ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-11-001-00

DATE: 2014 Jul 09

BETWEEN:

PRISCILLA JUNE LOVE
Plaintiff

– and –

THE ESTATE OF LEE RICHARD SCHUMACHER
Defendant

Kurt R. Pearson, for the Plaintiff

David M. Adams and Paul M. Fay, for the Defendant

HEARD: February 24, 25, 26, 27 and 28, 2014 at Kingston; written submissions May 1, 2014

Tausendfreund, J.

REASONS FOR JUDGMENT

OVERVIEW

[1] At issue in this action is the interest, if any, the Plaintiff has in a cottage on Bob’s Lake, being Part of Lot 17, Concession 4 and Part of Lot 17, Concession 5 in the Township of Bedford, in the County of Frontenac. The cottage is owned by the Defendant Estate. The Plaintiff used the cottage exclusively between 1985 and 2010, initially at the invitation of the now late Lee Schumacher (“Lee”) and as of 1993, based on the represented promise by Lee to leave the cottage in his Will to the Plaintiff. Lee died December 3, 2012. On August 6, 2010, Lee had made a Will leaving his entire estate to his son, Barry Lee Schumacher (“Barry”).

[2] The Plaintiff states that she relied on the promise made to her by Lee. She paid not only all of the expenses of the cottage, but improved and enlarged it over the years. The value of the property had increased as a result of her efforts. She seeks to have the verbal promise of the conveyance enforced. She relies on the concepts of proprietary estoppel and unjust enrichment. In the alternative, she advances a constructive trust claim.

[3] The Defendant Estate denies that Lee made such a promise to leave the cottage to the Plaintiff. It states that the Plaintiff was given the use of the cottage in return for which she paid all the necessary expenses and that one should offset the other. The Estate denies that the concepts of unjust enrichment and proprietary estoppel apply to these facts. As for the constructive trust claim, the Defendant Estate states that the Plaintiff simply maintained the cottage, but did not improve its value.

BACKGROUND

[4] The Plaintiff was born in 1940. She has lived in Akron, Ohio her entire life. She and her husband separated in 1984 and divorced in 1998. He died in 2004. They have two children, Pamela Love, born 1961 and Jill Thompson, born 1977.

[5] The Plaintiff was a homemaker until the mid-1980s when she obtained part-time employment to supplement her modest income.

[6] The Plaintiff and Lee met in 1963. They became friends. It was a non-romantic relationship which they maintained until shortly before his death. They lived close to each other. Lee looked after the Plaintiff and her family professionally in his dental practice. They included each other in their respective periodic family functions. She worked for Lee as a part-time housekeeper for 10 years.

[7] Lee was divorced in the 1950s. His only son Barry then lived with his mother. Barry became a lawyer and moved to Colorado in the early 1980s where he and his family still reside. Barry maintained infrequent contact his father over the years. He would visit his father once a year and maintained telephone contact.

[8] Lee was described as being frugal and a touch eccentric. He was not close to his family and had few friends. He owned his own house where he lived by himself for at least 50 years until the last two years of his life when he had become too frail and needed assistance. He was not a man of means. His dental practice had, over the years, provided him with a modest income. His son Barry assisted him financially over the last 10 years of his life.

THE COTTAGE

[9] In 1975, Lee inherited from his aunt, Agnes Fricker, a modest cottage property on Bob’s Lake. It had been built in the early 1950s by Agnes’ husband, George, who had predeceased her. The cottage had fallen into disrepair and was then but a rustic fishing cabin on 3.3 acres of waterfront property.

[10] Although the evidence is not clear on this point, I find that during the 10 years following Lee’s inheritance of the cottage, he made little, if any, use of it. Independent of his father, Barry attended at the cottage on four to five occasions between 1977 and 1982. He described it as a “cabin that would keep you out of the weather.”

[11] In 1985, Lee learned that the Plaintiff and her daughters had planned to visit the Trent–Severn Waterway and would thus find themselves a short drive from the cottage. That prompted Lee to encourage the Plaintiff to stop by and use the cottage which he described to her a fishing camp. The issue of rent was not raised. He told her that no one was using it, that he had not been there for some time and that he had turned the power off. The Plaintiff accepted the offer.

[12] Upon arrival, she found a camp “out of the 1940s”. It was dirty, overgrown and full of debris and detritus. It was sparsely furnished, including antiquated and ill-working appliances. It took five days for her and her daughters to clean the camp and clear the outside.

