Caplink Financial Corporation v. Petra Corp., 2013 ABQB 309

Court of Queen ’ s Bench of Alberta Citation: Caplink Financial Corporation v. Petra Corp., 2013 ABQB 309 Date: 20130522 Docket: 0903 01331 Registry: Edmonton Between: Caplink Financial Corporation Plaintiff - and - Petra Corp. and Daniel Matthews Corns Defendants - and - Scott Ryan Cummings Applicant/Respondent - and - 1469897 Alberta Ltd. Respondent/Applicant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Brian R. Burrows _______________________________________________________

[ 1 ] The Plaintiff held a first mortgage against land owned by the Defendants. The Plaintiff foreclosed. The land was sold. After payment of the Plaintiff ’ s interest a surplus of $225,662.72 remains from the sale proceeds. Scott Ryan Cummings claims entitlement to payment of a debt owed to it out of the surplus. 1469897 Alberta Ltd. opposes. [ 2 ] There are several complicating features to the facts which in my view are unnecessary to the understanding, assessment and determination of the issues.

I have therefore deliberately omitted reference to several of them in what follows. [ 3 ] Cummings loaned the Defendants, $200,000 on February 23, 2006. Corns signed a promissory note for $222,000.

The promissory note provided: - that Corns would pay the $222,000 on demand, - that the full amount would be due and owing “ on or before May 23, 2006", that is 3 months after the date of the promissory note, - that Corns would pay “ monthly interest ” on demand in the amount of $849.32 until “ the full amount to be due and owing is fully paid ” , - that land described in the note would be encumbered for the benefit of Cummings in the amount of $222,000 to be paid as previously set out. [ 4 ] The encumbrance contemplated by the promissory note was registered against the title to the land which was owned by Petra Corp. on March 21, 2006.

The only other encumbrances on title at the time it was registered were the first mortgage to Caplink Financial and an assignment of rents to Caplink Financial. [ 5 ] Cummings has deposed (affidavit sworn January 28, 2011) that prior to the date the full amount of the debt was to become “ due and owing ” , May 23, 2010, he and Petra Corp. agreed that the principal of the debt would be payable on demand only and that the monthly interest would be payable until demand was made. Petra Corp. did not in fact make interest payments monthly. It made lump sum payments which Cummings credited against interest.

In particular it paid: a. $6,000.00 on February 7, 2007 b. $8,000.00 on April 24, 2007 c. $16,000.00 on August 17, 2007 d. $13,000.00 on April 29, 2008 These payments put it in a credit situation in relation to interest payments until April 23, 2010.

No evidence contradicting this characterization of the payments made by Petra Corp. has been filed. (Evidence of the principal of 1469897 Alberta Ltd. that he disputes the characterization does not, in my view, constitute contradictory evidence.) [ 6 ] Caplink Financial commenced foreclosure proceedings on January 29, 2009. [ 7 ] On August 6, 2009, Steinke and Company Realty Ltd. registered a caveat against the land claiming an interest in land in respect of $250,000 for outstanding commissions owed to it by Petra Corp. [ 8 ] On September 11, 2009, while it was still subject to the foreclosure proceedings, the land was transferred to 1469897 Alberta Ltd.

The title obtained by 1469897 was subject to: 1 the Caplink Financial first mortgage for $442,500

2 the Caplink Financial assignment of rents 3 the Cummings charge for $222,000 4 a mortgage to TSE Ventures Ltd. for $300,000 5 a caveat by Brody Todd in respect of “ an agreement charging land ” 6 a mortgage to High Street Mortgage Investment Corp. for $101,000 7 the caveat by Steinke and Company Realty Ltd. The principals of 1469897 Alberta Ltd. are also the principals of Steinke and Company Realty Ltd. [ 9 ] On March 12, 2010, Cummings demanded payment of the principal of the debt, $222,000 from Petra Corp.

As noted, the uncontradicted evidence before the Court is that as of that date, and until April 23, 2010, Petra Corp. ’ s interest payments were current. [ 10 ] Caplink Financial obtained an Order Nisi/Order for Sale on May 17, 2010 and an Order Confirming Sale and Vesting Order on September 23, 2010. Title was vested in the purchaser in the foreclosure proceedings. The debt to Caplink Financial was paid out of the foreclosure sale proceeds.

