[Since I wrote the post below, the British Columbia Court of Appeal has allowed an appeal by The Land Title and Survey Authority of British Columbia. The effect of this appeal is that the mortgage is declared invalid, and it is no longer necessary for the Authority to compensate the victim of the fraud. The Court of Appeal decision is at 2009 BCCA 138. See my more up-to-date post here.]
Oehlerking Estate, 2008 BCSC 1648, is a case about real estate fraud.
Sarah Michele Mullen and some person whose identity is not known, but who is referred to as is customary as “John Doe,” went to a lawyer in Vancouver. (I pity the real John Doe, whose name is wrongly brandied about in respect of all kinds of misdeeds.) John Doe had a fake driver’s license identifying him as Roy Oehlerking. He told the lawyer he wanted to transfer his house to his niece, Ms. Mullen. She, in turn, arranged for a mortgage with GET Acceptance Corporation. The transfer of the house into Ms. Mullen’s name was completed, and she had the mortgage in the amount of $320,000 registered against the title. The GET Acceptance gave Ms. Mullen most of the funds.
Roy Oehlerking was never aware of the fraud that had been perpetrated against him. He died, and his widow was his executor. Mrs. Oehlerking instructed her lawyers to transfer the title to the house into her name as executor. It was then that she found out the house was no longer in her husband’s name.
By then, the money together with John Doe was long gone.
Mrs. Oehlerking sued John Doe, Sarah Mullen, the lawyer who handled the transfer and mortgage, GET Acceptance and the Land Title and Survey Authority of British Columbia, among others.
Mr. Justice Barrow ordered the title transferred from Ms. Mullen’s name to Mrs. Oehlerking’s name has her late husband’s executor. That part was easy.
The mortgage presented a more difficult issue. GET Acceptance Corporation was not aware that Ms. Mullen had obtained the title fraudulently. The lender was entitled to rely on the registration of title to the house, which was in Ms. Mullen’s name when the house was mortgaged. Under British Columbia’s Land Title Act, the state of the title is conclusive in respect of innocent third parties who give value.
The court held that the mortgage was valid, and binding on Mrs. Oehlerking, despite the fraud.
Fortunately, there is a fund available through the Land Title and Survey Authority to compensate people who are deprived by fraud (or other wrongful actions) of an interest in land. The legislative provisions are in Part 19.1 of the Land Title Act. To get compensation Mrs. Oehlerking must show that she was deprived of an interest, in this case the mortgage, because of both the fraud, and because of the law that title is conclusive. She must also take all reasonable steps to recover compensation from the wrongdoers.
Mr. Justice Barrows awarded compensation to Mrs. Oehlerking against both John Doe and Ms. Mullen. But he did not require her to take any further steps to collect from John Doe and Ms. Mullen. He found that there was no hope she would be able to collect from them. Accordingly, Mr. Justice Barrows ordered the Authority to compensate her for the cost of paying out the mortgage.
[Since posting this, I have become aware of the typographical error in the second paragraph. But after reading the comment by Mr. Sigalet below, I have decided that I like the word "brandied" just fine.]