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MORTGAGES - Mortgagee’s remedies - Power of sale - Conduct of sale

Wednesday, May 22, 2019 @ 8:41 AM  


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Appeal by Derewenko from an order approving the sale of his residential property by the mortgagee. The appellant contested the quality of the mortgagee’s marketing of the property, arguing that the marketing started from an imprudent listing price, and thus none of the offers in the bids presented to the court should be accepted. The property was listed in December 2018 at $474,900. At the time, an appraisal obtained by the appellant valued the property at $750,000. The mortgagee’s appraisal valued the property between $690,000 and $725,000. The tax assessment for 2018 valued the property at $423,000. The residence needed major repairs, including a new roof and septic system. The tax assessment for 2019 purposes assessed the property value as of July 2018 at $595,000, and an appraisal dated January 2019, obtained for the mortgagee, assessed the property at $500,000. This appraisal provided the only evidence of the general state of the residential real estate market in the area. Eight days after listing the property, the realtor received a conditional offer to purchase the property for $443,000. The mortgagee promptly accepted the offer, but the realtor continued to show the property. The judge erroneously held that the property had been on the market for 30 days at the time the offer was made and accepted. At the hearing of the mortgagee’s application, there were three sealed bids in addition to the original offer. The sealed bids were all higher than the original offer. The judge accepted the highest offer of $515,000. The judge opted to give no weight to the two appraisals in hand when the property was listed, accepted the statements in the Report that the residence required major repairs and rejected the submission that the materials submitted in support of the application were fatally flawed by the absence of explanation for the listing price or opinion of the providence of the proposed transaction. He put weight on the appraisal obtained after the realtor accepted an offer lower than the listing price and found that the exposure of the property to the market and the fact multiple bids were received was evidence that the marketing satisfied the standard required. The appellant argued the judge erred in his approach and his conclusions in respect to the listing price, and thereby erred in concluding the mortgagee satisfied its onus of demonstrating that the property was marketed in a proper and businesslike way.

HELD: Appeal allowed. The judge erred in principle in assessing the weight to be given to the appraisal report valuing the property at $750,000 based on facts found by the device of judicial notice that the real estate bubble had burst. It was not open to the judge to reach a conclusion based on judicial notice that was contrary to the evidence before him. The judge’s resort to judicial notice was contrary to the principles that guided judges when calling on general knowledge to fill in evidentiary lacuna. That error was material to the judge’s decision as the judge did not consider the evidence relevant to the listing price from the correct perspective. It could thus not be said that the judge’s conclusion the mortgagee had met its burden of showing that the sales process was conducted in a proper and businesslike manner, was met.

Elite Mortgage Corp. v. Derewenko, [2019] B.C.J. No. 607, British Columbia Court of Appeal, M.E. Saunders, S.A. Griffin and Butler JJ.A., April 5, 2019. Digest No. TLD-May202019005