14 Mortgagor May Require Mortgagee To Assign

CASE LAW

The petitioner, as holder of a first mortgage in foreclosure proceedings, applied to court for approval to sell a property belonging to the respondent, O. After the redemption period expired but before order absolute was taken, O applied to redeem the mortgage and, upon payment, to direct its assignment to a third party. The application to assign was denied and O brought this appeal from the master’s decision. As asserted by O, the purpose of the assignment was to allow the assignee to sell O’s property along with several other properties, apparently—according to O—for a price higher than the properties would realize if sold individually. In addition to the first mortgage in favour of the petitioner, O’s property was subject to a number of subsequently registered encumbrances including four certificates of pending litigation, a judgment, and a social service tax lien. O argued that the order nisi gave him the right to assign the mortgage on redemption notwithstanding the subsequent encumbrances and that, by letter from the proposed assignee, the assignee agreed not to apply for an order absolute thereby eliminating all of the subsequent encumbrances from title to the property. The court, in following principles established in Pacific Savings and Mortgage Corp. v. Can-Corp Development Ltd., 1982 CanLII 463 (BC CA), affirmed that an equity of redemption is not extinguished by the issuance of a certificate of indefeasible title to a foreclosing mortgagee. However, the court also found that a mortgagor’s entitlement to redeem is only a necessary precondition to an assignment permitted under s. 14 of the Law and Equity Act. In exercising that right of assignment, a mortgagor may not clear the title of subsequent encumbrances by redeeming the first mortgage under foreclosure and purporting to exercise the mortgagee’s right to take order absolute. Relying on the definitions of “encumbrance” and “charge” in the Land Title Act, the court affirmed that judgments and certificates of pending litigation are subsequent encumbrances that are protected in the same way as second and subsequent mortgages. As such, they are interests in the equity of redemption that entitle the creditor or certificate holder to redeem up the chain of mortgages just as the holder of a second or subsequent mortgage might do. In this case, the court confirmed the master’s decision, dismissed O’s appeal, and ordered that the foreclosure proceedings continue (Bank of Montreal v. Oldroyd, 2005 BCSC 1260).