Tomek v. Zabukovec et al.

[Indexed as: Tomek v. Zabukovec]

Ontario Reports Ontario Superior Court of Justice Fowler Byrne J. May 8, 2020 150 O.R. (3d) 398 | 2020 ONSC 2930

Case Summary

Contracts — Formation — Husband and wife in divorce application seeking remedy regarding property acquired by husband's father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Wife failing to establish oral agreement for transfer of property from father to husband and wife.

Estoppel — Proprietary estoppel — Husband and wife in divorce application seeking remedy regarding property acquired by husband's father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Husband establishing proprietary estoppel with respect to house, but not with respect to entire property.

Equity — Unjust enrichment — Husband and wife in divorce application seeking remedy regarding property acquired by husband's father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Husband and wife establishing entitlement to constructive trust through unjust enrichment.

Family law — Property — Constructive trusts — Husband and wife in divorce application seeking remedy regarding property acquired by husband's father — Father acquiring property with the intention of severing and building houses for himself and for husband and wife — Development restriction allowing only one house to be built — Husband and wife building and living in house — Husband believing he would inherit property — Father dying intestate — Husband and wife establishing entitlement to constructive trust through unjust enrichment.

Limitations — Real property — Husband and wife in divorce application seeking remedy regarding property acquired by husband's father — Husband and wife building and living in house on property for over 20 years before separation — Wife moving out of house and husband remaining in possession — Claims not statute-barred — Wife's claim commenced within ten-year limitation period — Limitation period not running against husband while he remained in possession.

The husband and wife were married in 1983. The husband subsequently located a 15-acre property for sale, which was ultimately purchased in the name of his father and financed by both his parents. He then applied for a development permit to construct a single-family dwelling, and he and his wife funded construction of a home. In 1989, the father applied to formally sever a 1.13-acre parcel, where the house was being constructed, with the intention of keeping the remaining 13.87 acres for himself and building another home. The application to sever was dismissed. An application for a development permit to construct a second home on the property was dismissed on the ground that the lot had already been severed to the maximum allowed. The husband and wife moved into the home in 1989 when it was far from complete, and over the next few years made substantial improvements at their own expense. The parties acted as though the house and immediately surrounding area belonged to the husband and wife, and the remaining acreage belonged to the father. The husband believed that he would inherit the property after his father's death. When the father died intestate in 2004, the husband believed that the property would be conveyed to him on his mother's death. In the meantime, the husband and wife continued to live on the property, pay all taxes and insurance, and make improvements with the mother's knowledge. The mother's will directed that a two-acre parcel of land containing the house be severed and conveyed to the husband, with the husband having an option to purchase his brother's interest in the remaining land if severance proved impossible. It was subsequently discovered that title to the property did not automatically vest in the mother's name, but that the rules of intestacy governed. The husband and wife separated in 2011, with the wife moving out of the home in 2018. The wife commenced a divorce application and almost all issues were resolved. Apart from the divorce itself, the only outstanding issues were the interest of the husband and wife in the property, with the husband's brother added as a party as litigation administrator on behalf of the father's estate.

Held, the application for divorce should be allowed and the husband and wife awarded joint beneficial ownership of 75 per cent of the property.

The property claims were not statute-barred. The wife commenced her claim for a beneficial interest against both the husband and estate in 2013, within the ten-year limitation period after the father's death in 2004. Although the husband made no claim until 2015, his continued possession of the land meant that the limitation period against him had not yet commenced.

The wife failed to make out any oral agreement for transfer of the property to the husband and wife. It was difficult to distill, objectively, the intention of the parties. According to the husband, any time the father spoke of leaving the house to him, the wife was never mentioned. There was also insufficient evidence to prove what consideration was required for the land to be conveyed.

The husband and wife established unjust enrichment. There was a benefit to the estate in that the value of the property was significantly enhanced by the construction of a single-family dwelling. There was a corresponding deprivation in that the construction and improvements were fully funded by the husband and wife with no ownership interest on title. There was no juristic reason for the benefit conveyed. Consideration of the circumstances and the reasonable expectations of the parties established that the estate failed to rebut the presumption of unjust enrichment with respect to construction and maintenance of the house, but the estate had rebutted the presumption with respect to the remaining acreage.

The husband made out a claim for proprietary estoppel with respect to the house, but not with respect to the remaining acreage. The father made an implied and unambiguous representation or assurance to the husband that he would eventually enjoy the benefit of part of the property. It was reasonable for the husband to expect that he would benefit from the work he put in on the house, but it was unreasonable for that expectation to extend to the entire property.

The appropriate remedy was a proprietary interest in the form of a constructive trust. A monetary recovery was inappropriate as the elements of proprietary estoppel had been made out. Also, a sufficiently substantial and direct link was established between the couple's contributions and the property. Further, their contributions were difficult to quantify. Based on expert evidence, the land portion of the valuation was almost equal to the house portion. After accrediting to the estate one-half the value of basic improved land and accrediting the remainder to the husband and wife, the result was a split of 25 per cent and 75 per cent, respectively, with the husband and wife to have carriage of the sale.

Cases Referred To:

Caledon (Town) v. Waterstone Properties Corp., [2017] O.J. No. 4087, 2017 ONCA 623, 282 A.C.W.S. (3d) 208, 64 M.P.L.R. (5th) 179, 80 R.P.R. (5th) 173; Kerr v. Baranow (2011), 108 O.R. (3d) 399, [2011] 1 S.C.R. 269, [2011] S.C.J. No. 10, 2011 SCC 10, 328 D.L.R. (4th) 577, 411 N.R. 200, [2011] 3 W.W.R. 575, J.E. 2011-333, 300 B.C.A.C. 1, 14 B.C.L.R. (5th) 203, 274 O.A.C. 1, 64 E.T.R. (3d) 1, 93 R.F.L. (6th) 1, 199 A.C.W.S. (3d) 1214, EYB 2011-186472, 2011 DFQ para. 4, 2011 CFLG para. 26,644, 2011EXP-624, folld

Other cases referred to:

