Metropolitan Trust v. Morenish Land Developments Ltd.

Metropolitan Trust v. Morenish Land Developments Ltd.

The mortgage's express language prescribed a nominal annual rate unqualified by any requirement to reinvest interim interest; therefore the court must give effect to the parties' language and the mortgagee was entitled to compute interest at 13% per annum by reference to monthly payment dates (per diem between dates) as performed, and the reinvestment principle does not apply absent contractual text to that effect.

Citation
[1981] 1 SCR 171
Parties
Appellant Plaintiff: Metropolitan Trust Company; Appellant Plaintiff: Canada Grundstuecksentwicklungen Lehndorff Vermoegensverwaltung G.m.b.H. & Co.; Appellant Plaintiff: W.B. Sullivan Construction Limited; Appellant Plaintiff: R.J. Prusac; Respondent Defendant: Morenish Land Developments Limited
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
27 January 1981
Procedural Posture
Mortgage Interest Computation Appeal to Supreme Court of Canada / On Appeal From the Court of Appeal for Ontario; Final Judgment by Supreme Court of Canada
Outcome
Appeal allowed; Court of Appeal order set aside; mortgagee entitled to recover the contested sum and costs
Legal Topics
Interest Calculation, Reinvestment Principle, Nominal Rate Vs Effective Rate, Prepayment of Principal, Interpretation of Payment Clauses
Source Language
English
Mortgages Interest Contract Interpretation Property Law Civil Procedure Interest Calculation Reinvestment Principle Nominal Rate Vs Effective Rate +2 more

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Parties

Metropolitan Trust Company

Appellant Plaintiff

Canada Grundstuecksentwicklungen Lehndorff Vermoegensverwaltung G.m.b.H. & Co.

Appellant Plaintiff

W.B. Sullivan Construction Limited

Appellant Plaintiff

R.J. Prusac

Appellant Plaintiff

Morenish Land Developments Limited

Respondent Defendant

Procedural Posture

Mortgage Interest Computation Appeal to Supreme Court of Canada / On Appeal From the Court of Appeal for Ontario; Final Judgment by Supreme Court of Canada

Legal Issues

  1. 1 How to calculate interest under a mortgage that states a per annum rate and provides interest payable monthly without specifying computation interval or reinvestment
  2. 2 Whether the 'reinvestment' or 'deemed reinvestment' principle applies as a rule of construction absent express contractual language
  3. 3 Whether payments of interest monthly at a stated annual rate produce a higher effective yield requiring an implied adjustment to produce the stated annual rate

Ratio Decidendi

The mortgage's express language prescribed a nominal annual rate unqualified by any requirement to reinvest interim interest; therefore the court must give effect to the parties' language and the mortgagee was entitled to compute interest at 13% per annum by reference to monthly payment dates (per diem between dates) as performed, and the reinvestment principle does not apply absent contractual text to that effect.

Court Disposition

Appeal allowed; Court of Appeal order set aside; mortgagee entitled to recover the contested sum and costs

Orders

  • Order setting aside the Court of Appeal decision
  • Mortgagee entitled to $168,195.04 plus interest thereon at 13% per annum from August 16, 1977, simple interest until paid