Mutual Life Assurance Company of Canada (Defendant) Appellant;
and
Clara Rosella Douglas (Plaintiff) Respondent
1918: May 15; 1981: October 8.
Present:—Sir Charles Fitzpatrick C.J. and Davies, Idington, Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ALBERTA.
Mortgage—Foreclosure—Extinguishment of debt—Collateral securities—"Land Titles Act," 1906, c. 24, s. 62 (a).
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A final order for foreclosure and its registration, in proceedings taken under section 62 (a) of the "Land Titles Act" of Alberta, do not extinguish the mortgage debt so as to estop the mortgagee from proceeding on the mortgagor's covenant to pay or realising on any collateral securities he may have.
APPEAL from the judgment of the Appellate Division of the Supreme Court of Alberta, reversing the judgment of Simmons J. at the trial, by which the plaintiff's action was dismissed.
This is an action brought by the respondent as beneficiary under a life insurance policy assuring the life of her husband in the sum of $5,000. One of the conditions contained in the policy was:
Before payment of this policy as a claim any loan or other indebtedness thereon, to the company by the assured, or by the beneficiary, and the balance of the year's premium, if any, will be deducted from the amount payable.
The respondent mortgaged to the appellant lots of land to secure an advance to her of $12,500, and she and the assured assigned the policy to the appellant as collateral security for the payment of the mortgage
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moneys. The mortgage having become in arrear, the appellant commenced foreclosure proceedings pursuant to the provisions of section 62a of the "Land Titles Act;" and after an abortive sale, a final order for foreclosure was made. The assured died a month after, and the appellant applied the net amount of the policy against the respondent's indebtedness. The respondent claimed that by reason of the final order of foreclosure, the mortgage debt became extinguished.
A. H. Clarke K.C. and M. McLeod for the appellant.
R. B. Bennett K.C. for the respondent.
THE CHIEF JUSTICE.—Speaking generally, I see very little practical difference at the present time between the mortgage of the English law and the hypothec of the civil law; both are jura in re aliena, and the terms in which certain sections of the Alberta Act are couched suggest an intention on the part of its framers to adopt, in part at least, the principles of the civil law of hypothecs. Both the mortgage and the hypothec are rights in rem conferred by a debtor upon a creditor as a security for a right in personam. The mortgage debtor transfers the title to the res to his creditor, retaining usually the possession and a right of redemption. The hypothecary debtor retains the title and possession, but gives a right in rem. The mortgagee may by foreclosure bar the mortgagor's right of redemption and thus secure a title absolute to the res. The hypothecary creditor has the right on default to bring the land to sale by the sheriff, and the proceeds are applied to the discharge of encumbrances according to their priority; and the personal obligation is discharged only in so far as the amount realised out of those proceeds is sufficient to satisfy the hypothecary claim. It is now generally recognised under the
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English system, although old forms are still used, that the real owner of the land is the mortgagor; and the mortgage is a mere security for the debt or obligation. In courts of law the mortgage is recognised as conveying an estate, while equity merely creates a lien, and the "Judicature Act" provides that where there is any conflict between the rules of equity and the rules of common law, the rules of equity shall prevail.
In Chancery foreclosure was adopted as a proceeding by which the mortgagor's right of redemption of the premises was barred.
Unless there is something very clear in the Alberta "Land Act," I should hesitate to say that, notwithstanding all the safeguards with which the rights of the mortgagor are surrounded, the mortgagee is to be treated as a usurer and to be deprived of his right to recover in personam on the covenant, merely because he exercises his right to foreclose the mortgagor's right of redemption. I cannot see why, if the mortgage is a mere security for the debt, the right in personam should not continue to exist after the debtor, by foreclosure proceedings, has lost his right of redemption for ever.
Assuming that the title to the land under the Alberta Act remains in the mortgagor, and the forms used would seem, as I have already said, to convey the impression that the intention of the framers of the Act was to adopt that principle of the civil law, while using the old terms of the English law, and that the foreclosure order does not vest the land in the mortgagee, but that the title passes under the statutory provision as in the civil law under the sheriff's title— and the vesting order coupled with it—non constat that the personal obligation to pay has been satisfied.
The two things are distinct and separate, and in the
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absence of express language in the statute I decline to accept the suggestion that, if the lender of the money endeavours to realise on his security, he is assumed to have released the debtor from his obligation to pay under the covenant. It may be that the foreclosure order is granted under the Act for the purpose of realising the debt; but the fact is that the principal obligation to pay the debt is not satisfied even if the security is realised upon, unless the amount realised is sufficient to liquidate the obligation.
