National Bank of Canada v. Rogers

In Judgments and Enforcement of Judgments, Maritime Liens, Mortgages & Priorities on (Updated )

Précis: The bank/mortgagee was granted summary judgement upon the default of the debtor in advance of the sale of the ship.

Facts: In February 2010 the defendants purchased a yacht for $924,000 of which approximately $675,000 had to be financed. The defendants obtained the financing through a facility the vendor had with the plaintiff bank. The transaction was recorded in a conditional sales contract on the plaintiff’s form which showed the vendor and the defendants as buyers. The vessel and a mortgage in favour of the plaintiff were subsequently registered on 16 November 2010. Meanwhile, the defendants took possession of the yacht in May 2010 but were not happy with it and complained to the vendor but not the plaintiff. In August 2010 the vendor agreed to replace the yacht with delivery of the new vessel to be in April 2011. In October of 2010, the yacht was returned to the vendor and it was further agreed that the vendor would provide cash for the mortgage payments on the yacht which were drawn from the defendants’ account. The yacht was resold by the vendor on 26 October 2011.The plaintiff was unaware of the resale which was never registered. The plaintiff was also unaware that the vendor was providing the mortgage payments to the defendants. The defendants never received the replacement vessel nor did they receive any part of the proceeds from the resale of the yacht. The vendor went bankrupt in early 2015 and the defendants ceased making mortgage payments in February 2015. The plaintiff commenced this action for the balance owing in rem and in personam against the defendants and brought this application for summary judgment. The defendants contested the application. At the time the application was heard, the yacht had been arrested and was subject to an order of judicial sale.

Decision: Judgment for the plaintiff.

Held: The defendants argue that this summary judgment motion is premature as the plaintiff has not yet sold the yacht. They rely on case law relating to real estate which says a mortgage in possession is obliged to sell at the best possible price. However, a ship is not real estate. A mortgagee of a ship is under no obligation to commence an action in rem or to arrest the vessel and, in any event, an arrest does not put the mortgagee in possession of the vessel. It is the court that will sell the vessel and the proceeds from the sale will be distributed between the claimants thereto who, at present, comprise only the plaintiff and the purchaser of the yacht on resale.
With respect to the merits, the defendants argue that the plaintiff as assignee of the conditional sales contract is liable for the many deficiencies in the vessel and for the actions of the vendor who, they say, was the agent of the plaintiff. But, the vendor did not have any authority to represent the plaintiff and no reasonable person could reasonably believe the vendor had ostensible authority. From the evidence it is perfectly clear that the defendants knew the vendor was not an agent for the plaintiff.