Canadian Imperial Bank of Commerce v. Nemeth, 2013 ABQB 290

Court of Queen ’ s Bench of Alberta Citation: Canadian Imperial Bank of Commerce v. Nemeth, 2013 ABQB 290 Date: 20130510 Docket: 1303 01859 Registry: Edmonton Between: Canadian Imperial Bank of Commerce Plaintiff - and - Zsuzsan Ann Nemeth Defendant _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is an application for a Redemption Order. [ 2 ] The Defendant has a mortgage, and a line of credit secured by a collateral mortgage. These loans went into default.

The mortgage is behind by about $1,000.00 and the line of credit by about $2,300.00. The bank is foreclosing on the second collateral mortgage.

[3] The Defendant is a senior and a widow. Her husband died February 2, 2012. She appeared at this application withoutcounsel. From her demeanour in Court, she does not appear to be coping well. [4] The Defendant tells me that her main source of income is her late husband’s pension.

The pension has stopped coming inbecause she is having trouble with the paperwork. [5] She also says that she understood that the credit facility was life-insured and that the Bank represented to her and her latehusband that the insurance was in place when their (first) mortgage was renewed the month before her husband died. [6] The Bank has denied coverage saying that the insurance coverage had, in fact, terminated when the Defendant’s husbandturned seventy. The mortgage was renewed in January, 2012. The Defendant’s husband died in February.

He was seventy two. [7] When the loans went into default the Bank exercised its option to demand payment of the line of credit in full. [8] The land and the Defendant are in Calgary. The Defendant travelled to Edmonton for this application. Despite the venueRules (3.3 and 3.4) the action was started in Edmonton. The Statement of Claim seeks possession of land, amongst other remedies. [9] The Defendant could have requested a change of venue in form 6 but instead she filed a Demand of Notice and pleadingshave closed.

Apparently, a Calgary legal aid lawyer is willing to assist her both with the foreclosure action and the paperwork for thepension transfer. [10] It is not unusual for unrepresented Defendants to appear in foreclosure actions. Typically, they want to have the procedureexplained to them. Often, they have concerns about timing of events; such as how long they have to bring up the arrears, or when theyhave to give up possession. They might object to the Plaintiff’s valuation of their home. The Court, of course, cannot provide legaladvice. It can only advise provide limited assistance.

However, this is a case that calls out for some commentary and some proceduraldirection. 1. Redemption Period [11] The Plaintiff’s exterior appraisal shows that there is plenty of equity in this property. [12] The Defendant is a natural person, not a corporation. The mortgage does not fit into the exception provided in

section 43 forcorporations or insured mortgages. Therefore, the Court is bound to apply the six month redemption period afforded by

section 41 of theLaw of Property Act unless one (or more) of the exceptions in sections 41(2)(

b) is proved; in which case the redemption period can belengthened or shortened. It makes no difference to

section 41 whether the mortgage is collateral to some other obligation. First City Trust Company v. Canis Holdings Ltd. (1982) (AB KB), 22 Alta. L.R. (2d) 136 at 137 per Funduk (M),citing J.J. Catering Ltd. v. 213205 Holdings Ltd., Edmonton Number 8003-19277 (unreported) per Hyndman (M). Stady v. Patel (1982) 48 A.R. 27 at 28 (para. 2), per Funduk (M). [13] In this case the Bank requested a six month redemption period.

[ 14 ]

Section 41provides: 41(1) The time to be fixed for redemption by the order nisi in an action for foreclosure of a mortgage and the time to be fixed for redemption by the order for specific performance in an action on an agreement for sale shall, (

b) in the case of land other than farm land, be 6 months from the date of the granting of the order

(2) In an action coming under subsection (1), the Court on application may decrease or extend the period of redemption having regard to the following circumstances: (

b) when the action is in respect of a security on land other than farm land, (

i) the ability of the debtor to pay, (ii) the value of the land including the improvements made on it, (iii) whether the land has been abandoned, (iv) the nature, extent and value of the security held by the creditor, (

v) the earning capacity of the debtor, and (vi) whether the debtor ’ s failure to pay was due to temporary or permanent unemployment or other conditions beyond the control of the debtor. (emphasis added) [ 15 ] Nearly all of the considerations in section 41(2)(

b) have some bearing on this case. It is well to remember that factors such as an inability to pay are grounds for extending the redemption period: Price and Trussler, Mortgage Actions in Alberta , Carswell 1985, p. 188 (and the authorities cited there). There is ample equity. The Bank is well secured and its security is in no jeopardy. The land has not been abandoned. The earning capacity of the debtor is apparently limited and the ability of the debtor to pay was due to a temporary condition, not entirely within her control. The loan is at prime plus six per cent.

The value of the security is not affected, as it might be if the going rate was shown to be now higher. [ 16 ] The only issue, and it is probably academic anyway, is whether I am limited to the factors set out in section 41(2)(b), or whether I can go beyond them to consider whether, for example, I could extend the redemption period to provide an allowance of time to have the insurance issue determined. Success on the insurance issue could, presumably, extinguish the debt. [ 17 ] In Stady v. Patel , counsel argued that abandonment of the property was a ground for shortening the redemption period.

At the time (1982) abandonment was not one of the factors listed in (then)

section 42 of the Law of Property Act , RSA 1980 c. L-8. Master Funduk held: [6] In my view, s. 42 is unambiguous, at least on the point of the court ’ s discretion to decrease or extend the redemption period dictated by the section.

