E Dehr Delivery Ltd v Dehr, 2016 ABQB 714

Court of Queen’s Bench of Alberta Citation: E Dehr Delivery Ltd v Dehr, 2016 ABQB 714 Date: 20161215 Docket: 1403 15398 Registry: Edmonton Between: E. Dehr Delivery Ltd Plaintiff - and - James Elmer Dehr, Monster Dog Trucking Inc and 1794994 Alberta Ltd Defendants _______________________________________________________ Reasons for Decision of W.

Breitkreuz , Master in Chambers _______________________________________________________ Introduction [ 1 ] Rapid Water Inc applies under s 5 of the Civil Enforcement Act , RSA 2000, c C-15 and s 64 of the Personal Property Security Act , RSA 2000, c P-7 ( PPSA ) for a declaration that it is the rightful owner, and is entitled to possession of, two water hauling trucks. Rapid Water is not a party to this action between the Plaintiff, E.

Dehr Delivery Ltd. (EDD) and the Defendants, James Dehr, Monster Dog Trucking Inc. and 1794994 Alberta Ltd. (179), who are also disputing the ownership of these two trucks, but Rapid Water negotiated for the trucks with James and Sarah and bought the trucks from the Defendant, 179. The trucks had been wrongfully taken from EDD, who had seized them under security agreements for the trucks with James and Monster Dog. Complicating matters, at about the same time as the purported sale to Rapid Waters, EDD’s security agreements were wrongfully discharged at the Personal Property Registry (PPR).

Facts [ 2 ] This action was commenced by EDD. Beulah Dehr is an officer of EDD. James Dehr, owner of Monster Trucking, is her son, while Wayne Dehr, owner of Rapid Water is her step-son and James’ half-brother. I will refer to each of them by their first names to avoid confusion. James and his girlfriend, Sarah Michalchuk, were directors of 179, as of April 1, 2014; James is no longer a director of 179. [ 3 ] EDD owned the two trucks and while Beulah’s husband was still alive, sold the trucks to James and Monster Dog as follows: Truck 780 VIN 1XKDDB9X14R972780 to James Dehr on June 29,2007

Truck 781 VIN 1XKDDB9X14R972781 to Monster Dog on July 1, 2012. [ 4 ] Under the Bills of Sale for the trucks, they were to remain registered to EDD until paid in full. James was required to pay $1500.00 per month for Truck 780 and Monster Dog was to pay $750.00 per week for Truck 781.

Both James and Monster Dog defaulted on payment and Beulah instructed Consolidated Civil Enforcement to seize the vehicles which were then seized on March 17, 2014. [ 5 ] I will outline the remaining events in timeline table for greater clarity: Date Action January 22, 2014 EDD registered a security interest in the trucks in the Personal Property Registry (PPR); registration # 14012221388 for Truck 780 and registration #14012221323 for Truck 781 March 12, 2014 Beulah on behalf of EDD instructed Consolidated Civil Enforcement to seize the trucks March 13, 2014 A warrant was issued for the trucks.

March 17, 2014 Trucks 780 and 781 were seized and surrendered to Beulah. March 18, 2014 EDD registered a Report of Seizure at the PPR re Truck 780 per Registration #14031824136. March 18, 2014 EDD registered a Report of Seizure at the PPR re Truck 781 per Registration #14031824290. March 25, 2014 Wayne, on behalf of Rapid Water, negotiated with James and Sarah, on behalf of 179, to purchase the trucks for a purchase price of $62,500.00 each. 179 charged an additional $3000.00 fee per truck for facilitating the sale.

Rapid Water paid a 10% deposit for one of the trucks and the $3000.00 facilitation fee for each truck by bank drafts dated March 25, 2014. March 25, 2014 PPR search by Truck 780’s serial number discloses EDD’s security interest, registered on January 22, 2014 and the registration of the EDD seizure of Truck 780 as Registration #14031824136. March 25, 2014 PPR search by Truck 781’s serial number discloses EDD’s security interest, registered on January 22, 2014 and the registration of the EDD seizure of Truck 780 as Registration #14031824290.

March 28, 2014 EDD employees were filling the trucks with water in Ardrossan, Alberta, when someone, allegedly the Defendants, took the vehicles. March 28, 2014 The EDD security interest registrations were discharged at the PPR. Registration #14061908005 discharged the security interest in Truck 780 and Registration #14061908214 discharged the security interest in Truck 781. March 28, 2014 Searches of PPR did not disclose the EDD security interest in the trucks as on March 28, 2014. March 29, 2014 Rapid Water paid the remaining balance for the trucks by bank draft.

