Toronto-Dominion Bank v. Phillips, 2014 ONCA 613

• Judge: MacFarland, Pepall and Strathy, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: April 15, 2014
• Jurisdiction: Ontario
• Citations: 2014 ONCA 613;(2014), 325 O.A.C. 141 (CA)

TD Bk. v. Phillips (2014), 325 O.A.C. 141 (CA)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. SE.001

The Toronto-Dominion Bank (applicant) v. Cindy Louise Phillips and Richard Joseph Phillips (respondents/appellant and respondent, respectively)

(C58084; 2014 ONCA 613)

Indexed As: Toronto-Dominion Bank v. Phillips

Ontario Court of Appeal

MacFarland, Pepall and Strathy, JJ.A.

August 29, 2014.

Summary:

A husband and wife owned residential property as joint tenants. The property was subject to a mortgage with the Toronto-Dominion Bank (TD). The wife incurred debt using an overdraft facility on her and her husband's joint bank account with the Bank of Montreal (BMO). BMO obtained a default judgment against the husband and wife for $32,734.37 plus costs of $1,161.15. BMO filed a writ of seizure and sale with the sheriff. The TD mortgage went into default and TD commenced power of sale proceedings. The husband and wife separated. The wife made a consumer proposal under the Bankruptcy and Insolvency Act which was deemed to have been approved by the court. TD sold the mortgaged property and realized a surplus of $52,295.14. TD applied to pay the surplus funds into court less $750 for the costs of the application, leaving a surplus of $51,545.14. The husband and wife agreed that the sum of $19,327.50 should be paid out to BMO.

The Ontario Superior Court, in a decision reported at [2013] O.T.C. Uned. 7016, ordered that $19,327.50 be paid out to BMO and that the remaining balance of $32,217.64 was to be split equally between the husband and the wife. The wife appealed, asserting that, due to the operation of the stay of proceedings imposed by s. 69.2(1) of the Act, 50% of the remaining balance should paid to her, and BMO's writ should be paid out of the husband's 50% share. Under the wife's proposed distribution, she would receive $25,772.57 and the husband would receive $6,445.97.

The Ontario Court of Appeal accepted the wife's position and allowed the appeal.

Bankruptcy - Topic 2103

Proposals - General principles - Application of bankruptcy provisions to proposals - A husband and wife jointly owned residential property which was subject to a mortgage with the Toronto-Dominion Bank (TD) - The Bank of Montreal (BMO) obtained a default judgment against the husband and wife for $32,734.37 for monies owing on an unsecured debt plus costs of $1,161.15 - BMO filed a writ of seizure and sale with the sheriff - The TD mortgage went into default and TD commenced power of sale proceedings - The husband and wife separated - The wife made a consumer proposal under the Bankruptcy and Insolvency Act - TD sold the mortgaged property - TD applied to pay the surplus funds ($51,545.14) into court - The husband and wife agreed that $19,327.50 should be paid out to BMO and the applications judge so ordered - The judge ordered that the balance of $32,217.64 was to be split equally between the husband and the wife - The Ontario Court of Appeal allowed the wife's appeal - Section 70(1) of the Act spoke of the precedence of bankruptcy orders and assignments - Section 66.4(1) directed that certain general provisions of the Act, including s. 70(1), should be read to apply to consumer proposals - Moreover, the policy rationale of treating unsecured creditors equally applied to the proposal regime - Contrary to the applications judge's finding, s. 27 of the Mortgages Act did not elevate BMO's unsecured status to that of a subsequent encumbrancer so as to achieve priority over the wife's other unsecured creditors - BMO's claim against the wife was stayed once the proposal was filed (s. 69.2(1)(a)) - The consent order authorizing payment to BMO, and the fact that the execution was completed and acted upon, resulted in the severance of the husband and wife's joint tenancy - The payment to BMO could only have been from the husband's 50% share of the surplus - Accordingly, $25,772.57 of the funds were to be paid to the wife and $6,445.97 was to be paid to the husband.

Bankruptcy - Topic 2308

Proposals - Effect of proposal - Stay of proceedings - What proceedings stayed - [See Bankruptcy - Topic 2103 ].

Bankruptcy - Topic 3642.1

Creditors - General - Priorities - Precedence of bankruptcy and assignments over interim judgments and orders - [See Bankruptcy - Topic 2103 ].

