



COURT OF APPEAL FOR ONTARIO

CITATION: Zabanah v.
    Capital Direct Lending Corp., 2014 ONCA 872

DATE: 20141205

DOCKET: C58755

Blair, Watt and Lauwers JJ.A.

BETWEEN

Diana Zabanah

Plaintiff

(Appellant)

and

Capital
    Direct Lending Corp.,

Anderson
    Sinclair LLP, Constantine Glinos and

Chicago
    Title Insurance Company

Defendants

(Respondents)

Antonio Conte, for the appellant

Anthony Cole and Kim T. Duong, for the respondent,
    Capital Direct Lending Corp.

Ted Evangelidis, for the respondent, Chicago Title
    Insurance Company

Heard: November 27, 2014

On appeal from the order of Justice Susan G. Himel of the
    Superior Court of Justice, dated April 22, 2014, with reasons reported at 2014
    ONSC 2219.

By the Court:

[1]

In 2007 the appellant purchased a second
    mortgage on a home from the respondent, Capital Direct Lending Corp., as an
    investment. The mortgagor, Patricia Kabongo, had fraudulently informed Capital
    Direct that the balance of the first mortgage on her home was about $83,000,
    when in reality it exceeded $200,000. The appellant advanced about $83,000 to
    the mortgagor through the brokering effort of Capital Direct. Capital Direct bought
    title insurance on the second mortgage from the respondent Chicago Title
    Insurance Co., and assigned the insurance policy to the appellant when she
    purchased the mortgage.

[2]

The appellant became aware of the mortgagors fraud in early 2008, but
    renewed the second mortgage nonetheless in 2008, 2009 and 2010. The mortgagor
    made an assignment in bankruptcy in 2010. The first mortgagee advised the
    appellant in February 2011 that sale of the home under power of sale had
    yielded insufficient proceeds to pay off the first mortgage, leaving nothing
    for the appellant.

[3]

The appellant issued the statement of claim on November 23, 2011,
    seeking damages for negligence, breach of contract and breach of fiduciary duty
    against Capital Direct, and an order that Chicago Title cover her loss under
    the title insurance policy. Capital Direct moved for summary judgment on the
    basis that the action was started after the two-year limitation period in the
Limitations
    Act
, 2002
, S.O. 2002, c. 24, Sched. B
.
Chicago Title
    moved for summary judgment under rule 20 of the
Rules of Civil
    Procedure
on the basis that the appellants
    title insurance policy specifically excluded recovery for any loss or damage
    that arose under the first mortgage. The motion judge granted summary judgment
    to both parties and dismissed the action against Capital Direct and Chicago
    Title.

[4]

There are two issues on this appeal.

[5]

The first is whether the appellants loss
    was covered by the Chicago Titles insurance policy. The motion judge concluded
    that there was no genuine issue requiring a trial with respect to the claim under
    the policy. She found, at
para. 83
:

The clear language of the policy of insurance excludes the
    Maple Trust mortgage. The CTIC policy was intended to cover the validity and
    priority of the second mortgage (neither of which are challenged in this
    action) and cannot be construed as "investment" insurance.  CTIC had
    no role in giving the plaintiff assurances concerning the first mortgage before
    any advances of funds were made.

[6]

The motion judge did not err in her interpretation of the policy and in
    dismissing the claim against Chicago Title.

[7]

The second issue concerns the limitation
    period. The first sub-issue is when the claim against Capital Direct was discovered.
    The second sub-issue is whether the limitation period applicable to the claim
    against Capital Direct was two years, as prescribed by the
Limitations
    Act, 2002
, or ten years, as prescribed by
    the

Real Property Limitations Act
, R.S.O. 1990, c. L.15 (
RPLA
).

[8]

The appellants discoverability argument was that she did not know who
    was responsible for her loss, injury or damage until 2011. In addressing this
    argument, the motion judge concluded that by April 2008, the appellant had the
    knowledge to infer that Capital Direct may have been the cause of her loss. She
    relied on this courts statement in

Kowal v. Shyiak
, 2012 ONCA
    512, 13 C.L.R. (4th) 7, at para. 18, that:

Certainty of a defendant's responsibility for the act or
    omission that caused or contributed to the loss is not a requirement. It is
    enough to have
prima facie
grounds to infer that the acts or omissions
    were caused by the party or parties identified.

