CONEXUS CREDIT UNION 2006 PLAINTIFF - v. –, 2023 SKKB 134

KING ’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 134 Date: 2023 06 26 Docket: QBG-RG-01896-2019 Judicial Centre: Regina BETWEEN: CONEXUS CREDIT UNION 2006 PLAINTIFF - and – DERRICK ENGEN AND KIMBERLY ENGEN DEFENDANTS - and - THE DRIVING FORCE INC., CANADIAN IMPERIAL BANK OF COMMERCE, SPECIAL INVESTMENTS LTD. (operating as COMMERCIAL TRUCK TERMINAL), SASKATCHEWAN EMPLOYMENT STANDARDS DIVISION, SASKATCHEWAN FINANCE – REVENUE DIVISION, TR PETROLEUM MARTENSVILLE LTD., PRICIPIS CAPITAL LLC DEFENDANTS Appearing: Rick Van Beseleare, K.C. and Erica Bodie for the plaintiff Derrick Engen and Kimberly Engen as self-represented defendants No one appearing for the other defendant JUDGMENT ROBERTSON J.

June 26, 2023 INTRODUCTION [ 1 ] This decision addresses an application for

summary judgment seeking enforcement of a mortgage debt. For the reasons which follow, the application is granted to dismiss the defence. The plaintiff has leave to file a revised Order Nisi for Sale by Real Estate Listing. BACKGROUND

Evidence [ 2 ] The following affidavit evidence was filed by the parties: Affidavits filed by the plaintiff, Conexus Credit Union 2006 [Conexus]: • Natalie Knudsen sworn July 5, 2019 • Natalie Knudsen sworn March 12, 2020 • Terry Wrishko sworn June 10, 2020 • Natalie Knudsen sworn October 28, 2020 • Ken Karwandy sworn April 18, 2022 [Karwandy Affidavit] • Natalie Knudsen sworn June 30, 2022 • Natalie Knudsen sworn April 20, 2023 Affidavits filed by the defendants, Derrick Engen and Kimberly Engen [Engens]: • Derrick Engen sworn June 12, 2020 • Derrick Engen sworn January 26, 2021 • Kimberly Engen sworn January 26, 2021 [ 3 ] On July 13, 2022, Conexus also filed: its Affidavit of Documents and the Affidavits of Documents of Kimberly Engen and Derrick Engen; Transcripts of Questioning of Derrick Engen [Derrick Engen Questioning] and Kimberly Engen and of Natalie Knudsen, as proper officer for Conexus; and Reply to Undertakings of Derrick Engen. [ 4 ] From this evidence, the following facts can be determined.

Facts [ 5 ] The property which is the subject of this action is a residential acreage located on SE 25-19-22 W2 in the Rural Municipality of Lumsden No. 189 and legally described as Parcel 4, Plan 95R37747 [Lumsden Acreage]. (Comparative Market Analysis prepared by Raymond Gartner dated May 30, 2019 and filed July 17, 2019; and Appraisal prepared by Pinnacle Appraisals as of November 1, 2016 filed as Exhibit “A” to Derrick Engen June 12, 2020 Affidavit). [ 6 ] The Engens and Calvin James Demyen [Mr. Demyen] entered into a lease agreement on January 1, 2012.

The Engens have occupied the Lumsden Acreage since then. [ 7 ] The Engens became interested in acquiring the Lumsden Acreage. The owner, Mr. Demyen, was interested in selling his property. [ 8 ] In 2013, the Engens unsuccessfully attempted to secure financing from other lenders to purchase the Lumsden Acreage. (Derrick Engen January 26, 2021 Affidavit at para. 7; and Derrick Engen Questioning at pp. 25-26). [ 9 ] To overcome this obstacle, the Engens and Mr. Demyen then entered into a sale agreement in 2013 which included swapping properties, with Mr.

Demyen taking title to the Engens’ residential property at 4920 McKinley Avenue, Regina, Saskatchewan. Upon taking title, Mr. Demyen assumed the existing mortgage on the McKinley Avenue property. [ 10 ] The Engens obtained financing to purchase the Lumsden Acreage from Conexus. Conexus held the existing mortgage for the Lumsden Acreage under its 2008 mortgage agreement with Mr. Demyen as then owner. [ 11 ] The Engens were represented throughout these transactions by Ken Karwandy, a senior lawyer practicing in Regina. Mr.

