Deck 23: Consumer Protection Legislation

Question 1

Hill Billy owns a rural farm in Nova Scotia. There is a mortgage on the farm in the amount of $100,000. The farm has a house, a barn and two machine sheds. He obtained a mortgage from the bank. Hill Billy decided that the house was too expensive to heat in the winter so he turned the heat off and moved into one of the smaller machine sheds. All of the pipes burst. Which of the mortgage covenants were breached?

A) Quiet possession
B) Not to commit waste
C) Acceleration clause
D) Equity of redemption
E) Maintenance and improvement

Answer 1

B

Question 2

Holly purchased a home in Manitoba. The home was mortgaged for $225,000. She lost her job and missed three mortgage payments. The bank decided to exercise its rights under the mortgage. What can it do?

A) Invoke the acceleration clause.
B) Invoke the default notice clause.
C) Obtain an order for foreclosure.
D) Invoke the acceleration clause and then obtain an order for foreclosure.
E) Invoke the default notice clause then the acceleration clause and then obtain an order for foreclosure.

Answer 2

E

Question 3

Bondi gave a mortgage to Dante on a parcel of land (located in Ontario), which he owned. Bondi later sold the mortgaged land to Green. Green, some time later, sold the land to Jones. Jones defaulted on payment of the mortgage. If Dante forecloses on the land, and later sells it for less than the amount of the mortgage, he may then take action against Jones for the deficiency.

Answer 3

FA LSE

Question 4

Where default occurs, and real estate markets are falling, the mortgagee will likely want to realise on the security in the quickest suitable manner, which is

A) Sale.
B) Sale under Power of Sale.
C) Foreclosure.
D) Discharge.
E) Possession.

Question 5

The following are the usual covenants of the mortgagor under a mortgage, except:

A) to pay the mortgage in accordance with its terms.
B) to pay municipal taxes.
C) not to remortgage without consent.
D) to insure the premises.
E) not to commit waste.

Question 6

Bondi gave a mortgage to Dante on a parcel of land (located in Ontario), which he owned. Bondi later sold the mortgaged land to Green. Green, some time later, sold the land to Jones. Jones defaulted on payment of the mortgage. Dante would be entitled to sell the land when Jones defaulted on the payment.

Question 7

Bondi gave a mortgage to Dante on a parcel of land (located in Ontario), which he owned. Bondi later sold the mortgaged land to Green. Green, some time later, sold the land to Jones. Jones defaulted on payment of the mortgage. Dante would be entitled to foreclose on the mortgage when Jones defaulted on the payment.

Question 8

The _________________ transfers the _______________ to the ________________ who later reconveys it with a _______________.

A) mortgagee; collateral; mortgagor; deed
B) owner; fee; mortgagor; discharge
C) mortgagor; hypothec; lender; covenant
D) mortgagor; fee; mortgagee; equity of redemption
E) none of the responses are correct

Question 9

Ashton wished to raise additional capital for his business, and arranged with Banyon for a $10,000 mortgage on his estate, Blackacre. Ashton did not disclose the fact that he had previously borrowed $10,000 from Clayton by way of a mortgage, and Clayton had not registered his mortgage against the title of Blackacre. Shortly after the mortgage to Banyon was registered, Ashton conveyed the estate to Dayton, for $25,000. Dayton was unaware of the mortgages to Banyon and C, and did not examine the title to Blackacre when he registered his deed. Dayton was unaware of the mortgage to Banyon, and consequently, Dayton's title to Blackacre would not be subject to the mortgage.

Question 10

Gladys wants to purchase Ken's home and assume his mortgage from Bank of Vancouver, which has an excellent interest rate of 5%. Can the mortgage be assumed?

A) Yes, if Ken obtains consent of the Bank of Vancouver to the sale and assignment of mortgage.
B) Yes, if Ken obtains the consent of the Bank of Vancouver to the assignment.
C) No, the Bank of Vancouver must discharge the mortgage.
D) Yes, if Ken gives the Bank of Vancouver notice of the assignment.
E) Yes, if Gladys gives the Bank of Vancouver notice of the assignment.

Question 11

Empire Bank and Smith execute a mortgage in favour of the Bank. Empire Bank informs Standard Bank, which later executes another mortgage of the property with Smith. Unknown to both Banks, Smith has already mortgaged the property to Jones. After registration by all, the register shows Standard, followed by Empire, then Jones. The priority of these mortgages is (from 1^st down)

A) Jones, Empire, Standard.
B) Jones, Standard, Empire.
C) Standard, Empire, Jones.
D) Empire, Standard, Jones.
E) Jones, Empire, Standard is void.

Question 12

Rita, an Alberta resident, has just paid off a mortgage on property located in Nova Scotia. She has a right to demand that the mortgagee provide her with a Release of Mortgage that can be registered. Why will title be returned to Rita?

