Wiseman's Sales and Services Ltd. v. Atlantic Insurance Co., (2007) 264 Nfld. & P.E.I.R. 86 (NLCA)

• Judge: Wells, C.J.N.L., Rowe and Mercer, JJ.A.
• Court: Court of Appeal (Newfoundland)
• Case Date: December 07, 2006
• Jurisdiction: Newfoundland and Labrador
• Citations: (2007), 264 Nfld. & P.E.I.R. 86 (NLCA);2007 NLCA 15

Wiseman's Sales v. Atlantic Ins. (2007), 264 Nfld. & P.E.I.R. 86 (NLCA);

    801 A.P.R. 86

MLB headnote and full text

Temp. Cite: [2007] Nfld. & P.E.I.R. TBEd. MR.001

Wiseman's Sales and Services Limited (appellant) v. Atlantic Insurance Company Ltd. (respondent)MR.

(05/15; 2007 NLCA 15)

Indexed As: Wiseman's Sales and Services Ltd. v. Atlantic Insurance Co.

Newfoundland and Labrador Supreme Court

Court of Appeal

Wells, C.J.N.L., Rowe and Mercer, JJ.A.

March 1, 2007.

Summary:

The plaintiff sold part of its business in 1999. The sale included the land, buildings, equipment and stock-in-trade at a separate branch from its main operations. The price of the stock was $100,000 and the purchaser signed a promissory note to pay it in 60 consecutive monthly payments. The purchaser placed fire insurance with the defendant on the business assets it purchased from the plaintiff. The plaintiff was named as "loss payee" in the insurance certificate that the defendant issued. The business burned down. The defendant denied the purchaser coverage and refused to pay the plaintiff the amount still owing for the stock. The plaintiff sued for the $66,666 still owing under the promissory note, claiming the benefit of the standard mortgage clause, estoppel and negligence.

The Newfoundland and Labrador Supreme Court, Trial Division, in a decision reported at 244 Nfld. & P.E.I.R. 285; 726 A.P.R. 285, dismissed the action. The plaintiff appealed. Before the appeal was heard, the Registrar, at the Court's request, contacted counsel and asked them to be prepared to address the issue of whether the evidence established the existence of an equitable mortgage, and, if it did, whether the plaintiff would be entitled to the benefit of the standard mortgage clause as the holder of an equitable mortgage.

The Newfoundland and Labrador Court of Appeal allowed the appeal on the basis that the plaintiff was the holder of an equitable mortgage and entitled to the benefit of the standard mortgage clause.

Insurance - Topic 1024

The insurance contract - Terms - Standard mortgage clause - The plaintiff (Wiseman's) sold part of its business to Performance - The agreement provided, inter alia, that Performance would pay $80,000 for the land, building and equipment upon closing, pay $100,000 for the stock, in 60 consecutive monthly payments, and give Wiseman's both a promissory note and a mortgage over the real property for the money owing for the stock - Performance placed fire insurance with the defendant (Atlantic) on the business assets purchased from Wiseman's - Wiseman's was named as "loss payee" in the insurance certificate that Atlantic issued - The business burned down - Atlantic denied Performance coverage and refused to pay Wiseman's the amount still owing for the stock - Wiseman's sued for the $66,666 still owing under the promissory note - Atlantic argued that Wiseman's was not a mortgagee and therefore not entitled to payment under the policy's standard mortgage clause because the mortgage was not executed and put in place - The Newfoundland and Labrador Court of Appeal disagreed - The actual mortgage not having been executed and registered, an equitable mortgage was immediately created - The fact that the obligation to execute the mortgage document remained to be fulfilled had no impact on the creation of the mortgage - It simply resulted in it being an equitable mortgage instead of a legal one - The requirement of a mortgage was not abandoned - Therefore, Wiseman's was entitled to recover under the standard mortgage clause - See paragraphs 1 to 42.

Insurance - Topic 5962

Fire insurance - Loss payable to mortgagee (or hypothecary creditor) - Mortgagee (or hypothecary creditor) - What constitutes - [See Insurance - Topic 1024 ].

Insurance - Topic 5976

Fire insurance - Loss payable to mortgagee (or hypothecary creditor) - Standard mortgae clause or loss payable clause - Mortgage defined - [See Insurance - Topic 1024 ].

Mortgages - Topic 207

Equitable mortgages - What constitutes an equitable mortgage - The Newfoundland and Labrador Court of Appeal rejected the assertion that there had to be a specific "demand" in order to bring an equitable mortgage into existence - An equitable mortgage could result from an agreement either: (1) by a contract to execute, when required, a legal mortgage; or (2) by a contract that certain property would stand as security - In the first circumstance a demand would, obviously, be required in order to complete the agreement that the property stood as security - Equally obviously, in the second circumstance, the agreement to create a mortgage charge was complete from the beginning and no further specific demand was required - Absent agreement that a specific demand would be required, equity imposed no such requirement - Essentially, an equitable mortgagee was entitled to exercise the same remedies as the holder of a legal mortgage - That was so whether the equitable mortgage was created by an agreement to create a legal mortgage, a deposit of title deeds or a mortgage of an equitable interest - See paragraphs 35 to 37.

