COURT FILE NO.: CV-11-443100
DATE: 20130206
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE PARTITION ACT, R.S.O., 1990, c. P.4. Section 2 and 3
BETWEEN:
909403 Ontario Limited, Marsica Investment Ltd., Cesidio Ranieri and Alberto Ramelli
Applicants
– and-
Antonio DiMichele also known as Tony DiMichele, Michele DiMichele also known as Michael DiMichele and Roberto DiMichele also known as Robert DiMichele
Respondents
B E T W E E N:
Mark Ross, for the Applicants
Antonio DiMichele, in person
Douglas Loucks, for the Respondent Roberto DiMichele
No one appearing for the Respondent Michele DiMichele
COURT FILE NO.: CV-12-448620
Roberto DiMichele
Applicant
-and-
Antonio DiMichele as estate trustee of the estate of Adalgisa DiMichele, Antonio DiMichele, personally, Michele DiMichele, 909403 Ontario Limited, Marsica Investments Limited, Cesidio Ranieri, Gilberto Olivieri, Alberto Ramelli, Capital One Bank and Avrum Slodovnick, and The Director of Titles, party pursuant to S, 57(14) of the Land Titles Act
Respondents
Douglas Loucks, for the Applicant
Antonio DiMichele, in person
Mark Ross for the Respondents 909403 Ontario Limited, Marsica Investments Limited, Cesidio Ranieri and Alberto Ramelli
Sean Lawler for the Respondent Avrum Slodovnick
Dona Salmon for the Respondent The Director of Titles
No one appearing for the Respondents Michele DiMichele, Gilberto Olivieri and Capital One Bank
application under rULE 14.05(3)(a), (b) and (c) of the Rules of Civil Procedure and Section 37 of the Trustee Act, R.S.O. 990, Chapter T.23
HEARD: January 7 – 9, 2013
Allen J.
R E A S O N S F O R J U D G M E N T
A. PROCEDURAL BACKGROUND
[1] The Applicants are a group of investors (“the Applicants”) who were involved with Anthony DiMichele (“Anthony”) in a real estate investment scheme that failed. They sued Anthony by actions brought in 2002 and 2003 which were ultimately consolidated into one action (“the 2002 Action”). The Applicants brought the proceeding that is before me against Anthony and his two brothers, Michael DiMichele (“Michael”) and Robert DiMichele (“Robert”), to recover on a judgment they obtained from this court (“the Judgment”) against Anthony. The Applicants are seeking the sale of a property in which Anthony and his two brothers are beneficiaries under their mother’s will (“the Will”).
[2] The Applicants brought the proceeding that is before me as an application under Rule 14.05 of the Rules of Civil Procedure (“the Application”) for a determination on an issue of law. Robert brought a Counter Application disputing the Applicants’ right to seek the sale of the property and asserting his entitlement to sole ownership of the property. Michael has taken no position and has filed no materials in relation to the Application. The matter came before the court a number of times before the current date. On August 21, 2012, it came before Belobaba, J. where he decided there were issues requiring determination by a trial. He ordered that the matter be transferred to the trial list for a three-day trial and that a trial record need not be filed.
B. THE WITNESSES IN THE APPLICATION
[3] In the 2002 Action, Simon Schonblum represented the Applicants and Avrum Slodovnick represented Anthony. Mr. Slodovnick ceased representing Anthony sometime in 2010 due to differences that arose between them.
[4] Mr. Schonblum’s evidence was required so another lawyer from his law firm appeared on the Application for the Applicants. With Mr. Slodovnick no longer representing Anthony, he appeared in person. Mr. Loucks appeared for Robert. The differences between Anthony’s evidence on one hand, and that of Mr. Slodovnick and Mr. Schonblum on the other hand, as to what transpired at a pre-trial on June 4, 2008 and the legal effect of the agreement arrived at is at the centre of the issues in dispute on this Application.
[5] The involvement of Mr. Slodovnick as a witness raises issues of lawyer/client privilege. Counsel for Mr. Slodovnick sought and obtained from Belobaba, J. an Order issued December 17, 2012 that granted leave to the parties to examine Mr. Slodovnick on advice he gave Anthony in relation to issues in this Application.
C. FACTUAL BACKGROUND TO THIS DISPUTE
1. The Mother’s Will
[6] The Applicants obtained default Judgment in the 2002 Action against Anthony on October 14, 2010 in the amount of $1.5 million. They applied to the sheriff for a Writ of Seizure and Sale against the title to a property at 269 Angelene Street in Brampton, Ontario (“the Property”)[^1].
