CITATION: Houston v. Houston, 2011 ONSC 5610
COURT FILE NO.: DC-09-00000047
DATE: 2011-09-23
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
RE: Laura Ann Houston, Appellant
- and -
Shawn Francis Houston, Respondent
BEFORE: Justice Gordon, Justice Chapnik, Justice Murray
COUNSEL: Joel Skapinker, for the Appellant
Stacy M. MacCormac, for the Respondent
HEARD: September 21, 2011
ENDORSEMENT
GORDON J.
Overview
[1] The Appellant wife appeals the decision made by Justice D. Roger Timms on May 26, 2010 following a six day trial. The trial was held to determine what payment, if any, was required to equalize the parties’ net family properties. Justice Timms issued a detailed oral judgment finding that the Respondent was required to pay to the Appellant, the sum of $46,103.96.
Standard of Review
[2] The Appellant raises several issues on appeal which attract different standards of review. Where the Appellant has raised a question of law, the standard of review is correctness. Where the Appellant has raised a question of fact, the standard of review is whether the trial judge committed a palpable and overriding error.
The Line of Credit Issue
Applicable Facts
[3] The first and most significant issue raised by the Appellant is the manner in which the trial judge treated the amount owing, as of the date of marriage, on a line of credit secured by a collateral mortgage on the matrimonial home.
[4] On the date of marriage, the Respondent owned a property known municipally as 132 Centennial Drive in Port Hope. That property subsequently became the matrimonial home. At the date of marriage the home was subject to a collateral mortgage which secured a line of credit with a balance of $114,996.91. Of this amount, the trial judge found that no more than $25,000 was related to the maintenance, preservation or improvement of the home. However, in calculating the required equalization payment, no part of the line of credit was included in the calculation of the Respondent’s debts and liabilities owing on the date of marriage.
Position of the Appellant
[5] It is the position of the Appellant that unless the Respondent is able to prove on a balance of probabilities that the monies borrowed on the line of credit were used to purchase or improve the property, they must otherwise be deducted as a debt or liability owing on the date of marriage.
Position of the Respondent
[6] It is the position of the Respondent that the entire balance of the line of credit, whether used to acquire or improve the home or not, is not to be deducted, since the debt is linked to the home by virtue of the collateral mortgage.
Finding of the Trial Judge
[7] In his reasons, the trial judge relied on the case of Collier v. Torbar, [2002] O.J. No. 2879 (C.A.) to find that no part of the debt was to be considered a debt or liability on date of marriage. In particular, he cited paragraph 20 of the decision which provides in part as follows: “In general terms, it seems to me that if the borrower can demonstrate that he or she is subject to some legal or financial constraint linking the debt to the matrimonial home, the debt should not be deducted from the marriage date value of other property owned by the borrower.” Given the existence of the collateral mortgage which secured the line of credit, the trial judge found the required link.
Analysis
[8] The issue raised in this ground of appeal is a question of law and accordingly a standard of correctness applies.
[9] The governing provision of the Family Law Act is Section 4(1) which, at the time this matter was tried, read as follows:
- (1) In this Part,
“net family property” means the value of all the property, except property described in subsection (2), that a spouse owns on the valuation date, after deducting,
(a) the spouse’s debts and other liabilities, and
(b) the value of the property, other than the matrimonial home, that the spouse owned on the date of the marriage, after deducting the spouse’s debts and other liabilities, calculated as of the date of marriage;
[10] It is to be noted that this provision of the Family Law Act requires the owner to deduct the debt owing on a matrimonial home, even though the value of the home itself is to be excluded. The result is what has been characterized as a double burden on the owner of the matrimonial home in certain circumstances. More specifically, a home owning spouse does not get to deduct from his net family property the value of the home as of the date of marriage and he must include the debt associated with the home in calculating the net value of his remaining assets as of the date of marriage. The result is an artificial increase in the home owning spouse’s net family property.
