ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 1982/10
DATE: 2014-09-09
BETWEEN:
TERESA SOWKA
Applicant
– and –
EDWARD SOWKA
Respondent
– and –
ROYAL BANK OF CANADA
J.P. Paciocco, Counsel for the Applicant
B. Pritchard, Counsel for the Respondent
Respondent
A. Tratnik, Counsel for the Respondent
HEARD: April 24, 2014
REASONS FOR DECISION
varpio, j.
INTRODUCTION
[1] This is a motion brought by Teresa Sowka – with Edward Sowka’s consent – to sever a joint tenancy in their former matrimonial property and to discharge the Royal Bank of Canada’s (“RBC”) writ of execution currently registered against that property. For the reasons that follow, the joint tenancy is hereby severed and said writ shall be discharged upon the payment of $37,000 into Court.
FACTS
[2] Edward and Teresa Sowka were married in 1982 and separated in 2009. A family law claim was commenced in 2010. During the course of the marriage, they lived at 243 St. Patrick Street, Sault Ste. Marie and owned the residence in joint tenancy.
[3] Ms. Sowka suffers from ill health, and since separation, has been unable to work. She accumulated considerable credit card debt during this time.
[4] RBC commenced a lawsuit as against Ms. Sowka for her unpaid credit card bills. Ms. Sowka did not defend the action and RBC ultimately entered default judgment. Pursuant to that judgment, Ms. Sowka owes RBC in excess of $40,000 of which some $22,000 is principle with the remainder being interest charges. On November 3, 2011, a writ of execution was filed with the Sheriff of Sault Ste. Marie whereby RBC encumbered Ms. Sowka’s interest in the matrimonial home.
[5] On September 3, 2013, Mr. and Ms. Sowka settled their matrimonial litigation at a settlement conference. The terms of settlement demanded that, inter alia, Ms. Sowka surrender her interest in the matrimonial home to Mr. Sowka.
[6] As part of the settlement conference materials, a valuation dated January 18, 2011 was filed with the court indicating that the matrimonial home was worth approximately $151,000, leaving the Sowkas with a net equity of approximately $37,000.
[7] On September 5, 2013, Ms. Sowka’s lawyers obtained default judgment against Ms. Sowka for $25,869.00 (presumably for legal fees) and subsequently filed a writ of seizure and sale against the matrimonial property.
[8] RBC has not consented to discharging its writ in order to permit the transfer of title to Mr. Sowka. The parties have attempted to settle the instant dispute to no avail. Accordingly, Ms. Sowka brought the instant motion for an order:
(a) severing the joint tenancy;
(b) declaring that Mr. and Ms. Sowka hold the property as tenants in common; and
(c) discharging RBC’s writ pending Ms. Sowka’s payment of $37,000 into court (the apportionment of which will be determined at a later date).
[9] Mr. Sowka consents to the motion while RBC is opposed.
[10] RBC’s counsel, Mr. Satin, swore an affidavit wherein he indicated that “the Bank will be significantly prejudiced in its efforts to enforce its judgment [should the motion be granted]. According to Ms. Sowka and her lawyers, Ms. Sowka has no other assets and is not employed. The writ is the Bank’s only leverage to enforce its judgment.”
[11] Interestingly, Mr. Satin also states:
According to the Minutes [of settlement in the matrimonial dispute], the parties agreed that Mr. Sowka would pay to Ms. Sowka an equalization payment totalling $285,505, comprised of $37,000.00 from re-financing the Property and pension interests valued at $248,505. We have not been advised of any other execution creditors of Ms. Sowka, except for the Bank and her lawyers. Clearly, Ms. Sowka has the means to satisfy the Bank’s judgment in full.
[12] While a dated property valuation was put before the Court, neither side has procured an up-to-date valuation such that I have no idea how much equity actually exists in the home as of today.
ISSUES
Was the joint tenancy severed by the Sowkas?
Assuming the joint tenancy was severed, should the writ be discharged once $37,000 is paid into court pending the determination of entitlement to the funds?