Burns Estate v. Mellon (2000), 48 O.R. (3d) 641, [2000] O.J. No. 2130, 188 D.L.R. (4th) 665, 133 O.A.C. 83, 34 E.T.R. (2d) 175, 97 A.C.W.S. (3d) 333 (C.A.); Cowper-Smith v. Morgan, [2017] 2 S.C.R. 754, [2017] S.C.J. No. 61, 2017 SCC 61, 416 D.L.R.. (4th) 1, [2018] 1 W.W.R. 209, 4 B.C.L.R. (6th) 1, 32 E.T.R. (4th) 1, 285 A.C.W.S. (3d) 776, 2017EXP-3495; Garland v. Consumers' Gas Co. (2004), 72 O.R. (3d) 80, [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, 2004 SCC 25, 237 D.L.R. (4th) 385, 319 N.R. 38, J.E. 2004-931, 186 O.A.C. 128, 43 B.L.R. (3d) 163, 9 E.T.R. (3d) 163, 130 A.C.W.S. (3d) 32; Granger v. Granger (2016), 133 O.R. (3d) 641, [2016] O.J. No. 6472, 2016 ONCA 945, 24 E.T.R. (4th) 182, 273 A.C.W.S. (3d) 780, 407 D.L.R. (4th) 83; Hartman Estate v. Hartfam Holdings Ltd., [2006] O.J. No. 69, 263 D.L.R. (4th) 640, 205 O.A.C. 369, 22 E.T.R. (3d) 161, 23 R.F.L. (6th) 201, 145 A.C.W.S. (3d) 52 (C.A.); McConnell v. Huxtable (2014), 118 O.R. (3d) 561, [2014] O.J. No. 477, 2014 ONCA 86, 41 R.P.R. (5th) 1, 42 R.F.L. (7th) 157, 370 D.L.R. (4th) 554, 237 A.C.W.S. (3d) 505, 315 O.A.C. 3; Orfus Estate v. Samuel and Bessie Orfus Family Foundation, [2013] O.J. No. 1626, 2013 ONCA 225, 227 A.C.W.S. (3d) 297, 86 E.T.R. (3d) 6, 304 O.A.C. 349, affg [2011] O.J. No. 4301, 2011 ONSC 3043, 71 E.T.R. (3d) 210 (S.C.J.); Pecore v. Pecore, [2007] 1 S.C.R. 795, [2007] S.C.J. No. 17, 2007 SCC 17, 279 D.L.R. (4th) 513, 361 N.R. 1, J.E. 2007-874, 224 O.A.C. 330, 32 E.T.R. (3d) 1, 37 R.F.L. (6th) 237, 156 A.C.W.S. (3d) 502, EYB 2007-118938; Pettkus v. Becker, [1980] 2 S.C.R. 834, [1980] S.C.J. No. 103, 117 D.L.R. (3d) 257, 34 N.R. 384, 8 E.T.R. 143, 19 R.F.L. (2d) 165, 6 A.C.W.S. (2d) 263; Rathwell v. Rathwell, [1978] 2 S.C.R. 436, [1978] S.C.J. No. 14, 83 D.L.R. (3d) 289, 19 N.R. 91, [1978] 2 W.W.R. 101, 1 E.T.R. 307, 1 R.F.L. (2d) 1, [1978] 1 A.C.W.S. 225, 1978 DFQ para. 10,003, 1978 DFQ para. 10,001; S & J Gareri Trucking Ltd. v. Onyx Corp., [2016] O.J. No. 3509, 2016 ONCA 505

Statutes referred to:

Evidence Act, R.S.O. 1990, c. E.23, s. 13 Real Property Limitations Act, R.S.O. 1990, c. L.15, ss. 4, 5(1) Statute of Frauds, R.S.O. 1990, c. S.19, s. 4 [as am.] Succession Law Reform Act, R.S.O. 1990, c. S.26

APPLICATION for divorce and resolution of property issues.

Counsel:

Ronald Sleightholm, for applicant. W. Ross Milliken, for Joseph Zabukovec. Dermot P. Nolan and Heather McKinnon, for Edward Waters.

Endorsement

[1] FOWLER BYRNE J.: — The applicant Wife, Judith Evelyn Tomek (the "Wife"), and the respondent Husband, Joseph Zabukovec Jr. (the "Husband"), were married on January 8, 1983 and separated on March 1, 2011. At the time this divorce application was commenced, the parties' three children were grown and independent. Prior to this trial, almost all outstanding issues relating to their marriage and separation had been resolved and they had entered into a comprehensive separation agreement. The only matters that remain outstanding are their divorce and their interest in a property owned by the late Joseph Zabukovec, the Husband's father ("Joseph Sr."). The Husband and Wife have agreed that they will share equally whatever interest either of them is found to have in the property.

[2] Joseph Sr. died intestate in 2004. Few steps have been taken to administer his estate (the "Estate"). Accordingly, the Husband's mother, Mary Zabukovec ("Mary"), was added as a party. The Husband's brother and only other sibling, Edward Waters ("Edward"), was added as Litigation Administrator on behalf of the Estate. It was agreed that the interests of Edward and the Estate were aligned. Mary has filed no pleadings and has taken no position in this litigation. Edward did not give any viva voce evidence at trial, but excerpts of his questioning transcript were read into the record.

I. Issues

[3] The following issues are to be determined at this trial:

(a) Do either the Husband or the Wife have a beneficial interest in the property? (b) If so, how should that interest be valued? (c) Is any party's claim statute-barred? (d) Should the divorce be granted?

II. Facts

[4] Joseph Sr. and Mary have two sons: the Husband, who was the eldest, and Edward Zabukovec, who changed his last name to Waters in or about 2000 or 2001 ("Edward"). While the Husband spent some time out west and in Windsor, Ontario, as a young man, for the most part he remained in the Region of Peel. Edward, on the other hand, left home when he was 16 years old. He lived out west for many years and then resided in various places in southwest Ontario outside of the Region of Peel from approximately 1994 to present.