Karwandy had no doubt that the Engens understood that they assumed the mortgage on the Lumsden Acreage as part of the transfer (Karwandy Affidavit). [ 12 ] The Engens made regular payments on the mortgage for the Lumsden Acreage from the time they acquired the property until 2018. The last payment they made on the mortgage was on February 23, 2019. The Engens also ceased paying property taxes in 2020. [ 13 ] The mortgage matured on October 28, 2021. The amount owing as of April 18, 2023 was $670,812.23.

Chronology of Events [ 14 ] The following chronology appears from the court file, including materials filed by the parties: 2008 May 22 Mortgage agreement between Conexus and Mr. Demyen securing loan of $610,000 against Block 4, Plan No.

95R37747, as described on Certificates of Title 01RA12063 and 01SE17397 [Conexus Mortgage] (Knudsen October 28, 2020 affidavit at para. 3 and Exhibit “A”) June 24 Conexus Mortgage registered against title to Lumsden Acreage as interest #114544795 (Knudsen October 28, 2020 Affidavit at para. 3) 2011 Discussions between Engens and Mr. Demyen about Lumsden Acreage 2012 January 1 Lease and Option to Purchase Agreement between Engens and Mr.

Demyen for possible transfer of Lumsden Acreage (Karwandy Affidavit at Exhibit “B”) 2013 Engens unsuccessfully attempt to secure mortgage financing for acquisition of Lumsden Acreage from other mortgage lenders and a mortgage broker (Conexus Compendium of Evidence [Compendium], Tab 9: Derrick Engen Questioning at pp. 25-26) May 28 Application and Loan Agreement between Conexus and Engens printed (Compendium, Tab 12A) July 4 Conexus issues Pre-Approved Mortgage Certificate for Engen purchase of Lumsden Acreage (Karwandy Affidavit at Exhibit “H”) July 22 Sale and Purchase Agreement between Engens and Mr.

Demyen involving swap of 4920 McKinley Avenue, Regina and Lumsden Acreage (Karwandy Affidavit at Exhibit “C”) August 1 Assumption of Mortgage document (Compendium, Tab 3) August 8 Title #143954365 issued in the names of Kimberly Engen and Derrick Engen as registered owners, as joint tenants, of Parcel 4, Plan No. 95R37747, being the Lumsden Acreage and showing Conexus Mortgage with value of $610,000 registered as interest #163719861 (Karwandy Affidavit at Exhibit “K”) August 9 Application to Amend a Term Loan, Mortgage or Cyclical Credit Agreement (Compendium, Tab 12B) August 12 Mr.

Karwandy reporting letter to Engens (Karwandy Affidavit at Exhibit “L”, and Compendium, Tab 13) August 13 Application and Loan Agreement stamped as “Received” (Compendium, Tab 12A; and Engens’ Affidavit of Documents #18) 2016 October 20 Engen letter to Conexus requesting re-advance under mortgage agreement (Compendium, Tab 15) October 27 Conexus approves loan under mortgage for $78,237.31 (Compendium, Tab 16) October 28 Telephone conversation between Kimberly Engen and Conexus (Compendium, Tab 17) November 1 Appraisal Report obtained by Engens (Derrick Engen June 12, 2020 Affidavit, Exhibit “A”) November 4 Amendment Agreement - Mortgage (Compendium, Tab 18) 2018 Engens default on Conexus Mortgage by missing payments 2019 February 23 Last payment on Conexus Mortgage of $2,340 from Engens (Knudsen July 5, 2019 Affidavit at para. 8; and Knudsen April 20, 2023 Affidavit at para. 3) July 17 Application Without Notice for Appointment (for hearing of application for leave to commence action) 2020 January 28 Krogan J. grants Appointment February 10 McCreary J. grants new Appointment June 16 Krogan J. grants leave to commence action June 18 Statement of Claim filed

