PCJ 2001 SKQB 132 Q.B. A.D. 1999 No. 2138 J.C.S. IN THE QUEEN'S BENCH JUDICIAL CENTRE OF SASKATOON BETWEEN: THE BANK OF NOVA SCOTIA and HOWARD GREGG ANDERSON, DIANNE FLORENCE DICKEN, FARM CREDIT CORPORATION, JAMES ANDERSON, NEIL GIBBINGS, MORRIS FRESLEE, TIMOTHY KEENE, JAMES PELETIER and JACELYN RYAN DEFENDANT M. Kim Anderson for the Bank of Nova Scotia Richard W. Danyliuk for Howard Anderson and Diane Dicken FIAT LAING J. March 14, 2001 [1] The applicant seeks an order nisi for sale of a 10 acre parcel of land near Rosetown, Saskatchewan on which the respondents operate an ostrich farming business. As of February 12, 2001, the amount owing on the mortgage which dates back to October 4, 1988 is $61,194.91. current certificate of title still shows the Farm Credit Corporation as second mortgagee in the amount of $36,000.00, but the affidavit material filed suggests it has been paid out. The named individuals after the Farm Credit Corporation in the style of cause are members of law firm that have filed writ of execution against the property. [2] Apart from the length of the redemption period and the upset price that should be included in any order for sale, the issue is whether this 10 acre parcel of land is a homestead within the meaning of The Saskatchewan Farm Security Act, S.S. 1988-89, c. S-17.1 (hereinafter referred to as the Act). At the time this court ruled on November 18, 1999 that s. 9(1)(d) of the Act did not apply to this action, no argument was advanced at that time by the respondents pursuant to s. 17(1)(b) that the application should be dismissed because it was homestead. The parties agree that since the summer of 1994 the land qualifies as farm land under the Act, and the house located on the property since that time has been homestead within the meaning of the Act. Where the parties disagree was whether the property was the respondents' homestead when s. 44(17) of the Act was proclaimed on September 20, 1992. Section 44(17) states: When farm land that is the subject of mortgage is not homestead when this subsection comes into force, this Part does not apply to the mortgage. If it was homestead at the time the foregoing section was proclaimed, final order for foreclosure would be stayed (s. 44(1)), and no order for sale could be made (s. 44(10)). Homestead Issue [3] The respondents had acquired the 10 mortgaged acres from Mr. Anderson's father, and commenced building their home in the summer of 1988. By the time the respondents entered into the subject mortgage on October 4, 1988 they were living in their home on the property. Mr. Anderson states at this time he was working at construction work in Rosetown and was raising some chickens, turkeys and geese that he had acquired from his father. He does not indicate the scale of this activity. At this time Mrs. Anderson (nee Dicken) was working at travel agency in Rosetown. In 1989 Mr. Anderson took job coaching hockey in Johannesburg, South Africa, while Mrs. Anderson remained in Rosetown. In 1990, Mr. and Mrs. Anderson both moved to Whitehorse, Yukon, and the house on the acreage was rented out. In 1991 they both moved to Capetown, South Africa. In 1992 they moved back to Whitehorse. In the spring of 1993 they moved back to the acreage in Rosetown. [4] While in South Africa Mr. and Mrs. Anderson had researched the ostrich business and decided they would like to become involved in the business of ostrich farming. While still living in the Yukon they incorporated in Saskatchewan, Satara Farms Inc. on August 4, 1992 with view to entering into the ostrich business. After moving back from the Yukon in 1993 Mr. Anderson built barn on the property to be subsequently used for the raising of ostriches. Ostrich eggs did not arrive until 1994. [5] It will be observed from the foregoing history of the property the only reference to farming activity prior to 1993, was the raising of some poultry in 1988, while both Mr. and Mrs. Anderson were full-time employed in non-farming occupations. There is no reference in the material to any farming activity on the mortgaged property in the years 1990, 1991 and 1992 while both respondents lived elsewhere. In the Act homestead is defined in s. 2(1)(h) as: (i) the house and buildings occupied by farmer as his bona fide farm residence; and (ii) the farm land on which the house and buildings mentioned in subclause (i) are situated, not exceeding 160 acres or one quarter section, whichever is greater; Farm land is defined in s. 2(1)(f) as: real property in Saskatchewan that is situated outside city, town, village, hamlet or resort village and that is used for the purposes of farming. As noted per Jackson J.A. in Bank of Montreal v. Nevin (1996), 1996 CanLII 5000 (SK CA), 144 Sask. R. 178 (Sask. C.A.) at p. 183: That there is farming component to each part of this definition is apparent. To be homestead, there must be bona fide farm residence and the land on which such residence sits must be used for "farming purposes". [Emphasis in original] [6] The respondents have not established that the land in the period of time prior to August of 1992 met the definition of farm land. The land was not being put to any farming purpose during that period. The respondent\'s house on the property in August 1992 fell into the category of what Gerein J. in Bank of Nova Scotia v. Blair (1989), 1989 CanLII 4547 (SK QB), 75 Sask. R. 289 at p. 292 referred to as "simply a dwelling in isolation". The land was not therefore, a homestead within the meaning of the Act in August of 1992, and the homestead provisions of s. 44 of the Act have no application in this case. Upset Price [7] There is no recent appraisal information available with respect to the property. The respondents state an upset price should reflect the amount of equity they have in the property. The applicant takes the position that as the property has been listed for sale for some considerable period of time without substantial offer forthcoming, an upset price should be the amount currently owing under the mortgage of $61,000.00. [8] In an formal appraisal done April 25, 1997 for financial