[5] In or around 1986 or 1987, the Husband joined Joseph Sr. in his framing business as an hourly employee. At that time, the Husband and Wife were living in the Caledon area, either renting or staying with friends or family. The Husband knew that Joseph Sr. was interested in buying some vacant land on which to build some houses. The Husband located some property for sale at 18945 Mountainview Road, Caledon (the "Property"), and told his father about it. Joseph Sr. viewed the 15-acre wooded parcel of land and loved it. He purchased it on August 3, 1988 for $160,000 and took title in his name alone. The purchase was financed by Joseph Sr. and Mary mortgaging their own home located on Hallmark Avenue in Etobicoke for $100,000 (the "Hallmark Mortgage") and investing the rest from their savings. Joseph Sr. and Mary paid the Hallmark Mortgage themselves until it was discharged in April 2003.

[6] Joseph Sr. hoped to be able to sever the land into lots, build houses and sell them for a profit. Despite this, shortly after purchasing the land, Joseph Sr. told the Husband to take a small section of the Property for himself and build himself a home for his family. In September 1988, the Husband took the necessary steps to apply to the Niagara Escarpment Commission for a development permit allowing him to construct a single-family dwelling. He filled out all the necessary forms and had his father sign them as the owner. They received approval in November 1988 and received the building permit in March 1989. Construction started in the fall of 1988, although no substantial work was done until the building permit was obtained. While Joseph Sr. purchased the land, the Husband and Wife funded the construction of the home themselves.

[7] In February 1989, Joseph Sr. applied to formally sever a 1.13-acre parcel from the Property, where the house was being constructed, with the intention of conveying it to the Husband and keeping the rest for himself. He also proposed that another home be constructed on the remaining 13.87 acres.

[8] During this time, the Husband and Joseph Sr. continued to work together in their framing business. An ongoing recession impacted their volume of work. Nonetheless, the Husband found odd jobs where he could and concentrated on building his home. During the first half of 1989, the Husband excavated the land, brought in the services, dug a well and constructed the shell of the house right up to the roof. He had help from friends and family, including Joseph Sr. and even Edward for a day.

[9] Unfortunately, in March 1989, they learned that the Land Division Committee of the Region of Peel denied their request to sever a lot. They appealed that decision to the Ontario Municipal Board in April 1989. In the meantime, they applied to the Niagara Escarpment Commission for a development permit for the construction of an additional home on the Property.

[10] By the summer of 1989, the Husband was running out of money for the construction. Accordingly, Joseph Sr. and Mary mortgaged their own home again on June 28, 1989 for $80,000 and made these funds available to the Husband and Wife to finish construction (the "Construction Mortgage"). With the exception of $6,500 used to purchase a car for the Wife, the funds were used to construct the home, including shingling the roof, installing windows and doors, laying brick and installing the necessary electrical, plumbing and HVAC. Although the Construction Mortgage was taken out by Joseph Sr. and Mary, the Husband and Wife considered this debt their own and paid it down until it was discharged in November 2004.

[11] At the end of June 1989, the Husband and Joseph Sr. learned that they were denied the development permit because the lot had already been severed to the maximum allowed. Joseph Sr. subsequently withdrew his appeal to the Ontario Municipal Board. Accordingly, by early July 1989, Joseph Sr. and the Husband knew that they would never be permitted to sever the Property.

[12] Both Joseph Sr. and the Husband were devasted by the news. Nonetheless, construction continued. The Husband stated that at one point shortly thereafter, his father put his hand on his shoulder and told him not to worry, as it would all be his when Joseph Sr. passed away.

[13] The Estate has maintained the position that when Joseph Sr. invited the Husband to build a home, the Husband and Wife were in a desperate financial position. They had a young family. The Husband did not have stable work and the Wife was at home raising the children. The Estate submits that Joseph Sr. invited them to build a house, not to gift them the Property, but to give them a place to live during this difficult time.

[14] I disagree. On the facts presented, I can comfortably infer that had the severance been granted, the severed lot would have been transferred to the Husband for no consideration and that this was Joseph Sr.'s intention when he told the Husband to build a home. No doubt money was tight, but the Husband and Wife were able in the past, and would continue to in the future, provide a place for their family to live. The offer of a lot from Joseph Sr. was intended to be a gift from father to son, irrespective of the Husband's financial situation at the time.

[15] The Husband and Wife and their young family moved into the house on the Property in the fall of 1989. It was far from complete. The only working sink in the home was in the laundry room. Over the following years, the Husband and Wife installed the kitchen, bathrooms, flooring and trim. They installed a sauna, improved the grounds, replaced the kitchen and windows at least one more time and replaced the roof at least twice before the trial. All of these improvements were funded by the Husband and Wife alone. In 1998, the Husband had the Property assessed to be a managed forest and he regularly kept the forest planted. The Husband started his career as a firefighter in 1990, but he continued to work with Joseph Sr., as a partner, when the industry revived. He continued with this side business until 2007. The Husband and Wife paid the property taxes and insurance premiums on the entire Property from the time they moved in.

[16] From the time the house was built, I find that the parties for the most part treated the Property as two separate units: the house and the immediately surrounding one to two acres (the "House") and the remaining acreage (the "Acreage"). From the time the Property was purchased, Joseph Sr. would frequently visit and walk the Acreage and cut firewood. Despite regularly attending the Acreage, Joseph Sr. respected that the House belonged to the Husband and Wife and treated it as such. He would not enter the House without them being there and only entered when invited. He had no input into the actual design and construction of the House. He had no input into renovations or other improvements. He never asked for rent. Everyone acted as if the House belonged to the Husband and Wife, whereas Joseph Sr. treated the Acreage as if he was the owner.

[17] The Husband understood and believed that the entire Property would remain his father's until his father died. However, the Husband assumed that his father would make arrangements for it to become his one day after his death. Unfortunately, on July 17, 2004, Joseph Sr. died. It appears that Joseph Sr. neglected to prepare a will. Nothing was done with the Estate. All parties, including Edward, believed that everything that belonged to Joseph Sr. would automatically go to Mary. Everyone carried on as before with respect to the Property. The Husband and Wife continued to reside on the Property, pay all the taxes and insurance premiums and make improvements, with Mary's full knowledge. The Husband believed that the Property would be ultimately conveyed to him upon Mary's death.