[11] The issue has been before the court on several occasions culminating in the Court of Appeal decision in Collier v. Torbar where in paragraphs 16 and 17, the court held as follows:
Section 4(1)(b) of the Family Law Act imposes a special burden on the spouse who brings a matrimonial home into the marriage by not permitting the spouse to deduct the marriage date value of the home in calculating his or her net family property. The legislature must have determined that the special character of a matrimonial home justified this special intention.
However, to require the spouse to deduct a debt incurred to purchase the matrimonial home from the marriage date value of property owned on the marriage date would impose a double burden. The spouse would receive no benefit for the marriage date value of the matrimonial home and would be further burdened by the marriage date amount of any debt attributable to the home. I agree with the reasoning in DaCosta v. DaCosta, Hulme v. Hulme and Reeson v. Kowalik that the Family Law Act should be interpreted so as to avoid this obvious unfairness.
[12] The Court of Appeal went on to find that although the loan under scrutiny in that case was not a mortgage, there were sufficient financial and legal constraints linking the debt and the matrimonial home to bring the case “...within the principle from DaCosta v. DaCosta, Hulme v. Hulme and Reeson v. Kowalik.”
[13] In commenting upon the Wife’s alternative submission that no debts incurred to acquire a matrimonial home, whether or not secured by a mortgage, should be deducted from the marriage date value of property owned on the marriage date, the Court of Appeal wrote at paragraph 20, that “Although there is much to be said for treating all debts on the same basis regardless of the legal form they take, unsecured and undocumented family loans may require different treatment. In general terms, it seems to me that if the borrower can demonstrate that he or she is subject to some legal or financial constraint linking the debt to the matrimonial home, the debt should not be deducted from the marriage date value of other property owned by the borrower. While I do not wish to rule out the possibility of similar treatment for other debts incurred to purchase a matrimonial home, courts must closely scrutinize unsecured and undocumented family loans to ensure the integrity of the equalization provisions of the Family Law Act.”
[14] Counsel for the Respondent, and indeed the trial judge, have taken these last comments of the Court of Appeal to stand for the proposition that any debt, even if unrelated to the acquisition of the matrimonial home, need not be deducted from the marriage date value of other property provided the borrower is subject to some legal or financial constraint linking the debt to the matrimonial home. However, this interpretation disregards the earlier finding of the court and the submission to which the comment was addressed, both of which specifically presuppose that the debt was incurred for the acquisition of the property. When these comments are considered in their context, it is clear that they were directed not to the purpose of the debt, but to its form.
[15] Accordingly, it is my reading of Collier v. Torbar that there is a twofold requirement for relief from deduction: firstly that the debt has been incurred to acquire the matrimonial home, and secondly that there must be some financial or legal constraint linking the debt to the home. If the borrower is able to satisfy the court on a balance of probabilities that both of these criteria are met he or she need not deduct the debt from the value of other assets owned on the date of marriage. If the borrower is not able to satisfy the court on one or both of these points the debt must be deducted.
[16] This reading of Collier v. Torbar would also accord with the decision of Justice Marshman in the case of Nagy v. Nagy, (2002) 27 R.F.L. (5th) 383, in which she concluded that:
“... when the debt was incurred to purchase a matrimonial home and is secured against that home, it should not be deducted from other assets owned on the date of the marriage. However, when (as here) the debt was originally incurred to purchase assets which can be excluded from the definition of net family property because they were owned on the date of the marriage, surely the plain wording of the Act provides for the subtraction of the debt owing from the value of those assets.”
[17] To hold otherwise would be to allow a borrower to avoid a double burden which does not, in fact, exist.
Conclusion
[18] The trial judge found that of the amount outstanding on the line of credit it had been established on a balance of probabilities that $25,000 could be attributed to the maintenance or improvement of the matrimonial home. Although this portion of the debt may not have been incurred for the purpose of acquiring the home, I would extend the eligibility for non-deduction to debt incurred to maintain or improve its value as in this case, since the same rationale of avoiding a double burden ought to apply to a debt incurred for that purpose. The trial judge’s factual finding is one that was open to the trial judge on the evidence and for which there was no palpable or overriding error. In the result, it is appropriate that of the balance due on the line of credit as of the date of marriage, the sum of $89,966.91 be deducted from the Respondent’s other assets owned on the date of marriage.