July 16 Statement of Defence filed November 26 Robertson J. grants Consent Order for

summary judgment hearing, but requires further chambers review on readiness for hearing 2022 October 27 Labach J. fiat November 22 Tochor J. fiat December 31 Morrall J. directs scheduling of

summary judgment hearing 2023 April 21 Chambers hearing by Robertson J. of

summary judgment application with decision reserved ISSUES [ 15 ] The first issue to be addressed on a

summary judgment application is whether the matter is suitable for

summary judgment. [ 16 ] The issues on the

summary judgment application are: 1. Are the Engens liable for the Conexus Mortgage debt? 2. Is the land subject to the Conexus Mortgage and thereby subject to foreclosure proceedings? This question turns on whether the Engens assumed the Conexus Mortgage. 3. Should the equitable remedy of rectification be applied to the Conexus Mortgage assumption documents to correct errors in the description? 4. Was the resulting transaction unconscionable?

POSITION OF PARTIES [ 17 ] The Engens acknowledge that they are liable for the debt but argue they did not assume the Conexus Mortgage and therefore it cannot be enforced by foreclosure proceedings. They also argue that if they did assume a mortgage, it is unenforceable because of errors in the mortgage documents or because the transaction was unconscionable. [ 18 ] Conexus argues that the Engens’ defence has no merit and ask that the defence be dismissed and Order Nisi for Sale by Real Estate Listing be authorized.

Conexus acknowledges errors in the mortgage documents, but says there was a mutual mistake and no one was misled as to the agreement. The errors can and should be corrected under the doctrine of rectification. ANALYSIS [ 19 ] I must first decide whether the action is suitable for

summary judgment before deciding whether to dismiss the statement of defence and grant judgment. Suitable for

Summary Judgment? [ 20 ] The Supreme Court of Canada, in Hryniak v Mauldin , 2014 SCC 7 at para 5 , [2014] 1 SCR 87 [ Hryniak ] , endorsed the

summary judgment procedure, recognizing that it promotes “fair access to the affordable, timely and just adjudication of claims.” As Karakatsanis J. wrote in Hryniak at para 4 : 4 … In my view, a trial is not required if a

summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial. [ 21 ]

Part 7 of The Queen’s Bench Rules provides procedures for resolving claims without a full trial. Division 2 of

Part 7 provides for

summary judgment. This alternative procedure is consistent with the foundational rules, the purpose of which is stated in Rule 1-3(1) as intending “to provide a means by which claims can be justly resolved in or by a court process in a timely and cost effective way.” [ 22 ] Rule 7-5(1) of The Queen’s Bench Rules requires the court to be “satisfied that there is no genuine issue requiring a trial with respect to a claim or defence or the parties agree to have all or part of the claim determined by

summary judgment and the Court is satisfied that it is appropriate to grant

summary judgment.” [ 23 ] In Casbohm v Winacott Spring Western Star Trucks , 2019 SKQB 44 at para 10 , [2019] 9 WWR 714, Kalmakoff J. (as he then was) cautioned that, even if the parties agree that a matter should be determined this way, the court must independently assess whether the

summary judgment process is appropriate and will not “compromise the fairness of the procedure or the justness of the outcome.” [ 24 ] Disputes which require factual determinations may not be suitable for

summary judgment, which usually rely upon agreed facts and affidavit evidence.

Summary judgment is unsuitable where credibility assessments are required to determine who to

believe and what actually happened. [ 25 ] Rule 7-5(2) allows the court, “in determining … whether there is a genuine issue requiring trial” some discretion in: 7-5(2) … (b) (

i) weighing the evidence; (ii) evaluating the credibility of a deponent; [and] (iii) drawing any reasonable inference from the evidence. [ 26 ] Although the defendants assert that they were not bound by the mortgage agreement, that assertion is a question of belief, rather than fact. Facts are determined from evidence, not fervency of belief. I am satisfied that the dispute is suitable for determination by

summary judgment. The filed materials provide a comprehensive and reliable record for determination of necessary facts. Assumption of the Mortgage [ 27 ] The evidence is clear that the Engens assumed the Conexus Mortgage. Since they took title with the Conexus Mortgage registered against the Lumsden Acreage, the land is subject to the foreclosure proceedings that are underway. [ 28 ] It is standard commercial practice for a lender to secure a loan for purchase of real property against that property by registration on title of the mortgage agreement.

