IN THE SUPREME COURT OF NOVA SCOTIA
Citation: Aulenback v. Trans Canada Credit Corporation, 2006
NSSC 141
Date: 20060508
Docket: SBW 219944
Registry: Bridgewater
Between:
Percy W. Aulenback
Applicant
v.
Trans Canada Credit Corporation
Respondent
Judge: The Honourable Justice A. David MacAdam
Heard: April 7, 2006 in Bridgewater, Nova Scotia
Counsel: Victor J. Goldberg and Martha Mann, for the Applicant
Mark A. Taylor, for the Respondent
David G. Coles, for 3038081 Nova Scotia Limited
John W. Chandler, Q.C., for Royce Hefler
By the Court:
[1] By Originating Notice (Action) filed on April 23, 2004 the respondent, Trans Canada Credit Corporation, initiated action against the applicant, Percy Aulenback, for payment of monies owed under three mortgages and, in default, for the foreclosure and sale of three lots of lands. Subsequently, no defence having been filed, the respondent, by ex-parte application, applied for and I granted, an order for the foreclosure, sale and possession of the three properties. The sheriff’s sale was held on May 26, 2005. Among the estimated twenty-five people in attendance at the sale were the applicant, his sister, Shirley Dauphinee, Allen C. Fownes, a barrister and solicitor who attended the sale on behalf of Mr. Aulenback and Royce Hefler, also the holder of a mortgage on the properties.
[2] Ms. Dauphinee, on being examined, indicated her purpose in attending the sale was to bid on the homestead property, which apparently had been in her family for over two hundred years. Royce Hefler, in his affidavit, indicated he held a second mortgage on the properties and intended to bid on one of the properties, which he described as woodland “... so as to recover the money owed to me by Percy Aulenback”. In his affidavit, he stated he would have bid up to $60,000.00 on this property but he had not intended to bid on the other two properties. He deposed that he “... did not realize that the properties were being sold as a bundle until the bidding commenced and I felt that I had no option at that point but to bid on all three properties. I was surprised the properties were being auctioned together.”
[3] Mr. Fownes, in his affidavit, deposed that he spoke to Mark Taylor, solicitor for the respondent, and to Sandra Webster, the deputy sheriff, “... to inquire as to whether the three properties foreclosed on and listed separately in the Notice of Sale could be sold individually.” He says Mr. Taylor refused “...the request on the basis that people were at the sale to bid on all three properties as one bundle.” The affidavit further indicated he then responded that persons could bid on all three properties even if they were sold separately and individually. The rationale for his request, as outlined in his affidavit, was that the sale should be conducted in such a manner as to cause the least prejudice to the applicant. He observed that one of the properties being sold was Mr. Aulenback’s home property. He further deposed that, despite his request, “... the properties were sold as en bloc to a third party who was the highest bidder at the sale.”
[4] Mr. Taylor, in his affidavit, stated that in the months preceding the sheriff’s sale he had been contacted by two different counsel indicating they were acting on behalf of Mr. Aulenback. He said he had not been contacted byMr. Fownes, on behalf of Mr. Aulenback, until he appeared at the sheriff’s sale and asked if the properties were being sold separately. He further deposed that at no time was he asked to postpone the sale. In his affidavit he stated:
At no time previous to this had Mr. Fownes or other counsel for Mr. Aulenback raise (sic) the issue of separate sales.
[5] The three properties were initially mortgaged to three different lending institutions, one of which was the respondent. The mortgages on the remaining two properties were eventually purchased by the respondent. On or about December 19, 2001, the applicant, together with his mother, executed a “mortgage renewal agreement” with the respondent . Counsel for the applicant says, for purposes of the foreclosure proceeding, the respondent relied on this document as a “consolidation agreement” in requesting a foreclosure order for the three properties. Victor Goldberg, counsel for Mr. Aulenback, after observing that the assignments of the mortgages in favour of the respondent were executed following the date of the “mortgage renewal agreement”, submits it is an “invalid consolidation agreement”. Mr. Goldberg suggests that as the respondent did not hold legal title to the mortgages at the time of the renewal agreement, the agreement is, therefore, invalid. He also says there was no statement of disclosure with respect to the new renewal terms nor were the applicant, or his mother, offered independent legal advise.
