Ferraton v. Shular, 2013 ONSC 7633
CITATION: Ferraton v. Shular, 2013 ONSC 7633
DIVISIONAL COURT FILE NO.: 594/12
DATE: 20131210
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
A.C.J.S.C. MARROCCO, HIMEL AND DITOMASO JJ.
BETWEEN:
MICHELLE FERRATON Appellant/Plaintiff
– and –
ANTHONY SHULAR Respondent/Defendant
Jeffrey Radnoff, for the Appellant/Plaintiff
Mark I. Wainberg, for the Respondent/ Defendant
HEARD at Toronto: December 10, 2013
A.C.J.S.C. MARROCCO (orally)
[1] Michelle Ferraton (“Ferraton”) sued Anthony Shular (“Shular”) for the balance of funds she claimed were owing under an agreement. The case proceeded to a summary trial under Rule 76.12 of the Rules of Civil Procedure. The presiding judge dismissed the action on the basis that Ferraton was precluded from advancing any claim for compensation because the Real Estate Business Brokers Act, 2002, S.O. 2002, c. 30 (“REBBA”) applied and Ferraton was not a licensed real estate salesperson and that the contract was unconscionable and must be set aside for legality. Ferraton appeals that decision dismissing her claim and ordering her to repay $17,954.00 that she had previously garnished from his bank account under a default judgment for breach of contract.
Background
[2] Shular inherited his mother’s house in St. Catharines, Ontario after she died in 2006. Shular and his partner Valentin Flicker spent a great deal of time living in and improving the property until 2008. Then Shular, who fell into a deeply depressed state lost interest in the property, failed to take care of it and failed to pay utility bills and taxes. Utilities were cut off and the municipality had to cut the grass.
[3] Shular and Ferraton were friends since 1995. Ferraton was aware that Shular suffered from depression and she had helped him in the past when he was depressed. She and her husband, Mark Pucyk, lived in Toronto but would stay at the house from time to time. She was aware that the property was declining and asked Shular if she could assist him in selling the property. Shular agreed and signed the Power of Attorney on November 11, 2008 permitting Ferraton to arrange for a real estate agent to sell the property.
[4] Ferraton put an arrangement to Shular to which he agreed, whereby Ferraton was to receive half the equity in exchange for helping with the sale of the property. Expenses were to be split between the two of them. The property was sold for $156,000 on November 23, 2008. The net proceeds were $140,000. Ferraton presented Shular with a typed agreement on November 25, 2008, that reduced the terms of their agreement to writing. The agreement provided that, “I, Gary Anthony Shular agree to split the proceeds of 92 Jacobson Avenue, St. Catharines, with Michelle Ferraton, 50%/50% in consideration of her work in arranging the sale of the house. Expenses incurred to sell or maintain the property will also be split 50%/50%.”
[5] Ferraton also agreed to buy the furniture in the house for $3,500. Shular, without any independent witnesses present and no legal advice, signed the agreement. Before closing on December 23, 2008, Shular spoke with a friend who advised him that the deal was unfair. After the closing, Shular gave Ferraton a cheque for $22,115.17, the $2,115.17 representing expenses paid by Ferraton to facilitate the sale and $20,000 representing payment for her contribution to the sale. Mr. Shular felt that this was a “just amount” and a “considerable amount.”
[6] Ferraton sued Shular for the balance of $32,000 representing fifty percent of the net equity. Mr. Shular did not defend the action and Ms. Ferraton obtained default judgment. Ms. Ferraton garnished the sum of $17,954 representing one half of the balance of a joint account in the names of Mr. Shular and his friend, Mr. Flicker. Mr. Shular moved to set aside the default judgment which was set aside with an order of costs payable by Mr. Shular.
[7] The summary trial proceeded on November 14 and 15, 2012. In her Reasons dated November 26, 2012, the trial judge made findings of credibility and found Mr. Shular and Mr. Flicker to be credible and said she preferred their evidence over that of Ms. Ferraton and Mr. Pucyk, where the evidence conflicted. She noted that Mr. Shular had a history of debilitating depression and “when the sales agreement was signed, he was experiencing depression, he was socially isolated and he was vulnerable.”
[8] The trial judge concluded that Ms. Ferraton came up with the equity splitting arrangement and drafted the agreement to protect her interests. The trial judge held that Ms. Ferraton “grossly exaggerated her contribution to the sale of the property” and that the total time spent preparing the property was fifty hours, which involved mainly cleaning the basement. She found that Ferraton was aware of Mr. Shular’s history of depression and that he was in depression during the summer and fall of 2008. Ms. Ferraton prepared an agreement and presented it to Shular without any discussion of the terms, no independent witnesses and no legal advice.
[9] The trial judge held that the agreement could not be enforced because to do so would violate sections 4(1) and 4(2) and s. 9 of the Real Estate and Business Brokers Act. Section 4(1) provides that only a person registered as a salesperson of a brokerage may trade in real estate. Section 4(2) provides that a person who is not registered shall not perform the function of a salesperson and s. 9 provides that, “No action shall be brought for commission or other remuneration for services in connection with a trade in real estate unless at the time of rendering the services, the person bringing the action was registered … under this Act.” J. Wilson J. relied on a decision of Market Leadership Inc. v. Loretta Foods Ltd. (2005) 46933 (Ont. C.A.), where Cronk J.A. for the court considered the meaning of the term “sale” in “real estate” and held that a stay granted by the motions judge should continue.