[18] The years following Joseph Sr.'s death were difficult for Mary. She lived with the Husband and Wife for approximately one year. Edward returned and wanted Mary to sell her home on Hallmark Avenue and buy a condo with him and live near her church. No resolution could be reached. Mary moved into a seniors' home in 2005. Edward cut off communication with his family until approximately 2013.

[19] The Husband testified that after they learned Joseph Sr. had no will, he urged Mary to make one. Arrangements were made for Mary to go see the family solicitor. The Husband did not attend this meeting and was unaware of the contents of Mary's will until 2011, when he discovered it under a carpet in the Hallmark Property while he was renovating it.

[20] The will, signed on December 5, 2005, was professionally drafted and witnessed by a lawyer and another individual. It directed that a two-acre parcel of the Property that contained the House be severed and conveyed to the Husband, which Mary indicated was the intention of Joseph Sr. and herself. If a severance was not possible, a procedure was put in place to value the Property in total and as a two-acre parcel containing the House. The will gave the Husband the option of purchasing Edward's interest in the remaining land at one-half the difference between the values, thereby satisfying her and Joseph Sr.'s intention that the Acreage be divided between their two sons. As stated, Mary did not participate in the litigation. She did not give any evidence with respect to the will or her intentions. A suggestion was made by all parties that Mary probably lacked the capacity to testify in any event. The lawyer who drafted the will was not called as a witness.

[21] In the years following Joseph Sr.'s death, the Husband and Wife continued to improve the Property and the grounds, replaced the roof and installed a geothermal HVAC system and a new generator. The whole time they resided there, the Husband and Wife paid the property taxes and insurance on the entire Property.

[22] Unfortunately, the Husband and Wife separated in March 2011. They continued to reside in the home, separately, until 2018, when the Wife moved out. It was subsequently discovered that title to the Property did not automatically vest in Mary's name, but that the rules of intestacy governed. While it is unclear when this realization was made, it appears to have been in or around the date of separation or shortly thereafter, when separation negotiations commenced. As indicated, Edward was out of contact with the family during this period but likewise took no steps with respect to the Estate.

[23] The Hallmark property was eventually sold in 2013 for $505,000, and all the proceeds went to Mary as a joint tenant. The remainder of the Estate consists of the Property.

[24] It is the position of the Husband and Wife that they have a beneficial interest in the Property either through an unjust enrichment claim, which would entitle them to a constructive trust or monetary compensation, or through the principles of proprietary estoppel. The Wife also argues there was an oral agreement between her and the Husband on one hand, and Joseph Sr. on the other hand, to convey the Property to them. The Estate maintains that the Husband and Wife's claim of an agreement and a beneficial interest in the Property, or even a compensatory claim, has not been made out on the facts or in law. The Estate also claims that the Husband and Wife's claim for a proprietary interest in the Property is statute-barred.

III. Analysis

A. Limitation period

[25] An action to recover land must be brought within ten years after the right to bring such action first accrued to the person bringing it: Real Property Limitations Act, R.S.O. 1990, c. L.15 ("RPLA"), s. 4. Section 4 also applies to equitable claims for property based on the remedy of constructive trust, even if the claimant seeks a monetary award in the alternative: McConnell v. Huxtable (2014), 118 O.R. (3d) 561, [2014] O.J. No. 477, 2014 ONCA 86, at paras. 38-40. Given that the claim of proprietary estoppel is also a claim for land based in equity, it is reasonable to conclude that this ten-year limitation period applies.

[26] Joseph Sr. passed away on July 17, 2004. The Wife commenced her claim, seeking a beneficial interest in the Property vis-à-vis both the Husband and the Estate on June 13, 2013, less than ten years later. The death of Joseph Sr. is the earliest date from which this limitation period could be calculated. Accordingly, the Wife's claims are not statute-barred.

[27] The Husband initially made no claim of an interest in the Property until February 12, 2015, when he amended his Answer to plead the principles of proprietary estoppel. This claim was made more than ten years after the death of Joseph Sr. From that point also, it appears that the Husband was also claiming a proprietary interest in the Property similar to that of the Wife, which was formally reflected in an amendment to his Answer made at trial.

[28] In the case of the Husband's claim for proprietary estoppel though, the limitation period has not yet commenced. In Caledon (Town) v. Waterstone Properties Corp., [2017] O.J. No. 4087, 2017 ONCA 623, the Court of Appeal for Ontario explained that, under s. 5(1) of the RPLA, possession can operate to postpone the commencement of the limitation period. If the claimant has been in possession of the land in which it seeks an interest, s. 5(1) postpones the commencement of the limitation period to the time of dispossession or discontinuance. In Waterstone, there was no evidence that the claimant was ever dispossessed of the land in question, and thus the claim was not statute-barred: paras. 33-37. See, also, Hartman Estate v. Hartfam Holdings Ltd., [2006] O.J. No. 69, 263 D.L.R. (4th) 640 (C.A.), at para. 34.

[29] Accordingly, given that the Husband continues in possession of the land, his claim is not statute-barred.

B. Oral agreement

[30] The Wife alleges that there was an oral agreement between the Husband and Wife on one hand and Joseph Sr. on the other hand, that title to the Property would be transferred to the respondent and the Wife in the future. Given that there is nothing in writing to support this contract regarding land, this claim is prima facie nonactionable: Statute of Frauds, R.S.O. 1990, c. S.19, s. 4.

[31] The Wife argues that the Statute of Frauds does not apply due to part performance by her and the Husband. Before conducting that analysis though, it would be useful to determine if an oral contract has been made out on the evidence.

