Canada Permanent Trust Co. v. King Art Developments Ltd., Klapstein, Barath, Bagaly, Bagaly, Owl Developments Ltd., Zurich Investments Ltd. and Drucker, (1984) 54 A.R. 172 (CA)

• Judge: McGillivray, C.J.A., Moir and Laycraft, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: June 20, 1984
• Citations: (1984), 54 A.R. 172 (CA);1984 ABCA 182;12 DLR (4th) 161;[1984] 4 WWR 587;32 Alta LR (2d) 1;54 AR 172;[1984] CarswellAlta 72

Can. Permanent Trust v. King Art Dev. (1984), 54 A.R. 172 (CA)

MLB headnote and full text

Canada Permanent Trust Company v. King Art Developments Ltd., Klapstein, Barath, Bagoly, Bagoly, Owl Developments Ltd., Zurich Investments Ltd. and Drucker

(Appeal Nos. 17085, 17196)

Indexed As: Canada Permanent Trust Co. v. King Art Developments Ltd., Klapstein, Barath, Bagaly, Bagaly, Owl Developments Ltd., Zurich Investments Ltd. and Drucker

Alberta Court of Appeal

McGillivray, C.J.A., Moir and Laycraft, JJ.A.

June 20, 1984.

Summary:

The plaintiff mortgagee brought an action against the mortgagor and its guarantors for the amount owing under a mortgage, for sale of the mortgaged property and, if necessary, the right to purchase it. A solicitor filed a demand of notice on behalf of the mortgagor and the guarantors. The mortgagee obtained an order nisi/order for sale, which left the liability of the guarantors to be determined after the sale. The order was amended ex parte with no notice to the guarantors or the mortgagor. No sale was obtained and the mortgagee applied for permission to purchase the mortgaged property (Rice Order). The Master permitted the mortgagee to purchase and awarded judgment against the mortgagor and guarantors for the deficiency. The guarantors applied to withdraw their demand of notice and for leave to file a statement of defence.

The Alberta Court of Appeal, in a judgment reported in (1984), 52 A.R. 139, allowed the guarantors to withdraw the demand of notice and file defences. The court reserved judgment on whether the Rice Order was valid and whether the guarantors were liable for the deficiency.

The Alberta Court of Appeal, Moir, J. A., dissenting, subsequently held that the Rice Order was valid and that the guarantors were liable for the deficiency.

Guarantee and Indemnity - Topic 1059

Liability of surety to creditor - Action against surety - Time for - The Alberta Court of Appeal stated that there was no rule of law requiring a mortgagee to proceed against mortgaged land before proceeding against the guarantors of the mortgage debt - The court stated that whether the land must first be sold was subject to the Master's discretion, because circumstances may exist where an action against the land first may be "utterly futile" - See paragraphs 76 to 78.

Guarantee and Indemnity - Topic 2507

Discharge of surety - Payment of principal debt - Pursuant to s. 44(1) of the Law of Property Act an order of foreclosure operates as full satisfaction of the mortgage debt - The Alberta Court of Appeal held that s. 44(1) was clear that foreclosure absolutely extinguished the mortgage debt, thereby releasing any guarantor of that debt from liability - See paragraph 29.

Interest - Topic 3508

Statutory interest - On judgments - Agreement to pay other than statutory rate - A mortgage stipulated that the interest rate in the mortgage continued to apply to the mortgage debt after judgment - The Alberta Court of Appeal held that the judgment must bear the statutory rate of 5% under s. 13 of the Interest Act - The court stated that pursuant to ss. 2 and 13 of the Act the mortgagee and mortgagor could not contract out of the interest rates fixed by the Act - See paragraphs 79 to 96.

Mortgages - Topic 5405

Mortgage actions - Actions on the covenant - Prohibition against - The Alberta Court of Appeal held that where a mortgagee under a mortgage granted by a corporation acquired title at a judicial sale it was open to the mortgagee to proceed on the personal covenant against the mortgagor and guarantors for any deficiency on the mortgage debt, because a judicial sale did not constitute foreclosure - See paragraph 44.

Mortgages - Topic 5509

Mortgage actions - Action for foreclosure and sale - Rice Order - When available - The Alberta Court of Appeal generally discussed the use of a Rice Order to allow a mortgagee to purchase the mortgaged property - The court stated that a Rice Order was not a "required procedure", but only a "permissible procedure" in appropriate circumstances - See paragraphs 52 to 57.

Mortgages - Topic 5512

Mortgage actions - Action for foreclosure and sale - Foreclosure order - Effect of - Pursuant to s. 44(1) of the Law of Property Act an order of foreclosure operated as full satisfaction of the mortgage debt - The Alberta Court of Appeal stated that s. 44(1) was clear that foreclosure absolutely extinguished the mortgage debt, thereby releasing any guarantor of that debt from liability - See paragraph 29.