A) She has legal title to the property.
B) It was an equitable mortgage.
C) Repayment fulfilled the acceleration clause.
D) She has equity of redemption.
E) She is foreclosed.

Question 13

Bondi gave a mortgage to Dante on a parcel of land (located in Ontario), which he owned. Bondi later sold the mortgaged land to Green. Green, some time later, sold the land to Jones. Jones defaulted on payment of the mortgage. As an alternative, Dante might take action against Bondi, the original mortgagor, on his covenant to pay.

Question 14

Hill Billy owns a rural farm in Nova Scotia. There is a mortgage on the farm in the amount of $100,000. The farm has a house, a barn and two machine sheds. He obtained a mortgage from the bank. Hill Billy decided that the house was too expensive to heat in the winter so he turned the heat off and moved into one of the smaller machine sheds. All of the pipes burst. What action can the mortgagee take?

A) Take action for possession
B) Take action for full payment
C) Take action for specific performance
D) Take action for foreclosure
E) Conduct a judicial sale

Question 15

Where a mortgagor obtains a "second mortgage", the mortgagor has mortgaged

A) the legal title.
B) the hypothecation.
C) the equity of redemption.
D) the first mortgage.
E) the right to avoid default.

Question 16

Which of the following are true statements?

A) A mortgage given in support of a promissory note is a "collateral mortgage".
B) On default, where real estate markets are swiftly rising, foreclosure proceedings would be desired by a mortgagee.
C) A registered discharge is a transfer of title.
D) All of the responses are true.
E) None of the responses are true.

Question 17

Where a first mortgagee completes a foreclosure action

A) it has foreclosed only against the interest of the mortgagor, not any subsequent mortgagee.
B) a second mortgagee has a right of action against the first mortgagee.
C) a subsequent mortgagee loses its rights in the property, and is left only with an action against the mortgagor.
D) the mortgagor receives the equity of redemption.

Question 18

A system of advances is common under

A) a collateral mortgage.
B) a residential mortgage.
C) a commercial mortgage.
D) a building mortgage.
E) an equitable mortgage.

Question 19

Bondi gave a mortgage to Dante on a parcel of land (located in Ontario), which he owned. Bondi later sold the mortgaged land to Green. Green, some time later, sold the land to Jones. Jones defaulted on payment of the mortgage. If Dante institutes foreclosure proceedings against Jones, Jones may ask the court to convert the foreclosure to sale proceedings.

Question 20

Bondi gave a mortgage to Dante on a parcel of land (located in Ontario), which he owned. Bondi later sold the mortgaged land to Green. Green, some time later, sold the land to Jones. Jones defaulted on payment of the mortgage. If Dante took action against Bondi, and Bondi paid the amount owing on the mortgage, Bondi would be entitled to an assignment of Dante's rights against the land and against Jones.

Question 21

A mortgage dated and signed on February 28, 1998, registered March 3, 1998 would be the first mortgage over another dated and signed January 19, 1998, registered March 6, 1998.

Question 22

Ashton wished to raise additional capital for his business, and arranged with Banyon for a $10,000 mortgage on his estate, Blackacre. Ashton did not disclose the fact that he had previously borrowed $10,000 from Clayton by way of a mortgage, and Clayton had not registered his mortgage against the title of Blackacre. Shortly after the mortgage to Banyon was registered, Ashton conveyed the estate to Dayton, for $25,000. Dayton was unaware of the mortgages to Banyon and C, and did not examine the title to Blackacre when he registered his deed. Ashton would be obliged to pay Clayton the $10 000 covered by the unregistered mortgage.

Question 23

Ashton wished to raise additional capital for his business, and arranged with Banyon for a $10,000 mortgage on his estate, Blackacre. Ashton did not disclose the fact that he had previously borrowed $10,000 from Clayton by way of a mortgage, and Clayton had not registered his mortgage against the title of Blackacre. Shortly after the mortgage to Banyon was registered, Ashton conveyed the estate to Dayton, for $25,000. Dayton was unaware of the mortgages to Banyon and C, and did not examine the title to Blackacre when he registered his deed. Dayton would be obliged to pay Banyon's registered mortgage to obtain a clear title to Blackacre.

Question 24

Where a debtor in default under a mortgage is in possession of the premises, a Writ of Possession would be required prior to conducting a sale.

Question 25

A mortgage given verbally, before witnesses, is an equitable mortgage and is enforceable in Canadian courts.

Question 26

A "charge" is a "mortgage" under the Land Titles System.

Question 27

Where a mortgagor sells property that he or she has mortgaged, in the absence of an agreement to the contrary, he or she will remain liable for payment of the mortgage.