The remaining surplus was paid into Court. [ 11 ] On October 27, 2010, Cummings applied for an order directing that the debt owed to it and secured by the Cummings ’ charge be paid from the surplus. 1469897 Alberta Ltd. opposed the application on the basis that Cummings ’ debt claim was statute barred. [ 12 ] The application was heard by Master Schlosser on May 5, 2011. On June 20, 2011 he issued a written decision granting Cummings ’ application ( 2011 ABQB 388 ).

Master Schlosser held that Cummings was obliged to show that it had an enforceable claim at the time its charge was removed from title in the foreclosure proceedings which created the surplus. The relevant time was the date of the sale order, September 23, 2010. The issue was whether any limitation period affecting Cummings ’ entitlement had expired as of that date. [ 13 ] Master Schlosser held it had not. He said: The March 12, 2010 demand left it open to the Applicant to bring an action until March 2012.

Given the history of the loan and the fact that interest remains current, there was no injury that warranted proceedings until there was a default in the payment of principal following the demand. Accordingly, the Applicant was within time to bring an action on September 21, 2010 when the Order creating surplus was made.

There are no obvious limitations issues that would preclude the Applicant ’ s claim, or require trial. [ 14 ] As there was some uncertainty as to whether Cummings had actually advanced $222,000 or only $200,000 to Petra Corp., Master Schlosser allowed Cummings ’ application subject to proof of the amount of the claim. [ 15 ] 1469897 Alberta Ltd. appealed Master Schlosser ’ s order. On February 24, 2012, Clackson J. allowed the appeal. He was of the view that Master Schlosser ’ s reasons did not explain how he reached the findings of fact which were the foundation of his ruling.

He identified three findings of fact in particular: 1- That the history of the loan was as represented by Cummings in particular that payments made were to be credited against interest even if that left the debtor in a positive interest balance. 2 - That contrary to the words of the promissory note, the principal of the loan did not become due and payable on May 23, 2006.

3 - That the principal of the loan became due only on demand. [ 16 ] Clackson J. acknowledged that 1469897 Alberta Ltd. had filed no evidence contradicting the evidence filed by Cummings which supported these points. But, he said, the burden on Cummings was greater than the normal civil burden, balance of probabilities, because the application was, in effect, a

summary judgment application. He did not order a trial of an issue because that remedy had not been requested. He observed that “ an application for advice and directions and/or a trial of an issue is the appropriate result ” . [ 17 ] Cummings brought essentially the same application he had brought before Master Schlosser, before me in special chambers. [ 18 ] It attempted to improve the evidence by filing a Notice to Admit Facts which included the facts which Master Schlosser had found on the basis of the uncontradicted evidence before him. 1469897 Alberta Ltd. responded by denying the facts.

It filed an affidavit in which its principal, who has no first hand knowledge and does not purport even to have hearsay information, disputes the essential points of fact.

It did not file evidence from the only other party to the transaction and the agreement which Cummings has sworn to, that is, Corns. [ 19 ] In my view, Clackson J. ’ s reluctance to accept Cummings ’ evidence as proving to the required standard that the parties to the loan, Corn and Cummings, agreed that despite the wording of the promissory note, the principal of the loan would not be due until it was demanded (i.e. that it was a demand loan and not a term loan), and that the payments Petra Corp. made would be considered interest payments, was practically and clearly an invitation to 1469897 Alberta Ltd. to obtain and file contradictory evidence if it exists.

A year after the invitation, it has not done so. [ 20 ] In my view, in these circumstances it is appropriate to accept Cummings ’ sworn and uncontradicted evidence, which is consistent with how Corn and Cummings conducted themselves, as establishing to the standard required, the facts upon which Master Schlosser concluded that at the relevant time, the date of the Order Confirming Sale, September 23, 2010, any limitation period which might apply to Cummings ’ claim had not expired.

If the limitation period commenced on the date of the demand, March 12, 2010, it had not expired when Cummings first commenced these proceedings claiming payment out of the foreclosure surplus, October 27, 2010. [ 21 ] In my view, Cummings is entitled to have the debt owed to it paid out of the surplus foreclosure proceeds in priority to the claim of any other party including 1469897 Alberta Ltd. I allow Cummings ’ application with costs. The order should be in the same terms as the order made by Master Schlosser. Heard on the 25 th day of March 2013.

Dated at the City of Edmonton, Alberta this 22 nd day of May 2013. Brian R. Burrows J.C.Q.B.A. Appearances:

The Plaintiff and the Defendants did not participate in the application. Randolph Langley for Scott Ryan Cummings Malcolm Lennie, Q.C. for 1469897 Alberta Ltd.