topbar

Articles

Legislative Bar to Oral Mortgage Extensions Confirmed

In the late-2010 decision in McMurdo v. Saleem, the court addressed two noteworthy elements of mortgage remedies:

  1. it confirmed that oral evidence of a mortgage extension contravenes the Statute of Frauds; and
  2. it considered its own evidence-assessing powers in connection with summary judgment and the determination of whether there is a “genuine issue for trial.”

The facts of the case were straightforward:  McMurdo was the mortgagee who held a mortgage on Saleem’s home.  The principal became due at maturity, but Saleem defaulted on repayment. McMurdo then brought a motion for summary judgment.  The main question for the court was whether there had been oral agreement between Saleem and McMurdo to extend the loan, as Saleem claimed.
 
The court found first of all that no such extension agreement existed, and that there was no genuine issue for trial.  It granted summary judgment on the mortgage to McMurdo.
 
In doing so, the court reflected on its own enhanced judicial powers under the newly-amended Rule 20.01 of the Rules of Civil Procedure.  In the context of an application by a party for summary judgment, that Rule allows a court to weigh evidence, assess credibility, and draw reasonable inferences from the evidence, all as part of its role in determining whether there is a “genuine issue for trial.”
 
Using this evidence-assessing power, the court found that Saleem’s version of events relating to the alleged oral extension lacked credibility and was inconsistent with other established facts.   For example, the parties had previously renewed the mortgage in writing – not orally – which showed that they had knowledge of the correct procedure for agreeing to an extension.
 
More importantly, the court observed that even assuming McMurdo and Saleem had agreed verbally to extend the loan, this arrangement would be contrary to the Statute of Frauds (which requires that all such agreements must be in writing).  Such an agreement would also be contrary to the Rules governing court procedure, which provide for certain rules relating to oral evidence, and would offend the express terms of the particular mortgage which prohibited extensions and renewals.  
 
This being the case, Saleem was ordered to repay McMurdo the principal amount of the mortgage together with pre- and post-judgment interest; McMurdo was also awarded possession of the property.   See McMurdo v. Saleem, 2010 (ONSC)