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Note: Donald Harvey Stewart (Tenant 1) and Calvin Verbeek (Tenant 2) purchased land for a gravel operation solely under Tenant 1's name. The land was subject to a mortgage from Farm Credit Canada (Issuer) for the amount of CAD 108,000. The mortgage secured an LC for CAD 106,000 in favor of Alberta Environment (Beneficiary) to cover reclamation obligations. Tenant 1 and Tenant 2 entered into a dispute over ownership and expenses of the lands. The parties reached a settlement: (1) Tenant 2 received judgment against Tenant 1 for CAD 400,000; (2) the land was placed under both Tenant 1 and Tenant 2's names as tenants in common; (3) and the settlement directed the land be sold, allowing either party to make an offer.

Tenant 2 made an offer on the land for CAD 1,600,000 requiring the mortgage be discharged and CAD 115,000 withheld from the purchase price to satisfy any draw on the LC until the expiration date of the LC. Tenant 1 then filed an application asking the court to reject Tenant 2's offer and accept an offer of CAD 2,000,000. In an affidavit, Tenant 1 clarified that CAD 10,000 would be withheld from the purchase price to cover any claim on the LC in favor of Beneficiary until closing. Tenant 2 then modified his offer, accepting responsibility for the mortgage and LC issues. Tenant 2 filed an application in favor of his new offer and asking the court to reject Tenant 1's offer. The Master in Chamber accepted Tenant 1's offer, and Tenant 2 appealed. Tenant 2 claimed Tenant 1's offer contained unacceptable terms relating to Tenant 2's obligations, the discharge of the LC and mortgage, and the treatment of stockpiled gravel.

The Alberta Court of Queen's Bench upheld the Master's order accepting Tenant 1's offer. The Judge noted that the conditions in Tenant 1's offer were standard terms and conditions, and The Law of Property Act dictated a process for division of the proceeds from the stockpile gravel. The Judge acknowledged that Tenant 1's offer was vague in regards to the mortgage and LC. However, the Judge noted that Tenant 1's affidavit clarified that LC could only be used to cover reclamation until closing, and Tenant 1 would have to secure a new LC for any future reclamation costs.

[JEB/mkg]

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