[32] When dealing with contracts which are substantially or wholly oral, the Court of Appeal for Ontario has stated that (i) it is necessary to distill from the words and actions of the parties what they intended; (ii) evidence of the parties' subjective intentions has no independent place in determining the terms of their bargain; (iii) the test of what the parties agreed to requires an objective determination; and (iv) the contract must include the requisite elements of offer, acceptance and consideration (citations omitted): S & J Gareri Trucking Ltd. v. Onyx Corp., [2016] O.J. No. 3509, 2016 ONCA 505, at para. 7.

[33] On the facts, it is difficult to distill, objectively, what the intention of the parties was. By the Husband's own evidence, the offer of the House was made to him only and not to the Wife. When the severance application was rejected and Joseph Sr. allegedly made assurances to the Husband that it "would all be yours", the Wife was not mentioned. Accordingly, it does not even appear the offer was made to the Wife. Also, there is insufficient evidence to prove what consideration was required for the land to be conveyed.

[34] Accordingly, I do not find on the evidence that an oral contract to convey the Property to the Husband and Wife has been made out. Accordingly, the applicability of the Statute of Frauds is not at issue.

C. Resulting trust

[35] The Wife has claimed a proprietary interest in the Property by way of a resulting trust. This is not a tenable position.

[36] A resulting trust occurs when property is put in the name of one party but because they gave no value for that property, it "results" back to the party who originally transferred it. The presumption can be rebutted if the receiving party can show that at the time of the transfer, the donor intended to gift the property to them: Pecore v. Pecore, [2007] 1 S.C.R. 795, [2007] S.C.J. No. 17, 2007 SCC 17, at paras. 20-24.

[37] All parties concede that the Property was purchased as vacant land. It was purchased with funds from Joseph Sr. and put in his name. There is simply no basis for the argument that ownership of the land should result back to the Husband and Wife. Quite appropriately, this claim was not pursued at trial with any great vigor.

D. Unjust enrichment

[38] The Wife and Husband claim the Estate has been unjustly enriched by the construction of the House and the upkeep of the Property. They claim the remedy of a constructive trust, or in the alternative, monetary compensation.

[39] In order to establish unjust enrichment, the Wife and Husband have to show that there was an enrichment of or benefit to the Estate, a corresponding deprivation of the Wife and Husband, and the absence of a juristic reason for the enrichment: Kerr v. Baranow (2011), 108 O.R. (3d) 399, [2011] 1 S.C.R. 269, [2011] S.C.J. No. 10, 2011 SCC 10, at para. 32. Once unjust enrichment has been established, the court must determine whether the Husband and Wife are entitled to a constructive trust, being a proprietary remedy, or monetary compensation.

[40] On the facts, I find that there has been a benefit to the estate, in that the value of the Property has been significantly enhanced by the construction of a single-family dwelling. The Wife and the Estate both called experts in real estate valuation. While these two experts disagreed on the value of the Property, both agreed that the addition of the single-family dwelling increased its value.

[41] A corresponding deprivation has also been made out on the facts. The construction of the House was fully funded by the Husband and the Wife through a loan from Joseph Sr., which was repaid, and their own employment income. They continually added to and improved their home over the last 30 years, all at their expense, and with no ownership interest on title. The Husband and Wife also paid for the insurance and the property tax on the entire 15 acres.

[42] The Estate provided expert evidence on the rental value of the Property with a single-family home and compared it to the expenses outlaid by the Husband and the Wife for the time of their occupancy. According to that calculation, the Husband and Wife saved approximately $644,000 during their occupancy by not having to pay rent, even if they are credited for the money they put into the Property. The Estate argues that there was no corresponding deprivation by the Husband and Wife and therefore no unjust enrichment.

[43] This is not the appropriate approach when considering the deprivation suffered by the Husband and Wife. This calculation does not account for the personal labour expended by them throughout the course of their occupation of the House, if not the entire Acreage. The value of unpaid labour lies at the heart of the analysis in Pettkus v. Becker, [1980] 2 S.C.R. 834, [1980] S.C.J. No. 103, where the court determined that the unpaid labour of Ms. Becker was a "corresponding deprivation" that let to the remedy of a constructive trust. At no time in that analysis was Ms. Becker made to account for the theoretical savings she amassed because she didn't have to pay rent to Mr. Pettkus.

[44] The enrichment must correspond to the deprivation that the plaintiff has suffered: Kerr, at para. 39. The analysis starts with determining if there was a benefit conveyed and then looks at the corresponding deprivation of that benefit. As stated in Rathwell v. Rathwell, [1978] 2 S.C.R. 436, [1978] S.C.J. No. 14, at p. 455 S.C.R., and cited in Pettkus, at p. 844 S.C.R., "As a matter of principle, the court will not allow any man unjustly to appropriate to himself the value earned by the labours of another." Accordingly, at this stage of the analysis, the focus is not on whether the Husband and Wife were able to save more money by not paying rent, or even if Joseph Sr. could have made more money by charging rent, but whether the fruits of the Husband and Wife's labours -- the construction of the house and the maintenance of the grounds, which they performed and paid for out of their own pocket -- benefited the Estate. It has never been suggested otherwise.

[45] In addition, even if there was a mutual conferral of benefits between the Husband and Wife on one hand and the Estate on the other, it is not to be considered at this stage of the analysis. It is considered at the defence or remedy stage. In limited circumstances, it can be taken into account at the juristic reason stage of the analysis, but only to the extent that it provides relevant evidence of the existence of a juristic reason for the enrichment: Granger v. Granger (2016), 133 O.R. (3d) 641, [2016] O.J. No. 6472, 2016 ONCA 945, at paras. 38-42; Kerr, at paras. 109-115.

[46] With respect to the third element, if there is no reason in law or justice for the Estate to retain the benefit conferred by the Husband and Wife, that benefit would be "unjust": Kerr, at para. 40. First, it must be determined whether there is a juristic reason within the established categories that would deny recovery, such as a contract or the intention to make a gift. According to the analysis set out in Kerr, relying on Garland v. Consumers' Gas Co. (2004), 72 O.R. (3d) 80, [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, 2004 SCC 25, at paras. 44-46, once the Husband and Wife have shown that there is no juristic reason for the benefit conveyed from within the established categories of juristic reasons, they have made out their prima facie case of unjust enrichment. The burden then reverts to the Estate to establish that there is another reason to deny the relief. In determining if another reason has been established, the court should look at all the circumstances of the transaction, having regard to the reasonable expectations of the parties and public policy considerations: Kerr, at para. 43.

