Goodyear v. Burnhamthorpe Square, (1998) 116 O.A.C. 1 (CA)

• Judge: Brooke, McKinlay and Carthy, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: October 29, 1998
• Jurisdiction: Ontario
• Citations: (1998), 116 O.A.C. 1 (CA)

Goodyear v. Burnhamthorpe Square (1998), 116 O.A.C. 1 (CA)

MLB headnote and full text

Temp. Cite: [1998] O.A.C. TBEd. NO.020

Goodyear Canada Inc. (applicant/appellant) v. Burnhamthorpe Square Inc. (respondent/respondent in appeal) and The Canada Life Assurance Company (intervener/respondent in appeal)

Burnhamthorpe Square Inc. (applicant/respondent in appeal) v. Goodyear Canada Inc. (respondent/appellant)

(C27153)

Indexed As: Goodyear Canada Inc. v. Burnhamthorpe Square Inc. et al.

Ontario Court of Appeal

Brooke, McKinlay and Carthy, JJ.A.

October 29, 1998.

Summary:

In 1980, Goodyear leased premises in a development from Angeles' predecessor. Aetna held a first and second mortgage on the premises. The mortgages were secured by assignments of rents and leases. Good­year and Aetna entered into an attornment and non-disturb­ance agreement. Goodyear re­ceived notice of the assignment of rents and leases. In 1984, Angeles gave a third mort­gage to Canada Life that was also secured by an assignment of rents. In 1987, Goodyear and Angeles negotiated a new lease that was to expire in 2002. The con­sents of the mort­gagees and non-disturbance agreements were not executed. In 1993, Aetna assigned its mortgages and assign­ments of rents to Cana­da Life. Angeles subsequently defaulted. Canada Life appointed a receiver and mana­ger who was discharged at the end of 1993. In 1994, Canada Life entered into possession of the premises. Burnhamthorpe purchased the premises by taking an assignment of the three mortgages and an assignment of the rents. Burnhamthorpe foreclosed against Angeles under the mortgages. Canada Life took a mortgage back and an assignment of rents. Goodyear claimed that the 1987 lease was terminated and a new year-to-year lease was created by virtue of Canada Life en­tering into possession of the premises in 1994. In May 1996, Goodyear gave Burn­hamthorpe notice of its intention to terminate the lease on December 21, 1996. Goodyear sought a declaration that the tenancy was year-to-year and that the tenancy expired on De­cember 21, 1996. Burnhamthorpe sought a declaration that the lease did not expire until 2002.

The Ontario Court (General Division), in a decision reported 34 O.T.C. 63, held that the assignments of the leases to Canada Life were assignments by way of security. As a result, the leases were terminated when Canada Life took possession. A new year-to-year lease was created when Goodyear re­mained in possession and paid rent to Cana­da Life. Goodyear's May 1996 notice to quit was not effective to terminate the lease by December 21, 1996. Goodyear was required to give six months' notice to ter­minate the lease for December 31, 1997. Burnham­thorpe had a duty to mitigate. Goodyear appealed. Burnhamthorpe and Canada Life cross-appealed.

The Ontario Court of Appeal allowed the appeal and held that Goodyear's notice was sufficient to terminate the tenancy as of December 31, 1996. The court dismissed the cross-appeal.

Contracts - Topic 1165

Formation of contract - Privity of contract - What constitutes - Goodyear leased pre­mises from Angeles' predecessor - The premises were subject to three mortgages (eventually held by Canada Life) - The mortgages were secured by assignments of rents - In 1987, Goodyear and Angeles negotiated a new lease that ran until 2002 -No attornment or non-disturb­ance agreement was executed by Goodyear and Canada Life - Angeles defaulted - Canada Life took possession of the premises - Burnhamthorpe purchased the premises by taking an assignment of the mortgages and an assignment of the rents - Burnham­­thorpe foreclosed against Angeles - Good­year argued that the 1987 lease was ter­minated and a new year to year lease was created when Canada Life entered into possession - Burnhamthorpe claimed that Goodyear remained bound by the 1987 lease because there was privity of contract with Burnhamthorpe as ultimate assignee of the mortgagees - The Ontario Court of Appeal affirmed that there was no privity of contract - See paragraphs 21 to 39.

Contracts - Topic 9000

Rights and liabilities of strangers to con­tract - General - Privity of contract - [See Contracts - Topic 1165 ].

