nan QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2014 SKQB 344 Date: 2014 10 23 Docket: QB 148 of 2014 Judicial Centre: Saskatoon BETWEEN: TORONTO-DOMINION BANK and DAVID GARRY SCHELL and CORINNE LAVOIE Counsel: L. Zerajic for the plaintiff No one representing the defendants FIAT ROTHERY J. October 23, 2014 [1] This fiat is in response to certain deficiencies in draft order nisi for judicial sale provided by plaintiff’s counsel. The court’s direction on various aspects of the proposed order will assist both plaintiff’s counsel and the bar in general. [2] The plaintiff applied for an order nisi for judicial sale of the property owned by the defendants. The Limitation of Civil Rights Act, RSS 1978, L-16 [LCRA] does not preclude the plaintiff from suing on the covenant because this is not purchase-money mortgage. However, judicial sale is required so that the plaintiff may apply to have the amount of deficiency in the judgment set by the court. Otherwise, as provided by s. of the LCRA, foreclosure of the mortgage operates as full satisfaction of that debt. [3] The plaintiff applied by notice of application for the order nisi for judicial sale, with service upon both defendants. Neither defendant appeared in court. The plaintiff filed draft order nisi for judicial sale in support of its application. It is from this draft order that certain rulings and directions are now provided. THE APPROPRIATE SELLING OFFICER [4] The draft order proposes that after the end of the redemption period, the mortgaged land be sold under the direction of the plaintiff’s lawyers, by way of listing the property for period of ninety days with licenced real estate agent. While the assistance of real estate agent is beneficial in obtaining the best price for residential property such as this, it has long been decided by this court that another solicitor other than the plaintiff’s own solicitor must direct the sale. [5] As stated by Wright J. in Farm Credit Canada Lundback, 2002 SKQB 376 (CanLII), 225 Sask 315 [Lundback] as follows: nan The applicant applied for an order for judicial sale following the service of statement of claim on the respondents in which it sought foreclosure or alternative relief. In so doing, it asked that its solicitor, Mr. Hesje, be appointed as selling officer to conduct the sale and report to the Court. nan expressed my concern to Mr. Hesje during the course of his submissions as to the propriety of the applicant solicitor serving in such dual function. He informed me that some members of our Court have allowed this to be done, others have declined. nan In my respectful view, it is not appropriate for the Court to appoint, as selling officer, the solicitor for the applicant creditor. There are obvious difficulties with conflict of interest. Who does the selling officer serve: the Court, from which his or her authority originates; or the client? nan The matter is of sufficient importance that concluded should reduce my thoughts to fiat and direct that it be distributed to other members of the Court. To be fair, Mr. Hesje indicated he was perfectly willing to have another member of the Law Society unconnected to the proceedings appointed as selling officer. understand that Grant Richards of Cuelenaere Kendall Katzman Watson Hagen will serve in this role as opposed to Mr. Hesje. [6] agree with the reasoning set out in Lundback. The proposed selling officer ought not to be the plaintiff’s own counsel. SETTING THE RESERVE BID [7] The setting of the reserve bid in judicial sale is requirement of s. of LCRA which states: Where, in an action upon or relating to mortgage of real property, the mortgagee, or person claiming through or under him, seeks to have the property sold, and the proceeds of sale applied in satisfaction of the mortgage indebtedness in whole or in part, the court or judge shall not order sale of the property except subject to such upset price or reserve bid as the court or judge deems proper having regard to all the circumstances. [8] As stated in Saskatoon Credit Union Ltd. Goertz, (1989), 1989 CanLII 4446 (SK CA), 73 Sask 81 (CA) at para 34: The general principle governing the upset price or reserve bid under s. has been touched on above: the amount fixed by the judge must be reasonable price, that is, as near the fair market value as is possible to be obtained at forced sale. Since the judge did not fix reserve bid and since this case must be remitted to the Court below for up-to-date evidence as to present value of the property, prevailing market conditions and all other relevant factors before reserve bid can be fixed, it is inappropriate to attempt any more than very general statement of principle. Since s. applies only to sales at the request of the mortgagee, it was obviously enacted to protect the interest of the mortgagor. Whether the land is worth more or less than the amount owing, it will always be in the best interest of the mortgagor that the land not be sold at price far below its real value, always possibility at forced sale. Thus, the primary responsibility of the judge must be to ensure that the best possible price will be obtained for the land…the judge must use the substantial discretion vested in him to ensure reasonable price on the one hand and to ensure that the sale not be abortive on the other. [Emphasis added] [9] Setting the reserve bid is an exercise of judicial discretion. The only information before the court as to the value of this mortgaged land is “residential desktop report” appraisal completed January 8, 2014, which appraises the mortgaged land at market value of $85,000 to $125,000. Plaintiff’s counsel states that the plaintiff does not know the condition of the house because no one has inspected it. Counsel suggests that setting the reserve bid at $100,000, which is 80% of the upper range of the value, is appropriate in the circumstances. [10] From this partial appraisal and with no information on the