Finley et al. v. Tines, 2011 MBCA 101

Citation: Finley et al. v. Tines, 2011 MBCA 101 Date: 20111214 Docket: AI 11-30-07638 IN THE COURT OF APPEAL OF MANITOBA B E T W E E N : RONALD EARLE FINLEY, NORMAN ) P. Halamandaris WAYNE MENNIE and ANNA BEATRICE ) for the Applicant WALL ) ) R. H. Johnston, Q.C. (Plaintiffs) Respondents ) for the Respondents ) - and - ) Chambers motion heard: ) December 1, 2011 PETER TINES ) ) Decision pronounced: (Defendant) Applicant ) December 14, 2011 SCOTT C.J.M. 1 The applicant attempted to file his factum and appeal book, but was three days late. He wishes to appeal from a decision of a Court of Queen’s Bench motions judge who denied his application for

summary judgment dismissing the respondents’ action. He now applies for an extension of time to enable him to perfect his appeal. The respondents oppose on the basis that the applicant’s appeal has no reasonable chance of success because recent amendments to their statement of claim render the request for

summary judgment moot. 2 There is no dispute between the parties as to the applicable issues to be addressed on a motion to extend the time to perfect an appeal: (1) was there a continuous intention to appeal; (2) is there a reasonable explanation for the delay; (3) are there arguable grounds of appeal; and (4) is there any prejudice suffered by the other party. Only question No. (3) is in issue here. 3 The facts briefly (taken from the applicant’s proposed factum) are that a corporation known as Iran Management Ltd. (Iran) sold property in Brandon, Manitoba, in 2003, taking back a second mortgage.

The three respondents were directors of Iran at the time. On closing, a first mortgage was registered in favour of one Jansen (the Jansen mortgage) in the amount of $85,000, personally covenanted by the applicant. The purchaser defaulted and Iran foreclosed and took title in January 2007, subject to the Jansen mortgage. Iran eventually again sold the property. In April 2009, Iran’s lawyer, Johnston (also counsel for the respondents), paid $125,607.58 in trust – subject to eventual agreement as to the precise amount – to discharge the Jansen mortgage.

The discharge, which stated that “all money due or to grow due on same has been paid” and “the above instrument has not been assigned,” was duly executed by Jansen and filed in the Land Titles Office. 4 Some months later, during negotiations that led up to resolution of the amount owing on the Jansen mortgage, Johnston, on behalf of Iran, requested and received an assignment of the Jansen mortgage in favour of the three respondents. In the request, it was indicated that the respondents intended to pursue the applicant on his personal covenant in the mortgage. 5 In the meantime, the applicant moved for

summary judgment, arguing that after a good, hard look, the respondents could not, as a matter of law, claim on the personal covenant once the mortgage had been completely discharged. His application was dismissed by the master, whereupon the applicant appealed. After this date, but before the hearing of his appeal before the Queen’s Bench judge, Jansen’s lawyer provided Johnston with an undated, but signed assignment of the mortgage.

6 The Queen’s Bench judge was of the view that a discharge of the mortgage does not necessarily discharge a covenant topay, and that there was a presumption that “the third party, namely the plaintiffs, do not intend to discharge the mortgage but rather tokeep it alive for their own benefit.” He concluded that the respondents’ intention whether to pay off or discharge the mortgage was animportant issue and that “[t]his is not a matter that should be determined on a

summary basis, rather there is a genuine issue for trial.” Accordingly, the applicant’s appeal was dismissed. 7 Shortly before the applicant’s notice of appeal was filed in this court, the respondents, with the consent of the applicant,amended the statement of claim, asking for a declaration “as to the meaning and effect” of the discharge of mortgage and an order, ifnecessary, rectifying the discharge to reflect the true intentions of the respondents and Jansen.

The respondents assert that a mutualmistake occurred in that an assignment of mortgage was also to be provided by Jansen and that the discharge “ought to be rectified todelete any reference to payment or state that all money due or to grow due on the Mortgage has been paid by the Plaintiffs herein and notthe Mortgagor and not the Covenantor.” 8 In argument before me, the applicant submitted that the critical issue is whether the discharge of the Jansen mortgage stillentitled the respondents, as purchasers of the mortgage, to claim against the applicant on his personal covenant.

The after-the-factassignment, counsel argued, is simply too little too late as there was “nothing” left to assign. Section 6(1) of The Mortgage Act,C.C.S.M., c. M200, provides as follows: When mortgagor may require mortgagee to assign mortgage to third party 6(1) Where a mortgagor is entitled to redeem he may require the mortgagee, instead of giving a certificate of payment or re-conveying,and on the terms on which he would be bound to re-convey, to assign the mortgage debt and convey the mortgaged property to any thirdperson, as the mortgagor directs; and the mortgagee is bound to assign and convey accordingly.

The applicant asserts that this section, relied on by the respondents, applies specifically and only to a mortgagor. 9 Lastly, strong reliance is placed by the applicant on the Alberta Court of Appeal decision of First National Mortgage Co.and Block Bros. Realty Ltd. v. L.J.V. Holdings Ltd. et al. (1989), 1989 ABCA 88 , 95 A.R. 237, which stands for theproposition, counsel argues, that whether under a

section similar to s. 6(1) of The Mortgage Act or at common law, once the entiremortgage has been discharged, the covenants to pay are no longer enforceable. 10 In response, the respondents’ counsel essentially conceded that the applicant had raised an arguable issue, but for one factor,namely, that as a result of the amendments to the statement of claim claiming rectification and declaratory relief, the appeal was renderedmoot. The respondents’ position seems to be that having regard to the amended statement of claim, new facts have been pled and theissues between the parties are no longer the same.

If the court interprets the discharge of the Jansen mortgage as a discharge of the debt,a declaration is sought that it was executed as a result of a mutual mistake and any reference to payment in full by the applicant should bedeleted so as to reflect the true bargain. 11 I do not agree that the appeal from the dismissal of the applicant’s application for

summary judgment is necessarily moot. There is still the issue as to the application of s. 6(1) of The Mortgage Act. There is still the issue whether complete payment/dischargeof the Jansen mortgage in circumstances such as these entitles the respondents to claim under the personal covenant contained in the“discharged” mortgage.

The effect of the belated amendment to the statement of claim requesting rectifications as an alternate remedyand whether it trumps the applicant’s arguments earlier summarized is, in itself, an arguable issue. 12 These are all issues that deserve the attention of a panel of this court. 13 I accordingly grant the application for an extension of time within which to perfect the appeal to December 28, 2011. Costsin the cause. ______________________________ C.J.M.