Bankruptcy - Topic 3685

Creditors - General - Claims by creditors against special deposits - Money paid into court - [See Bankruptcy - Topic 2103 ].

Mortgages - Topic 7982

Statutory and contractual rights - Sale under power of sale - Sale proceeds and expenses - Disposition of excess proceeds held by mortgagee - [See Bankruptcy - Topic 2103 ].

Mortgages - Topic 7990

Statutory and contractual rights - Sale under power of sale - Sale proceeds and expenses - Priorities - [See Bankruptcy - Topic 2103 ].

Real Property - Topic 3886

Joint estates - Severance of joint tenancies - Mutual acts which result in severance - [See Bankruptcy - Topic 2103 ].

Real Property - Topic 3892

Joint estates - Severance of joint tenancies - Execution - [See Bankruptcy - Topic 2103 ].

Cases Noticed:

Royal Bank of Canada v. Larue, [1928] A.C. 187 (P.C.), refd to. [para. 27].

Sklar and Sklar, Re; Seiberline Rubber Co. of Canada v. Canadian Credit Men's Trust Association (1958), 37 C.B.R. 187; 26 W.W.R.(N.S.) 529 (Sask. C.A.), refd to. [para. 27].

Ontario Development Corp. v. Trustee of the Estate of I.C. Suatac Construction Ltd. (1976), 12 O.R.(2d) 465 (C.A.), refd to. [para. 27].

Hunter (James) and Associates Inc. v. Citifinancial Canada Inc. et al., [2007] O.T.C. Uned. P70 (Sup. Ct.), refd to. [para. 27].

Hancor Inc. et al. v. 118353 Canada Ltée et al. (1995), 191 N.R. 360; 37 C.B.R.(3d) 117 (F.C.A.), refd to. [para. 29].

Forest v. Hancor Inc. - see Hancor Inc. et al. v. 118353 Canada Ltée et al.

National Bank of Canada v. Young, [2002] O.T.C. 742 (Sup. Ct.), refd to. [para. 31].

Polsak, Re (1978), 19 O.R.(2d) 570 (H.C.), refd to. [para. 31].

Cohen, Re (1948), 29 C.B.R. 11 (Ont. H.C.), affd. [1948] 4 D.L.R. 808 (Ont. C.A.), refd to. [para. 33].

Dilollo (Bankrupt), Re (2013), 310 O.A.C. 282; 117 O.R.(3d) 81; 2013 ONCA 550, refd to. [para. 33].

msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd. - see Dilollo (Bankrupt), Re.

Royal & SunAlliance Insurance Co. v. Muir Estate, [2011] O.T.C. Uned. 2273; 9 R.P.R.(5th) 104; 2011 ONSC 2273, refd to. [para. 35].

Power v. Grace, [1932] O.R. 357 (C.A.), refd to. [para. 37].

Cameron (Bankrupt), Re, [2011] O.T.C. Uned. 6471; 108 O.R.(3d) 117; 2011 ONSC 6471, refd to. [para. 38].

Arnold Bros. Transport Ltd. v. Murphy (2013), 295 Man.R.(2d) 66; 34 R.P.R.(5th) 217; 2013 MBQB 137, refd to. [para. 41].

Sirois v. Breton, [1967] 2 O.R. 73, refd to. [para. 41].

Maroukis v. Maroukis, [1984] 2 S.C.R. 137; 54 N.R. 268; 5 O.A.C. 182, refd to. [para. 42].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 66.4(1) [para. 29]; sect. 70(1) [para. 28].

Mortgages Act, R.S.O. 1990, c. M-40, sect. 27 [para. 31].

Authors and Works Noticed:

Lem, Jeffrey W., and Bocska, Rosemary, Halsbury's Laws of Canada - Real Property (1st Ed. 2012), HRP-37 [para. 36]; HRP-41 [para. 37]; HRP-42 [para. 39].

Counsel:

Gustavo F. Camelino, for the appellant, Cindy Louise Phillips;

Michael Odumodu, for the respondent, Richard Joseph Phillips.

This appeal was heard on April 15, 2014, by MacFarland, Pepall and Strathy, JJ.A., of the Ontario Court of Appeal. Pepall, J.A., released the following judgment for the court on August 29, 2014.