Chavez and Toplar v. Ertan and Mehmet, 2014 ONSC 3124

CITATION: Chavez and Toplar v. Ertan and Mehmet, 2014 ONSC 3124

DIVISIONAL COURT FILE NO.: DC-7-13 (Small Claims Court Claim No. SC-11-2125)

DATE: 2014-05-23

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

Salvador Chavez, Blanca Chavez and Hasan Toplar Plaintiffs (Respondents)

– and –

Yilmaz Ertan and Alkan Mehmet Defendants (Appellants)

COUNSEL: J.E. Opolko, Counsel for the Respondents (Plaintiffs) F.A. Mendes, Counsel for the Appellant (Defendant), Alkan Mehmet No one appearing for Yilmaz Ertan

HEARD: May 15, 2014

THE HONOURABLE MR. JUSTICE D.J. GORDON

REASONS FOR DECISION

[1] On April 28, 2013 judgment was granted against both defendants, Yilmaz Ertan and Alkan Mehmet, jointly and severally, in the amount of $25,000, plus costs, after a trial in the Kitchener Small Claims Court.

[2] Mr. Mehmet appeals from that judgment. For the reasons that follow, the appeal is granted.

Background

[3] In the Spring of 2010, Hasan Toplar purchased a residential property, known as 392 Fischer Hallman Road, Kitchener. The purchase price was $200,000. Yilmaz Ertan had recommended the acquisition as an investment. Mr. Toplar then resided in Ottawa.

[4] The residence required renovation work. Mr. Ertan suggested Mr. Mehmet for the project. Mr. Toplar and Mr. Mehmet entered into an oral agreement for that purpose. Work proceeded. Payments were delivered to Mr. Mehmet from time to time.

[5] In the Fall of 2010, Mr. Ertan informed Mr. Toplar of a potential purchaser for the property. On November 12, 2010, Salvador Chavez and Blanca Chavez signed an offer to purchase. The purchase price was $280,000. Mr. Toplar accepted the offer by signing on November 17, 2010.

[6] Schedule “A” to the agreement identified a number of items to be completed prior to closing, including the walkway, laundry room, basement bedroom, electrical work and siding on windows.

[7] The purchase price was subsequently reduced to $265,000, as the purchasers were unable to arrange mortgage financing on the original purchase price.

[8] Closing of the transaction occurred on January 28, 2011. The purchasers did not inspect the property prior to this event. A holdback of $500 was arranged with respect to the siding on the windows only. The monies were subsequently released to Mr. Toplar.

[9] At some point after closing, Edwin Chavez, son of Salvador Chavez and Blanca Chavez, approached Mr. Mehmet as to installing driveway paving stones. Mr. Mehmet agreed to do so on his return from Cyprus. This did not occur as this action was commenced prior to his return.

Litigation

[10] The initial claim was issued on August 24, 2011. The plaintiffs were Mr. Chavez and Ms. Chavez. The defendants were Mr. Toplar, Mr. Ertan and Mr. Mehmet. The claim sought damages of $25,000 for the work on the property that had not been completed. The plaintiffs based their claim on failure to repair the Schedule “A” items, latent defects and fraudulent misrepresentations. Mr. Chavez and Ms. Chavez were self-represented at this point in time.

[11] Mr. Ertan retained a solicitor, Timothy Fedy. Mr. Fedy prepared and served a Defence, dated September 9, 2011. In this document, Mr. Ertan denied liability for the plaintiffs’ claims. He also asserted that the plaintiffs were in possession of appliances, seeking compensation for same. This latter item was then formally addressed in a Defendant’s Claim, dated September 15, 2011. Mr. Ertan’s claim was for $5,000.

[12] Mr. Mehmet served a Defence, dated October 11, 2011. He was then self-represented. Mr. Mehmet denied liability to the plaintiffs, saying he never received any consideration from them and did not enter into any agreement to do work for the plaintiffs.

[13] A copy of Mr. Toplar’s Defence was not provided by counsel. It is presumed such a Defence was served, given the nature of subsequent events.

