Reference no: EM131911501
Commercial Law Case Assignment:
Shirley worked at Big Tim's massage parlour in a large industrial city in Southern Ontario. It was during one of her appointments that she struck up a relationship with one of her customers Perky Newlands. After several sessions they became quite intimate and they soon became a couple. She was 37; he was 92 but acted and looked like 68. Perky now had a steady girlfriend. They regularly went out together and often traveled to Buffalo to shop and for Perky to purchase inexpensive over-the-counter Viagra.
Shirley grew tired of living in a small cramped apartment and decided she wanted to buy a small house. She was looking for something modest in her existing neighbourhood. She found an ideal property close to work; the listing price of the house had just been reduced to $80,000. Shirley only had $10,000 to put down towards the purchase and needed to finance the rest. She went from bank to bank but was always turned down, probably because of her profession. Through one of her clients, she met a mortgage broker who introduced her to Isabel McLennan. Isabel was known to have invested in mortgage financing in the past. Isabel's son Roscoe, a well-known lawyer in town who arranged mortgages for his mother to invest in, looked at the proposed deal with Shirley and concluded that it would be a sound one only if Shirley could come up with some extra collateral. Shirley approached Perky. She explained her predicament and suggested that if Perky were to put his home up for additional collateral she could finance her dream home. She even hinted to Perky that this might become their "little love nest."
At first Perky resisted. Shirley was angry and intimated that some of her usual "favours" might not be forthcoming unless Perky put up his house as security for her. All Perky was doing, she told him, was being a "character witness" for her. After a few days Perky finally agreed.
Perky and Shirley arranged to meet at Roscoe's office the next day to sign the mortgage papers. Roscoe sent Perky down the street to Wilhelm Kaiser's office, another well-known and respected real estate lawyer, for independent legal advice. Wilhelm, being the savvy lawyer that he was, grilled Perky on a variety of matters to determine Perky's lucidity and whether he understood the nature of the transaction. Perky satisfied Kaiser that he was lucid and that he was entering into this collateral mortgage willingly. Wilhelm then signed the Certificate of Independent Legal Adviceand the mortgage transaction proceeded.
Business was down at Big Tim's and Shirley wasn't getting the tips she was accustomed to. As a result, some months later, Shirley fell into default on her mortgage. She missed her payments for a period of six months. Perky was unaware that Shirley wasn't making the mortgage payments and even if he had known he wouldn't have been able to make them himself because he was on a small disability pension. After several failed attempts to recover the missed payments from Shirley, Roscoe issued a Notice of Sale under Mortgage pursuant to the Mortgages Act on behalf of his mother Isabel. Shirley realized that her only option was to sell. Unfortunately for Shirley the real estate market had collapsed in her neighbourhood because the town's largest employer had just laid off thirty percent of their workers. Her agent listed the house for $80,000 but the only pending offer was $65,000. It was at this point in time that Perky's daughter Emma Lee got involved. Apparently, Perky had promised his daughter that when he died, she would get his house, free and clear. She was outraged to find out that her father had mortgaged his home and that there would be very little equity left in it if the foreclosure on Shirley's house proceeded. (Any outstanding debt on Shirley's mortgage would be recovered from Perky.) To keep his daughter from "being mad at him," Perky decided to feign (fake) senility.
As a result, Perky's daughter Emma Lee brought an action against Shirley and Isabel in Small Claims Court claiming the original deal was invalid and should be set aside. She requested an injunction to prevent the sale of Shirley's house until the matter could be dealt with by the courts.
Outline, explain and discuss all of the legal principles of this case. Discuss Emma Lee's legal position. Advise Shirley and Isabel of their legal positions in respect to Emma Lee's lawsuit. What is the likely outcome of all the legal proceedings? Why?