[47] On the evidence, there was no contract between the Husband and Wife and Joseph Sr. that would deny the Husband and Wife any benefit or compensation for their contributions to the Property, and none was suggested. Nor was any evidence led to support the finding that the Husband and Wife intended that their expenditures and labour were a gift to Joseph Sr. so that he alone could benefit from it. Again, no party even suggested that this was the case. Accordingly, on a prima facie basis, the Husband and Wife have satisfied their burden to prove that there is no juristic reason for the benefit they conveyed. Accordingly, the burden now shifts to the Estate to show that in all the circumstances, having regard to the reasonable expectations of the parties and public policy considerations, there is another reason that a finding of unjust enrichment should not be made.

[48] It is reasonable for the Husband and Wife to expect to receive some benefit for their ongoing improvement and upkeep of the Property. It is true that they were able to live on the Property at a lower cost than if they had purchased the Property themselves. However, the Husband and Wife were both clear that they would have never expended the time and money that they did on the Property had they believed they would not receive an interest in it.

[49] There is no evidence of Mary's expectations. While a copy of her will was made an exhibit, it is hearsay and will not be relied on.

[50] There is some evidence of Edward's expectations. He knew that the property was owned by Joseph Sr., and he knew that the Husband and Wife had built on the Property. On at least two or three occasions, Joseph Sr. raised the idea that Edward build a house on the Property as well. In each instance, Edward declined because, in his words at the questioning: "It was a mess . . . That whole situation . . . this is a mess here today. The whole situation is a mess." At this point, everyone knew that no severance was possible. From this I infer that Edward was aware that the Husband's ownership claim in the Property was probable, if not inevitable. He also knew that the Husband objected to the proposal that Edward build on the Property for the same reason.

[51] The expectation of Joseph Sr. is less straight forward. The Husband's evidence about what Joseph Sr. told him is hearsay. The Husband and Wife's case is further complicated by the necessity of corroboration by some other material evidence: Evidence Act, R.S.O. 1990, c. E.23, s. 13. The Estate maintains there has been no corroboration, and therefore the court has no evidence of what Joseph Sr. intended, making it more difficult to make a finding of unjust enrichment.

[52] The corroboration required by s. 13 of the Evidence Act must be evidence independent of the evidence of the Husband and Wife which shows that their evidence on a material issue is true. This corroborating evidence can be direct or circumstantial, a single piece of evidence or several pieces of evidence considered cumulatively: Burns Estate v. Mellon (2000), 48 O.R. (3d) 641, [2000] O.J. No. 2130, 188 D.L.R. (4th) 665 (C.A.), at para. 29. Not every particular of the party's evidence need be corroborated but the material evidence in corroboration must be independent of the opposite or adverse party and must appreciably help the judicial mind to accept one or more of the material facts deposed to. It must materially enhance the probability of the truth of the adverse party's statement: Orfus Estate v. Samuel and Bessie Orfus Family Foundation, [2011] O.J. No. 4301, 2011 ONSC 3043 (S.C.J.), at para. 16, affd at [2013] O.J. No. 1626, 2013 ONCA 225.

[53] It is the position of the Husband and Wife that Joseph Sr. intended to give them the entire Property when he died. After reviewing the entirety of the evidence, I find that the intention of Joseph Sr. to convey to the Husband the House was corroborated. However, there is insufficient evidence to corroborate that Joseph Sr. intended to give the entire Property to the Husband. In so finding, I rely on the following corroborating evidence:

(a) With respect to the house, (1) on February 10, 1989, Joseph Sr. signed an Application for Consent to sever the Property. In that Application, Joseph Sr. asked for permission to sever a lot of 1.13 acres, which was to be conveyed to his son, the Husband; (2) after learning that the severance would not occur, Joseph Sr. still facilitated a loan to the Husband of $80,000 in order to construct the home, the repayment of which Joseph Sr. accepted; (3) after learning the severance would not occur, no steps were taken to sell the land; (4) Joseph Sr. was aware that the home was constructed nonetheless and then improved without any expense to Joseph Sr.; (5) the construction costs and continued improvements were at the sole expense of the Husband and Wife; (6) the property taxes and insurance were paid by the Husband and Wife, to the knowledge of Joseph Sr.; (7) Joseph Sr. respected the privacy of the Husband and Wife at the House; he did not intrude or act like it was his; and (8) Joseph Sr. never asked for rent.

(b) With respect to the Acreage, (1) in his application in 1989 to sever a lot, he indicated that he intended to keep the remaining acreage for himself; (2) Joseph Sr. offered to allow Edward to build on the Property; (3) Joseph Sr. mortgaged the Property in order to loan money to Edward, without the consent or involvement of the Husband; (4) Joseph Sr. came and went on the Acreage, without notification to the Husband or without seeking his permission; and (5) there is no evidence that Joseph Sr. ever intended to disinherit his wife or Edward from his entire Estate.

[54] Accordingly, after considering all the circumstances and the reasonable expectations of the parties, the Estate has failed to rebut the presumption that it was unjustly enriched by the construction and ongoing maintenance of the House. However, the Estate has rebutted this presumption with respect to Acreage.

[55] Accordingly, I find that the Estate has been unjustly enriched by the Husband and Wife with respect to the construction, improvement and maintenance of the House, but not with respect to the Acreage. The appropriate remedy will be addressed below.

E. Proprietary estoppel

[56] The Husband relies on the principles of proprietary estoppel in support of his position that he is entitled to the entire Property.

[57] The Supreme Court of Canada has recently stated that an equity arises when (1) an implied or express representation or assurance is made to the claimant on the basis of which the claimant expects that he or she will enjoy some right or benefit over property; (2) the claimant relies on that expectation by doing or refraining from doing something and their reliance is reasonable in all the circumstances; and (3) the claimant suffers a detriment as a result of their reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on their word: Cowper-Smith v. Morgan, [2017] 2 S.C.R. 754, [2017] S.C.J. No. 61, 2017 SCC 61, at para. 15.

