COURT OF APPEAL FOR ONTARIO
CITATION: Farkas v. Bedic, 2016 ONCA 82
DATE: 20160128
DOCKET: C58672
Laskin, Pardu and Brown JJ.A.
BETWEEN
Mary Farkas
Plaintiff (Respondent)
and
Nick Bedic also known as Nikola Bedic
Defendant (Appellant)
Paul D. Amey, for the appellant
Julie K. Hannaford and D. Clarke, for the respondent
Heard: June 24, 2015
On appeal from the judgment of Justice James W. Sloan of the Superior Court of Justice, dated March 13, 2014, with reasons reported at 2014 ONSC 1638.
Laskin J.A.:
A. Overview
[1] The appellant, Nick Bedic, and the respondent, Mary Farkas, met and began dating in 1994. At the time, he was 49 and separated from his wife; she was 51 and a widow. They began living together full-time in mid-1997 and co-habited for thirteen and one-half years before separating in early 2011. During the course of their relationship, they acquired and maintained several properties. Each party contributed financially and by physical labour.
[2] When the relationship ended, Farkas sought a half interest in the properties or in the proceeds from their sale. After a detailed review of the evidence, the trial judge found in her favour. In doing so, he held that though many of the key facts were not disputed, where the evidence of Bedic and Farkas differed, he preferred her evidence.
[3] On appeal, Bedic challenges the trial judge’s findings on two of the properties: the Queensway Motel and the Fairview Motel.
[4] Bedic purchased the Queensway Motel five years before he met Farkas. Later, however, Farkas gave him two loans totalling $125,000 to enable him to pay off two mortgages on Queensway. In exchange for these loans, Bedic gave Farkas a half interest in the motel. They signed an agreement in July 1997 to reflect their bargain.
[5] Bedic submits that the trial judge erred by failing to find that Bedic’s transfer of a half interest in Queensway to Farkas created a resulting trust under which she held her half interest beneficially for him. He contends that under their agreement, she was only entitled to the repayment of her loans. Alternatively, Bedic submits that the trial judge erred in finding that Farkas was entitled to an equal interest in the motel because his capital and labour contributions were far greater than hers.
[6] Bedic purchased the Fairview Motel and took title in his name alone. The trial judge, however, found that Farkas was entitled to half the value of Fairview, or, alternatively, a half interest in Fairview because of her contributions to a “joint family venture”. In the trial judge’s opinion, to hold otherwise would unjustly enrich Bedic at Farkas’ expense. Bedic submits that the trial judge erred in finding that Farkas had any interest in the Fairview Motel.
[7] A final issue on which Bedic appeals is the trial judge’s finding that Bedic withdrew money from the parties’ joint account and failed to account for his withdrawals. The trial judge awarded Farkas just under $18,000 for these unaccounted for withdrawals. Bedic submits that the trial judge erred in making this finding.
[8] For the reasons that follow, I would not give effect to any of Bedic’s submissions. I would thus dismiss his appeal.
B. The Issues
(1) Did the trial judge err in finding that Farkas had a 50 percent beneficial interest in the Queensway Motel?
[9] Bedic submits that the trial judge erred in finding that Farkas had a 50 percent beneficial interest in the Queensway Motel. His submission has two branches. First, he argues that the 50 percent interest he deeded to her in 1997 should revert to him by resulting trust. Under the agreement the parties signed, Farkas is entitled only to be repaid the $125,000 she advanced to him, and, once repaid, she is required to reconvey her half interest in the motel. Second, Bedic argues that if Farkas was entitled to a beneficial interest in Queensway, it should be far less than 50 percent as, contrary to the trial judge’s finding, his capital and labour contributions were significantly greater than hers. I do not agree with either branch of Bedic’s submission.
(i) Should Farkas’ one-half interest revert to Bedic by a resulting trust?
[10] Bedic purchased the Queensway Motel in 1989. It was a 16-room motel in Simcoe, Ontario. The purchase price is in dispute. At trial, Bedic testified that he paid $450,000 plus $45,000 for fixtures. Farkas testified that Bedic told her the purchase price was $450,000. In this court, Bedic contends that the purchase price was actually $495,000, and he relies on his lawyer’s reporting letter. I will deal with this discrepancy when I discuss the second branch of Bedic’s submission.
