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MORTGAGES - Mortgagee’s remedies - Power of sale - Sale proceeds - Distribution

Friday, February 26, 2021 @ 2:00 PM  


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Appeal by Canada Investment Corporation (CIC) from an order of a motion judge directing that surplus proceeds held for CIC arising out of a receivership sale of one of the debtor’s properties be paid to the Stanbarr claimants, creditors of CIC. Various related corporations, including CIC, held subsequent mortgages on several of the debtor’s properties. Around the time of the receivership, a principal of CIC and the related corporations holding subsequent mortgages was charged with fraud. A claims process was established on consent under which claimants could prove a direct claim against one of the subsequent mortgagee corporations, entitling the claimant to a pro rata unsecured claim against surplus proceeds to which the particular mortgagee corporation was entitled. CIC held a second mortgage on the Caldwell property. The receivership sale of the Caldwell property yielded surplus proceeds of $784,843. The Stanbarr claimants moved in the receivership for a Mareva injunction in relation to the surplus proceeds from the Caldwell sale based on its separate action against CIC related to mortgaged properties not part of the receivership. The trial judgment in the separate action did not finalize the monetary judgment in favour of the Stanbarr claimants. The receiver recommended the Caldwell surplus proceeds be paid to the Stanbarr claimants on the basis the amount owed to the Stanbarr claimants in their separate action was greater than the proceeds of the Caldwell sale being held for CIC in the receivership.

HELD: Appeal dismissed. The consent procedure was properly followed. There was no confusion that the Stanbarr claimants’ participation was based on their claim to the surplus of the sale of the Caldwell property. There was no requirement for the Stanbarr claimants to issue a statement of claim. The motion judge applied the correct onus when he held the onus was on the party disputing the receiver’s recommendation to show sufficient reason why it should not be followed. There was no basis to interfere with the motion judge’s findings on the effect of the trial judgment in the separate action, which was to partially quantify the amount owing to the Stanbarr claimants by CIC. He made no error by accepting the recommendation of the receiver.

Comfort Capital Inc. v. Yeretsian, [2020] O.J. No. 5785, Ontario Court of Appeal, K.N. Feldman, J.M. Simmons and A.L. Harvison Young JJ.A., December 30, 2020. Digest No. TLD-February222021009