Even though the full price had been paid, James, Sarah, and 179 retained possession of the trucks. April 2, 2014 Because James, Sarah, and 179 retained possession of the trucks, Rapid Water registered its interest in the trucks at the PPR under s 26(2) of the Sale of Goods Act , RSA 2000, c S-2 , listing James, Sarah, Monster Dog, and 179 as debtors and Rapid Water as the Creditor. April 9, 2014 Monster Dog and James presented cheques to EDD for the amounts outstanding under the Notice of Seizure and costs.

When the cheques were presented to the Bank, Beulah was advised there were insufficient funds to honour the cheques. EDD demanded return of the vehicles, but the Defendants refused. April 29, 2014 179 provided Rapid Water with a Bill of Sale for each truck. The Bills of Sale were executed by Wayne on behalf of Rapid Water and Sarah on behalf of 179, but the Bills of Sale listed the purchase price as $56,250.00 per truck– that is the purchase price of $62,500.00 less the 10% deposits paid on March 25, 2014. April 29, 2014 Rapid Water took possession of the trucks and began using them in its water hauling business.

October 22, 2014 EDD commenced this action – Action #1403 15398. December 17, 2014 EDD was granted a Replevin Order and an interlocutory injunction Order in this Action. January 2, 2015 The Defendants were noted in default in this Action. January 7, 2015 Bailiffs, as directed by EDD, seized Truck 781 under the Replevin Order, taking possession of it while it was being repaired. January 20, 2015 EDD registered the Replevin Order as Registration #15012026789 at the Registry, listing James and Monster Truck as the debtors. [ 6 ] Rapid Water has commenced a separate action, Action # 1503 04886 against the Defendants.

Issues [ 7 ] Wayne and Rapid Water define the issues simply as whether EDD’s security interest was unperfected on the date of purchase, which they assert was March 29, 2014 when the final payment was made. In particular, they argue that under the PPSA regime Rapid Water has the right to the water trucks free and clear of EDD’s later registered interest in the trucks, since the PPSA has replaced the common law rule of nemo dat (that a person cannot convey to another more than that person has).

To the extent that EDD’s security interest was wrongfully discharged, they argue, the PPSA makes the person who wrongfully discharged the interest liable to the secured party for its loss or damages. [ 8 ] EDD however argues that the issues are more complex and can be summarized as: 1. Rapid Water is not a party to this action and therefore cannot bring this application under s 5 of the Civil Enforcement Act ; 2.

Rapid Water commenced action #1503 04886 against EDD raising the same issues as in this Application, and therefore is precluded from bringing this Application; 3. 179 had no title, interest or right in the Trucks; 4. None of James, Monster Truck, or 179 had an interest in the truck to be conveyed to Rapid Water because the goods were under seizure; 5. There are sufficient facts in dispute that this matter should not be resolved in a Chamber’s application.

Rapid Water’s submissions [ 9 ] Rapid Water argues that the PPSA replaces the common law maxim of nemo dat quod non habet : that a purchaser cannot acquire any greater title to goods than a seller had in the goods. The Courts have found that the PPSA is intended to overrule contractual or property rights with new statutory rules: Gauntlet Energy Corp (Re), 2003 ABQB 718 at para 22 .

Under ss 30(6) and (7) of the PPSA , a buyer takes serial number goods free from any security interest if the buyer bought the goods without knowledge of the security interest and where the goods are not described by serial number in the registration. [ 10 ] Further, Rapid Water noted that whether the transferee has met the requirements is to be determined at the date the transfer took place, citing Ronald CC Cuming, Catherine Walsh & Roderick J Wood, Personal Property Security Law, 2nd ed (Toronto: Irwin Law Inc, 2012). [ 11 ] The evidence, according to Rapid Water, establishes that the goods are serial number goods, and that on March 29, 2014 Rapid Water did not know that EDD had a security interest.

Further, on that date the EDD’s security interests were not registered, having been wrongfully discharged on March 28, 2014.

Therefore, Rapid Water argues it takes the trucks free of EDD’s security interest. [ 12 ] Rapid Water further notes that under s 20 of the PPSA , the unperfected security interest is subordinate to a transferee’s interest when the transferee has acquired the interest under a non-security agreement transaction, provided value, and acquired the interest without knowledge of the security interest before the security interest is perfected. [ 13 ] Rapid Water also noted that s 68 of the PPSA provides a remedy for the wrongful discharge of registrations, and that EDD’s remedy is to pursue the persons who discharged the registrations without authority.