Mortgages - Topic 207

Equitable mortgages - What constitutes an equitable mortgage - [See Insurance - Topic 1024 ].

Mortgages - Topic 209

Equitable mortgages - Equitable mortgage - Enforcement of - [See Insurance - Topic 1024 ].

Practice - Topic 7024.5

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Exceptions - Grounds raised by appellate court - [See Practice - Topic 7048 ].

Practice - Topic 7048

Costs - Party and party costs - Entitlement to party and party costs - Successful appellant on argument not raised at trial - The Newfoundland and Labrador Court of Appeal allowed a plaintiff's appeal on a ground that the court itself had raised - The court stated that the evidence clearly established the basis for this ground and the trial judge ought to have allowed the plaintiff's claim instead of dismissing it - For that reason he ought also to have ordered that the plaintiff was entitled to its costs, at trial, on a party and party basis, and ought not to have awarded costs to the defendant - However, the plaintiff did not plead this ground, did not argue it before the trial judge and did not, itself, raise it on appeal - In these circumstances, justice was best served by ordering that, except for one unsuccessful interlocutory application, each party would bear its own costs at trial and on appeal - See paragraph 48.

Practice - Topic 8348

Costs - Appeals - Cases where costs of appeal refused - Where appeal disposed of on grounds not raised by successful party - [See Practice - Topic 7048 ].

Cases Noticed:

Haley's Auto Sales Ltd. et al. v. Constitution Insurance Co. of Canada (1990), 110 N.B.R.(2d) 23; 276 A.P.R. 23 (T.D.), affd. (1991), 115 N.B.R.(2d) 177; 291 A.P.R. 177 (C.A.), refd to. [para. 18].

Willis v. Nowata Land and Cattle Co., 1989 OK 169; 789 P.2d 1282 (Sup. Ct.), refd to. [para. 22].

Bay Bulls Sea Products Ltd. et al. v. Insurance Corp. of Newfoundland Ltd. et al. (2003), 232 Nfld. & P.E.I.R. 183; 690 A.P.R. 183 (N.L.T.D.), varied (2006), 260 Nfld. & P.E.I.R. 173; 786 A.P.R. 173 (N.L.C.A.), refd to. [para. 22].

Royal Bank of Canada v. Boyd (Trustee of), [1991] A.J. No. 1276 (Q.B.), refd to. [para. 24].

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor (No. 2), [2002] 1 S.C.R. 678; 283 N.R. 233; 299 A.R. 201; 266 W.A.C. 201; 2002 SCC 19, refd to. [para. 25].

R. v. Palmer, [1980] 1 S.C.R. 759; 30 N.R. 181, refd to. [para. 28].

R. v. Nielsen and Stolar, [1988] 1 S.C.R. 480; 82 N.R. 280; 52 Man.R.(2d) 46, refd to. [para. 28].

R. v. Stolar - see R. v. Nielsen and Stolar.

Elias Markets Ltd. (Bankrupt) et al., Re (2006), 216 O.A.C. 49 (C.A.), refd to. [para. 33].

National Bank of Canada et al. v. Merit Energy Ltd. et al. (2001), 294 A.R. 36 (Q.B.), affd. (2001), 93 Alta. L.R.(3d) 43 (C.A.), refd to. [para. 35].

Authors and Works Noticed:

Anger and Honsberger, The Law of Real Property (2nd Ed. 1985), vol. 2, pp. 1643 to 1645 [paras. 32, 37, footnote 3].

Cheshire, Geoffrey Chevalier, and Burn, E.H., Modern Law of Real Property (13th Ed. 1982), pp. 660, 661 [para. 37, footnote 8].

Falconbridge, Law of Mortgages (4th Ed. 1977), c. 5 [para. 32, footnote 2]; pp. 83 [para. 33, footnote 6]; 87 to 89 [para. 37].

Fisher and Lightwood, Law of Mortgage (7th Ed. 1931), p. 16 [para. 33, footnote 5].

Halsbury's Laws of England (3rd Ed. 1955), vol. 27, paras. 236 to 277 [para. 32, footnote 4]; 271 [para. 34, footnote 7].

Ziff, Bruce H., Principles of Property Law (2nd Ed. 1996), pp. 375, 376 [para. 32, footnote 1].

Counsel:

Corwin Mills, Q.C., for the appellant;

John Dawson, for the respondent.

This appeal was heard on November 16 and 22 and December 7, 2006, by Wells, C.J.N.L., Rowe and Mercer, JJ.A., of the Newfoundland and Labrador Court of Appeal. Wells, C.J.N.L., delivered the following decision for the court on March 1, 2007.