Mortgages - Topic 5666

Mortgage actions - Sale - Procedure - The Alberta Court of Appeal generally discussed whether a Rice Order, tender by the mortgagee on a court-conducted sale or some other procedure was preferable in selling mortgaged property - The court held that because of varying circumstances it "would not shackle the master or judge by either specifying or forbidding any procedure for all the circumstances now existing or which may arise in the future but again would leave it to the common sense exercise of discretion" - See paragraphs 62 to 64.

Mortgages - Topic 5668

Mortgage actions - Sale - Valuation - The Alberta Court of Appeal discussed whether a court-conducted sale of mortgaged property should be based on a "forced sale for cash", "forced sale on terms" or "market value" - The court stated that cases decided on one set of facts should not be taken as binding authority that one or the other of these values must be used in other cases with different facts - The court stated that the value to be used was dependent on the facts of each case - See paragraphs 66 to 73.

Mortgages - Topic 5670

Mortgage actions - Sale - Bidding - Persons entitled - The Alberta Court of Appeal held that in a court-conducted sale there was no reason to prevent a mortgagee from bidding - The court stated that "whether the sale will be by tender, by a proposal by the mortgagee, by some combination of the two procedures, or by some other mode is ... a matter for the exercise of discretion dependent upon the facts of each case. The approval or disapproval of any bid or proposal is similarly dependent upon the facts put before the judicial officer" - See paragraph 73.

Cases Noticed:

Gordon Grant & Co. v. F.L. Boos, [1926] A.C. 781 (P.C.), folld. [para. 14].

Rushton v. Industrial Development Bank (1973), 34 D.L.R.(3d) 582 (S.C.C.), ref'd to. [paras. 14, 20].

Perry v. Barker (1806), 13 Ves. 198; 33 E.R. 269, ref'd to. [para. 16].

Netherlands Investment Company v. Des Brisay, [1928] 1 W.W.R. 461 (Alta. C.A.), ref'd to. [para. 19].

Douglas v. Mutual Life Assurance Company, [1918] 1 W.W.R. 690, ref'd to. [paras. 22, 25-27, 151-153, 166-168].

Fink v. Robertson (1907), 4 C.L.R. 864 (Aust. H.C.), not folld. [paras. 24, 147-150, 171].

Security Trust Company v. Sayre, [1920] 3 W.W.R. 469 (S.C.C.), folld. [paras. 30-39, 43, 105].

Manitoba Development Corporation v. Berkowits, [1979] 5 W.W.R. 138 (Man. C.A.), appld. [para. 41].

Perry v. National Provincial Bank of England, [1910] 1 Ch. 464, ref'd to. [para. 47].

Moschi v. Lep Air Services Ltd., [1973] A.C. 331, ref'd to. [para. 48].

Hyundai Shipbuilding and Heavy Industries Co. Ltd. v. Pournaras, [1978] 2 Lloyd's Rep. 502, ref'd to. [para. 48].

Hyundai Heavy Industries Co. Ltd. v. Papadopolous, [1980] 1 W.L.R. 1129, ref'd to. [para. 48].

Bauer v. Bank of Montreal, [1980] 2 S.C.R. 102; 32 N.R. 191, ref'd to. [para. 48].

Roynat Ltd. v. Denis, [1982] 5 W.W.R. 509; 17 Sask.R. 415 (Sask. C.A.), ref'd to. [para. 48].

Trusts & Guarantee Company v. Rice, [1924] 2 W.W.R. 691 (Alta. C.A.), ref'd to. [para. 52].

Crown Life Assurance Co. v. Clark (1915), 9 W.W.R. 333, not appld. [para. 58].

Guest v. Smythe (1870), L.R. 5 Ch. 551, ref'd to. [para. 59].

Credit Foncier Franco-Canadian v. Edmonton Airport Hotel Co. Ltd. and Superstein (1964), 48 W.W.R.(N.S.) 641 (Alta. C.A.), ref'd to. [para. 75].

Meridian Developments Ltd. v. Nu-West Group Ltd. (1984), 52 A.R. 248, folld. [para. 76].

Humble Investments Ltd. v. Therevan Development Corporation (1982), 21 Alta. L.R.(2d) 40, ref'd to. [para. 77].

Edelweiss Credit Union v. Boehm (1978), 8 B.C.L.R. 51, ref'd to. [para. 82].

Pacific Savings and Mortgage Corp. v. Foresthill Development and Investment Co. Ltd. (1980), 25 B.C.L.R. 171, ref'd to. [para. 83].

Heller-Natofin (Western) Ltd. v. Carleton Dev. Ltd., [1980] 1 W.W.R. 657, ref'd to. [para. 83].

Norfolk Trust v. Wolcoski, [1982] 6 W.W.R. 190 (B.C.C.A.), agreed with [para. 84].

Chin Si-Thoo v. Berry, [1978] 2 W.W.R. 641 (Man. Q.B.), dist. [para. 85].