[6] Mr. Goldberg acknowledges that the request by the applicant, to the deputy sheriff and counsel for the respondent, was not to cancel the sale, but rather to have the three properties sold individually. He agrees Mr. Aulenback was not seeking to redeem the mortgages subject to the foreclosure order, rather he was asking to have the three properties sold separately so his sister could bid on the family homestead. As such, notwithstanding the submissions in respect to the validity of the so called “consolidation agreement”, there was no request to stop the sale nor was any application made, in this regard, at any subsequent time, including during this application. Mr. Goldberg says the remedy he is seeking is to have the sale reconstituted, but with the properties sold separately.
[7] The properties were purchased by 3038081 Nova Scotia Limited for a total price of $265,000.00. Jeffrey Potter, President and Secretary of the purchaser deposed that following receipt of the sheriff’s deed, on June 17, 2005, and the sale being ratified and confirmed by the Supreme Court, on July 14, 2005, the purchaser was successful in having the properties migrated under the Land Registration Act, Stats. N.S. 2001, c.6, as amended. The purchaser then made efforts to sell the property and on October 23, 2005 entered into an agreement of purchase and sale for one of the properties, with the closing scheduled for October 31, 2005. Because of difficulties associated with the migration of title, the closing was extended, until it was completed on January 5, 2006. He says the remaining properties have not been sold, as of March 31, 2006.
[8] The applicant, in his affidavit, said he arranged for “certain funds” for the purchase of the family homestead by his sister, Ms. Dauphinee, and attended at the sale with Mr. Fownes for this purpose. He deposed that there were approximately twenty-five people in attendance at the sale and he was advised by some of these individuals that they were interested in bidding on the properties individually. He referred to Mr. Fownes asking the deputy sheriff and Mr. Taylor if the lots could be sold individually and the request being refused. His affidavit then continued:
12. As a result of the foreclosure, I have lost my properties and most importantly my family has lost our family home which has been in our family since the late 1700s. I have also not been able to realize the value to discharge the second mortgagee and make payments in the judgment creditors.
13. Since the date of the Sheriff’s Sale until now I have been in contact with lawyers in an attempt to remedy the problem and retained Victor Goldberg in early November who was willing to proceed.
14. I am asking that the Order for Foreclosure, Sale and Possession be set aside and that a new Order be issued in which the properties are foreclosed on individually so that I may have an opportunity to purchase the Properties.
[9] It is uncontested that the application for the order confirming the sale was made without objection by Mr. Aulenback, or anyone on his behalf. Apparently, the first notification to the purchaser of a concern by Mr. Aulenback with the foreclosure and sale of these properties, occured on November 3, 2005 when Mr. Goldberg wrote to John S. Fitzpatrick, another counsel on behalf of the purchaser, stating:
It is our position that Order for foreclosure, sale and possession was improperly given. We have been instructed to commence proceedings to set aside the Order which, if granted, would have the result of overturning the sheriff’s sale.
I would ask that you no further steps in connection with the foreclosure or possession.
[10] Mr. Fitzpatrick responded, asking for particulars of the suggested justification for setting aside the foreclosure, which he noted had been confirmed by the court. Mr. Fitzpatrick not receiving a reply forwarded a further fax on November 21, 2005 advising he had a sale pending in the near future and that his client intended to proceed with the sale under the authority of the existing confirming order. Mr. Goldberg, in his affidavit, attached further correspondence, including a letter dated November 24, 2005 acknowledging receipt of Mr. Fitzpatrick’s correspondence and advising he was out of the country. In his letter, he stated he was in the process of finalizing the application and offered to further discuss the matter with Mr. Fitzpatrick. He suggested the sale not take place in the circumstances. On December 16th he forwarded a further notice to Mr. Taylor, Mr. Fitzpatrick and Michael Kennedy, apparently counsel then representing Mr. Hefler, enclosing a copy of his letter addressed to the court in respect to the intended application. Mr. Fitzpatrick by letter dated December 20th responded that he would be out of his office until January 2nd, but in the meantime he wished to be advised in the event a hearing date was scheduled. As noted earlier, the purchaser proceeded on January 5, 2006 to complete the sale of one of the properties.