[11] When Bedic and Farkas first began dating, she owned her own home in Hamilton but stayed with him at the motel on weekends. By mid-1997, they began co-habiting at the motel, and, a year later, she sold her Hamilton home.
[12] The agreement on which Bedic relies was signed by the parties in July 1997. It reflected Farkas’ two loans to Bedic. In 1995, Bedic asked Farkas to loan him $30,000 to pay off his second mortgage on the motel. She did so by increasing the mortgage on her own home in Hamilton.
[13] Then, in 1997, Bedic told Farkas that he needed more money or he would “lose everything”. Specifically, he asked Farkas for $100,000 to discharge the first mortgage on Queensway held by Income Trust, as Income Trust would not renew its mortgage. Bedic said that, in exchange, he would transfer to Farkas a one-half interest in the motel. Farkas agreed to give him the money. She took out a $125,000 mortgage on her own home. She used part of the proceeds to pay off her $30,000 mortgage and advanced to Bedic the sum of $94,951.08. The total of her loans to Bedic thus amounted to about $125,000. In July 1997, the parties entered into an agreement, which in its relevant terms provides as follows:
Should the relationship between Farkas and Bedic end for whatever reason, Bedic agrees to repay to Farkas the sum of $125,000.00 on demand and Farkas shall in return transfer her one half interest in the property to Bedic.
THE PARTIES FURTHER AGREE that if it becomes necessary to sell the property for whatever reason, be it by agreement of the parties, Power of Sale or Partition Application by either Bedic or Farkas, then Farkas shall receive her investment of $125,000.00 before any monies are disbursed to Bedic.
[14] Bedic formally transferred a one-half interest in the motel to Farkas and a deed of transfer was registered on title. In 2006, the parties sold the Queensway Motel for $728,000.
[15] Bedic submits the agreement contemplated that he would repay Farkas’ loans and that she would reconvey her half interest to him. In other words, she held her half interest for the benefit of Bedic and thus it would “result” to him. I do not agree with this submission for three reasons.
[16] First, the parties did not rely on the agreement. At trial, Bedic’s lawyer admitted that he was “not relying on – on the contents of it so much as the intention at the time. At the end of the day, I don’t, our case really doesn’t rise and fall on the agreement.” And the trial judge expressly found, at para. 139, that Bedic himself treated the agreement as if it did not exist:
When it was suggested to [Bedic] that both parties treated the agreement if it didn’t exist he denied that this was the case, however at questions 266 & 267 of his examination for discovery he indicates that they did treat the agreement at Ex 3 Tab B-5 as if did not exist. When this was pointed out to the Defendant, he said that he probably didn’t understand the Plaintiff’s lawyer when he asked the question. I find this answer disingenuous.
[17] Indeed, when the motel was sold in 2006, neither party relied on the agreement. Bedic did not offer to pay Farkas $125,000, and Farkas did not ask Bedic for the money.
[18] Second, the facts do not support the existence of a resulting trust. A resulting trust is an arrangement where one person holds property for the benefit of another and typically is created or implied when title to the property is transferred to a party who did not provide any value for it. Unless the transfer is held to be a gift, the party is required to return the property to the true owner. Legally, the beneficial interest in the property “results” to the person who transferred legal title: see Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at para. 24.
[19] Here, however, Farkas provided value in exchange for the equity interest in Queensway transferred to her. She loaned Bedic $125,000 to enable him to pay off the two mortgages on the motel.
[20] Third, Bedic’s conduct does not demonstrate an intention to create a resulting trust. Whether a resulting trust is created or implied depends on the intent of the transferor at the time of transfer. Although the transferor gives another person legal title to the property, the transferor does not intend the other person to have a beneficial interest in the property. Thus, the other person holds the beneficial interest in trust for the transferor: Pecore v. Pecore at para. 5.