[13] The following year, Lee gave the Plaintiff the cottage key again. She and her daughters then stayed for six weeks. She replaced the stove and upgraded the electrical system. When she then told Lee of the improvements and how much she and her daughters had enjoyed the visit, Lee told her to just keep using it, as he did not want his brother or any of his family making use of it. The pattern of her annual visits to the cottage then started.

[14] In 1989, Lee visited the cottage for three days while the Plaintiff and her daughters were there. He was pleased with the improvement and encouraged them to continue their annual visits.

[15] The Plaintiff by then had extended her annual visit to the cottage to eight weeks. It had become a routine for her and her daughters. In 1993, Lee told her to “go ahead-take care of it-it will be yours.” Lee repeated that promise to the Plaintiff’s daughters Pam in 1994 and to Jill in 2000 and thereafter to the Plaintiff on several other occasions up to 2009. After that initial promise, the Plaintiff placed her name on the mailbox, arranged the installation of a phone line and cable television, changed the mail address for realty taxes to her Akron home, changed the insurance coverage into her name and Lee’s name jointly and dealt with the Ontario Property Assessment Corporation to achieve a reduction in the property tax assessment for the cottage. The Plaintiff also increased substantially cottage projects she and her family undertook after 1993 to the point that her daughter Pam had to arrange for a loan to finance these activities.

[16] As of 1985 when the Plaintiff started to her annual visits to the cottage, Lee did not pay any further expenses for the cottage nor assumed any tasks regarding its maintenance and upkeep, all of which had been taken on by the Plaintiff.

[17] Between 1985 and 2010, the Plaintiff paid all expenses, upgraded, enlarged, improved and maintained the cottage. These activities can be summarized as follows:

a. Payment of all realty taxes, insurance, hydro and telephone;
b. The opening, closing and securing of the cottage;
c. Replacing and adding appliances and fixtures;
d. Maintain, repair, upgrade and enlarge the cottage;
e. Replace sewage system; and
f. Maintain and improve the grounds, including waterfront and dock.

[18] In 2003, the Plaintiff presented a letter to Lee which she had written to him to address her legal interests in the cottage. She reminded him of his promise made 10 years earlier to her that the cottage would be hers someday. She proposed an option to have both their names registered on title. He did not challenge her letter, except to say that her proposal would become too complicated.

[19] In 2005, she arranged for the preparation of a draft deed of the cottage into her name. She gave the draft to Lee. He said he would give it his son to review. She heard nothing further of it.

[20] In each of the years 2000 and 2001, Lee arranged for the preparation of a draft Last Will and Testament. Each document provided for the transfer of the cottage to the Plaintiff. Her daughter Jill was named as the alternate beneficiary. Neither Will was ever signed.

[21] In 2010, Lee signed his Last Will and Testament in which he left his entire estate to his son Barry. There was no mention of the cottage. The Plaintiff learned of that document and arranged a meeting with Lee. It was not a pleasant occasion. He denied that he had ever made such a promise and denied the existence of the two draft Wills ten years earlier. He then added that the Plaintiff should refrain from any further use of the cottage.

[22] Colleen Hall-Clark, a real estate appraiser active in Eastern Ontario Cottage Country, provided an opinion of value for the cottage in 1985 in the range of $32,000-$37,000 and at 2014, a value of $174,000.

[23] A number of neighbouring cottage owners testified. Their evidence can be summarized as follows:

a. During the 1970s and early 1980s, the property was known as the “Fricker” cottage. It looked old and overgrown. There were no signs or sounds of any use or occupation by anyone during those years. After the mid-1980s and for the next 25 years, the cottage had taken on life again. The appearance of the property improved to the point that it was described as “immaculate.” During those years, it had then become known as the “Love” cottage.

