Merit Group Ltd. v. Sicoli (Comment), (1987) 76 A.R. 326

• Case Date: February 16, 1987
• Citations: (1987), 76 A.R. 326

Merit Group Ltd. v. Sicoli (Comment) (1987), 76 A.R. 326

MLB headnote and full text

Case Comment

Merit Mortgage Group Ltd. v. Sicoli (1983), 75 A.R. 204.

Section 41(1)(a) of the Law of Property Act (Alta.) and Puisne Mortgagees: A Case Comment on Merit Mortgage Group Ltd. v. Sicoli

Indexed As: Merit Group Ltd. v. Sicoli (Comment)

Joseph T. Robertson

Associate Professor of Law, Faculty of Law

University of New Brunswick

February 16, 1987.

Summary:

A creditor/mortgagee brought an action against the debtor/mortgagor for monies owing under a promissory note. The debt was secured by the note and a third mortgage, executed at the same time, with identical prepayment provisions. A prior mortgagee obtained foreclosure and the property was sold. The mortgagor submitted that s. 34(17) of the Judicature Act (now s. 41(1)(a) of the Law of Property Act) prohibited the mortgagee from suing on the note. The Alberta Court of Queen's Bench, in a judgment reported 42 A.R. 365, allowed the action. The court held that the prohibition applied only where a foreclosing mortgagee attempted to sue on the personal covenant. The mortgagor appealed.

The Alberta Court of Appeal, in a judgment reported 75 A.R. 204, allowed the appeal. The court held that where the obligations under the mortgage and the note were not merely co-extensive in form, but were in substance the same, the obligations were indistinguishable and s. 41(1)(a) precluded an action on the note.

In the following case comment, a commentator examined the scope of the decision, particularly as it affected a subsequent nonforeclosing mortgagee who appeared to be left without a remedy.

Mortgages - Topic 5405

Mortgage actions - Action on the covenant - Prohibition against - A subsequent mortgagee loaned monies to a debtor/mortgagor in exchange for a promissory note and a mortgage - The note and mortgage were contemporaneously executed, with identical repayment provisions - When a prior mortgagee obtained foreclosure the subsequent mortgagee sued the mortgagor/debtor on the note - The Alberta Court of Appeal held that the action was prohibited by s. 41(1)(a) of the Law of Property Act, because the obligations under the note and mortgage were not merely co-extensive in form, but were in substance the same, therefore the obligations were indistinguishable - A commentator examined the scope of the decision as it pertained to subsequent mortgagees' rights to maintain an action on the covenant.

Cases Noticed:

Merit Mortgage Group Ltd. v. Sicoli, [1982] 5 W.W.R. 374; 42 A.R. 365 (Q.B.), [1983] 5 W.W.R. 381; 75 A.R. 204 (C.A.), consd. [para. 1 et seq., Fn. 8].

Clayborn Investments Ltd. v. Weigert (1977), 5 A.R. 50; 3 Alta. L.R.(2d) 295 (C.A.), consd. [paras. 10, 12-14, 29, Fn. 4, 10, 11, 12, 14, 23].

Canadian Imperial Bank of Commerce v. Andrejcsik, [1984] 3 W.W.R. 153; 53 A.R. 137, consd. [para. 19, Fn. 19].

Calgary Federal Credit Union v. McLaren (1985), 56 A.R. 1 (Q.B.), consd. [para. 24, Fn. 13, 20].

Continental Bank of Canada v. Trim and Trim (1985), 61 A.R. 133 (Q.B.), consd. [para. 25].

Thijssen v. Gulusha et al. (1985), 59 A.R. 138 (Q.B.), refd to. [para. 1, Fn. 4].

Edmonton Savings and Credit Union Ltd. v. Brown Estate (1986), 70 A.R. 156 (Q.B.), refd to. [Fn. 13].

Bank of Nova Scotia v. Barley (1980), 71 A.R. 321 (M.C.), refd to. [Fn. 13].

Bank of Nova Scotia v. Patchett and Patchett (1985), 63 A.R. 218 (M.C.), refd to. [see footnotes].

Provincial Treasurer of Alberta v. Lafrance (1980), 13 Alta. L.R.(2d) 142 (Q.B.), refd to. [para. 2, 31, Fn. 19, 24].

Guaranty Trust Company of Canada v. Douglas, [1982] 6 W.W.R. 178; 20 Sask.R. 1 (Sask. Q.B.), refd to. [para. 34, Fn. 29].

Krook v. Yewchuk, [1962] S.C.R. 535, refd to. [para. 38, Fn. 32].

Statutes Noticed:

Interpretation Act, R.S.A. 1980, c. I-7, sect. 14.

Judicature Act, An Act to Amend the, S.A. 1939, c. 85.

Judicature Act, An Act to Amend the, S.A. 1964, c. 40.

Law of Property Act, R.S.A. 1980, c. L-8, sect. 41(1)(a), sect. 44.

Limitation of Civil Rights Act, R.S.S. 1978, c. L-16, sect. 2(1).

National Housing Act, R.S.C. 1970, c. N-10, sect. 5.

Authors and Works Noticed:

Falconbridge on Mortgages (4th Ed. 1977), p. 444, n. 7 [Fn. 5].

Price and Trussler, Mortgage Actions in Alberta (1985), p. 232 [Fn. 7 ].

Osborne, G.E., Handbook on the Law of Mortgages (2nd Ed. 970), pp. 702, 705, n. 61 [Fn. 25, 30].

Washburn, R.M., The Judicial and Legislative Response to Price Inadequacy in Mortgage Foreclosure Sales (1980), 53 S.C.L.R. 843 [Fn. 25 ].

Skelton, Government and the Mortgage Debtor [Fn. 31].

Counsel:

[This is a case comment, therefore conatins no counsel.]

This Case Comment was delivered by Joseph T. Robertson, Associate Professor of Law, Faculty of Law, University of New Brunswick, on February 16, 1987:

This Case Comment was delivered by Joseph T. Robertson, Associate Professor of Law, Faculty of Law, University of New Brunswick, on February 16, 1987: