COURT FILE NO.: CV-12-0000-3125-00ES

CV-12-0000-3102-00ES

DATE: 20141126

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTERS OF THE ESTATE OF SPASIJA LAPAJKOSKI AND OF STOJAN LAPAJKOSKI

BETWEEN:

DRAGICA BELCHEVSKI AS ESTATE TRUSTEE FOR THE ESTATE OF SPASIJA LAPAJKOSKI and STOJAN LAPAJKOSKI BY HIS LITIGATION GUARDIAN DRAGICA BELCHEVSKI

Applicants

– and –

MILKA DZIEMIANKO

Respondent

David J. Moll and Ali Mian, for the
Applicants

John M. Picone and Dana Carson, for the
Respondent

HEARD: September 29, 30,
October 1, 2014

CHIAPPETTA J.

Overview

[1] The issue in this case is title to a home located at 47 Roebuck Drive, Scarborough, Ontario (the “home”). For reasons set out below, I have concluded that the circumstances of this case warrant the sale of the home and an equal division thereafter of the net proceeds of sale between Mr. Lapajkoski and the Respondent, Milka Dziemianko.

Background

[2] The home was purchased by Mr. and Mrs. Lapajkoski (“the Lapajkoskis”) in 1981. They are of Macedonian descent with limited command of the English language.

[3] They have three daughters, Milka Dziemianko (“MD”), Mrs. Dragica Belchevski (“DB”) and Lubija Petrevska (“LP”). In 1998, the Lapajkoskis retained a lawyer to prepare mirror wills that provided that, after each other, MD would inherit the house, DB would have her debts forgiven and LP would receive $10,000. At the same time, the Lapajkoskis executed mirror powers of attorney for property and for personal care, naming each other as attorney and MD as substitute attorney.

[4] In October 2006, MD moved into the home with her husband and her parents. Renovations were done to the home prior to and after that time. The cost of the renovations and who paid for them are issues before the Court.

[5] On May 2, 2007, MD and her parents met with lawyer, William Popovski, to obtain legal advice regarding a transfer and interest, without consideration, in the home to MD as an equal joint owner. Mr. Popovski is a lawyer with decades of direct and relevant experience, is of Macedonian origin, speaks Macedonian, and services a client base which is approximately 50% Macedonian.

[6] On May 11, 2007, the transfer of title was complete, giving MD equal joint ownership in the home, along with her parents (“the May 2007 transfer”). The validity of the May 2007 transfer is an issue before the Court.

[7] In October 2009, the Lapajkoskis provided DB with $20,000 to assist her with financial troubles. This upset MD. Shortly thereafter, the Lapajkoskis left the home to live with DB and gave her a further $40,000. The relationship between MD and her parents broke down thereafter and has since become irreparable.

[8] On May 12, 2010, MD transferred legal title of the home to herself (“the May 2010 transfer”) and simultaneously executed a declaration of trust confirming that her parents remained the beneficial owners of their interest in the home and that MD only held the legal title to their interests as their trustee (“declaration of trust”). The effect of the May 12, 2010 transfer on the joint tenancy, if any, is an issue before the Court.

[9] On December 30, 2010, the Lapajkoskis revoked the original powers of attorneys and removed MD as a substitute attorney. They entered into new powers of attorney, naming DB as a substitute attorney.

[10] On December 10, 2012, Mr. Stojan and Mrs. Spasija Lapajkoski commenced an application seeking, amongst other relief, a declaration that they are the sole legal and beneficial owners of the home and an order vesting ownership of the home in their names as joint tenants.

[11] On September 9, 2013, MD commenced an application seeking, amongst other relief, a declaration that she is the owner of the home and an order for partition and/or sale of the home.

[12] Mrs. Spasija Lapajkoski (“SL”) died on June 14, 2014. DB continued the application as the trustee of her mother’s estate. DB also acts as the litigation guardian of her father pursuant to the power of attorney dated December 30, 2010. There is no evidence of Mr. Lapajkoski’s present capacity. He has not provided any evidence in this proceeding and did not attend trial.

