Chichak v. Chichak

 

In Chichak v. Chichak, 2021 BCCA 286, the British Columbia Court of Appeal confirmed that a creditor who has registered a judgment against real property held in the name of a debtor cannot enforce the judgement in respect of an interest of another person who has an equitable interest in the property. This is so even when the equable interest is not registered on the title to the land. The creditor may only enforce the judgement to the extent of the debtor’s interest in the land.

Derek Chichak and his wife Jennifer Chichak bought real property together. The title was transferred to Ms. Chichak’s name and then later she transferred the title into Mr. Chichak’s name. Mr. Chichak was sued by two creditors, who registered their judgment against the property. Another creditor had a mortgage against the property and when mortgage went into default, the property was sold in a foreclosure proceeding brought by another creditor. After the amount of the mortgage was paid, there remained surplus funds from the sale of the property, and the two creditors with registered judgements sought to have the funds paid out to them. Ms. Chichak, however, claimed that she had a 50% interest in the equity in the property because of her contribution to the purchase price. When one person pays for or transfers property to another, there is a presumption that the recipient of the property holds the property, or in this case half of it, on a resulting trust for the person who paid the purchase price or transferred the property. Ms. Chichak claimed that because her husband held a half interest in the property in trust for her, his judgment creditors were only entitled to recover one-half of the surplus funds, with Ms. Chichak entitled to the other half.

The Supreme Court of British Columbia did not make any finding as to whether Mr. Chichak held an interest in the property on a resulting trust for Ms. Chichak, but held that even if he did, the judgment creditors were entitled to be paid first. Their judgment on the title took priority to Ms. Chichak’s claim. Ms. Chichak appeal.

Madam Justice Saunders in allowing the appeal held that a judgment creditor who registered the judgment against the title to real property could not enforce the receive a greater interest in the property than that held by the judgment debtor. This principle is referred to in Latin as “nemo dat quod non habet” which loosely translated means “you can’t give what you ain’t got.” If Mr. Chichak was only entitled to a one-half interest in the property, then his creditors can only take his half interest; they are not entitled to the other half interest if he holds it in trust for Ms. Chichak.

This common-law principle that a judgment creditor may only enforce a judgment to the extent of the debtor’s interest in property is supported by the wording of the Court Order Enforcement Act. Section 83 (3) (a) and (7) provides:

(3)   From the time of its registration the judgment forms a lien and charge on the land of the judgment debtor specified in the application referred to in section 88 in the same manner as if charged in writing by the judgment debtor under his or her signature and seal,

(a)     to the extent of his or her beneficial interest in the land,

….

(7)   A judgment creditor is not a bona fide purchaser for value.

 [emphasis in decision]

The creditors pointed to section 23 (2) of the Land Title Act, which provides that subject to certain specific exceptions the title “is conclusive evidence at law and in equity, as against the Crown and all other persons, that the person named in the title as registered owner is indefeasibly entitled to an estate in fee simple to the land described in the indefeasible title….” In other words, people dealing with the registered owner of real property are entitled to rely on the owner’s title. This protects, for example, buyers of property from the owner on title form others later claiming that the seller did not in fact own the property.

However, Madam Justice Saunders, noting the distinction between a judgment creditor and a purchaser, held that section 23 (2) of the Land Title Act does not apply:

[14]         By the registration system, all interests in the property that will affect a prospective purchaser for value are recorded in the register, with the intention that the true state of the title – of all the interests pertaining to the property – will be evident, subject to these few statutory exceptions, and a bona fide purchaser for value will take priority over the holder of an unregistered interest. Section 86(7) of the Court Order Enforcement Act, of course, explicitly provides that a judgment creditor is not a bona fide purchaser for value.

[15]         In my respectful view, the judge misapplied the Land Title Act by effectively equating a judgment creditor, a person who seeks to collect on a judgment in likely unrelated litigation, to the position of a person who has relied on the register in acquiring their indefeasible interest in the land. This would allow a judgment creditor to obtain greater recovery from the land than even the judgment debtor could derive. This result could be legislated, no doubt. However, in my view, it has not; the current legislation does not reach this far. The result, in my view, is contrary to decided authority presented to us but, it appears, not to the judge of first instance.

The Court Appeal ordered that the case be remitted to the Supreme Court of British Columbia to determine whether Ms. Chichak in fact had a beneficial interest in the property.  If she can establish her resulting trust claim, the judgment creditors will not be entitled to the funds representing Ms. Chichak’s share of the surplus proceeds from the sale.