Daylight Capital Corp. v. Date:, 2014 MBCA 17

Citation: Daylight Capital Corp. v. Date: 20140131 Winnipeg (City) et al., 2014 MBCA 17 Docket: AI 13-30-07959 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Barbara M. Hamilton Mr. Justice Alan D. MacInnes Mr. Justice Marc M. Monnin BETWEEN : ) S. T. Hombach ) for the Appellant ) DAYLIGHT CAPITAL CORPORATION ) D. A. M. Pambrun ) for the Respondent (Applicant) Appellant ) The City of Winnipeg ) - and - ) S. M. Boonov ) for the Respondent THE CITY OF WINNIPEG and ) M.

Fedowich MARIA FEDOWICH ) ) Appeal heard: (Respondents) Respondents ) October 31, 2013 ) ) Judgment delivered: ) January 31, 2014 MONNIN J.A. [ 1 ] This is an appeal from a judgment dismissing an application for a declaration that the appellant, Daylight Capital Corporation (Daylight), was entitled to an assignment of a tax sale certificate from the City of Winnipeg (Winnipeg) under s. 385(3) of The City of Winnipeg Charter , S.M. 2002, c. 39 (the City Charter ).

While the appellant originally claimed to be entitled to the assignment in priority to the respondent Maria Fedowich, it no longer seeks to set aside the assignment given to that party, but, in the alternative, seeks damages which were denied by the application judge. Facts [ 2 ] The facts are straightforward. The dispute arises from property at 348 Enniskillen Avenue in Winnipeg, owned by John Fedowich, the spouse of Maria Fedowich (the property). They were married on December 12, 1997, and remained so until Mr. Fedowich’s death on September 24, 2010. Mrs.

Fedowich continued to live on the premises after his death. [ 3 ] Mr. Fedowich owed money to Rev. Vladimir Olach, which resulted in a judgment being obtained against him for the amount of $6,575 on October 29, 2003 (the Olach judgment). The Reverend obtained a certificate of judgment from the Court of Queen’s Bench pursuant to s. 2 of The Judgments Act , C.C.S.M., c. J10 (the Act ), which was registered against the title on November 7, 2003. [ 4 ] Mr. Fedowich did not pay his real property taxes for the years 2007, 2008 and 2009.

In 2009, Winnipeg commenced tax sale proceedings with the result that the land was sold to Winnipeg at a tax sale on December 4, 2009. A tax sale certificate was issued on that date. [ 5 ] On September 20, 2011, Daylight obtained an assignment of the Olach judgment for $1,000. Daylight then wrote to Winnipeg requesting that Winnipeg’s tax sale certificate be assigned to it on the strength of it being the assignee of a registered judgment against the property.

Winnipeg’s legal department conducted a search of the Winnipeg Land Titles Office which did not show that a certificate of judgment with respect to the assignment had been registered against the title. Winnipeg wrote to Daylight advising that it could not process its request for an assignment of the tax sale because “a current search of the property’s Title indicates that Daylight Capital Corporation does not have a bona fide interest on [the property].” In light of the position taken by Winnipeg, Daylight set about to obtain a new certificate of judgment which included its assignment.

There was a delay caused by the fact that the original

documentation filed with the court for the certificate of judgment did not contain an affidavit of execution. A new certificate of judgment showing the assignment was eventually registered in the Winnipeg Land Titles Office on December 30, 2011. [ 6 ] In the meantime, Mrs. Fedowich, who had registered a homestead notice on February 2, 2006, applied to Winnipeg for an assignment of the tax sale certificate.

The certificate was assigned to her on December 6, 2011, and she proceeded to have the property transferred to her in due course. [ 7 ] When Daylight wrote to Winnipeg on January 5, 2012, with the evidence that it had perfected its documentation on title with respect to its assignment, it was told by Winnipeg that the latter no longer held any interest in the property as it had assigned it on December 6, 2011. [ 8 ] Daylight commenced proceedings by way of a notice of application against Winnipeg seeking an order setting aside the assignment of the tax sale certificate to someone other than Daylight.

It was unsuccessful in obtaining a temporary litigation order. As the title to the property was given to Mrs. Fedowich, Daylight abandoned its request for an assignment of the tax sale certificate and, instead, sought damages as an alternative remedy. [ 9 ] The matter proceeded before the Court of Queen’s Bench. [ 10 ] The application judge, after reviewing the position of both parties, dismissed Daylight’s claim. He concluded that Daylight was aware of the steps it needed to take to register its interest in the property, but that it did not meet the requirements of the Act when it attempted to do so.

He held that the Registry of the Court of Queen’s Bench had no alternative but to reject the initial attempt to register the assignment of the judgment with the court as being non-compliant with the requirements of the Act . He also found no fault with Winnipeg’s refusal to accept notification of the assignment, and its search of the property title in the Winnipeg Land Titles Office to determine whether or not Daylight had a bona fide interest.