[14] Mr. Chavez and Ms. Chavez served a Defence to Defendant’s Claim, dated November 1, 2011. They denied liability for the claim of Mr. Ertan, saying the appliances were left at the premises, despite their requests to have them removed. They also asserted that Mr. Ertan had left the property without paying his rent and utility bills.

[15] A settlement conference took place in the Fall of 2011. Subsequently, an Amended Claim was issued on December 29, 2011. As a result of this document, Mr. Toplar was no longer a defendant. Rather, he became a plaintiff. The allegations against Mr. Toplar in the original Claim were deleted. New allegations were added, essentially made by Mr. Toplar against Mr. Ertan and Mr. Mehmet. Mr. Toplar sought damages from them of $25,000, which funds he asked be used to complete the renovations of the house for the benefit of the Chavez family. The three plaintiffs are all shown as self-represented in this document.

[16] I pause at this point to comment on the Amended Claim. As the trial judge said in paragraph 4 of her Reasons, this was “an unusual twist”.

[17] In my view, the change in Mr. Toplar’s status as a party was fatal to the claim of Mr. Chavez and Ms. Chavez as against Mr. Mehmet. Mr. Mehmet’s liability, if any, was not independent. It could only arise through a cross-claim from Mr. Toplar.

[18] Mr. Mehmet served a Defence to the Amended Claim, dated February 3, 2012. As before, he denied liability.

[19] Mr. Fedy served a Defendant’s Claim, dated February 6, 2012, on behalf of Mr. Ertan. Mr. Ertan sought damages of $5,000 against Mr. Chavez and Ms. Chavez for the appliances as in his prior pleading. He now claimed damages of $25,000 against Mr. Toplar, alleging an oral contract to equally share in the profit on the sale of the property.

[20] Mr. Toplar served a Defence to Defendant’s Claim, dated February 20, 2012. He was still self-represented. Mr. Toplar denied liability to Mr. Ertan, alleging the claim to share in the profits to be a “lie”.

[21] The three plaintiffs retained Mr. Opolko prior to trial. Of some interest, Mr. Opolko was also the solicitor for Mr. Chavez and Ms. Chavez with respect to the real estate transaction. According to the Reasons of the trial judge, at paragraph 50, Mr. Ertan arranged for the lawyers, Mr. Kosky representing Mr. Toplar. Having regard to the nature of the dispute in this lawsuit, Mr. Opolko was in the unenviable position of representing both the vendor and purchasers at trial.

Reasons of Trial Judge

[22] The trial took place over two days, May 8, 2012 and January 10, 2013. The Reasons of the trial judge were released April 28, 2013.

[23] Following a lengthy review of the evidence and analysis of the issues, the trial judge granted judgment as follows:

(a) Mr. Chavez and Ms. Chavez were awarded $25,000 in damages against Mr. Ertan and Mr. Mehmet, jointly and severally; and

(b) Mr. Ertan’s claim against Mr. Toplar and against Mr. Chavez and Ms. Chavez were dismissed.

[24] As previously mentioned, Mr. Toplar was also a plaintiff but the aforementioned order did not award him damages, despite findings made by the trial judge regarding Mr. Ertan’s breach of his fiduciary duty. Indeed, the trial judge concluded that Mr. Toplar did not suffer any damages but, rather, profited from the sale of the property.

[25] Mr. Toplar did not appeal the decision. Nor did Mr. Ertan. Accordingly, I need only address the issues as they relate to Mr. Mehmet and the Reasons of the decision of the trial judge pertaining to his involvement in events.

Issues on Appeal

[26] Although numerous grounds were articulated in the Notice of Appeal, dated May 24, 2013, the issues raised by Mr. Mendes in his Factum and at the hearing were restricted to the following:

(a) did the law of agency apply?

(b) was there a special relationship between Mr. Mehmet and Mr. Chavez and Ms. Chavez?

(c) were representations made by Mr. Mehmet to Mr. Chavez and Ms. Chavez? and

(d) was Mr. Mehmet liable to Mr. Chavez and Ms. Chavez.

Standard of Review

[27] The standard of review of a trial decision is as follows:

(a) on pure questions of law, correctness;

(b) on questions of fact or mixed law and fact, overriding and palpable error that constitutes a substantial wrong or miscarriage of justice.

