COURT FILE NO.: CV-09-4778
DATE: 20140902
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Rosina Edda Servello
Plaintiff
– and –
Antonio Servello
Defendant
COUNSEL:
J. David Sloan, for the Plaintiff
William A. Sangster, for the Defendant
HEARD: June 9-12, 2014
BEFORE: E.J. Koke J.
THE NATURE OF THE ACTION
[1] Rosina and Carmelo Servello immigrated to Canada from Italy in the 1950s. They saved their money and fulfilled their dream of owning a home when they purchased a house on Wyld Street in the city of North Bay, Ontario. Thereafter in 1972, they purchased a property at 990 Lakeshore Drive in North Bay.
[2] The Servellos built a home on the Lakeshore Drive property and moved into it with their eight children. The defendant, Antonio Servello (“Antonio”) was three years old at the time and he was the youngest of the children.
[3] Carmelo died on April 7, 2006. Title to the Lakeshore Drive property, which will be referred to as the “home property”, passed to Rosina as the surviving joint tenant.
[4] On September 15, 2006, approximately 5 months after his father’s death, Antonio attended at the registry office with his mother, and, with the assistance of a conveyancer, title to the home property was transferred to Antonio as sole owner. Thirteen days later, on September 28, 2006, Antonio returned to the registry office and with the assistance of the same conveyancer he transferred the property to himself and to Rosina as joint tenants.
[5] Approximately three years later, Rosina attended at the registry office with one of her daughters. A title search confirmed the aforementioned transfers of the home property. Rosina alleges that this is the first time that she became aware that she was no longer sole owner of the home property, and that her son Antonio had acquired a right of survivorship.
[6] Rosina’s first language is Italian and her comprehension and reading of the English language is limited. The registry office in North Bay is in the court house building, and Rosina testified that when she and Antonio attended at the “court house” in 2006, she was informed by her son that she was signing a document which would give him the power to look after her as she grew older. She was still upset and grieving the loss of her husband at the time and she was not aware that she was transferring a property to him. She also submits that she only attended at the court house with Antonio on one occasion and that she was not present later when the home property was transferred to her and Antonio as joint tenants. She requests an order from the court restoring her as sole owner of the property.
[7] Antonio claims that he has invested time and money into the home property and that when he and his mother attended with the conveyancer, they did so for the purpose of transferring to him an adjacent property which had been purchased by his parents in 2004. Several weeks after the initial transfer took place, he discovered that the adjacent property had merged with the home property and so the effect of the transfer was to transfer the entire merged home property to him. He then returned to the registry office and added his mother as a joint owner of the merged property. He agrees that it was never the intention of the parties to create a joint tenancy in the home property and that he did not appreciate at the time that he was creating a right of survivorship. However, he has refused to restore title to the home property to his mother as sole owner.
[8] Antonio requests a declaration from the court that he holds a legal or an equitable interest in the home property in a percentage or in a form to be determined by the court, or in the alternative that Rosina be ordered to pay him a sum of money which reflects his contribution to the property. In the further alternative, he requests that the court order that the property be severed, and that he receive title to a portion thereof.
[9] Antonio argues that the laws of proprietary estoppel, unjust enrichment and constructive trust apply to the facts of this case, and on this basis he holds an interest in the home property. In determining whether Antonio is entitled to an interest in the home property, it is helpful to review the various transactions and improvements involving the property and adjacent properties owned by the parties, as well as Antonio and his parents’ contribution and involvement therewith.
The addition to the workshop
[10] The original home property was 24.384 metres or 80 feet wide. The house which the Servellos built on this property faces south towards Lakeshore Rd. and is located on the westerly side of the frontage. Carmelo, who was trained as a carpenter and woodworker, built a 28-foot by 30-foot one-storey garage on the eastern side of the frontage, and he used this as his woodworking shop (the “workshop”).
[11] After completing his education and spending some time with the Canadian military, Antonio returned to North Bay and moved into the basement of the family home. Initially, he worked with his father who taught him carpentry and building skills, and then later he started a furniture restoration business, using the workshop as a base. In about 2002, a local casket manufacturing business in the area ceased operations, and Antonio was able to purchase a number of caskets from this company and start a second business finishing and selling caskets.
[12] Carmelo and his father shared the workshop. With both of them using the building space became an issue and in 2004 it was decided to expand the workshop by adding a 28-foot by 28-foot two-storey addition at the rear. The addition was constructed in 2005, and after completion, Antonio continued to carry out his furniture restoration and casket business in the expanded building.
[13] There is a considerable dispute between the parties as to who paid the costs of constructing the addition, and the amount of labour which was contributed by Antonio. Antonio claims that he paid for most of the materials and provided most of the labour, and that Carmelo was in such poor health that he could do little more during the construction process than measure the wood which had to be cut. He submits that he paid approximately $100,000 out of his own funds for materials and to pay subcontractors, $40,000 of which was borrowed. Rosina submits that she and her husband paid for the addition and that Carmelo was actively involved in the construction. Also, much of the work was performed by subcontractors, including relatives.
[14] After his father’s death, Antonio continued to live in the basement of his mother’s home with his wife and children. However, the discovery that Antonio had arranged to transfer the home property into his name created considerable tension between Antonio and his mother and siblings, and Antonio and his family moved into a house in the community of Redbridge. After living in Redbridge for a short period of time, he moved back to the home property and lived in the unfinished second floor of the workshop with his family.
[15] After the discovery that Antonio was a joint owner of the home property, Antonio’s mother and siblings insisted that he remove himself from the title to the property and transfer it back to Rosina as sole owner. Antonio refused. Relationships within the family continued to deteriorate. Antonio changed the locks to the workshop building and refused to allow other family members, including his mother, inside the building. Rosina’s washing machine and dryer were located on the main floor of the original workshop, and she was no longer able to use these appliances. The police were called on several occasions.
