Roth v Garber, 2016 ABQB 157

Court of Queen ’ s Bench of Alberta Citation: Roth v Garber, 2016 ABQB 157 Date: 20160316 Docket: 1503 19322 Registry: Edmonton Between: Olatope Roth and Shawn Roth Applicants - and - Allan Garber, Shanel Prue, Allan Garber Professional Corporation and Prairie Western Development Corporation Respondents _______________________________________________________ Endorsement of the Honourable Madam Justice J.B. Veit _______________________________________________________ [ 1 ] As a result of the publication of my previous decision in this matter, 2016 ABQB 103 , the lawyer for the mortgage financers on two of Ms.

Prue’s lots came to learn that an attachment order had been placed on those lots on December 21, 2015. As mentioned in the earlier decision, after the purported dissolution of the partnership by Mr. Garber, the mortgagees represented by Mr. Bodner had undertaken to provide a total of $500,000.00 in mortgage funds to Ms. Prue on two of the four lots which had previously been partnership properties and had actually distributed approximately $400,000.00 of those monies to Mr. Garber on or about December 14, 2015. Mr.

Garber has sworn that, on December 15, 2015, he distributed approximately $300,000.00 of the monies received from the mortgagees to: pay off the existing mortgages on the two Prue lots; pay off certain trade creditors with respect to debts allegedly owing on the previous partnership lots; and, repay himself for monies allegedly advanced to trade creditors with respect to the previous partnership lots. It is

expected that Mr. Garber obtained title insurance prior to distributing the mortgage monies. The monies remaining in Mr. Garber’s hands are frozen by the attachment order. The mortgagees have not yet distributed approximately $100,000.00 of the promised mortgage funds. On January 15, 2016, Mr.

Garber registered the mortgage securing the mortgagees’ interest. [ 2 ] The mortgagees apparently based their investment decision on the presumed value of the two Prue lots when the houses which were being built on the properties were completed; on December 14, 2015, the mortgagees had been advised that each of the houses on the two Prue lots was 66% complete. From the submissions made at this hearing, I am now satisfied that, on December 14, 2015, neither the mortgagees nor Mr. Garber were aware of the December 21, 2015 attachment order. Moreover, I am satisfied from Mr.

Bodner’s submissions that his clients were unaware of the partnership and bare trust agreements which, at least until October 28, 2015, applied to the lands on which the mortgage monies were advanced. The mortgagees now indicate that they will not advance the remaining $100,000.00 from the mortgage funds, unless their mortgage position is given priority over the attachment order. [ 3 ] Mr. Garber and Ms. Prue ask the court to re-instate the partnership agreement and the bare trust agreement and to vacate the attachment order previously granted. [ 4 ] The Garber/Prue application is allowed, in part.

The attachment order - first issued on December 21, 2015, served on Mr. Garber on December 29, 2015, and confirmed by me on February 22, 2016 - is suspended on the two Prue lots with which we are concerned on this application, only so as to allow the mortgagees’ mortgage to gain priority over the attachment order and to allow Mr. Garber to use the$100,000.00 plus the remaining mortgage funds in his hands, totalling approximately $35,000.00, on construction debts relating to the two Prue lots. In all other respects the attachment order, as confirmed, remains in place.

In other words, the attachment order is not suspended on either the remaining Garber lot or on the remaining two Prue lots. The attachment order of December 21, 2015 which is suspended for the limited purposes set out above re-attaches to the two Prue lots in question once the mortgage funds have been expended on those lots; it is the court’s intention that the two Prue lots should not be re-remortgaged or sold without re-assessment of the Roth attachment order. [ 5 ] In the statement of claim she filed on December 21, 2015, the same date on which she applied for an attachment order, Ms.

Roth asked, inter alia , for a declaration that the partnership agreement and the bare trust agreement referred to in the previous decision are both still in effect.

The other remedies she asked for included: damages against the defendants jointly and severally, an accounting of all the property and finances of the partnership, a liquidation order in respect of the partnership, an indemnity from any liability arising out of being titleholder to one of the lots of the partnership, a declaration of a legal and equitable interest in the real property of the partnership. [ 6 ] By asking, in her statement of claim, for the re-instatement of the partnership, and a full partnership accounting, Ms.

Roth obviously intended that she herself would also be bound by the partnership agreement and the bare trust agreement; she did not intend, nor would it be appropriate for the court to allow her, to personally profit from Mr. Garber’s purported dissolution of the partnership. In other words, at least until the date of the purported dissolution of the partnership, Ms. Roth intended to be treated as a partner, i.e., taking the risk of loss along with the hope of gain. [ 7 ] The partnership agreement and the bare trust agreement are not re-instated.

When she asked for the re-instatement of the agreements on December 21, 2015, Ms. Roth was not aware of the mortgagee dealings on the two "Prue" properties; in light of these major developments, re-instatement of the agreements should not be foisted on Ms. Roth. In any event, in light of Mr. Garber's assertion that the mortgage monies received from Mr. Bodner's clients were all incorporated into the previous partnership lands, it would be impossible to try to re-instate the partnership and bare trust agreements while saving Ms.

Roth from any claim in relation to the new mortgages: it is still unclear whether all of the claims paid out by Mr. Garber from the mortgage advance relate to the properties which remained in the names of the Garbers and the Prues after the purported dissolution of the partnership or whether the claims paid out from the mortgage advance relate, at least in part, to work which had been previously performed on the lot facially owned by Ms.

Roth. [ 8 ] When the court initially granted the attachment order, and subsequently confirmed it, the court was obviously trying only to prevent the defendant partners from personally profiting from liquidating their equity interest in the partnership either through the sale, or the mortgaging, of any of the partnership property. [ 9 ] Mr. Garber's sworn evidence establishes that, at least to the date of this application, neither he nor Ms. Prue have received any return on their partnership equity; that is what the attachment order is designed to prevent. The information sworn by Mr.

Garber also indicates that, even if the remaining approximately $135,000.00 of mortgage funds were disbursed on the two Prue lots in question, it is extremely unlikely that there will be any remaining partnership or Prue equity in those two properties. [ 10 ] Now that the mortgagees represented by Mr. Bodner have been made aware of the partnership agreement, of the bare trust agreement, and of Mr. Garber’s sworn evidence concerning his

interpretation of the way in which any mortgage monies acquired by any of the partners on the security of partnership property could be spent, the mortgagees are in a position to protect their interest in the two Prue properties. [ 11 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 1 st day of March, 2016. Dated at the City of Edmonton, Alberta this 15 th day of March, 2016.

J.B. Veit J.C.Q.B.A. Appearances: Kember Handzic, Emery Jamieson LLP for the Respondents D.A. Bodner, Douglas A. Bodner Law Office for the mortgagees on the Prue lots Avish Nanda, Nanda & Company for the Applicants