There is no evidence here of any intention, on the part of the mortgagee, to take the property in satisfaction of his debt.
It would seem to me, and I speak with great deference, that on the true construction of the Act the parties remain, as Mr. Justice Idington says, as they were under the old system. The mortgagee is entitled to sue on his covenant though, if he does, the mortgagor, on payment of the debt, in entitled to redeem his property; and the mortgagee must be in a position therefore to restore the property. Sections 62. and 63 (a) seem to provide for a twofold remedy, and for the postponement of the remedy upon the covenant until the foreclosure proceedings are exhausted.
I have read the case in the Supreme Court of Australia of Fink v. Robertson, with great care, and with respect must say that the dissenting judgment of Mr. Justice Higgins, to the effect that foreclosure under the Australian Act does not involve the release of the debt, and that the right to recover under the personal covenant still continues to exist, has led me to the conclusion that, applying the same principles to the Alberta Act, this appeal must be allowed.
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DAVIES J.—In this appeal from the judgment of the Appellate Division of the Supreme Court of Alberta, to which I have given much consideration, I concur with the reasons stated by my brother Anglin in allowing the appeal and restoring the judgment of the trial judge.
I would simply add that if the legislature intended to make such a radical change in the relations and obligations of the mortgagor and mortgagee towards each other as held by the Appellate Division, namely, that the obtaining of a final order for foreclosure and its registration ipso facto extinguished the debt due to the mortgagor and estopped him from proceeding on the mortgagee's covenant to pay or from realising on any collateral securities he may have taken to secure payment of his debt they would have said so clearly and distinctly.
Under the law of England such a foreclosure on a common law mortgage admittedly did not extinguish the debt or prejudice the right of the mortgagee to recover on his collateral securities. Of course, the mortgagee could not after foreclosure claim to hold the land and at the same time sue on a covenant for the debt or recover it under his collateral securities. He could not have both land and the money secured upon it. If he chose to foreclose and then sell the land or part of it, he would be taken to have elected to take the land for his debt.
But in a case such as the present, where the mortgagee, though he has foreclosed, stands ready to reopen the foreclosure and able on being paid his debt to restore the land to the mortgagor, it does seem to me the inference drawn by the court below that under the "Land Titles Act" the foreclosure operated to ex-
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tinguish the debt and so deprive the mortgagee of his other remedies was a forced and improper one.
If that inference was the proper one and established as the law, investors would be very shy of loaning their money on mortgage security. At any rate, it is not an inference which I would draw from the Act under consideration; and if the legislature intended such a result they would have used language expressive of their intention.
The foreclosure order, when registered, bars, it is true, all further right of redemption on the part of the mortgagor; but so did the order for foreclosure under the old common law mortgage. But why should it be inferred under the statutory mortgage that such a foreclosure also extinguishes the unpaid debt secured and destroys all right in the mortgagee to realise on his collaterals under circumstances such as those under consideration where the mortgagee avows itself ready to open the foreclosure, receive payment of its debt and restore the land to the mortgagor?
I am not able to draw such an inference.
IDINGTON J.—The appellant, by its policy of insurance dated the 4th January, 1911, insured the life of D. F. Douglas in the sum of $5,000 subject to conditions printed or written on the succeeding pages thereof, which were made part of the contract.
Amongst other alternatives of payment so undertaken was one to pay the said sum on his death to the respondent, who was his wife, if she survived him.
Amongst the conditions so printed were the following:—
Before payment of this policy as a claim, any loan or other indebtedness thereon to the company, by the assured or by the beneficiary, and the balance of the year's premium (if any), will be deducted from the amount payable. No action or proceedings against the company shall
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be brought or taken upon this policy unless commenced within one year from the date at which the policy becomes a claim, and in any such action or proceedings the policy shall in all respects be construed according to the laws of the Province of Ontario.
On the 10th January, 1911, she, in consideration of $12,500 lent by appellant to her, gave it a mortgage on land in Calgary and therein covenanted to pay said sum with interest at seven per cent. per annum, and further covenanted to pay all the premiums upon the policy aforesaid during its currency, and that upon default of payment of any of said premiums, the company might pay the same and add the amount thereof to the principal money thereby received, and such payments should bear interest at seven per cent. per annum, and for the better securing the payment thereof she mortgaged her estate and interest in said land to said company.
