Schafer v. Royal Bank
Michael Peter Schafer and Patricia Duaine Cranston, Plaintiffs and Royal Bank
of Canada, Defendant
Ontario Superior Court of Justice
Judgment: December 3, 1999
Heard: November 29, 1999
Counsel: Alfred M. Kwinter, for Plaintiffs.
Larry W. Keown, for Defendant.
Subject: Civil Practice and Procedure; Property
Injunctions — Availability of injunctions — Injunctions in specific contexts — Enforcement of security.
Cases considered by Lamek J.:
Arnold v. Bronstein (1970),  1 O.R. 467, 15 D.L.R. (3d) 649 (Ont. H.C.) — applied
APPLICATION by mortgagor for interlocutory injunction to restrain sale of properties under power of sale.
1 The plaintiff in this action (in which no Statement of Claim has yet been delivered) sought an injunction to re-strain, until the trial of the action, the sale of two properties under power of sale. The properties to which I shall refer respectively as “the Park Lane property” and “the Front Street property” are subject to a mortgage in favour of the defendant Bank and were to be disposed of in separate sales which were to close on November 30, 1999, the day after the day on which I heard this motion.
2 In compliance with the terms of the mortgage, insurance was placed on the properties. The Bank was named as the payee of any insurance proceeds.
3 The building on the Front Street property burned down. The insurer paid the proceeds of the contents insurance. Those proceeds have been paid out to tenants of the building. The balance of the insurance cover is $550,000, of which the insurer has paid some $35,000 to the municipality as the cost of demolition of the remains of the building. At issue here is the amount of $100,000 which the insurer has paid to the Bank and which the plaintiff wants the Bank to turn over to him (or to a third party) to be applied to the reconstruction of the building. The balance of the insurance monies will only be paid out by the insurer if a timely start is made on reconstruction. The plaintiff-mortgagor cannot afford to begin reconstruction unless the Bank makes available the $100,000 that it is holding. The plaintiff’s evidence is that the building can be reconstructed for $400,000 and, once finished, will be of sufficient value to enable the Bank to be repaid in full. The Bank has refused to turn the funds over or to make them available for reconstruction and has agreed to sell the bare site to the municipality
4 With respect to the Park Lane property, I find nothing in the material before me to justify any delay in the clos-ing of that sale. The selling price is higher than that stated by two apparently qualified valuators. The mortgagor has filed an opinion as to value prepared by a real estate sales representative. He puts the value at three times that stated by the Bank’s valuators and, indeed, at a value higher than the top end of the range that he himself says to be appro-priate. I prefer to accept that the opinions expressed by the Bank’s valuators are more reliable. But if I am wrong and the plaintiff is able to demonstrate that the sale at the contract price was improvident, a remedy will be available. In my view, the Bank has satisfied any and all requirements to enforce its rights under the power of sale, I find no basis here for the grant of injunctive relief so far as the Park Lane property is concerned.
5 With respect to the Front Street property, the plaintiff argues that the Bank’s position is so unreasonable as to indicate bad faith on its part and to justify my granting the relief sought. It is said that the Bank, by refusing to make the insurance monies which it holds available to begin reconstruction, is preventing the plaintiff from receiving the balance of the insurance monies. This will not only provide a windfall to the insurer but will not benefit the Bank and will cause extreme prejudice to the plaintiff who will, of course continue to be liable to the Bank for the short-fall on its recovery.
6 It is clear that it is only in the most unusual case that a mortgagee will be restrained from exercising its rights under a power of sale contained in the mortgage. The leading decision is Arnold v. Bronstein (1970),  1 O.R. 467 (Ont. H.C.) where Lacourciere, J. (as he then was) said ( at p.:
… Courts have refused to interfere with the proper exercise of a power of sale in all but the most extreme and exceptional cases. In fact, the learned author of Kerr on Injunctions, 5th ed., p. 538, in a chapter dealing with injunctions between mortgagor and mortgagee, goes so far as to assert that:
The Court has no jurisdiction to restrain a mortgagee from selling under a power of sale, provided he keep within the terms of the power and no case of fraud is made out.
The proposition is well supported by cases. … The general rule developed from numerous cases is that a mortgagee, acting in good faith and without fraud, will not be restrained from a proper exercise of his power of sale, except upon tender by the mortgagor of the principal moneys due, interest and costs
7 There was no suggestion in the evidence before me that the Bank was behaving fraudulently, dishonestly, or improperly. The price for which the Front Street property was to be sold — although very substantially less than the price that the mortgagor asserted the property would bring if the building were reconstructed — was within the range of values stated by two valuations. On two occasions, the Bank indicated that it might be prepared to refrain from the exercise of its power of sale and it invited proposals from the mortgagor. Receiving no response, the Bank pro-ceeded under the power. It is unfortunate that the mortgagor was seriously ill during much of 1999 but neither he nor his solicitors or anyone acting on his behalf advised the Bank of the mortgagor’s condition or made any response — even a purely temporizing one — to the Bank’s invitations. That is indeed unfortunate but certainly does not indicate any impropriety on the Bank’s part.
8 In the result, therefore, I decline to issue the injunction requested by the mortgagor. Again, if the plaintiff-mortgagor should succeed in an allegation that the sale was improvident, he may have his remedy.
9 As I have said, I heard this motion on Monday, November 29. In light of the scheduled closing of the two sales for Tuesday, November 30, I delivered my decision from the bench at the close of argument, promising that Reasons would follow later in the week. These are those Reasons.
10 At the close of argument, I also invited and received submissions as to costs of the motion. I then made an Or-der awarding costs to the defendant Bank in the amount of $1,500.