The documents used and process followed in this case conform to standard commercial practice. [ 29 ] The Conexus Mortgage was continually registered against title to the Lumsden Acreage, originally when Mr. Demyen was owner and then when the Engens took title. The Conexus Mortgage has never been discharged. [ 30 ] The July 22, 2013 Sale and Purchase Agreement in para. 1(

a) expressly provided for “assumption of the existing mortgage on the Acreage as at August 1, 2013” and in para. 4(

b) for “the Engens qualifying for the assumption of Demyen’s mortgage currently registered against the Acreage.” (Compendium, Tab 7). [ 31 ] The Sale and Purchase Agreement in para. 2(

a) and 4(

a) similarly provided for Mr. Demyen assuming the mortgage on the McKinley Avenue property to which he would take title in the swap. No argument is taken with the fact that Mr. Demyen assumed the mortgage on the McKinley Avenue property. How then could the Engens not have assumed the mortgage on the Lumsden Acreage? [ 32 ] After the transfer was completed, Mr.

Karwandy reported to the Engens, including providing a copy of the title which showed registration of the Conexus Mortgage (Karwandy Affidavit at para. 24 and Exhibit “L”). [ 33 ] From these facts I find that the Engens assumed the Conexus Mortgage and were contractually bound by its terms. [ 34 ] The Engens’ plea of ignorance as to the nature of documents they signed is contrary to the facts and not credible. [ 35 ] The Engens are not unsophisticated persons. Derrick Engen operated various businesses.

They had a previous mortgage on their McKinley Avenue property. (See January 28, 2013 email from “Carpe Diem Limousine” to Naomi Abrey of Conexus: Compendium, Tab 10). [ 36 ] When seeking mortgage financing in 2013, Derrick Engen contacted other mortgage lenders and obtained the assistance of a mortgage broker. When that proved unsuccessful, the Engens and Mr.

Demyen entered into an agreement to swap their properties to achieve the transfer of the Lumsden Acreage, including mutual assumption of the mortgages on the two properties. (See: Derrick Engen January 26, 2021 Affidavit at para. 7; and Derrick Engen Questioning at pp. 25-26). That was the key to achieving their goal of acquiring the Lumsden Acreage. [ 37 ] The word “mortgage” is commonly understood. The documents in the record, including agreements and forms signed by the Engens, repeatedly use the term “mortgage” both in prominent title to some documents and within the document text.

For example, July 4, 2013 “Pre-Approved Mortgage Certificate”, August 1, 2013 “Assumption of Mortgag e”, August 13, 2013 “Application to Amend a Term Loan, Mortgage or Cyclical Credit Agreement”, and November 4, 2016 “Amendment Agreement – Mortgage ”. [emphasis added] Many of the documents were included in the Engens’ Affidavits of Documents so would have been provided to them. [ 38 ] Derrick and Kimberly Engen both signed the seven-page “Application and Loan Agreement”.

That document on the first page under “Purpose/Intended Use:” states “Assume Calvin Demyen CCU Mortgage 11392347-1” (Compendium, Tab 12a). [ 39 ] Derrick Engen and Kimberly Engen both signed the one-page “Application to Amend a Term Loan, Mortgage, or Cyclical Credit Agreement” dated August 9, 2013. That document stated “Purpose of Application” as “Renewal Amendment – Assumption” (Compendium, Tab 12b). [ 40 ] Derrick and Kimberly Engen both signed a letter dated October 20, 2016 to Conexus requesting a new loan of $78,000 which would be added to the existing mortgage on the Lumsden Acreage (Compendium, Tab 15).