[9]

The motion judge found that the appellant must be taken to have
    discovered her claim on or before April 3, 2008. She found, at para. 56:

Zabanah knew, by February 27, 2008, that the second mortgage
    was not adequately secured because there was insufficient equity in the
    property. She knew that Capital Direct was the party who had failed to inform
    her of these facts. By April 3, 2008, her husband was told that Capital Direct
    or CTIC might be liable and the possibility of retaining legal counsel had been
    raised. Yet she chose to renew the mortgage with the borrower three times
    (2008, 2009, and 2010), without making any further inquiries about what was
    being done to protect the investment or whether the insurance policy would
    provide coverage for the known problem.

[10]

These
    are factual findings and the appellant has not demonstrated that the motion
    judge made a palpable and overriding error. We agree with the motion judge that
    there is no basis to conclude that a solicitor-client relationship existed
    between the appellant and Capital Direct, or that their relationship gave rise
    to fiduciary responsibilities.

[11]

An
    important factor in the motion judges decision was her finding, at para. 13,
    that [i]t is undisputed that, in February 2008, Capital Direct offered to
    reimburse Mr. Zabanah for up to $500 in fees if he chose to consult with or
    obtain a lawyer. Mr. Zabanah and the plaintiff did not consult with counsel.

[12]

The
    appellant has not demonstrated that the motion judge made a palpable and
    overriding error with respect to when the appellants cause of action against
    Capital Direct was discoverable.

[13]

With
    respect to the applicable limitation period, the appellant submits that the motion
    judge erred in determining that the two-year limitation period prescribed by the
Limitations Act, 2002
, applies. Instead, she argues that s. 43 of the
RPLA
applies and sets a ten-year limitation period.

[14]

The
    appellant relies on this courts decision in
The Equitable Trust Co. v.
    Marsig
, 2012 ONCA 235, 109 O.R. (3d) 561, for the proposition that the
Limitations
    Act, 2002
deals with limitation periods for claims other than those
    affecting real property. She draws particular support from a few lines in
Marsig
,
    at paras. 27 and 30, where Perell J. (
ad hoc
) stated:

Put simply, the
Limitations Act, 2002
, was enacted to
    deal with limitation periods other than those affecting real property.



It has been the case historically that guarantees associated
    with land transactions have different limitation periods from guarantees
    associated with contract claims. Moreover, as already noted, it is my view that
    the Legislature intended that all limitation periods affecting land be governed
    by the
Real Property Limitations Act
.

[15]

The
    appellant argues that the motion judge erred in concluding, at para. 46, that Zabanahs
    claims do not affect any land, because the loss she suffered was the reduced
    value of her security interest in the land.

[16]

We
    disagree. The appellants claim against Capital Direct is based in negligence
    and in contract.  The negligence relates to what Capital Direct is alleged to
    have done and to what its representative said to her, and assurances that were
    given following discovery of the fraud.  The contract relates to the
    transaction whereby the appellant acquired the second mortgage in question. 
    Neither of these claims constitutes an action upon a covenant contained in an
    indenture of mortgage or any other instrument . to repay the whole or part of
    any money secured by a mortgage, which is what is required for the application
    of s. 43 (1) of the
Real Property Limitations Act
.


[17]

Marsig
involved a guarantee covenant contained in a mortgage and is distinguishable
    on that basis: see
Marsig
, at paras. 19-21 and 23.  The motion judge
    recognized this. Admittedly, the potential reach of the language in the last
    sentence in para. 30 of
Marsig
, that the Legislature intended that
    all limitation periods affecting land be governed by the
Real Property
    Limitations Act
, is very broad. But, in our view, these words must be
    interpreted in the context of Perell J.s immediately preceding point: It has
    been the case historically that guarantees associated with land transactions
    have different limitation periods from guarantees associated with contract
    claims.

[18]

We
    agree with the motion judges qualification regarding s. 43 of the
RPLA
,
    that [t]o the extent that language could be read as encompassing every action
    in which a mortgage or piece of real estate is in any way involved, I do not
    believe that it accurately describes the present state of the law. The motion
    judges statement at the end of para. 46 is unassailable, and makes all the
    difference: Nothing that this court decides will affect any party's
    relationship to the second mortgage or the property. The appellants action,
    as against Capital Direct, is simply a negligence and contract claim, and is not
    a claim to an interest in land, as in
Marsig
.

[19]

Accordingly,
    we agree with the motion judge that the
Limitations Act, 2002
governs
    the appellants claims against Capital Direct, and the
RPLA

does
    not apply. The action against Capital Direct is time-barred and the motion
    judge correctly dismissed it.

[20]

The
    appeal is dismissed, with costs payable by the appellant, in the amount of
    $7500 to Chicago Title, and $12,500 to Capital Direct, both all-inclusive.

Released: December 5, 2014 RAB

R.
    A. Blair J.A.

David
    Watt J.A.

P.
    Lauwers J.A.


