ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-09-1262-00
DATE: 20120402

B E T W E E N:

GAETANO LO FASO

Gaetano Lo Faso on his own behalf

Plaintiff

• and -

ANTHONY (aka Tony) FERRACUTI, ANTHONY FERRACUTI INVESTMENTS LIMITED, DALLAS INVESTMENTS LIMITED, CRAVIT & FERRACUTI INTERIOR DESIGN INC., 518391 ONTARIO INC., DRUMLIN DEVELOPMENTS LIMITED, DAVID FERRACUTI INVESTMENTS LTD., HEATHER FERRACUTI, GERALD BOREAN, MAURO (aka Maurizio) MARCHIONI

Colby Linthwaite and Fred Tayer, for the Defendants

Defendants

HEARD: October 18 & 19, 2011 and February 21,2012

REASONS FOR JUDGMENT

Lemon J.

[ 1 ] The plaintiff seeks an order for a certificate of pending litigation (“CPL”) against the premises owned by the defendant, 518391 Ontario Inc. (“518”). The defendants, as described below, deny that a CPL is appropriate and, in response, seek an order for partial summary judgment to dismiss some of the plaintiff’s claims.

Court Proceedings

[ 2 ] In 1987, Kelton & Ferracuti Consultants Limited (Mr. Ferracuti’s company), (“Kelton”) sued Mr. Lo Faso’s company, 588157 Ontario Inc. (“588”). As part of that proceeding, Kelton registered a lien on 588’s lands. In 1993, that action was dismissed and judgment was awarded to 588 in the amount of $101,837, in addition to costs of $278,000. Pursuant to a court order dated April 10, 2001, Mr. Lo Faso obtained the rights and causes of action of 588. On May 26, 2006 an order was made substituting Mr. Lo Faso for 588 in that action. In the end, Kelton now owed Mr. Lo Faso $389,837 plus accumulating interest.

[ 3 ] In October 2006, Kelton declared bankruptcy. The bankruptcy court granted Mr. Lo Faso orders under the Bankruptcy and Insolvency Act , R.S.C., 1985, c. B-3, (“BIA”) to permit him to bring certain claims that otherwise would have been vested in the trustee in bankruptcy. Those claims are asserted in this action along with certain personal claims being made by Mr. Lo Faso.

[ 4 ] In this action, Mr. Lo Faso alleges that for 13 years (1993 – 2006), Mr. Ferracuti directed Kelton to oppose both Mr. Lo Faso’s company and Mr. Lo Faso himself with respect to his efforts to collect on 588’s judgment. He also pleads that Mr. Ferracuti directed Kelton to make an assignment in bankruptcy on October 13, 2006, in order to avoid paying on the judgment.

[ 5 ] It is alleged by Mr. Lo Faso that during the period of the outstanding judgment, Mr. Ferracuti directed Kelton to dispose of its assets with the intention to defeat his claim. One of those assets was an affiliated company, 518. It is agreed that, at least until March of 1999, 518 owned a property at 2301 Haines Road in the City of Mississauga and that the Haines Road property was held in trust for Kelton.

[ 6 ] Anthony Ferracuti was the guiding mind, if not the sole officer and shareholder, of Kelton and 518. Heather Ferracuti was his wife when Kelton transferred 518 to her.

[ 7 ] In short, Mr. Lo Faso seeks to enforce his judgment against the principal asset owned by 518, being held in trust for Kelton, the 2301 Haines Road property. He therefore seeks a CPL to maintain that property until the end of trial.

[ 8 ] In response, the defendants, Anthony Ferracuti (by his estate trustee), 518391 Ontario Inc., Drumlin Developments Limited, David Ferracuti Investments Ltd and Heather Ferracuti, submit that the plaintiff has no viable claim to the Haines Road property that requires a trial. They submit that the parts of the statement of claim that relate to that property should be dismissed.

[ 9 ] The defendants, Gerald Borean, Parente Borean, Mauro Marchioni have not been served with the statement of claim and have not participated in these motions.

Chronology

[ 10 ] The documented chronology is as follows.