EDD’s submissions Rapid Water is not a party to this action [ 14 ] EDD argues that the Court cannot give Orders against non-parties and conversely a non-Party cannot seek Orders against parties. Further, it argues that s 5 of the Civil Enforcement Act applies only to compliance and enforcement under the Act when the non- party has commenced another action for the same relief. Essentially, Rapid Water is seeking a judgment finally determining rights.

The other action [ 15 ] EDD asserts that any determination of rights should be addressed in the Action where Rapid Water is a party. 179 had no title, interest, or right in the trucks [ 16 ] Because 179, James and Monster Truck had no rights or interest in the trucks, EDD argues they had no ability to convey the trucks to Rapid Water. In particular, EDD says that it sold the trucks on a conditional sale and the property in the trucks remained with EDD until the trucks were fully paid for.

Further, EDD submits that when goods are sold by a non-owner without the authority or consent of the owner, the buyer can acquire no better title to the goods than the seller, citing s 23(1) of the Sale of Goods Act . Transfer of property from EDD to James and Monster Truck

[17] EDD argues that under s 19(1) of the Sale of Goods Act the property in the trucks did not transfer to James and Monster Truckbecause the conditional sales contract between them specified that title remained with EDD until the full purchase price was paid. EDDcites the decision in Traders Finance Corporation Ltd v Stan Reynolds Auto Sales Ltd, (AB KB), [1955] 1 DLR 670,13 WWR (NS) 425 (ABSC) for the proposition that a thief cannot transfer title.

In particular, EDD argues that before the PPSA applies,the debtor must have some property rights in the collateral or the power to transfer property rights in the collateral, citing Ronald CCCuming, Walsh & Wood 119. EDD further submits that James and Monster Dog had no rights in the property because it had been seized.In particular, Rapid Water argues that a lawful seizure is a “statutory clog” on title to the goods, restoring the principle of nemo dat to theproperty.

A chambers application is not suitable [18] EDD cites two contradictions in the evidence: whether Wayne knew of the terms of the sales of the trucks to James andMonster Dog and Wayne’s reliance on the registration discharge on the same date that the trucks were wrongfully removed from thePlaintiff. Further. EDD notes that Wayne does not depose to the date he purchased the truck. The bank draft payments, copies of whichare attached to James’ affidavit, are dated March 25, 2014, comprising the facilitation fee and one 10% deposit and March 29, 2014 forthe balance.

As well, the Bill of Sale identifies April 29, 2014 as the date of sale. Analysis Can Rapid Water bring this application in an action where it is a non-party? [19] Rapid Water is not a party to this action, and has commenced its own action against James, Sarah, 179 and Monster Dog.However, it brings this application under s 5 of the Civil Enforcement Act which provides that “an interested party” may apply fordirections or to “determine any matter or issue that arises out of any civil enforcement proceedings”.

The Court is empowered under s5(2) to make a binding declaration of rights to ensure “the protection of the interests of any person in property that is subject to civilenforcement proceedings.” The two trucks in issue were seized in civil enforcement proceedings under this legislation. [20] Similarly s 64 of the PPSA provides that “a person with an interest in the collateral” may apply to the Court for an ordermaking a binding declaration of right necessary to ensure compliance with the enforcement provisions of the Act (s 64(a)) or for an ordermaking a binding declaration of right necessary to ensure protection of the interests of any person in the collateral”. [21] Next, I must determine whether Rapid Water is “an interested party” for the purpose of making this application.

MasterLaycock in ID Foods Corp v G Heileman Brewing Co (1996), (AB KB), 194 AR 108 (QB) (at para 26) reviewed anumber of authorities on the meaning of “interested party” under the Civil Enforcement Act.

McDonald J in Fort Garry Trust Company vAlberta Securities Commission, et al (1980), 27 AR 52 (QB) was interpreting an Order appointing a Receiver/Manager and at 55 heheld that an interested party “is a person whose rights or property have in some way been prejudiced." [22] McLaughlin J in Re Crittenden and City of Vancouver (1984), (BC SC), 14 DLR (4th) 599 addressed themeaning of “parties interested” in a subdivision appeal, saying that at law, “interest” usually connotes legal concern, title or right inproperty” (at 601). [23] Having reviewed these authorities, McDonald J concluded: ... it is within the context of the Civil Enforcement Act that one must determine the meaning of interested party.