[7] The Property had been the family home of the DiMichele family for several decades. The parents of the DiMichele brothers resided at the Property until their deaths, the father’s death being in 1987 and the mother’s on September 5, 1996. The mother gained title to the home on her husband’s death. Robert has lived at the Property for some 50 years.
[8] Under the terms of the Will, executed on September 30, 1987, she named Anthony as estate trustee. The Will provides in its relevant part:
I GIVE, DEVISE AND BEQUEATH all of my estate, both real and personal, including any property over which I may have power of appointment, all my monies and securities for monies of every nature and kind and wheresoever situate, unto my Trustee upon the following trusts, namely:
a) To pay all my just debts, funeral expenses and testamentary expenses as soon as possible after my decease;
b) To pay out of the residue of my estate all Succession Duties, Inheritance and Death Taxes and pay taxes that may be payable in this or in any other jurisdiction by reason of my decease;
c) To deliver all the rest and residue of my estate then remaining to my issue alive at the date of distribution in equal shares per stirpes
IN ORDER TO CARRY OUT the provisions of this my Will, I give my Trustee power to sell, call in and convert into money, all of my estate at such time or times, in such manner and upon such terms as my Trustee in his discretion may decide upon, with power and discretion to postpone such conversion of such estate or any part or parts thereof, for such length of time as he may think best, and I hereby declare that my Trustee may retain any portion of my estate in the form in which it may be at my death … for such length of time as my Trustee in his discretion may deem advisable, without responsibility for loss, to the intent that investments or assets so retained shall be deemed to be authorized investments for all purposes of this my Will.
[9] The three sons were the mother’s only issue at the time of her death. The Will granted each of the sons alive at the date of distribution, in equal shares, a contingent interest in the residue of her estate remaining after the estate trustee paid the debts, funeral and testamentary expenses, duties and taxes. The Will authorized Anthony to sell, call in and convert into money the entirety of the estate at his discretion.
[10] On December 16, 1997, the date Anthony obtained a Certificate of Appointment of Estate Trustee with a Will, the only asset in the estate was the Property. On March 21, 2002, the estate property was transmitted to Anthony. The parcel register for the Property dated January 23, 1998 names “DiMichele, Antonio” as the “Owner” and under the heading “Capacity” are the letters “TWW”, which stands for “Trustee with Will”. The Transmission by Personal Representative – Land registered on title names the Applicant as “DiMichele, Antonio” and indicates his “Capacity” as “Estate Trustee with a Will”.
[11] Anthony denied knowledge of his mother’s Will and of being aware of his appointment as estate trustee. He also denied he applied for the Certificate of Estate Trustee with a Will and further asserts he was not aware the house was transmitted to him. He says he only became aware of these things in 2010 when the Applicants sought the sale of the house. However, I found Anthony to be a most unreliable and deceptive witness. His evidence was largely self-serving, and based on hearsay and speculation. He contradicted his own affidavit, his own testimony and much of the documentary and other witnesses’ evidence with respect to his legal connection to the Angelene Property.
[12] Anthony sought to persuade the court that a lawyer, who was a former business partner of his, applied for the Certificate and was also responsible for registering the transmission of the property to him as estate trustee. He was relentless in attempting to refute the suggestion on cross-examination that he must have known and understood the contents of correspondence and documents bearing his initials and signature. Anthony’s feigned ignorance is all the more striking in view of the fact that he has been a real estate agent for some 48 years. It does not stand to reason that he would be blind to the significance of property documentation and to his own interest in property.
[13] Wherever Anthony’s evidence is contradicted by the evidence of Mr. Schonblum and Mr. Slodovnick and by documentary evidence, I do not accept Anthony’s evidence.
[14] In relation to the 2002 Action, the Applicants looked to the Property to satisfy the Judgment. When they filed the Writ of Seizure and Sale with the sheriff, they gave the required notice to the brothers of their direction to the sheriff to enforce the Judgment through a sale of the Property. Robert responded objecting to the sale. Michael did not respond. The sheriff refused to authorize the sale indicating that given the beneficial interests a court order would be required.
[15] Under the Land Titles Act, R.S.O. 1990, c. L.5 (“the LTA”) the Director of Land Titles is required to be given notice of property title litigation involving land registered in the land titles system. A representative of the Director attended the trial, made brief closing submissions, but called no affidavit or oral evidence.
[16] It is the Applicants’ request for a court Order that underlies the issues in this trial. Before I identify the specific issues before the court, I need to provide further background to some developments in the 2002 Action.
