COURT OF APPEAL FOR ONTARIO
CATZMAN, FELDMAN and GILLESE JJ.A.
B E T W E E N:
MARY ARHONTO SEARS
Joseph Markin for the appellant
Applicant (Appellant)
- and -
MARIE SEARS, PAUL SEARS, ATHENA MALLIOUX and THE CANADIAN IMPERIAL BANK OF COMMERCE MORTGAGES INC.
Enio Zeppieri and Gregory Gryguc for the individual respondents
Keith Geurts for the corporate respondent
Respondents (Respondents in Appeal)
Heard: July 08, 2003
On appeal from the judgment of Justice Peter G. Jarvis of the Superior Court of Justice dated September 20, 2002.
1Mary Arhonto Sears lives with her mother and two of her siblings in the family home at 72 Mulholland Avenue, Toronto. Her mother and siblings wanted to renovate the home. Mary Sears, however, refused to take liability for the mortgage that would be placed on the property in order to finance the renovations.
2After receiving a letter from her siblings telling her to pay rent or be evicted, Mary Sears unsuccessfully brought an application for a declaration that a transfer of title and mortgage registered against the property were of no force and effect. She appeals from dismissal of that application. For the reasons that follow, I am of the view that the appeal should be allowed.
Background
3Nicholas Sears and his wife, Marie Sears, had four children. Mary Sears, the appellant, is one of those children. The individual respondents to the application are Mary Sears’ mother, Marie Sears and her two siblings who also reside at the family home, Paul Sears and Athena Mallioux.
4Mary Sears had a very close relationship with her father. When he died, he left a will in which he gave Mary Sears the family home.
5The appellant’s mother, Marie Sears, took steps to attack the validity of the will and obtain title to the property. During the legal proceedings, Mary Sears and her mother settled the dispute through mediation and executed Minutes of Settlement.
6Greer J. considered the Minutes of Settlement at a hearing in which the parties were represented by counsel and issued a judgment (“the Judgment”), the operative sections of which are set out below.
THIS COURT ORDERS AND ADJUDGES that the house located at 72 Mulholland Avenue, Toronto, Ontario (“the house”), more particularly described in Schedule “A” hereto, shall be transferred by the Estate trustee without a will of Nicholas Sears’ (a.k.a. Nick Sarafopoulos) to Marie Sears as her own property absolutely. The only mortgage which Marie Sears may register against the property shall be a mortgage from which the proceeds are used by her for capital improvements and repairs to the said property.
THIS COURT FURTHER ORDERS AND ADJUDGES that Marie Sears agrees to attend on a solicitor to have a Last Will and Testament drawn for her and Marie Sears and Mary Arhonto Sears shall execute an agreement that upon Marie Sears’ death 35% of the net value of the house and its contents, shall be paid to or delivered to Mary Arhonto Sears, and that in addition thereto, Mary Arhonto Sears shall receive under Marie Sears’ Will, not less than the same share as Marie Sears’ largest beneficiary receives in the remainder of Marie Sears’ estate.
THIS COURT FURTHER ORDERS AND ADJUDGES that in the event the house is sold prior to Marie Sears’ death, Mary Arhonto Sears shall receive 35% of the net proceeds of the sale of the house and shall still be entitled to receive an amount equal to the amount received by the largest beneficiary of the estate of Marie Sears on her death.
THIS COURT FURTHER ORDERS AND ADJUDGES that Mary Arhonto Sears shall be at liberty to reside with Marie Sears without expense for so long as she lives and no demand for any payment on account of the residence or ongoing expenses shall be made upon her. In the event the property located at 72 Mulholland Avenue, Toronto, Ontario, is sold, then Mary Arhonto Sears, upon receipt of the said 35%, agrees to forthwith find her own accommodations at her own expense.
THIS COURT FURTHER ORDERS AND ADJUDGES that there shall be no further claims between the parties and this action is hereby dismissed without costs.
7Title to the property was transferred to Marie Sears pursuant to the Judgment.
8Mary Sears lived with her mother and brother, Paul Sears, at the family home. Later, her sister, Athena Mallioux, moved in with her two children. Stresses arose.
9Marie Sears attempted to obtain mortgage financing in order to make substantial repairs and renovations to the home. Marie Sears asked Mary Sears to accept liability for the mortgage. After Mary Sears refused, Marie Sears told her that she would transfer the property to Athena Mallioux and Paul Sears, as they were willing to assist with the mortgage.
10Mary Sears then received a letter from her two siblings telling her that they owned the home and that she had to pay rent of $650 per month or she would be evicted.
