Brennenstuhl Estate v. Trynchy et al.

• Jurisdiction: Alberta
• Court: Court of Queen's Bench of Alberta (Canada)
• Judge: Graesser, J.
• Citation: (2008), 435 A.R. 85 (QB),2008 ABQB 256,2007 ABQB 703
• Date: 20 November 2007

Brennenstuhl Estate v. Trynchy (2008), 435 A.R. 85 (QB)

MLB headnote and full text

Temp. Cite: [2007] A.R. TBEd. NO.138

Kenneth William Gibb, Executor and Trustee under the Last Will and Testament of William John Brennenstuhl, deceased (plaintiff) v. Lorraine Trynchy, Peter Trynchy, Triple T. Management Ltd. and William Paul Prylowski (defendants)

And Between: William Paul Prylowski (plaintiff by counterclaim) v. Kenneth William Gibb, Executor and Trustee under the Last Will and Testament of William John Brennenstuhl, deceased (defendant by counterclaim)

(0103 07993; 2007 ABQB 703; 2008 ABQB 256)

Indexed As: Brennenstuhl Estate v. Trynchy et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Graesser, J.

November 20, 2007 and April 22, 2008.

Summary:

Brennenstuhl, a farmer, in return for money to pay off his debt, transferred lands to Triple T., a corporation owned by the Trynchys (the first transaction). Two years later, Triple T. transferred the lands to Prylowski and, as a condition of that transfer, Prylowski leased the lands to Brennenstuhl, and granted him an option to purchase the lands (the second transaction). Brennenstuhl consented to the second transaction and released the Trynchys and Triple T. Brennenstuhl defaulted on the lease and Prylowski claimed entitlement to the lands. Brennenstuhl remained in possession. Brennenstuhl died. His estate sued Triple T., the Trynchys and Prylowski, seeking various remedies. The estate claimed that the lands were impressed with a trust, that the only interest of Triple T. and Prylowski in the lands was that of mortgagee, and in any event, the initial transfer from Brennenstuhl to Triple T. and the lease and option from Prylowski to Brennenstuhl were unconscionable.

The Alberta Court of Queen's Bench held that the estate was entitled to a declaration that Triple T. acted as a trustee of Brennenstuhl's beneficial interest in the lands and that Triple T.'s interest in the lands was that of an equitable mortgagee. However, the position of Triple T. as trustee and mortgagee was satisfied and any obligations were discharged as a result of the release and consenting to the sale of the lands from Triple T. to Prylowski. No other relief against the Trynchys or Triple T. was granted. Prylowski acquired the lands free and clear of any former interest of Brennenstuhl by reason of the transfer from Triple T. and the release. Brennenstuhl's interest in the lands as a beneficiary and having an equity of redemption were extinguished by the release, and s. 203 of the Land Titles Act operated as a shield to the estate's claims relating to any supposed unregistered interests. There was no unconscionability. Therefore, the estate's claims against Prylowski were dismissed entirely. Prylowski was entitled to, inter alia, an order for possession of the lands and arrears of rent.

Contracts - Topic 9329

Unconscionable transactions relief - Conditions for relief - General - The Alberta Court of Queen's Bench reiterated the four prong test for unconscionably: "(1) a grossly unfair and improvident transaction; (2) the victim's lack of independent legal advice or other suitable advice; (3) an overwhelming imbalance in bargaining power caused by victim's ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and (4) the other party's knowingly taking advantage of this vulnerability" - The court noted that these tests were sequential and each element had to be established - See paragraphs 110 and 111.

Contracts - Topic 9350

Unconscionable transactions relief - Conditions for relief - What constitutes harsh and unconscionable - Brennenstuhl, a farmer, in return for money to pay off his debt, transferred land to Triple T., a corporation owned by the Trynchys (the first transaction) - Two years later, Triple T. transferred the lands to Prylowski and, as a condition of that transfer, Prylowski leased the lands to Brennenstuhl, and granted him an option to purchase the lands (the second transaction) - Brennenstuhl consented to the second transaction and released the Trynchys and Triple T. - Brennenstuhl defaulted on the lease and Prylowski claimed entitlement to the lands - Brennenstuhl died - His estate sued claiming unconscionability - The Alberta Court of Queen's Bench held that the estate failed to establish that the second transaction between Prylowski and Brennenstuhl was unconscionable - While Prylowski got a good deal, the transaction was not grossly unfair - The parties were at arm's length so there was no presumption of undue influences and Brennenstuhl had legal advice - While there was an imbalance in bargaining power; there was no evidence that Prylowski knowingly took advantage of Brennenstuhl - See paragraphs 109 to 146.