An "interested party" is abroader term than "a person claiming an interest" in the property. The latter person must have an ownership interest. The former personmay have an ownership interest or only have a possessory lien or mechanics lien claim. [24] Veit J in Dell Chemical & Marketing Ltd v Aquasol International Inc, 2000 ABQB 821 cited Master Laycock’s decision inID Foods with approval when dealing with a non-party’s application to set aside an Attachment Order, saying (at para 9): In the broadest sense of the words, Mr. Galloway is a party who is "interested" in Mr.

Storey's real property because of the beneficialinterest Mr. Galloway claims in that property. [25] The Court of Appeal similarly cited ID Foods in Agbi v Geosimm Integrated Technologies Corp, 1998 ABCA 374 (at para44) [26] Master Laycock again addressed the question in Alligator Group v Telalert Inc, 1999 ABQB 784, where he said that s 5 ofthe Civil Enforcement Act permitted a secured creditor or “other interested third party” to apply for a determination of an issue arisingfrom any civil enforcement proceedings.

I conclude that Rapid Water has sufficient interest to make this application even though it is nota party to these proceedings. [27] It is not necessary to determine whether this application could have been brought in the other action, as it may be dealt withhere. Did Rapid Water purchase the trucks when EDD’s security interest was notperfected? [28] Rapid Water relies on s 20 of the PPSA for the proposition that EDD’s security interest is subordinate to its interest as atransferee who gives value and acquires an interest in the goods without knowledge of the security interest before it is perfected.

Further, it asserts that it acquired its interest at the time of the sale: March 29, 2014, a day after EDD’s registration was wrongfully cancelled at the PPR and was therefore unperfected. [ 29 ] Cuming, Walsh & Wood notes that value given includes any consideration that supports a simple contract, including a promise to pay (at 378). Further, he notes that the relevant date is the date the interest was acquired (at 370).

The authors indicate that for public policy reasons, even if delivery of the goods is postponed, the Courts may decide that the relevant time is the time the contract of sale is concluded (at 380) and notes that in most cases property passes “once the conditions required by sale of goods legislation are met” (at 380). [ 30 ]

Section 19 of the Sale of Goods Act provides that property transfers to a buyer at the time the parties intend it to be transferred. Section 19(2) provides that to determine the parties’ intentions the Court should consider the terms of the contract, the conduct of the parties and the circumstances of the case. [ 31 ]

Section 20 then sets out rules for ascertaining intention if no intention is apparent. [ 32 ] There is no evidence of the parties’ intent here. There was no written contract of sale until the Bill of Sale was issued in April; there is nothing in the Bill of Sale that speaks to the intention to transfer. Wayne does not depose to an intention in regards to the date of transfer, nor does his affidavit state when the contract was entered into. Rapid Water did not take possession of the trucks until April, but that is not evidence of an intention to delay transfer of interest, only of possession.

On March 25, James et al did not yet have the trucks in their possession, and even when the final payment was made on March 29, the Defendants retained possession. Delay of payment and delivery are not relevant to the parties’ intention in these circumstances. [ 33 ] Where no different intention appears, the rules under s 20 of the Sale of Goods Act apply.

Under s 20(2), in an unconditional contract for the sale of specific goods, the property in the goods passes to the buyer when the contract is made, regardless of whether payment or the time of delivery are postponed. [ 34 ] Wayne deposes that the parties negotiated for the purchase of the trucks, and that they agreed to two facilitation fees of $3000.00, two deposits of 10% of the purchase price, and the remaining balance. The facilitation fees were paid by two bank drafts dated March 25, 2014 and the deposits of $6250.00 were paid by bank drafts, one dated March 25, 2014 and the second dated March 29, 2014.

The remaining balance was paid by two bank drafts of $56,250.00 each. [ 35 ] It is apparent that by March 25, 2014, the parties had agreed to all the terms of the contract for sale and had met the requirements of a simple contract. In particular, the parties must have agreed on the purchase price since the deposits were for 10% of the purchase price (see para 10 of Wayne Dehr’s affidavit) and one of those deposits was paid by a bank draft dated March 25, 2014.

In the absence of evidence that the parties intended a different date for the transfer and any evidence that the contract was entered into after March 25, 2014, it is reasonable to infer that the contract for sale was entered into on March 25 when the parties had agreed to all the terms of the purchase.

