Date: 20010503
Docket: S.H. 169682
IN THE SUPREME COURT OF NOVA SCOTIA
[Cite as: Scotia Mortgage Corporation v. MacDonald, 2001 NSSC 61]
BETWEEN:
SCOTIA MORTGAGE CORPORATION
APPLICANT
- and -
CRAIG STEPHEN MacDONALD
RESPONDENT
D E C I S I O N
HEARD BEFORE: Justice Walter R. E. Goodfellow in the Supreme Court of Nova Scotia (Chambers) on May 1st, 2001
ORAL
DECISION: May 1ST, 2001
WRITTEN RELEASE
OF ORAL: May 3rd, 2001
COUNSEL: Stephen Kingston, Solicitor for the Plaintiff
Craig Stephen MacDonald - Not represented/No Appearance
GOODFELLOW, J.: (Orally)
BACKGROUND
[1] Craig Stephen MacDonald executed a Mortgage to Scotia Mortgage Corporation November the 12th, 1997. Scotia Mortgage Corporation issued an Originating Notice (Action) the 28th of February, 2001 setting out the particulars of the Mortgage alleging:
4. Default in payment has been made under the terms of the mortgage and consequently the following amounts are due as of February 23, 2001:
a. Principal balance: $47,815.66
b. Interest: 1,664.68
c. Taxes (debit): 101.28
d. Protective disbursements: 215.00
e. Other: Nil
TOTAL OUTSTANDING $49,796.62
[2] Craig Stephen MacDonald, as indicated by an Affidavit of Service filed, was personally served with the Originating Notice and Statement of Claim at Calgary, Alberta on the 22nd of March, 2001 and no defence having been filed, Scotia Mortgage Corporation proceeded with this Application.
APPLICATION
[3] Scotia Mortgage Corporation applies for an Order for Foreclosure and Sale and seeks the amount due on the Mortgage to be settled at $50,335.84 with interest thereon at the rate of 6.20 per cent per annum from April the 30th, 2001 to the earlier date of the date of payment by the sheriff or twenty days following the date of sale, together with any charges and protective disbursements as approved by the court with their costs to be taxed.
[4] The documentation is of the usual high standard expected of the Applicant’s solicitor and the Application has come before me this date in Chambers.
[5] I reviewed this Application prior to Chambers and communicated to the Applicant’s solicitor my concerns that quite possibly this was a continuation of the policy we have seen whereby the Mortgagee when there is default unilaterally places insurance on the property without any reference or inquiry as to whether there is pre-existing insurance. Normally, one would expect the Mortgagor’s file to contain a mortgage insurance rider relating to the insurance the Mortgagor placed, as a prerequisite to the Mortgagee advancing the mortgage funds. I raised a number of specific questions, including whether or not any existing insurance was due to expire and if so, when? In the event that this policy placed by Scotia Mortgage Corporation extended beyond the sale date and the property were sold, would there be a rebate? Would the rebate be to the credit of the Mortgagor, in the event the disbursement was allowed?
[6] Scotia Mortgage Corporation responded initially by fax to my further inquiry as follows:
We are advised that it is the policy of SMC to place insurance coverage upon properties upon which Mortgages go into default. The coverage is for the principal debt and there is a $5,000.00 deductible. The insurance is separate and apart from any insurance placed by the Mortgagor upon the property and helps protect SMC from any eventuality where the primary coverage by the Mortgagor lapses, which might otherwise result in difficulty in SMC recovering.
There is no provision for rebate.
[7] Upon receipt of this fax I left a further message the evening of the 30th of April on Mr. Kingston’s voice mail indicating that his response did not address my concerns and I have now heard further argument in Chambers.
ISSUE
Is Scotia Mortgage Corporation entitled to recover the protective disbursement in the amount of $215.00 which represents an expenditure by Scotia Mortgage Corporation for insurance?
[8] The only provision in the Mortgage the 12th of November, 1997 relating to insurance appears to be a fairly standard clause, para 10.
10. INSURANCE
You will without delay insure, and keep insured in our favour and until this mortgage is discharged, all buildings covered by this mortgage (including those which will be built in the future both during construction and afterwards) against loss or damage by fire and other perils usually covered in fire insurance policies and against any other perils we may request. Your policy must be in a form satisfactory to us and must include extended perils coverage and a mortgage clause stating that loss is payable to us. You must keep the buildings insured for their replacement cost (the maximum amount for which the buildings can be insured) in Canadian dollars, by a company approved by us. If in our opinion, you do not provide adequate insurance we can obtain insurance for you. What we pay for this insurance will immediately become payable by you to us. Any premium paid by us may be added to the loan amount and will be a charge against your property. Interest is payable by you on the premiums paid by us at the interest rate payable on the loan amount until they are paid by you to us. You shall at our request, transfer to us all insurance policies and receipts you have on the buildings and any proceeds from that insurance. At our request, you will give the insurance policies to us.
If you do not:
n Maintain adequate insurance, as required in this paragraph, on the buildings;
n Deliver a copy of any insurance policy or receipt to us at our request, or
n Provide us with evidence at our request of any renewal or replacement of the insurance, at least fifteen full days before your insurance expires or is terminated,
we can, but are not obliged to insure any of the buildings. What we pay for this insurance shall be added to the amount you owe under this mortgage and shall bear interest at the mortgage interest rate. You will pay this amount with your next monthly payment.
If any loss or damage occurs, you will provided us immediately, at your expense, with all necessary proofs of claim. You will also do all necessary acts to enable us to obtain payment of insurance proceeds. The production of this mortgage will be sufficient authority for an insurance company to pay us any loss related to the insurance policy or to accept instructions from us dealing with the loss.
Insurance proceeds may, in whole or in part, at our option be:
(a) Applied to rebuild or repair the damaged buildings; or
(b) Paid to you; or
(c) Paid to any other person who owns or did own the property as established by the registered title; or
(d) Applied, at our sole discretion, to the loan amount outstanding in whole or in part, whether due or not yet due.
INSURANCE ACT
Notice of cancellation or alternation
168(1) Where the loss, if any, under a contract has, with the consent of the insurer, been made payable to a person other than the insured, the insurer shall not cancel or alter the policy to the prejudice of that person without notice to him.
Manner of notice
(2) The length of and manner of giving the notice under subsection (1) shall be the same as notice of cancellation to the insured under the statutory conditions in the contract. R.S., c.231, s. 168.
CONCLUSION
[9] The Applicant is unable to satisfy me that they had made any effort to ascertain the continued existence of insurance coverage nor is the Applicant in a position to indicate any notice to it pursuant to s. 168 of the Insurance Act. The assumption I make is that there is preexisting insurance paid for by the Mortgagor which meets the obligation of the Mortgagor under the Mortgage. The mortgage contract, s.10, only permits the Mortgagee to place insurance for which the Mortgagor is liable for the premium, if the Mortgagor fails to comply with paragraph 10 of the mortgage contract.
[10] In the circumstances, the alleged protective disbursement is not recoverable against the Mortgagor.
J.