- DATE: 20021011 DOCKET: C34697
COURT OF APPEAL FOR ONTARIO
RE: Peter Marchese, Estate Trustee for the Estate of Giulia Marchese, deceased (Petitioner/Respondent on Appeal/Appellant by Cross-appeal) and Pasquale Marchese, 621209 Ontario Ltd., Superior Sodding Co. Ltd., and Joseph Falco (Respondents/Appellants/Respondents by Cross-Appeal)
BEFORE: MORDEN, MOLDAVER, AND SIMMONS JJ.A.
COUNSEL: A. Burke Doran, Q.C. Jacqueline Mills For the appellants, respondents by cross-appeal, Pasquale Marchese and 621209 Ontario Ltd.
Massimo Rovazzi For the respondent by cross-appeal, Joseph Falco
P. D. Schmidt G. Karahotzitis For the respondent, appellant by cross-appeal
HEARD: September 24, 2002
On appeal from a judgment of Justice Mary Anne Sanderson of the Superior Court of Justice dated June 30, 2000
E N D O R S E M E N T
[1] In our view, it was open to the trial judge to accept the wife’s appraiser’s evidence that the value of Block 108 was $10.25 million as at the date of separation. The appellants concede, and we agree, that the wife’s appraiser was entitled to consider the sale of Block 108 to Bayview Landmark for $10.5 million in determining the value of Block 108, even though the sale to Bayview Landmark occurred after the date of separation.
[2] We do not accept the appellants’ submission that the trial judge erred in failing either to reject the wife’s appraiser’s opinion or discount it substantially, because the development proposal underlying the sale to Bayview Landmark eventually failed. The trial judge found Bayview Landmark to be an “informed arm’s length purchaser” based on evidence from Mr. Lam, a principal of Bayview Landmark, concerning his original assessment of the viability of the development proposal. In our view, it was open to the trial judge to accept Mr. Lam’s evidence. Moreover, Bayview Landmark paid $4.5 million (43% of the purchase price) on closing and provided a vendor-take-back mortgage for the balance of the purchase price. The vendors of Block 108 retained the $4.5 million and foreclosed on their mortgage after Bayview Landmark’s development proposal failed. Given these circumstances, we reject the appellant’s submission that the mortgage back was essentially worthless and we see no basis for finding that the trial judge erred in failing to discount, or reject, the wife’s appraiser’s opinion as to value.
[3] Further, the appellants’ appraiser acknowledged that, on valuation principles, he would have considered the Bayview Landmark and Plaza Corp. transactions in his investigation of the value of Block 108, had he not been instructed by his client to ignore those transactions. This, in itself, justified the trial judge’s decision to reject the appellants’ appraiser’s evidence.
[4] In the circumstances, there is no reasonable basis for concluding that the trial judge erred in preferring the evidence of the wife’s appraiser over that of the appellants’ appraiser.
[5] There is no merit in the appellants’ submission that the trial judge disregarded relevant evidence, or made a finding not reasonably supported by the evidence, when she accepted the wife’s testimony that the wife was present when the husband orally contracted to sell the Caserta property for 880 million lire. The trial judge noted that the husband produced no documents supporting the 780 million lire sale price. The record discloses that, in fact, the husband produced a “vendita” (an agreement of purchase and sale) reflecting a sale price of 500 million lire. However, the husband testified that that amount did not reflect the actual sale price, but rather reflected the purchaser’s wishes. In these circumstances, it was clearly open to the trial judge to reject the husband’s evidence and to accept the wife’s evidence.
[6] The appellants’ third ground of appeal and the respondent’s fifth ground of cross-appeal raise opposite sides of the same issue. In addition to her claim for equalization of net family properties, the wife claimed damages “for conversion and diversion of funds due and payable to the wife and of assets owned by the wife”. Part of this claim related to the proceeds of $3,318,332 in cheques made payable to the wife, or to the wife and the husband jointly, prior to the date of separation, which the wife claimed she never received.
[7] We do not accept the husband’s submissions that there was no evidence to support the trial judge’s finding that he had undisclosed assets totalling $947,500 on the date of separation and that the trial judge erred in requiring him to account for that sum. Although the wife’s forensic accountants were unable to uncover specific undisclosed assets, in our view, the record amply supports the trial judge’s conclusions.
[8] In particular, the husband acknowledged withdrawing $2 million in cash from the bank shortly after the separation, burying it in a hole under a stone, and failing to disclose this money on his original financial statement. That evidence, combined with the evidence concerning the cheques and concerning the husband’s additional sources of funds, justified imposing an evidentiary burden on the husband to explain the disposition of the proceeds of the cheques. The husband failed to call his accountant as a witness after claiming that he relied on his accountant in financial matters and failed to lead any other evidence concerning the source and disposition of funds flowing through his bank accounts. In these circumstances, it was open to the trial judge to draw the inferences that she did concerning the existence of undisclosed assets.
[9] We do not accept the respondent’s claim that the trial judge erred in failing to require the husband to account for the proceeds of all of the cheques. The trial judge was not required to make a finding that the husband wrongfully converted the wife’s assets because he failed to account for the proceeds of the various cheques. The husband acquired significant assets during the relevant period, many for the benefit of both parties.
