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Collecting a Judgment Against Land Isn’t Always Easy

5 minute read

In the April 2020 decision of 1842752 Ontario Inc. v. Fortress Wismer 3-2011 Ltd., 2020 ONCA 250, the panel of Simmons, Harvison Young and Zarnett JJ.A. confirmed that an execution creditor was not entitled to enforce judgment against the registered owner of lands beneficially held in trust for the debtor nor priority to construction advances.

Pace Developments (The Mark) Ltd. is the registered owner of the lands being developed as an eighteen story condominium, but holds the lands for Fortress Wismer (35%) and two other corporations under an unregistered trust agreement. In 2016, Pace Mark gave a construction financing charge to Firm Capital Mortgage Fund Inc. and a further charge to MarshallZehr Group Inc. In January 2018, the appellant, 1842752 Ontario Inc. obtained a writ of seizure and sale based upon a November 2017 judgment for $100,000 plus interest and costs against Fortress Wismer 3-2011 Ltd.  The appellant gave notice of the writ to Firm Capital and asserted that any subsequent advances would be subordinate to the writ.   Firm Capital disagreed.

The appellant applied for declarations that its writ of seizure and sale against Fortress Wismer is binding on Pace, can be executed against Pace, and gives the appellant priority over the construction charges to the extent of advances made following actual notice of the writ. The application judge held that the appellant is not entitled to enforce its writ of seizure and sale against Pace, nor to priority over the arm’s length construction financing.  The Court of Appeal upheld this decision as it found no error in the decision.  Neither the statutory authorities nor the case law supports the appellant’s entitlement to the relief sought according to the Court of Appeal.

Section 9(1) of the Execution Act, R.S.O. 1990, c. E.24 gives the sheriff the authority to seize and sell lands of an execution debtor subject to a writ of seizure and sale, including lands held in trust for the execution debtor. The Land Titles Act provides that a writ of execution binds the lands against which it is issued from the date the sheriff receives it.  Section 13 of the Execution Act provides that land belonging to a person are liable to and chargeable with the person’s debts and subject to the remedies available under the Execution Act.  The court emphasized, however, that section 13 does no more than confirm that lands are subject to the remedies of seizure and sale provided for under the Execution Act. As was explained in Yaiguaje v. Chevron Corporation, the Execution Act is a procedural statute that facilitates the collection of debts through the mechanisms contained in it. It does not grant substantive rights to judgment creditors. These sections of the Execution Act do not authorize adding the legal owner of a property in which a judgment debtor has an unregistered beneficial interest to a writ of seizure and sale against the judgment debtor.

Nor does the decision of Michaud v. Coreslab Structures (Ont.) Inc., which was attempted to be used by the appellant, support the request for a declaration that its writ of seizure and sale against Fortress Wismer is binding on and enforceable against Pace.  Unless a statutory provision says otherwise, only the debtor’s interest can be seized and sold.  In other words, the appellant stands in no better position than Fortress Wismer.  It cannot avoid the same charges, liens and equities that the interest was subject to in the hands of Fortress Wismer.  The appellant can only have Fortress Wismer’s interest in the lands sold and share in the proceeds of sale of that interest in accordance with the priorities set out in the Creditors’ Relief Act, 2010.

The court further held that the appellant’s submission that it acquired priority over subsequent advances by Firm Capital under section 93(4) of the Land Titles Act by giving Firm Capital actual notice of its writ of seizure and sale is misconceived. Section 93(4) gives a registered charge priority over “every…person claiming by, through or under the charger”. It does not create any priorities over a prior registered charge for an execution creditor. It speaks to the priority of advances made under a previously registered charge following registration of a further transfer, charge or other instrument executed by the chargor, or the chargor’s successors. A writ of seizure and sale is not created through a transfer, charge or other instrument executed by the chargor or the chargor’s heirs, executors, administrators or estate trustees and so, a holder of a writ does not fall within the section.

While the Creditors’ Relief Act, 2010 gives an execution creditor priority over a charge registered subsequent to an execution, the court pointed out that it does not give an execution creditor priority over subsequent advances made under a charge registered prior to the execution being filed.  The court noted that it may be an issue for another day as to whether that section would give priority in the circumstances of a debtor who is an unregistered beneficial owner over a subsequent charge by a registered owner.

The appeal was dismissed.  While the execution creditor still has its writ, the writ could not be used to seize and sell the land as against the registered owner, Pace, and was not in priority to construction advances.  This case shows how it can be challenging, especially in complex land ownership structures, to collect upon a judgment.

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