Court rejects bank's claim for more than amount owing on mortgage

A Nova Scotia Supreme Court justice has ruled that it was unjust and unreasonable for the Toronto-Dominion Bank to claim almost $17,000 from a Cape Breton couple who owed under just over $10,000 on a mortgage loan.

In 2003, Shawn and Margaret MacLean of Scotchtown took out a mortgage of $18,000 on a property on Mahon Street in New Waterford, N.S.

The couple fell into arrears in 2014 with $10,495 still owing and the bank moved to foreclose and sell.

Foreclosure auction

Shawn MacLean tendered a bank draft for the amount owing on the mortgage, but the bank rejected it, claiming other costs had driven up the debt to $18,671, slightly more than the initial loan.

In Nova Scotia, mortgage lenders have the option of placing the property for public auction and buying it themselves, while still being able to recover the debt from the borrower. Two weeks later, the bank went ahead with a foreclosure auction where it bought property itself for another $1,150.

Nearly a year later, the bank sold it for $4,000.

At the end of the process, the bank claimed a deficiency of $16,967, including the original debt.

Bank awarded $6,877

The bank asked the court to approve its claim of a deficiency between the outstanding debt, plus costs and the money it recovered by selling the property.

But in a decision rendered in June and published Wednesday, Justice Gerald Moir awarded the bank only $6,877.

In his ruling, Moir said "foreclosure and sale is an expensive remedy to enforcing a small loan.

"There is no evidence that any thought was given by the bank of the efficacy or the efficiency of using foreclosure and sale to enforce a small loan against a vacant lot in a very depressed community."

An expensive process

The choice of an expensive process "undermine(s) the justice and reasonableness of a conventional calculation of the deficiency against the MacLeans, " he said.

Moir found the process put the MacLeans' right to redeem the loan out of their reach and limited the bank's claim to "what would have been recovered in an action for a debt that was less than half the jurisdictional maximum of the Small Claims Court."

He also reduced the judgment by the apparent value of the land.

"This way the bank recovers no more than, and the MacLeans pay no less than, would have been the case if the less expensive remedy was chosen," he said.