Supreme Court of Canada
Loose v. Spruce Holdings and Investments Limited, [1972] S.C.R. 653
Date: 1972-01-25
Carl William Loose Appellant;
and
Spruce Holdings and Investments Limited Respondent,
1971: November 15, 16; 1972: January 25.
Present: Martland, Judson, Ritchie, Hall and Laskin JJ.
ON APPEAL FROM THE SUPREME COURT OF ALBERTA, APPELLATE DIVISION
Mortgages—Number of actions taken by respondent including two mortgage foreclosure actions—Settlement agreement—Overall indebtedness secured, among other securities, by abeyant foreclosure proceedings—Default under agreement—Effect of foreclosure order granted in one action upon right to obtain foreclosure in other action—The Land Titles Act, R.S.A. 1955, c. 170, s. 110(1).
The respondent was the plaintiff in eight actions, two of which were mortgage foreclosure actions. Action No. 85985 was for foreclosure of the Buck-horn Ranch; action No. 85986 was for foreclosure of the V-V Ranch. A settlement agreement of November 23, 1966, provided for various securities being given to the respondent. Included in these securities were certain provisions in respect of the foreclosure actions.
Default under the agreement having occurred, the respondent proceeded with the foreclosure action in respect of the V-V Ranch land, and, on April 16, 1968, it obtained a foreclosure order vesting title in it, which was registered in the Land Titles Office on February 17, 1969. It effected a sale of this land, and the respondent admitted a net credit balance, on the sale, of $129,902.46 to be credited against the $350,000 and accrued interest balance which remained due under the settlement agreement.
The respondent also proceeded toward realization of its security on the Buckhorn land. It applied for foreclosure and vesting of title to the land on November 21, 1968. Two issues were then directed to be tried, of which the Court was concerned, on this appeal, with only one; i.e., what was the effect of the foreclosure order granted in the V-V Ranch action upon the respondent’s right to obtain foreclosure in the Buckhorn action, having regard to
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s. 110(1) of The Land Titles Act, R.S.A. 1955, c. 170 (now s. 109(1), R.S.A. 1970, c. 198)?
It was the appellant’s contention, which was accepted in the judgment at trial, that the effect of this subsection was that, upon foreclosure of the V-V Ranch mortgage, the respondent could have no further claim against the appellant, because that mortgage secured a debt settled by the compromise agreement, and that debt was fully satisfied by the foreclosure. This decision was reversed on appeal to the Appellate Division.
Held: The appeal should be dismissed.
As held by the Court below, the purpose of s. 110(1) is to relieve against the personal obligation for payment of a debt, and when there is no debt but only a security given subject to a right of redemption on payment of a stipulated amount, then the section has no application at all.
Even on the assumption that the agreement of November 23, 1966, created a debt owing by the appellant to the respondent, it was not a debt secured by a mortgage within s. 110(1). That subsection relates to a debt originally secured by a mortgage and upon which foreclosure proceedings to obtain satisfaction thereof are taken when that mortgage is in default. It does not apply to the present situation where a compromise agreement consolidating a variety of debts, some originally secured by promissory notes and others by mortgages, fixes an overall indebtedness which is secured, among other securities, by abeyant foreclosure proceedings on a mortgage, and where the default which gives rise to pursuit of the foreclosure proceedings is default under the compromise agreement itself.
There was the further circumstance that the debt which was secured by the taking of the V-V Ranch mortgage was one which was owed solely by the C.W. Loose Farms Limited, and not by the appellant, who was not a party to it. Section 110(1) could not be construed to mean that foreclosure of a mortgage can satisfy any debt other than one which is owed by the mortgagor.
APPEAL from a judgment of the Supreme Court of Alberta, Appellate Division[1], allowing an appeal from a judgment of Dechene J. Appeal dismissed.
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B.A. Crane, for the appellant.
E.M. Woolliams, Q.C., and M.L. Moore, for the respondent.
