Court File and Parties
COURT FILE NO.: CV-12-446163
DATE: 20130215
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Maria Colantonio
Applicant
– and –
Don Park L.P., Mercedes-Benz Financial, a Business Unit of DCFS Canada Corp. and Import Auto Leasing Inc.
Respondents
Alistair Riswick, for the Applicant
Mark Lieberman, for the Respondents
HEARD: February 7, 2013
Morgan J.
Reasons for Decision
[1] This Application pits the beneficial interest in property under an unregistered Declaration of Trust against an execution creditor of the registered title holder who the beneficiary says is only a trustee under the unregistered document.
[2] The Applicant and her husband, Ovidio Colantonio, purchased a home at 98 Markham Street, Toronto in 1965 (the “Property”). The Applicant lived there until moving into an assisted living facility in 2010. She died after this Application was issued, and counsel advise me that it is continued by her estate.
[3] Ovidio Colantonio died on March 12, 2003, at which time the Applicant as the surviving joint tenant became the sole owner of the Property. Two months later, on May 29, 2003, the Applicant executed a Transfer of title in the Property to her two sons, David and Tony Colantonio, each as to an undivided 50% interest, with a life interest reserved to herself. This Transfer was registered on title on June 3, 2003. The Land Transfer Tax affidavit registered along with the Transfer states that the conveyance was for “natural love and affection”, with no monetary consideration.
[4] Also on May 29, 2003, the Applicant signed a one-page document entitled “Declaration of Trust”. This document is divided into two parts, with the top and the bottom portions each having separate signature lines.
[5] The top portion of the Declaration of Trust states that David and Tony Colantonio “acknowledge that they hold and stand possessed of [the Property] as bare Trustees for and on behalf of Maria Colantonio…” The Declaration of Trust contains a sentence in which David and Tony, as trustees, “agree at the written request and cost of Maria Colantonio to transfer title to her or as she may direct.” As will be discussed below, this is an important sentence. Counsel for the Respondent submits that it reveals the true character of the document.
[6] The Declaration of Trust goes on to specify that, “[n]otwithstanding that the ownership of the lands may be registered in the names of the Trustees, the true and beneficial ownership thereof for all purposes is vested in Maria Colantonio.” At the end of this top part of the page there is a signing line on which David and Tony each placed their signature and dated it May 29, 2003.
[7] The bottom portion of the page is separated from the top portion by a dotted line. The bottom contains a one-paragraph indemnity agreement by the Applicant. In this paragraph, she undertakes “to save harmless and…to indemnify [David and Tony] or their estate…in respect of any claims, demand, losses…whatsoever incurred by them by reason of having acted or acting as Trustees on our behalf.”
[8] Under the indemnity paragraph is another signing line. The Applicant signed this portion of the Declaration of Trust page and dated it May 29, 2003. Accordingly, while the Applicant did not actually sign the Declaration of Trust as settlor of the Trust, she did in this way acknowledge the Declaration signed by David and Tony.
[9] The Declaration of Trust was never registered on title to the Property. Counsel for the Respondent points out that the Property is under the Registry Act and not the Land Titles Act. It therefore was at least possible for the Declaration of Trust to be registered had the parties desired to do so.
[10] The Applicant continued to live in the Property after the transfer of title. She paid all of the costs of upkeep of the Property, including taxes, utilities, maintenance, and repairs. As indicated, she lived in the Property until 2010, at which time she requested that the Property be re-conveyed to her as called for in the Declaration of Trust. In her affidavit she explains that she wanted to rent or sell the Property in order to raise funds to support her move to the assisted living home.
[11] On March 8, 2006, Tony Colantonio submitted an application to lease a vehicle from the Respondent. On this application form, he listed his home address as 98 Markham Street and indicated that he lived at the Property. That information was false. He had not lived at the Property for many years.
[12] Furthermore, Tony stated on the automobile lease application that “he owned the property free and clear”. This statement is also false, or at the very least quite misleading. He failed to mention the Declaration of Trust, failed to mention that he was only a 50% owner of the Property, and failed to mention that his mother had a life interest in the Property. On the basis of the information contained in this application, and apparently without checking its accuracy or doing any further due diligence, the Respondents leased a vehicle to Tony.