[16] Antonio has continued to exercise exclusive use and possession of the workshop to the date of trial.
The severance applications and the purchase of the Kristensen property
[17] In 1990, Carmelo and Rosina applied to the City to sever the lands on which the workshop was built from the home property, and thereby create a separate lot on which the workshop would be situated. The application was refused on the basis that the newly created lot would not meet city by-laws. In 2003, prior to the expansion of the workshop, a second application to sever was commenced, but the application was again refused.
[18] The adjacent lot to the east of the home property at 998 Lakeshore Drive was owned by the estate of Hans Kristensen (the “Kristensen property”). By agreement dated August 21, 2003, Hans Kristensen’s son Enver Kristensen, who resided in the house on the property, consented to a sale of this property to Carmelo and Rosina, on the condition that the estate retain a small portion of the property on which his house was located.
[19] An application was commenced to sever a 60-foot by 110-foot portion of land on which the Kristensen house was situated from the remainder of the Kristensen property, and on October 15, 2003, the committee of adjustments allowed the severance. The balance of the Kristensen property was transferred to Carmelo and Rosina on April 30, 2004.
[20] Title to the Kristensen property merged with the home property. The acquisition of this property almost doubled the size of the home property. This merged property was the property which was transferred to Antonio when he attended at the registry office with his mother in September, 2006.
[21] At the same time as the application to sever the Kristensen property was made, Carmelo and Rosina also brought an application to the committee of adjustments for consent to use the workshop for the purposes of conducting a woodworking and refinishing business. This application was granted, on the basis that the business qualified as a home-based business which was carried on in an accessory building. At the time, both Carmelo and Antonio lived on the home property and used the workshop to carry out their carpentry work.
[22] Antonio submits that he negotiated the purchase of the Kristensen property with Enver Kristensen and that he contributed financially to the purchase. He also submits that he paid for and prepared the paperwork for the successful application to sever the Kristensen house from the property. He argues that it was agreed and understood by his parents that at some time in the future the lands on which the workshop was located, which would include the Kristensen property, would be severed from the home property and transferred to him. The only reason steps were not taken at the time to sever and transfer these lands was because he did not own a home on the Kristensen property and his business would therefore no longer qualify as a home business.
[23] Rosina submits that she and her husband paid for the Kristensen property, and that the purpose of the purchase was to help secure what she termed “the future of their children”. Antonio’s sister Luisa testified that her father had talked about someday building homes on this land for family members. They both testified that it was understood that Antonio could use the workshop as long as he used it to carry on his business, but there was no agreement by Antonio’s parents that he would be granted ownership of the land on which the workshop was built.
The purchase of “the Rock” by Antonio
[24] The lot to the east of the Kristensen property (which had now merged with the Servello home property) was owned by the city. The Servellos had always referred to this lot as “the Rock”. On May 3, 2004, three days after the purchase of the Kristensen property closed, Antonio entered into an agreement of purchase and sale with the city to purchase the Rock for $16,150. The funds for the purchase were supplied by his parents.
The purchase of the Kristensen house by Antonio
[25] After living in Redbridge for a short period of time, Antonio and his family moved into the unfinished second floor of the expanded workshop. On February 25, 2010, now almost four years after his father’s death, Antonio purchased the 60-foot by 100-foot house and lot which had been retained by Enver Kristensen. He tore down the existing house and over the course of the next several years, he built a house on the lot and upon completion, he moved into this new house with his family. He continues to exercise exclusive use of the workshop, which is located between his newly built house and the Servello family home. His mother continues to live in the house on the home property but is effectively prohibited from entering the workshop.
The payment by Antonio to his mother of $18,000.00
[26] Antonio has produced a typed document entitled “Land and Workshop Payment”, which was signed by his mother. The document purports to be an acknowledgment by Rosina that she received $18,000 from him, representing monies “owed” (by Antonio) to his parents for their contribution to the costs of constructing the addition to the new workshop and purchasing the Kristensen property. This document also states that “the new workshop is an addition added to an existing workshop at 990 Lakeshore Drive that Carmelo and Rosina Servello gave to me, Tony Servello, to conduct my business.” The document also purports to be an acknowledgement by Rosina that it was their mutual intention that the workshop would be severed from the home property in the future, and that the severance “will take place from the date of [sic] this agreement is signed to an indefinite period”. The payment also purported to “cover land that Carmelo and Rosina Servello paid for” which was described in the agreement as the Kristensen property. The document is dated September 1, 2006, which is two weeks before the home property was transferred to Antonio.
[27] Rosina agrees that she received $18,000 from Antonio but submits that she understood that $15,000 of this amount represented payment of an outstanding loan which she and Carmelo had given Antonio so he could purchase the Rock. The balance of $3,000 represented other monies which she loaned to him.
The meetings with lawyers and the preparation of Wills
[28] Several wills and a codicil were tendered into evidence by the parties. The earliest will is a will signed by Rosina on January 28, 1994. At the time, Carmelo was still alive. The will is a standard husband/wife will in which Rosina left her entire estate to her husband, and in the event he predeceased her, the estate was to be divided equally among her children.
[29] The will was prepared by Joe Sinicrope, a lawyer practicing in North Bay. Mr. Sinicrope was called as a witness at the trial. Mr. Sinicrope’s late father was in business with Carmelo, and he explained that he has known the Servello family his whole life and has acted as lawyer for Carmelo and Rosina and for other family members for many years. He speaks Italian.