[7] Counsel for the plaintiff submits the court is not limited, in considering an application to decrease the redemption period, tothose circumstances listed in (b). Counsel submits the court can shorten the period of redemption where other circumstances exist. I donot agree. . . . . [9]

Section 42 had its beginning in1942 by the Judicature Amendment Act, S.A. 1942, c. 37. The

section was carried forward intosuccessive Judicature Acts until its recent recasting into the Law of Property Act. [10] Shortly after its initial passage the

section was the subject of various adjudication, on one point or another. One of the decisionsis Halbert v. Netherlands Investment Company of Canada, (SCC), [1945] S.C.R. 329. Estey. J. (Rinfret, C.J.C.,concurring) states at p. 335: This amendment does not purport to confer jurisdiction on the judge. His jurisdiction is determined apart from the provisions of thisamendment, which merely gives direction with respect to the terms to be granted in certain orders nisi.

It places some limitation upon thediscretion the judge previously exercised in fixing the period for redemption, but does not affect his general jurisdiction to hear anddetermine the application. Any failure to follow or misconstrue the provisions of this amendment is a mistake in law which wouldprovide a proper basis for an appeal, but does not involve any question of jurisdiction . . . (emphasis added) [11] Kerwin J., states at p. 338: However, he had power on an ‘application’ to decease the period of redemption, having regard to certain circumstances set out in theenactment.

He did in fact decrease the period and whether he did so on ‘application’ is immaterial as his order was not appealed from.(emphasis added) [12] Kellock, J., states at pp. 339-40: On the 19th of March, 1942, an amendment to the Judicature Act came into force.

This amendment, enacted by c. 37 of the 1942 statutes,s. 34, provided that, as therein set forth, in actions for foreclosure of a mortgage commenced either before or after the passing of the Act,the time to be fixed for redemption by the order nisi should be one year, provided that upon certain evidence, this time might beabridged or extended . . . (emphasis added) [13] There can be no doubt that the only grounds upon which the court may decrease or extend the period of redemption are those setout in the section.

The legislature has dictated what grounds can be considered. . . . . [16] It is apparent mortgagees do not like s. 42. The court is often faced with applications to shorten the period of redemption wherethere are no grounds or the evidence is of the flimsiest nature. Those that are dissatisfied with s. 42 should address their submissions tothe legislators, not ask the court to pay lip service only to the

section and engage in evasion of what the legislature has directed. [17] It may be the

section is outdated in not taking account of grounds which did not exist 40 years ago, such as the mortgagorabandoning the land. That, however, is a matter for the legislators, not the court. [18] The legislature apparently took note of Master Funduk’s decision. The

section was subsequently amended to include what isnow section 41(2)(b)(iii). [19] The equitable jurisdiction of the Court to set a redemption period exists notwithstanding

section 41. If the mortgagor were acorporation (and therefore outside the protection of that section) there is no statutory redemption period. The decided cases provide

guidance about how the equitable jurisdiction of the court ought to be exercised. (See, for example, Mortgage Actions in Alberta,above, at p. 190-191 and the cases cited there.) [20] As noted in the Halbert case,

section 41 does not confer jurisdiction. The effect of it is to limit the discretion of the Courthearing the application for the redemption order to the factors listed in section 41(2)(

b) for land other than farm land. Here theChancellor’s foot cannot be any size: it is limited by statute to a range of sizes. [21] Therefore, I am not permitted to consider an allowance of time for the determination of the insurance issue as a ground forextending the redemption period. It would be unnecessary as most of the other factors in section 41(2)(

b) apply here. [22] I note that not much is to be gained from an overly technical approach to

section 41. Even though the grounds for reducingthe redemption period may be limited by the section, the Court has a wide discretion under section 17(1) of the Judicature Act, RSA2000, c. J-2, to grant a Stay of proceedings, which would have much the same practical effect as extending the redemption period. [23] In all of the circumstance it is appropriate that the redemption period be set at eight months. If necessary, I would be willingto grant relief from the consequences of the Plaintiff’s election to accelerate and permit redemption on payout of the arrears and costsnotwithstanding the acceleration.

Kolacz v. Munzel (AB KB), [1971] 5 W.W.R. 757 (Alta. S.C.) per O’Byrne, J. Mortgage Actions in Alberta at p. 194, (and the cases cited there). 2. Procedural Order [24] The Defendant filed a Demand of Notice. Given that there is this unresolved insurance issue, a Defence and Counterclaimmight have been appropriate. However, there is not yet an application to withdraw the Demand of Notice and file a Defence.

Unless theparties move matters forward quickly, a Defence and Counterclaim relating to the insurance issue might take some time to resolve. [25] A more direct method might be to take out what would ordinarily be an originating application for a declaration with respectto coverage.

The only problem is if there is disagreement about what had been represented (as opposed to the legal effects of this) a trialmight be necessary. [26] If the Defendant does not apply to withdraw the Demand of Notice and file a Defence and Counterclaim, she has leave to filean application with respect to coverage using this action instead of having to have a separate commencing document with a new actionnumber. A copy of the policy was not before the court. While an application for a determination of coverage might require additionalparties, they would all be closely connected.

Leave is given to use this action number for those purposes pursuant to Rule 1.4. 3. Venue [27] Rule 3.5 provides: 3.5 The Court may order that an action be transferred from one judicial centre to another (

a) if the Court is satisfied that it would be unreasonable for the action to be carried on in the judicial centre in which it is located, or

(

b) at the request of the parties. [ 28 ] The Defendant and her home are in Calgary. In my view, the appropriate venue is the Judicial Centre of Calgary and the Clerk is directed to transfer the file. Heard on the 10 th day of April, 2013. Dated at the City of Edmonton, Alberta this 10 th day of May, 2013. W. S. Schlosser M.C.C.Q.B.A. Appearances: Paul Govenlock Reynolds Mirth Richards & Farmer LLP for the Plaintiff Zsuzsan Ann Nemeth self represented