See: Housen v. Nikolaisen, [2002] S.C.R. 235.

Analysis

[28] In my view, the appellant succeeds on each of the aforementioned issues. With respect, the trial judge misapprehended the evidence or drew improper inferences of fact from the evidence and incorrectly applied the law to the facts of the case. Such results in reversible error.

(i) Agency

[29] There is no dispute by the parties in the appeal as to the status of Mr. Ertan regarding the events in question. The trial judge determined Mr. Ertan was the agent of both Mr. Toplar and of Mr. Chavez and Ms. Chavez. There is ample support in the evidence for this finding.

[30] The involvement of Mr. Mehmet was different. He was the contractor, retained by Mr. Toplar to perform the renovation work.

[31] In her Reasons, the trial judge refers to the basis of the plaintiffs’ claim being negligent and fraudulent misrepresentation made by both defendants regarding the work to be performed before and after closing of the transaction. In her analysis, the trial judge considered the legal principle of “caveat emptor” and its exceptions, commenting that such normally involves vendors and purchasers. As the defendants were not the vendors, she next examined principles of agency.

[32] The claim did not allege that Mr. Mehmet acted as an agent of any of the plaintiffs. Having regard to the lesser standards regarding pleadings in Small Claims Court actions, an examination of the evidence at trial does not reveal a factual basis to find Mr. Mehmet was an agent. Indeed, the trial judge made no such finding regarding Mr. Mehmet, only as to Mr. Ertan. Yet, in her analysis, the trial judge treated both defendants in the same manner.

[33] A determination of agency is a conclusion of law. The onus is on the plaintiffs to present evidence to support a finding of fact. See: Gardner v. Ontario (1987), 7 D.L.R. (4th) 464 (Ont. S.C.), at paras. 27-28, citing Garnac Grain Co. Inc. v. H.M.F. Fairclough Ltd. and Bunge Corporation (1967), 2 All E.R. (H.L.).

[34] To engage in a discussion of liability pertaining to representations, a finding of agency is required. It is unclear in her Reasons as to why Mr. Mehmet was treated in the same manner as Mr. Ertan. Regardless, the evidence does not support a finding of agency. This is both an improper inference and an error in law.

(ii) Special Relationship

[35] In considering liability for negligent misrepresentations, the trial judge correctly identified the necessary requirements, namely:

(i) there is a duty of care based on a “special relationship” between the representor and representee;

(ii) the representation must be untrue, inaccurate or misleading;

(iii) the representor must have acted negligently in making the misrepresentations;

(iv) the representee must have reasonably relied on the negligent misrepresentations; and

(v) the reliance must have been detrimental to the representee in that damages resulted.

See: Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at para. 34.

[36] The initial hurdle is in establishing the special relationship. Mr. Mehmet was retained by Mr. Toplar. The trial judge correctly found there was no contractual relationship between Mr. Mehmet and Mr. Chavez and Ms. Chavez.

[37] In result, the analysis of special relationship necessitated consideration of the following indicia:

(i) whether the representor had a direct or indirect financial interest in the transaction in respect of which the representation was made;

(ii) whether the representor was a professional or someone who possessed a special skill, judgment or knowledge;

(iii) whether the advice or information was provided in the course of the representor’s business;

(iv) whether the advice or information was given deliberately, and not on a social occasion; and

(v) whether the advice or information was given in response to a specific inquiry or request.

See: Hercules Management Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165, at para. 43.

[38] The analysis of the trial judge was restricted to the involvement of Mr. Ertan, such as preparation of the agreement of purchase and sale. There was no finding as to Mr. Mehmet. Nor could there be such a finding as Mr. Mehmet was performing work for Mr. Toplar and had no interest in the transaction. Hence, there was neither a contractual arrangement nor a special relationship between Mr. Mehmet and Mr. Chavez and Ms. Chavez. Again, it appears the trial judge treated Mr. Mehmet in the same manner as Mr. Ertan. That was incorrect. As no special relationship was found to exist, there is no duty of care owed to Mr. Chavez and Ms. Chavez and, hence, no liability based on negligent misrepresentations.