[30] Several weeks after Antonio attended at the registry office with his mother, he attended at Mr. Sinicrope’s office with Rosina, and Mr. Sinicrope was instructed to prepare a codicil to Rosina’s will. Mr. Sinicrope prepared the codicil, and on October 25, 2006, Rosina returned to his office and signed the codicil, which purported to transfer to Antonio the workshop and the land on which it was situated upon her death. Antonio was also to receive a right of first refusal to purchase the home property.
[31] There is a subsequent will which was signed by Rosina on November 13, 2009, shortly after she discovered the transfers of the home property to Antonio. In this will, she gives each of the children the right to purchase her home, with discretion to her trustee to determine who to sell it to if more than one of her children wished to purchase it. She leaves some specific bequests to some of her children and directs that the residue be divided equally among her surviving children.
[32] The November 13, 2009 will was prepared by Sandro Orlando, a North Bay lawyer. Mr. Orlando was called as a witness and testified that on May 8, 2009, he met with Rosina who had been brought to the office by her daughter, Luisa for the purpose of preparing a will and powers of attorney. Mr. Orlando speaks Italian well enough that he could converse with Rosina.
[33] Mr. Orlando testified that he reviewed with Rosina the transfers of the home property which had taken place at the registry office following Carmelo’s death, and he explained to her the nature of a joint tenancy and the effect which such a tenancy with Antonio would have if she died. She explained to him that it was never her intention that Antonio inherit the house if she died before him, that she and Antonio did not go to a lawyer when the conveyances were prepared, and that she was still very distraught over the death of her husband at the time Antonio took her to the registry office to sign the transfers.
[34] Initially, Rosina instructed Mr. Orlando to prepare a will in which the workshop would be given to Antonio on her death, assuming it could be severed, with the residue of the estate to be divided among her other 7 children. When she came to sign the will on June 2, 2009 however, she had changed her mind, indicating that she was still upset about the way in which Antonio had obtained title to the property and that she wanted to reconsider the gift of the workshop to Antonio. In Mr. Orlando’s words, Rosina expressed the sentiment that she had been “tricked” by Antonio into giving him an interest in the home property. She instructed him to remove the provision whereby Antonio was given the workshop and the estate was instead divided equally among the 8 children.
[35] On the advice of Mr. Orlando, Ms. Servello also signed a transfer of her joint interest in the home property to herself. This transfer had the effect of creating a tenancy in common with Antonio, thereby giving her a minimum of protection in the event of her death before Antonio.
THE CLAIM BY ROSINA AGAINST ANTONIO
[36] Following Antonio’s refusal to transfer the home property back to his mother as sole owner, Rosina commenced legal action against him. The claim was issued on December 1, 2009. Rosina requests in her claim that the two transfers – the transfer of the home property from herself to Antonio on September 15, 2006, and the subsequent transfer on September 28, 2006 from Antonio to the plaintiff and Antonio as joint tenants be set aside.
[37] In support of this request, the plaintiff argues that the initial transfer to Antonio should be declared null and void on the grounds that (1) Antonio procured title to the property through undue influence, (2) she should have received independent legal advice and (3) she did not understand the nature of the document which she signed and the doctrines of non est factum and mistake apply.
[38] For the reasons which follow, I agree that these transfers should be set aside and that Rosina should be restored as sole owner of the home property.
[39] Estey J. in the Supreme Court decision in Marvco Color Research Ltd. v. Harris[^1] described the doctrine of non est factum in the following words, rooted in an old English case:
[W]here a document was executed as a result of a misrepresentation as to its nature and character and not merely its contents the defendant was entitled to raise the plea of non est factum on the basis that his mind at the time of the execution of the document did not follow his hand.
[40] The “did not follow his hand” theme was continued by LaForme J. in Beer v Beer:[^2]
Non est factum is a defence whose application is restricted to those circumstances where the person relying on it must show; (1) they were not careless, and (2) the document signed was different from the one they thought they were signing [citation omitted].
[41] Following his meeting with Rosina, Mr. Orlando wrote Antonio a letter advising him of his mother’s disapproval of the transaction in which he acquired title to the home property. Antonio replied by way of letter dated September 30, 2009, in which he attempted to explain how the transactions unfolded, stating in the letter:
I then proceeded a short while later to the court house with my mother, to transfer the property that I purchased from my neighbour, and the document was signed. It wasn’t until later that I noticed that the entire property was in my name alone, this included my mother’s property, this was not my intention and I made it very clear at the court house that this could not be in my name alone.
[42] Clearly, Antonio did not understand the nature of the document he signed. He testified that he was not aware that the Kristensen property had merged with the home property and that it was his intention to transfer only the Kristensen property to himself.
[43] Rosina testified that when she signed the deed, she thought she was signing a document which would give Antonio the power to look after her in her old age, a power of attorney of sorts.
[44] Whatever it was that Rosina thought she was signing at the time, I am confident that she did not believe that she was signing a document that transferred her entire property, including the home property, to Antonio. She had made it clear throughout her life that she intended to treat her children equally upon her death, and there was no reason for her to transfer the entire home property to one of her eight children.
[45] I find that both non est factum and mistake apply to the circumstances of this case, and this makes the transfer of an interest in the property to Antonio null and void.
[46] The plaintiff also argues that the deed transferring the property to Antonio as sole owner should be set aside on the basis of undue influence and on the basis that Rosina did not receive the benefit of independent legal advice.
[47] At the time Antonio took his mother to the registry office, he was living in her house. She was recently widowed. English is not her first language, and the family had always used Mr. Sinicrope as their lawyer when they engaged in real estate transactions. Mr. Sinicrope knew the family and the family history, and he could speak Italian. However, Antonio chose not to take Rosina to Mr. Sinicrope’s office, but instead he took Rosina directly to the registry office where he arranged for a conveyancer to arrange for the transfer of the home property to him. The conveyancer did not speak Italian, and she was a stranger to Rosina, who signed the deed without the benefit of independent legal advice. Antonio, who received the benefit of the transaction, was by her side throughout.
