Farm Credit Canada v. Beaumont, 2012 NSSC 356

SUPREME COURT OF NOVA SCOTIA Citation: Farm Credit Canada v. Beaumont, 2012 NSSC 356 Date: 20121009 Docket: Hfx No. 391213 Registry: Halifax Between: FARM CREDIT CANADA , a body corporate Applicant v. PRICEWATERHOUSECOOPERS INC ., Trustee in Bankruptcy on behalf of Micah Ronald Beaumont, MICAH RONALD BEAUMONT , carrying on business as Paradise Charolais Farms, AUDREY IRENE BEAUMONT , HATT ’ S QUALITY MEATS INC ., a body corporate, BRANCH TREE NURSERY & LANDSCAPING INCORPORATED , a body corporate Respondents Judge: The Honourable Associate Chief Justice Deborah K.

Smith Heard: September 12 th and October 9 th , 2012 Oral Decision: October 9 th , 2012 Written Decision: October 16 th , 2012 Counsel: Maurice P. Chiasson, Q.C. & Sara Scott, for the Applicant No one appearing for the Respondents By the Court : [ 1 ] I have before me an application by Farm Credit Canada for an Order for Foreclosure, Sale and Possession of certain properties located in Lunenburg County, Nova Scotia bearing PID numbers 60329273, 60642626 and 60642634.

[ 2 ] By way of background, on November 14 th , 2003, Micah Ronald Beaumont and Audrey Irene Beaumont signed a Loan Approval and Acceptance Agreement with Farm Credit Canada in the principal amount of eighty thousand dollars ($80,000.00). A company known as Branch Tree Nursery & Landscaping Incorporated signed as Guarantor. This is known as loan 232124. [ 3 ] As security for this loan, Mr. and Ms. Beaumont signed a collateral mortgage the same date over PID number 60329273.

This mortgage, which was in the amount of two hundred fifty thousand dollars ($250,000.00), was registered in the Lunenburg County Registry of Deeds on November 17 th , 2003. [ 4 ] On July 29 th , 2004, Mr. and Ms. Beaumont executed a further Loan Approval and Acceptance Agreement with Farm Credit Canada in the principal amount of one hundred twenty thousand dollars ($120,000.00). Again, Branch Tree Nursery & Landscaping Incorporated signed as Guarantor. The loan agreement executed by the parties indicated that this new loan was also to be secured by the collateral mortgage referred to above.

This new loan is known as loan 247724. [ 5 ] On January 10 th , 2006, Mr. and Ms. Beaumont executed a further Loan Approval and Acceptance Agreement in the principal amount of one hundred thousand dollars ($100,000.00). Branch Tree Nursery & Landscaping Incorporated, again, signed as Guarantor. This loan agreement indicated that the loan was to be secured by a five hundred thousand dollar ($500,000.00) mortgage on PID number 60329273 as well as on lands being purchased from Calvin L. Snyder Inc. [sic] – part of PID number 60329687.

According to the affidavit of Jason Inman sworn to September 20 th , 2012 the lands purchased from Calvin L. Snyder Limited were made up of PID numbers 60642626 and 60642634. This new loan is known as loan 273880. [ 6 ] On January 10 th , 2006, Mr. Beaumont (said to be carrying on business as Paradise Charolais Farms) and Ms. Beaumont, signed a second collateral mortgage. Branch Tree Nursery & Landscaping Incorporated signed this mortgage as Guarantor.

Despite the fact that the loan documentation indicated that the mortgage was to be in the principal amount of five hundred thousand dollars ($500,000.00), the collateral mortgage that was signed was only in the amount of one hundred thousand dollars ($100,000.00). This mortgage had three deed descriptions attached to it, one relating to PID number 60642634, one relating to PID number 60642626 and one relating to PID number 60329273. This mortgage was registered in the Lunenburg County Land Registration Office on January 16 th , 2006 against PID number 60329273 only.

It was not registered against PID numbers 60642634 or 60642626. [ 7 ] By letter dated April 4 th , 2006, Farm Credit Canada wrote to the solicitor who had been retained to arrange for the execution and registration of this mortgage, Michael K. Power, pointing out that the mortgage was only in the amount of one hundred thousand ($100,000.00) – not five hundred thousand ($500,000.00) as Mr. Power had been instructed. As a result, on April 19 th , 2006, Mr. and Ms. Beaumont executed a Mortgage Amending Agreement amending the principal amount of the mortgage to five hundred thousand dollars ($500,000.00).

Branch Tree Nursery & Landscaping Incorporated signed this Mortgage Amending Agreement as Guarantor. This Mortgage Amending Agreement was registered at the Lunenburg County Land Registration Office on April 20 th , 2006. Unlike the original mortgage, the Mortgage Amending Agreement was registered against PID numbers 60329273, 60642626 and 60642634. [ 8 ] All of the loans in question are now in significant arrears and Farm Credit Canada seeks to foreclose under the mortgages.

