or place at which notices and proceedings relating to the caveat or the subject-matter of the caveat may be served and the nature of the interest claimed and the grounds on which the claim is founded. ... 132(1) A caveator while the caveator ’ s caveat remains in force may file with the Registrar a notice of the change of address for service stated in the caveat, or in any previous notice of change of address for service.

(2) On receipt of a notice of change of address for service, in the prescribed form or to the like effect, and the Registrar ’ s proper fee, the Registrar shall enter the notice in the record and shall make a memorandum of it on the certificate of title affected by the caveat. ... 183(1) No action of ejectment or other action for the recovery of any land for which a certificate of title has been granted lies or shall be sustained against the owner under this Act in respect of it, except in any of the following cases: (

a) the case of a mortgagee as against a mortgagor in default; (

b) the case of an encumbrancee as against an encumbrancer in default; (

c) the case of a lessor as against a lessee in default; (

d) the case of a person deprived of land by fraud as against the owner of the land through fraud, or as against a person deriving title otherwise than as a transferee bona fide for value, from or through the owner through fraud; (

e) the case of a person deprived of or claiming any land included in a grant or certificate of title to other land by misdescription of the other land or of its boundaries, as against the owner of the other land; (

f) the case of an owner claiming under an instrument of title prior in date of registration under this Act, or under any law heretofore in force in any case in which 2 or more grants, or 2 or more certificates of title, or a grant and certificate of title, are registered under this Act or under any such law in respect of the same land.

(2) In any case, other than one mentioned in subsection (1), the production of the certificate of title or a certified copy of it is an absolute bar and estoppel to any such action against the person named in the certificate of title as owner or lessee of the land described in it. IV. Positions of the Parties [ 18 ] The Applicants seek a declaration that the tax sale of the three unsubdivided lots was illegal as a result of the County's negligence and breach of its duties to the Applicants under ss. 412 and 421(4) of the MGA .

Section 412(3) required the County to notify the persons who are liable to pay the tax arrears that a tax arrears list has been prepared and sent to the Registrar. The Applicants argue that they were not notified, as persons responsible to pay taxes, that a tax arrears list had been prepared and sent to the Registrar. [ 19 ] Further, s. 421(4) of the MGA provides that a municipality must give notice of the advertisement of a public auction to: (

a) the owner of each parcel of land to be offered for sale, (

b) each person who has an interest in any parcel to be offered for sale that is evidenced by a caveat registered by the Registrar, and (

c) each encumbrancee shown on the certificate of title for each parcel to be offered for sale.

[20] Under s. 417, the Registrar of the Land Titles Office must also provide a notice of warning of a tax sale to: (

a) the owner ofthe parcel of land, (

b) any person who has an interest in the parcel that is evidenced by a caveat registered by the Registrar, and (

c) eachencumbrancee shown on the certificate of title for the parcel. Section 417(3) specifies that such notice “must be sent to the addressshown on the records of the Land Titles Office” for each of those persons. [21] The Applicants note that while s. 417 expressly provides that Notice of Warning of a Sale must be sent to the address forservice on the caveat, s. 421 does not have a similar provision.

Therefore, the Applicants argue, the County’s authority was not restrictedto only sending the Notice to the address on file at the Land Titles Office, and it should have sent the Notice to the correct addresses,which the County's Assessment Office had in its records. The County did nothing further, even though it had actual knowledge from theApplicants of their current addresses, and had sent annual tax notification letters and receipts to those addresses. [22] The Applicants argue that the County should have made further inquiries as to the Applicants' correct addresses by contactingits other departments.

Where the MGA is unclear or vague about questions such as which address is to be used, it must be interpretedgenerously in favour of the interest holder. This case is distinguishable from the decision in EJS Holdings Ltd v Calgary (City) (1982),1982 ABCA 237 , 41 AR 439, [1982] AJ No 704 (CA) because the County had actual knowledge that the address where theNotice was sent was incorrect.

In EJS, the Court of Appeal held that the equivalent legislation (the Tax Recovery Act, RSA 1970, c 360)requiring that a tax notice be sent to caveators could not be interpreted as requiring that notice be served, even where the municipalityknew that notice had not been received (see paras 8-10). [23] The Applicants further submit that the County was aware of their beneficial ownership of the lots, because the Applicantsattended a Public Hearing called by the County Council and a Development Appeal Board hearing, and spoke with a County Assessor.As well, the Applicants note that they had duly paid all of the taxes set out in tax notification letters sent to them every year since 1985,and that there were no arrears on the Applicants’ portion of the taxes. [24] The Applicants conclude that the tax sale was illegal, given that notice was not properly given under ss. 412(3) and 421(4) ofthe MGA. [25] The new owner argues that its title is valid pursuant to the provisions of the MGA, it purchased the property free and clear ofthe applicants' claims, and a bona fide purchaser for value of real property benefits from indefeasibility of title once his title isregistered.

