ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV–09-384618
DATE: 20131010
B E T W E E N:
1430556 Ontario Limited
Plaintiff
- and -
Francesco Calandra, also known as Frank Calandra, Mario N. Pacione, Luciano Pacione, 1290100 Ontario Inc. and 2058383 Ontario Inc.
Defendants
Allan S. Halpert,
for the Plaintiff
Vito S. Scalisi,
for the Defendant Frank Calandra
Mario Pacione, in Person
Luciano Pacione, in Person
HEARD: October 8 & 9, 2013
WHITAKER J.:
Overview
[1] This is an action for breach of trust and conversion arising from a motor vehicle sale and purchase. A claim in negligence has been abandoned.
[2] The value of the claim is approximately $45,000.00
[3] The defendant, F. Calandra (“Calandra”), contests the claim and takes the position that the actions are statute barred by the Limitations Act 2002, S.O. 2002, c.24, Sched. B, ss.4 and 5.
[4] The corporate defendants have been wound up. The defendant, M. Pacione, is bankrupt. The plaintiff has judgment against M. Pacione for $53,583.00.
[5] I conclude that Vito Moriello, as the directing mind of the plaintiff, appointed M. Pacione as agent on behalf of the plaintiff corporation with full authority to do whatever was necessary to sell the vehicle – including if necessary, retaining counsel. For the following reasons, the action is dismissed.
What Happened
[6] Most of the facts are uncontested.
[7] Mr. Vito Moriello is the president, sole shareholder and directing mind of the plaintiff corporation. Moriello testified on behalf of the plaintiff.
[8] Mario Pacione (“M. Pacione”) and Luciano Pacione (“L. Pacione”) are brothers. Each owned one of the corporate defendants. Together they operated a car repair business.
[9] The plaintiff is a holding company for real estate and automobiles. The principal business of the plaintiff is the buying and selling of cars.
[10] In 2007, the plaintiff owned a dozen cars, including a 1998 Hummer H1.
[11] Moriello was in the habit of having his vehicles repaired and maintained by the Paciones at their auto repair shop.
[12] In January or February of 2007, Moriello brought the Hummer in for repairs. The repairs were difficult, expensive and time consuming.
[13] In late March or early April, M. Pacione called Moriello to tell him that he might have a prospective purchaser for the Hummer.
[14] Moriello was indifferent to the details of a sale and said that if he could get $45,000.00 for the car plus GST, that “would be fine”.
[15] The next discussion about the car took place in September of 2007. M. Pacione told Moriello that the sale would happen soon.
[16] The prospective out-of-province purchaser advised M. Pacione that he insisted on the proceeds of the sale to be deposited in a solicitor’s trust account and to be held in escrow pending the purchaser’s receipt of the car.
[17] In May 2007, the defendant, Calandra, a member of the Ontario Bar was retained by M. Pacione to hold the funds in escrow as required by the purchaser.
[18] Calandra had in the past acted for M. Pacione and his family on a number of occasions. M. Pacione advised Calandra that the owner of the car had signed over ownership and that the corporation owned by M. Pacione, that being 1290100 had full authority to sell the vehicle and to hold the proceeds of the sale. Calandra was not retained for any other purpose, nor was he asked to undertake any investigations in connection with the pending purchase and sale. He was not asked for an opinion on title or any other issue that might arise in the transaction.
[19] Calandra testified that there was no apparent irregularity or suspicious circumstances that would cause him any concern.
[20] Calandra repeated in his evidence that he understood his retainer to be a simple conduit for funds. He understood his client to be M. Pacione and only for limited purposes.
[21] On May 16, 2007, Calandra received a letter from M. Kiss, a lawyer in Calgary who acted on behalf of the purchaser of the car. Enclosed with the letter was a cheque payable to Calandra in trust for $47,900.00. The cheque was deposited into Calandra’s trust account.
[22] The car was delivered to the purchaser who, through his solicitor, indicated that the car was acceptable and further, that the funds could be released. M. Pacione directed Calandra to pay the proceeds of sale to the law firm of Simmons da Silva and Sinton LLP, which he did.
[23] In December of 2007, M. Pacione told Moriello that the car was sold and the proceeds were in the lawyer’s trust fund. Mr. Moriello replied that this was “fine” as long as he could get his money before the end of February 2008. Moriello had a closing on a real estate transaction in May of 2008 and the cash was needed for the closing.
[24] M. Pacione testified that Moriello did not want to take early payment of the funds as he was being investigated by the Canadian Revenue Agency and did not want the cash on hand.
[25] To date, the plaintiff has received approximately $7,000.00 of the proceeds of the sale.
[26] Calandra maintains that his client throughout was M. Pacione who was appointed as agent by Moriello.
The Issues
[27] The parties agree the issues are:
(i) is Colandra a constructive trustee under knowing assistance;
(ii) or willful blindness;
(iii) or has he converted the funds;
(iv) is there a defence under the Limitations Act?
Constructive Trustee
[28] The parties agree on the applicable law.
[29] It is agreed that a third party may be a constructive trustee where they have knowingly assisted in a dishonest and fraudulent way. The degree of knowing assistance required of the stranger is actual knowledge. Recklessness or willful blindness will also suffice. (Air Canada v. M & L Travel Ltd., 1993 33 (SCC), [1993] 3 S.C.R. 787, 1991 CarswellOnt)
[30] Constructive knowledge and even carelessness are not sufficient to establish knowledge. (Dynamic Medical Concepts Inc. v. DiBenedetto, 2009 ONCA 662; Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805, 1997 334)
[31] It is apparent from the cases that there must be some flavour of wrong-doing on an objective standard before it is appropriate for the court to find there to be knowledge to justify personal liability.
[32] In the present case, there is nothing that would approach a finding of knowledge on the part of Calandra. There was nothing at any point to indicate fraud or more broadly, any behaviour that would be inconsistent with the very limited conduct required by the retainer as he understood it. Calandra had no basis to suspect that M. Pacione was not the owner capable of giving instruction.
[33] There is no constructive trust.
Conversion
[34] With respect to the ground of conversion, the parties also agree on the applicable law. It is uncontested that conversion may be innocent and encompasses any conduct which is inconsistent with the owner’s right of possession.
[35] It is also the case that there is no conversion if the defendant is dealing with the property in a manner authorized by the owner. (373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81, 2002 S.C.C. 81, 2002 CarswellAlta 1573))
[36] Moriello, as directing mind of the plaintiff, made it clear to M. Pacione that he was free to do whatever was necessary to dispose of the car and that included the ability to act as agent of the owner of the vehicle and the sale funds. Even after the funds were being held in trust, Moriello was content without any other information about the transaction. It was all “fine” as long as he would eventually be paid. Moriello was only concerned about the timing of the payout.
[37] I find there to be no conversion by Colandra.
[38] In the circumstances, it is not necessary to deal with the Limitations Act issue.
[39] The action is dismissed.
[40] Costs submissions may be made in writing within ten days and no longer than three pages.
WHITAKER, J.
DATE: October 10, 2013
COURT FILE NO: CV–09-384618
DATE: 20131010
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1430556 Ontario Limited
Plaintiff
- and -
Francesco Calandra, also known as Frank Calandra, Mario N. Pacione, Luciano Pacione, 1290100 Ontario Inc. and 2058383 Ontario Inc.
Defendants
JUDGMENT
WHITAKER J.
Released: October 10, 2013