Kokanee Mortgage MIC Ltd. v., 2013 BCSC 2285

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Kokanee Mortgage MIC Ltd. v. 669655 B.C. Ltd., 2013 BCSC 2285 Date: 20131212 Docket: 09-3015 Registry: Victoria Between: Kokanee Mortgage MIC Ltd. Petitioner And: 669655 B.C. Ltd. Erwin Brechert Respondents Before: Master Bouck Reasons for Judgment Counsel for the Petitioner: W. Johnson agent for H.R. Dreyer Counsel for the Respondents: H.C. Ritchie Clark, Q.C. Place and Date of Hearing: Victoria, B.C. December 4, 2013 Place and Date of Judgment: Victoria, B.C.

December 12, 2013 Introduction [ 1 ] This is a foreclosure proceeding involving a parcel of land in the North Saanich area with a civic address of 1465 McTavish Road. The respondent Brechert resides at the property. [ 2 ] On November 26, 2013, the petitioner brought an application seeking approval of a sale of the property to a third party. The respondents requested and obtained an adjournment of that application in order to file a response and affidavit material. [ 3 ] On December 4, 2013, the sale of the property to the third party was approved, despite the respondents’ opposition.

These are my reasons for making that order. Evidentiary Issues [ 4 ] Prior to arguing the substance of the application, the respondents raised objections to the admissibility of certain portions of the petitioner’s evidence. [ 5 ] The objections raised were with respect to two exhibits to the affidavit of Suzanne Bossio: an appraisal dated August 7, 2013, and a realtor’s letter dated November 6, 2013.

In addition, the respondents objected to the admissions of three affidavits filed belatedly by the petitioner, each of which exhibited an appraisal of the property. [ 6 ] After hearing submissions, I ruled that the exhibits to Ms. Bossio’s affidavit were admissible, except that portion of the realtor’s letter that purported to opine on the fair market value of the property. The three affidavits were found to be inadmissible on this application. The affidavits were not truly responsive to the respondents’ material and violated Rule 8-1(14) of the Supreme Court Civil Rules .

In any event, the petitioner was content to proceed with the application without relying on that material. The affidavits were physically removed from the application record. [ 7 ] The realtor’s letter is tendered as a comparative marketing report. It is common practice for the court to receive these kinds of letters in lieu of an affidavit from the marketing realtor.

While the use of and reliance on this type of unsworn “evidence” has been the subject of judicial criticism, the practice of providing information on marketing activity by way of realtor’s letter is long established. [ 8 ] The quality and quantity of the information contained in these kinds of letters varies widely. The letter should not, in my view, purport to address value. Rather, the letter is intended to assist the court in considering the providence of any proposed sale. The length and breadth of marketing activity and a description of offers received is suitable content for these letters.

In this case, I have only relied

on essentially two paragraphs of the realtor’s letter; the balance of the letter’s content strays into what is really opinion evidence on value. Facts [ 9 ] Ironically, much of the factual background relevant to this application comes from the respondents’ evidence. [ 10 ] The petitioner’s mortgage fell into default some years ago resulting in an order nisi being granted on August 11, 2009.

The petitioner’s debt is for more than $2,000,000. [ 11 ] The petitioner was granted conduct of sale of the property on August 17, 2010. [ 12 ] There is conflicting evidence as to whether the property was listed for sale by the petitioner in 2010. Certainly, steps to market the property were underway in 2011. Interest in the property was limited. [ 13 ] By March 2012, the petitioner had received a third party offer to purchase the property.

It appears that this offer was either accepted or about to be accepted when the parties in this action entered into a “standstill” agreement. [ 14 ] Under the agreement, the petitioner would not seek court approval of any proposed sale for a period of time in order to allow the respondents an opportunity to pay the outstanding debt (or part thereof). The agreement was premised on the respondents’ receiving monies upon the resolution of another lawsuit. [ 15 ] In or about 2011, another company controlled by Mr.

Brechert had commenced an action in this court seeking recovery of monies from an unrelated defendant (the “Land Craft Action”). Although not particularly relevant, that action concerned monies provided by Mr. Brechert’s company to assist in a land development project. [ 16 ] The petitioner agreed not to seek court approval of any sale of the property until after June 2012, being the trial date in the Land Craft Action. [ 17 ] The

summary trial in the Land Craft Action was heard June 14, 2012 with judgment given on January 31, 2013. Land Craft was not successful in the action. [ 18 ] Although the evidence is scant, it appears that the property has been listed for sale as follows: Listing Current since November 2011 $988,000 Listing May 2011 to November 2011 $1,090,000 Listing Prior to May 2010 $1,345,000 Listing May 2010 $1,550,000 Listing February 2010 $1,900,000 Listing August 2009 $1,950,000 Listing Prior to August 2009 $2,400,000 [ 19 ] The majority of these listing periods preceded the granting of the order for conduct of sale.

However, there is no evidence of any offers being made to purchase the property before August 2010. [ 20 ] According to the realtor’s marketing report, the property has been listed for sale between 2011 and November 6, 2013 for a total of 553 days (or 18 months over this approximate two-year period). [ 21 ] During this period, four offers were received by the petitioner. In December 2011, an offer of $885,000 was received but rejected. In January 2012, an offer of $750,000 was also rejected by the petitioner.

Another bid by the first offeror resulted in an agreed purchase price of $990,000 but with conditions attached. Those conditions were not removed and the offer died. The fourth offer is the one approved on December 4 th . It is not clear which offer is referenced in the standstill agreement but that question need not be answered to resolve this application. [ 22 ] By May 2013, the property was being actively marketed. Mr. Brechert apparently required certain conditions for showings. The petitioner demanded that Mr.

