ONTARIO

SUPERIOR COURT OF JUSTICE

Court File No.: 72241/11 SR
Date: 2012-01-26

Between:

KEITH LOPEZ and IRIS LOPEZ
Plaintiffs / Defendants by Counterclaim

– and –

MICHAEL BROMLEY also known as MIKE BROMLEY
Defendant / Plaintiff by Counterclaim

Counsel:
J.R Robles, for the Plaintiffs / Defendants by Counterclaim
B. Rubinoff, for the Defendant / Plaintiff by Counterclaim

Heard: January 24, 2012

Justice: B.A. Glass

PLAINTIFFS’ MOTION FOR CERTIFICATE OF PENDING LITIGATION AND INTERIM INJUNCTION REGARDING SPECIFIC REAL PROPERTY

DEFENDANT’S MOTION FOR SUMMARY JUDGMENT DISMISSING PLAINTIFFS’ CLAIMS

BACKGROUND

[1] The plaintiffs loaned $140,000 to their son-in-law when he and the daughter of the plaintiffs were buying a cottage property in the County of Haliburton. The loan was secured by a promissory note only.

[2] Subsequently, the defendant and his wife sold the Haliburton property and purchased another property on Wolfe Island in the Kingston area. The latter property was placed only in the name of the daughter. The defendant claimed that property to be a matrimonial home.

[3] There was no mortgage registered against either piece of real estate.

[4] Payments on the loan went into arrears in April 2006.

[5] The action for the outstanding debt of about $35,000 was commenced on April 8, 2011.

[6] The plaintiffs sued in contract and in equity.

[7] There is an issue raised that the limitations period expired before the commencement of the action. The defendant argues that the 2 year limitation period expired in 2008, but the plaintiffs claim that the defendant rekindled the debt by acknowledging indebtedness with family litigation documents in 2009 so that the limitation period did not expire prior to the statement of claim being issued.

ISSUES

[8] Do the plaintiffs have an interest in the Wolfe Island property with an equitable mortgage?

[9] Has the claimed debt by the plaintiffs become one that cannot be enforced because the limitation period for commencing an action had expired?

[10] Can the plaintiffs claim a constructive trust or damages for unjust enrichment?

[11] Can the plaintiffs make a claim for a certificate of pending litigation?

[12] Do the plaintiffs have a right to an interim injunction to restrain the defendant from alienating, selling, encumbrancing, or conveying the Wolfe Island property?

[13] Is there a genuine issue requiring a trial?

ANALYSIS

Interest in Real Property

[14] All the documentation filed demonstrates that the parents, i.e. the plaintiffs, borrowed money and placed a mortgage on their own home so that they could provide funds to the defendant when he was buying the Haliburton cottage property. Realistically, the plaintiffs loaned the money to their daughter and son-in-law. No mortgage was created. Only a promissory note was created.

[15] It appears that the payments made by the defendant were matching the mortgage payments made by the plaintiffs for the mortgage they placed on their residence. However, there is no evidence indicating any intention to have a mortgage.

[16] The evidence demonstrates that the payments stopped in the spring of 2006.

[17] When the Haliburton property was sold, no step was taken regarding payment to the plaintiffs of what remained outstanding for the loan.

[18] When the Wolfe Island property was purchased, no mortgage on that property was created in favour of the plaintiffs. This property was registered in the name of the daughter of the plaintiffs only.

[19] There is a document signed by Iris Lopez stating that the money was not a loan but rather a gift. This appears to have been provided when financing was being arranged for the Wolfe Island property by her daughter. Now, Iris Lopez claims that the defendant asked her to sign the document called a Gift Letter stating that the funds she and her husband gifted the funds to Mr. Bromley and the daughter of the plaintiffs. She states that she did not understand the necessity for the document and that the defendant stated that it would be used for income tax purposes.

[20] If this loan created a contractual debt, it does not evolve into an equitable mortgage simply because the son-in-law and daughter purchased land with the funds.

Limitations Restrictions

[21] Sections 13(9) and (10) of the Limitations Act, 2002 provide that the debt must be acknowledged in writing signed by the debtor before the expiry of the limitation period and given to the person with the claim or the person’s agent. The document relied upon by the plaintiffs does not fall into that category. Rather, it was a financial statement in the family litigation by the defendant dated June 2, 2009. The defendant’s financial statement stated he owed money to the plaintiffs. However, that statement was created after the limitation period expired. Further, this family litigation financial statement was not directed to the plaintiffs or their agent. There is no evidence that the lawyer for the daughter in her family litigation was an agent for the plaintiffs.

[22] If the debt is statute-barred, it cannot be re-activated as submitted by the plaintiffs. I conclude that the claim is barred by the provisions of the Limitations Act, 2002.

Unjust Enrichment & Constructive Trust

[23] If there was an equitable claim for relief, it would be bound by the limitations period of the Limitations Act, 2002. See Schneider v. State Farm Mutual Automobile Insurance Co., [2010] O.J. No. 3848 at paragraph 49. In other words, a party does not have a way around the limitations period by making a claim in equity.