2. The June 4, 2008 Pre-Trial
[17] A pre-trial took place on June 4, 2008 before Spiegel, J. The trial of the 2002 Action was scheduled to proceed in the very near future. Anthony was not prepared for trial. He did not have his financial evidence in order and an adjournment, one of many that marked the history of that litigation, would allow him the opportunity to retain a forensic accountant. The Applicants were concerned about securing funds for the Judgment in the wake of another delay in the trial. Again, Anthony disputes this, but the lawyers testified Spiegel, J. recommended $350,000 as an amount for security by way of mortgages placed on title to both the Property and the cottage property. Ultimately, the mortgage on the Property was in the amount of $350,000 (“the Mortgage”). The Mortgage was to be held by Mr. Slodovnick in trust for the Applicants as security for monies owing under any judgment obtained.
[18] Although again Anthony disputes this, Mr. Schonblum and Mr. Slodovnick testified that Anthony agreed to security being placed on the Property. Their evidence was that Anthony did not advise he held the Property as estate trustee or that his brothers had a beneficial interest in it. Minutes of Settlement were drafted at the pre-trial which, among things, provided the security by way of mortgages on title to both the Property and cottage property. Anthony initialled each page and along with the other parties and counsel, signed on the signature page. Despite Anthony’s protestations, the evidence is clear that he knew a Mortgage was being placed on the Property.
[19] I find that Anthony was aware he was appointed estate trustee; that he was aware that title to the Property was transmitted to him as estate trustee; and that he knew on June 4, 2008 when he authorized the Mortgage that he held title in trust for the beneficiaries.
[20] Despite the mother’s express wishes in her Will, Robert contends his mother intended and he agreed that he have possession and title to the Property on her death. This agreement was never set down in writing. However, Anthony attested to the fact that the mother did state such an intention and that the three brothers agreed to that arrangement. Robert says the fact he lived in the home for decades, took care of his mother in her old age, and paid expenses associated with the house supports the mother’s intention.
[21] The Property was appraised in July 2012 at a value of between $500,000 and $530,000. The only charge on title is the $350,000 Mortgage held in trust by Mr. Slodovnick for the Applicants.
D. ISSUES
[22] The following issues are before the court.
(a) Is the Mortgage against the Property valid?
(b) If the Mortgage is valid,
i. Are the Applicants entitled to recover the full amount of the Mortgage on the sale of the Property? or
ii. Are the Applicants entitled to only the value of Anthony’s one-third share of the Property?
(c) If the Mortgage is not valid:
i. Is Robert entitled to ownership of the entire interest in the Property?
E. THE PARTIES’ POSITIONS
1. The Applicants’ Arguments
(a) The Applicants’ First Position
[23] The Applicants firstly argue there is support in statutory and common law to find the Mortgage valid against the entire Property.
(i) The Land Titles Act
[24] The Applicants argue the fact the Property was subject to a trust does not affect the validity of the Mortgage. They rely on the provisions of the LTA.
[25] Section 62 of the LTA provides that the description of an owner as a trustee does not impose upon a person dealing with the owner a duty of making an inquiry as to the power of the owner to deal with the property. The owner can deal with the property as though a trust did not exist subject to a caution in a prescribed form being registered on title. No such caution was registered against the Property.
[26] Further, section 72(1) of the LTA provides that only the parties to a charge, trust or other instrument registered on title are deemed to have notice of the contents of any instruments other than those referred to on the parcel register. The owner of the land can deal with the property or charge as if the description of the owner as trustee did not exist.
[27] Courts have considered the implications of the land titles legislation on property interests registered under that system. In the Randvest, infra, an application came before the court where an owner’s authority to convey title to a purchaser was in question due to a reference to a trust in a land transfer affidavit. Chapnik, J. held the LTA does not recognize the existence of trusts. The LTA produces a guarantee of title. On that basis the requisition was found invalid [Randvest Inc. v. 741298 Ontario Ltd. No. 3182, at paras, 10 - 16, (Ont. Gen. Div.). See also Black v. Owen, 2012 ONSC 400, [2012] O.J. No. 516 (Ont. S.C.J. (Div. Ct.), a recent case that follows Randvest].
[28] What this means according to the Applicants is that it is of no consequence that Anthony’s ownership capacity is described on the parcel register as “TWW” or “trustee with a Will”. So Mr. Slodovnick, on behalf of the Applicants, was not required to inquire of Anthony about his capacity to deal with the Property before obtaining the Mortgage. The Will was not registered on title and the Applicants as beneficiaries of the Mortgage would not be deemed to have knowledge of Robert’s and Michael’s interests in the Property. The Applicants submit they are therefore entitled to an Order for sale of the Property in order to realize the $350,000 security from the proceeds of sale.