[10] The trial judge made careful findings assessing the likelihood that the proceeds of the various cheques had been accounted for; she attempted to compensate the wife and, at the same time, attempted not to over-compensate her. Despite her finding that the husband had undisclosed assets on the date of separation, the trial judge made an explicit finding that the husband “did not follow any long-term strategy to deprive [the wife] of her share of the family assets. To the contrary … his records show [his wife], who never participated in his businesses in any way, to be a major income earner and creditor”. In our view, the trial judge made a reasonable assessment of the evidence and the claims that were before her. We see no basis for interfering with her findings of fact.
[11] As for the balance of the cross-appeal, the trial judge was in the best position to determine the factual issue of whether the deduction for income tax arising from the deemed disposition on death of the husband’s shares in 621209 Ontario Ltd. was “so speculative” that such costs could “safely be ignored”: Sengmueller v. Sengmueller (1994), 17 O.R. (3d) 209 (C.A.); see also MacPherson v. MacPherson (1988), 1988 4732 (ON CA), 63 O.R. (2d) 641 (C.A.). It may have been open to the trial judge to conclude that the husband had a longer life expectancy than that used to calculate the notional income tax consequences of a deemed disposition on death, that he would avail himself of a tax sheltering mechanism for the shares prior to his death, or that, in all of the circumstances, these or other possibilities rendered the likelihood or consequences of disposition too uncertain to be taken into account. However, in light of the husband’s age, his marital status, and all of the evidence concerning his life expectancy, we see no basis for interfering with the trial judge’s decision to accept the evidence of tax consequences proffered by the husband and to allow the deduction that he claimed.
[12] The trial judge found that the sum of $39,936, which was the wife’s share of the profit on the sale of 68 Sheila Crescent, was included on the wife’s net family property statement as an amount payable from 621209 Ontario Ltd. The appellant by cross-appeal does not contest this finding but claims that the trial judge erred by failing to require the husband to account for the total proceeds of sale of this property, which the husband claimed was deposited into a joint bank account belonging to the parties. In our view, it was open to the trial judge to conclude that these funds were either reflected in other assets shown on the net family property statements or that they had been used to defray family expenses.
[13] We reject the wife’s submission that the trial judge erred by failing to declare that the wife is a 50% owner of the $190,000 mortgage registered against the title to the 33 Blue Springs Road property. We acknowledge that, in his pleadings, the husband conceded that the wife is a beneficial owner of 50% of this mortgage. However, the trial judge’s findings amount to a determination that this mortgage is a sham. Having found that there is no asset, the trial judge did not err in failing to declare that the wife owns 50% of it.
[14] We find no basis for interfering with the trial judge’s conclusion that 621209 Ontario Ltd. is the beneficial owner of the Niagara Falls property that was registered in the name of Superior Sodding Co. Ltd. The trial judge was aware of Mr. Filipovich’s testimony that the appellants’ accountant had on occasion instructed him to backdate documents. Nevertheless, she accepted the evidence disclosed by the financial records and attested to by the husband that 621209 Ontario Ltd. either provided, or was responsible for, the funds used to pay for this property and that the property was reflected as an asset of 621209 Ontario Ltd. It was open to the trial judge to act on this evidence. Further, the trial judge’s conclusion reflects a finding that 621209 Ontario Ltd. was the beneficial owner of these lands from the date on which they were acquired. In our view, given the financial arrangements, it was open to the trial judge to reach this conclusion despite the husband’s imprecise testimony concerning the trust.
[15] Finally, given that the husband reflected the value of the Niagara Falls land in the value he attributed to his shares in 621209 Ontario Ltd. based on his (or his accountant’s) understanding that the numbered company was the beneficial owner of the property, and that the wife contested his entitlement to do so, it was necessary that the trial judge determine the ownership of this land as an incident of determining what values were to be reflected in the husband’s and the wife’s respective net family property statements.
[16] There is no basis for interfering with the trial judge’s conclusion that the balance of the proceeds of sale of 66 Sheila Crescent should be paid to Joseph Falco after payment of the mortgage in favour of 621209 Ontario Ltd. Although the trial judge found that the wife knew and agreed that Falco, the parties’ first-born grandson, was to receive this property as a gift, subject only to repayment of the $100,000 mortgage when the property was sold, the trial judge did not make a specific finding concerning the identity of the donor(s) to Falco.
[17] In our view, it was open to the trial judge to conclude that the July 10, 1986 agreement for the sale of the property from the Marchese-Vettese joint venture group to the husband and wife was never completed. The deed that was necessary to complete that transaction was not signed by all of the vendors, and Mr. Filipovich was clearly in error when he stated in a letter that the husband and the wife were the registered owners of the property. Further, it was 621209 Ontario Ltd. that paid the purchase price ($80,000) to the vendors almost one year after the latest closing date specified in the 1986 agreement had passed. Although the husband may have advanced all or part of the purchase price to 621209 Ontario Ltd., there is no evidence of any contribution by or on behalf of the wife. Given these circumstances, the trial judge did not err in finding that the wife had no basis for objecting to the conveyance to the Falco.
[18] Finally, in our view, any failure on the part of the donor(s) to follow through on all steps necessary to comply with income tax requirements should not be visited upon Falco, whom the trial judge found to be the donee of a gift.
[19] There is no reasonable basis for interfering with the trial judge’s exercise of discretion in awarding costs. Leave to appeal costs is refused.
[20] The appeal and cross-appeal are dismissed. As success on appeal is divided, subject to any submissions that counsel may make within seven days, there will be no order as to costs.
_____ “J. W. Morden J.A.”
_____ “M. J. Moldaver J.A.”
_____ “Janet Simmons J.A.”