The Promissory Note Issue
[19] The Appellant acknowledges that when the Respondent purchased the matrimonial home from his parents there was a debt obligation for the unpaid balance of the purchase price, which amounted to $80,000.00. The trial judge found that this debt and the terms of its repayment were properly reflected in a promissory note which had been prepared when the transaction was completed but of which no signed copy could be located to be put into evidence. He went on to find that the balance owing as of the date of marriage was $47,000.00 and that a term of the loan was that it would be due in full in the event of the sale of the property. Since the debt was incurred for the purchase of the property and there was a financial constraint linking the debt to the home, he did not require the Respondent to deduct the loan balance from his assets existing on the date of marriage.
[20] The Appellant takes the position that the trial judge erred in determining the balance owing as of the date of marriage and in finding that there existed a legally binding constraint as required by Collier v. Torbar.
[21] The trial judge’s finding with respect to the balance owing on the debt as of the date of marriage is a finding of fact. He considered the evidence which was placed before him and was satisfied on a balance of probabilities that the Respondent had made payments to his parents of some $33,000.00. He specifically considered and quite properly relied upon documentary evidence which established that monthly payments of $500.00 had been made. There was no palpable or overriding error in this finding or the manner in which he arrived at it.
[22] Given the trial judge’s finding that the debt existed on the terms set out in the unsigned promissory note that was before the court, and given that a term of the debt was that it would become due in full in the event of the sale of the home, there can be no doubt that there was some legal or financial constraint linking the debt to the matrimonial home, as prescribed in Collier v. Torbar.
[23] Accordingly, this ground of appeal must fail.
The 2000 Chevrolet Monte Carlo
[24] The Respondent concedes that the trail judge erred by failing to include in the Appellant’s assets on marriage, a 2000 Chevrolet Monte Carlo valued at $9,000.00 and that it is appropriate for this court to revise the required equalization payment to reflect this error.
The College Street Debt
[25] The Respondent was a joint owner with his parents of the home occupied by his parents and known as 24 College Street. There was a mortgage on the property which he was obliged to sign given that he was an owner of the property. The balance of this mortgage decreased by about $18,000.00 over the course of the marriage and the Appellant correctly points out this was not factored into the trial judge’s calculation.
[26] However, at the trial it became abundantly clear that the Respondent received no part of the loan and did not and was not expected to contribute to its payment. In fact, during closing submissions the Appellant volunteered that in the circumstances it was not appropriate to include in the Respondent’s net family property the amount by which that mortgage had been reduced during the marriage and she specifically requested that it not be factored into the judge’s calculations.
[27] Given the circumstances of the loan and the specific concession made at trial it is not appropriate to revisit that issue on appeal.
Disputed Valuations
[28] The Appellant argues that the trial judge incorrectly valued several items at trial and improperly preferred the evidence of one expert over another. In my view, the trial judge properly considered the evidence before him and made findings of fact free from overriding or palpable error.
The Honda Generator
[29] The parties agree that the Husband owned a Honda Generator on the date of separation that was worth $1,750.00. The trial judge erred by not including this asset in the Respondent’s assets on separation. It is appropriate that the required equalization payment include adjustment for this item.
Conclusion
[30] The trial judge determined that the Respondent owed to the Applicant an equalization payment of $46,103.96. Having regard to the errors noted above the decision of the trial judge is set aside. In its place it is ordered that the Respondent pay to the Appellant an equalization payment of $96,462.41.
[31] In the event the parties are unable to agree on costs, we invite written submissions on the costs of this appeal and the trial below, not to exceed six pages in length per party. The Appellant’s submissions shall be delivered within 30 days. The Respondent’s within 45 days.
Justice Gordon
Justice Chapnik
Justice Murray
Date: September 23, 2011