As indicated previously, they filed an application for an Order for Foreclosure, Sale and Possession in relation to PID numbers 60329273, 60642626 and 60642634. [ 9 ] Numerous issues have arisen in relation to the mortgages only two of which need to be dealt with today. [ 10 ] The first issue involves an

interpretation of the mortgage documents to determine whether each collateral mortgage secures all of the loan agreements executed by the parties or whether each mortgage relates only to certain loans. The second issue relates to an ambiguity in the January 10 th , 2006 mortgage concerning which properties were intended to be mortgaged at that time. [ 11 ] Turning to the first issue: Farm Credit Canada submits that both of the mortgages in question secure all three of the loans. They base their argument on the wording of the mortgages and, in particular,

section 2 which provides:

2. WHAT THIS MORTGAGE DOES By signing the Specific Mortgage Terms attached, You acknowledge that You are indebted to Us or may become indebted to Us and agree to repay the Principal Sum or the Loan Amount outstanding with interest as set forth in any Loan Agreement . You also Mortgage all of Your estate and interest in the Property to Us, as additional and collateral security for the repayment of all the Loan Amounts . [Emphasis added] [ 12 ] “ Loan Amount ” is defined in the mortgages as: “Loan Amount ” means the outstanding balance of any Loan or Guarantee after demand or of any draw under any Loan.

This balance could include unpaid principal, defaulted payments, interest on defaulted payments, Other Charges and interest on Other Charges. [ 13 ] If the term “ Loan Amount ” was the only term defined in the mortgages, Farm Credit Canada ’ s position may be persuasive. However, the terms “ Loan Agreement ” , “ Loan ” and “ Loans ” are also defined in the mortgages. They provide: “Loan Agreement ” means any Promissory Note, Loan Approval and Acceptance, Loan or Credit Agreement or any similar agreement evidencing a Loan between You and Us to be secured by this Mortgage .

It also means any Guarantee signed by You guaranteeing the repayment to Us of a loan We made to a third party, which contingent indebtedness under the Guarantee is secured by this Mortgage. [Emphasis added] [ 14 ] “ Loan ” or “ Loans ” are defined as: “ Loan ” or “ Loans ” means all Loans made by Us to You from time to time and secured by this Mortgage , including the Loan made at the time that this Mortgage is signed. It also means any Loan made by Us to a third party which You have guaranteed to repay. Loans may be agreed to in Loan Agreements.

The Specific Mortgage Terms attached set out the maximum Principal Amount of the Loans and the maximum interest rate We will charge You on the Loans. [Emphasis added] [ 15 ] Significantly, the terms “ Loan Agreement ” “ Loan ” and “ Loans ” do not refer to all loans between the parties. These refer to all loans that are to be secured by the mortgage in question . In other words, only those loans that are to be secured by that mortgage fall within the definition of “ Loan Agreement ” , “ Loan ” or “ Loans ” .

One then looks to the loan documentation itself to see if the loans were intended to be secured by a particular mortgage. [ 16 ] A review of the loan documentation supports the conclusion that specific loans were intended to be secured by specific mortgages. The Loan Approval and Acceptance Agreement relating to loan 232124 indicates that security for that loan was to be by way of a mortgage on PID 60329273. Similarly, the Loan Approval and Acceptance Agreement relating to loan 247724 indicates that that loan was to be secured by the same mortgage.

The Loan Approval and Acceptance Agreement relating to loan 273880 indicates that it was to be secured by a mortgage on PID 60329273 as well as a mortgage on lands which were being purchased from Calvin L. Schneider Inc. [sic]. All of this leads one to the conclusion that specific loans were intended to be secured by specific mortgages. [ 17 ] If one were to accept Farm Credit Canada ’ s

interpretation of the mortgages, the words “ secured by this mortgage ” in the definition of “ Loan Agreement ” , “ Loan ” or “ Loans ” would be meaningless. The drafters of this document (Farm Credit Canada) must have intended that these words have meaning.

[ 18 ] I conclude, therefore, that

section 2 of the mortgages in question must be read in light of the

definitions contained in

section 1 of the said mortgages. In light of these

definitions, only those loans that were to be secured by a particular mortgage are covered by that mortgage. [ 19 ] I find, therefore, that the collateral mortgage registered at the Lunenburg County Registry of Deeds on November 17 th , 2003 as document number 7209 secures only loan 232124 as well loan 247724. [ 20 ] Further, I find that the collateral mortgage registered at the Lunenburg County Land Registration Office on January 16 th , 2006 as document number 84106070 secures only loan 273880. [ 21 ] I should indicate that I do not find the terms of the mortgages in question to be ambiguous.

If I am in error in this regard, however, any ambiguity would be interpreted against Farm Credit Canada who authored the documents in question. [ 22 ] That takes me to the second issue. In the

Definitions

section of the January 10 th , 2006 mortgage “ property ” is described as: “ Property ” means the land described on the Specific Mortgage Terms attached. This includes all buildings on that land and all improvements made before or during the time this Mortgage is in effect.” [ 23 ] When one turns to the “ Specific Mortgage Terms ”

section of the mortgage in question no lands are described. There is a “

Schedule A ” attached to the mortgage which contains three deed descriptions to three different properties but, unlike the first mortgage that was executed in November of 2003, “

Schedule A ” is not referred to in the Specific Mortgage Terms. That raises the question of which properties were intended to be mortgaged by this collateral mortgage. [ 24 ] I am satisfied that the answer to this question is found in the Mortgage Amending Agreement which is attached as Exhibit “ C ” to Mr. Inman ’ s August 17 th , 2012 affidavit relating to the Lunenburg properties. That Mortgage Amending Agreement confirms that the intention of the parties was to mortgage PID numbers 60642634, 60642626 and 60329273 when executing the January 10 th , 2006 mortgage.

Of course we are still faced with the issue that this 2006 mortgage was not registered against two of the properties in question. We will deal with that issue in a subsequent hearing. However, I am satisfied that the properties that were intended to be mortgaged were the three properties referenced above. Deborah K. Smith Associate Chief Justice