He stated as follows (at para. 53): While Daylight provided Winnipeg with the initial assignment of judgment which it says ought to have been construed by Winnipeg as de facto notice, I find that Winnipeg acted properly in relying only on the search of title in the WLTO [Winnipeg Land Titles Office] to determine whether or not Daylight held a bona fide interest in the property. In refusing to transfer the TSC [tax sale certificate] to Daylight, Winnipeg not only acted in accordance with the law, but also in accordance with prudent practice procedures.

The fault lies with Daylight in not having prepared the assignment of judgment in accordance with the Act . Had they done so initially, they would have been able to register a certificate of judgment in the WLTO, thereby giving Winnipeg notice of their bona fide interest in the property. [ 11 ] Costs were reserved, and as we understand, have not yet been spoken to.

Issue on the Appeal [ 12 ] The issue is simply whether the application judge erred in law when he concluded that, notwithstanding the assignment of the judgment, Winnipeg was not required under s. 385(3) of the City Charter to assign the tax sale certificate to Daylight upon receipt of its request on September 27, 2011. Standard of Review [ 13 ] Daylight submits that the issue on this appeal is one of statutory

interpretation; namely, the interplay of the City Charter , the Act and The Real Property Act , C.C.S.M., c. R30 (the RPA ), therefore requiring a review of the application judge’s decision on a standard of correctness. Winnipeg agrees, and so do I. Position of the Parties

a) Daylight’s Position [ 14 ] Daylight’s position is that the various statutory provisions – the City Charter , the Act and the RPA – do not contemplate that assignments of judgment need to be registered in order to be effective to give the assignee the same priority as given to the original judgment creditor. In essence, the position of Daylight is that, upon obtaining the assignment, the judgment creditor steps into the shoes of the original holder of the judgment and obtains the same priority against other claimants to property as would the holder of the originally registered certificate of judgment.

It argues that there is nothing in the Act or the RPA which provides a mechanism by which a new certificate of judgment can retain the priority of the old one and argues that s. 12(3) of the Act recognizes that assignments cannot be registered. Furthermore, s. 64 of the RPA unambiguously confirms that priority is granted by the order of registration. Therefore, there is no

section or provision which requires the registration of the assignment in order to obtain the benefit of a prior registration of the judgment. [ 15 ] Daylight says that Winnipeg’s argument that s. 8 of the Act provided for such priority is incorrect in that s. 8 of the Act applies only to registration of certificates of judgment obtained after a suit upon a judgment. [ 16 ] It further argues that the Winnipeg Land Titles Office’s practice of registering a new certificate of judgment that includes reference to the assignment is not sanctioned by either the Act or the RPA and is, in fact, contrary to s. 12(3) of the Act . [ 17 ] Finally, Daylight argues that Winnipeg had actual notice of the assignment, although not registered, and as such was

bound by the usual law of equity regarding notice. The actions by the Registry of the Court of Queen’s Bench to withdraw the certificate of judgment because it did not abide by the form set out in

Schedule “B” of the Act was incorrect. In its submission, the form is not exclusively mandated as s. 12(1) refers to an assignment being in the form set out in the

schedule or “to the like effect” and the affidavit of execution which was requested is only a procedural evidentiary rule for filing a document. It does not affect the legal validity of the document itself.

b) Winnipeg’ s Position [ 18 ] While on the original application Winnipeg relied upon s. 8 of the Act as governing the issue of whether an assignment of a judgment had the same priority as the initial certificate of judgment, it did not rely upon that argument on this appeal. Although Winnipeg did not dispute that Daylight had a valid assignment of the Olach judgment and that it received actual notice of that assignment, its position was that, until registered with a certificate of judgment, the assignment did not give Daylight an interest or charge as contemplated in s. 385(3) of the City Charter .

Therefore, at no time that Daylight made a request of Winnipeg for assignment of the tax sale certificate was it entitled to it. Winnipeg relies on the decision of Willman v. Ducks Unlimited (Canada) , 2003 MBQB 41 , 171 Man.R. (2d) 297, to the effect that (at para. 33): …. Knowledge of an unregistered interest held by another in land is of no effect (absent fraud) against someone who has perfected his priority in interest by registration in the land registry.

The equitable doctrine of notice has been statutorily usurped. …. [ 19 ] Therefore, Winnipeg’s position is that the filing of the assignment of judgment with it, while giving it actual notice of the document, did not act as notice of a registered interest in, or charge on, the property which would have engaged s. 385(3) in favour of Daylight.