[21] Here, Bedic is the transferor and it is his intent that is relevant. His conduct, however, shows no intent to create a resulting trust. Quite the contrary. He treated the equity from the sale of the motel as belonging beneficially to both him and Farkas. The vendor take back mortgage was registered in both their names. The monthly mortgage payments were made out to both of them. The cheque for the proceeds due on closing was also made out in both their names. And the proceeds were deposited into a joint bank account. The trial judge thus held, at para. 172:
Following the sale of the Queensway Motel, the parties treated the equity from the sale as belonging to each of them equally. The mortgage back was registered in both their names, the monthly mortgage payments were made out to both their names, the cheque for the net equity due to them on closing was made out in both their names and that cheque was deposited by the Defendant, into a joint bank account.
[22] I would not give effect to this branch of Bedic’s submission.
(ii) Did the trial judge err in finding that the parties contributed “more or less equal amounts of capital” to the Queensway Motel?
[23] The trial judge found, at para. 171:
The evidence is clear that both parties put significant sweat equity into their first property at Queensway Motel and contributed more or less equal amounts of capital based on the evidence presented at this trial.
[24] And he concluded, at para. 173:
Therefore, the court cannot come to any other conclusion than the equity from the Queensway Motel belonged to the parties equally.
[25] In making this finding, the trial judge held that Bedic bought the Queensway Motel for $450,000 in 1989 and that the value of the motel had not changed between 1989 and 1997, when Farkas became part-owner, as neither party presented evidence to the contrary. Bedic submits that both holdings are in error.
[26] Other than filing his lawyer’s reporting letter on the purchase of the motel, Bedic led no evidence of the value of the motel when he had purchased it. The reporting letter states that the purchase price was $495,000, but it does not break down that amount between property and fixtures. And the trial judge had evidence from Farkas and even Bedic that the purchase price for the motel alone was $450,000.
[27] Also, and importantly, Bedic led no evidence of the value of the motel in 1997. When asked what he thought the motel was worth in 1997, he admitted candidly that he did not know. Moreover, I do not think one can infer that the motel had increased in value between 1989 and 1997 simply because nearly a decade later it sold for $728,000. Without any evidence of value, the trial judge can hardly be faulted for assuming that the motel had not changed in value between 1989 and 1997.
[28] However, even assuming that the value of the motel was $495,000 in 1997, that value would not undermine the trial judge’s finding that the parties’ capital contributions were roughly equal. Farkas loaned Bedic $125,000 to permit him to discharge the two mortgages against the property. She also gave Bedic $7,000 in 1997 to help him renovate the motel and a further $17,000 for renovations out of the sale of her Hamilton house in 1998. Thus her capital contributions were roughly $150,000. Bedic’s capital contributions in 1997, even assuming the motel was worth $495,000, were not significantly different from Farkas’. In 1997, Income Trust held an approximately $193,000 mortgage on the motel. Bedic was responsible for debts of $53,500 “associated with the motel”. And at the time, his former wife still had an interest in the property. The math may not be exact, but however one looks at the debits and credits, the math reasonably supports the trial judge’s finding that Bedic and Farkas “contributed more or less equal amounts of capital”.
[29] I would not give effect to Bedic’s submission on the Queensway Motel.
(2) Did the trial judge err in finding that Bedic holds title to the Fairview Motel in trust for himself and Farkas equally?
[30] Bedic bought the Fairview Motel in 2004 for $200,000. The motel had four rooms, when he bought it, and eight rooms after he renovated it. Each room was equipped with a kitchenette. Bedic took title to the motel in his name alone and said that he bought it over Farkas’ objection.
[31] The trial judge, however, found that Bedic holds title to Fairview in trust for himself and Farkas equally. He found a joint family venture in connection with the motel and he found that Bedic and Farkas had contributed jointly to its acquisition, maintenance, and improvement. To remedy what would otherwise be Bedic’s unjust enrichment, the trial judge effectively found that Farkas had a beneficial one-half interest in Fairview by a constructive trust. Bedic, as constructive trustee, was obligated to convey that one-half interest to her or to pay her one half the value of Fairview. The parties agreed that her one-half interest was valued at $112,500.
[32] After referring to Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, the Supreme Court’s seminal judgment on joint family ventures and unjust enrichment, the trial judge summarized his finding, at para. 177:
I therefore find that the Defendant holds the title of the Fairview Motel in trust for himself and the Plaintiff on an equal basis. To hold otherwise would allow the Defendant to be enriched where there is no juristic reason for such enrichment and the Plaintiff would be accordingly deprived.