The judgment of the Court was delivered by
MARTLAND J.—In November 1966, the respondent was the plaintiff in eight actions. Two of these were against the appellant and J.O. Guest Ranch Limited, two were against the appellant and C.W. Loose Farms Limited (hereinafter referred to as “the Company”), three were against the appellant alone, and one was against the Company alone. Some of these actions were founded on promissory notes, one was a claim on an unpaid vendor’s lien, and two, with which we are primarily concerned in this case, were mortgage foreclosure actions. One of these may be described as the “Buckhorn mortgage” on which it was alleged there was a balance owing by the appellant of $169,604. The other may be described as the “V‑V Ranch mortgage”, on which there was claimed a balance of $453,320 owed by the Company. This was a second mortgage security. The total amount of the claims involved in these various actions was well in excess of $1,000,000.
On November 23, 1966, a settlement agreement was executed by the appellant, the Company and the respondent. After reciting the eight actions, it provided:
That upon receipt of the sum of One Hundred Thousand ($100,000.00) Dollars in legal tender of Canada, Spruce agrees that all claims of Spruce against Loose and Loose Farms and J.O. Guest Ranch Limited shall be settled at and for the sum of Five Hundred and Fifty Thousand ($550,000.00) Dollars payable in legal tender of Canada, at the City of Calgary, in the Province of Alberta, in the manner following, that is to say:
(a) The sum of One Hundred Thousand ($100,000.00) Dollars on the execution of this agreement, receipt of which is hereby acknowledged.
(b) The balance of Four Hundred and Fifty Thousand ($450,000.00) Dollars without interest on or before the 15th day of April, A.D. 1967.
The agreement went on to provide that the due date might be extended if, prior to April 15, 1967, $100,000 or more were paid, such exten-
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sion to be for one month for each full $100,000 paid. Provision was made for a further extension upon like terms. No interest on the unpaid balance would be due prior to default. After default, interest was payable at the rate of 6 per cent per annum as from November 1, 1966, on the unpaid balance.
The settlement agreement provided for various securities being given to the respondent. In particular, it provided, in respect of the Buckhorn foreclosure action (#85985) and in respect of the V-V Ranch foreclosure action (#85986), as follows:
(c) The Foreclosure Order held by Spruce in Action No. 85985 shall not be entered but held in abeyance but on default, then such Order may be entered and the said action continued, provided however, that any moneys received on sale of the said lands shall be credited to the balance remaining unpaid, or in the event of a Vesting Order being granted to Spruce, the agreed value of the land, or failing agreement, such value as may be established by arbitration shall be credited to the balance remaining unpaid.
(d) It is agreed that all further proceedings in the foreclosure Action No. 85986 be stayed against the V-V Lands and that Loose Farms will execute a Consent Order for Decree Nisi in the said Action agreeing that the period of redemption in the said Action shall expire on a date Six (6) months after the due date and that such Consent Order shall agree that the balance unpaid and accrued due under the said Mortgage and Action shall be the unpaid balance of the sum of Five Hundred and Fifty Thousand ($550,000.00) Dollars remaining unpaid to Spruce together with interest computed thereon as hereinbefore provided, together with chargeable costs and expenses.
The next following paragraph, relating to these two actions, as well as to others, reads:
(e) Notwithstanding anything to the contrary herein contained, it is understood and agreed by and between the parties hereto that the foregoing Consent Judgment provided for in Action No. 86026, the Transfer of Land provided for with respect to the Vulcan Farm, the remedies in respect of Action No. 85985 and the rights and remedies in Action No. 85986 respecting the V-V Ranch
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property are all given as security for the payment of the balance of the settlement moneys owing to Spruce and that Spruce may pursue any and all remedies available to it after default independent of each other, and that no action or thing taken or done by Spruce shall constitute a release of any remedy available to it in any of the other matters hereinbefore referred to or of any remedy that Spruce may have at law or equity whatsoever.
The respondent received payment of the initial amount of $100,000 and a further payment of $100,000 on April 14, 1967. No further payments were made. The respondent proceeded with the foreclosure action in respect of the V-V Ranch land, and, on April 16, 1968, it obtained a foreclosure order vesting title in it, which was registered in the Land Titles Office on February 17, 1969. It effected a sale of this land, and the respondent admits a net credit balance, on the sale, of $129,902.46 to be credited against the $350,000 and accrued interest balance which remained due under the settlement agreement.