Contracts - Topic 9912

Promissory estoppel - Where applicable - Requirement of detrimental reliance - Goodyear leased premises from Angeles - In 1987, they negotiated a new lease that ran until 2002 - Canada Life held three mortgages on the premises and assign­ments of rents and leases - Canada Life took possession after Angeles defaulted - Burn­hamthorpe purchased the premises by taking an assignment of the mortgages and rents - Burnhamthorpe foreclosed against Angeles - Prior to the closing of this trans­action, Goodyear delivered an estoppel certificate to Burnhamthorpe to the effect that the 1987 lease would remain in place -Subsequently, Goodyear claimed that the lease was terminated when Canada Life took possession of the premises and a year to year lease was created - Burnham­thorpe claimed that Goodyear was estopped from claiming the lease was terminated - The Ontario Court of Appeal rejected the argu­ment where Burnham­thorpe did not change its position in reli­ance on the certificate - See paragraph 82.

Estoppel - Topic 2203

Estoppel by deed - General - When available - [See Contracts - Topic 9912 ].

Landlord and Tenant - Topic 10

General principles - Privity of estate - Goodyear leased premises from Angeles - In 1987, they negotiated a new lease that ran until 2002 - Canada Life held three mortgages on the premises and assign­ments of rents and leases - Canada Life took possession after Angeles defaulted - Burn­hamthorpe purchased the premises by taking an assignment of the mortgages and rents - Burnhamthorpe foreclosed against Angeles - Goodyear argued that the 1987 lease was terminated and a new year to year lease was created when Canada Life entered into possession - Burnhamthorpe claimed that Goodyear remained bound by the 1987 lease because there was privity of estate with Burnhamthorpe as ultimate assignee of the mortgagees - The Ontario Court of Appeal affirmed that there was no privity of estate - See paragraphs 40 to 53.

Landlord and Tenant - Topic 52

Creation of relationship - Relation implied from - Creation of estate by estoppel - [See Contracts - Topic 9912 ].

Landlord and Tenant - Topic 6528

Termination, forfeiture and reentry - Ter­mination - Possession by mortgagee or foreclosure - Goodyear leased premises from Angeles - In 1987, they negotiated a new lease that ran until 2002 - Canada Life held three mortgages on the premises and assignments of rents and leases - Canada Life took possession of the prem­ises after Angeles defaulted - The Ontario Court of Appeal held that when Canada Life entered into possession, a deemed new year to year tenancy was established be­tween Goodyear and Canada Life where Goodyear had not rejected the tenancy - Although Goodyear originally indicated an intention to be bound by the 1987 lease, there was no evidence that Canada Life intended to be so bound - Therefore, the tenancy at that time was year to year - See paragraphs 61 to 67 - This was not altered by a subsequent foreclosure or the issuance of an estoppel certificate by Goodyear - See paragraphs 68 to 82.

Landlord and Tenant - Topic 6528

Termination, forfeiture and reentry - Ter­mination - Possession by mortgagee or foreclosure - Goodyear leased premises from Angeles - In 1987, they negotiated a new lease that ran until 2002 - Canada Life held three mortgages on the premises and assignments of rents and leases - Can­ada Life took possession of the prem­ises after Angeles defaulted - The trial judge held that "when a mortgagee goes into possession of premises subject to a lease subsequent to the mortgage, unless there is an agreement between the lessee and the mortgagee to the contrary, the original lease is terminated" - The Ontario Court of Appeal stated that there was no authority for this proposition - See para­graph 75.

Landlord and Tenant - Topic 6528

Termination, forfeiture and reentry - Ter­mination - Possession by mortgagee or foreclosure - Goodyear leased premises from Angeles - In 1987, they negotiated a new lease that ran until 2002 - Canada Life held three mortgages on the premises and assignments of rents and leases - Can­ada Life took possession after Angeles defaulted - Burnhamthorpe purchased the premises by taking an assignment of the mortgages and rents - Burnhamthorpe foreclosed against Angeles - Burnham­thorpe argued that the lease between Goodyear and Angeles continued despite Canada Life taking possession, and when Burnhamthorpe took over Angeles' posi­tion through foreclosure it was entitled to en­force the lease against Goodyear - The Ontario Court of Appeal rejected Burn­hamthorpe's assertion - See paragraphs 74 to 81.

Landlord and Tenant - Topic 6528

Termination, forfeiture and reentry - Ter­mination - Possession by mortgagee or foreclosure - [See Contracts - Topic 1165 and Landlord and Tenant - Topic 10 ].