In the second paragraph of the letter they wrote:

We currently have a mortgage with you on our acreage with a balance around $483,000.00. Our appraised value of our property was $915,000.00 four years ago. Our initial mortgage was $560,000.00. [ 41 ] Conexus agreed to make this loan. Both Derrick and Kimberly Engen initialled the one-page “Application to Amend a Term Loan, Mortgage, or Cyclical Credit Agreement” dated October 27, 2016. That document states “Mortgage Re-advance Amount” as $78,237.31 and “Purpose of Application” as “Increase back up to their original mortgage amount” (Compendium, Tab 16).

A two-page “Amendment Agreement – Mortgage” describing the land as “Blk 4 Plan 95R37747” is also signed by the Engens (Compendium, Tab 18). [ 42 ] Mr. Karwandy was the Engens’ lawyer. Mr. Karwandy in his affidavit at para. 8 states that in January 2012 he explained to the Engens that “the option to purchase included an assumption by the Engens of the mortgage indebtedness and mortgage over the Acreage owed to Conexus.” He confirmed at para. 10(

a) that the purchase price for the Lumsden Acreage in the Sale and Purchase Agreement was made up of “An assumption of Demyen’s mortgage on the Acreage, which mortgage was in favour of Conexus”. At para. 11, he states his opinion that: 11. In my opinion it was clearly understood by all parties, including the Engens, that the transaction was based upon a swap of the two real properties with an assumption by the Engens of the existing mortgage in favour of Conexus given by Demyen in respect of the Acreage, and an assumption by Demyen of the mortgage made by the Engens in favour of CIBC over the Engen Regina House.

Mr. Karwandy concludes at paras. 25-27 that there was never any doubt but that the Engens were to assume the Conexus Mortgage as part of the transfer of titles and that the Engens were aware of that. [ 43 ] The Engens regularly made the mortgage payments for five years after taking title to the property, from 2013 to 2018. The reason they gave for stopping payments was financial difficulties.

There was no challenge to the existence of the mortgage against the Lumsden Acreage nor to their assumption of the Conexus Mortgage. [ 44 ] The Engens’ claim that they were not aware or did not understand they had assumed the Conexus Mortgage was not raised until their Statement of Defence was filed in 2020, years after the relevant transactions. Even if they have come to believe that themselves, that belief is not based on the facts. The fact is that the Engens assumed the Conexus Mortgage which upon registration on title secured the loan against the Lumsden Acreage.

The Lumsden Acreage is therefore subject to the foreclosure proceedings underway in this action. [ 45 ] The next question is whether errors in the mortgage documents made the agreement unenforceable.

Rectification of the Mortgage Agreement [ 46 ] Conexus concedes that there were errors in the mortgage documents, but argues that no one was misled and that the doctrine of rectification should be applied to correct those errors to conform to the original and mutual agreement of the parties. [ 47 ] Conexus relies upon two recent decisions applying the doctrine of rectification: MFI Ag Services Ltd. v Farm Credit Canada , 2023 SKCA 30 , affirming 2015 SKQB 379 ; and First National Financial GP Corporation v Mayer , 2022 SKKB 273 .

Those decisions confirm that the doctrine of rectification will be applied sparingly. It cannot be used to re-write an agreement. Rather it is applied to restore an agreement by correcting errors in the agreement to reflect the original and mutual intent of the parties. [ 48 ] To succeed on an application for rectification, the applicant has the onus to prove on a balance of probabilities: 1. an original agreement (meeting of minds on essential terms) between the parties; 2. that there was a mistake made when the original agreement was reduced to writing or in the implementation documents; and 3. that either: (

a) it was a mutual mistake by both parties; or (

b) it was a unilateral mistake by one party and the other party stayed silent so as to take advantage of the mistake in circumstances that are equivalent to fraud. [50] Because rectification is an equitable remedy, even if these requirements are established, the court retains a discretion as to whether to grant relief. In deciding whether to exercise its discretion, the court will try to do what is fair, having regard to all of the circumstances. [ 49 ] I am satisfied that Conexus has met this test. Conexus agreed to finance the Engens’ acquisition of the Lumsden Acreage.

A critical and necessary part of that financing involved the assumption of the Conexus Mortgage by the Engens. Unbeknownst to the parties, some of the documents contained errors in some references to the mortgage agreement or descriptions of the real property. No one noticed those errors until litigation ensued years later. Importantly, no one was misled by those errors. Correcting those errors now simply returns the mortgage agreement to the original intent of the parties. That is only fair.