[10] J. Wilson J. also relied on the case of Neiman v. Duffmits Holdings Inc., 2010 ONSC 4643, where Strathy J. noted that s. 9 of the Real Estate and Business Brokers Act had been consistently enforced by the courts to protect the public.
[11] Justice Wilson found that the agreement was “by its clear terms for work arranging for the sale of the house” and that the claim was for “other remuneration for services in connection with a trade in real estate” and prohibited by sections 4 and 9 of the Real Estate and Business Brokers Act. Ms. Ferraton’s claim was dismissed. Justice Wilson found that Ms. Ferraton was not entitled to any compensation and had to repay the money she had received. However, Justice Wilson noted that Mr. Shular was not seeking repayment of the $22,115.17 that he had paid to Ms. Ferraton and permitted Ms. Ferraton to keep that amount. Accordingly, J. Wilson J. ordered the repayment of the amount garnished, less costs awarded in Ms. Ferraton’s favour.
[12] The trial judge went on to find that the test for unconscionability was met as well. She held that the agreement was unenforceable as there was inequality in the position of the parties in that Ferraton knew about Shular’s emotional frailties and history and took advantage of him, such that there was a radically unequal bargaining position and determined that the agreement was substantially unfair. The trial judge described the agreement as “obviously improvident”. Relying on the classic statement of unconscionability in Mundinger v. Mundinger, 1968 250 (ON CA), [1969] 1 O.R. 606 (C.A.) at para. 6, the trial judge noted that once the elements had been met, the onus shifts to the other party to demonstrate that they were “scrupulously considerate” of the other’s interests during the bargaining process. The trial judge held the agreement was unconscionable and that Ms. Ferraton could not displace the onus.
[13] Section 19(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides that an appeal lies to the Divisional Court from a final order of the Superior Court of Justice for a single payment of not less than $50,000 exclusive of costs. The standard of review for a judicial appeal on a pure question of law is that of correctness. Findings of fact are not to be reversed unless it can be established that the trial judge made a palpable and overriding error. Similarly, questions of mixed fact and law are subject to the palpable and overriding standard of review.
Positions of the Parties
[14] Ms. Ferraton takes the position that the Real Estate and Business Brokers Act does not apply to this case because the payment was not for services in connection with a “trade in real estate.” Ms. Ferraton urges that assisting in finding a profitable deal and doing the work to ensure the deal was completed, is not covered by the Act. Ms. Ferraton points out that there was a licensed real estate person retained to sell the property.
[15] Ms. Ferraton argues that the sanctity of bargains ought to be protected and that Mr. Shular ought not to be entitled to equitable relief. Ms. Ferraton submits that no evidence was led to support an adjustment of the contract price. Finally, she takes the position that the defendant, Shular, does not have clean hands because he took no steps to pay an outstanding costs order and arranged with the assistance of Mr. Flicker to avoid and frustrate a garnishment order of the court. Ms. Ferraton asks that the appeal be allowed with costs.
[16] Mr. Shular takes the position that the trial judge did not commit a palpable and overriding error in finding that the service provided by Ms. Ferraton was in connection with a “trade in real estate.”
[17] It is Mr. Shular’s position that the trial judge’s holding is in keeping with the jurisprudence and public policy. It is also Mr. Shular’s position that unconscionability was clearly and specifically pleaded in the defence and that the trial judge applied the correct test to the facts of this case.
Decision
[18] The trial judge concluded that an agreement where someone would receive approximately $70,000 for fifty hours of work was an unfair bargain, that the parties were in an unequal bargaining position and that Ms. Ferraton could not displace the burden on her to show that her conduct was scrupulously considerate of Mr. Shular’s interest.
[19] There is no basis on which this Court could properly intervene with those findings. The decision to apply the “clean hands doctrine” and grant or deny equitable relief, was a matter for the trial judge. Her Honour took into account the unpaid costs and the defendant’s avoidance of the garnishment order in the relief she granted. There is, therefore, no basis for us to interfere with that discretionary decision. We need not, therefore, decide whether s. 9 of the Real Estate and Business Brokers Act applies.
[20] Finally, it was within the trial judge’s discretion on the day of trial to refuse to hear the plaintiff’s motion to strike and proceed with a two day trial.
[21] Accordingly, the appeal is dismissed.
COSTS
[22] We are not prepared to grant substantial indemnity costs in this matter. I have endorsed the Appeal Book and Compendium, “This appeal is dismissed for oral reasons given. Costs fixed at $6,000 plus disbursements and HST, payable by the appellant to the respondent.”
A.C.J.S.C. MARROCCO
HIMEL J.
DITOMASO J.
Date of Reasons for Judgment: December 10, 2013
Date of Release: December 20, 2013
CITATION: Ferraton v. Shular, 2013 ONSC 7633
DIVISIONAL COURT FILE NO.: 594/12
DATE: 20131210
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
A.C.J.S.C. MARROCCO, HIMEL AND DITOMASO JJ.
BETWEEN:
MICHELLE FERRATON Appellant/Plaintiff
– and –
ANTHONY SHULAR Respondent/Defendant
ORAL REASONS FOR JUDGMENT
A.C.J.S.C. MARROCCO
Date of Reasons for Judgment: December 10, 2013
Date of Release: December 20, 2013