[13] Tony died on May 20, 2009. In 2010, David Colantonio and the estate of Tony Colantonio agreed to re-convey the Property to their mother, the Applicant. When they went to make arrangements for this transfer of title, they discovered that the Respondents had executions against Tony which prevented clear title from being conveyed back to their mother.
[14] The Applicant commenced the present application on February 10, 2012. She seeks a declaration that she is the legal and beneficial owner of the Property, that Tony’s estate has no legal or beneficial ownership interest in the Property, and that the writs of seizure and sale filed by the Respondents do not attach to, and create no interest in, the Property. David Colantonio and the estate of Tony Colantonio both support her application.
[15] Mr. Riswick, on behalf of the Applicant, submits that the Property has been held in trust for the Applicant since the Declaration of Trust was signed in 2003, and that Tony was nothing more than a bare trustee when the Respondents registered their executions. He further argues that it has long been recognized that execution creditors are subject to the same equities as the debtor. Jellett v Wilkie (1896), 1896 49 (SCC), 26 SCR 282.
[16] In Young v LeMon, [1985] 3 CPC (2d) 163, the Ontario District Court held that an unregistered trust agreement takes priority over an execution creditor where the trust instrument was created prior in time to the creditor’s Writ of Fi Fa. This court has recently reiterated the point in Michaud v Coreslab Structures (Ont.) Inc., 2012 ONSC 355, at para 59, where it stated (quoting Anger and Honsberger, Law of Real Property):
An execution creditor can sell the lands of his debtor under execution but the land to be sold is subject to the charges, liens and equities to which it was subject in the hands of the debtor. Hence, it has been repeatedly held that if there is an unregistered interest outstanding against the lands at the time that execution is lodged with the sheriff, the unregistered interest is entitled to priority over the execution. In other words the execution creditor stands in no better position than his debtor.
[17] Mr. Lieberman, for the Respondents, takes no issue with this as a proposition of law. However, he submits that the priority of a prior unregistered trust over the interest of an execution creditor depends in the first place on the trust being a valid trust. This, he submits in turn, depends on the settlor of the trust exhibiting the requisite intent to create the trust.
[18] It is long established that, “[i]n order to create a trust, there must exist what is commonly referred to as a certainty of intention.” Erb v The Queen, 1999 203, at para 27 (TCC). As explained in Eileen E. Gillese, The Law of Trusts (1997), at p. 39:
To satisfy the certainty of intention requirement, the court must find an intention that the trustee is placed under an imperative obligation to hold property on trust for the benefit of another. Certainty of intention is a question of construction; the intention is inferred from the nature and manner of the disposition considered as a whole. The language employed must convey more than a moral obligation or a mere wish as to what is to be done with certain property. The language used need not be technical, so long as the intention to create a trust can be found or inferred with certainty.
[19] Mr. Lieberman contends that the Declaration of Trust dated May 29, 2003 does not exhibit the requisite certainty. In particular, he notes that the Applicant has not signed the document as settlor, only as indemnifier of the purported trustees. Although David and Tony declare that they hold the Property in trust, nowhere in the Declaration of Trust does the Applicant explicitly state that she is conveying them the Property in trust.
[20] Mr. Lieberman further submits that the Declaration of Trust really amounts to no more than an agreement to re-convey the Property in the future. As he sees it, David and Tony have taken title to the Property as registered, and the only qualifier on that is that the unregistered document imposes a contractual obligation on them to transfer title back to their mother upon her written request. This contractual obligation, according to Mr. Lieberman, does not go to title, and so does not undermine the validity or priority of the executions filed by the Respondents.
[21] This position, according to Mr. Lieberman, is supported by Tony Colantonio’s 2006 application for his car lease. Tony failed to mention the Declaration of Trust, the argument goes, because he did not think that it validly established a trust; rather, he considered that he was the owner of a beneficial interest in the Property.
[22] On the facts in the record before me, it is not easy to glean the parties’ intention in signing the Declaration of Trust and then not registering it. Mr. Lieberman suggests in his factum that this was done for estate planning purposes, “to eliminate potential probate fees on the death of the Applicant.” Presumably, this means that if the unregistered Declaration of Trust had not been revealed by that time, David and Tony would not disclose it and it would be assumed that title was conveyed to them as registered in 2003.