[58] The reasonableness of the claimant's reliance may be circumstantial. The relevant assurance or promise must be unambiguous and appear to have been intended to be taken seriously. Equity also allows the court to look backwards from when the promise is due to be fulfilled and to ask whether, in the circumstances of what actually happened, it would be unconscionable for the promise not to be kept: Cowper-Smith, at paras. 26-28.

[59] If the elements of proprietary estoppel are made out, the court has considerable discretion in crafting a remedy that suits the circumstances of the case. That being said, the court is to use a principled approach and is not to exercise completely unfettered discretion according to what the judge considers fair in any particular case. There must be proportionality between the remedy and the detriment it aims to avoid. The reasonableness of the expectations must be assessed in light of, amongst other things, the detriment the clamant has actually suffered. The court must strike a balance between vindicating the claimants' subjective expectations and correcting the detriment, which may be difficult or even impossible to measure: Cowper-Smith, at paras. 46-48.

[60] Irrespective of whether Joseph Sr. made an express representation, I find that he made an implied and unambiguous representation or assurance to the Husband that the Husband would eventually enjoy the benefit of part of the Property. As indicated above, and based on the same factors set out in the unjust enrichment analysis, this representation referred only to the House that the Husband and Wife built and maintained and not to the Acreage.

[61] It is also clear that the Husband relied on this expectation. I find that it was reasonable for the Husband to expect that he would benefit from the work he put into designing and constructing a house specific to his family and that he would benefit from the constant improvements and maintenance to the House, both before and after Joseph Sr.'s death. This is especially so given that the construction was funded with Joseph Sr.'s assistance and then the funding repaid to him, even after they knew the severance was not possible. It is clear that the Husband relied on his father's implied assurances, as he never sought to leave or purchase property elsewhere.

[62] However, it would be unreasonable for the Husband's expectation to extend to the entire Property, including the Acreage. Given Joseph Sr.'s numerous offers to Edward to build on the land (of which the Husband was aware), the mortgage of the Property to benefit Edward and Joseph Sr.'s continual occupation of the Acreage, it would not be reasonable for the Husband to rely on Joseph Sr.'s alleged promise of inheriting "it all".

[63] I also find on the evidence that the Husband suffered a detriment as a result of his reasonable reliance. As indicated, both the Husband and Wife gave evidence that they would have invested their time and money elsewhere if they did not believe they would have an interest in the House they constructed. As a result, it would now be unjust to find that they are unable to rely on the implied assurances of Joseph Sr. that at least the House would be theirs.

[64] Accordingly, I find that the Husband has made out the elements of proprietary estoppel with respect to the House only.

IV. Remedy

[65] I have found that the Estate has been unjustly enriched by the contributions of the Husband and Wife with respect to the House and that the Husband has established proprietary estoppel with respect to the House. It is now the role of the court to determine the appropriate remedy.

[66] Once unjust enrichment has been established, the court is first to consider a monetary remedy prior to granting a proprietary remedy such as a constructive trust. If a monetary remedy is considered appropriate, I am to consider the mutual benefit conferred on each party and use it as a "set-off" when ascertaining a monetary remedy: Granger, at para. 50; Kerr, at paras. 109-115.

[67] Before making a proprietary award, the court must be satisfied that a monetary award is insufficient in the circumstances. In so determining, the court should consider the probability of recovery and whether the Husband and Wife should be granted the additional rights that flow from owning property: Kerr, at para. 52.

[68] After considering the circumstance of this case, I find that a monetary recovery would not be appropriate and that the Husband and Wife should receive a proprietary interest in the Property.

[69] I make this finding for several reasons. First, the elements of proprietary estoppel have been made out. In that circumstance, the only appropriate remedy is an interest in land. Second, a sufficiently substantial and direct link has been established between the contributions of the Husband and Wife and the Property so as to justify a proprietary remedy: Kerr, at para. 51. Finally, the Husband and Wife's contributions are difficult to quantify. While a useful Cost/Benefit analysis was submitted by the Estate, it does not take into consideration all the expenses incurred by the Husband and Wife (which was their obligation to provide). It also does not take into consideration the value of their "sweat equity" expended in the 30 years that at least one of them has resided there. Also, it is difficult to quantify the contributions of the Husband and Wife to the House separate from the contributions to the Acreage.

[70] The court has been asked by the parties to value a portion of a non-severable property as if it was severed. The exercise of valuation is theoretical at best. Nonetheless, a principled approach must be followed. Proportionality is required between the actual detriment suffered, which may be difficult to measure, and the remedy granted. In order to give effect to a principled remedy I will quantify the Husband and Wife's beneficial interest in the Property as a percentage of its entire value.

[71] Two experts provided helpful opinion evidence on the value of the Property. The expertise of both experts was undisputed.

[72] Ms. Vaughan was jointly retained by all parties. She was asked to provide a market value for the Property in two ways. First, she was asked to value the 15-acre lot with the House, being built in 1989, having two storeys, 2,809 square feet (excluding basement), and five bedrooms. Second, she was asked to value the same House on a two-acre lot. Her valuations were current as of May 9, 2016. Her opinion was that the larger parcel had a market value of $810,000 and the smaller parcel had a market value of $771,000, which is 95 per cent of the entire value of the Property. When asked what her valuation would be if the House was on a 1.1-acre parcel, she opined that it could be up to $25,000 less which is up to 92 per cent of the value.

[73] It became clear during Ms. Vaughan's evidence that the value of vacant land ready for development was much higher than vacant land that has no further use. Once a home is built, the accompanying acreage added only 5 to 8 per cent to the value of the land. That being said, she was clear that the conclusion of her two valuations is not that the value of the undevelopable 13 acres is only $39,000, or that the undevelopable 13.9 acres is $64,000.

