A recent Alberta Court of Appeal decision addressed a case in which a son and mother had obtained a mortgage through fraud, after the son fraudulently impersonated the father to secure the loan.

At issue was the Alberta Dower Act, which prohibits the disposition of a homestead without the consent in the prescribed form of the non-owning spouse.

Son Obtains Mortgage Through Fraud

A married couple owned a home in joint tenancy, the title of which was in both of their names. They had purchased the home in 1991 and paid off the mortgage given to secure the purchase price. Their son lived in the home but had no ownership interest in it.

The son persuaded his mother to apply through a broker to a financial corporation for a loan to be secured by a mortgage on the home. He had done this on 12 different occasions with different brokers for progressively larger amounts. The financial corporation approved the loan in the amount of $245,000.

The mortgage documents to secure the loan were prepared by the financial corporation’s lawyers and signed by the mother and the son. The son did so by impersonating his father; his father had no knowledge of the transaction. Of note was the fact that father and son shared the same first name and surname. The financial corporation thought the son owned the house with his mother as they had both sworn a statutory declaration that they were the owners and the house was their principal residence. The mortgage was registered against the title to the home. Funds were advanced and used to pay out two previous mortgages, which had also been fraudulently obtained by the son, and the balance of the funds was paid into a bank account in the names of the mother and son. However, it was unclear whether the mother understood the nature of the transaction; she did not speak English, had only received a Grade 4 education in Portugal, and did only what her son instructed her to do. There was no evidence that she had received any funds from the mortgages.

After a default in payment of the mortgage, the financial corporation commenced foreclosure proceedings. It was not until the documents were served on the mother and the father that the fraud was discovered.

The son was convicted of fraud and received a custodial sentence.

The financial corporation also sought personal judgment against the son but did not seek a personal remedy in fraud against the mother. The mother and father defended against the claims, while the son was noted in default. 

Lower Court Decisions and Issue on Appeal

The Master’s decision concluded that the Dower Act prohibited a disposition by mortgage without the consent of the spouse; a disposition by mortgage without the consent of the spouse was expressly prohibited by the Dower Act and was invalid. The Master noted that dower rights underlie ownership in joint tenancy by husband and wife. He declared the mortgage invalid and ordered its discharge. He also granted judgment in favour of the financial corporation against the son.

The Queen’s Bench judge found that the Master’s analysis of the son’s dower rights was correct. In the result, she concluded that the mortgage was invalid because it was obtained through fraud or forgery, and the signature of the other spouse was not obtained.

The financial corporation appealed, arguing that the Queen’s Bench judge erred in misinterpreting or misapplying the provisions of the Dower Act and in adopting the Master’s decision that the unregistered dower interest of the father could affect or nullify the registered mortgage interest of a bona fide mortgagee that had conveyed valuable consideration.

The appeal turned solely upon the operation of the Dower Act.

Court of Appeal Dismisses Appeal

The court began by explaining that under the Dower Act, a married person is prohibited from making a disposition, without consent, of a homestead whereby “any interest of the married person” will or may vest in another person during the life of the married person or the spouse of the married person.

This means that a married person, who without obtaining consent or an order dispensing with consent, makes a disposition that results in the registration of title in the name of another person, is liable to the spouse in an action for damages. The court explained that this remedy is limited to improper transfers of title and not registration of encumbrances.

After reviewing relevant case law on the matter, the court held that under the Dower Act a fraudulent mortgage made without the consent of the spouse registered at the Land Titles Office does not convert the right of the married person with a dower interest into an action for damages, as is the situation with a fraudulent transfer. Rather, the fraudulent mortgage is invalid for lack of consent and is to be removed from title to preserve the dower rights of the married person, which is equally the case with respect to land held in joint tenancy.

As a result, the court dismissed the appeal. Therefore, the financial corporation’s mortgage would be struck from the title registered in the names of the father and the mother. Additionally, the foreclosure action against them was dismissed. Finally, the judgment against the son would be upheld.

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For more than 25 years, the experienced litigation lawyers at DBH Law in Calgary have advised clients on a wide range of mortgage and foreclosure issues. We represent both borrowers and lenders in this highly technical and generally complex area of law. Our goal is to always resolve mortgage disputes and foreclosure issues quickly and efficiently and to bring them to the most satisfactory end for our clients. Our knowledgeable team of lawyers and staff will be with you every step of the way, providing perspective by focusing on what’s important and working to keep your property in your hands. Please contact us online or by phone at 403.252.9937 to see how we can help you today.