Brechert abide by the conduct of sale order, failing which an application would be made for vacant possession. [ 23 ] Parallel to the marketing of the property, the petitioner accepted further promises from the respondents to pay the debt (partially) and resolve this proceeding in its entirety. That agreement included the payment by the respondents of outstanding property taxes as well as a further lump sum payment. The respondents did pay the taxes but were unable to arrange financing for the lump sum payment. [ 24 ] Mr. Brechert has received a promise from a lender to investigate possible financing.

That financing is premised on the re- development of the property. Indeed, the appraisal provided by Mr. Brechert addresses value only if the property is sub-divided. No steps have been taken by Mr. Brechert in the last three years to pursue this or any other type of re-development of the land. Discussion [ 25 ] The crux of the respondents’ submission is that the evidence presented falls short of that required for the court to approve the proposed sale.

[26] Counsel seemed to be in agreement that there is no expert opinion evidence of value that might assist the court. The petitioner’sappraiser opines of a value for the property as of August 2007. The opinion from the respondents’ appraiser is based on the re-development of the property. Neither of these opinions address the present value of the property. [27] Nevertheless, there is some information contained in each of the appraisals that does assist the court. For example, there isinformation about the current assessed value ($886,000).

This figure reflects a decline in the property’s value from the perspective of theassessment authorities. The assessed value of the property in 2007 was $1,105,000. [28] The respondents cite the many principles discussed in Columbia Trust Co. v. Larsen, (BC SC), [1986] B.C.J.No. 677, 6 B.C.L.R. (2d) 369, as a “road map” for the court’s adjudication of this application. While certainly no issue is taken with therecitation of the law in that case, the application before the court was for a conduct of sale order, not the approval of a sale following thegranting of such an order.

The application was refused because the petitioner offered the court no evidence of value of the lands thatwere to be sold. The court determined that such evidence was a pre-requisite to the granting of an order for conduct of sale to themortgagee. [29] More recently, the court has addressed the evidence which might be relevant on an application to approve a sale in foreclosureproceedings. In Romspen Mortgage Corporation v.

Lantzville Foothills Estates Inc., 2013 BCSC 2222, Thompson J. says this: [18] The most important evidence is the length of time that this property has been exposed to the market and the fact that no otherunconditional offers have been made, ... And further: [20] An appraisal is no more than an expert's opinion on what a property's sale price is likely to be if properly exposed to the marketfor an appropriate length of time.

In a case where property has received a proper and lengthy exposure to the market, as I find thisproperty has, there comes a point where the market speaks loudly and the appraisals become relegated to not much more than well-meantbut inaccurate predictions. See RBC v.

Marjen Investments Ltd. (1998), 1998 NSCA 37 , 155 D.L.R. (4th) 538 (N.S.C.A.). [30] Here, the market has spoken on the value of the property as reflected in the offer presented to the court. [31] There is also the suggestion that the marketing efforts of the realtor were insufficient or at least not fully explained as to satisfythe court that the sale is provident. No authorities were cited with respect to the duties of a listing realtor in marketing a property likelybecause no such authorities exist: Wood Lake Development Ltd. v.

Renascence Enterprises (Woods Lake) Corp., 2011 BCSC 849 aff’d inMission Creek Mortgage Ltd. v. Angleland Holdings Inc., 2013 BCCA 281 at para. 40. [32] What the Court of Appeal says in Mission Creek is that “the mortgagee must go about finding a buyer in a businesslike mannerand the court must be satisfied that the proposed sale is provident in all the circumstances”. [33] I am satisfied that both the petitioner and its agent proceeded in a businesslike manner in finding buyers. The usual marketingefforts were utilized.

This is not, for example, a quick sale to a non-arms-length party. [34] The word provident has several meanings, including judicious, prudent and commonsensical.

This sale was provident forseveral reasons, including that: the property had been marketed (albeit on and off) over a two-year period; this is not the first offer madeto purchase the property; offers which the petitioner believed to be below fair market value were rejected; and there is nothing in theevidence to suggest that a better price could be achieved if the property was subjected to further exposure. [35] It is regrettable that the property will not fetch a price sufficient to satisfy the respondents’ debt to the petitioner, but the lawdoes not require a mortgagee to obtain such a price before a sale will be approved.

At some point, the borrower must accept theconsequences of his bargain with the lender. While the court in Columbia Trust Co. v. Larsen accurately describes the vulnerability ofmany mortgagees before the court, Mr. Brechert has been treated more than fairly by the petitioner over the past two years. I recognizethat the petitioner might well have commercial reasons for its forbearance but that same forbearance ought not to be a basis for rejectingthis sale. [36] Finally, on a practice note, I wish to reiterate Mr.

Clark’s observation of the inadequacy of the petitioner’s notice of application. [37] It is typical in foreclosure proceedings to see the bare minimum recitation of the relevant facts and legal basis for the reliefsought. It is appreciated that there is some useful economy in proceeding this way, particularly when the court is experienced andknowledgeable in this area of law. However, in keeping with the comments and observations of Southin J. in Columbia Trust Co. v.Larsen, it ought to be remembered that most mortgagors are unrepresented and have minimal to no access to legal advice.

At the veryleast, it would assist the court in knowing that the applicant has identified to the mortgagor the common law authorities relied upon aswell as providing some content to the Legal Basis part of the notice of application beyond the simple statutory authorities. [38] In this case, the respondents were more than ably represented by counsel. Nonetheless, both counsel and the court were requiredto look beyond the notice of application to address the legal basis for the application.

That ought not to be necessary if counsel’s mind isdirected to the issue when preparing the notice of application in the first instance. How the material could or ought to be improved will beleft to counsel’s judgment on future applications. “C.P. Bouck” Master C.P. Bouck