The husband joined in said mortgage, as a covenantor with the company that she would pay the mortgage money and interest and said premiums, and abide by and perform all the covenants, provisoes and conditions in the said mortgage.
The mortgage was registered on the 12th of January, 1911, in the land registration district at Calgary.
They both, on the 10th January, 1911, assigned the insurance policy and all benefits thereunder to the said company and thereby it was declared that the assignment was made as a collateral security for the repayment of the said $12,500 and interest and for any further advances.
They never paid anything either on account of principal or interest or premiums save the cash premium.
The appellant, on the 26th August, 1915, took proceedings under section 62 (a) of the "Land Titles Act" of Alberta for sale of said lands and, failing that, fore-
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closure, which proceedings terminated by a final order of foreclosure on the 20th November, 1916, made by the deputy registrar which, in the operative part, reads as follows:—
It is ordered that the mortgagor and all persons claiming through or under him subsequently to said mortgage do stand absolutely debarred and foreclosed of and from all rights to redeem the mortgaged premises mentioned in the application herein.
And then follows a description of the land.
The usual affidavit, required by the Act to procure registration of the appellant as owner, was made, and the usual form of certificate issued that the appellant was then the owner of said lands
subject to the encumbrances, liens and interests notified by memorandum underwritten or indorsed hereon, or which may hereafter be made in the register.
There does not appear to be any reference therein to any encumbrances; much less note of the mortgage in question.
I may remark in passing that the argument founded upon the assumption that vendors or transferors under the Act were by virtue thereof bound to pay prior encumbrances and hence a mortgagee getting a final order of foreclosure must be presumed to have assumed the burden of his own mortgage so foreclosed does not seem to get much support from this certificate.
The respondent's husband died on the 1st February, 1917. On the 2nd of April, 1917, the appellant applied the net amount of $4,460.53, which, if nothing else had to be considered, would have been the amount payable by virtue of the policy upon the mortgage debt, claiming the right to do so by virtue of the assignment of the policy.
The respondent, on the 9th May, 1917, began this action to recover the amount accrued due under said policy and claimed to be entitled to recover same.
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Notwithstanding the assignment thereof, to the appellant, the declaration of the respondent proceeds as if no such assignment had ever existed, and in truth, without saying anything as to it, impliedly assumes, as if in fact duly established, the rather startling propositions of law that a final order of foreclosure and the mere registration thereof and issue of a certificate thereof obliterates all prior legal relations and obligations and the rights springing therefrom, as if they had never existed, so far as anything relative to the conduct and acts of the mortgagor and possible rights in favour of the mortgagee springing therefrom; but preserving sacredly everything possibly springing from the acts of any one else which might, by any possibility, enure to the benefit of the mortgagor. Nay more, it presumes all such latter rights to have been duly transferred, ipso facto, as it were, to the mortgagor without any formal conveyance of any kind such as would formerly have been required in law to enable the mortgagor to assert his right thereto in any legal proceedings.
The possible rights, duties and obligations of trustees or sureties and others which might, in manifold ways needless to dwell upon, have arisen meanwhile from some of the many complications of such inter-relations as our modern commercial activities often produce, are presumably swept away for the benefit of the defaulting mortgagor by what may have been a mere thoughtless act on the part of the mortgagee so long as he has not been involved in fraud in procuring such registration.
Accident or mistake cannot be rectified, for in effect the court, by its ruling, has said the result (unless possibly tainted with fraud involving him who has become such registered owner) obliterates all else standing—for the protection of no matter whom or
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what—in the way of the defaulter whose name has been deleted from the record, and the mortgagee's name substituted therefor.
Such would seem to be some few of the results of upholding the judgment appealed from and the mode of thought directly or impliedly approved as that to be used in the interpretation and construction of an act designed to improve and simplify the mode of dealing with and determining the rights and obligations of men in what is part of the daily intercourse of some one or more of them.
Another very obvious result of the maintenance thereof would be the impossibility of opening a foreclosure to relieve from oppression, free men from injustice, and rectify that which, in such like cases, has often been found to be the result of some trivial accidental oversight on the part of someone.
Let us test the validity of such reasoning as would lead to such results by adverting to the relevant law which governed the rights and obligations of mortgagor and mortgagee up to, and at the time when, the statute now relied upon for the production of such results was enacted, and see if that law has been repealed thereby, or in the least invaded.