Statutory Provisions [ 20 ] The relevant sections of the RPA and the Act are attached as Appendix “A.” Analysis and Decision [ 21 ] I have concluded that the application judge was correct in holding that Winnipeg was acting in accordance with the provisions of s. 385(3) of the City Charter when it refused Daylight’s application for transmission of the tax sale certificate as its assignment was not evidenced by a certificate of judgment against the title to the property which recognized the assignment of the judgment.

When one considers the legislative schemes set out in the City Charter with respect to tax sales, and in the Act with respect to certificate of judgments, Winnipeg’s position must prevail. As this court has mentioned recently, the provisions with respect to tax sales in Winnipeg’s City Charter must be read and viewed in combination with provisions of the RPA (see Thunderbird Holdings Ltd. v. Manitoba et al. , 2013 MBCA 78 , 14 M.P.L.R. (5th) 5).

Those provisions, as is the case with tax sales with respect to municipalities, operate within the ambit of the Torrens system where registration and concurrent indefeasibility are essential characteristics. [ 22 ] Pursuant to s. 385(3) of the City Charter , only “a person who has an interest in, or a charge on , the property may require the tax purchaser [Winnipeg] to assign to the person the tax sale certificate in respect of the property” (emphasis added). [ 23 ] In accordance with the wording of s. 2 of the Act , a judgment, by itself, does not create an interest in, or a charge on, the land.

It is only the registration of a certificate of judgment obtained from the court against the land which creates the charge. Until a certificate is obtained from the court and registered in the Winnipeg Land Titles Office, all that a judgment creditor has is the ability to apply to have it registered. [ 24 ] As noted by Victor Di Castri, Q.C., Registration of Title to Land , looseleaf (Toronto: Carswell, 1987) vol. 2 (at p. 17-3): The right to apply to have an instrument registered cannot be translated into the right to have it registered . …. [ 25 ] Sections 3(2) and 12 of the Act deal with assignments.

Section 12(3) recognizes that an assignment of a judgment is not registerable in the Winnipeg Land Titles Office in the same fashion that a judgment itself is not registerable. It is only a certificate issued by the court, as evidence of the validity of a judgment or of an assignment, which is a registerable instrument in the Winnipeg Land Titles Office as contemplated by the legislation. [ 26 ] In

summary, neither a judgment nor an assignment of a judgment gives an interest in, or charge against, the land. It is only the certificates obtained from the court that, when registered, do so. [ 27 ] Therefore, in my view, s. 385(3) of the City Charter did not give Daylight an interest or charge sufficient to require Winnipeg to transfer the tax sale certificate until it had perfected its interest by registration of a new certificate of title in the Winnipeg Land Titles Office. [ 28 ] Daylight argues that, in the absence of a specific provision similar to that found in s. 8(2) of the Act , giving a new

certificate of judgment the same priority as the certificate of judgment previously registered, the assignment was effective to transfer the rights to enforce the certificate of judgment to Daylight without the need to register a further certificate. Consequently, it had the right to the tax sale certificate as having an interest ranking in priority to the homestead interest of Mrs. Fedowich. [ 29 ] Whether the Act is unclear as to the effect of filing a certificate of judgment based upon an assignment, in my view, is not an issue in this case. What is involved is an

interpretation of s. 385(3), and the lack of an instrument registered by the appellant giving it an interest in or charge upon the land which it could enforce in the circumstances. If needed, I would adopt the argument advanced by Winnipeg that the filing under s. 3(2) of a certificate of judgment after an assignment is a recognition of the transfer of the original judgment to a new party and the legal consequences that flow from it.

However, until that registration, equitable notice provisions do not supplant the requirements under the RPA and the Torrens system. [ 30 ] For these reasons, I would dismiss the appeal with costs to Winnipeg. [ 31 ] As to the respondent, Mrs. Fedowich, her counsel did not participate and, since counsel for Daylight conceded that he was not seeking damages against her, her counsel was not invited by the court to make oral submissions. However, she was required to file a factum and I would grant her costs of $500 and reasonable disbursements. J.A. I agree: J.A. I agree: J.A.

Appendix “A” The Real Property Act , C.C.S.M., c. R30:

Definitions 1 In this Act , and in instruments purporting to be made or registered under this Act, unless the context otherwise requires …. “ instrument” means a certificate of title, title, certificate of search or charge, book, record, plan, or data stored in the electronic information system, relating to a dealing with land, or creating a mortgage, encumbrance, or lien thereon, or evidencing title thereto and includes any duplicate of the instrument; ….

Daily record of district registrar 14(1) The district registrar shall record and make all entries of every instrument presented for registration, and assign a serial number to the instrument and such other data as the Registrar General may prescribe, in the order in which it was presented together with the date of presentation; and the record of these entries shall be called the daily record.

