March 1, 2003Family compensated in mortgage fraud case |
But judge limits award to actual expenses Deed transferred without their knowledge |
Mortgage fraud is in the news
again with the release of a decision by Ontario's deputy director of
titles awarding compensation to a Markham family for having the title to
their house stolen from them.
It all started back in October 1999, when Maria and Leonardo Morra
bought their house on Reansbury Cres. in Markham and took out a $50,000
new first mortgage with the Royal Bank of Canada.
Without their knowledge, on March 1, 2000, a deed to the property was
registered, transferring ownership to someone masquerading under the
name Sambhu Ghosh. Land transfer tax of $7,515 was paid on the stated
purchase price of $552,000. At the same time, the Royal Bank mortgage
was discharged and a new mortgage was registered in favour of the
Toronto-Dominion Bank for $240,000.
All three documents the deed, the discharge and the new mortgage
were fraudulent. The Morras never sold their house and did not pay off
their mortgage. Nor did they know until much later what had happened to
their title.
By August, 2000, the Morras had discovered the fraud and the York Region
police had begun an investigation. Charges were laid against three
individuals, but they were stayed or abandoned for lack of evidence.
The Morras retained a lawyer and 19 months after the fraud, they finally
obtained a court order restoring their title and the original Royal Bank
mortgage, as well as cancelling the deed to Ghosh and the fraudulent TD
mortgage. By this time, however, whoever it was who received the
proceeds of the phony TD loan was long gone.
Under Ontario law, a person wrongfully deprived of an interest in land
can apply to a court to recover from the fraudster "what is just by way
of compensation or damages." If, however, the injured party cannot
recover from the guilty parties, he or she is entitled to apply to the
Land Titles Assurance Fund for damages.
The Morras retained Toronto lawyer Bernard Gasee, who was successful in
several previous applications for compensation from the assurance fund.
But this time, in addition to their out-of-pocket costs, Gasee asked for
damages for indirect economic loss, including costs of anti-anxiety
medication, loss of the ability to refinance their Royal Bank mortgage
at a lower rate, as well as intangible, aggravated and punitive damages
of $75,000.
The Morras' application was heard by Louis Arki, Ontario's deputy
director of titles, in January 2002. It took more than a year for Arki
to write his five-page decision awarding the Morras their actual costs
and expenses, but declining to award any money for their pain, suffering
and anxiety.
In the end, the Morras were awarded $12,370 (representing most of their
legal costs) and the Royal Bank got $2,000 for most of its losses.
No claim was made by the Toronto-Dominion Bank for its $240,000 loss.
Coincidentally, the week after the Arki decision in the Morra case was
released, Justice Ted Matlow of the Superior Court rendered his decision
on an appeal of similar compensation fund orders made a year earlier by
Jean Iu, another deputy director of titles. Those orders awarded actual
cash losses, but no damages for the grief suffered by the innocent
parties who had their land titles stolen from them.
The question for the court on the appeals was whether the parties could
recover additional monies from the assurance fund as "just compensation"
for their suffering, grief and non-monetary losses. Gasee also acted for
the claimants on the appeals.
Justice Matlow was obviously troubled by the cases, saying that the
compensation provision of the Land Titles Act "is not a model of
legislative draftsmanship." He agreed with the decisions in the previous
hearings and declined to award compensation for any non-monetary losses.
He did note, however, that the claimants could recover compensation for
their "actual loss."
In light of the rash of title frauds, I would encourage homebuyers to
protect their ownership by buying title insurance at the time of
purchase. For a one-time premium, it protects owners from any subsequent
title fraud. But if you already own your home, it's too late. Just pray
it doesn't happen to you.
Bob Aaron is a Toronto real estate lawyer. Send questions to Bob Aaron, 10 King Street East, #1400, Toronto, Ontario M5C 1C3, or by e-mail to bob@ aaron.ca , phone 416-364-9366, or fax 416-364-3818.
Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.
Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.