Issues

1. Was the May 2007 transfer a valid inter vivos gift?

[13] The Applicants submit that the May 2007 transfer is not a valid inter vivos gift given the application of the doctrines of non est factum and undue influence. Further, it is submitted that if the May 2007 transfer is found to be valid and effective, the Lapajkoskis intended to create a trust, not make a gift.

[14] In Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, the Supreme Court of Canada discussed the law of resulting trusts. Rothstein J. stated, at para. 24:

[W]here a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended: see Waters' Law of Trusts, at p. 375, and E. E. Gillese and M. Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110. This is so because equity presumes bargains, not gifts.

[15] To establish the requisite intention to gift, or animus donandi, it must be shown that the transferor intended to part with the property and did not intend to reserve to himself or herself the ultimate right of disposal: Fleet Estate v. Davies, 2009 ABCA 376, [2009] A.J. No. 1530 (Alta. C.A.). The transferee must prove on a balance of probabilities the intention of the transferor at the time of the transfer: Pecore, para. 43.

[16] In Pecore, the Supreme Court of Canada discussed what the Court can consider in determining the intention of the transferor. Rothstein J. stated, at para. 55:

Where a gratuitous transfer is being challenged, the trial judge must […] weigh all the evidence relating to the actual intention of the transferor to determine whether the presumption has been rebutted. It is not my intention to list all of the types of evidence that a trial judge can or should consider in ascertaining intent. This will depend on the facts of each case.

[17] The intention of a transferor may be inferred from an examination of that person's acts along with various extrinsic factors, including the nature of the relationship between the parties to the transaction, the size of the gift as measured against the total of the transferor's property, and the importance of the gifted item in relation to the transferor's overall property: Fornasier v. Grills, [2009] 82 B.L.R. (4th) 220, [2009] O.J. No. 1369, at para. 61.

[18] Non est factum is a difficult plea to make out; it requires that the party signing a document must have a fundamental understanding as to the nature or effect of the document and must not be guilty of carelessness in signing the document without being aware of its contents: see Marvco Color Research Ltd. v. Harris, 1982 63 (SCC), [1982] 2 S.C.R. 774, 141 D.L.R. (3d) 577; Bhuvanendra v. Sivapathasundram, 2014 ONSC 278, [2014] O.J. No. 305, at para. 49; and Roth Estate v. Juschka, 2013 ONSC 4437, 230 A.C.W.S. (3d) 121, at para. 143.

[19] Undue Influence was described by the Supreme Court of Canada as the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright or subtle abuse of power: Geffen v. Goodman Estate, 1991 69 (SCC), [1991] 2 S.C.R. 353, 81 D.L.R. (4th) 211, at para. 40. The Court will examine the relationship between the parties and ask whether the potential for domination is inherent in the relationship itself. The onus is on the transferee to show that the transferor entered into the transaction as a result of his/her own full, free and informed thought: Morden (Attorney of) v. Currie, [2008] 166 A.C.W.S. (3d) 185, [2008] O.J. No. 553 (Ont. Sup. Ct.), at para. 25.

[20] In my view, the doctrines of non est factum and undue influence have no application to the circumstances of this case. The evidence is such that the Lapajkoskis understood the true nature and character of the May 2007 transaction at the time of transacting.

[21] Further, upon weighing all of the evidence, there is sufficient evidence to conclude on a balance of probabilities that at the time of the May 2007 transfer, the Lapajkoskis intended to gift the home to MD as a complete and unconditional gift. I make this conclusion in part as a result of the following findings of fact:

i) Mr. Popovski is a senior member of the Ontario Bar with 36 years of experience in the relevant area of law. He is heavily involved in the Macedonian community, has spoken Macedonian since birth and has done thousands of real estate transactions and thousands of wills and powers of attorneys for a client base that is about 50% Macedonian. I found his evidence to be impartial, reliable, credible, and I accept it.

ii) Mr. Popovski testified generally that he always makes sure his clients understand the legal advice he gives them, and that he would not act on a transaction if he thought that his clients didn’t understand it, particularly if they are elderly and not sophisticated. He always asks in Macedonian, “Do you understand?”.

iii) Mr. Popovski testified that he considered the Lapajkoskis to be his clients.

