DATE: 20050214

DOCKET: C40264

COURT OF APPEAL FOR ONTARIO

RE:

BEATRICE YOUNGMAN (Plaintiff (Appellant) -and- CARL FERRARO, also known as CARLO LOUIS FERRARO, and RETA FERRARO and MONTY FERRARO (Defendants/Respondents)

BEFORE:

CATZMAN, LASKIN and ARMSTRONG JJ.A.

COUNSEL:

Mark Youngman

for the appellant

Paul L. Seitz

for the respondent

HEARD AND RELEASED ORALLY:

February 9, 2005

On appeal from the judgment of Justice Lorna-Lee Snowie of the Superior Court of Justice dated May 28, 2003.

E N D O R S E M E N T

[1] Two findings are critical to the trial judge’s decision. First, she found that Carl Ferraro had no beneficial interest in the Vardon Drive property. Second, she found that even if he did have a beneficial interest, his transfer of his half-interest to his son, Monty Ferraro, was not a fraudulent conveyance.

[2] In our view, the trial judge’s first finding is unsupportable. The trial judge concluded that Carl Ferraro held a half-interest in trust for his wife, Reta, and that the conveyance from Reta Ferraro to Reta and Carl Ferraro jointly was made solely to effect a severance. Even accepting the evidence of Reta and her lawyer that a half-interest was transferred to Carl Ferraro for the purpose of a severance, it does not follow that he held this interest in trust for his wife. Indeed, all of the evidence shows the contrary – that he held a beneficial interest in the Vardon Drive property. This evidence includes his representations before the Ontario Municipal Board, the payment of his gambling debt and the lifting of the writ of execution in order to transfer the property to his son, the absence of any written documentation evidencing a trust, and the absence of any evidence from the lawyer that the severance was to be effected by a transfer in trust.

[3] We therefore set aside the trial judge’s finding of a trust relationship and conclude that Carl Ferraro beneficially owned a half-interest in the Vardon Drive property.

[4] We must then address the trial judge’s second finding: the transfer to Monty Ferraro in October 1997 was not a fraudulent conveyance.

[5] In our view, on the evidence before her, the trial judge’s assessment of the “badges of fraud” reflects palpable and overriding factual errors. We agree with counsel for the appellant that the trial judge made these three errors:

(i) The trial judge held that the gift to Monty Ferraro was not the only property Carl Ferraro owned because he also owned 11 Cork Street East. Although the trial judge, technically, may have been correct, the Cork Street property had no equity and the principal on the mortgage had been outstanding since 1994.

(ii) The trial judge concluded that Carl Ferraro did not continue in possession of the Vardon Drive property. This conclusion was contrary to the undisputed evidence that after the transfer to Monty Ferraro, Carl Ferraro continued to live at Vardon Drive with his wife and son.

(iii) The trial judge concluded that the consideration for the conveyance was not grossly inadequate because Monty Ferraro agreed to build a house on the property where his parents could live. We do not agree with this conclusion. The property was transferred to Monty Ferraro for love and affection. He financed the building of a house on the property by a mortgage, which was guaranteed by the parents.

[6] These three errors taint the trial judge’s finding that the conveyance was not fraudulent. We therefore set aside that finding.

[7] That leaves the question of remedy. In our view, the only appropriate remedy is a new trial and we so order. Accordingly, the appeal is allowed, the judgment of the trial judge is set aside and a new trial is ordered.

[8] The appellant is entitled to her costs of the appeal, fixed in the amount of $6,000.00, inclusive of disbursements and G.S.T. The costs of the trial before Snowie J. are reserved to the judge presiding at the new trial.

Signed: “M.A. Catzman J.A.”

“John Laskin J.A.”

“Robert P. Armstrong J.A.”