Scotia Mortgage Corporation v Carifelle, 2016 ABQB 466

Court of Queen’s Bench of Alberta Citation: Scotia Mortgage Corporation v Carifelle, 2016 ABQB 466 Date: 20160824 Docket: 1503 05125 Registry: Edmonton Between: Scotia Mortgage Corporation Plaintiff - and - Joey T. Carifelle Defendant _______________________________________________________ Reasons for Judgment of W.S. Schlosser , a Master of the Court of Queen’s Bench of Alberta _______________________________________________________ [ 1 ] Can an estranged wife living in the matrimonial home redeem her husband’s mortgage? In my view, the answer is yes.

The more general question is whether an interest in land is a pre-requisite for the right to redeem. [ 2 ] Joey T. Carifelle bought a home in High Prairie, Alberta. Kristen Rich moved in. They later became husband and wife. [ 3 ] Unhappy differences developed in their marriage. Mr. Carifelle left for points unknown. Ms. Rich continued to live in the home. She is not on the mortgage, which is a National Housing Act mortgage. It matures in February, 2019. [ 4 ] Ms. Rich has sued Mr. Carifelle for divorce. He has been noted in default. [ 5 ] If Ms.

Rich were vengeful or retributive, she could live in the house until the equity was exhausted and then depart, leaving Mr. Carifelle to suffer a deficiency judgment. However, she wishes to keep the house for herself, her new partner and their new young child. Refinancing is not an option until the matrimonial property is divided and title is dealt with. [ 6 ] Ms. Rich is represented by counsel. She has not registered a matrimonial property Certificate of Lis Pendens against the property. [ 7 ] The property is now in Final-Order-for-Foreclosure territory - or at least Order-for-Sale-to-the-Plaintiff territory.

Housing prices have not been going up in High Prairie. Three interim Orders have been given, holding off this eventuality and permitting Ms. Rich to continue to reside in the house, so long as payments were made on the mortgage. The Orders have been complied with, more or less. [ 8 ] The mortgage company wants the property and a deficiency judgment. They question Ms.

Rich’s right to redeem, or to make payments. [ 9 ] If this were simply a debtor-creditor situation, allowing a third party to pay the debt is something Professor Dunlop called ‘a difficult and controversial legal problem’: (Dunlop, Creditor – Debtor Law in Canada (2 nd edition) page 21). Some cases suggest that

creditor acknowledgment is required. Other cases (mainly English) say that the debtor has to acknowledge the payment. Ms. Rich iscaught in the middle. The creditor is balking at acknowledgment and the debtor, Mr. Carifelle, is out of the picture. [10] Land-law cases are somewhat more helpful. The cases are thoughtfully reviewed in Price and Trussler’s, Mortgage Actions inAlberta, at pages 184 – 186. [11] Many of the cases are English. Many of them are old - or at least before the Law of Property Act 1925 in England, and outsidethe Torrens System in Alberta.

In almost all of the cases referred to, the right to redeem falls to someone with an interest in land[1]. Ms.Rich, notwithstanding her ability to file a matrimonial Lis Pendens, is essentially a creditor or a licensee, with respect to her interest orher occupation of the home. [12] The older cases say that execution creditors can redeem; though apparently not mere judgment creditors until they have filed awrit against it[2]. This may be because there is no common law right to execute against real property. [13] A Guarantee does not give a legal or an equitable interest in land and it will not sustain a caveat.

However, guarantors whohave made payments on the mortgage may thereby gain a charge on the mortgagor’s interest and can redeem: Badger v Megson, (1980) (AB KB), 14 Alta LR (2d) 49 at 57,58 (MC). In Green v Wynn

(1869) LR 4 Ch Appeals 204, Lord Hatherly, LCobserves (at 207): ‘any person under a liability to pay interest [under a mortgage] would be at liberty to redeem.’ Perhaps this contractualobligation has the effect of turning an in personam obligation into an in rem right. [14] A licensee was permitted to redeem in Re McLean (NB CA), [1941] 1 DLR 722 (MBSC Appeal Division),though with a strong dissent by Grimmer J. [15] Ms. Rich is presently just a creditor. Even though Mr. Carifelle is noted in default in the matrimonial property action, thematrimonial proceedings are a long way from execution, a writ, or, an Order under

section 19 of the Matrimonial Property Act RSA 2000c M-8. A

section 35 matrimonial Lis Pendens would crystallize priority but does not explicitly create an interest in land. That is not to saythat an interest in the matrimonial home could not be granted. The Court has very broad powers with respect to matrimonial property. [16] Part of the issue is that redemption is used in two senses. The first sense is to bring a mortgage current. The second sense is topay it out in exchange for the mortgagee’s interest. [17] For common law mortgages in England prior to the Law of Property Act 1925, or pre-Torrens mortgages, title was in thename of the mortgagee.

The mortgagor had the equity of redemption. In that context, redemption usually meant paying out themortgagee to get title back; a right which a stranger would not have. The statutory mortgage under our Torrens System does not give titleto the mortgagee. A mortgage is only a charge. Bringing the debt current falls more into the purview of debtor-creditor law than land-law.

In that context, perhaps all that is required is acknowledgment. [18] Although the decided cases fall fairly neatly into line with the proposition that an interest in land is necessary for a right toredeem, I have not seen any authorities that suggest it is necessary in principle. I note that the Law of Property Act, RSA 2000, c L-7,permits granting relief to a mortgagor but does not otherwise limit who can redeem.

Falconbridge says: “The right to redeem is availableto all persons who have a legal interest in the equity of a real property which has been secured by a mortgage.” (Falconbridge onMortgages, Fifth Ed, Traub, looseleaf p 29-1, emphasis added). As an estranged spouse with a matrimonial action, Ms. Rich certainly hasthat. [19] I would be content to rely on the special status of an estranged spouse in matrimonial proceedings to permit Ms. Rich topreserve the status quo and redeem.

At the very least she has an interest that is affected by the foreclosure in the same sense that anysubsequent incumbrancer might be. [20] If a convenient fiction is necessary, Ms. Rich could be thought of as the agent of the owner or the mortgagor. She might alsogain an interest, if one is necessary, by virtue of her payments; on analogy with the Guarantee cases. However, her victory may bePyrrhic until her matrimonial property action is concluded. If Ms. Rich wishes to assert these rights in the foreclosure action it ispreferable that she should be made a party. Heard on the 30th day of June, 2016.

Dated at the City of Edmonton, Alberta this 24th day of August, 2016. W.S. Schlosser M.C.C.Q.B.A. Appearances: Gloria Vinci

Vinci Phillips for Scotia Mortgage Corporation Brian Carriere Carriere Law Office for Kristen Rich