Manufacturers Life Insurance Co. et al. v. Granada Investments Ltd. et al., (2001) 150 O.A.C. 253 (CA)

• Judge: Osborne, A.C.J.O., Labrosse and Doherty, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: Friday October 20, 2000
• Jurisdiction: Ontario
• Citations: (2001), 150 O.A.C. 253 (CA)

Manufacturers Life v. Granada Inv. (2001), 150 O.A.C. 253 (CA)

MLB headnote and full text

Temp. Cite: [2001] O.A.C. TBEd. OC.024

Manufacturers Life Insurance Company and KPMG Inc. (plaintiffs/appellants) v. Granada Investments Limited, Joseph Shaw and Barbara Allan Shaw (defendants/respondents)

(C31739)

Indexed As: Manufacturers Life Insurance Co. et al. v. Granada Investments Ltd. et al.

Ontario Court of Appeal

Osborne, A.C.J.O., Labrosse  and Doherty, JJ.A.

October 10, 2001.

Summary:

Manufacturers Life Insurance Co. (Manulife) held two mortgages on golf course properties owned by Granada Investments Ltd. The mortgages were guaranteed by Shaw. When the mortgages matured, Manulife demanded payment, but Granada did not pay. On March 13, 1996, Manulife appointed KPMG as receiver of Granada. The golf course properties were sold in October 1997. Manulife sued Granada and Shaw for the shortfall on the mortgages following the sale.

The Ontario Court (General Division), in a decision reported at 91 O.T.C. 241, held that Manulife had a duty to mitigate its losses and that it should have sold the properties between March 1996 and October 1996. As a result, the trial judge held that Manulife could only recover from Granada and Shaw the amount of the mortgage debt as of October 31, 1996, and not as of October 1, 1997, when the lands were sold. Manulife appealed.

The Ontario Court of Appeal allowed the appeal. The court granted judgment for Manulife against Granada and Shaw for the amount of the shortfall on the mortgages following the sale of the properties and remitted the matter to the trial judge to determine the amount owed by reference or as the trial judge might direct.

Damages - Topic 1002

Mitigation - Duty to mitigate - [See Damages - Topic 1045 and Mortgages - Topic 5424].

Damages - Topic 1045

Mitigation - In contract - Exception - Action for debt or liquidated damages - The Ontario Court of Appeal held that, as a general proposition, mitigation did not apply to an action for a fixed debt as it did to tort and contract damage claims - See paragraph 76.

Mortgages - Topic 5424

Mortgage actions - Duties of mortgagee - Mitigation - Manulife held two mortgages on golf course properties owned by Granada - The mortgages were guaranteed by Shaw - When the mortgages matured, Manulife demanded payment, but Granada did not pay - On March 13, 1996, Manulife appointed a receiver of Granada - The properties were sold in October 1997 and Manulife sued Granada and Shaw for the shortfall on the mortgages - The trial judge held that Manulife had a duty to mitigate its losses and that it should have sold the properties between March 1996 and October 1996 - As a result, the trial judge limited Manulife's recovery from Granada and Shaw to the amount of the mortgage debt as of October 31, 1996, and not as of October 1, 1997, when the lands were sold - The Ontario Court of Appeal allowed an appeal and granted Manulife judgment against Granada and Shaw for the amount of the shortfall following the sale - Manulife was not under a duty to mitigate and it acted in good faith - It was also not in possession of the properties until August 30, 1996 - Although Manulife could have asserted rights to possession before that date, it was entitled to exercise its right of possession when it chose to do so.

Mortgages - Topic 5425

Mortgage actions - Duties of mortgagee - Re sale of mortgagor's property - [See Mortgages - Topic 5424].

Mortgages - Topic 5672

Mortgage actions - Sale - Duties of mortgagee - [See Mortgages - Topic 5424].

Mortgages - Topic 7867

Statutory and contractual rights - Sale under power of sale - Powers of mortgagee - Possession - [See Mortgages - Topic 5424].

Cases Noticed:

Oak Orchard Developments Ltd. v. Iseman, [1987] O.J. No. 361 (H.C.), affd. [1989] O.J. No. 2394 (C.A.), refd to. [para. 50].

Canada Trustco Mortgage Co. v. Windsor Painting Contractors Ltd. (1991), 22 R.P.R.(2d) 222 (Ont. Gen. Div.), refd to. [para. 51].

Modern Realty Co. v. Shantz, [1928] S.C.R. 213, refd to. [para. 63].

Hausman v. O'Grady (1986), 61 O.R.(2d) 96 (H.C.), affd. (1989), 67 O.R.(2d) 735 (C.A.), refd to. [para. 68].

Cuckmere Brick Co. v. Mutual Finance Ltd., [1971] Ch. 949, refd to. [para. 68].

Hodgins v. Laurentian Bank of Canada, [1994] O.J. No. 2460 (Gen. Div.), refd to. [para. 70].

British Columbia Land and Investment Agency Ltd. v. Ishitaka (1911), 45 S.C.R. 302, refd to. [para. 71].

Pacific & Western Trust Corp. v. Gretchen Enterprises Ltd. (1989), 79 Sask.R. 308; 63 D.L.R.(4th) 764 (Q.B.), refd to. [para. 76].

Authors and Works Noticed:

Anson, Principles of the English Law of Contract (21st Ed. 1959), p. 459 [para. 76].

Bennett on Power of Sale (1997 Ed), p. 51 [para. 56].

Chitty on Contract (24th Ed. 1977), vol. 1, pp. 727, 728 [para. 76].

Falconbridge on Mortgages (4th Ed. 1997), pp. 643 [para. 56]; 651 [para. 64].

Counsel:

J.B. Casey and J. Wigley, for the appellants;

Michael Rice, Chief Financial Officer of Granada Investments Limited;

Joseph Shaw, in person.

This appeal was heard on October 20, 2000, before Osborne, A.C.J.O., and Labrosse and Doherty, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Osborne, A.C.J.O., and was released on October 10, 2001.