Interest - Topic 5004

Interest as damages (prejudgment interest) - General principles - Discretion of judge - Brennenstuhl, a farmer, in return for money to pay off his debt, transferred land to Triple T., a corporation owned by the Trynchys (the first transaction) - Two years later, Triple T. transferred the lands to Prylowski and, as a condition of that transfer, Prylowski leased the lands to Brennenstuhl, and granted him an option to purchase the lands (the second transaction) - Brennenstuhl consented to the second transaction and released the Trynchys and Triple T. - Brennenstuhl defaulted on the lease and Prylowski claimed entitlement to the lands - Brennenstuhl died - His estate sued Prylowski - The Alberta Court of Queen's Bench dismissed the estate's claim against Prylowski, holding that Prylowski was entitled to possession and rental arrears with simple interest on arrears at the rate of 16% - The estate claimed that interest should be varied because of delay under s. 2(3) of the Judgment Interest Act - The court held that the Judgment Interest Act had no application to prejudgment interest in this case where interest was provided for under the provisions of the lease option agreement - The court stated that it had no general discretion to disallow interest which was contractually provided for - Interest in this case was dealt with under s. 2(2)(h) of the Act, which provided that the Act had no application to interest that was validly contracted for - As a result, s. 2(3) could not apply, as the award of interest here was not under the Act - See paragraphs 167 and 197 to 207.

Mortgages - Topic 24

General principles - Mortgage defined - The relationship - Brennenstuhl, a farmer, in return for money to pay off his debt, transferred land to Triple T., a corporation owned by the Trynchys (the first transaction) - Two years later, Triple T. transferred the lands to Prylowski and, as a condition of that transfer, Prylowski leased the lands to Brennenstuhl, and granted him an option to purchase the lands (the second transaction) - Brennenstuhl consented to the second transaction and released the Trynchys and Triple T. - Brennenstuhl defaulted on the lease and Prylowski claimed entitlement to the lands - Brennenstuhl died - His estate sued Triple T., the Trynchys and Prylowski, claiming that the only interest of Triple T. and Prylowski in the lands was that of mortgagee (i.e., they held the lands in trust) - The Alberta Court of Queen's Bench characterized the first transaction as a lending or mortgage transaction and the second transaction as a purchase of land - The court stated that the existence of the option did not lessen Prylowski's interest, nor did it make him a mortgagee, whether legal or equitable - Further, the court rejected the argument that the doctrine "once a mortgage always a mortgage" applied - That doctrine had no application to Prylowski because he never entered a mortgage transaction or purchased a mortgage - Nor did the doctrine apply to the first transaction because that transaction ceased to be a mortgage, and Triple T. ceased to be a trustee, once Brennenstuhl consented to the sale to Prylowski and released the Trynchys and Triple T. - The doctrine had no application where a mortgagor validly released the mortgagee from any claims - There was nothing in the first transaction that could be considered to be a clog on the equity of redemption; nor was there anything in Trynchy's conduct which could be treated as a clog - Brennenstuhl was encouraged to redeem for the exact amount of the debt and no restrictions were ever placed in his way - As a result, the fact that Triple T. might have been a mortgagee of the lands did not prevent it from transferring the lands to Prylowski, free and clear of any mortgagor obligations and any right of redemption in favour of Brennenstuhl - See paragraphs 1 to 101.

Mortgages - Topic 207

Equitable mortgages - What constitutes an equitable mortgage - [See Mortgages - Topic 24 ].

Mortgages - Topic 209

Equitable mortgages - Equitable mortgage - Enforcement of - Brennenstuhl, a farmer, transferred land to Triple T., a corporation owned by Peter and Lorraine Trynchy, in return for money to pay off his debt (the initial transaction) - Some two years later Triple T. transferred the lands to Prylowski and, as a condition of that transfer, Prylowski leased the lands to Brennenstuhl, and granted him an option to purchase the lands (the lease transaction) - Brennenstuhl consented to the sale to Prylowski and released the Trynchys and Triple T. - Brennenstuhl defaulted on the lease and Prylowski claimed entitlement to the lands - Brennenstuhl died - His estate sued Prylowski, claiming an unregistered equitable interest - The Alberta Court of Queen's Bench rejected this argument holding that s. 203 of the Land Titles Act provided Prylowski with a valid defence to Brennenstuhl's claims relating to unregistered equitable interests - The court stated that the release operated to the same extent as a discharge of mortgage - Brennenstuhl's equitable interest in the lands and rights as an equitable mortgagee were lost when he consented to the transfer to Prylowski and released Triple T. and the Trynchys - No issues of fraud or lack of bona fides arose - See paragraphs 102 to 108.

Mortgages - Topic 4704

Redemption of mortgage - Clog on equity of redemption - What constitutes a clog - [See Mortgages - Topic 24 ].