[11] Mr. Goldberg, in his written submission, says the applicant is seeking an order declaring the order for foreclosure, sale and possession and the subsequent sheriff’s sale a nullity. At the hearing, however, the focus of his submission related to the decision by counsel for the respondent and the deputy sheriff to refuse the request to sell the lands individually. He suggested, as a result, the court should order the resale of the properties. The affidavits of Mr. Hefler and Ms. Dauphinee were clearly filed in support of his submission that the amount generated by individual sales, would, in total, “obviously” have exceeded the amount generated by the single sale of the three lots.
[12] Mr. Coles, on behalf of the third party purchaser, suggests that in any event the application has been made before the wrong judge. He says it should have been made, not before the judge who had issued the order for foreclosure, sale and possession, but rather before the judge who had issued the order confirming the sale. In any event, counsel suggests that if Mr. Aulenback wished to make an application, he should have done so prior to the order confirming sale. Mr. Taylor, on the other hand, in addition to adopting much of the submission of Mr. Coles, also comments in respect to the validity of the consolidation. He observes that the monies for the purchase by the respondent of the two mortgages in question had been paid on or about December 12th and 13th and, therefore, prior to the execution of the “renewal agreement” by Mr. Aulenback and his mother. He says, therefore, the consolidation “...was contractual rather than purely equitable and, therefore, the position taken by the applicant now is not applicable”. He continues by noting that the argument concerning the validity of the consolidation should have been made following service of the originating notice and statement of claim, rather than some two years later.
THE LAW
[13] The applicant, on the issue of the appropriateness of reopening a final order for foreclosure, references Falconbridge on Mortgages, (5th edition; looseleaf, 2005, as updated) where in s. 26:240 the author, apparently relying on Dovercourt Land Building and Savings Co. v. Dunvegan Heights Land Co., [1920] O.J. No. 115, states:
It has been said that a court of equity is always ready to hear a meritorious application for relief against a foreclosure, and will open it whenever good and substantial reasons for such a course are shown to it, provided the application is reasonably made. The mere fact that the land has been sold to a third person is not alone an insurmountable obstacle, and the true equitable principle is that the mortgagor may be permitted to redeem whenever the equities in the mortgagor’s favour outweigh all that are against him or her.
[14] Counsels written submission then continues:
We appreciate that some time has passed since the sheriff’s sale. We have been advised by Mr. Aulenback that he has been in contact with lawyers in an attempt to remedy the problem for some time and only retained this firm in early November. We notified the buyer and Trans Canada as soon as we became involved in the file.
[15] Mr. Coles, on the other hand, references the decision of the Supreme Court of Canada in Pew v. Zinck (1953), 1 S.C.R. 285:
Under the law of Nova Scotia the Court has no jurisdiction to allow a mortgagor of lands to redeem after a sale under a decree but before conveyance and before a report has been made to the Court and approved.
[16] Justice Rand, in the reasons of the majority, indicated the question at issue is whether, under the laws of Nova Scotia, “...the court has jurisdiction to allow a mortgagor of lands to redeem after a sale under decree but before conveyance and before a report has been made to the court and approved.”
[17] Recognizing that a foreclosure and sale preceding in Nova Scotia required an order confirming the sale, Justice Rand, at pp. 286 - 287, comments:
Several special features of that law should first perhaps be mentioned. The rule, as far back as 1833, authorized and since then followed, is that long ago adopted in Ireland under which, instead of foreclosures as in England, the realization of a mortgage is by way of sale. The order formally forecloses the equity of redemption and directs a sale, but reserves a further right of redemption until the day of the sale. By c. 140, R.S.N.S. 1923, continuing, in this respect, the provision of preceding enactments, the sale, unless otherwise ordered by the court, shall be made by the sheriff of the county in which the lands lie, who is authorized to execute a deed which “when delivered to the purchaser shall convey the land ordered to be sold.” The purchaser can pay the price and the sheriff execute the deed immediately upon acceptance of the bid. The sheriff renders a report of the proceedings to the court, but whether that report must be confirmed is disputed. Rule 8 of Order 51 of the Supreme Court practice provides that where an order is made directing any property to be sold,
the same shall, unless otherwise ordered, be sold, with the approbation of the court or a judge, to the best purchaser that can be got, the same to be allowed by the judge, and all proper parties shall join in the sale and conveyance as the judge directs.
