A recent Ontario case has confirmed that guarantees included
within registered mortgage documents enjoy the longer limitation
period of ten years available under the Real Property Limitations
Act1 rather than the standard two year limitation period
for traditional guarantees under the Limitations Act,
The Marsig3 case arose from a motion for summary
judgment made by the defendant guarantor
dismiss a claim made against him on his guarantee of a mortgage
which had gone into default. The mortgagee
("Equitable") had sued Mr. Marsig for
the deficiency arising after the completion of its power of sale
proceedings. Mr. Marsig had argued that his guarantee was a demand
obligation, and that all demand obligations, including guarantees
within a mortgage document, are governed by the Limitations Act,
2002. He submitted that the action against him on the guarantee was
therefore statute-barred under Section 5 of that Act which
establishes a general two year limitation period for all demand
obligations. Mr. Marsig's initial motion was dismissed and he
The Court of Appeal dismissed the appeal, finding the Real
Property Limitations Act was the governing statute, not the
Limitations Act, 2002, stating the legislature clearly intended
that all limitation periods affecting land be governed by the Real
Property Limitations Act. Thus, the fact that almost three years
had elapsed between the time the notice of sale under mortgage was
served on the guarantor (which was held to constitute a demand for
payment), and the commencement date of the action for the
deficiency claim, was irrelevant as the operative limitation period
was ten years, not two years.
In support of its ruling, the Court noted that it would cause
more confusion and uncertainty in the law if the limitation period
for enforcing a mortgage debt was different from the limitation
period for enforcing a guarantee of that debt4. The
Court determined that mortgagees confronted with a shorter
limitation period for the guarantee than for the mortgage debt
would undoubtedly sue and attempt to collect the whole debt
outstanding from the guarantor first to preserve the limitation
period.5 Such action would be taken rather than
proceeding in a more cost effective manner to realize on the
security over the real property first, and then suing the guarantor
only for the deficiency as Equitable had done in this
case.6 The Court found this would be an undesirable
situation for mortgage guarantors generally.
Section 43(1) of Real Property Limitations Act is drafted fairly
broadly such that the ten year limitation period applies to any
action upon a covenant contained in an indenture of mortgage, or
"any other instrument made ... to repay the whole or part of
any money secured by a mortgage". As such, the reference to
any other instrument might be interpreted as making the ten year
limitation period available to stand-alone guarantees relating
specifically to real property, even though the guarantee is not
embedded within the registered document itself. In Marsig, the
Court did not have to address that issue based upon the facts
before it. However, extending the Court's reasoning and
statements that limitation periods affecting land were intended to
be separate and distinct from general limitation periods, it seems
likely that the Court would interpret Section 43(1) as extending to
a stand-alone guarantee provided it relates solely to a mortgage
debt. Until we have a case on that specific point however, the
better practice for lenders wishing to lock in the benefit of a
longer limitation period would appear to be to include any such
guarantee within the registered document itself.
*Nate Appleton, an articling student in the Toronto
Office, also contributed to this post
1 Real Property Limitations Act, R.S.O. 1990, c. L. 15,
2 Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, as
3 The Equitable Trust Company v. Marsig et al., 109 O.R.
(3d) 561 ["Marsig"].
4 Marsig, at page 568
5 Marsig, at pages 568-9.
6 Marsig, at page 569.
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