[48] The law is clear that in the case of gifts or other transactions inter vivos, the natural influence as between a mother and son exerted by those who possess it to obtain a benefit for themselves is an undue influence.[^3]
[49] This is a textbook example of a case in which the presence of undue influence by a child over a parent requires that the parent have independent legal advice. Rosina did not receive independent legal advice, and accordingly the two deeds which gave Antonio an interest in the land should be set aside on this basis as well.
[50] In conclusion, I find that neither Antonio nor his mother understood the nature and effect of the document which transferred the home property to Antonio. Furthermore, Rosina’s signature on the deed was obtained as a result of undue influence. I am therefore ordering that this deed be set aside on the basis that it is void.
[51] With respect to the second deed, in which the property was transferred to Antonio and the plaintiff as joint tenants, Rosina testified that she was not present at the registry office when this was signed. It was not necessary for her to attend at the registry to sign this deed, and I accept her evidence that she was not present.
[52] My finding that the initial deed to Antonio was null and void is determinative with respect to any issue of the validity of the second deed from Antonio to Rosina and himself as joint tenants. Since the first deed was of no effect, Antonio did not have the requisite interest in the land to execute this second deed.
[53] Also, the evidence is that Antonio did not know the nature and effect of this second deed either. In his letter to Mr. Orlando he states:
I did not know at the time that if something happened to my mother that all the property would be mine. I thought that a will determined that.
[54] In conclusion, I find that this second transfer is null and void, and I am ordering that it be set aside.
Decision – Plaintiff’s claim
[55] For the above reasons, I find that the deeds of September 15, 2006 and September 28, 2006 are void and should be set aside. With respect to Rosina’s deed to herself on September 1, 2009 to sever the joint tenancy, I find that this deed is now redundant, and in order to avoid any confusion on title, I am ordering that this deed be set aside as well. In summary, title to the property is to be registered in the sole and exclusive name of Rosina, as it was before it was improperly transferred to Antonio on September 15, 2006.
THE COUNTERCLAIM BY ANTONIO AGAINST ROSINA
Assurances given to Antonio by his Parents
[56] The starting point for deciding whether Antonio has acquired an interest in the workshop is to determine whether Antonio and his parents had reached a mutual understanding or agreement with respect to the future use and ownership of the property.
[57] I find that Antonio was given assurances by his parents that they intended to transfer the workshop to him, including the land on which it was built, at some time in the future. It is doubtful that the parties defined any of the terms of the transfer with any certainty, or that their intentions went beyond a mere mutual understanding which evolved over time. The timing and form of the transfer were contingent on future circumstances, some of which were out of their control, since a severance required the consent of the committee of adjustments. I also find that Antonio’s use of the building was not intended to be exclusive, but that Carmelo would continue to carry on his woodworking business in the building and that Rosina would use the building to do her laundry.
[58] These assurances were given to Antonio by his parents in recognition of his interest in woodworking, which was the trade he was taught by his father, as well as in recognition of the time and money Antonio contributed to the expansion of the building. My reasons for making this finding are as follows.
[59] Firstly, I place significant weight on the evidence of Mr. Sinicrope. Mr. Sinicrope has known the Servello family his whole life. He has no reason to favour either of the parties.
[60] When Rosina first attended at Mr. Sinicrope’s office in October, 2006 she brought with her two documents. One of the documents was the typed “Land and Workshop Payment” document. The second document comprised typed will instructions.
[61] Mr. Sinicrope testified that when he met with Rosina, her demeanour was as he had always known her, and he was not concerned about her emotional or mental status. He went over the codicil instructions on the first day she came in and then again on the day she came in to sign the codicil. He met with her privately in a conference room and reviewed the documents with her, and he is convinced that she understood the documents. She did not seem to be confused, under duress or depressed. Mr. Sinicrope testified that he has prepared hundreds of wills in his career, and if he felt she did not understand the document, he would not have permitted her to sign it.
[62] The codicil purports to give Antonio a right of first refusal to purchase the home property, and also provides in paragraph 3(c)(ii) that on her death her trustee is:
To transfer to my son, Antonio Servello, the workshop that is located next to my home at 990 Lakeshore Drive, North Bay, Ontario, and the land that goes with the workshop as well as any personal belongings that I may have in the workshop which my son, Antonio Servello, has already paid me for, should this property not have already been severed and transferred to Antonio Servello prior to my death.
[63] In cross examination by plaintiff’s counsel, Mr. Sinicrope was asked about the phrase “has already paid me for” in the codicil. It was suggested to him that the phrase referred to the personal belongings and not to the land. Mr. Sinicrope disagreed, and expressed his opinion that the phrase referred to both the land and the personal belongings.
[64] The instructions given to Mr. Sinicrope where given to him in the privacy of his office. Mr. Sinicrope was an old and trusted friend of the Servello family. He appears to have taken the necessary steps and precautions to ensure that she was not being unduly influenced by Antonio.
[65] In my view, the instructions given by Rosina to Mr. Sinicrope with respect to the provisions to be included in the codicil is the best and most accurate reflection of the understanding which had developed between Antonio and his parents with respect to the future use and ownership of the workshop.
[66] In conclusion, I find that when Rosina signed the codicil, she did so fully aware that she was providing Antonio with a means of securing an interest in the workshop property, and I accept that she did so to honour a commitment, which had been made to Antonio by her and Carmelo. I also accept that when she referred to the workshop and contents in her codicil as something Antonio “has already paid me for”, she was referring to both land and contents.