I need not dwell upon the introduction of the English law into the North-West Territories.
I am spared that trouble by the reiteration of so much thereof as we are concerned with herein, by the re-enactment, so late as 1907, of the sections 10 and 11 of the "Supreme Court Act," statutes of Alberta, 1907, ch. 3, reading as follows:—
10. For the purpose of removing doubts and ambiguity but not so as to restrict the generality of the next preceding section, it is declared and enacted that the court shall have the like jurisdiction and powers as by the laws of England were, on the 15th July in the year one thousand eight hundred and seventy, possessed and exercised by the Court of
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Chancery in England in respect of the matters hereinafter enumerated or referred to, that is to say:
* * * * * *
(b) In all matters relating to trusts, executors and administrators, co-partnerships and accounts, mortgages and awards, or to infants, idiots or lunatics and their estates;
* * * * * *
(i) The administration of justice in all cases where there exists no adequate remedy at law.
11. The rules of decision in the said matters in the last preceding section mentioned shall, except where otherwise provided, be the same as governed the Court of Chancery in England in like cases on the 15th July, one thousand eight hundred and seventy.
If there can be said to have been finally settled anything in regard to the jurisdiction and power of the Court of Chancery in England at the date named it was the power of reopening a foreclosure and further imposing upon him who had foreclosed and sought to enforce thereafter his common law right which was otherwise undoubted such terms of procedure as would have the effect of doing justice between those concerned.
It was settled that he, seeking to impose his common law right of suing upon a covenant for the debt, must be ready to reopen the foreclosure and ready to restore that property which had become his as absolutely as the English language could express it and further that if he had sold and conveyed away the property he had so acquired he should be restrained from proceeding to enforce that common law right whether by suing upon the covenant or in way of asserting a proprietory right over any property he had held by way of collateral security to his mortgage.
The long line of cases, from the times of Lord Hardwicke down to the year 1870, need not be dwelt upon. However unsatisfactorily some of the earlier cases may have been dealt with, or reported, the case of Lockhart v. Hardy, decided, in 1846, by an able judge, well
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conversant with equity jurisprudence, in a considered judgment, expresses the law as it existed and maintains what I have just stated.
Merely to shew that such law continued as late as July, 1870, I may refer to the case of Kinnaird v. Trollope, wherein at p. 642 Mr. Justice Stirling reaffirms the law so laid down, citing also Palmer v. Hendrie, decided by Sir John Romilly in 1860, and presenting another aspect of the application of the principles involved and adopted. That was when the mortgagee and the mortgagor had united in disposing of the estate.
Such being the undoubted state of the law which the Supreme Court of Alberta was in 1907 required to observe, how can we find any substantive amendment altering the rights of the parties in that regard or a repeal thereof in the language of section 62 (a) of the "Land Titles Act" of Alberta?
It is certainly not so expressed therein. Nor does such result seem to have been in the faintest degree part of the purpose of the enactment. It seems to me clear that the sole purposes of the enactment were to simplify and thus improve the procedure in simple cases of foreclosure and cheapen the law, and as sub-section 15 seems to indicate, to safeguard the interest of mortgagors by requiring an attempt at sale before issuing an order of foreclosure.
The net result is stated in sub-section 16 as follows:
Every order of foreclosure under the hand of the registrar when entered in the register shall have the effect of vesting in the mortgagee or encumbrancee the land mentioned in such order free from all right and equity of redemption on the part of the owner, mortgagor or encumbrancer or any person claiming through or under him subsequently to the mortgage or encumbrance; and such mortgagee or encumbrancee shall, upon such entry being made, be deemed a transferee of
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the land and become the owner thereof and be entitled to receive a certificate of title for the same.
There is nothing in the legal result which I can see differentiating the result of a foreclosure under and by means of section 62 (a) from that by way of section 62 which stands effective—same test must apply to foreclosure in either case.
What is there in this language but an expression of just such results as flowed from a foreclosure in all past history in the obtaining of same in the Court of Chancery?
The effect of that always had been to vest the mortgaged estate or interest in the land if not already vested in the mortgagee as in some such cases it might not have been.
It was not always the effect, of a mortgage which came to be foreclosed, to have conveyed an estate in the land though frequently it so happened to be the case.
A mortgage that fell short of doing so might, if the necessities of the case so demanded, or if the parties so desired have been created by them in some one of many ways, and even I suspect in the terms of the "Land Titles Act," if such a method chosen, and if for the purpose of the enforcement thereof by way of foreclosure it fell within the necessities of the execution of justice between the parties to make a vesting order part of the foreclosure, I imagine the Court of Chancery would have been equal to the emergency a good many years before July, 1870.