[23] Mr. Lieberman’s point is potentially a very strong one. As indicated in Erb, supra, at para 28, if a real intention to create a trust cannot be found, or if conflicting and contradictory intentions are found to have been present, then the trust must fail. If the trust is void for uncertainty, David and Tony’s title would be subject only to the Applicant’s registered life interest, but not subject to any overriding beneficial interest held by the Applicant.
[24] The court’s task in interpreting the Declaration of Trust, as with interpreting a will, is to “give full effect to the testator’s [settlor’s] intentions as far as possible. Those intentions are to be determined in light of the circumstances existing when the Will [Declaration] was executed.” Brannan v Public Trustee, 1991 1622, at 11 (BC SC). In interpreting the Applicant’s intentions, the court is not bound by “the formal expression of the parties” and is mandated to “look to the surrounding circumstances, including the conduct of the parties, in assessing whether the intent to settle a trust is present.”Antle v The Queen, 2010 FCA 280, at para 11 (Fed CA).
[25] I find the evidence of Tony’s lease application to be of little assistance in determining the intentions at issue here. As I read it, the information he provided to the Respondents does not reflect anything useful about his own intentions let alone the intentions of his mother as settlor, which is all that counts.
[26] It is true, of course, that Tony told the Respondents that he owned the Property outright. Those statements on the application form, however, do not speak to any title or trust intentions in 2003. They reveal only that in 2006 Tony was willing to say whatever it took to get himself a Mercedes.
[27] As Mr. Reswick conceded in his submissions, Tony lied to the Respondents. He misled them into thinking that he was the sole, unencumbered owner of the Property, when a routine title search would have shown that he was not. One does not even have to be told of the unregistered Declaration of Trust to see that Tony was providing incorrect information. He was unreliable then, and his application form is unreliable evidence of anything now.
[28] Mr. Lieberman summarizes in his factum the Applicant’s own evidence of intention: “[t]he Applicant deposed that she was not prepared to make an absolute gift of the Property to her sons but did not state the reasons why not.” While that is true, I do not see it as fatal to the Applicant’s case. It is the settlor’s intention to create a trust, not her motivation for doing so, that must be made apparent.
[29] Since the only evidence in the record of the Applicant’s intention is her sworn statement that she did not want to make her sons the beneficial owners, I have no reason not to take it seriously. She may have had an inkling that Tony was accumulating creditors, or, as Mr. Lieberman suggests in his factum, the Applicant may have been concerned “to eliminate any issues if somebody [i.e. David or Tony] got divorced down the road”.
[30] It is my task to determine the Applicant’s intention by having a view to “both the written documents and the actions of the parties”. Antle, supra, at para 11. The Declaration of Trust is not well drafted, but it certainly declares that David and Tony hold the Property as bare trustees for the Applicant. Whatever the Applicant may have thought would happen upon her death is anyone’s guess, but it seems evident that in 2003 she was not prepared to give her home away. She continued to pay for its entire upkeep, and wanted not only to live in it for the rest of her life (thus explaining the life interest she reserved for herself), but to preserve the beneficial interest for herself so that her sons could or would not lose it.
[31] I find that in 2003 the Applicant intended to convey the Property to David and Tony in trust for herself. Tony misrepresented the true state of affairs to the Respondents, which is quite unfortunate; but his misdeeds in leasing a car cannot be permitted to undermine what appears from all the evidence in the record to have been his mother’s intention to retain beneficial ownership of the Property.
[32] The Applicant is declared to be the beneficial owner of the Property, and the estate of Tony Colantonio has no beneficial ownership interest in the Property. Accordingly, the writs of seizure and sale filed by the Respondents do not attach to, and create no interest in, the Property.
[33] Counsel have advised me that the parties agree that costs of the successful party be fixed at $6,500.00 plus HST. That is very reasonable. The Respondents shall pay costs to the Applicant in the amount of $6,500.00, plus HST.
Morgan J.
Released: February 15, 2013
COURT FILE NO.: CV-12-446163
DATE: 20130215
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Maria Colantonio
Applicant
– and –
Don Park L.P., Mercedes-Benz Financial, a Business Unit of DCFS Canada Corp. and Import Auto Leasing Inc.
Respondents
REASONS FOR JUDGMENT
E.M. Morgan J.
Released: February 15, 2013