(b) The Applicants’ Second Position
[29] The Applicants’ alternate position is if the court finds the Mortgage cannot be enforced against the interests of Robert and Michael that in either of two ways the Mortgage attaches to Anthony’s one-third interest and they are entitled to recover against that interest.
(i) Anthony’s Residual Interest
[30] The first of these alternative ways is based on the principle that as a residual beneficiary, Anthony has a definable one-third interest in the Property which took effect once the estate had been fully administered. The estate being fully administered in the Applicants’ submission means the estate is ready to distribute. There is no need for the estate to have been actually distributed [Hollebone v. Paterson, [1982] B.C.J., No 1849, at paras. 9-12, (B.C.S.C)]. Anthony’s evidence is that all estate debts had been discharged and the sole asset in the estate was the Property which was valued at $100,000 at the time of the mother’s death.
[31] The Applicants rely on sections 2 and 3(1) of the Partition Act, R.S.O. 1990, c. P.4 which allows an application to be brought for the partition of land in which joint tenants or tenants in common have interests. The Applicants submit they have an interest in Anthony’s one-third interest and as such are entitled to seek partition and sale of the Property to recover their security from the proceeds.
(ii) The Mortgage Ranks behind Robert’s Interest
[32] Under s. 24 of the Mortgages Act, R.S.O. 1990, c. M 40 a mortgagee has a power to sell the mortgaged property to recover principal money secured by the mortgage following three months from the time of a default. The principal money came due according to the Applicants on the date of the Judgment in October 2010.
[33] The Applicants argue Anthony had the authority to grant the Mortgage and if the court were to determine the Applicants knew or ought to have known of Robert’s interest, the Mortgage would remain valid but rank behind Robert’s interest. What this means in practical terms according to the Applicants is that the Mortgage though registered would not be secured by equity because of its rank behind the beneficiaries’ residual interests. When the Property is sold under a power of sale, Anthony’s one-third interest would be subject to execution and paid out to the Applicants on sale.
(c) Anthony`s Position
[34] Anthony asserts he agrees with Robert that their mother intended that the Property go to Robert on her death. His understanding was that Robert would give him $50,000 to $60,000 in exchange for his interest in the Property.
[35] Anthony attempts to rely on a non est factum defence in asserting the Mortgage is not valid because he did not know he was signing a mortgage against the Property. This defence however is available only in the limited circumstances where a person can be free from being bound by a contract because for instance he was mistaken as to the nature of the contract.
[36] As I indicated above, I do not accept Anthony`s assertion that he was not aware his mother appointed him estate trustee and that the Property was subject to a trust. For reasons I set out earlier, it is not believable he thought he was only giving security on the cottage property and that he did not know when he signed the Minutes of Settlement on June 4, 2008 that he was giving a mortgage on the Property to Mr. Slodovnick in trust for the Applicants as security.
(d) Robert’s Position
[37] Robert also relies on statutory and common law to advance the position that the Mortgage is invalid and he is entitled to the entire interest in the Property. He puts forward two alternative arguments.
(i) No Interest in Land
[38] Robert’s first position is that the Will did not grant to the residual beneficiaries an interest in real property. He argues that based on the oral agreement with the mother he is entitled to sole title to the Property. This position if accepted would get Robert around s.4 of the Statute of Frauds, R.S.O, 1990, c. S. 10 which provides agreements pertaining to interests in real property must be in writing.
[39] Robert argues the words under the Will “the rest and residue of my estate then remaining to my issue alive at the date of distribution in equal shares per stirpes” do not create a property interest in any of the three brothers. The Will does not identify the Angelene property nor are the brothers identified. The Will refers only to “issue alive at the date of distribution”. Robert submits that were any brother to die before distribution that brother’s interest would not vest. What follows according to this view is that the brothers each have a contingent beneficial interest in the residue of the property, not an interest in real property.
[40] Robert cites two types of cases to support his position that the brothers had only a contingent beneficial interest in the residue of the estate before distribution. One type of case involves property interests as dealt with under the family legislative scheme and the other cases involve property interests in the context of estates administration.
[41] The Court of Appeal for Ontario in a matrimonial proceeding, Spencer v. Riesberry, considered a family trust that first held one house and later several other properties. In a proceeding pertaining to the division and valuation of family property on marriage separation, the court was asked to decide whether a daughter had an interest in a matrimonial home in one of the properties at the time she separated from her husband, pursuant to sections 4(1) and 18(1) of the Family Law Act, R.S.O 1990, c. F. 3 (“the FLA”). The daughter, her husband and two children had resided at the property during the marriage. The daughter’s entitlement under the trust was conditional upon her being alive at the time of the mother’s death.