But, after all, by the "Land Titles Act" it is not absolute ownership of the estate but only that subject to prior encumbrances and claims created by the mortgagor or his predecessors that is in truth vested;
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cleared, however, of all subsequent encumbrances or conveyances by or through the mortgagor.
Then there is given as to that so vested nothing more than has been stated by so eminent an authority as Lord Selborne in the case of Pough v. Heath, as follows:—
This being the position of the title, as long as the mortgage is redeemable, the effect of an order of foreclosure absolute is to vest the ownership of, and the beneficial title to the land, for the first time, in a person who previously was a mere encumbrancer. The equitable estate of the mortgagor is then forfeited and transferred to the mortgagee. It is transferred as effectually as if it had been conveyed or released. "A foreclosure" (said Lord Hardwicke) "is considered as a new purchase of the land." "The mortgage being foreclosed" (said Sir William Grant) "the estate becomes absolutely his." "By the order made in the foreclosure suit" (said Sir Lancelot Shadwell) "he became the absolute owner." Casborne v. Scarfe; Silberschildt v. Schiott; Le Gros v. Cockered. The title obtained by such "new purchase"' did not, before the "Wills Act" of 1838, pass by general words in a will, duly attested to pass real estate, made before the foreclosure and not afterwards republished; it did pass, if such will were republished after foreclosure, or if a new will in like general terms were then made.
It follows from this state of the law, that when the owner of land under an ordinary decree of foreclosure absolute takes proceedings to recover possession of that land, he seeks possession of that which, by a title newly accrued, has for the first time become his own property; and that it can make no difference whether the title which he previously had as a mere incumbrancer was, or was not, protected by a legal estate. The possession which he now claims, and the right by virtue of which he seeks to recover it, are substantially different from the possession which he might before have claimed, and from the right by virtue of which he might have claimed it. "There car be no two things" (said Lord Manners in Blake v. Foster), "more distinct or opposite than possession as mortgagee and possession as owner of the estate; nor can anything be more hazardous or inconvenient than the possession of a mortgagee, the manner in which he is called to account is most rigorous and severe. One consequence of the decision, that a mortgagee who obtains a foreclosure absolute is not safe against the Statute of Limitations under circumstances like those of the present case, would be to make it necessary for him (under such circumstances) to take possession while still mortgagee, or, it if were resisted, to bring ejectment for that
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purpose, on pain of forfeiting his title and of becoming liable, if a trustee (as the present plaintiffs are), for a loss by breach of trust of the whole value of the estate.
These are expressions by masters of the law and of the English language as to the effect of a final order of foreclosure.
I do not think the Alberta legislature can have meant more in their language which I have just quoted.
To suggest that the court cannot interfere with the registrar seems, I respectfully submit, like playing upon words. All the court does is to operate upon the parties who must obey or be enjoined by the Supreme Court to do that which that statute above quoted enabled to be done.
No case I have seen goes so far as to carry such power as the Court of Chancery had into operation by vesting or divesting any estate. I am not assuming, however, that the court in a proper case is powerless to deal with the register. I am merely dealing with the only argument on this head that the respondent presents as derivable from the nature of the order and the language of the Act relative thereto. The necessities of this case do not involve more than a recognition of the power in the court to enjoin him seeking to assert a right to desist therefrom unless and until he retransfers, or is ready to do so, all that he got by his foreclosure.
There is another argument presented in which the doctrine of merger is made to do duty.
There is nothing in the common law doctrine of merger relative to the meeting of greater and lesser estates in the same person, or other common law mergers which can be found here to apply and support the argument; or that the contract of the parties, as a whole, merged in the order for foreclosure. Nor can
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I see how the doctrine of merger as founded upon intention of the parties can be made to operate, unless we discard all judicial opinion and assume that those who developed the law we are asked to apply to determine what is in question between the parties herein were too stupid to have seen the point till the present day.
