Background
Bemco Financial Services Ltd. loaned $1,000,000 to 12425467 Canada Inc. (“124”), secured by a mortgage on a rental property at 47 Bloor Street in Sudbury, Ontario. The two individual defendants, Sasitharan Somasekarampillaai and Laavanya Sasitharan, personally guaranteed the loan. When 124 defaulted, Bemco exercised its power of sale and sold the property, then sued all three defendants for a claimed shortfall of $79,057.87.
The central factual dispute was the actual sale price. Bemco maintained the property sold for $1,100,000 — comprised of cash and an $825,000 vendor take-back mortgage (VTB). The appellants pointed to a Land Transfer Tax statement within the same registered instrument (SD475685) that appeared to record the cash component alone as $1,100,000, which when added to the $825,000 VTB would imply total consideration of $1,925,000 — enough to eliminate any shortfall. The appellants also challenged Bemco’s accounting of rents, interest on the VTB, management fees, property taxes, and real estate commissions.
On a summary judgment motion, Justice Stothart of the Superior Court accepted Bemco’s evidence — including the Agreement of Purchase and Sale, statement of adjustments, and contemporaneous emails — and found the sale price was $1,100,000. She dismissed the appellants’ alternative MLS listing as not credible, partly because it implausibly showed 124 itself as the seller. She did, however, rule in the appellants’ favour on one point: a three-month interest penalty was not recoverable, reducing the judgment to $58,067.48.
The Court’s Holding
The Court of Appeal (Miller, Trotter, and Osborne JJ.A.) dismissed the appeal. The appellants argued on appeal that the motion judge had effectively “rectified” Registered Instrument SD475685 without following the rectification procedure under s. 160 of the Land Titles Act, R.S.O. 1990, c. L.5, and that she had improperly reversed the burden of proof by requiring them to rebut the presumption of accuracy afforded to registered documents under s. 78(4) of that Act. The court rejected both arguments.
On the rectification point, the court held that the motion judge simply weighed SD475685 alongside all other evidence to determine the actual consideration received — she made no order altering or correcting the registered instrument. On the s. 78(4) point, the court held that provision concerns indefeasibility of title and the protection of subsequent purchasers for value, citing Airport Business Park Inc. v. Huszti Holdings Inc., 2023 ONCA 391, 481 D.L.R. (4th) 696, at para. 44, leave to appeal refused, [2023] S.C.C.A. No. 347. That issue was not engaged here; the motion judge’s task was simply to determine the consideration received for purposes of the shortfall calculation.
The court found no error in the motion judge’s credibility and reliability findings regarding the conflicting evidence, nor in her treatment of the appellants’ accounting allegations. Costs of $13,000 (inclusive of taxes and disbursements) were awarded to Bemco.
Key Takeaways
- A motion judge resolving a factual dispute about sale proceeds in a power-of-sale shortfall action is not “rectifying” a registered instrument merely by weighing it against other evidence — no order under s. 160 of the Land Titles Act is required or engaged.
- Section 78(4) of the Land Titles Act, which protects the indefeasibility of title for subsequent purchasers for value, has no application to a straightforward dispute about the quantum of consideration received on a mortgage enforcement sale.
- Where a borrower or guarantor challenges the sale price in a shortfall action, they must put their best foot forward with credible, reliable evidence; bare assertions or documents of questionable authenticity will not be sufficient to defeat summary judgment.
- A lender enforcing a mortgage under power of sale cannot recover a contractual interest penalty where that charge is found to be improper — courts will reduce the shortfall claim accordingly even on an otherwise successful summary judgment motion.
Why It Matters
This decision provides useful clarity for lenders and their counsel pursuing shortfall judgments after a power-of-sale. It confirms that the evidentiary task of determining sale proceeds is a straightforward weighing exercise and that borrowers cannot weaponize technical arguments under the Land Titles Act — a statute directed at title integrity, not debt quantum — to frustrate an otherwise well-supported summary judgment motion.
For guarantors and borrowers, the case underscores the high evidentiary bar required to raise a genuine issue for trial when challenging a lender’s accounting of sale proceeds. Credibility findings made on a summary judgment record will receive appellate deference, and unsubstantiated or internally inconsistent documents are unlikely to carry the day.