[42] The appellate court upheld the trial court’s decision that at separation the daughter had a contingent beneficial interest and not a property interest in the family trust assets whatever they might be at the time of the mother’s death [Spencer v. Riesberry, 2011 ONCA 418, paras. 35 and 35, (Ont. C.A.)].
[43] Spencer v. Riesberry relied on another matrimonial case Gennaro v. Gennaro, infra, where the court was asked to decide whether the husband’s one-third vested interest in his mother’s estate, which at separation held only one house, was a property interest in a matrimonial home under the FLA, to be treated as such on property division [Gennaro v. Gennaro, 1994 7484 (ON SC), [1994] O.J. No. 183, para. 12, (Ont. U.F.C.)].
[44] Section 9 of the Estates Administration Act, R.S.O. 1990, c. E.22 (“the EAA”) provides if real property is not disposed of within three years after the death of the testator, it automatically vests in the beneficiaries entitled under a will (or intestacy) unless a caution in a prescribed form has been registered on title to the property. Section 10 of the EAA provides that nothing in s. 9 takes away from a personal representative’s rights under a will such as the power granted to the personal representative to sell or otherwise deal with the property.
[45] Robert relies on cases that, in view of s. 10’s apparent limitation on s. 9, considered the effect on vesting under s. 9 of an administrator’s authority under a will to sell estate property.
[46] In Caldwell v. LaMothe, infra, the deceased under a will granted full power in the administrator to sell any part of the estate. The administrator sought to sell property beyond three years after the death. The court found the consent of the other beneficiaries was not required and that pursuant to s. 10, s. 9 did not apply because of the full power to sell [Caldwell v. LaMothe, [1996] O.J. No. 1179, paras. 6 and 9, (Ont. Gen. Div.)].
[47] In Re. Canning, infra, decided under the predecessor Devolution of Estates Act, R.S.O. 1937, c 163, dealt with the sale of estate property before the expiry of the three years. The court applied comparable provisions to the EAA and held that if there is a plain and valid unconditional power of sale the court would not interfere with the sale [Re. Canning, [1949] C.C.S No. 1198 (O.C.J. (Gen. Div.)) and see Re. Jefferies and Calder, [1951] O.W.N. (O.C.J. (Gen. Div.)].
[48] In Proudfoot Estate (Re.), infra, the court determined that the intentions of the testator as expressed in the will must be considered when deciding whether an express or implied power to sell applies to property under a will. The court held the testator’s will clearly intended that the one property at issue, unlike other estate properties, not be subject to the executrices’ power to sell [Proudfoot Estate (Re.), [1994] O.J. No. 704 (Ont. Gen. Div.)].
[49] Robert argues Anthony was granted power to sell the property under the estate and pursuant to s. 10 of the EAA s. 9 did not apply to vest the property in the DiMichele brothers. Robert submits Anthony did not have a vested property interest when he gave the Mortgage and as such had no authority to grant it.
(ii) The Mortgage is Void as Fraudulent
[50] Robert argues that by Anthony mortgaging the Property as though he had full legal title, when he actually held title as a trustee, he engaged in a fraudulent transaction. This, according to Robert, renders Anthony a fraudster and the Mortgage void as a fraudulent instrument.
[51] Section 155 of the LTA provides a fraudulent instrument, that if unregistered would be fraudulent and void, despite registration, is fraudulent and void. The definitions of “fraudulent instrument” and “fraudulent person” under s. 1 of the LTA provide:
“fraudulent instrument” means an instrument,
(a) under which a fraudulent person purports to receive or transfer an estate or interest in land,
(b) that is given under the purported authority of a power of attorney that is forged,
(c) that is a transfer of a charge where the charge is given by a fraudulent person, or
(d) that perpetrates a fraud as prescribed with respect to the estate or interest in land affected by the instrument;
“fraudulent person” means a person who executes or purports to execute an instrument if,
(a) the person forged the instrument,
(b) the person is a fictitious person, or
(c) the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument;
[52] Robert cites Lawrence v. Maple Trust, infra. In that case an imposter, posing as the plaintiff, retained a lawyer to sell the plaintiff’s home. The imposter gave the lawyer a forged agreement of purchase and sale, the terms of which governed the sale of the property to another imposter, Mr. Wright. Mr. Wright applied for a mortgage from Maple Trust which Maple Trust approved and advanced funds pursuant to a mortgage agreement. Maple Trust started an action for possession of the property and the plaintiff brought an application to set aside the fraudulent transfer of the mortgage [Lawrence v. Maple Trust Co., 2007 ONCA 74 (Ont. C.A.)].