[67] Secondly, Mr. Orlando testified that the initial instructions he was given by Rosina in 2009, with respect to amendments to her will, included a provision that Antonio would receive the workshop property, assuming the property could be severed on her death. These instructions were provided by Rosina notwithstanding the fact that she had recently discovered that she had unwittingly transferred an interest in the home property to Antonio. At the time, she was contemplating legal action against her son. It is difficult to comprehend why she felt compelled to be so generous to her son in these circumstances, unless one finds that she felt she still had some obligation to honour a previous commitment to him.
[68] Although Rosina later changed her instructions to Mr. Orlando and ultimately did not include a provision in her will giving Antonio the workshop, it was apparent at trial that she was dealing with a considerable amount of hostility and distrust on the part of her other children towards Antonio and I expect she would have been subject to their influence as well. When she was asked to explain why she withdrew the bequest which gave Antonio the workshop she did not deny that she had promised him the workshop but she testified that “I changed this because after I realized he had done what he had done…therefore did not want him to have the shop…what he had done was very bad.” It struck me that she was punishing him for what she felt was his trickery in arranging for the transfer of the home property.
[69] Thirdly, Antonio submits that the ultimate purpose for the severance and purchase of the Kristensen property was to create a larger parcel of land, which would facilitate the severance of the property on which the workshop was built. I note that the documents which were filed in support of the minor variance to permit the workshop to be used for commercial purposes, as well as the Kristensen severance application and the building permit application, indicate that Antonio was the individual who was directly involved in pursing these applications. Correspondence from the city was addressed to both him and Carmelo. His active involvement in the process strengthens his argument that the parties had agreed and understood that he would receive a benefit therefrom.
[70] Fourthly, at the time these applications took place, Carmelo was in poor health and effectively retired from active work. There was no reason he required a larger workshop or more land. The construction of the addition was for the benefit of Antonio.
[71] Fifthly, Antonio made, what was for him, a substantial investment in both time and money in the workshop property. Antonio was not a wealthy man. He was living in his parent’s basement with his wife and children. His rental arrangement with his parents was that he could pay reduced rent in return for performing maintenance chores on the home property and he had to borrow approximately $18,000 from his parents to purchase the Rock. The evidence indicates that he took out a $40,000 line of credit to purchase materials for the building expansion. I do not believe he would have made this investment in the absence of some assurances that the workshop property would ultimately become his.
[72] Although Antonio’s sister Luisa testified that it was her understanding that Antonio was only promised the “use” of the shop by his parents, for as long as he needed it to carry on his business, I do not believe that Antonio would have made such a significant contribution in the absence of an assurance that his efforts and contribution would result in a permanent benefit.
[73] In conclusion, it is my view that Antonio’s investment of time and money in the workshop expansion, together with Rosina and Carmelo’s acquiescence therewith, can only be understood if one accepts that there was a mutual understanding among them that the workshop property would eventually be transferred to him.
Antonio’s contribution to the expansion of the workshop
[74] In deciding whether Antonio has an equitable right to an interest in the workshop property, it is also necessary to determine the extent of his contribution to the building expansion. I am satisfied that the purchase of the Kristensen property was considered by the parties to be a precondition to an eventual successful severance application, and Antonio’s contribution to the purchase of the Kristensen property is therefore also relevant.
[75] The extent of Antonio’s contribution to the construction of the building is in dispute. Antonio claims that he has paid for all the building materials, and contributed most of the labour to construct the addition. His mother and the siblings who testified on her behalf maintain that many of the costs were incurred by Rosina and Carmelo, and much of the labour was also provided by Carmelo and other subcontractors.
[76] Unfortunately there was a dearth of evidence presented to the court to support the positions of either party; neither kept accurate records, and many of the documents which were provided by Antonio to support his position were delivered just prior to the commencement of trial, resulting in issues of admissibility.
[77] In determining the extent of his contribution, it is helpful to understand exactly what it was that comprised the expansion of the existing workshop.
[78] The workshop addition is a very simple and basic structure. The building footprint is relatively small, measuring only 28 feet by 28 feet, which is approximately the size of a larger residential two-car garage. It is of frame construction and is covered on the outside with vinyl siding. It has a block foundation, a concrete floor, and is insulated. The walls on the first floor have drywall. A review of the building permit application indicates that the building plans did not include a bathroom, a kitchen or any plumbing, although it has electricity and a boiler for heating.
[79] The second storey consists of an open room which has a plywood floor, and although it has electricity and is heated, the construction has not been completed beyond the insulation stage.
[80] The addition is connected to the original 28-foot by 30-foot workshop by way of a door, and it also has a separate outside entry door. The original building has plumbing, a two-piece bathroom, and it houses Rosina’s washing machine and dryer.
[81] In my view, Antonio significantly exaggerated his contribution to the construction of the building. One of the ways he did so was to claim credit for work and expenses which were unrelated to the construction. For example, he provided documents which confirmed that he incurred expenses for repairing his machinery, totalling $7,488.40. These expenses were incurred over a number of years, some as recently as 2009 which was 4 years after the completion of the addition.
[82] Antonio also placed a high monetary value on work which constituted maintenance and clean up on the home property. For example, he included a sum of $5,000 for snow removal on the home property, and $1,505 for removing rubbish. The evidence was that he was required to perform this type of work as part of his rental arrangement with his parents.
[83] There is no evidence before the court that the parties contemplated that work or expenses which were not directly related to the construction of the workshop would be considered part of his contribution for the acquisition of the workshop. I am therefore only willing to credit Antonio with work and expenditures which are directly related to the construction.
[84] Notwithstanding the fact that he exaggerated the value of his contribution, I find that Antonio did make what was for him a significant financial contribution to the construction of the addition and he also contributed a significant amount of labour and time. I value his contribution as follows.