It relies on s. 183 of the Land Titles Act, which provides that no action lies for recovery of land against an owner to whom acertificate of title has been issued, except in limited circumstances that do not apply here. The new owners further argues that the caveatsfiled by the Applicants after the tax sale are void because they arise from the creation of an illegal subdivision. V. Issues [26] In considering the claim against the County for negligence and breach of the MGA, the following issues must be addressed: 1.

Was the County required to notify the Applicants under s. 412(3) of the MGA as the persons who were liable to pay the taxarrears? 2. Was the County required to send the s. 421 Notice to an address other than the address on file with the Land Titles Office? 3. Are the existing caveats enforceable? 4. Have the Applicants established damages against the County? 5. Should the Applicants receive some or all of the surplus sale proceeds?

VI. Analysis 1. Was the County required to notify the Applicants under s. 412(3) of the MGA as the persons who were liable to pay the taxarrears? [27] Section 412(3) required the County to notify the persons who were liable to pay the tax arrears that a tax arrears list had beenprepared and sent to the Registrar. I find that the Applicants were at no time the registered owners of the land, and were therefore neverliable to pay tax on the land. Further, the caveat did not identify the nature of the Applicants' interests under it as being equitable title,only a leasehold interest.

The fact that the Applicants did pay or contribute toward the taxes for which the registered owner was liabledoes not bring them within s. 412(3). 2. Was the County required to send the Notice under s. 421 of the MGA to an address other than the address on file with the LandTitles Office? [28] The Land Titles Office is a centralized repository of all information concerning a parcel of land, including all affectedinterests, officially recorded and filed by way of Certificate of Title.

The entire Land Titles system relies upon this statutorily basedcentralized system which enables parties to be informed of, and to certify, land ownership and interests claimed in specific parcels ofland, including the names and addresses of those who own or claim an interest. Those parties registering with the Land Titles Officehave an obligation to keep that registry updated in terms of their claims and their contact information.

Informal alternate means ofupdating information cannot substitute the need to keep the information at the Land Titles Office current for the sake of anyone wishingto access that information for the purposes of providing notice. [29] More specifically, a caveat holder is expected to update his or her contact information at the Land Titles Office in order tofacilitate receipt of notice of proceedings affecting the caveat. In this case, the Applicants last updated this information at the Land TitlesOffice in 1988. That information was not current in 2010. The responsibility for updating rests with the Applicants.

Informal notice to aparty cannot relieve that responsibility. [30] Likewise, the County is entitled to rely on the information filed at the Land Titles Office. The County is not required to takeadditional steps to ascertain if the information is correct or to take steps to locate the correct information. Again, the obligation to keepthat information current is on the caveat holder, who risks not receiving notice of any matter involving his/her caveat if the address at theLand Titles Office is not updated.

Any other system would be unreliable, cumbersome and defeat the purpose of a centralized landregistry system. [31] In my view, I am bound by the Alberta Court of Appeal decision in EJS Holdings that there is a clear distinction in the tax recovery legislation between sending notice and serving notice.

As noted in Elliot v Toronto(City) (1999), (ON CA), 43 OR (3d) 392, 118 OAC 362 in which the Ontario Court of Appeal was dealing withsimilarly worded legislation: “Receipt is not a necessary element of the concept of ‘send to’ …” The requirement under s. 421 of theMGA is to “send a copy”, not to serve or to ensure receipt.

In this case, notice was sent in accordance with the provisions of the MGA. [32] Moreover, I reject the Applicants' argument that the County cannot assume that it can simply serve notice under s. 421 of theMGA on the caveat holders at the address noted on the Certificate of Title because s. 421 differs from s. 417.

Principles of statutoryinterpretation, most recently discussed by the Supreme Court of Canada in R v Tse, 2012 SCC 16 at para 20, require the Court to read thewords of legislation “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, theobject of the Act, and the intention of Parliament”, citing EA Driedger, Construction of Statutes, 2nd ed (Toronto: Butterworths, 1983) at87. [33] In my view, one must read the tax sale provisions within the entire legislative context.

Section 417 provides that notice of asale must be sent to property owners and those with a registered interest on title. It specifies that notice must be sent to the address in therecords in the Land Titles Office. Under s. 421, the County is required to publish advertisements giving notice of a public auction in theAlberta Gazette and the local newspaper. It further provides that a notice containing that advertisement must be sent to property owners

and those with a registered interest on title. Both s. 417 and s. 421 use virtually identical language to identify who will receive notice,and that language identifies the interest holders as any person who has an interest in the parcel evidenced by a caveat registered by “theRegistrar”, defined as the Registrar under the Land Titles Act.

