Real estate units offered to settle a mortgage default, which allegedly proved worthless, have pitted a Penticton company against a law firm in a BC Supreme Court dispute.
Penticton-based Rochester Motel (1987) Ltd. has filed suit against Albas Wahl LLP, also of Penticton, alleging negligence and breach of contract.
According to the statement of claim filed December 9, 2011, Rochester hired Albas Wahl in 2005 to provide legal advice concerning the sale of a Calgary apartment building to Condo Condo Development Group Inc.
The claim alleges that, at Rochester’s request, Albas Wahl advised Rochester with respect to the sale and a sale agreement with Condo.
According to the claim, the sale agreement stated that Condo would convert Rochester’s apartment building to at least 67 individual residential condo units and two commercial retail units. The agreement also provided that, as part of the purchase price, Rochester would accept a $6 million mortgage from Condo secured on the individual strata units.
The claim states that the deal was completed and Condo proceeded to sell the majority of the condo units until, in September 2009, Condo announced that it was insolvent and couldn’t continue its mortgage payments.
The court document alleges that Condo offered Rochester a quit claim to the four remaining units.
“Rochester sought and obtained the advice of [Albas Wahl] as to how best to maximize the recovery it could obtain on the mortgage debt owed to it by Condo,” the statement of claim reads.
It alleges that, on the advice of Albas Wahl, Rochester accepted the quit claim on the units “rather than foreclose on the mortgage or otherwise pursue the debt owed to it by Condo.”
But when Rochester inspected the units, the claim alleges, the company discovered that they “were neither residential nor commercial retail units” but rather 75 storage lockers – some rented to the public, but the majority empty.
“The remaining units have proved of no commercial value and Rochester has lost the mortgage amounts owing on [the units] in the mortgage documentation of some $604,800,” the court document alleges.
Rochester is claiming that Albas Wahl breached its duty of care by, among other things, failing to advise Rochester that it was receiving mortgage security on storage units. Rochester is seeking damages for breach of contract and negligence, and special damages.
In a response filed December 23, Albas Wahl opposed all of the relief sought by the plaintiff. The response claims that Albas Wahl acted “as a reasonable and prudent lawyer” in the situation and did not breach its duties.
“[Albas Wahl] was not obliged to and did not offer business advice as that is not the obligation of the lawyer but exclusively the province of the client,” the response argues.
The response puts Rochester “to strict proof of all loss and damage alleged.”
None of these allegations have been proven in court. •
