1807871 Alberta Ltd Plaintiff - v. -, 2021 ABQB 91

Court of Queen’s Bench of Alberta Citation: 1807871 Alberta Ltd v MGN Contracting Co Ltd, 2021 ABQB 91 Date: 20210205 Docket: 1703 06806 Registry: Edmonton Between: 1807871 Alberta Ltd Plaintiff - and - MGN Contracting Co Ltd and 1529771 Alberta Ltd Defendants _______________________________________________________ Endorsement of W. S.

Schlosser, Master of the Court of Queen's Bench of Alberta _______________________________________________________ [ 1 ] This issue, left over from an earlier Special Chambers Application, is whether a caveat protecting a discharged mortgage should be taken off title pursuant to the principle in Crystal Wealth Management System Limited v JC Food Service Limited , 2020 ABCA 369 .

That case holds that a deliberate but mistaken discharge of a mortgage extinguishes the rights under the mortgage (both in rem and in personam ) including an action on the covenant (where available) but it does not extinguish the underlying debt. [ 2 ] The facts of this case are somewhat more complicated. The Woods parties and the Lawrence parties were in business together.

The Lawrence parties ran into financial difficulties. 1529771 Alberta Ltd (152), a Wood party company, had a mortgage registered against property owned by the Lawrence parties. [ 3 ] The mortgage was discharged sometime in September 2014 to enable the Lawrence parties to obtain financing. The mortgage

was discharged pursuant to an agreement where the Woods parties expected to be paid from the new financing. [4] The mortgage remained off title for roughly two years. While the mortgage was off title, the Lawrence parties granted anoption to purchase the lands to Storage Capital

(2) LP. Storage Capital caveated their option to purchase in June 2016. [5] The refinancing was obtained, but the Woods parties were not paid. In September 2016, the Woods parties (in particular,152) filed a caveat referencing the unpaid mortgage and, later, a lis pendens. Storage Capital then entered an agreement for purchase andsale and assigned it to 1807871 Alberta Ltd (180). The Lawrence parties pledged to indemnify 180 for any claims 152 had against thelands. Throughout, the principals of Storage Capital and 180 were aware of the negotiations between the Wood parties and the Lawrenceparties.

In a manner of speaking, they had enhanced notice of the interest of 152 and Woods parties beyond the caveat registered againsttitle. The balance of the issues between the parties have been submitted to arbitration. [6] In my view, the following principles apply here: 1. A caveat does not create an interest in land, it merely gives notice (St Pierre v Schenk, 2020 ABCA 382 (at paras 30, 31)). Underthe present law, the equities between the original parties are preserved despite registration. Registration does not create immediateindefeasibility just by virtue of the act of registration.

We are not yet at the stage of absolution without confession. 2. In order to be sustainable, the caveat must protect an interest in land (eg 1244034 Alberta Ltd v Walton International Group Inc,2007 ABCA 372 at para 36 per Slatter JA). 3. This case is closer to First National Mortgage Co Ltd v LJV Holdings Ltd, 1989 ABCA 88 (at paras 45 and 46, referring to Co-operative Trust Co of Canada v Target 21 Industries Ltd, (SK CA), [1988] 3 WWR 97), where the mortgage wasdischarged, not unilaterally, or by mistake, but by agreement; and in the expectation of a benefit.

In the case of a mutual agreement, themortgagee must be taken to have accepted the benefit in exchange for the discharge (para 45). ‘If a mortgagor consents to the discharge(like here, but unlike Crystal Wealth), the mortgagor is not unilaterally prejudiced and the mortgagee will not be deemed to haveaccepted the security for its debt’ (para 46). So, there is still an enforceable debt based on both Crystal Wealth and First National. [7] But is it an interest in land? As I read these cases, the effect of the discharge is to extinguish the rights under the mortgage,though not the underlying debt.

The in rem rights are gone and the promise to pay stands in their place. [8] I do not like to see parties break their promises but the new mortgage is really more of an attachment than a postponement,and, on the present state of the law, must be discharged. [9] I am not willing to waive s 191 of the Land Titles Act, in the event there is further evidence about intention. Heard on the 18th of November, 2020. Dated at the City of Edmonton, Alberta this 5th day of February, 2021. W. S. Schlosser M.C.Q.B.A.

Appearances: Nigel J Forster of Weir Bowen LLP for 1807871 Alberta Ltd Robert D Gillespie for the Wood Parties Ian Wachowicz of Dentons Canada LLP

for the Lawrence Parties