Bank of Nova Scotia v. U.P.C. Holdings Ltd. et al. (1979), 25 A.R. 117; 11 Alta. L.R. 331, ref'd to. [para. 86].

Maple Credit Ltd. v. Xomox Investments Ltd. et al. (1982), 45 A.R. 309; 21 Alta. L.R.(2d) 289, ref'd to. [para. 87].

In re Premier Permanent Building Land and Investment Association, Ex parte Lyell (1899), 25 V.L.R. 77 (S.C.), ref'd to. [para. 151].

Bernard v. Faulkner (1914), 7 W.W.R. 163 (Alta. T.D.), ref'd to. [para. 151].

Orsler v. Colonial Investments & Loan Co., [1917] 3 W.W.R. 513 (Alta. T. D.), ref'd to. [para. 151].

Waring v. Ward (1802), 7 Ves. Jr. 332, ref'd to. [para. 161].

Simpson v. Forrester & Others (197273), 132 C.L.R. 449, ref'd to. [para. 163].

States Advances Corporation of New Zealand v. Leyland O'Brien Timber Co. Ltd., [1940] N.Z.L.R. 628 (Auckland S.C.), ref'd to. [para. 169].

Short v. Graham, [1908] W.L.R. 787 (Alta. T.D.), ref'd to. [para. 170].

Montreal Trust Co. v. Boggs and Beresford (1915), 8 W.W.R. 1200 (Sask. T. D.), ref'd to. [para. 170].

Welsh v. Popham, [1915] S.C.R. 549, ref'd to. [para. 170].

British Columbia Land & Investment Agency Ltd. v. Montreal Trust Co., [1935] 3 W.W.R. 566 (P.C.), ref'd to. [para. 170].

Trusts & Guarantee Co. Ltd. v. Monk (1924), 21 Alta. L.R. 151 (App Div.), ref'd to. [para. 170].

Edmonton Airport Hotel Company v. Credit Foncier, [1965] S.C.R. 441, ref'd to. [para. 195].

Krook v. Yewchuk, [1962] S.C.R. 535; 39 W.W.R.(N.S.) 13, ref'd to. [para. 200].

Loose v. Spruce Holdings, [1941] 1 W.W.R. 121, ref'd to. [para. 201].

Clayborn Investments v. Wiegert (1977), 5 A.R. 50; 3 Alta. L.R.(2d) 295, ref'd to. [para. 207].

Statutes Noticed:

Land Titles Act, S.A. 1906, c. 24, sect. 62a(16) [para. 23].

Interest Act, R.S.C. 1970, c. I-18, sect. 2, sect. 13 [para. 80].

Law of Property Act, S.A. 1928, c. 29, sect. 7 [para. 155].

Law of Property Act, R.S.A. 1980, c. L-8, sect. 40, sect. 41, sect. 42, sect. 43, sect. 44 [see appendix].

Judicature Act, S.A. 1964, c. 40, sect. 35 [para. 115].

Rules of Court (Alta.), rule 496 [para. 116]; rule 689, rule 690, rule 691 [para. 115].

Transfer of Land Act, 1890 (Victoria), sect. 95, sect. 130 [para. 158].

Authors and Works Noticed:

Washburn, Robert M., The Judicial Legislative Response to Price Inadequacy in Mortgage Foreclosure Sales (1980), 53 S. Cal. L. Rev. 843 [para. 120].

Robins, Treatise on The Law of Mortgages (1897), pp. 903-907 [para. 133]; 1016 [para. 136].

Black's Law Dictionary (5th Ed.), p. 1204 [para. 45].

Bacon, Essay on Usury [para. 89].

Rowlatt on The Law of Principal and Surety (4th Ed.), p. 92 [para. 49].

Turner, R.W., Problem of Mortgagee Bidding at Sales (1935), 21 Virg. L. Rev. 600, pp. 164 [para. 138]; 603 [para. 137]; 605 [para. 139].

Turner, R.W., The Equity of Redemption (1931), [para. 140].

Counsel:

M. Trussler, B. Kenny, and L.C. Hoyano, for Canada Permanent Trust Co.;

No one for King Art Developments Ltd.;

E. Mirth, and S. McNaughton, for Arthur Klapstein, Johnny Barath and Owl Developments Ltd.;

P. Warner, and D.N. McGuigan, for Leslie and Attila Bagoly;

G.L. McLennan, for Zurich Investments Ltd. and Emil Drucker.

These appeals were heard before McGillivray, C.J.A., Moir and Laycraft, JJ. A., of the Alberta Court of Appeal.

On June 20, 1984, the judgment of the Court of Appeal was delivered and the following opinions were filed:

Laycraft, J.A. - See paragraphs 1 to 96;

McGillivray, C.J.A. - See paragraphs 97 to 100;

Moir, J.A., dissenting - See paragraphs 101-210.