Legal fees, Probate fees and Funeral expenses for Hans Kristensen; legal fees for purchase of Kristensen property
[85] Antonio testified that because he would be the one to benefit from the purchase of the Kristensen land, he agreed to contribute to the acquisition of the property. He submits that he negotiated the purchase of the property with the late Hans Kristensen’s son Enver, and as part of the purchase price for the property, he agreed to pay for Hans Kristensen’s funeral and probate costs and the legal fees associated with the death, as well as a casket for his burial. In addition, he agreed to pay for all legal fees associated with the severance and sale of the Kristensen property.
[86] In my view, the evidence supports Antonio’s assertion that he paid for these, and accordingly he should be credited with paying the following in relation to the purchase of the Kristensen property:
Estate legal/probate fees: ......................................................... $3087.40
Deposit for purchase of property: ........................................... $1000.00
Casket, valued by Antonio: .................................................... $3,500.00
Total: ..................................................................................... $7,587.40
Royal Bank of Canada (“RBC”) payments for building materials, subcontractors, etc.
[87] Antonio obtained a $40,000 line of credit to pay building costs. The arrangement with RBC was that upon incurring building costs and expenses, Antonio would deliver a document entitled “Invoice Direction Payment from Customer” to the bank, together with copies of the invoices for building expenses referred to therein. If RBC was satisfied that the invoices constituted building costs, it would then deposit an amount of money into Antonio’s bank account, equal to 90% of the invoices and less 7% GST. Antonio was responsible for paying GST and the additional 10% of the invoices where applicable.
[88] The invoices which were accepted by the bank constitute the most credible summary of the building costs incurred by Antonio. The records indicate that the bank deposited the sum of $28,190.82 into Antonio’s account between May 5, 2005 and February 28, 2006. In addition, it would appear that he paid an additional sum of $2,384.46 in relation to these invoices for GST and to bring the payments up to 100 percent. I credit Antonio with payment of $30,575.28 for these building materials.
Additional payments for materials, subcontractors
[89] Antonio provided a list of expenses he paid directly entitled “personal expenses”. These expenses include items such as the purchase of gravel and electrical supplies and the cost of hydro hookup. Most of these expenses are supported with copies of cancelled cheques, and I credit Antonio with these expenses, after taking out certain expenses incurred in 2011 and bank interest charges. The expenses I have allowed total $7,470.98.
Labour costs by Antonio
[90] Antonio has claimed the sum of $35,720.00 representing his labour costs. His labour contribution included such tasks as installing strapping on the ceiling, installing drywall on a portion of the workshop and framing the building with the assistance of his father. Antonio valued his time for most of these tasks at a rate of $90 per hour.
[91] In my view, $90 represents an unreasonably high and inflated hourly rate of pay for the type of work required to construct this addition. As I have already noted, the design was simple and basic, and the construction of the building did not require an extraordinary degree of skill.
[92] For example, Antonio claims the sum of $3,600 for framing the first floor of the building, which he states took 40 hours. This represents a rate of $90 per hour. The framing of this building, which Antonio did with the assistance of his father, could not have been difficult. The building is square in shape, with no complicated angles. The roof is two sided, without valleys or dormers. The floor joists and roof trusses are pre-engineered.
[93] Antonio values his contribution to the preparation of the building drawings at $1,440. He claims that it took him 16 hours to prepare these drawings. A review of the building permit indicates that the drawings were not in the form of architectural plans but were comprised of 3 pages of simple hand drawn diagrams of a two-storey square building.
[94] With respect to the mechanical services, I note that the in-floor heating and the electrical work was subcontracted to others, as was the concrete finishing work. The building did not require flooring, plumbing or plumbing fixtures, baseboards or other finishing work.
[95] In conclusion, I find that Antonio’s assessment of his labour contribution is unrealistically high given the modest size, design and complexity of the building. No evidence was tendered in court to support an hourly rate of $90. In my view, Antonio’s labour contribution for the construction of this simple building should be assessed at $10,000, which represents an hourly rate of approximately $25.
Land and Workshop Payment
[96] When Antonio attended at the offices of Mr. Sinicrope with his mother in October 2006, he brought with him the document entitled “Land and Workshop Payment”. This document, which was signed by Rosina, purports to be an acknowledgement by Rosina that she received $18,000 from Antonio, the purpose of which was to reimburse her for the costs which she and Carmelo incurred in constructing the addition and purchasing the Kristensen lands. Rosina agrees that she received these funds but submits that it was her understanding that these funds were intended to reimburse her and Carmelo for the money they provided to Antonio to enable him to purchase the Rock. The Rock had been purchased by Antonio in May 2004 for $16,150.
[97] Antonio claims that $6,500 of this sum represented the payment by his parents for the Kristensen property, and since this property was acquired to facilitate a severance of the workshop, he felt obliged to repay his parents. He submits that an additional sum of approximately $6,000 of the $18,000 was intended to repay his parents for building costs they had incurred, and an additional sum of $2,629.71 was intended to discharge a private mortgage he had arranged with his parents for a property in Redbridge. The balance of $2,870.29 was to be applied to the purchase of the Rock.
[98] The evidence is that the Land and Workshop Payment document was reviewed by Rosina in Mr. Sinicrope’s office when she and her son attended to add a codicil to her will which would transfer the workshop property to Antonio on her death. In my view, the setting and context in which the document was reviewed, together with the wording of the document, suggests that the document confirmed payment by Antonio for the costs of the “new construction and land”.
[99] I am therefore crediting Antonio with payment of an additional $12,500 for the land and construction costs.