[33] Bedic submits that the trial judge erred in this finding and that he alone owns the Fairview Motel. I do not agree. The trial judge’s finding of a joint family venture and his award of a half interest in the motel as a remedy for Farkas’ claim of unjust enrichment are reasonably supported by the evidence. In Kerr v. Baranow, Cromwell J. wrote, at para. 85:
I conclude, therefore, that the common law of unjust enrichment should recognize and respond to the reality that there are unmarried domestic arrangements that are partnerships; the remedy in such cases should address the disproportionate retention of assets acquired through joint efforts with another person.
[34] As I will discuss, on the record before him, the trial judge had ample evidence to find that Bedic and Farkas had a domestic partnership, a partnership in which they acquired, maintained, and improved several properties over the course of their thirteen and one-half years together. Although the trial judge expressly applied the concepts of joint family venture and unjust enrichment to the Fairview Motel alone, his reasons and his order make it evident that the parties’ joint family venture extended to the Queensway Motel and to the other two properties that the parties acquired jointly, Hillcrest and Clear Creek. I have already dealt with the Queensway Motel and Bedic has not challenged Farkas’ equal ownership of Hillcrest or Clear Creek. I turn then to the evidence and the trial judge’s findings on the Fairview Motel.
[35] To obtain an award for unjust enrichment arising from a joint family venture, a claimant must show two things: first, a joint family venture; and second, a link between the claimant’s contribution to the venture and the accumulation of assets or wealth: see Kerr v. Baranow, at para. 87.
(i) Joint family venture
[36] In deciding whether an unmarried couple has organized their life in a domestic partnership or a joint family venture, Cromwell J. suggested a trial judge consider four factors, which, he acknowledged, overlap to some extent: mutual effort, economic integration, actual intent, and priority of the family: Kerr v. Baranow, at para. 89. Although the trial judge here did not expressly review the evidence under these factors, the evidence and his findings do show a joint family venture between Bedic and Farkas.
[37] Mutual effort. This factor asks whether the parties worked collaboratively toward common goals. Did they pool their efforts? Here, the answer is unquestionably yes. After Bedic bought the Fairview Motel, it needed to be substantially renovated. He and his brother did the renovations over the course of 18 months. During that time, Farkas alone ran and took care of the Queensway Motel. When the renovations were completed, Bedic and Farkas moved into the Fairview Motel and worked more or less equally to run it. Both cleaned the rooms, made the beds, did the laundry, and washed the floors and bathrooms. Farkas alone cooked the meals. She estimated that she spent five hours a day working at the motel, for which she was not paid.
[38] Economic integration. This factor asks whether the parties’ economic interests were intertwined. Was there mutuality and interdependence in their economic relationship – for example, through the use of joint accounts – that prevailed over their individual interests? Again, here the answer is yes. The bulk of the down payment for the Fairview Motel came from the sale of the Clear Creek property, which Bedic and Farkas held as joint tenants. Mortgage payments on the vendor take back mortgage were made from the Queensway Motel account. Bedic discharged that mortgage in 2008, using funds from the parties’ joint account at the Royal Bank of Canada. The trial judge found, at para. 174:
There is no doubt that the Fairview Motel was purchased, maintained, renovated and had its mortgage discharged using joint monies which originated from the Queensway Motel, the vendor take back mortgage on the Queensway Motel and the joint cheque the parties received on closing.
That finding is fully supported by the evidence.
[39] Actual intent. The parties’ intent may be expressed or inferred. Bedic’s own trial counsel expressly acknowledged that Farkas was entitled to half the value of the Fairview Motel. Although Bedic disagrees with what his counsel said, that acknowledgement was before the trial judge. Moreover, the parties’ intent to maintain a domestic partnership can be inferred from their conduct. For example, they had business cards printed for the motel that said “Your Hosts: Nick & Mary”.
[40] Priority of the family. Bedic and Farkas did not have children together. But the evidence showed that throughout their relationship they gave priority to working together and sharing responsibilities. A telling piece of evidence showing the priority Farkas gave to her partnership with Bedic over her own interests was her decision to retire early, in 1999, from her job at the hospital, and to move from Hamilton to Simcoe to work alongside him in the motel business. By retiring early, she gave up the larger pension she would have received if she had continued working.