condition of the premises, setting the reserve bid at $100,000 may not reflect the best possible price that can be attained. Under the terms of this proposed order nisi for judicial sale, the realtor is permitted to reduce the list price to the amount of the reserve bid without further direction from the court. It would be more fair to set the reserve bid at an amount closer to $125,000. If the mortgaged land cannot be sold at that amount, the plaintiff has leave to return the matter to court to seek a lower reserve bid, based upon evidence to support its position. Therefore, I set the reserve bid (or minimum selling price) at $115,000. THE PAYMENT OF PURCHASE MONIES INTO COURT [11] The draft order sets out the following proposal for disbursing the purchase monies: AND IT IS FURTHER ORDERED that the purchase monies shall be applied disbursed as follows: (a) firstly, to the property taxes outstanding on the mortgaged premises to the date of sale; (b) secondly, to any real estate commission payable; (c) thirdly, to the reasonable and actual property maintenance and utility costs incurred by the Plaintiff to the date of sale; (d) fourthly, to costs incurred by the Plaintiff in this action on solicitor and client basis to be taxed; (e) fifthly, to the Plaintiff for application toward the amounts owing to the Plaintiff herein as directed by this Honourable Court on application to confirm the sale; and (f) lastly, if any sale funds remain that the funds be paid into this Honourable Court and disbursed by further order of the Court on application by any of the remaining interested parties. [12] This proposed order is not in accordance with Rule 10-47(2). This proposed order contemplates the plaintiff paying itself costs it may be entitled to under the mortgage, paying itself the amounts owing under the mortgage, and paying itself the costs on solicitor client basis “to be taxed”. [13] Rule 10-47(2) of the Queen’s Bench Rules states: (2) Any moneys resulting from the sale, mortgage, partition or exchange must be paid into Court or to trustees, or otherwise dealt with as the judge in chambers may order. [14] Rule 10-47(2) and the corresponding form 10-45A make it clear that the purchase monies are to be paid into court to the credit of the cause to be applied as directed by the court. While it may be permissible to have the outstanding property taxes and real estate commission paid out of the proceeds of sale, the determination of reasonable costs allowed under the mortgage is matter for the court to determine upon further application. [15] Solicitor-client costs must be assessed by the court, upon application with service upon the defendants. The monies cannot be disbursed to the plaintiff until that assessment has been made. See: CIBC Roberts, 2006 SKQB 44 (CanLII). [16] Monies owed under the mortgage are to be set by the court on further application; the plaintiff does not receive those funds in advance. There may be accounting issues that the defendants may wish to address and the application to confirm the sale allows for this relief. The proper forum to disburse funds is the application to confirm the sale, if the judicial sale process has proved successful. THE CONFIRMATION OF SALE APPLICATION [17] The application to confirm the sale must be brought in timely manner. Form 10-45A refers to that application being made within one month of the sale. This proposed order provides for two months prior to the confirmation application, which creates uncertainty for the proposed purchaser and unnecessary delay for both the plaintiff and the defendants. [18] Because solicitor-client costs must be assessed by the court on notice of application, it follows that the application for the order confirming sale must also be brought by notice of application. This is the stage in the foreclosure proceeding to not only seek confirmation of the sale, but also to seek the court’s direction on the payment of the purchase monies, including costs. It is the stage to set the deficiency amount of the judgment, if any. All these outstanding matters ought to be addressed in one final proceeding. DIRECTIONS TO PLAINTIFF’S COUNSEL [19] Counsel for the plaintiff has leave to file an amended draft order nisi for judicial sale which incorporates the rulings herein, and to direct it to my attention for review. [20] will maintain carriage of this file, including the application to confirm the sale. Because some of the terms of the draft proposed order nisi for judicial sale are matters that have cautioned the plaintiff’s counsel about on previous applications, it is appropriate that assess solicitor-client costs. Plaintiff’s counsel may obtain date for the next court proceeding from the local registrar. J. A. R. ROTHERY
The court gave leave to counsel for the plaintiff to file an amended draft order nisi. It made the following recommendations regarding the draft order: 1) the sale should be held under the direction of a solicitor other than the plaintiff’s solicitor; 2) that relying upon a partial appraisal and in the absence of information on the condition of the property, setting the reserve bid at $100,000 might not reflect the best price. Fairness demanded the reserve bid be set at $125,000 but the court set the bid at $115,000. If the property could not be sold at that price, the plaintiff was given leave to apply to the court for a lower reserve bid; and 3) Queen’s Bench rule 10-47(2) required that purchase monies are to be paid into court to the credit of the cause to be applied as directed by the court, including costs. Only after an application and service upon the defendant and after the court had assessed solicitor client costs could monies be disbursed to the plaintiff. Monies owed under the mortgage must be set out by the court on application. All of these matters may be addressed in one final proceeding, in the application to confirm the sale, if the judicial sale proved successful.