[ 11 ] In 1982, 518 purchased the Haines Road property for $210,000.00. It is agreed that 518 held the property in trust for Kelton. Effectively, then, Kelton was the beneficial owner of the Haines Road property, so it could be available to Mr. Lo Faso and Kelton’s other creditors.

[ 12 ] In 1984, 518 mortgaged the property to the Bank of America for $1,400,000.00.

[ 13 ] In 1989, Mr. Ferracuti became the sole officer and shareholder of Kelton. Also, in 1989 the mortgage between 518 and Bank of America was paid out and a new mortgage was placed for $2,150,000.00 to North American Life Assurance Company.

[ 14 ] Between 1989 and 1991, Kelton paid out management fees of $1,360,000.00.

[ 15 ] In 1991, 518 defaulted on the mortgage and North American Life sued the corporation on the mortgage. In 1992, Mr. Ferracuti offered the property to North American Life for a release. This offer was not accepted by North American. Rather, the mortgage was restructured and the amended terms of the mortgage were registered May 19, 1995.

[ 16 ] For the fiscal year ending 1992, Kelton paid out dividends of $790,000.00. At the same time, 518 suffered rental losses on the Haines Road property of $316,481.00.

[ 17 ] On May 12, 1993, Mr. Lo Faso’s company obtained its judgment for approximately $380,000.00. That same year Kelton ceased to operate.

[ 18 ] Between 1994 and 1998, Haines Road suffered rental loses of $28,883.00. As at December 31, 1998, the mortgage on the property totalled $1,926,638.16 and there were outstanding taxes of $13,341.00. The only evidence of value of the property at that time estimates the value at a high of $1,900,000.00. I will come back to that appraisal.

[ 19 ] The events of March, 1999 are the crux of the action. The defendants submit that sometime between March and October, 1999, Kelton transferred the shares in 518 to Mr. Ferracuti’s wife, the defendant Heather Ferracuti for good consideration. In return for that transfer, Heather consented to a mortgage to Toronto Dominion Bank being placed on her home in the amount of $200,000.00. The $200,000.00 was then used to pay for improvements on 2301 Haines Road in order to obtain a lucrative lease. That lease allowed 518 to carry on business.

[ 20 ] Mr. Lo Faso was out of the country between 1994 and 2000. He took no active steps to enforce his judgment during that time.

[ 21 ] On November 12, 2004, a mortgage was placed on the property to Toronto Dominion Bank for $1,400,000.00.

[ 22 ] By 2006, Mr. Lo Faso was making efforts to enforce his judgment in the original action against Kelton. On September 27, 2006, Marrocco J. ordered that Mr. Ferracuti could be examined by Mr. Lo Faso in aid of that execution. The following day, September 28, 2006, 518 granted a mortgage to Mr. Ferracuti on the Haines Road property totalling $2,000,000.00. If valid, this mortgage would give Mr. Ferracuti higher rights against the company than Mr. Lo Faso. On November 3, 2006, Mr. Ferracuti assigned Kelton into bankruptcy.

[ 23 ] This claim was issued March 20, 2009, and the bankruptcy court allowed Mr. Lo Faso to proceed against the company.

[ 24 ] To complete the chronology, Mr. Ferracuti passed away November 18, 2009.

(Decision continues exactly as provided in the source text.)

Lemon J.

Released: April 2, 2012

COURT FILE NO.: CV-09-1262-00
DATE: 20120402

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: GAETANO LO FASO Plaintiff - and – ANTHONY (aka Tony) FERRACUTI, ANTHONY FERRACUTI INVESTMENTS LIMITED, DALLAS INVESTMENTS LIMITED, CRAVIT & FERRACUTI INTERIOR DESIGN INC., 518391 ONTARIO INC., DRUMLIN DEVELOPMENTS LIMITED, DAVID FERRACUTI INVESTMENTS LTD., HEATHER FERRACUTI, GERALD BOREAN, MAURO (aka Maurizio) MARCHIONI Defendants REASONS FOR JUDGMENT Lemon J.

Released: April 2, 2012