Plaintiff went ahead with loan knowing that defendant’s mortgage stood in priority

Ontario civil | Equity | Equitable doctrines | Subrogation

Plaintiff lent 837 Ltd. money. Loan was secured by $1,100,000 mortgage on commercial property. There were two prior mortgages: P held first mortgage of $449,070, and defendant held second mortgage of $49,900. Plaintiff paid off P’s mortgage and more than $75,000 in tax arrears. 837 Ltd. defaulted on payments on plaintiff mortgage, and property was sole under power of sale, without notice to defendant. Plaintiff brought action claiming that it was entitled to priority based on equitable subrogation for having paid off P’s mortgage and taxes. Defendant brought successful motion for summary judgment. Plaintiff appealed. Appeal dismissed. Once defendant proved that her mortgage was registered in priority to plaintiff’s, motion judge was correct to impose burden on plaintiff to prove entitlement to equitable subrogation. On findings motion judge was entitled to make, plaintiff went ahead with loan knowing that defendant’s mortgage stood in priority and that she would not postpone her interest. Plaintiff was seeking subrogated priority over defendant for mortgage that was more than double in value to P mortgage, and that carried much higher interest rate than mortgage it replaced. There were cogent and proper reasons for motion judge’s decision to reject request for remedy that would leave defendant with nothing.

L-Jalco Holdings Inc. v. MacPherson (2018), 2018 CarswellOnt 8207, 2018 ONCA 488, S.E. Pepall J.A., K. van Rensburg J.A., and David M. Paciocco J.A. (Ont. C.A.); affirmed (2017), 2017 CarswellOnt 10043, 2017 ONSC 4055, Mew J. (Ont. S.C.J.).

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