Summary
[100] I summarize Antonio’s contribution to the purchase of the land and construction to include the following:
Legal fees/probate fees for Kristensen purchase: ................... $7,587.40
Costs paid through RBC: ..................................................... $30,575.28
Payments made directly by Antonio: ...................................... $7470.98
Labour and Time: ................................................................. $10,000.00
Reimbursement to parents for costs of land and materials:.. $12,500.00
Total Contribution: ............................................................ $68,133.66
ANALYSIS OF ANTONIO’S CLAIM
[101] Antonio pleads and relies on the law of unjust enrichment, and claims relief on the basis that his interest in the property is the subject of a constructive trust in his favour.
[102] The test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment.[^4]
[103] The plaintiff also relies on the principles of proprietary estoppel. The test for proprietary estoppel is found in Eberts v Carleton Condominium Corp. No. 396, 2000 CanLII 16889 (ON CA), 136 O.A.C. 317, 36 R.P.R. (3d) 104 (C.A) at para. 23:
Proprietary estoppel is a form of promissory estoppel. It is commonly supposed that estoppel cannot give rise to a cause of action, but proprietary estoppel appears to be an exception to that rule: see Lord Denning in Crabb v. Arun District Council, [1976] 1 Ch. 179 at 187-188 (C.A.). But there must be an 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.
[104] I find that many of the elements of unjust enrichment and proprietary estoppel exist in the circumstances of this case.
[105] For example, I have valued Antonio’s contribution to the workshop addition in monetary terms to be approximately $68,133.66. Although this is not the same thing as saying that the overall value of the property has increased by this much, it still represents an enrichment to Rosina. I have also found that Antonio has expended considerable money and labour in helping with the construction of the addition, and he has therefore experienced a corresponding deprivation. With respect to the claim for proprietary estoppel, I have concluded that Carmelo and Rosina encouraged and supported Antonio’s efforts in expanding the workshop building, and that it was understood by the parties that he would be rewarded for his efforts.
[106] Notwithstanding these findings, Antonio’s counterclaim fails for the following reasons:
a) He does not come to the court with clean hands;
b) His claim is premature.
Clean hands
[107] In Saskatchewan Wheat Pool v. Feduk,[^5] the court summarized the clean hands doctrine by quoting from the following paragraphs taken from Professor Spry’s book, The Principles of Equitable Remedies:
It may be said of these cases that they fall into two main categories. In the first category, the plaintiff is shown to have materially misled the court or to have abused its process, or to have attempted to do so. In the second category are cases where the grant of the relief that the plaintiff seeks would enable him to achieve a dishonest purpose and where in all the circumstances it appears to the court to be inequitable to grant the particular relief in question. These cases may indeed be said to depend ultimately on a general principle that is directed against unconscionable conduct or the absence of clean hands. But whilst this general principle is susceptible of fresh applications in appropriate circumstances, care should be taken not to extend it to cases where, by implication, it has already been held not to apply.
In the first category, specific performance may be refused if the plaintiff is shown to have materially misled the court or to have abused its process or to have attempted to do so. Whether on any particular occasion the behaviour of the plaintiff has been sufficiently improper to lead to a refusal of relief is a matter that is within the discretion of the court. Hence the conscious making of an untrue statement to the court, especially on a material matter, is a consideration tending against the grant of specific performance, and the gravity and nature of the impropriety are taken into account, together with such other matters as hardship to the parties, by the court in exercising its discretion.
In the second category of cases the court is being asked to assist unconscionable conduct on the part of the plaintiff, either by enforcing a right already improperly obtained or by otherwise furthering unconscionable purposes. So it has been said, “No court of equity will aid a man to derive advantage from his own wrong, and this is really the meaning of the maxim.” But nonetheless the undesirable behaviour in question must involve more than merely a “general depravity”; it must have “an immediate and necessary relation to the equity sued for; it must be a depravity in a legal as well as in a moral sense”. An “immediate and necessary relation”, that is, the fact that the plaintiff seeks to derive advantage from his dishonest conduct in so direct a manner that it is considered to be unjust to grant him relief, has thus been insisted on in many situations. [footnotes omitted][^6]
[108] In my view, Antonio’s conduct fits squarely within the second category of cases; he is attempting to derive an advantage from his own wrongs, and his own wrongs are directly related to the relief he requests from the court.
[109] The “wrongs” in this case include the following:
(a) Taking his mother directly to the registry office for the purpose of transferring a valuable property to himself, without ensuring that she first received independent legal advice;
(b) The secretive nature of the transfers of the property; his failure to disclose his visit to the registry office to his seven siblings;
(c) His failure to advise his mother that he had mistakenly transferred the entire home property to himself, and that he had then unilaterally provided himself with a joint interest in the home property, with a right of survivorship;
(d) Taking over control of the entire workshop building, denying entry to his siblings and creating a situation where his mother felt compelled to do her wash and laundry at a different location;
(e) Dealing with the entire merged property as though it was his own, and using it to store old machinery and other debris.
(f) Refusing to transfer the home property back to Rosina, notwithstanding his admission that he was not entitled to a right of survivorship in the home property.
[110] Of all of the above-mentioned “wrongs”, I find Antonio’s refusal to transfer the home property back to Rosina to be the most egregious. He has acknowledged that it was never Rosina’s intention to transfer the entire property to him, yet he refuses to return the property to her.
[111] Clearly, the only reason why Antonio is refusing to transfer the home property back to Rosina is because he perceives that somehow this provides him with leverage and an advantage in his quest to secure an interest in the workshop property. He has maintained his refusal, notwithstanding the fact that he knows that his actions have caused his mother considerable distress in her old age. He seeks the assistance of the court, but is quite prepared to improperly rely on self-help remedies as well.
[112] Antonio’s egregious behaviour has also made it impractical to provide him with the type of equitable remedies which would otherwise be available in this case.