[53] The Court of Appeal for Ontario held that Maple Trust, the chargee, with due diligence had the opportunity to avoid the fraud whereas the plaintiff, the true owner had no such opportunity. Applying that principle, Robert argues the Applicants and/or their counsel Mr. Slodovnick knew or reasonably could have known Anthony was the registered owner of the Property pursuant to a transmission and had no authority to grant the Mortgage to Mr. Slodovnick.
F. ANALYSIS
[54] Having considered the parties’ many and varied arguments, I have come to the conclusion that the Applicants’ security in the Mortgage is only good against Anthony’s one-third interest in the Property.
[55] I will start with consideration of Robert’s alternative arguments on the invalidity of the Mortgage. I look first at the argument that the Mortgage is fraudulent and should be found void for that reason. I will then consider Robert’s position that the Mortgage is invalid as having been given by Anthony where a property interest did not exist.
1. Fraud
[56] There is scant judicial authority in Ontario on fraud in the land titles context. Other jurisdictions have provided some guidance. Although Alberta land titles legislation does not define “fraud”, an Alberta court has attempted to set some broad boundaries for this concept as it relates to land titles:
Fraud includes deceit, and dishonesty, and other forms of common law fraud. Fraud does not include mere knowledge of an unregistered interest even when combined with knowledge that the registration will defeat that interest. Within these broad boundaries the courts have not attempted to define fraud. It has been said that fraud required “something more” than mere notice amounting to injustice, dishonesty, or inequity.
[Bhimani v. Lartiga (2009), A.W.L.D. 4158, paras. 32-34, (Alta.Q.B.); see also Nagy v. Nagy (1983), 1983 2305 (SK CA), 31 Sask. R. 38, para. 10, (Sask. Q.B.); and Alberta (Ministry of Forestry, Lands & Wildlife) v. McCulloch (1991), 1991 5819 (AB KB), 3 W.W.R. 662, para.26, (Sask. Q.B.)]
[57] On the view that the Applicants and/or their lawyers had knowledge or ought to have had knowledge of Anthony’s capacity as estate trustee, there would have to be more than mere notice to constitute fraud.
[58] I also find critical features of Maple Trust, supra, set it apart from the case before me. Anthony was not an imposter in the sense of posing as another person when the Mortgage was given as was the case in Maple Trust. There was no forgery. Anthony signed his own name. Anthony did not meet other features of a “fraudulent person” as set out in s. 1 of the LTA. He was not posing as a fictitious person. Although it is the case that as trustee Anthony did not hold full legal title, Anthony did meet the requirement of the definition as “the registered owner of the estate or interest in land affected by the instrument”.
[59] Anthony did not give notice that he held title to the Property in the limited capacity of an estate trustee and that he shared beneficial interest with his two brothers. However, I find notwithstanding Anthony’s lack of forthrightness about the nature of his title, this alone does not place him within the bounds of fraud as conceived under the land titles system. I agree with the Applicants that an action by the other brothers would more appropriately lie against Anthony for breach of the fiduciary duty accorded to trustees under section 16 of the EAA.
[60] I therefore do not find the Mortgage void as being a fraudulent instrument.
2. Interest in Property and Vesting
[61] I also do not accept Robert’s position that Anthony had no property interest in the Property when he gave the Mortgage.
[62] Robert cited cases involving matrimonial disputes on the division of family property where determination was sought on whether beneficial interests in the residue of an estate met the definition of matrimonial property under family law legislation. The courts found that a contingent beneficial interest in the residue of an estate was not a property interest and hence not a property interest in a matrimonial home. The matrimonial cases looked at the nature a property interest as it existed at the date of separation whenever that might be, whether before or after the testator’s death. Whereas the focus of the estates administration cases is on the nature of the interest following the testator’s death and on whether the powers granted to an estate trustee are such that they affect the timing of vesting of beneficial interests.
[63] The estates in the matrimonial cases contained multiple parcels of real property over which trustees had varying duties. In Riesberry v. Spence, supra, the testator had not yet died so for that reason the property was not vested. In Gennaro v. Gennaro, supra, the testator granted the trustee broad powers of sale and administration over the various properties in the estate, much broader than the powers granted in the case before me.
[64] The estate administration cases Robert cited which deal with the effect of section 10 of the EAA on the presumptive vesting of a property interest under s. 9, I find are also distinguishable from the case before me.