[24] When one claims unjust enrichment, one must establish three points. They are an enrichment, a corresponding deprivation and the absence of any juristic reason for the enrichment. The plaintiffs have submitted that if they have established these points, then the court should find that there is a constructive trust in the Wolfe Island property in their favour to the extent of what remains outstanding on the loan. That is a little more than $35,000.

[25] In Segnitz v. Royal & Sun Alliance Insurance Co. of Canada, 2003 49343 (ON SC), [2003] O.J. No. 3848 at paragraph 23, Haines J. held that the doctrine of unjust enrichment was not developed as an alternative remedy in equity to one in contract. It is not to be used to avoid limitation periods. To allow for unjust enrichment where the claim is founded in breach of contract would be akin to eliminating a legislated limitation period for breach of contract.

[26] In Canada (Attorney General) v. Confederation Life Insurance Co., 1995 7097 (ON SC), [1995] O.J. No. 1959 at paragraphs 188, 193, and 199, Blair J. held that a contractual debtor–creditor relationship is sufficient for a juristic reason for an enrichment that can be accounted for on the basis of a contractual relationship. There is an objective test when determining whether the party contributing to the enrichment has a reasonable expectation of receiving an interest in the property and did the recipient know or ought the recipient to have known of this reasonable expectation. In Confederation Life at these paragraphs, the court was analyzing the concept of unjust enrichment as a gateway to a constructive trust.

[27] When considering this analysis in Confederation Life, I conclude that the plaintiffs did not expect to receive an interest in the Haliburton real estate nor subsequently in the Wolfe Island property. Objectively, they appear never to have given a thought to such an interest. Rather, only after the relationship of their daughter and the defendant ended and payments for the loan discontinued did they give thought to having an interest in the subsequent property purchased. Such a conclusion means that the plaintiffs have not established a juristic reason for the alleged enrichment. Further, with the Segnitz decision, the plaintiffs cannot use equity to circumvent the limitation period.

Tracing Funds

[28] The plaintiffs claim that the funds can be traced from the plaintiffs to the Haliburton property and then to the Wolfe Island property so that if they have an equitable mortgage or if they can claim a constructive trust, they have followed the money to its end conclusion on Wolfe Island. Again, this is a debtor-creditor relationship. In Canadian Imperial Bank of Commerce v. Melnitzer (Trustee of), [1993] O.J. No. 3021 at paragraph 128, the court relied on Kerr on Fraud & Mistake, 7th ed. (1952) at p. 587 where the author stated that equity and common law do not permit tracing where the relationship is nothing more than one of debtor and creditor.

Certificate of Pending Litigation

[29] If the plaintiffs do not have a valid claim for unjust enrichment and a constructive trust in the Wolfe Island property, they have no interest in the real property for which they seek a certificate of pending litigation. They have a claim for money owing, subject to the provisions of the Limitations Act, 2002. They cannot claim to hold an equitable mortgage in real estate by virtue of tracing loaned funds from themselves to the Haliburton property and then to the Wolfe Island property as noted in Melnitzer above.

Injunction

[30] The request for interlocutory injunctive relief requires the plaintiffs to establish three prerequisites. Is there a serious issue to be tried? Would the moving party suffer irreparable harm if the motion were to be refused? Which side would suffer greater harm as a result of granting or refusing the relief? Because the plaintiffs have no claim to pursue, there cannot be a serious issue to be tried. There is no claim because the plaintiffs are statute barred from pursuing the claim for unpaid funds. They never had an equitable interest in either piece of real property. Rather, the plaintiffs were content to have nothing more than a promissory note until there was a default after their daughter and the defendant no longer were together. The Gift Letter states clearly that the funds were a gift. Because of my analysis of the claims regarding the limitation period, I do not need to make a finding about the Gift Letter. Therefore, there cannot be any foundation for injunctive relief.

Summary Judgment Motion

[31] The defendant has brought a cross motion to dismiss the action because the claims of the plaintiffs are time barred by the Limitations Act, 2002.

[32] The review of the facts and the law previously given in this decision have demonstrated that the claims of Mr. and Mrs. Lopez are barred from being pursued because they were made in the statement of claim after the passing of a two-year limitation period. Since they cannot be pursued, there is no genuine issue requiring a trial.

[33] My analysis of the plaintiffs’ request for an equitable mortgage on the Wolfe Island property together with a claim for injunctive relief make clear my conclusion that such claims cannot be advanced.

[34] The plaintiffs have no reasonable likelihood of succeeding with their claims at a trial. The full appreciation of the evidence is clear with the materials supplied. There is no genuine issue requiring a trial in this action. This motion falls within the Court of Appeal’s decision in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764.

[35] The bottom line is that there is no genuine issue requiring a trial so that the defendant’s motion for summary judgment should be granted.

CONCLUSION

[36] These reasons have addressed the claims of the plaintiffs’ motion and result in a dismissal of the plaintiffs’ motion.

[37] The same reasons lead to a natural conclusion granting the defendant’s motion. Therefore, summary judgment in favour of the defendant should issue dismissing the action.

Justice B.A. Glass

Released: January 27, 2012