[41] Against this overwhelming evidence of a joint family venture, there is scant, if any, evidence to suggest that while living together the parties pursued their own individual interests. The trial judge thus did not err in finding that Bedic and Farkas had a joint family venture, which included the operation of the Fairview Motel.
(ii) Link between the joint family venture and the accumulation of wealth
[42] In Kerr v. Baranow, Cromwell J. said that to be entitled to a remedy for unjust enrichment arising from a joint family venture, the claimant must show “a link between his or her contributions to it and the accumulation of assets and/or wealth” (at para. 100). In other words, the family’s accumulation of wealth must have resulted from the parties’ mutual efforts. Cromwell J. wrote, at para. 102:
Once the claimant has established his or her contribution to a joint family venture, and a link between that contribution and the accumulation of wealth, the respective contributions of the parties are taken into account in determining the claimant’s proportionate share.
[43] The evidence supports a link between Farkas’ contribution to her partnership with Bedic and their accumulation of wealth. And the evidence supports the trial judge’s finding that each party’s proportionate share in the Fairview Motel should be equal. I repeat the trial judge’s finding, at para. 174:
There is no doubt that the Fairview Motel was purchased, maintained, renovated and had its mortgage discharged using joint monies which originated from the Queensway Motel, the vendor take back mortgage on the Queensway Motel and the joint cheque the parties received on closing.
[44] And the trial judge added, at para. 175:
In addition, the evidence is uncontroverted that while the Defendant was spending his time renovating the Fairview Motel, the Plaintiff was essentially running the Queensway Motel on her own. The evidence is also clear that after the parties moved into the Fairview Motel both parties worked more or less equally to maintain and run the motel. No wages were paid, to either party.
[45] I see no error in the remedy ordered by the trial judge. I would not give effect to this ground of appeal.
(3) Did the trial judge err in finding that Bedic had failed to account for money he withdrew from the parties’ joint account?
[46] The trial judge found that Bedic had improperly taken money from the parties’ joint account with the Royal Bank of Canada. He said that Farkas was entitled to one-half the amount Bedic had taken and had not accounted for less two withdrawals she had benefited from. Following the trial judge’s calculations, Farkas was entitled to $17,929.48. Bedic submits that the trial judge erred in his finding. He maintains that the parties’ banking records show the money he took was properly accounted for. I do not accept his submission.
[47] The money in question represented part of the net proceeds of sale from the Queensway Motel. Those proceeds had been deposited in the parties’ joint account with the Royal Bank of Canada and invested in guaranteed investment certificates. The trial judge recognized that Farkas had withdrawn $29,660 from that account in March 2010 and that she had taken another $14,000 to pay her capital gains tax.
[48] The trial judge also found that between 2007 and 2009, Bedic had made several withdrawals from the joint account, which Farkas was not aware of and which Bedic could not satisfactorily account for at trial. The trial judge quantified these unaccounted for withdrawals in the amount of $93,518.96. He then deducted from that amount the money Farkas withdrew in March 2010, leaving withdrawals by Bedic exceeding those by Farkas of $63,858.96, entitling her to one half that amount or $31,929.48. He gave further credit to Bedic for $14,000 he had paid on account of Farkas’s capital gains tax, for a balance owing to her of $17,929.48. The trial judge ordered that Bedic pay Farkas this amount.
[49] I do not think it falls on this court to redo the trial judge’s forensic accounting, which led him to make the order he did. He had evidence to support his finding and his order. Although Bedic might be able to point to other evidence to support his submission, the trial judge’s finding was not unreasonable. Thus I would not give effect to this ground of appeal.
C. Conclusion
[50] I am not persuaded that the trial judge erred in his findings that Farkas was entitled to one-half interest in both the Queensway Motel and the Fairview Motel or in his finding that Bedic had failed to account for money he had withdrawn from the parties’ joint account with the Royal Bank of Canada. Accordingly, I would dismiss Bedic’s appeal. Farkas is entitled to her costs of the appeal, which I would fix in the amount of $25,000, inclusive of disbursements and applicable taxes.
Released: January 28, 2016 (“J.L.”)
“John Laskin J.A.”
“I agree. G. Pardu J.A.”
“I agree. David Brown J.A.”