institution other than the plaintiff, the property was appraised at $115,000.00. This appraisal recognized that on cost replacement basis the value of the property was $193,500.00, and went on to say that acreages in southwestern Saskatchewan have typically sold between 40 percent and 70 percent of physically depreciated cost, depending on location. This appraisal went on to note that in view of the fact the subject property was located reasonably close to Rosetown, value near the top of that range was considered to be reasonable and the 40 percent depreciation factor applied. [9] On April 15, 1998 valuation of the property by real estate firm in Rosetown, Saskatchewan offered the opinion the total market value of the property was $225,000.00. The basis for this opinion was not identified in the report. [10] The most recent appraisal was conducted at the request of the applicant and is dated October 8, 1999. This appraisal report, using direct comparison approach, set the value of the property at $72,000.00 $88,000.00. The report went on to note: Subject property listed for sale for approximately year. Original listing price at $225,000. Listing agent reports two offers, one at $61,000 and one at $72,000. Offers reflect little consideration by potential purchasers for the barn facility and also the non-typical design of the dwelling may be impacting negatively on value. [11] In an affidavit dated February 19, 2000 Mr. Anderson states he believes an appropriate reserve bid would be $200,000.00. He states with respect to the last appraisal conducted, the appraiser did not inspect the interior of the buildings on the property. He goes on to state: .The property is 10 acres, miles from Rosetown. It has very large, modern house, with every convenience available. It cost $120,000.00 to build in the late 1980's. There is well with good water supply, which cost $22,000.00 to put in. As well, special 4,000 square-foot barn is on the property. It cost about $80,000.00 to build. It is used for my ostrich-breeding operation at present and has specialized equipment in it, such as $10,000.00 incubator. As well, it has radiant floor heat, and 14-foot ceilings. This construction allows the barn to be used for other purposes, such as machinery storage, manufacturing or horse training. [12] Without going into detail, the respondents have been rather unlucky to date in their ostrich breeding operation, which includes initial difficulties with sources of supply, the purchase of shelters for the ostriches which failed and resulted in the plaintiffs obtaining $140,000.00 judgment which apparently is yet uncollected against the manufacturer or distributor, as well as reverses in their marketing efforts caused in part by an oversupply situation. The implication in the affidavit material is that the respondents will remain in the ostrich business irrespective of final order for sale or foreclosure with respect to this property. The respondents ask for more time in order to refinance the operation. They make the point that they have cleared off most of the debt associated with the ostrich enterprise except for the Bank of Nova Scotia and the execution holders on title. The Farm Land Security Board report, which is now somewhat dated having been prepared in January 1998 concluded that: ". .the farmers have made sincere and reasonable effort to meet their obligations under the mortgage". [13] On this application, apart from asking for six month redemption period in order to allow refinancing of the property, the respondents did not update how likely it is that such refinancing is realistically possible in the short term. Likewise, the respondents did not provide an updated appraisal that would support their position the property is worth far more than the $61,000.00 the bank proposes as an upset price for sale. The respondents also did not comment on what if any offers of purchase they have received in the past year and half. [14] am not comfortable at setting an upset price for the sale at $61,000.00 considering the amount of money the respondents have invested in the property, unless there is no other choice. At the same time, am not comfortable guessing at what if any higher upset price should be set. Leaving aside the depressed rural economy in Saskatchewan, which may account for the fact substantial offers to purchase have not been forthcoming, it is also puzzling why the respondents have not been able to refinance the property if the ongoing operation has chance of success, bearing in mind the amount of the mortgage debt is not beyond the means of the average $30,000.00 wage earner. [15] In the end result, I consider it reasonable to adjourn this application to myself on June 7, 2001 at a time to be set by the local registrar. If this time does not allow the respondents to resolve the debt, by sale of the property or refinancing, then the respondents shall have the onus on the return date of providing evidence why the upset price suggested by the applicant should not be included in an order nisi for sale. The evidence submitted by the respondents to date does not do this. [16] Application adjourned.
FIAT. The applicant sought an order nisi for sale of a 10 acre parcel of land on which the respondents operate an ostrich farming business. The amount owing on the mortgage was $61,194.91 as of February 12. In issue was whether the home was a homestead within the meaning of the Saskatchewan Farm Security Act when s.44(17) was proclaimed on September 20, 1992. HELD: The application was adjourned to June 7. 1)The homestead provisions of s.44 had no application in this case. The land was not being put to any farming use prior to August 1992 and the respondent's house at the time fell into the category of 'simply a dwelling in isolation' (Bank of Nova Scotia v. Blair). 2)There was no recent appraisal information available. If the respondents have not resolved the debt by sale or refinancing by the return date they will have the onus of providing evidence that the upset price suggested by the applicant should not be included in an order nisi for sale.