ANALYSIS

[24] Based on the evidence, I make these findings of fact:

a. Prior to 1985, the use of the cottage by Lee and his family was limited to a few cursory visits. By then, the cottage had fallen into disrepair based on the passage of time and lack of use and upkeep.

b. After the Plaintiff’s initial visit to the cottage in 1985, a pattern developed. Lee made the cottage available to the Plaintiff each year. She, in turn, assumed responsibility for maintenance and upkeep of the property. This relieved Lee of the financial and other obligations for the property. He, in turn, had little interest in either visiting or in the ownership of the property in general. It was but an obligation to him. He was pleased that the Plaintiff, his long-time friend, had fully embraced the cottage for her and her family and had assumed all responsibility for its maintenance. He relished in her accounts of her family’s use of the property and the various improvements they effected over the years.

c. In 1993, Lee encouraged the Plaintiff to further to take care of the cottage as it would be hers someday. He repeated that promise to her periodically over the years and also raised it with each of her daughters.

d. On Lee’s instructions, his lawyer prepared a draft Will for him in each of the years 2000 and 2001. Each of these documents included the bequest to the Plaintiff of the cottage. These Wills were never signed.

e. In 2010, Lee signed his Last Will and Testament. He left his entire estate including the cottage to his son Barry.

f. In the period of 1985-2010, the Plaintiff spent in excess of $100,000 on the cottage. That included maintenance and periodic expenses such as realty taxes, insurance, hydro and telephone. It also included refurbishing, enlarging and improving the cottage and the property. Material and labour provided by and on behalf of the Plaintiff at a cost to the Plaintiff of at least $75,000 enhanced the value of the cottage property in an amount greater than $100,000.

[25] Corroboration contemplated by s.13 of the Evidence Act is not required as Lee was still alive when this action started. He instructed counsel to defend this action and filed pleadings and affidavits. In any event, I find that the Plaintiff’s evidence has ample corroboration, as contemplated by s.13 of the Evidence Act.

[26] The arrangement between the Plaintiff and Lee was one of mutual benefit. I find that the cottage to Lee was but a burden. It was located a drive of many hours from his Akron, Ohio home. He had rarely visited it and showed little inclination to use it, either for himself or his family. Although it was not a burden to him, he found its maintenance was a matter of financial and personal inconvenience. In initially making the cottage available to the Plaintiff, he had intended to provide a benefit to a long-time friend, but happily found an arrangement which unburdened him of an obligation.

[27] The initial arrangement had gradually developed into a pattern when, in 1993, Lee made his initial mention to the Plaintiff of an eventual bequest. Over the years, he periodically repeated to the Plaintiff his plan to leave her the cottage. He also mentioned it to her daughters and instructed his lawyer, on two occasions, to prepare draft Wills, which included his proposed bequest of the cottage to the Plaintiff. As noted, he did not sign either of these documents. The Will which he finally signed in 2010 left his entire estate, including the cottage, to his son Barry.

[28] There may be any number of reasons why Lee changed his mind. The fact is, he did. The evidence is unclear as to the reason.

[29] The Plaintiff urges that the oral arrangement between her and Lee was partly performed and thereby addressed the concerns and requirements of s.4 of the Statute of Frauds. Based on that part performance, the Plaintiff states, the arrangement can and should be specifically enforced: see Erie Sand & Gravel Ltd. v. Seres Farms Ltd., 2009 ONCA 709 at paras. 49 and 78.

[30] What the Plaintiff fails to address is whether this arrangement was, in fact, an agreement. Lee made the cottage available to the Plaintiff on an annual basis. In return, the Plaintiff paid the expenses and relieved Lee of a burden and an obligation which he no longer needed to address. His offer to leave the cottage to the Plaintiff, likely as a bequest, and if carried out, would have been in the nature of a gift. It was not, however, an agreement. As such, there is nothing to be specifically enforced in the sense of Deglman v. Guaranty Trust Co of Canada, 1954 2 (SCC), [1954] S.C.R. 725.

[31] That said, I found that after the 1993 offer by Lee to leave the cottage to the Plaintiff, she increased, financially and in labour, her efforts to enlarge and improve the cottage property and thereby, its value. I must now address the extent to which, if any, the concepts of proprietary estoppel and unjust enrichment affect the right of the Defendant Estate to leave, as a bequest, the cottage to Barry.

PROPRIETARY ESTOPPEL

[32] The ONCA in Clarke v. Johnson 2014 ONCA 237, [2014] O.J. No. 1481 held at paras.41 and 42 that:

a. Proprietary estoppel is an equitable doctrine by encouragement or acquiescence and a means by which proprietary rights may be affected or created, and invoked in the absence of consideration or of writing; and

b. This doctrine was recognized as the foundation of modern proprietary estoppel in the House of Lords decision in Ramsden v. Dyson (1866), L.R. 1 H.L. 129 and has been repeatedly accepted in Canada.