[74] Ms. Vaughan opined that the most appropriate manner in which to value the Property, and the approach she used, was the direct comparison approach. She used the cost approach only to check the results of the direct comparison approach. The cost approach starts with a value of the land, assumed already to be improved by a home, and then adds to that value based on the particularities of the home, such as its size and features. appropriately depreciated. The result is that the land portion of the valuation, being $400,000, is almost equal to the House portion, being $413,000. She also agreed that in general, land values increase over time and the values of homes depreciate.

[75] Mr. Kormann was hired by the Estate to provide a value of the Property assuming that no house was built and it remained a vacant lot. Mr. Kormann determined that vacant land in this area, if available for development, was worth $44,000 per acre, using the direct comparison approach. Given that the Property is 15 acres, the value as of October 23, 2018 was $660,000. Mr. Kormann agreed that if the land was not available for development, the value of the Property would be a fraction of the value, although no value was given.

[76] He indicated that if asked to value the Property as it actually was with a home, he would start with the value of the land and then add on any improvements to the land, such as a house.

[77] The only reliable and tangible evidence given to the court is the value of the entire Property -- 15 acres with a large home. Unfortunately, no opinion was provided on the value of undevelopable acreage in Caledon. The value of a house on two acres, or 1.1 acres, and the value of developable vacant land, though, can provide some assistance to the court to craft a principled equitable remedy.

[78] In crafting an equitable remedy, I accept that Joseph Sr. purchased the land at a cost of $160,000 with his own funds in 1988. I also accept that between 1988 and 1989, the Husband and Wife expended their own money and labour to dig a foundation, bring in the services and frame the house to its roof, following which in July 1989 they borrowed an additional $80,000 from Joseph Sr. for more construction. Accordingly, in the first few years, I find that the financial contribution of Joseph Sr. on one hand and financial and labour contributions of the Husband and Wife on the other hand, were roughly equal.

[79] After that, the situation changed. Joseph Sr. knew that the land could not be severed and that the remaining undeveloped land would always remain so. Joseph Sr.'s financial contribution to the Property all but halted. From that point, the Husband and the Wife paid the property taxes and insurance premiums for the entire Property. The Husband also took the necessary steps to have the land designated as a managed forest and he became responsible for planting trees. He was responsible for that expense, but he also benefitted from a lower property tax rate. Any improvements from approximately 1990 onwards were all at the expense of the Husband and Wife alone.

[80] While the comparison approach is the appropriate approach to use to value this land as a parcel, equity demands that we value it differently so that each party's respective contribution and detriment be balanced. Therefore, the most principled approach that could be taken on the evidence before the court is to use the cost approach as a foundation and then adjust it for the realities of this case.

[81] I start with the valuation of basic improved land at $400,000 provided by Ms. Vaughan. I infer that this means a bare-bones improvement -- just a residence. That value should be divided between Joseph Sr. on one hand and the Husband and Wife on the other hand because they both started this venture with equal contributions: Joseph Sr. contributed the land and the Husband and Wife contributed the construction.

[82] After that, the additional improvements were all at the expense of time and effort by the Husband and Wife. Given that the building depreciates and the land appreciates in value, any depreciation in the House should be accredited to the Husband and Wife. According to the cost approach of valuation, the depreciated value of the home plus the contributory value of the site improvements was $413,000. Accordingly, one-half of the value of basic improved land, $200,000, shall be accredited to the Estate, and the remaining $613,000, being one-half the value of basic improved land, plus the value associated with the house, shall be accredited to the Husband and Wife. For ease, this will be averaged to a 25 per cent and 75 per cent share in the value of the Property, respectively.

V. Sale of the Property

[83] Given that ownership of the Property has been divided in percentages, the Husband and Wife, as well as the Estate, are all equally motivated to sell the Property for the highest price possible. That being said, there is little utility in having three parties involved in the sale of the property, as long as the Property is sold for a fair value.

[84] Given that the Husband and Wife are most familiar with the Property, it makes sense that they have carriage of the sale, with full disclosure to the Estate.

VI. Conclusion

[85] The parties have advised that the Property will be sold. Accordingly, the issue for the court to decide is how to divide the proceeds of the sale. Accordingly, for the foregoing reasons, I make the following orders:

(a) Joseph Zabukovec and Judith Evelyn Tomek, who were married at Toronto, Ontario, on January 8, 1983, shall be divorced and the divorce shall take effect 31 days after the date of this Order; (b) the Husband and Wife have a joint beneficial ownership of 75 per cent of the Property through a constructive trust and proprietary estoppel; (c) the Estate of Joseph Sr. retains the remaining 25 per cent interest in the Property to be distributed in accordance with the rules of intestacy as set out in the Succession Law Reform Act, R.S.O. 1990, c. S.26; (d) the Husband and Wife shall have the joint and sole authority to retain a real estate agent, set or reset a listing price, instruct the real estate agent, negotiate offers and otherwise ready the Property for sale; (e) the Husband and Wife have the joint and sole authority to enter into a binding agreement of purchase and sale as long as the purchase price does not go below $810,000; a copy of any accepted agreement of purchase and sale for $810,000 or more shall be forwarded to the Estate forthwith; (f) in the event that the Husband and Wife are only able to secure a sale price of less than $810,000, the Estate must also be a party to any Agreement of Purchase and Sale; (g) the signatures of the Husband, the Wife and the Estate are required on all closing documentations; the Estate shall be represented by Edward Waters; (h) the parties are encouraged to resolve the issue of costs themselves. If they are unable to do so, the Husband and Wife shall serve and file their written submissions, restricted to two pages, single-sided and double-spaced, exclusive of costs outline and offers to settle, no later than 4:30 p.m. on May 22, 2020; the Estate shall serve and file its responding submissions, with the same restrictions, no later than 4:30 p.m. on June 5, 2020; any reply submissions by the Husband and Wife, with the same size restrictions, shall be served and filed no later than 4:30 p.m. on June 12, 2020; if no submissions are received by May 22, 2020, there shall be no costs. All costs submissions shall be e-mailed to scjtrialofficebrampton

Application allowed.

End of Document