The law invoked by appellant herein has been often applied under circumstances which, far more forcibly than anything in this simple case suggests, presented the probability of an intention to abide by the foreclosure and abandon all other rights, yet such was not the conclusion drawn by the many eminent judges who have had to solve the problem, and all the while the doctrines of merger were recognised as in force where properly applicable. I prefer abiding by the law they made. Because the machinery by which the law may have been administered has been changed that furnishes no reason for changing or presuming to change the substantial and well-known principles of the law; especially so when we find it emphasised by such recent enactment as I have quoted from the "Supreme Court Act", of Alberta, 1907, in section 11, where the duty to observe it is enjoined "except where otherwise provided" and no such otherwise provision is or can be referred to bearing upon the duty so prescribed for us to follow.
The case of Fink v. Robertson, relied upon below, does not bind us, and is not of any value save for the reasoning it may furnish. Having read it, I may say respectfully that I prefer the reasoning of Mr. Justice Higgins, the dissenting judge, to that of the Chief Justice.
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But there are many other considerations than those presented therein which enter into what binds us here, which may not have existed in Australia and bound that court; many others such as the legislation which assigns and defines the jurisdiction of the courts there should have to be entered into or brought forward to enable us to intelligently deal with the conclusion therein before we could make the decision applicable to the law governing the Alberta courts and us herein. The absence of many statutes, even of that country, from our reach, render it an impossibility to accept it as our guide unless we go it blind. I prefer trying to see where I am going. Hence I shall not labour with that decision. I cannot deprive appellant of its clear right unless upon an express legislative declaration of the law. And if I had to draw an inference of the intention I should want something much more clear and explicit than exists herein pointing the way to go.
Above all, in attributing to any one an election I cannot try to impose upon those concerned in any such relation the absolute renunciation of the law and language relative to what a foreclosure means in the minds of those accustomed thereto unless they have given them clear and explicit legislative declarations as a guide. Speculative inferences of what might be done under a new system are no ground for attributing to others the implication of an election or the duty to make it. The inference of fact I should draw is that nobody concerned on behalf of appellant ever paid the slightest attention to those remains of a wreckage. If they did they probably concluded the policy was worthless and would never be maintained.
I incline to infer it was only part of the one scheme the parties had in question, namely, the loan and its security.
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Nothing was ever paid nor was, I suspect, likely to be paid, but the first cash premium.
The unexpected death of Mr. Douglas, after the foreclosure, suggested to someone the possibilities of that confusion of thought which sometimes succeeds, though in justice presenting no merits, for not only had the claim been assigned to appellant and was as much out of the respondent's power as if she had assigned it to someone else, but also by a condition written in the policy itself it had been made subject to any debt due appellant.
I fail to see how she can recover unless and until she has redeemed her promise in that assignment and that suggests to me that the law of Ontario which was to have been, by the policy, the limit of the right to recover might well have been held as determining that right.
Nothing was made of that and I do not rely upon it for any purpose but to illustrate how many things remain untouched but yet might fall within the range of a judgment maintaining that appealed from.
The adoption by the framers of the "Land Titles Act" of a principle or form of mortgage drawn from the civil law yet grafting thereon rights defined by language using terms of foreclosure, etc., found in our equity jurisprudence, unknown to the development of that law elsewhere, suggests curious reflections and considerations; especially when reminded of how much of that jurisprudence has been drawn from the civil law.
I can conceive of a case where the beneficiary had gone on paying premiums for years after the foreclosure and then entirely different considerations would arise and possibly in law an entirely different result might be reached.
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The appeal should be allowed with costs here and in the appellate court below, and the judgment of the trial judge be restored and, if desired, notwithstanding her renunciation of such right, provision be made for her redeeming within the usual time, after taking an account of what is the right sum due, the said lands upon the footing of the said insurance money being deducted from the sum found due on the mortgage.
ANGLIN J.—The plaintiff sues to recover the proceeds of an insurance policy on the life of her deceased husband held by the defendant company as collateral security to a mortgage made by him to secure a loan from the company. This mortgage, given under the Alberta "Land Titles Act," was foreclosed by an order of the registrar made under sub-section 16 of section 62 (a) of that statute. The company still holds the land foreclosed. It applied the proceeds of the policy on its mortgage debt, offering to allow the plaintiff, as her deceased husband's representative, to redeem on payment of the balance of its claim. The plaintiff, however, insists that the effect of the foreclosure under sub-section 16 of section 62 (a) was to release or extinguish the mortgage debt and to discharge all securities held as collateral therefor, because the mortgagee thereby became vested with an irredeemable title to the land and the courts, thereafter, could not compel it to open the foreclosure as a condition of attempting to realise the mortgage debt. This is the issue presented by the defendant's appeal from the judgment of the Appellate Division of the Supreme Court of Alberta, which, reversing the trial judge (Simmons J.), upheld the plaintiff's contention.
