2020 ONCA 234, 2020 ONCA 234

Hobson v. Hobson Ontario Reports Court of Appeal for Ontario Rouleau, Hourigan and Roberts JJ.A. March 19, 2020 150 O.R. (3d) 126 | 2020 ONCA 234 Case

Summary Real property-- Mortgages — Mortgage agreement — Persons liable — Appeal by daughter from trial judgment that found her liable under mortgage allowed — Parents purchased cottage in 2001 — Title was registered in name of daughter — Mortgage was registered against property in favour of parents — Mother registered second mortgage against property in 2009 — She commenced application seeking declaration she was true owner of cottage — Trial judge found parents' intention was daughter would have ownership of cottage and daughter was liable under original mortgage — Trial judge erred in granting order on process.

Real property-- Proceedings — Appeals and judicial review — Practice and procedure — Pleadings — Appeal by daughter from trial judgment that found her liable under mortgage allowed — Parents purchased cottage in 2001 — Title was registered in name of daughter — Mortgage was registered against property in favour of parents — Mother registered second mortgage against property in 2009 — She commenced application seeking declaration she was true owner of cottage — Trial judge found parents' intention was daughter would have ownership of cottage and daughter was liable under original mortgage — Trial judge erred in granting order on substantive issue that was not in notice application or contained in parties' submissions process.

The daughter appeals from a trial judgment that found her liable under a mortgage. The parents purchased a cottage for $147,694 in 2001. Title to the cottage was registered in the name of the daughter. A mortgage for $175,000 was registered against the property in favour of the parents. In 2009, the father passed away. The mother obtained a new mortgage in the amount of $350,000 registered on title. She subsequently commenced an application seeking a declaration she was the true owner of the cottage. The trial judge found the parents' intention was that the daughter would have ownership of the cottage.

She further found, based on a direction and acknowledgement signed by the parties, that the daughter was liable under the original mortgage for the amount it secured but was not liable for the subsequent mortgage as the daughter received no consideration for it. Held , the appeal should be allowed. While mortgages were part of the factual matrix, the trial judge had to consider in determining whether to grant the relief sought in the application, the issue of the daughter's liability under either mortgage was not squarely before her.

The trial judge erred in granting an order on a substantive issue that was not in the notice application or contained in the submissions made by the parties at trial. It would be unfair to foreclose the daughter from making arguments and adducing evidence in support of her position she had no liability under either mortgage. [page127] APPEAL from the order of Rady J., [2019] O.J. No. 3894 , 2019 ONSC 4429 . Ryan Naimark and Alex Nikolaev , for respondent, Marjorie Renwick. Kari Chan , for Financial Services Commission of Ontario. BY THE COURT: --

[ 1 ] This case concerns the ownership of a cottage that was purchased by Keith ("Keith") and Gaetanne Hobson ("Gaetanne") for $147,694 in 2001. Title to the cottage was registered in the name of their daughter, Tania Hobson ("Tania"). At the time of purchase, a mortgage was registered against the property in favour of Keith and Gaetanne (the "original mortgage"). This mortgage was in the amount of $175,000, which represented the full purchase price plus the cost of planned improvements to the property. [ 2 ] In 2009, Keith passed away. Gaetanne had the property appraised. It had appreciated considerably.

A new mortgage in the amount of $350,000 was registered on title in favour of Gaetanne (the "subsequent mortgage". [ 3 ] After a falling out with Tania, Gaetanne commenced an application on October 30, 2018. The only substantive relief she sought was a declaration that she is "the true owner" of the cottage. [ 4 ] At the trial of the application, Gaetanne claimed ownership of the cottage through the operation of a purchase money resulting trust. Tania submitted that the cottage was a gift and that any mortgage was to be forgiven upon Keith and Gaetanne's death.

It was Gaetanne's position that because the original mortgage was to be forgiven, she had not divested herself of all power and control over the cottage, and, therefore, the cottage was not a gift. [ 5 ] The trial judge found, at para. 26, that it was Keith and Gaetanne's intention that Tania would have ownership of the cottage: I am satisfied that preponderance of evidence demonstrates that at the time of the cottage purchase, Keith and Gaetanne intended that title would be in Tania's name and the cottage hers. [ 6 ] This finding was reflected in para. 1 of the trial judge's order, which states that the cottage ". . . was a gift to the respondent [Tania] at the time it was made". [page128] [ 7 ] In her reasons, the trial judge went on to consider the effect of the mortgages.

She found, based on a Direction and Acknowledgment dated September 23, 2001 and signed by Tania, Keith, and Gaetanne, that Tania was liable under the original mortgage for the amount it secured, being $175,000. However, the trial judge found there was no consideration received by Tania for the subsequent mortgage and, therefore, she was not liable for the full $350,000.

Paragraph 2 of her order reflects these findings and states, " . . . the respondent is liable under the mortgage given by her at the time of the gift." [ 8 ] Tania raises one issue on appeal: whether the trial judge erred in making a determination regarding her liability for the mortgages. She makes three submissions on this ground of appeal: (

a) her liability under either mortgage was not an issue on the application, and was not addressed at trial; (

b) there was no evidence or incomplete evidence to support a finding of liability under either mortgage; and (

c) there was no consideration for either mortgage. [ 9 ] Gaetanne submits that Tania's liability under the mortgages was not a separate issue but an essential part of the trial judge's decision regarding ownership of the cottage. Further, she argues that there was extensive evidence regarding the mortgages from all the major witnesses at trial. Therefore, Gaetanne submits that liability under the mortgages was properly determined by the trial judge. [ 10 ] We are not persuaded by that submission.

While the mortgages were part of the factual matrix that the trial judge had to consider in determining whether to grant the relief sought in the application, the issue of Tania's liability under either mortgage was not squarely before her.

The trial judge erred in granting an order on a substantive issue that was not in the notice application or contained in the submissions made by the parties at trial. [ 11 ] In these circumstances, it would be unfair to foreclose Tania from making arguments and adducing evidence as she deems fit in support of her position that she has no liability under either mortgage.. [ 12 ] The appeal is allowed. We order that paragraph 2 of the trial judge's order be set aside. Tania, as the successful party, is entitled to her costs of the appeal payable by Gaetanne.

Those costs are fixed in the agreed-upon, all-inclusive sum of $4,500. Appeal allowed End of Document