Priority of registration 64 Instruments shall be registered in the order of the serial numbers assigned to them and entered in the daily record and instruments registered in respect of or affecting the same estates or interests shall, notwithstanding any expressed, implied or constructive notice, be entitled to priority according to the serial number. Registration essential

66(4) No instrument is effectual to pass an interest in land under the new system or to render the land liable as security for the payment of money as against a bona fide transferee thereof, until the instrument is registered in accordance with this Act .

Definitions 80(1) The following

definitions apply in this section. “interest” includes any estate or interest in land. “owner” includes (

a) the owner of any registered interest in whose name the interest is registered; or (

b) the caveator or assignee of a caveat in whose name the caveat is registered. Protection for person accepting transfer 80(2) A person who contracts for, deals with, takes or proposes to take a transfer, mortgage, encumbrance, lease or other interest from an owner is not — except in the case of fraud or a wrongful act in which that person has participated or colluded — (

a) required for the purpose of obtaining priority over a trust or other interest that is not registered by an instrument or caveat, (

i) to inquire into or ascertain the circumstances in or the consideration for which the owner or any previous owner of the interest acquired the interest, or (ii) to see to the application of the purchase money or any part of the money; and (

b) affected by any notice, direct, implied or constructive, of any trust or other interest in the land that is not registered by an instrument or caveat, despite any rule of law or equity to the contrary. The Judgments Act , C.C.S.M., c. J10

Definitions 1(1) In this Act , …. “register” or “registered” , used with respect to a judgment or of a writ or order of attachment, means register or registered by the registration of a certificate thereof under this Act or some former Act of the Legislature. ….

Registered judgment a lien on land 2 Immediately upon a judgment for payment of money being entered or recovered in the Court of Queen’s Bench or in the Federal Court of Canada for a sum exceeding $40., a certificate of judgment in the form set out in

Schedule A or to the like effect under the seal of the court and signed by the registrar or a deputy registrar of the court may be registered in any Land Titles Office in the province; and from the time of the registration thereof, the judgment, except as hereinafter mentioned, binds and forms a lien and charge on all lands of the judgment debtor against which the certificate of judgment is registered by instrument charging specific land and, while registered in the general register, against all lands of the judgment debtor in the Land Titles District in which the certificate is registered that are held in a name identical to the debtor set out in the certificate of judgment, whether or not the lands are registered under The Real Property Act ; and the certificate when so registered has the same effect as if the judgment debtor had under its hand and seal executed a lien charging the lands in favour of the judgment creditor.

Proceedings on registered judgment 3(1) After the registration of the certificate of judgment, the judgment creditor may, if he elects to do so, proceed upon the lien and charge thereby created; but no proceedings to realize upon a registered judgment shall be commenced until after one year from the date of the registration of a certificate in respect thereto.

Form of certificate after assignment of judgment 3(2) Where an assignment of a judgment is registered in the court as herein provided, each certificate of the judgment thereafter issued shall contain a statement giving the particulars of the assignment, which statement may be in the following words or words to the like effect: I further certify that by an assignment dated the day of , 19 , and registered in this court on the day of , 19 , the above named judgment creditor assigned the said judgment to of .

Where further assignments made 3(3) Where more than one assignment of a judgment is registered, each certificate of the judgment thereafter issued shall contain a like statement giving the particulars of each assignment so registered. Registration of certificates of judgment obtained upon a judgment 8(1) Where an action or suit, not prohibited by clause 2(1) (

l) of The Limitation of Actions Act [C.C.S.M., c. L150], is brought or commenced upon a judgment, order, or decree of any court in Manitoba or of the Federal Court of Canada, under which a certificate has been registered, that at the time judgment is entered in the action or suit, forms a lien or charge upon the lands of the judgment debtor or any one claiming under him, the certificate, notwithstanding the entry of judgment in the action or suit, continues to form a lien or charge upon the lands of the judgment debtor or anyone claiming under him for 30 days after the entry of the judgment but not thereafter.

Priority of registrations 8(2) If within the 30 days mentioned in subsection (1) a certificate of the judgment entered in the action or suit is registered, that certificate of judgment from the date of its registration is entitled to the same priority as the certificate of judgment registered at the date of the entry of judgment in such action or suit, if the first certificate registered of the judgment entered in the action or suit contains a statement showing that the judgment was recovered on a former judgment; which statement may be in the following words or words to the like effect: This judgment was recovered in an action brought on a former judgment recovered in this court on the day of , 19 , in suit numbered and entered up in judgment roll No. (or as the case may be).

Form of assignment of judgment 12(1) Where, a judgment creditor assigns a judgment to another person, the assignment shall be in the form set out in

Schedule B, or to the like effect; and, in the case of a second or subsequent assignment thereof, the form shall include a reference to all previous assignments and give the particulars thereof.

Registration of assignments in court 12(2) An assignment of a judgment may be registered in the court in which the judgment was recovered. Registration in land titles offices prohibited 12(3) No assignment of a judgment shall be registered in any land titles office in the province.