This, with an immaterial change, reproduces Order 51 of the Rules of the Supreme Court, 1883. This latter was, in turn, taken from Rule 13 of Order 35 adopted by the Court of Chancery in 1852 under the Chancery Procedure Act, c. 86, 15 & 16 Vict. For the purposes of the matter before us...
[18] Later, at pp. 289-290, he observes:
On what grounds, then, may the court refuse to confirm? Although it would be impossible to enumerate them all, fraud, mistake, misconduct by the purchaser, error or default in the proceedings are well established. But the controlling fact to which these ground give emphasis, is that the purchase can be defeated only by juridical action. To hold, on the other hand, that the court, acting otherwise than in setting aside the sale, can destroy such a right would be to attribute to it the repudiation of its own contract without proper cause.
But it is said that so long as the court retains the power of approval, the original jurisdiction to permit redemption is preserved and that this is a further condition to which the purchaser submits himself. Redemption in that case would be an act intercepting the approval, not a ground for refusing approval: and allowing it would, on the theory advanced, wipe out all steps following the order for sale. Since no case has been cited in which that has been done, we have no indication of how the resulting matters would be dealt with, such as the purchaser’s discharge, the costs and expenses, the deposit, the reconveyance where the deed has been given before redemption. In the last situation, it would be extraordinary that the court should permit the instrument to remain outstanding.
If such a condition has, for the past century, been annexed to sales under decree, we surely would have some reference to it in the cases or in the standard works on equity practice; but the researches of counsel have failed to discover one instance in which such a power has been exercised in any jurisdiction within the British Commonwealth. There are a number of authorities directly in point from the United States: Brown v. Frost (1), holding that there was no power to redeem after a sale, although the mortgagee was the purchaser: Pennsylvania Company v. Broad St. Hospital (2), declaring that the mortgagor’s right of redemption “must be exercised before the sheriff’s hammer falls”; Parker v. Dacres (3), in which the United States Supreme Court, speaking through Harlan J. at p. 47 said:--
In the view we take of this case it is unnecessary to express an opinion whether the provision relating to sales under execution, properly interpreted, give a right of redemption after sale under a decree of foreclosure. If it did not, the decree below must be affirmed, for a right to redeem, after sale, does not exist unless given by a statute.
Young’s Appeal (4), in which Ross J. on appeal used this language:--
The bona fide purchaser, at a public sale of land, the moment it is knocked off to him, if he complies in all respects with the conditions of the sale, instantly acquires a vested right to the property sold.
and
Gibson v. Winslow (5), in which it is stated:--
The moment the land was struck down, the interest of the purchaser attached.
[19] Referenced by counsel for the purchaser is the decision of the Nova Scotia Supreme Court, Appeal Division in Devan Properties Ltd. v. Metropolitan Stores of Canada Ltd. ,[1988] N.S.J. No. 460; 88 N.S.R. (2d) 129, where the court was considering the validity of a lease on property given subject to a mortgage which was the subject of a foreclosure and sale. In his reasons, at p. 142, Justice Matthews observes:
Care must be exercised when considering texts or case law relating to other jurisdictions. See Mr. MacIntosh’s text, para. 12.6E:
The Nova Scotia procedure of foreclosure and sale was developed many years ago as the customary manner of foreclosing a mortgage in this province. Exercise of power of sale as is done in other provinces seems to be limited in Nova Scotia to other forms of secured transactions such as debentures. If a mortgage is involved, nothing less than a properly conducted foreclosure and judicial sale by the Sheriff will satisfy solicitors that the former owner's equity of redemption has been extinguished."