The respondent also proceeded toward realization of its security on the Buckhorn land. It applied for foreclosure and vesting of title to the land on November 21, 1968, which was subsequent to the date on which the foreclosure order had been granted in respect of the V‑V Ranch land. Two issues were then directed to be tried, of which we are concerned, on this appeal, with only one; i.e., what was the effect of the foreclosure order granted in the V‑V Ranch action upon the respondent’s right to obtain foreclosure in the Buckhorn action, having regard to s. 110(1) of The Land Titles Act, R.S.A. 1955, c. 170 (now s. 109(1), R.S.A. 1970, c. 198)? That provision is as follows:
110. (1) The effect of an order of foreclosure of a mortgage or encumbrance made by any court or judge is to vest the title of the land affected thereby in the mortgagee or encumberancee free from all right and equity of redemption on the part of the owner, mortgagor or encumbrancer or any person claiming through or under him subsequently to the mortgage or encumbrance, and the order operates as full satisfaction of the debt secured by the
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mortgage or encumbrance, and the mortgagee or encumbrancee shall be deemed a transferee of the land and becomes the owner thereof and is entitled to receive a certificate of title for it.
It was the appellant’s contention, which was accepted in the judgment at trial, that the effect of this subsection was that, upon foreclosure of the V-V Ranch mortgage, the respondent could have no further claim against the appellant, because that mortgage secured a debt settled by the compromise agreement, and that debt was fully satisfied by the foreclosure.
This decision was reversed on appeal to the Appellate Division[2]. Clement J.A., who delivered the unanimous judgment of the Court, after reviewing and relating the reasoning of this Court in Krook et al. v. Yewchuk et al.[3], and in Edmonton Airport Hotel Co. Ltd. et al. v. Credit Fonder Franco-Canadien[4], to the statutory provision and the circumstances of this case, stated this conclusion, with which I agree:
In the case at bar, we are concerned with the terms of the settlement agreement, which is the effective document, as was the agreement for sale in the Krook case. In both cases the securities and means of carrying out the agreed terms are related and subservient to the main agreement, and in that context do not have an independent life of their own. There is here no covenant to pay whatsoever in the settlement agreement: whatever compulsions might operate on Loose to redeem the mortgaged properties, they do not amount to a debt in the defined sense, I am of opinion that the purpose of s. 110(1) is to relieve against the personal obligation for payment of a debt, and that when there is no debt but only a security given subject to a right of redemption on payment of a stipulated amount, then the section has no application at all.
I would allow the appeal and direct that upon the issue tried the answer is that the order for foreclosure
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of the V-V Ranch has no effect on the proceedings for foreclosure of the Buckhorn Ranch, other than in respect of accounting.
Even on the assumption that the agreement of November 23, 1966, created a debt owing by the appellant to the respondent, it was not a debt secured by a mortgage within s. 110(1). That subsection relates to a debt originally secured by a mortgage and upon which foreclosure proceedings to obtain satisfaction thereof are taken when that mortgage is in default. It does not apply to the present situation where a compromise agreement consolidating a variety of debts, some originally secured by promissory notes and others by mortgages,, fixes an overall indebtedness which is secured, among other securities, by abeyant foreclosure proceedings on a mortgage, and where the default which gives rise to pursuit of the foreclosure proceedings is default under the compromise agreement itself.
There is the further circumstance that the debt which was secured by the taking of the V-V Ranch mortgage was one which was owed solely by the Company, and not by the appellant, who was not a party to it. In my opinion, s. 110(1) cannot be construed to mean that foreclosure of a mortgage can satisfy any debt other than one which is owed by the mortgagor.
I would dismiss the appeal with costs.
Appeal dismissed with costs.
Solicitors for the appellant: Moscovich, Moscovich, Spanos & Matisz, Lethbridge.
Solicitors for the respondent: Woolliams, Korman & Moore, Calgary.