



COURT OF APPEAL FOR ONTARIO

CITATION: L-Jalco Holdings Inc. v. MacPherson, 2018 ONCA 488

DATE: 20180525

DOCKET: C64115

Pepall, van Rensburg and Paciocco JJ.A.

BETWEEN

L-Jalco Holdings Inc.

Plaintiff (Appellant)

and

Beverly Ann MacPherson

Defendant (Respondent)

Bryan Skolnik, for the appellant

Mark Ross, for the respondent

Heard and released orally: May 22, 2018

On appeal from the judgment
    of Justice Graeme Mew of the Superior Court of Justice, dated June 29, 2017.

REASONS FOR DECISION

[1]

On September 3, 2008, the appellants, L-Jalco Holdings, lent money to
    837047 Ontario Limited (837). That loan was secured, in part, by a $1,100,000
    mortgage placed on a commercial building at the corner of Queen and Division
    Streets in Kingston, Ontario. There were two prior mortgages on the property at
    the time. Mr. Dwight Powell held the first mortgage in the amount of
    $449,070.37. The Respondent, Beverly MacPherson, held the second mortgage in
    the amount of $49,900.  L-Jalco paid off Mr. Powells mortgage and more than
    $75,000 in tax arrears, but not Ms. MacPhersons mortgage.

[2]

837 subsequently defaulted on its payments on the L-Jalco mortgage, and
    on June 13, 2012, the property was sold under power of sale. This was done
    without notice to Ms. MacPherson. The building sold for $425,000. L-Jalco now
    claims all of the proceeds of sale. It brought an action against Ms. MacPherson
    claiming that even though her mortgage was registered in priority to theirs, it
    is entitled to priority based on equitable subrogation for having paid off Mr.
    Powells mortgage and the taxes.  Ms. MacPherson counter-claimed for priority
    payment of the amount outstanding on her mortgage.

[3]

In claiming equitable subrogation, L-Jalco relied on its claim that Ms.
    MacPhersons lawyer failed to fulfill an undertaking to discharge her mortgage
    that L-Jalco claims he provided. L-Jalco also argued that Ms. MacPherson should
    not be enriched by assuming first priority as a result of L-Jalcos act of
    paying off the first mortgage. L-Jalco argued that it could simply have taken
    an assignment of the Powell mortgage, thereby securing priority over her
    mortgage, making it equitable that it receive priority through subrogation.

[4]

On June 29, 2017, Ms. MacPherson was granted summary judgment.  The
    motion judge rejected L-Jalcos claim that Ms. McPhersons lawyer undertook to
    discharge her mortgage. He found as a fact that when L-Jalco advanced the
    mortgage funds it knew or was indifferent that Ms. MacPherson refused to
    postpone her mortgage. The motion judge held that, in any event, it would not
    be equitable to give L-Jalco a priority for a much larger mortgage carrying a
    higher interest rate than the Powell mortgage. In these circumstances, the motion
    judge found it to be unfair to leave Ms. MacPherson with nothing. The motion
    judge therefore dismissed L-Jalcos claim to equitable subrogation and ordered
    L-Jalco to pay Ms. MacPherson the sum secured by her mortgage of $49,900.

[5]

L-Jalco appeals. It contends that the motion judge erred in:

·

placing the onus on L-Jalco to establish the availability of the
    remedy of equitable subrogation when the summary judgment motion was brought by
    Ms. MacPherson;

·

determining that facts were readily discernible even though there
    was disputed evidence relating to central issues;

·

making a number of factual and credibility determinations; and

·

in failing to properly apply the doctrine of equitable
    subrogation.

[6]

We dismiss L-Jalcos appeal.

[7]

The motion judge was correct to impose the burden on L-Jalco to prove
    its entitlement to equitable subrogation, notwithstanding that Ms. MacPherson
    initiated the summary judgment motion. The motion judge raised this issue with
    the parties, stating that the onus is on L-Jalco. He invited comments from
    counsel for L-Jalco and no issue was taken with this position. Once Ms. MacPherson
    proved that her mortgage was registered in priority to L-Jalcos mortgage, the
    burden fell squarely on L-Jalco to prove the equitable subrogation claim it
    relied upon, in answer.

[8]

The motion judges conclusion that the facts required to render summary
    judgment were readily ascertainable, despite disputed evidence, is entitled to
    deference. At the commencement of the motion, L-Jalco encouraged the trial
    judge to proceed by way of summary judgment by commenting that, there really
    isnt much dispute about the facts.  It does not lie easily in L-Jalcos mouth
    to contend now that this was not a proper case for summary judgment. Moreover,
    L-Jalco relied heavily on documentary evidence to establish its claim that Ms.
    MacPherson had undertaken to discharge her mortgage. The motion judge was well
    situated to assess this evidence. Crucial testimony from Mr. Murano, the
    principal of 837, that he advised L-Jalcos lawyer that Ms. MacPherson would
    not agree to postpone her mortgage was not contradicted. We therefore see no
    palpable or overriding error in the motion judges decision to proceed by
    summary judgment despite the evidence in dispute.

[9]

Nor have any palpable or overriding errors been identified in the
    factual and credibility findings impugned by L-Jalco. The challenges L-Jalco
    makes represent an attempt to re-argue the dispute. The material findings were
    for the motion judge to make, and all of his findings of fact are amply
    supported on the evidence before him.

[10]

Finally,
    the motion judges decision not to grant the remedy of equitable subrogation is
    discretionary. As this court recognized in
Mutual Trust Co. v. Creditview
    Estate Homes Limited
, [1997] O.J. No. 3258 (C.A.), at pp. 6-7, the
    fundamental principle underlying the doctrine of subrogation [is] one of
    fairness in the light of all the circumstances. On the findings the motion
    judge was entitled to make, L-Jalco went ahead with the loan to 837 knowing
    that Ms. MacPhersons mortgage stood in priority to their own and that she
    would not postpone her interest. Moreover, L-Jalco seeks a subrogated priority
    over Ms. MacPherson for a mortgage that is more than double in value to the
    Powell mortgage, and that carries a much higher interest rate than the mortgage
    it replaced. These are cogent and proper reasons for the motion judges
    decision to reject L-Jalcos request for equitable subrogation that, if
    granted, would leave Ms. MacPherson with nothing. There is no basis to
    interfere.

[11]    The appeal is dismissed with costs of $15,000
    inclusive of disbursements and applicable taxes to be paid by the appellant to
    the respondent.

S.E. Pepall J.A.

K. van Rensburg J.A.

David M. Paciocco J.A.


