General Litigation Case Study
Case name: Dow v. Montreal Trust Co.
British Columbia Court of Appeal
Vancouver, British Columbia
Nemetz C.J.B.C., Seaton, Hinkson, Anderson and Hutcheon JJ.A.
Judgment: filed December 16, 1985.
(1 p.)
Mortgages — Payment — Payment before maturity — Interest Act, R.S.C. 1970, c. I-18, s. 10.
This was an appeal by the mortgagor from the dismissal of his application for payment and discharge of his mortgage pursuant to s. 10 of the Interest Act.
HELD: The appeal was dismissed for the reasons given in Turner v. Royal Trust Corp.; see 86 DRS P70-117. The remedy of s. 10 of the Interest Act was not available to the mortgagor on an extension of the initial mortgage period.
Counsel:
W. Kosteckyj, for the respondent.
Peter William Dow, appearing in person.
The judgment of the Court was delivered by
1 HUTCHEON J.A.:— This appeal was heard on the same day as that of Turner v. Royal Trust Corporation of Canada. For the reasons given in that case, the appeal of the mortgagor, Peter William Dow, is dismissed. The remedy of s. 10 of the Interest Act is not available to the mortgagor on an extension of the initial mortgage period.
HUTCHEON J.A.
NEMETZ C.J.B.C.
SEATON J.A.
HINKSON J.A.
ANDERSON J.A.
QL Update: 970327
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Between
Peter William Dow, petitioner, and
Montreal Trust Company, respondent
[1984] B.C.J. No. 748
Vancouver Registry No. A841218
British Columbia Supreme Court
Vancouver, British Columbia
(In chambers)
Gould J.
Oral judgment: July 19, 1984.
(6 pp.)
Counsel:
The petitioner appearing on his own behalf.
W. Kosteckyj, for the respondent.
1 GOULD J. (orally):— I am going to give an oral judgment in this case while the arguments are fresh in my mind. Upon receipt of the transcript I may edit it somewhat, but the result will remain unchanged.
2 This is a petition, the essence of which is the proposition that the mortgagor in this case, Mr. Peter William Dow, the petitioner, is entitled to pay off a mortgage, presumably on his home, with the amount owing on principal and interest plus three months' interest, pursuant to Section 10, sub-section 1 of the Canada Interest Act. The mortgagee, Montreal Trust Company, resists that and says it is a mortgage that is not within Section 10(1) in the sense that it can be paid off at any time now with principal and interest plus three months' bonus, so to speak.
3 The mortgage originally is dated June 7, 1976, and it was for one year. The maturity date was June 1, 1977. Typed in at the end of the original mortgage document are some additional clauses with reference to maturity date. They are so described and they are correctly described. I am going to include only the first paragraph of those, which is the relevant one for the issues in this case. This is from page 4 of the mortgage.
"The Term for repayment of the indebtedness hereunder is subject to extensions, each of which will be for one year or two years. The total of such extensions, together with the term hereinabove stipulated, shall not exceed Five. (5) years (unless otherwise agreed to by both parties hereto at the expiry of five years), such extensions to be granted as follows: ..."
I do not need to put the rest in.
4 On July the 1st, 1977, approximately one month after the first mortgage had expired, a letter was written by Montreal Trust to Dow offering him an extension for one year, another year, which he took and that expired July, 1978. On July the 5th, 1978, the Montreal Trust wrote him again, offering another extension for one year, which he took. That takes us to July, 1979. There was a third extension granted from 1979 to 1980 and a fourth extension was from 1980 to 1981 and a fifth extension from 1981 to 1982 and a sixth and last extension from 1982 to 1987. Now, something must be said about that one. The letter there, instead of offering a one-year extension or a one or two-year extension, offered five choices, all the way from six months to five years. The wording of that letter is important. It so set out that the mortgagor is asked to mark which one of the five elections he takes and in this case Mr. Dow marked the election to renew the mortgage for five years. Those are the words used, "five years".