(iii) Representations

[39] The trial judge determined that both defendants made untrue, inaccurate and misleading statements about the work to be done. She also found they made false representations. While there is considerable discussion in her Reasons regarding Mr. Ertan, the trial judge did not identify what representations were made by Mr. Mehmet. At best, there was a reference that work would be completed after closing but the purported misrepresentations by Mr. Mehmet were not identified.

[40] As hereafter discussed, the only statements made by Mr. Mehmet were with respect to the driveway. The representations regarding the renovations to the residence came from Mr. Ertan. Assuming the purported misrepresentations pertained to the quality of workmanship, there must be an evidentiary foundation to support a finding regarding Mr. Mehmet independent of Mr. Ertan. This was not done, nor could it as Mr. Mehmet’s relationship was with Mr. Toplar.

[41] The only discussion involving Mr. Mehmet is with the driveway. It appears there is no dispute Mr. Mehmet advised Edwin, as agent for his parents, that the work would be done on his return from Cyprus. There was a disagreement as to the time frame for the return. Regardless, this action was commenced before Mr. Mehmet returned and, hence, the work was not done.

[42] While Mr. Mehmet made a representation the driveway paving stones would be installed, such occurred long after closing of the transaction and has no connection to the agreement of purchase and sale. Further, the evidence does not establish or contract for this item as no mention was made as to cost or other details. There was no consideration. The trial judge dealt with the driveway as part of the whole project when, in fact, it was a separate matter unconnected to the transaction.

(iv) Liability

[43] There can be no dispute, Mr. Mehmet, as the contractor, bears responsibility for his work. However, as the trial judge found, there was no contractual relationship between Mr. Mehmet and Mr. Chavez and Ms. Chavez. The contract was with Mr. Toplar and hence, any liability of Mr. Mehmet is to Mr. Toplar. But, Mr. Toplar suffered no damages, having made a considerable profit on the transaction.

[44] Assuming merger did not apply on the closing of the transaction and that the defects were either latent or caused by defective workmanship, Mr. Chavez and Ms. Chavez had a cause of action against Mr. Toplar. Absent agency and the other factors previously discussed, there was no claim directly against Mr. Mehmet. Mr. Toplar could have cross-claimed against Mr. Mehmet. Joining forces with Mr. Toplar in the Amended Claim was a fatal decision by Mr. Chavez and Ms. Chavez.

[45] Even if it could be said that Mr. Toplar assigned his interests to Mr. Chavez and Ms. Chavez, in so doing, damages could then only be assessed based on a diminution in value of the property. And as Mr. Toplar suffered no damages, Mr. Chavez and Ms. Chavez would be in the same position.

Summary

[46] The trial judge was clearly sympathetic to the plight of Mr. Chavez and Ms. Chavez. Accepting the relevant findings of fact, however, still necessitates a determination of liability based on principles of law. In my view, the path followed by the trial judge was incorrect. The decision cannot stand with respect to Mr. Mehmet.

[47] In result, the appeal is granted and the judgment in the Small Claims Court, granted April 28, 2013 is set aside as it relates to Mr. Mehmet. In the circumstances of this case, I decline to direct a new trial. Mr. Chavez and Ms. Chavez cannot succeed in their claim against Mr. Mehmet. Accordingly, judgment is granted dismissing the plaintiffs’ claim against Mr. Mehmet only.

[48] If the parties cannot agree on the issue of costs, brief written submissions are to be delivered by counsel to my chambers in Cayuga within 30 days of the release of this decision.

D.J. Gordon J.

Released: 23 May 2014

CITATION: Chavez and Toplar v. Ertan and Mehmet, 2014 ONSC 3124

DIVISIONAL COURT FILE NO.: DC-7-13 (Small Claims Court Claim No. SC-11-2125)

DATE: 2014-05-23

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Salvador Chavez, Blanca Chavez and Hasan Toplar Plaintiffs (Respondents)

– and –

Yilmaz Ertan and Alkan Mehmet Defendants (Appellant)

REASONS FOR DECISION

D.J. Gordon J.

Released: May 23, 2014

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