[113] For example, I cannot grant him the continued shared use of the workshop on an indefinite basis because his bullying actions have caused serious conflict between him and his mother and other family members, and he has made it clear that he is unwilling to share the property in a reasonable and considerate manner. The evidence supports the fact that he has taken steps to prohibit other family members, including his mother, from entering or using the building. Also, he is using the home property to store unsightly debris, including old machinery and piles of soil and other fill.
[114] Antonio has requested that Rosina be ordered to pay him a sum of money which reflects his contribution to the property. If circumstances were different I might consider such relief as fair and proper. However, there is no evidence before the court to indicate that Rosina is in a financial position to pay Antonio any money whatsoever and given Antonio’s conduct I am not prepared to impose on her an obligation which may pose a financial hardship.
[115] Antonio also requests an order from the court that the property be severed, and that he receive title to a portion thereof. I believe that if the property was severed and title granted to Antonio, Rosina would be denied future use of the property. I am unable to deny her such future use. Furthermore, an application to sever the land on which the workshop was built was previously denied, and there is no evidence before me to suggest that a severance will be granted.
[116] Antonio has also requested a declaration from the court that he holds a legal or an equitable interest in the home property in a percentage or in a form to be determined by the court. If I were to grant such a declaration, this would effectively restrict and limit Rosina’s future dealings with the property. For example, she would be unable to use the property as security, or mortgage it. Once again, in light of Antonio’s conduct, I am unwilling to impose such a restriction on her. Furthermore, there is no evidence before me, expert or otherwise, to indicate how much the value of the home property has increased as a result of the construction of the workshop addition. I expect any increase in value will be considerably less than the cost of construction; a future purchaser of the property may see little use or value in a larger workshop building.
[117] In summary, Antonio comes before the court claiming equitable relief. In order to obtain such relief, he must come with clean hands. He has behaved badly, and his wrongful behaviour is directly connected to the relief he now requests. In my view, if the court grants Antonio the relief he requests, it would effectively be endorsing his wrongful actions. A court of equity will not reward bad behaviour, and in the circumstances, Antonio’s counterclaim fails.
Antonio’s claim is premature
[118] Although the failure of Antonio to come before the court with clean hands is sufficient to dispose of his counterclaim, I will make some comments with respect to this defence to the counterclaim as well.
[119] I have found that there was an understanding between Antonio and his parents that he would derive a benefit in return for his investment in the construction of the workshop, and that this benefit would be in the form of the continued use of the workshop and the eventual transfer of an interest in the workshop property.
[120] There was no date set however as to when this transfer should occur, only that any transfer of the property would take place at some time in the future, as circumstances would permit.
[121] The circumstances at the time of Carmelo’s death were such that if the property was severed, it would lose its designation as a home-based business, and Antonio required this designation in order to carry on his business in the workshop.
[122] Also, there was no guarantee that an application to sever the property on which the workshop was built would be successful, and so the form that such a transfer would take was also uncertain. The codicil which Rosina signed in Mr. Sinicrope’s office on October 25, 2006 addressed this uncertainty by providing that the workshop and land on which it was built would be transferred to Antonio, but also provided that he had a right of first refusal of the home property. Presumably, he could choose to exercise this right of first refusal in the event a future severance proved to be unsuccessful.
[123] There is no evidence before that court that Rosina had ever denied Antonio the continued use of the building.
[124] In my view, Antonio’s claim had not crystalized at the time he commenced this counterclaim.
[125] Antonio’s claim therefore fails on this ground as well.
DECISION
[126] For the reasons set out above, the plaintiff’s claim succeeds. The two transfers of the home property to Antonio in 2006 are null and void, and I am ordering that Rosina is to be restored as sole owner of the property. The counterclaim by Antonio is dismissed.
[124] In view of the deterioration in the relationship between Antonio and his mother, for which I hold Antonio responsible, it does not appear that Rosina and Antonio can continue to share the workshop. Antonio has until December 31, 2014 to vacate the workshop premises, and remove all of his equipment, machinery and any other items he is storing on the home property. Thereafter, Rosina is to enjoy exclusive possession of the entire home property, including the workshop. This will provide Antonio with time to relocate his business elsewhere. This will also give the parties time to work towards the restoration of their relationship, and possibly come to some other amicable arrangement with respect to the workshop.
COSTS
[125] If the parties cannot agree on costs, they are to file and serve written submissions in relation thereto within 20 days of the release of this decision. Thereafter, they have 10 days to respond to each other’s submissions. Submissions are to be no more than 3 typed pages in length, exclusive of schedules and attachments thereto.
COURT FILE NO.: CV-09-4778
DATE: 20140902
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Rosina Edda Servello
Plaintiff
– and –
Antonio Servello
Defendant
REASONS FOR JUDGMENT
E.J. Koke
Released: September 2, 2014
[^1]: Marvco Color Research Ltd. v. Harris, 1982 CanLII 63 (SCC), [1982] 2 S.C.R. 774, 141 D.L.R. (3d) 577. [^2]: Beer v. Beer(1997), 43 O.T.C. 115, 13 R.P.R. (3d) 33 (Ont. Ct. (Gen. Div.)) at para. 26. [^3]: See: Vanzant v. Coates (1917), 1917 CanLII 523 (ON SC), 37 D.L.R. 471, 39 O.L.R. 557 (Ont. H.C.); Simpson v. Ziprick (1995), 8 E.T.R. (2d) 1 (B.C.C.A.). [^4]: See Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834, at p. 848; 117 D.L.R. (3d) 257; Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629 at p. 30. [^5]: 2003 SKCA 46, 232 Sask.R. 161, leave to appeal to SCC refused, [2003] S.C.C.A. No. 359. [^6]: I.C.F. Spry, The Principles of Equitable Remedies, 6th ed. (Toronto: Carswell, 2001) at pp. 245-46.