Given the language of these provisions, it is illogical to suggest that theCounty has a more onerous obligation to determine the correct address from sources other than the Land Titles Office when sendingnotice containing the advertisement of the public auction, than when the notice of tax arrears and sale is sent.

It is reasonable to assumethat the Legislature intended that the same process apply to both sections: send the notice to the address in the Land Titles Officerecords. [34] However, even if I am wrong in this regard, s. 131(1) of the Land Titles Act clearly requires that the caveat "...shall statesome address or place at which notices and proceedings relating to the caveat or the subject matter of the caveat may be served..." I amsatisfied that even if s. 421 of the MGA does not specify that the address for giving notice to a caveat holder is that on the caveat, thissection of the Land Titles Act clearly requires that the address or place at which notices and proceedings relating to the caveat may beserved must be filed at the Land Titles Office on the title.

These proceedings clearly fall within that description. [35] For the foregoing reasons, I find that the Applicants have not established that the County was negligent in failing to givenotice, nor that it breached its duties to the Applicants under the MGA. Pursuant to s. 423(1), a person who purchases a parcel of land ata public auction acquires the land free of all encumbrances except those specified in that section. 1260582 Alberta Ltd. acquired the landfree of the caveats filed by the Applicants. 3.

Are the existing caveats enforceable? [36] After the tax sale, the Applicants filed caveats against the new owner's title claiming an interest as beneficial owners.MacDonald J.'s decision notes that no plan of subdivision of the quarter

section including the cottage site had been filed and that “notransfer of the lot of Cwalina can be given, excepting, perhaps on a description by metes and bounds, and subject to the approval of townplanning authorities”. Upon payment of $310, Cwalina was to become the equitable owner of Lot 1 “subject to the liability to pay taxesupon receiving a transfer of title”. The decision clearly contemplated that subdivision of the land would be necessary to give effect to theequitable interest through transfer of title.

No subdivision has ever occurred. [37] As was found in Sullivan v Newsome (1987), 1987 ABCA 102 , 78 AR 297, 52 Alta LR (2d) 304 (CA), s. 88 of theLand Titles Act (now s. 94) disallowed the sale of land until after a plan of subdivision was duly registered, and as no plan had beenregistered in that case, the caveat notifying parties about the interest was unenforceable as it offended the rule against illegal subdivision.The situation is no different here.

The option to purchase was exercised for purchase of the land by each of the Applicants before anysubdivision plan was registered, making a caveat protecting that interest, filed some 40 or more years later, under the exercised option,unenforceable. [38] In any event, a bona fide purchaser for value purchased the property with no knowledge of a claim to the Applicants’ interestas beneficial owners. Any interest which the Applicants may have had in the land was extinguished upon the conclusion of the tax saleproceedings and the acquisition of clear title by the new purchasers pursuant to s. 423(1) of the MGA.

This result is integral to thelegislative scheme for tax sales. If a new owner's rights to clear title were to be threatened by such an unknowable interest, it woulddefeat the purpose of the legislation. [39] I find that the Applicant's caveats are unenforceable and I order that they be discharged immediately. 4. Have the Applicants established damages against the County? [40] I have found no negligence or breach of statutory duty by the County, and thus there is no basis for a claim for damages.

TheCounty was entitled to rely on the addresses for service of notice on title and had no obligation or duty to search further, even within itsown departments, for other possible addresses. 5. Should the Applicants receive some or all of the surplus sales proceeds?

[ 41 ] A Monitor was appointed pursuant to the Companies Creditors Arrangement Act, RSC 1985, c C-36 in relation to the insolvency of the prior registered owner, Lake Eden Projects Inc. Pursuant to the December 13, 2011 Order of Thomas J., the Monitor has retained $100,000 out of the tax sale proceeds pending further Order of the Court.

The Applicants apply for distribution of surplus sale proceeds under s. 428 of the MGA . [ 42 ] In my view, the appropriate forum for the application for distribution of the surplus is the Companies Creditors Arrangement Act action in relation to the insolvency of the prior registered owner, Lake Eden Projects Inc. Few particulars have been provided to this Court in relation to this claim. The Court dealing with the CCAA action will be in a better position to determine who, if anyone, should receive notice of the application under s. 428(3), and to assess any competing claims. VII.

Conclusion [ 43 ] The application is dismissed. VIII. Costs [ 44 ] The parties may speak to costs within 90 days of the date of this decision. Heard on the 16 th day of May, 2012. Dated at the City of Edmonton, Alberta this 29 th day of June, 2012. J.H. Goss J.C.Q.B.A. Appearances: Phyllis J. Van Campenhout Hall & Van Campenhout for the Applicants George (Joe) F. Chivers Brownlee LLP

for the Respondent, Parkland County Coralie Schultz Mohr Witten LLP for the Respondent 1260582 Alberta Ltd.