[65] Courts have found whether the beneficiaries’ interests automatically vested within three years after the testator’s death pursuant to s. 9 depends, applying s. 10, on what effect the trustee’s power to sell might have on delaying the vesting. The full powers of sale granted to trustees in Caldwell v. La Mothe, Re. Canning and Re. Jefferies and Calder, supra, were found to prolong the time for the vesting of residual interests. Critical here is the intention of the testator. The court in Proudfoot, supra, emphasized the importance of respecting the clear intention of the testator in determining whether a power of sale affects estate property. That is to say, if a will makes it clear the intention that automatic vesting should not occur or that the trustee has discretion beyond three years, that intention prevails [Re. Barrow, (1980) 8 E.T.R. 169, para. 16, (Ont. Gen. Div.)].
[66] Anthony paid the debts and liabilities soon after the mother’s death. As noted earlier, the only property in the mother’s estate at her death was the Property which at that time was valued at $100,000. It was the mother’s intention as stated in her Will that once administration was completed all the rest and residue of her estate then remaining should go in equal shares to her issue alive at distribution. Robert argues the discretion granted to Anthony under the Will to postpone the conversion of the estate is a power that affects the timing of vesting of the residual interests. However, I find this argument yields to the fact that there is no clear intention in the Will that automatic vesting not occur or that Anthony have discretion beyond three years.
[67] I apply the decisions of the courts that have held that administrators who have discharged their duties as administrators by paying the debts and liabilities of the deceased, have no right or authority to sell land that they hold as trustees for those beneficially entitled. When the three years has expired the land has adequately vested in the persons beneficially entitled as though the administrator had conveyed it [Re. Cavanagh (1938), O.W.N. 67 (Ont. Gen. Div.), confirmed in 783107 Ontario Inc. v. Hickson Estate (1993), 34 R.P.R., para. 7, (Ont. Gen. Div.)].
[68] The Cavanagh and Hickson Estate, supra, decisions dovetail with the case law the Applicants advance in support of their second position that security could be sought against Anthony’s one-third vested interest. Hollebone v. Paterson, supra, held the estate does not have to be distributed for beneficial interests to vest. The estate need only be fully administered, that is, ready to distribute for an interest in property to take effect. There is no need for the estate to have been actually distributed. Each of the DiMichele brothers therefore has a one-third interest in the Property, the only property in the estate at the mother’s death and at the time the Mortgage was granted.
3. Robert’s Claim to an Oral Contract in Relation to the Property
[69] Section 4 of the Statute of Frauds requires agreements in respect of real property to be in writing. Robert asks the court to recognize an oral agreement between his mother and him that he have title to the Property after her death. This argument of course is predicated on a finding that no beneficial interests have vested, that no interest in property exists in the beneficiaries. The obvious result of such a finding would be that the Statute of Frauds does not apply.
[70] I have found that the Property interests vested in the three beneficiaries. There is no written agreement or any other document evidencing Robert’s interest. Even with the passage of 15 years since the mother’s death, Robert did not register his purported interest on the land titles registry. I therefore find any oral agreement between Robert and his mother has no force or effect.
[71] This renders moot the Applicants’ argument that the Mortgage would take priority after Robert’s interest.
G. CONCLUSION
[72] I rejected Robert’s argument that the Mortgage is invalid as procured by fraud or as not attaching to an interest in property. Pursuant to section 78(4) of the LTA, except if fraudulent, when registered an instrument is deemed to be embodied in the record and to be effective according to its nature and intent, and in the case of a mortgage, to charge the land.
[73] The beneficial interests of Anthony and his two brothers had already vested by the time Anthony gave the Mortgage in 2008. Hence Anthony could only mortgage and transfer the value of his interest to the Applicants which means the Mortgage is only enforceable against Anthony’s one-third interest. Further, the 2002 Action was brought against Anthony in his personal capacity not against him as estate trustee. He therefore could only give as security what he owned in his personal capacity not what he held as estate trustee.
H. DISPOSITION
[74] The Application is allowed and the Counter Application is dismissed.
[75] Sections 2 and 3(1) of the Partition Act, R.S.O. 1990 c P.4 allow an application to be brought for the partition of land in which joint tenants or tenants in common have interests. Anthony, Robert and Michael hold their interests as tenants in common in proportion to their respective rights [Spring v. Kinnee (1928), 1928 834 (ON CA), 62 O.L.R. 562 (Ont. C.A.)]. A judgment creditor is only entitled to seize the interest that a judgment debtor possesses in the land in question [Royal Bank of Canada v. Friesen, 1979 2422 (SK KB), [1980] 2 W.W.R. 580 (Sask. Q.B.)]. Thus, the Applicants are entitled to seek partition and sale of the Property to recover their security from the proceeds.