Therefore, under s 20(2) the property in the goods transferred to Rapid Water on March 25, 2014. [ 36 ] On March 25, 2014, EDD’s security interest was still registered and perfected. [ 37 ] Under s 20 of the PPSA a security interest is subordinate to the interests of a transferee who acquires the interest under a non- security agreement transaction, who provides value, and who acquires the interest without knowledge of the security interest before the security interest is perfected. [ 38 ] Here, EDD’s interest was perfected at the time Rapid Water acquired its interest in the trucks.

EDD’s interest is protected and its registration takes priority. Rapid Water’s interest in the trucks is subordinated to EDD’s perfected security interest. If the interest transferred later, what is the result? [ 39 ] If, however, I am wrong, and Rapid Water did not acquire its interest until March 29, the question arises whether Rapid Water was able to acquire good title to the trucks when the seller, 179, had no interest in them. EDD relies on the maxim of nemo dat quod non habet : that a purchaser cannot acquire any greater title to goods than a seller had, citing s 23 of the Sale of Goods Act .

Rapid Water, on the other hand, focuses its analysis on the PPSA provisions, in particular ss 20 and 30. [ 40 ] The common law principle of nemo dat has been statutorily limited, both in the PPSA and in the Sale of Goods Act . For example, s 23 of the Sales of Goods Act is only a partial codification of the nemo dat maxim. It provides that if a non-owner sells good without the authority of the owner, the buyer can acquire no better title than the sellers unless the owner’s conduct has precluded him from denying the seller’s authority to sell.

See Bartin Pipe & Piling Supply Ltd v Epscan Industries Ltd , 2004 ABCA 52 , leave to appeal denied [2004] SCCA No 203 at para 16. [ 41 ] Further, s 23(2) of the Sales of Good Act provides that nothing in the Sales of Good Act affects any legislation that permits the apparent owner of goods to dispose of them as if they were the true owner. An example of legislation that permits an apparent owner of goods to sell good title to goods is found in s 26(1) of the Sale of Goods Act , See Bartin at para 17. This

section deals with a seller who has sold an item to Buyer 1, but keeps possession of it, and then sells it to Buyer 2, who buys and receives the item in good faith and without notice of the previous sale. The second sale is effective as “if the person making the delivery or transfer were expressly authorized by the owner of the goods to make it.” Thus, Buyer 1 is not protected by s 23, even though the seller was no longer the owner, and therefore Buyer 2 acquires good title.

As noted in Cuming Walsh & Wood (at 250) Buyer 1 will have only a cause of action against the seller. [ 42 ] Buyer 1, however, can protect his interests in goods purchased but remaining in the seller’s possession under s 23(2), as Rapid Water did here. This subsection is an express exception to s 23(1): “Subsection 1 does not apply...” when Buyer 1 buys goods or documents of title to goods outside of the ordinary course of the seller’s business and immediately registers his interest in the Personal Property Registry in accordance with the PPSA .

Buyer 2’s interest would then be subject to Buyer 1’s interest (see Cuming, Walsh &

Wood at 251-52). [ 43 ] Of course, the PPSA is the predominant exception to nemo dat principles. Cuming, Walsh & Wood discuss the policy reasons underlying why nemo dat does not apply in the realm of PPSA : As noted above, the provision [s 20] has been designed (as have almost all of the priority rules of the Act ) to facilitate risk assessment. A potential transferee will determine whether the property in the possession or control of the debtor in which she hopes to acquire an interest is subject to a security interest by obtaining a search result from the registry.

On the basis of information disclosed she will assess the risk of proceeding with the proposed transaction. If a prior security interest is not disclosed by a search, public policy dictates that, should she decide to proceed with the transactions, she should have priority. (at 380) [ 44 ] If, therefore, Rapid Water did not acquire its interest until March 29, when EDD’s security interest was no longer registered, it would be entitled to a declaration that its interests subordinate EDD’s interests.

Conclusion [ 45 ] I conclude that Rapid Water acquired its interests in the trucks on March 25, 2014 when it completed the contract for sale, having negotiated the terms and having paid a deposit. EDD’s security interest was registered at that date. Therefore its registration takes priority over the transfer to Rapid Water. [ 46 ] The parties may speak to costs if they are unable to agree on them. Heard on the 10 th day of May, 2016. Dated at Edmonton, Alberta this 15 th day of December, 2016. W. Breitkreuz M.C.C.Q.B.A. Appearances: Dean A Hitesman Dentons Canada LLP for the Applicant, Rapid Water Inc.

Eric Kahlke Eric Kahlke Professional Corporation for the Respondent, E. Dehr Delivery Ltd.