Practice - Topic 7110.1

Costs - Party and party costs - Special orders - Increase in scale of costs - Conduct of opposite party - A successful party alleged that there should be some measure of costs because of late disclosure of a Mary Carter agreement by the other parties - The Alberta Court of Queen's Bench held that there had been no apparent breach of the Rules of Court and no apparent prejudice in the conduct of the proceedings - There was, therefore, no basis for the court to consider any remedies for an alleged breach of professional conduct - See paragraphs 215 to 224.

Real Property - Topic 1741

Equitable estates and interests - Equitable interests - General - [See Mortgages - Topic 209 ].

Sale of Land - Topic 806

The contract - Agreement for sale v. mortgage - [See Mortgages - Topic 24 ].

Cases Noticed:

400091 British Columbia Ltd. v. Copper Beach Estates Ltd. et al., [1992] B.C.T.C. Uned. 992 (S.C.), refd to. [para. 94].

Dical Investments Ltd. v. Morrison (1990), 13 R.P.R.(2d) 157 (C.A.), refd to. [para. 95].

Kreick v. Wansbrough, [1973] S.C.R. 588, refd to. [para. 101].

Holt, Renfrew & Co. v. Singer (Henry) Ltd. et al. (1982), 37 A.R. 90; 20 Alta. L.R.(2d) 97 (C.A.), refd to. [para. 104].

Lanstrom Developments Ltd. v. Passburg Petroleums Ltd. (1984), 53 A.R. 96; 30 Alta. L.R.(2d) 379 (C.A.), refd to. [para. 106].

Cain v. Clarica Life Insurance Co. (2005), 384 A.R. 11; 367 W.A.C. 11 (C.A.), refd to. [para. 110].

Cope v. Hill, [2007] A.R. Uned. 133 (C.A.), refd to. [para. 111].

Goodman Estate v. Geffen (1987), 98 A.R. 321 (C.A.), revd. [1991] 2 S.C.R. 353; 127 N.R. 241; 125 A.R. 81; 14 W.A.C. 81, refd to. [para. 117].

Bertolo v. Bank of Montreal (1986), 18 O.A.C. 262; 33 D.L.R.(4th) 610 (C.A.), refd to. [para. 121].

Dusik v. Gooderham, [1985] B.C.J. No. 18 (C.A.), refd to. [para. 121].

Pike v. Pike (1996), 142 Nfld. & P.E.I.R. 200; 445 A.P.R. 200 (N.L.T.D.), refd to. [para. 121].

Toussaint v. Toussaint (1982), 40 N.B.R.(2d) 541; 105 A.P.R. 541 (C.A.), dist. [para. 122].

Massey v. Midland Bank plc, [1995] 1 All E.R. 929 (C.A.), refd to. [para. 127].

S.M.B. v. K.R.B. (1997), 32 O.T.C. 161 (Gen. Div. Fam. Ct.), dist. [para. 143].

Rayani v. Yule & Co. (Hong Kong) Ltd., [1996] 3 W.W.R. 574; 178 A.R. 231; 110 W.A.C. 231; 36 Alta. L.R.(3d) 217; 1996 CarswellAlta 491 (C.A.), refd to. [para. 201].

Pugsley v. Wong et al. (2000), 265 A.R. 80 (Q.B.), refd to. [para. 204].

Van Den Broek v. Ainsley, [1995] O.J. No. 552 (Gen. Div.), refd to. [para. 206].

Boretta Construction Ltd. v. Nanaimo-Ladysmith School District No. 68, [1999] B.C.J. No. 2528 (S.C.), refd to. [para. 206].

Newell v. McIvor (1998), 164 Sask.R. 258 (Q.B.), refd to. [para. 219].

Statutes Noticed:

Judgment Interest Act, R.S.A. 2000, c. J-1, sect. 2(1) [para. 198]; sect. 2(2) [para. 199]; sect. 2(3) [para. 200].

Land Titles Act, R.S.A. 1980, c. L-5, sect. 66 [para. 102]; sect. 203 [para. 103].

Authors and Works Noticed:

Falconbridge on Mortgages (5th Ed. 2003) (2007 Looseleaf Update), para. 3:50 [para. 93].

Counsel:

Roger C. Stephens (Simons & Stephens), for the plaintiff;

Coralie Schultz (Carr & Smith), for the defendant, William Paul Prylowski;

Aran Veylan, Q.C. (Cleall), for the defendants, Lorraine Trynchy, Peter Trynchy and Triple T. Management Ltd.

This case was heard on October 1 and 5, 2007, before Graesser, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the decision on November 20, 2007 (see paragraphs 1 to 169), followed by supplementary reasons on April 22, 2008 (see paragraphs 170 to 226).