For the reasons stated by Mr. Justice Higgins in his
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dissenting judgment in Fink v. Robertson, I incline to think I should have been of the opinion that, as the Alberta "Land Titles Act" stood after the introduction of section 62 (a) in 1915 (ch. 3, sec. 2), an order of foreclosure made by the registrar under that section had no effect upon the mortgagors' covenant for payment and the mortgagee's rights in respect thereof other than or different from that which a final order of foreclosure granted by the court under section 62 would have had. The operation and the consequences of an absolute order of foreclosure obtained under the ordinary jurisdiction of a court of equity—those of an order made under section 62 must be the same—as well as its history are stated in the Fink Case. See, too. Campbell v. Holyland; Platt v. Ashbridge ; Trinity College v. Hill.
As pointed out by Mr. Justice Higgins in dealing with section 130 of the Victoria "Transfer of Land Act," 1890, which corresponds with sub-section 16 of section 62 (a) of the Alberta "Land Titles Act," the term "foreclosure" used in each is a technical term, descriptive of a well-established equitable remedy to which well-known rights and incidents are attached. It may be somewhat inappropriate in a system under which a mortgage is merely a security and transfers no estate to the mortgagee. But there is nothing to warrant the assumption that the legislature meant that the "foreclosure" order which it empowered the registrar of titles to grant should have an effect upon the relations between the mortgagor and the mortgagee and their respective rights in regard to the mortgage debt and the securities held for it, including the foreclosed property, greater than and essentially
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different from that which courts of equity had for many years given to their foreclosure decrees. That its operation was intended to be similar is further indicated, if indeed not conclusively established, by the fact that the language in which its effect upon the title to the land and the mortgagor's interest therein is stated in the statute, viz., that the land shall be vested in the mortgagee or encumbrancee
free from all right and equity redemption on the part of the owner, mortgagor or encumbrancer, or any person claiming, through or under him, subsequently to the mortgagee or incumbrancee
is, as Higgins J. points out at p. 885, substantially that of the foreclosure orders absolute issued by courts of equity (Seton on Decrees, 3rd ed., p. 1393). The provision for the vesting of the land and declaring that the mortgagee or incumbrancee obtaining the order shall be deemed a transferee and become the owner thereof were necessary, as that learned judge says, because a mortgage under the Act does not operate as a transfer but only as a security and is analogous to the direction inserted in an equity decree for the foreclosure of an equitable mortgage—that the mortgagor shall execute a conveyance of the land.
I do not find in the provisions that a mortgagee foreclosing under sub-section 16 is to be deemed a transferee of the land and that a transferee of land subject to a mortgage or encumbrance impliedly covenants to indemnify the transferor against the same (section 52) anything to warrant the conclusion sought to be drawn from them—that it was intended that an order of foreclosure under section 62 (a) (16) should have the effect of releasing or extinguishing the mortgagor's covenant. In the first place the mortgagee does not become a transferee from the mortgagor—the mortgagor is not his transferor. There is no
instrument transferring land subject to a mortgage or encumbrance,
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and it is only in such an instrument that section 52 imports the covenant of indemnity by the transferee. The land is vested in the mortgagee free from the mortgage or encumbrance. Section 52, in my opinion, has no application to the statutory transfer effected by a foreclosure order made under sub-section 16.
I should require much more explicit language than anything found elsewhere in the Alberta "Land Titles Act" to justify the inference that "foreclosure" under section 62 (a) (16) was meant to be something so essentially different from any other foreclosure that it has the effect of extinguishing the mortgage debt, thus releasing all collateral securities, rendering it impossible for the mortgagee to proceed on his covenant and depriving the court of jurisdiction, however exceptional the circumstances (short of fraud), upon proper terms to relieve the mortgagor from the loss of his property.
Reference may also be made to The Premier Permanent Land & Investment Association, Ex parte Lyall, and Noble v. Campbell.
Orser v. Colonial Investment and Loan Co.; Bernard v. Faulkner; and Richards v. Thomson, cited in argument do not really help much in the determination of the case at bar. As far as they go they assist the appellant. All three, however, were cases of proceedings for foreclosure taken in court. In the first the order of foreclosure itself contained a judgment for personal payment making it impossible to maintain successfully that the personal liability of
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the mortgagor was extinguished. In the second the court, on an application heard ex parte, allowed a reservation of the mortgagor's personal liability to be expressed in its foreclosure order. In the third the mortgagee had transferred the land to a bona fide purchaser for value and thereafter neither he nor the mortgagor could have had any right in equity to have the foreclosure opened.