To do otherwise would provide the Engens with an unearned windfall and penalize Conexus for what amounts to clerical errors. [ 50 ] I therefore apply the doctrine of rectification to correct the errors. Unconscionability [ 51 ] The law of unconscionability is reviewed in the context of a mortgage agreement in Mountain Investment Corp. v

Quewezance, 2022 SKKB 266 , 2022 SKQB 266 at paras 22-27, 476 DLR (4th) 545. There is a two-part test forunconscionability: 1) proof of inequality in the positions of the parties; and 2) proof of an improvident bargain. I accept that commerciallenders such as Conexus have an advantage over most borrowers. So the question of unconscionability depends on the second part of thetest; whether the Conexus Mortgage was an improvident bargain for the Engens?

I find that it was not an improvident bargain nor anunconscionable transaction. [52] The Engens argue that an absence of legal advice when signing mortgage documents as proof of unconscionability. Ireject that argument. [53] First, absence of legal advice is not proof of unconscionability. Legal advice is only one of many factors that may beconsidered in determining unconscionability. [54] Second, the claim is contrary to the facts. The Engens had the benefit of legal advice over a long period from anexperienced lawyer, Mr.

Karwandy. [55] Finally, there is nothing in the content or process of the Conexus Mortgage that raises any suggestion ofunconscionability. On the contrary, the Conexus Mortgage has standard mortgage terms and was achieved through standard commercialpractice. There is nothing in or about that agreement that is remotely unconscionable. The only unusual aspect – the swap of properties –was of primary benefit to the Engens, who were until then unable to secure financing from other lenders. [56] The Engens were anxious to obtain mortgage financing to allow them to acquire the Lumsden mortgage.

Conexusenabled that transaction to the benefit of both the Engens and Mr. Demyen. The Engens had no complaint at the time or in the yearsfollowing. Their default in mortgage payments had nothing to do with Conexus, according to their own evidence which lays the blamefor their financial difficulties on unrelated events. Conclusion [57] For the reasons set out above, I am fully satisfied that the Engens’ defence must be dismissed.

Judgment and Orders [58] The Engens’ defence is dismissed and the Engens are declared to have assumed the Conexus Mortgage against theLumsden Acreage. [59] Errors in the mortgage and transfer documents are hereby rectified. Conexus referred to four separate errors in itsdocuments: 1) address of the property; 2) reference to legal land description; 3) date of original mortgage agreement, being May 22,2008; and 4) mortgage loan number, which should be 11392347.

I invite Conexus to submit an order specifying the specific correctionsto be made to specific documents so as to achieve the intent of my decision. [60] Conexus filed a draft Order Nisi for Sale by Real Estate Listing on April 20, 2023. While the draft order nisi isgenerally acceptable, certain terms should be revised or completed. First, paras. 3-5 stated the amounts owing as of April 18, 2023 andthe current interest rate. Conexus may wish to update that draft to the date of decision and I give leave to do so. Second, the sellingofficer is unnamed.

I invite Conexus to name an independent lawyer in the draft order nisi which is to be submitted for my approval. Thedraft order nisi is otherwise acceptable, including the proposed redemption period of 30 days. Although the standard redemption periodis 90 days, the circumstances of this case, including lack of payment on the mortgage, insurance and property taxes, justify the shorterperiod. Costs [61] Conexus sought costs on a solicitor and client basis for this action from the granting of leave.

Natalie Knudsen’sAffidavit of April 20, 2023 estimates Conexus has incurred legal fees at $52,000 plus disbursements of $12,000. Costs on foreclosureproceedings are usually addressed at the end of the proceeding on application for assessment of costs. So I leave the question of costs tobe dealt with at that time. Seized [62] Given my knowledge of this file and to avoid burdening my colleagues, I considered seizing myself for the purpose ofany order confirming sale or substituting foreclosure and application for costs. However, that might cause delay if I am unavailable.

Itherefore leave assignment of future applications to the local registrar. J. D.N. ROBERTSON