In a similar vein Falconbridge, supra, at pp. 522‑23 said:
The practice prevailing in Nova Scotia as to foreclosure and sale is substantially different from that prevailing in Ontario, and some of its peculiar features may be appropriately mentioned here.
What is called in Nova Scotia an order of foreclosure and sale is a formal adjudication of foreclosure, as contrasted with the order nisi or interlocutory judgment under the Ontario practice, which, as its name indicates, is merely an adjudication that the defendant be foreclosed unless he redeems within the time specified, and which, in case of default thereunder, must be made final or absolute by a further order. The adjudication of foreclosure under the Nova Scotia order is, however, subject in effect, if not in terms, to the provisions which the order also contains directing, inter alia, a sale by the sheriff, unless in the meantime the party entitled to do so pays the amount due with costs; so that the order may be said to be nisi only, and not absolute, because the right to redeem exists until the sale under the decree [Stubbings v. Umlah (1900), 40 N.S.R. 269 (S.C.); Pew v. Zinck and Lobster Point Realty Corp., [1953] 2 D.L.R. 337 (S.C.C.)]."
In Pew v. Zinck and Lobster Point Realty Corporation et al., [1953] 1 S.C.R. 285, the Supreme Court of Canada concluded that, in Nova Scotia, the right of redemption in the mortgagor exists only up to the time of sale. The equity of redemption of the mortgagor was extinguished by the sale. Should the position of a subsequent encumbrancer after the confirmatory order be greater?
[20] Justice Matthews then refers to the decision of Chief Justice Cowan in Nova Scotia Savings and Loan Co. v. Corcoran [1978] N.S.J. No. 39; 29 N.S.R. (2d) 192, where an application to set aside a sheriff’s sale of land was dismissed. On the application for foreclosure, the certificate of title improperly omitted to disclose the name of the second mortgagee who, as a result, did not receive notification of the sheriff’s sale. The property was sold to a purchaser who subsequently mortgaged the property and made extensive improvements thereon. Chief Justice Cowan found that a purchaser at a sheriff’s sale, conducted in the usual way after full compliance with the terms of an order authorizing the sale, is entitled to rely on the deed from the sheriff and on the court order. The error involved was that of the solicitor and the purchaser could not be held responsible. There was no fraud, mistake or misconduct on the part of the purchaser to warrant setting aside the sheriff’s sale in the circumstances.
[21] Justice Matthews, in respect to the practice in Nova Scotia, refers to the comments of Chief Justice Cowan at p. 209:
I again refer to Nova Scotia Savings and Loan Co. v. Corcoran at p. 209 ((1978) 29 N.S.R. (2d) 192; 45 A.P.R. 192):
The practice in foreclosure proceedings under the Civil Procedure Rules is the same as the practice under the Rules formerly in force and an application is always made by the plaintiff mortgagee to have the sheriff's report as to sale and all proceedings in the action ratified and confirmed.
While the decision in Pew v. Zinck et al., supra, dealt with the jurisdiction of the court to permit redemption by the mortgagor after the sale, and before delivery of the sheriff's deed, the reasons upon which the decision was based support the view which I take in the case before me, that, there being no fraud or illegality on the part of the purchaser, at the sheriff's sale, there was, at the conclusion of the sale, a binding contract of purchase and sale of the interest of the mortgagors in the land, subject only to the approval by the court of the report of the sheriff. There was, in this case, no fraud, mistake or misconduct on the part of the purchaser, and no error or default in the proceedings. The only error was that of the solicitor who prepared the certificate of subsequent encumbrances and the responsibility for that error rests upon the solicitor and, perhaps, upon the plaintiff who retained that solicitor and in whose name the proceedings were taken. Responsibility for that error cannot be placed upon the purchaser at the sheriff's sale and he cannot be made responsible for results which flowed from that error.
The purchaser is, in my opinion, entitled to require the plaintiff or the sheriff to apply to the court for confirmation of the sheriff's report and of the sale. No evidence was adduced before me which would indicate that such confirmation should not be granted.