11A title search revealed that Marie Sears had transferred title to the respondents, Paul Sears and Athena Mallioux, and that a mortgage in favour of the corporate respondent in the amount of $215,000 had been registered against the property.
12The transfer deed indicated that Paul Sears and Athena Mallioux each received an undivided one-half interest in the property and that consideration for the transaction was $175,000. However, when cross-examined, Marie Sears and Athena Mallioux refused to answer whether the $175,000 had been paid for the property. Some of the answers given by Marie Sears suggest that she received no money on account of the sale of the property.
13The individual respondents told Mary Sears that they would arrange for an independent appraisal of the property. There is no evidence that such an appraisal was obtained. In cross-examination, Athena Mallioux testified that no appraisal had been conducted. The individual respondents invited Mary Sears to obtain an appraisal of her own. She chose not to.
14The individual respondents maintain that, in accordance with paragraph 3 of the Judgment, Mary Sears is entitled to $61,250, which is 35% of $175,000.
15The position advanced on behalf of Mary Sears throughout these proceedings has been that the transfer from Marie Sears to Paul Sears and Athena Mallioux was a fraudulent conveyance. The applications judge rejected that argument. He noted that the burden of proof of a fraudulent conveyance lay with the appellant and found that there was no evidence to satisfy him that the value ascribed to the property was other than fair market value. As the appellant failed to discharge the burden, her application was dismissed.
16The applications judge also rejected Mary Sears’ request for rectification of the Judgment. This determination has not been appealed.
17The appellant appeals on the basis that the applications judge incorrectly decided the matter of the alleged fraudulent conveyance. She also moves to introduce fresh evidence of the value of the property as at June 24, 2002, the date that the transfer deed was registered. In addition, she seeks leave to appeal the costs award below.
Analysis
18In my view, the applications judge correctly decided the matter of the alleged fraudulent conveyance. However, that part of the dispute relating to the sale of the property is properly resolved on trust law principles, not the law of fraudulent conveyances. At the hearing of the appeal, the respondents conceded that the pleadings permit the matter to be considered on the basis of trust law principles.
19Paragraph 1 of the Judgment resulted in Marie Sears becoming the legal titleholder to the property.
20Paragraph 3 of the Judgment implicitly gives Marie Sears the right to sell the property, as it provides that the property can be sold before her death. However, paragraph 3 explicitly provides that if the property is sold, Mary Sears is entitled to 35% of the net sale proceeds. In other words, Mary Sears is entitled to a 35% beneficial interest in the sale proceeds of the property.
21Moreover, paragraph 4 of the Judgment gives Mary Sears the right to live in the property, without expense, until her death or until the property is sold.
22The combined effect of paragraphs 3 and 4 is to make Marie Sears trustee of the property at the point of sale. As trustee, Marie Sears is obliged to act in the best interests of the beneficiaries. A trustee must use all reasonable diligence to obtain the best price for the property and must pay fair and equal attention to the interests of all persons concerned. See Slater v. Badenach (1884), 10 S.C.R. 296.
23On the record before this court, it is not clear that the property has actually been sold. Marie Sears is entitled to sell the property; she is not entitled simply to transfer title to others nor is she entitled to buy out Mary Sears’ interest in the property. The fact that a transfer of the property was executed and registered does not mean that a sale actually took place. A sale involves transfer for consideration.
24The burden of proof is on Marie Sears, as trustee, to show both that the trust property was actually sold and, if it were, that she obtained a sale price that discharges her obligation to Mary Sears qua beneficiary.
25Marie Sears has not proven that the property was actually sold and, if it was, that the value of $175,000 ascribed to the property was the fair market value at the date of sale. One might consider that the mortgage for $215,000, the basis for which amount is not explained in the record, is evidence to the contrary but that need not be decided. As trustee, Marie Sears may only sell the property for an amount that demonstrates that she has acted solely in the best interests of the beneficiaries.
26In light of these conclusions, there is no need to consider Mary Sears’ motion to introduce fresh evidence.
Disposition
27For the reasons given, the appeal is allowed and this matter is referred back for trial of the following issues:
(i) Did Marie Sears sell the property municipally described as 72 Mulholland Avenue, Toronto?
(ii) If so, upon what date did the sale take place and what was the fair market value of the property on the sale date?
23The appellant is entitled to her costs on appeal and below. Costs of the appeal are fixed at $6,000.
Released: August 1, 2003 Signed: “E.E. Gillese J.A.”
MAC “I agree: M.A. Catzman J.A.”
“I agree K. Feldman J.A.”