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DISCHARGE OF BANKRUPT - Debts not released by discharge

Thursday, March 15, 2018 @ 6:27 AM  

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Appeal by Rodriguez from an order, declaring that a default judgment against him survived his discharge from bankruptcy. The judgment related to a debt arising from Rodriguez’s failure to comply with his payment obligations under a mortgage. In applying for the order under appeal, FCT Insurance and LawPro claimed that Rodriguez not only breached his mortgage obligation to PCF, but also misappropriated trust funds paid to him by mistake by his lawyer from the proceeds of the sale of the mortgaged property. FCT, the title insurer, and LawPro, the insurer for the lawyer, had obtained the default judgment they sought to have survive Rodriguez’s discharge from bankruptcy. In their pleadings against Rodriguez, they had sought only to enforce his mortgage debt. They added additional allegations against him in their application in the bankruptcy. The judge relied on this evidence in making the declaration.

HELD: Appeal allowed. The judge should have limited his consideration to the nature of the debt that LawPro and FCT were seeking to have survive the discharge. He erred in determining the application based on other conduct by Rodriguez that might result in a debt surviving bankruptcy. LawPro and FCT were not entitled to change the foundation of the judgment debt they were seeking to enforce.

Lawyers' Professional Indemnity Co. v. Rodriguez, [2018] O.J. No. 948, Ontario Court of Appeal, D.H. Doherty, D. Paciocco and I.V.B. Nordheimer JJ.A., February 21, 2018. Digest No. TLD-Mar122018009