Nor do the decisions in Williams v. Box, and Smith v. National Trust Co., materially aid either party. The former rests on an amendment to section 126 of the Manitoba "Real Property Act" held to have restored to the court (if it was ever taken away) the jurisdiction over mortgages which it had before the "Real Property Act" was passed. A somewhat similar provision in section 10 of the Alberta "Supreme Court Act" of 1907, ch. 3, long antedates section 62 (a) of the Alberta "Land Titles Act," whereas the amendment to section 126 of the Manitoba "Real Property Act" was passed subsequently to the enactment of sub-sections 113 and 114 of that statute under which the foreclosure in Williams v. Box was bad. It must always be remembered, however, that a certificate of title is, under section 44 of the Alberta Act, as under section 71 of the Manitoba statute, conclusive evidence at law and in equity only "so long as it remains in force." Mr. Justice Idington emphasises the fact in Williams v. Box, at p. 12.
All that was decided in Smith v. National Trust Co. was that in a mortgage of property under the Manitoba "Real Property Act" (R.S.M. 1907, ch. 148), an express power of sale, at all events if it do not explicitly otherwise provide, must be exercised under and in accordance with the requirements of the sections
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of that Act governing the exercise of the statutory-power of sale which it confers. (Sub-sections 109 et seq.) While Mr. Justice Duff, who wrote the Majority judgment, says of the mortgagee, at p. 641, that
his rights and powers must rest directly upon the provisions of the statute itself,
he significantly adds:
This view, of course, does not involve the consequence that the mortgagee's rights are those only which the statute expressly gives him. It is obvious that many things are left to implication; and where, in any particular case, it appears that the rules governing reciprocal rights of the mortgagor and mortgagee under the mortgage contract in relation to the mortgaged property are left to implication then it is a question to be determined upon an examination of the statute as a whole how far the rights of the parties are to be governed by the rules of law which, apart from the statute, are applicable as between mortgagor and mortgagee.
My learned brother had already said:—
There is much in the Act to indicate an intention on the part of its authors that, under the statutory mortgage, the powers and rights of the mortgagee should, in substance, be economically equivalent to those possessed by a mortgagee under a common law mortgage—
an observation which applies with equal force to the Land Titles Act of Alberta.
But whatever might have been the effect of section 62 (a) as originally enacted, the adoption of the proviso to section 62 contained in section 4 of the "Statute Law Amendment Act" of 1916, ch. 3, in my opinion, leaves no room for doubt as to its proper construction. That proviso reads:—
Provided, however, that where proceedings in respect of any mortgage or incumbrance have already been, or hereafter shall have been, commenced under the provisions of the next following section, no proceedings under this section for the enforcement of the covenant for payment shall be commenced, or if commenced, shall be continued until the remedies provided by the next following section are exhausted.
Where proceedings have been begun under section 62 (a) this proviso expressly stays all curial proceedings to enforce payment until nothing more can be done under that section, i.e., until an order for foreclosure under
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sub-section 16 has been made and registered and a certificate of title issued to the mortgagee. Only then are the remedies provided by section 62 (a) "exhausted." It would be difficult to conceive of a more distinct legislative recognition of the fact that the taking of any or all the remedies under section 62 (a) does not release the mortgage debt or extinguish the right of the mortgagee to proceed to enforce payment on his mortgagor's covenant. In the enactment that if the mortgagee has begun proceedings under section 62 (a) he cannot proceed upon his mortgagor's covenant until he has obtained the order of foreclosure—the ultimate remedy for which sub-section 16 of that section provides—the implication that he may then do so is irresistible.
A somewhat similar provision for the case of foreclosure proceedings in court under section 62 was made at the same time by clause (b) of section 4 of the Act of 1916, ch. 3. In connection with this latter provision it may be observed in passing that where foreclosure has been obtained it may be a little difficult to determine
the amount of the judgment or mortgage debt remaining unsatisfied.
But with that difficulty we are not now concerned.
I am for the foregoing reasons, with respect, of the opinion that the judgment of the learned trial judge was right and should be restored. The appellant should have its costs in this court and in the Appellate Division.
BRODEUR J.—I concur in the result.
Appeal allowed with costs.
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