When people fail to make their mortgage payments, they often point their finger at other people. In this case, the debtor wanted to avoid paying back his mortgage because (essentially) he had more debts than he disclosed to the bank. Read more below about this not very effective defence to a foreclosure action. The whole of the Xceed Mortgage Corp. v. Jesty case is available online if you want more details about this foreclosure.
The Facts Around This Mortgage Foreclosure Defence
This mortgage defence action relates to a mortgage granted by Jesty. Jesty borrowed money from Xceed Mortgages in 2006. Xceed mortgage agreed to lend funds to Jesty. Xceed Mortgage required that they receive a first charge on the title. This means that any previous debts registered on title would have to be paid out with the mortgage proceeds. Jesty’s plan was to use the borrowed mortgage money to pay off his first mortgage and then use the extra funds to pay off debts related to vehicles he used for work.
Xceed was not aware that Jesty owed money on utilities, taxes and workers’ compensation. In order for Xceed Mortgage to get a first position charge, these debts had to be paid out. As a result, there was not enough money left to pay of the debts associated with the vehicles. Jesty made all his regular payments. In 2011, when the mortgage matured, Xceed Mortgage did not renew the mortgage. Xceed required the mortgage to be paid back at that point. Jesty failed to pay back the borrowed funds and Xceed Mortgage started a foreclosure action.
How The Borrower Tried To Avoid The Foreclosure
The borrower, Jesty, tried to avoid the foreclosure action by saying that because he did not get extra funds to pay back the vehicle debts, Xceed mortgage breached the contract and they cannot foreclose. There was no evidence that Xceed committed to any specific purpose for the funds, only that they woudl lend a specified amount of money. Justy also tried to sue the mortgage company for failing to give him enough funds to deal with the vehicle debts.
How the Court Viewed This Defence to Mortgage Foreclosure
The initial trial judge ruled in favour of Xceed Mortgage. The judge stated that the lack of excess funds for Justy to pay off the vehicle debts did not constitute a breach of contract. The mortgage company did not have any responsibility as to the debts owed by Justy or the amount of funds he required other than what was approved. The trial judge dismissed the foreclosure defence and the counterclaim.
But, How Did The Appeal Court See the Defence
In this case, the Court of Appeal agreed with the trial judge. The funds were funded to Jesty and Justy failed to pay back the mortgage as required under the terms of the mortgage. This was not a mortgage foreclose defence that worked.
Getting The Help You Need
Our firm represents both lenders adn borrowers, but not in the same action. If you are a lender who requires help foreclosing on a mortgage, or a borrower who has been served with mortgage foreclosure documents, the lawyers at Kahane Law Office can help. If you need help call today. Call 403-225-8810 or email today to contact us.