Landlord and Tenant - Topic 6683

Termination, forfeiture and reentry - Notice of termination - Form of - Re­quire­ments of - Goodyear leased premises from Angeles - In 1987, they negotiated a new lease that ran until 2002 - Canada Life held three mortgages on the premises - In 1994, Canada Life took possession after Angeles defaulted - In December 1995, Burnhamthorpe purchased the prem­ises by taking an assignment of the mort­gages and rents - Burnhamthorpe fore­closed against Angeles - Goodyear argued that the 1987 lease was terminated and a new year to year lease was created when Canada Life entered into possession - In May 1996, Goodyear gave notice that it would quit the lease on December 21, 1996 - The Ontario Court of Appeal affirmed that a year to year lease was created on January 1, 1995 and ran to December 31 - The court held that the notice was valid - Al­though Goodyear's notice to quit did not state that Goodyear was to deliver up the premises on the proper date, it was clear that Goodyear wished to quit the lease at the end of the 1996 term - See paragraphs 83 to 91.

Landlord and Tenant - Topic 6689

Termination, forfeiture and reentry - Notice of termination - Validity of - [See Landlord and Tenant - Topic 6683 ].

Landlord and Tenant - Topic 7630

Overholding tenants - Tenancy created - Yearly tenancy - [See first Landlord and Tenant - Topic 6528 ].

Mortgages - Topic 1408

The mortgage - Property mortgaged - Sale or lease - The Ontario Court of Appeal stated that "if a lease is executed by a mortgagor after the mortgage has been granted, the mortgagee will be bound by the terms of the lease if it is made with his express or implied consent ... whether the tenant would be bound without attorning to the mortgagee is unclear." - See paragraph 57.

Mortgages - Topic 1484

The mortgage - Transfer or assignment - Effect of - By mortgagee - [See Con­tracts - Topic 1165 and Landlord and Tenant -Topic 10 ].

Cases Noticed:

London Drugs Ltd. v. Brassart and Van­winkle, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1; 97 D.L.R.(4th) 261, refd to. [para. 21].

Minister of National Revenue v. Alberta (Treasury Branches) et al., [1996] 1 S.C.R. 963; 196 N.R. 105; 184 A.R. 1; 122 W.A.C. 1, folld. [para. 32].

Manufacturer's Life Insurance Co. v. J.K.P. Holdings Co. (1986), 70 A.R. 360; 26 D.L.R.(4th) 461 (C.A.), not folld. [para. 46].

Davidson v. McKay (1867), 26 U.C.Q.B. 306, refd to. [para. 57].

Canada Permanent Building and Savings Society v. Rowell (1860), 19 U.C.Q.B. 124, refd to. [para. 57].

District Bank Ltd. v. Webb, [1958] 1 All E.R. 126 (Ch.), refd to. [para. 57].

Corbett v. Plowden, [1884] 25 Ch.D. 678 (C.A.), refd to. [para. 64].

Page v. Welford, [1941] 4 D.L.R. 448 (Ont. C.A.), dist. [para. 75].

Guscon Enterprises Ltd. v. Andsam Masonry Co. (1995), 48 R.P.R.(2d) 255 (Ont. Gen. Div.), refd to. [para. 84].

Towerson v. Jackson, [1891] 2 Q.B. 484 (C.A.), refd to. [para. 84].

Evans v. Elliot (1838), 112 E.R. 1242, refd to. [para. 84].

Cohen v. Taylor Services Stores, [1948] 4 D.L.R. 658 (Ont. C.A.), refd to. [para. 87].

Mannai Investment Co. v. Eagle Star Life Assurance Co., [1997] 2 W.L.R. 945; 215 N.R. 321 (H.L.), folld. [para. 88].

Bianchi et al. v. Aguanno et al. (1983), 42 O.R.(2d) 76 (Div. Ct.), dist. [para. 90].

Authors and Works Noticed:

Scane, R.E., The Relationship of Landlord and Tenant (1965), pp. 1 [para. 40]; 2, 3 [para. 41].

Counsel:

Mark S. Hayes and Jonathan F. Lancaster, for the appellant;

Brian G. Morgan, for the respondent;

Michele Lawford and Robert Rueter, for the intervener.

This appeal was heard on February 16, 17 & 18, 1998, before Brooke, McKinlay and Carthy, JJ.A., of the Ontario Court of Ap­peal. McKinlay, J.A., delivered the fol­lowing judgment on October 29, 1998.