See also: Cowderoy v. Sorkos Estate, 2012 ONSC 1921, at paras. 68-95

[33] Acquiescence and encouragement, the two branches from which proprietary estoppel arose, were considered by the Privy Council in Plimmer v. Wellington Corporation (1883-84) L.R. 9 App. Cas 699. In that case, the Plaintiff had erected a wharf on Government land with the Government’s permission. The Government then encouraged the Plaintiff to extend the wharf and erect a warehouse, which the Plaintiff did at his own expense. After some time, the Government took the position that the Plaintiff was trespassing on Government land. Relying Ramsden v. Dyson, supra and as the land owner had encouraged the Plaintiff’s improvement, the Court held that it would therefore be unjust of the Government to later seek to deprive the Plaintiff of his use of the land.

[34] A similar determination was reached in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. [1982] Q.B. 133. The Court held at p. 15:

... the application of the Ramsden v. Dyson … principle … requires … ascertaining whether … it would be unconscionable for a party to be permitted to deny that which, knowingly, or unknowingly, he has allowed or encouraged another to assume to his detriment …

[35] The ONCA in Eberts v. Carleton Condominium Corp No. 396 (2000) 2000 16889 (ON CA), 136 O.A.C. 317 accepted the following test for proprietary estoppel:

23 Proprietary estoppel is a form of promissory estoppel. … The basic tenets of proprietary estoppel are described in McGee, Snell's Equity, 13 ed. (2000) at pp. 727-28:

Without attempting to provide a precise or comprehensive definition, it is possible to summarize the essential elements of proprietary estoppel as follows:

(i) An equity arises where:

(a) the owner of land (O) induces, encourages or allows the claimant (C) to believe that he has or will enjoy some right or benefit over O's property;

(b) in reliance upon this belief, C acts to his detriment to the knowledge of O; and

(c) O then seeks to take unconscionable advantage of C by denying him the right or benefit which he expected to receive.

(iv) The relief which the court may give may be either negative, in the form of an order restraining O from asserting his legal rights, or positive, by ordering O to either grant or convey to C some estate, right or interest in or over his land, to pay C appropriate compensation, or to act in some other way.

[36] The three elements which must be established for the modern application of proprietary estoppel are encouragement or acquiescence, detrimental reliance and unconscionability: See Clarke v. Johnson, supra at para.46.

[37] The Schumacher Estate urges that the facts in this case are not sufficient to warrant the application of the principle of proprietary estoppel. It states that the Plaintiff has been more than adequately compensated for her maintenance of the cottage by her use and enjoyment of it for 25 years. As such, the Plaintiff did not act to her detriment, the Defendant states, and for that reason, the application of proprietary estoppel must fail.

[38] Applying the above noted principles of proprietary estoppel to the evidence which I accept, I find that:

a. In making the promise to leave the Plaintiff the cottage, Lee encouraged the Plaintiff to spend her meager funds, her time and her labour into improving the cottage. Although he may have unknowingly encouraged her, his promise certainly induced the Plaintiff in that regard, a state of affairs in which he acquiesced.

b. Expending her efforts in that regard, the Plaintiff detrimentally relied on Lee’s promise.

c. Having directed most of her limited resources to improving the cottage in the belief that she would have the continued beneficial use of it into the future, it would be unconscionable to now deny her the continued benefits of her efforts and resources.

UNJUST ENRICHMENT

[39] I return to Clarke v. Johnson, supra, at para. 64:

64 To establish unjust enrichment, a plaintiff must prove an enrichment; a corresponding deprivation; and the absence of a juristic reason for the enrichment: Peter v. Beblow, 1993 126 (SCC), [1993] 1 S.C.R. 980, at p. 987. In Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, Cromwell J. framed the absence of juristic reason at para. 40 as "no reason in law or justice for the defendant's retention of the benefit conferred by the plaintiff, making its retention "unjust" in the circumstances of the case."

[40] As I already noted, I find that the value of the cottage property increased over the years based on the Plaintiff’s time, her labour and her financial resources. Her efforts and money she expended on the cottage far exceeded any reasonable economic rent which might have been due only for her use of the cottage. What follows is that there was a corresponding deprivation when in 2010, Lee reversed his periodically repeated offer to leave the Plaintiff his cottage.

