CITATION: Iori v. Village Building Supplies (1997) Ltd., 2007 ONCA 156

DATE: 20070309

DOCKET: C43919

COURT OF APPEAL FOR ONTARIO

RE:

GIUSEPPINA IORI by her Litigation Administrator, MARIA ROSARIA IORI (Plaintiff/Respondent) – and – VILLAGE BUILDING SUPPLIES (1997) LTD. (Defendant/Appellant)

BEFORE:

GOUDGE, GILLESE and LANG JJ.A.

COUNSEL:

Michael A. Handler

for the appellant

Gregory T. A. Gryguc

for the respondent

HEARD & RELEASED ORALLY:

March 1, 2007

On appeal from judgment of Justice Ellen M. Macdonald of the Superior Court of Justice, dated June 28, 2005, with reasons reported at [2005 ONSC 23122](https://www.canlii.org/en/on/onsc/doc/2005/2005canlii23122/2005canlii23122.html), 16 R.F.L. (6th) 244.

E N D O R S E M E N T

[1] Village Building Supplies (1997) Ltd. carries on business as a supplier of drywall and related construction materials. It extended credit to Nicola Iori and Steve Gramolini who carried on a drywalling business under the name of Blue Willow Contracting.

[2] Blue Willow supplied and installed drywalling for Baycrest Homes in a subdivision of new homes in Woodbridge, Ontario. Village supplied Blue Willow with the materials. Blue Willow got paid but it did not pay Village so Village registered a lien against title to several lots in the subdivision.

[3] Village agreed to release its liens in exchange for a mortgage of approximately $100,000 on a home in the subdivision owed by Nicola Iori’s wife, Giuseppina Iori. The property was the matrimonial home. Title to the property was in Giuseppina Iori’s name alone.

[4] Following a trial, Macdonald J. declared the mortgage in favour of Village to be null and void. She found that Ms. Iori’s signature on the mortgage had been forged and that the mortgage had been registered without Ms. Iori’s knowledge or consent. The trial judge found that Village knew Ms. Iori was the registered owner at the time that the mortgage had been placed on title but that it made no inquiries to confirm that Ms. Iori had actually signed the mortgage. She held that, as the mortgage was being placed on the matrimonial home, pursuant to s. 21(1) of the Family Law Act, R.S.O. 1990, c. F.3, extra precaution had to be taken to ensure that both spouses signed the mortgage with the benefit of independent legal advice. Although she found Village to be innocent, the trial judge also found that had it or its advisors exercised due diligence, the fraud would probably have been prevented. She held the forged mortgage to be a nullity. She further held that the admitted forgery invalidated the counterclaim.

[5] Village argues that the trial judge failed to properly or adequately deal with its counterclaim. The two principal claims made in the counterclaim and advanced again on appeal are that Ms. Iori has been unjustly enriched to the detriment of Village and that Ms. Iori is a constructive trustee of the property for Village’s benefit because of her knowing receipt of funds obtained through breaches of trust.

UNJUST ENRICHMENT

[6] It is trite law that in order for Village to succeed in its unjust enrichment claim, it must prove that:

(1) Ms. Iori was enriched;

(2) it (Village) suffered a corresponding deprivation; and

(3) there is no juristic reason for the enrichment.

[7] Ms. Iori is said to have been enriched as a result of an $80,000 reduction in the purchase price of the property. This reduction resulted from an agreement made in April 2000 between the builder-developer of the subdivision and Blue Willow. There is no evidence that Ms. Iori, although named as a party to the agreement, ever signed the agreement. Under the terms of the April 2000 agreement, the purchase price of the property was reduced by $80,000 in exchange for drywalling to be supplied and installed in the subdivision by Blue Willow.

[8] Even assuming that the first two requirements for unjust enrichment have been satisfied, we are of the view that the April 2000 agreement is a juristic reason for Ms. Iori to have received the $80,000 benefit. The April 2000 agreement made between the builder‑developer and Blue Willow was a valid contract under the terms of which the builder‑developer received drywall services from Blue Willow in exchange for which it reduced the purchase price of the matrimonial home by $80,000. The contract is a juristic reason for the $80,000 reduction in the purchase price which inured to Ms. Iori’s benefit.

CONSTRUCTIVE TRUST

[9] Again, there is no quarrel between the parties on the basic principles of law: a stranger to a trust may be liable as a constructive trustee for breach of trust on the basis of knowing receipt of trust property. Liability in this case depends on Village proving that two requirements have been satisfied:

(1) Ms. Iori received trust property; and

(2) she had knowledge of the breach of trust.

[10] It does not appear from the record that Ms. Iori had sufficient knowledge of the circumstances such that it would be open to a court to find that an honest person would have been on inquiry, as required by the Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805.

[11] Moreover, Ms. Iori never received trust property. Even if Nicola Iori received monies which could be characterized under the Construction Lien Act, R.S.O. 1990, c. C.30, as trust monies, there is no evidence to trace those monies into Ms. Iori’s hands or the property.

[12] Consequently, the appeal is dismissed with costs to the respondents fixed at $4,000, inclusive of GST and disbursements.

“S. T. Goudge J.A.”

“E. E. Gillese J.A.”

“S. E. Lang J.A.”