[22] Clearly the authorities from other jurisdictions cited by the applicant’s counsel, relating to reopening a foreclosure proceeding, including where the property has been sold to a third person, would not be applicable in Nova Scotia. Among the authorities referenced by counsel for the purchaser is the decision of Justice Hallett in Atlantic Trust v. H & E General Stores Ltd. (1977), N.S.J. No. 28: 25 N.S.R. (2d) 526, where the successful application to set aside the sale, made pursuant to an order for foreclosure and sale was obtained before the order confirming sale. As such it is not relevant to the present circumstance where the order confirming sale has been issued.
[23] Counsel for the purchaser acknowledges the court may refuse to confirm the sheriff’s sale, citing Pew v. Zinck, supra, where there is, “...fraud, mistake, misconduct by the purchaser, error or default in the proceedings.” The submission of counsel then continues:
In this case, of course, Aulenback now complains of defects in the conduct of the sale which were known to him prior to the sale, and before the sale was ratified and confirmed by the Court. Is he still entitled to raise the defects now, after the sale was confirmed?
[24] I am satisfied the answer to counsels question is that, absent fraud or illegality on the part of the purchaser, whether the purchaser be the mortgagee or a third party purchaser and, particularly where the applicant, as here, attended the sale with counsel, the time has passed for raising issues as to the conduct of the sale itself. These are matters to be raised at, or before, the application for the order confirming the sale. It is unnecessary to comment on the extent of any exception in the circumstance of fraud or illegality on the part of the purchaser. No such fraud or illegality was alleged in respect to the purchaser of the property, nor, for that matter, in respect to the respondent or its counsel.
[25] Counsel has referred to Civil Procedure Rule 15.08 which reads:
Where a party is entitled to:
(a) maintain a proceeding for the reversal or variation of an order upon the ground of a matter arising or discovered subsequent to the making of the order;
(b) impeach an order on the ground of fraud;
(c) suspend the operation of an order;
(d) carry an order into operation;
(e) any further or other relief than that originally granted,
he may apply in the proceeding for the relief claimed.
[26] However, there is nothing in this Rule to warrant granting the relief sought by the applicant. The applicant was fully aware of the sheriff’s sale and, in fact, attended with counsel and, notwithstanding the present allegation that the conduct of the sale prejudiced his position, no intervention was made, or sought to be made, prior to the hearing for the order confirming the sheriff’s sale. There is nothing in 15.08 that would entitle Mr. Aulenback to the relief he now seeks.
[27] The applicant also references Civil Procedure Rule 47.16(1) which reads:
(1) Where an order is made directing a property to be sold, the court may permit any party or person having the conduct of the sale to sell the property in such manner as he thinks fit, or as the court directs, for the best price that can be obtained.
(2) The court may give such directions as it thinks fit for the purpose of effecting a sale, including, without restricting the generality of the foregoing, directions.
(a) appointing the party or person who is to have the conduct of the sale;
(b) fixing the manner of sale, whether by contract conditional on the approval of the court, private treaty, public auction, sheriff’s sale, tender or some other manner;
(c) fixing a reserve or minimum price;
(d) requiring payment of the purchase price into court or to trustees or other persons;
(e) for settling the particulars or conditions of sale;
(f) for obtaining evidence of the value of the property;
(g) fixing the remuneration to be paid to the party or person having the conduct of the sale;
(h) requiring an abstract of title to be prepared for the use of the court.
[28] Again, the time for taking exception to the manner in which the sale was conducted was at or before the hearing for the order confirming the sale.
[29] It would, therefore, appear, at least in Nova Scotia, the right of a mortgagor to redeem expires once the sheriff has sold the property. Objection to the conduct of the sale must be made on or prior to the order confirming the sale. The extent, if any, to which the time periods are extended, in the circumstance of fraud or illegality on the part of the successful purchaser, whether it be the mortgagee or a third party, remain unclear and are unnecessary to determine on this application.
[30] The application by Mr. Aulenback is, therefore, dismissed with costs to the respondent.
MacAdam, J.