[41] In considering whether or not there was a juristic reason for the enrichment, I turn again to Clarke v. Johnson, ibid, at para. 68:

68 … it is at this juncture that the parties' reasonable or legitimate expectations are to be considered: Kerr [supra], at para. 9. In that decision, at para. 34, Cromwell J. observed that the legal principles embedded in the law of unjust enrichment must be applied in the particular factual and social context out of which the claim arises. If there is no established basis such as a contract or a gift on which to deny relief to the party who has suffered a detriment, a trial judge should then consider whether there is another reason to deny relief. At this second stage of the analysis, a trial judge may take into account the parties' legitimate expectations and moral and policy-based arguments as to whether particular enrichments are unjust. Overall, the test for juristic reason is flexible, and the relevant factors will depend on the situation before the court: Kerr, at paras. 43-44. … the analysis should not be "purely subjective" with unacceptable "immeasurable judicial discretion": Kerr, at para. 43.

[42] Other than the fact that Lee had changed his mind, for reasons that are not clear and which would be entirely speculative to particularize, I find that there was no articulable juristic reason.

[43] In short, by 2010, the decision of the future of the cottage was no longer in Lee’s unfettered domain. I find that the Plaintiff has established her claim based on both or either unjust enrichment and proprietary estoppel.

REMEDY

[44] In determining an appropriate remedy, I am reminded that I should exercise my discretion in a principled and reasoned basis: See Clarke v. Johnson, ibid, at para. 73. I also note these comments in Kerr v. Baranow, supra, on remedies for unjust enrichment:

47 The first remedy to consider is always a monetary award …

50 … when a monetary award is inappropriate or insufficient, a proprietary remedy may be required. [Pettkus v. Becker 1980 22 (SCC), [1980] 2 SCR 834] is responsible for an important remedial feature of the Canadian law of unjust enrichment: the development of the remedial constructive trust. Imposed without reference to intention to create a trust, the constructive trust is a broad and flexible equitable tool used to determine beneficial entitlement to property… . Where the plaintiff can demonstrate a link or causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property, a share of the property proportionate to the unjust enrichment can be impressed with a constructive trust in his or her favour …

51 As to the nature of the link required between the contribution and the property, the Court has consistently held that the plaintiff must demonstrate a "sufficiently substantial and direct" link, a "causal connection" or a "nexus" between the plaintiff's contributions and the property which is the subject matter of the trust … A minor or indirect contribution will not suffice … the primary focus is on whether the contributions have a "clear proprietary relationship" …

53 The extent of the constructive trust interest should be proportionate to the claimant's contributions.

[45] In my view, a monetary award here, for these reasons, is not the preferred option:

a. The Defendant Estate is a relatively modest one;

b. The Plaintiff applied her energy, time, effort and her financial resources based entirely on the emotional ties she and her daughters had developed over the years to this cottage. A monetary award would be a hollow remedy for this Plaintiff;

c. The SCC in Kerr, ibid, at para. 50 “recognized that, in some cases, when a monetary award is inappropriate or insufficient, a proprietary remedy may be required; and

d. As I found that the Plaintiff has demonstrated a link or causal connection between her contributions, maintenance and improvements of the cottage, a share of the cottage proportionate to the unjust enrichment can be the subject of a constructive trust in her favour: See Kerr, ibid, at para. 50.

[46] The appropriate remedy on these facts will be a 15 year license to the Plaintiff to occupy the cottage property exclusively. This license is personal to the Plaintiff and includes her invitees. This license may not be assigned by the Plaintiff except to her daughters, Pam Love and Jill Thompson. The grant of this license is subject to payment by the Plaintiff and/or her daughters of realty taxes, hydro and insurance for the cottage which is to be maintained by them in good standing. The license will start August 1, 2014. Payment of realty taxes and maintenance of insurance shall be confirmed once annually starting August 1, 2015.

[47] Success, to some degree, was divided which should be reflected in the award of costs which, absent Rule 49 offers, should favour the Plaintiff. If required, I may be spoken to on the question of costs within 30 days, absent which the question of costs is deemed to be resolved.

Honourable Mr. Justice Wolf U. Tausendfreund

Released: July 9, 2014

COURT FILE NO.: CV-11-001-00

DATE: 2014 Jul 09

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

PRISCILLA JUNE LOVE
Plaintiff

– and –

THE ESTATE OF LEE RICHARD SCHUMACHER
Defendant

REASONS FOR JUDGMENT

Tausendfreund, J.

Released: July 9, 2014