Facts
Lawrence owned a home and had a mortgage on the property. An imposter fraudulently pretending to be Lawrence sold the property to Wright, who was also a fraudster. Wright registered the property in his name, and took out a mortgage on the house from Maple Trust. Maple performed their due diligence by checking the registry. When Lawrence found out about this she sued Wright and tried to have Maple Trust's mortgage negated. The trial judge overturned the land transfer to Wright, but upheld the mortgage as valid, which Lawrence appealed.
Issue
- Does the Land Titles Act promote immediate indefeasibility of title, or deferred indefeasibility?
Decision
Appeal allowed.
Reasons
Section 78(4) of the Act states that it is reasonable to rely on anything in the registry as fact. However, s.155 states that a transfer that would otherwise be invalid is not validated simply because the title was registered.
Lawrence is trying to the nemo dat rule to have the mortgage cut out as well. She says that because Wright obtained the title fraudulently, any dealings that he made with the land are invalid. However, the court rejects this because this is not in line with the purpose of the Act.
Maple Trust tries to claim that the Act promotes immediate indefeasibility of title because of s.78, which says that registration immediately makes title indefeasible. The court also rejects this by reading the entire act, and taking into consideration the fact that s.78 was added later than the rest of the act and was only supposed to clarify the principles in the Act. It would completely negate the common law rules, which is not the intention of the Act.
Finally, Ontario intervenes and states that the Act really promotes the theory of deferred indefeasibility of title. This theory states that if title is registered fraudulently, then the intermediate party who relies upon this information (Maple in this case) can have their title defeated by the original owner. However, if the intermediate sells the title to a bona fide purchaser for value without notice, then that deferred party takes good title. The court accepts this view, and therefore if Maple had sold the title to another party, that party would have taken good title. However, as this did not occur, Lawrence can defeat Maple's interest because the title of the original owner trumps an intermediate party under the theory of deferred indefeasibility of title.
The court accepts this theory based on past decisions, and also for policy reasons. They say that it is contrary to public policy to force a landowner such as Lawrence to settle for damages rather than getting her property back when it was fraudulently taken from her. Finally, the judge states that simply because Maple had their interest defeated does not preclude them from applying to the Fund created under the Act for the protection of parties who innocently lose money because of the registry system. However, he does not say that they would be successful in such a claim.
Ratio
- The Land Titles Act promotes the theory of deferred indefeasibility of title; if the title is registered fraudulently, then the intermediate party who relies upon this information can have their title defeated by the original owner, however, if the intermediate owner sells the title to a bona fide purchaser for value without notice, then that deferred party takes good title.
- Simply registering a fraudulently obtained title does not make the title valid.