POSITION OF THE PARTIES
The Sowkas
[13] The Sowkas argue that joint tenancy can be severed through a course of conduct as described in Hansen v. Hansen Estate (2012) 2012 ONCA 112, 109 O.R. (3d) 241. They rely upon Rule 3 (course of conduct) and not Rule 2 (explicit agreement)[^1]. They posit that the course of conduct undertaken by the parties in the matrimonial litigation makes it clear that the joint tenancy was effectively severed at the time that the Sowkas negotiated a settlement of their family law affairs, if not earlier.
[14] The Sowkas claim that the following factors evidence a course of conduct sufficient to sever a joint tenancy:
(i) the parties separated with no prospect of reconciliation;
(ii) the parties closed a joint account from which expenses for jointly held property were paid;
(iii) divorce proceedings were commenced;
(iv) both co-owners made claims for equalization of net family property;
(v) an appraisal of the matrimonial home was obtained;
(vi) each party claimed one-half the value of the matrimonial home in his/her Statement of Financial Information; and
(vii) the anticipated final settlement of the matrimonial litigation was based on Ms. Sowka selling her interest in the matrimonial home to Mr. Sowka.
[15] The Sowkas further rely upon 160420 Canada Inc. v. Donley Investments Ltd. [2011] O.J. No. 3964 as standing for the proposition that a writ of execution can be discharged by the court in order to avoid injustice. They submit that failure to discharge the writ would be unjust in the circumstances of this case since Mr. Sowka has incurred none of the debt. Further, the Sowkas submit that a premium should be placed upon the value associated with settling matrimonial litigation.
RBC
[16] RBC submits the Sowkas’ efforts are insufficient to sever the tenancy. Further, RBC states that the ability to sever joint tenancies via Rule 3 as described in Hansen Estate only applies to situations where parties are attempting to ensure that an unjust right of survivorship is thwarted.
[17] RBC also relies upon Marankis v. Marankis, 1984 76 (SCC), [1984] 2 S.C.R. 137 to state that a creditor’s execution continues to be binding after an inter vivos transfer of an encumbered interest.
[18] RBC further submits that, even if the Sowkas are able to sever the joint tenancy, it would be unfair to discharge the writ of execution in exchange for the deposit of $37,000 into court since:
(a) RBC would lose its primary leverage in the proceedings;
(b) $37,000 is insufficient security to ensure that RBC is paid full value for its judgment plus interest;
(c) Mr. Sowka knew – or ought to have known – the risks associated with owning property as a joint tenant; and
(d) The Sowkas are attempting to defeat a validly placed writ.
LAW AND ANALYSIS
Severance of Joint Tenancies
[19] There is a dearth of precedent dealing with joint tenancy in the common law. Luckily, the Ontario Court of Appeal has recently written about severing joint tenancies in Hansen Estate. Winkler C.J.O., writing for the court, described the differences between joint tenancies and tenancies in common at paragraphs 29 to 31:
Joint tenancy versus tenancy in common
A joint tenancy and a tenancy in common are the main forms through which two or more persons may collectively hold interests in property. In a joint tenancy, the co-owners hold the property as a unified whole such that each holds an equal interest in the property. In contrast, in a tenancy in common, one co-owner may be entitled to a greater proportionate interest in the property than the other(s).
There are very few other practical differences between the two forms of land holding. Ultimately, the critical distinction between the two -- what Blackstone's Commentaries refers to as "the remaining grand incident" -- is the right of survivorship: Sir William Blackstone, Commentaries on the Laws of England: A Facsimile of the First Edition of 1765-1769, Vol. 2 (Chicago: University of Chicago Press, 1979), at p.183.
Through the right of survivorship, the interest of a co-owner in a joint tenancy will pass equally to all of the other co-owners upon his or her death. If multiple co-owners remain, the joint tenancy remains in existence, while if only one owner survives, the entire interest in the property passes to the survivor. In contrast, upon the death of a co-owner in a tenancy in common, the deceased's interest in the property passes to his/her estate.
[20] In paragraphs 32 to 36, Winkler C.J.O. went on to describe how parties can sever a joint tenancy:
Methods for severing a joint tenancy
As the application judge recognized, the classic statement setting out three ways in which a joint tenancy may be severed is that of Vice-Chancellor Wood in Williams v. Hensman, supra, at p. 867 E.R.:
A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund-losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested. You must find in this