Question 28

Ashton wished to raise additional capital for his business, and arranged with Banyon for a $10,000 mortgage on his estate, Blackacre. Ashton did not disclose the fact that he had previously borrowed $10,000 from Clayton by way of a mortgage, and Clayton had not registered his mortgage against the title of Blackacre. Shortly after the mortgage to Banyon was registered, Ashton conveyed the estate to Dayton, for $25,000. Dayton was unaware of the mortgages to Banyon and C, and did not examine the title to Blackacre when he registered his deed. Dayton's title would not be subject to the mortgage to Clayton.

Question 29

Ashton wished to raise additional capital for his business, and arranged with Banyon for a $10,000 mortgage on his estate, Blackacre. Ashton did not disclose the fact that he had previously borrowed $10,000 from Clayton by way of a mortgage, and Clayton had not registered his mortgage against the title of Blackacre. Shortly after the mortgage to Banyon was registered, Ashton conveyed the estate to Dayton, for $25,000. Dayton was unaware of the mortgages to Banyon and C, and did not examine the title to Blackacre when he registered his deed. Consider the title to Dayton's property, and Dayton's legal position with respect to Clayton and Banyon. Clayton's unregistered mortgage would take priority over Banyon's registered mortgage, because it was signed and given by Ashton first.

Question 30

It would be customary for a developer to deliver only partial discharges of a development mortgage to purchasers of homes on residential building lots.

Question 31

The mortgagee advances money to the mortgagor.

Question 32

Ashton wished to raise additional capital for his business, and arranged with Banyon for a $10,000 mortgage on his estate, Blackacre. Ashton did not disclose the fact that he had previously borrowed $10,000 from Clayton by way of a mortgage, and Clayton had not registered his mortgage against the title of Blackacre. Shortly after the mortgage to Banyon was registered, Ashton conveyed the estate to Dayton, for $25,000. Dayton was unaware of the mortgages to Banyon and C, and did not examine the title to Blackacre when he registered his deed. Dayton would be obliged to pay Clayton the $10 000 secured by the unregistered mortgage, if Ashton defaulted in payment.

Question 33

The debtor under a mortgage must give his consent before a lender can assign a mortgage to another lender.

Question 34

List the four common covenants of a mortgagor, and discuss the four principal remedies of a mortgagee on default.

Question 35

As long as money is owing, the lender under the mortgage owns the lands.

Question 36

In a situation of default, it is easier for the lender to realise on his security by obtaining a final order of foreclosure, rather than conducting a power of sale.

Question 37

The only "legal mortgage" that can be made is the "first mortgage".

Question 38

Illustrate by example the use of mortgage financing in the course of land development by each of the land developer, the builder who buys a lot on speculation that someone will buy the house he intends to build and from the perspective of a purchaser of such a home. Use of specific numbers is not required unless desired.

Question 39

An "open mortgage" may be repaid at any time.

Question 40

An equity of redemption is a mortgageable estate in land.

Question 41

Jamil and Kevin purchase a residential property as an investment for $50,000. Each contributes $10,000 in cash and together they mortgage the property for $30,000 to raise the remainder of the purchase price. A few weeks later, Kevin decides to end the partnership and Jamil buys his interest in the property for $10,000. Advise Kevin.

Question 42

Does the legal idiom "possession is nine-tenths of the law" apply in the context of mortgages?

Question 43

Phillip owns a home in fee simple, which he subsequently mortgages for $150,000 to the Empire Bank. Two years later Phillip decides to move to another city and sells the property to Carl, who assumes the mortgage to the Empire Bank. Carl is later laid-off from work, and runs into serious financial difficulties resulting in the mortgage going into default. Describe the options open to the Empire Bank with respect to each of the parties, and follow these options through to their natural conclusion. Speculate as to any mechanisms which may commonly be put in place for greater certainty between the parties on the assumption of a mortgage.

Question 44

Prevailing interest rates on second mortgages are invariably higher than rates paid against first mortgages. Explain fully the reasons for this phenomenon.

Question 45

Empire Bank registered a first mortgage against Johnston's property in the amount of $250,000 as security for an irrevocable letter of credit it had given on Johnston's account. Johnston posted the letter of credit with a municipality to which the municipality could look should Johnston fail to execute his obligations with respect to a subdivision he was building. Sometime later the Commonwealth Bank registered a second mortgage against Johnston's property in the amount of $750,000. When the second mortgage was registered, Commonwealth Bank advanced the full face value of the loan of $750,000. The Empire Bank received actual notice of the Commonwealth Bank's mortgage. Ultimately a demand was made by the municipality against the letter of credit in the sum of $35,000. The Empire Bank paid the money to the Municipality and claimed priority over the Commonwealth Bank as it had been first to register, even though it knew that the Commonwealth had made prior advances against the security and the property. Does the Empire Bank have priority over the Commonwealth Bank and, if so, to what extent? Discuss the issues of priority raised here.
D.L.R. (3d) 172 (Ont. High Crt.).