[76] The Applicants are entitled to appear before a Master at Toronto to seek an Order for partition or sale, or for the partition of part and sale of the remainder of the Property in accordance with the interests of the parties entitled to share in it.
[77] The Applicants are entitled to seek an Order that the land, or such part of it that the referee sees fit, be sold under the direction of the referee, free of all encumbrancers, if any, who have consented to the sale, and subject to the claims of the encumbrancers who have not consented to the sale, and that the purchaser pay the purchase money into court to the credit of this proceeding, subject to the Order of the court.
I. COSTS
[78] I asked the parties for costs outlines at the conclusion of the proceeding. I had ordered Anthony DiMichele to leave the court room during closing arguments due to his disruptive behaviour. He was therefore not present when I requested the costs outlines. I asked my judicial assistant to write to Anthony to advise him of my request and to give him until Friday, January 18, 2013 to deliver his costs. My assistant did so by letter dated January 11, 2013 sent by ordinary mail. Anthony did not deliver a response to my request for a submission on costs.
[79] The Director of Land Titles indicated she would not be requesting costs. I therefore considered only the costs of Mr. Ross and Mr. Loucks.
[80] The Applicants were fully successful on the Application and Counter Application and, in accordance with the principle that costs follow the event they are entitled to an award of costs.
[81] The Court of Appeal for Ontario set down the principle that the objective of a determination on costs is to fix an amount the unsuccessful party is required to pay that is fair and reasonable rather than an amount reflecting the actual costs of the successful party [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.)].
[82] In deciding what is fair and reasonable, the expectation of the parties concerning the quantum of a costs award is a relevant factor [Boucher, supra, at para. 38]. If successful, the Applicants would seek total actual costs of $21,338.09 inclusive of HST and disbursements. Robert DiMichele would seek total partial indemnity costs of $37,695.44 inclusive of HST and disbursements.
[83] Rule 57.01 of the Rules of Civil Procedure provides criteria the court can consider in determining costs.
[84] Regarding the complexity of the proceeding, I find the issues on the Application and Counter Application to have been considerably complex owing to the fact that property issues were raised in relation to three legislative schemes, land titles, family law, and estates administration law. As well, on some of the issues, Ontario jurisprudence is scarce and the court was faced with some rather novel considerations. Counsel put forward some interesting and challenging questions.
[85] The proceeding moved along fairly expeditiously with no terribly significant delays. It lasted less than three days. But here I am drawn to comment on Anthony DiMichele’s conduct. Throughout his testimony, he was evasive and non-responsive to questions. This called upon the court to admonish him on many occasions to answer the questions put to him. His obstructive outbursts and belligerence during the other parties’ testimonies and argument ultimately caused his ejection from the courtroom. This will be considered against him on costs.
[86] I award costs of $15,000 against Anthony DiMichele inclusive of HST and disbursements and $10,000 against Robert DiMichele inclusive of HST and disbursements, payable within 30 days of this Order. These awards are reasonable and within the reasonable expectations of the parties.
J. ORDER
[87] Order accordingly.
Allen J.
Released: February 6, 2013
COURT FILE NO.: CV-11-443100
DATE: 20130206
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE PARTITION ACT, R.S.O., 1990, c. P.4. Section 2 and 3
BETWEEN:
909403 Ontario Limited, Marsica Investment Ltd., Cesidio Ranieri and Alberto Ramelli
Applicants
– and-
Antonio DiMichele also known as Tony DiMichele, Michele DiMichele also known as Michael DiMichele and Roberto DiMichele also known as Robert DiMichele
Respondents
B E T W E E N:
Roberto DiMichele
Applicant
-and-
Antonio DiMichele as estate trustee of the estate of Adalgisa DiMichele, Antonio DiMichele, personally, Michele DiMichele, 909403 Ontario Limited, Marsica Investments Limited, Cesidio Ranieri, Gilberto Olivieri, Alberto Ramelli, Capital One Bank and Avrum Slodovnick, and The Director of Titles, party pursuant to S, 57(14) of the Land Titles Act
Respondents
application under rULE 14.05(3)(a), (b) and (c) of the Rules of Civil Procedure and Section 37 of the Trustee Act, R.S.O. 990, Chapter T.2
R E A S O N S F O R J U D G M E N T
Allen J
Released: February 6, 2013
[^1]: The Applicants also sought a Writ of Seizure and Sale on a cottage property in Muskoka. The issues in this Application pertain to the property at 269 Angelene Street so these Reasons focus on the issues that arise from a mortgage placed on the Property and the Applicants’ efforts to obtain an order to sell it.