5 Now, going back, Mr. Dow could have paid off this mortgage in the middle of 1977. He could have paid it off again in the middle of 1978. He could have paid it off again in the middle of 1979 and again in the middle of 1980 and again in the middle of 1981 and again in the middle of 1982. In the middle of 1982 Dow still had not paid it off, although he had had five chances to do so, all without bonus. He elected to renew for five years, not five years and a day, but five years. He now says he falls within 10(1) because the original mortgage, if you add all the extensions to it, of course, has already exceeded five years.
6 I now direct myself to Section 10(1) of the Canada Interest Act. Counsel for Montreal Trust argues and I think correctly, that the obvious purpose of that section is to preclude mortgagees from locking mortgagors in for more than five years. Obviously, the Legislature, in this case the Parliament of Canada, deemed a five-year locking-in period acceptable, but five years and any more, not so. The opening words of the section are:
"Whenever any principal money or interest secured by a mortgage of real estate is not, under the terms of the mortgage, payable until the time more than five years after the date of the mortgage, then if at any time after the expiration of such five years .
Then it goes on to say that it can be paid with three months' bonus.
7 Now, has this mortgagor been locked in? He has not been locked in at all and he has had, so far, six opportunities to pay the mortgage, all without bonus, none of which he has availed himself. The following cases have been extensively canvassed. Potash v. Royal Trust Company, a decision of the Court of Appeal of Manitoba, I believe unreported and numbered 409/83, has been extensively canvassed here. It covers two mortgages, but the principles enunciated with reference to each of them are identical and in each case each mortgage initially was for more than five years. So that makes this case very, very different from the case at bar because there is no mortgage here or renewal which is more than five years. The only five-year period at all applies to the last renewal. The original mortgage was for one year and all the intervening renewals were for one year. In the Potash case the initial mortgages were both for more than five years. I have also had the benefit of considering Lynch v. The Citadel Life Assurance Company, a decision of Mr. Justice Bouck of this court. The Reasons are dated July the 6th, 1983, and the Vancouver Registry number is C833327. Again the facts are different here.
Also quoted is Butcher v. The Royal Trust Company, I think an unreported decision of Wright, J., of the Court of Queen's Bench for Saskatchewan, No. 4784 (1983). The Reasons are dated the 15th of March, 1984. Another case is Davis v. Crown Life Insurance Company, a decision of Spencer, C.C.J., as he then was, reported (1978) 8 B.C.L.R. 111.
8 I revert now to the Butcher case and to page 11 and 12 thereof, wherein Mr. Justice Wright says this:
"There is an important corollary to that principal, however. If the borrower chooses to extend or renew his agreement with a lender for a further term, even though there is no change in the terms of the new arrangement save for the new dates for payment, then s. 10 only applies to the new term. It would be illogical and manifestly unjust if a mortgagor could renew an existing mortgage and then immediately retire his debt by simply paying the principal, interest and a sum equivalent to three months interest. He, not the lender, determines if he will pay his original obligation when it falls due. If the original term was for more than five years then he is assured of his right to pay off that indebtedness after the five year interval. If the borrower therefore avails himself of a new arrangement he cannot escape the consequences by arguing either that the original mortgage is for more than five years (Potash v. Royal Trust situation) or that the original term and the new term total more than five years and he is therefore entitled to prepay. S. 10 is not intended to provide consumers with an escape hatch that would not be available to them if they signed a new formal instrument. A renewal or extension is a new mortgage for the purpose of determining the application of S.10 in my respectful view."
I adopt the language there used by Wright, J., as precisely applying to the facts at bar here and find, therefore, that the petitioner is not entitled to pay the mortgage or the renewal thereof in the manner that he prays for. You will be able to pay that off as soon as five years have elapsed.
9 Do you want costs?
10 MR. KOSTECKYJ: Yes, my lord.
(DISCUSSION BETWEEN THE COURT, COUNSEL AND THE PETITIONER)
11 THE COURT: The petition is dismissed with costs.
QL Update: 970430
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