iv) Mr. Popovski reviewed his notes from his meeting of May 2, 2007 with Mr. and Mrs. Lapajkoski and MD. His notes read:

Parents own 47 Roebuck Drive and want to add their daughter as an equal joint owner. They hope to live with Milka the rest of their lives, I advised that they can transfer the house to Milka in their wills, and that if they transfer the house while they are alive they lose control. I told them that they will be signing an acknowledge-ment. I asked what happens if there is a dispute between them. They refused to believe it.

v) Mr. Popovksi testified that Mr. Lapajkoski was leading and was in charge of the meeting. Mr. Popovksi received the information recorded in his notes from Mr. Lapajkoski. Mr. Lapajkoski was speaking Macedonian.

vi) Mr. Popovski testified that he provided legal advice to the Lapajkoskis in Macedonian. He satisfied himself that in fact the Lapajkoskis were transferring title to MD voluntarily and that they were capable of doing it. He spent quite a bit of time going over the effect of adding MD to the title and the consequences of joint tenancy. He believed the Lapajkoskis understood and so he proceeded to effect the transfer.

vii) Mr. Popovski specifically explained the concepts of joint tenancy and the right of survivorship in Macedonian to the Lapajkoskis.

viii) Mr. Popovski testified that this type of transaction is “typical” in the Macedonian community. It is typical that the house is transferred without consideration to the child while the parents are still alive for probate reduction purposes.

ix) Mr. Popovski specifically explained to the Lapajkoskis that the transfer would preclude them from dealing with the home in the same way they could as sole owners, even if their relationship with MD later broke down. He made it clear to them “that once you give, you can’t take without permission of the other owners”. In his view, they understood what that meant.

x) The Lapajkoskis and MD signed an Acknowledgment confirming that they understood the transaction they were entering into, including that the Lapajkoskis would give up control over the home and that in future they and MD would not be able to deal with the home without each other’s consent. Mr. Popovski testified that he explained the terms of the 7 paragraphs of the Acknowledgment to the Lapajkoskis “in great detail” for between half an hour to an hour in Macedonian and that he confirmed their understanding. His evidence is that he was satisfied that the Lapajkoskis understood the Acknowledgment and that he obtained confirmation of their understanding in Macedonian.

xi) Mr. Popovski testified that he encouraged each of his clients to seek independent legal advice.

xii) At the time of the May 2007 transfer, MD was already named to inherit the home in the Lapajkoskis wills, which they had prepared with a lawyer in 1998, before MD moved into the home, and was the substitute power of attorney. It is uncontested that at the time of the May 2007 transfer the relationship between MD and her parents was functional, based on longstanding love and devotion.

xiii) Prior to her death, SL swore an affidavit in support of her application on August 28, 2014 and a supplementary affidavit on February 7, 2014. SL deposes that Mr. Popovski never explained anything to her husband, including that they had the option of seeking independent legal advice that he spoke to MD in English and that MD translated to Macedonian. She further claims that MD tricked her into signing a contract to give MD an interest in the home which would only become effective if MD took care of her parents for the rest of their lives and survived both of her parents. In my view, SL’s affidavit evidence should carry little weight. MD’s counsel was unable to cross-examine SL on her affidavits, her evidence therein runs contrary in relevant part to the tested evidence at trial of both Mr. Popovski and MD and the affidavits were deposed long after the May 2007 transfer after the relationship with MD had deteriorated beyond repair.

xiv) Further, the evidence of SL as deposed is illogical. It defies common sense that the Lapajkoskis would enter into a redundant contract to give MD an interest in the home which would only become effective if she took care of her parents for the rest of their lives and survived both her parents when MD already stood to inherit the entire home upon surviving her parents.

xv) MD testified that Mr. Popovski was recommended to her by DB and that he provided legal advice to her and her parents in Macedonian. She confirmed the evidence of Mr. Popovski that he explained to her and her parents in detail the nature of the arrangement they were entering into, including that the gift could not later be undone, that her parents would be giving up the control they had over the home, that they would not be able to deal with the home without MD’s consent, and he made it clear to all of them they were entitled to independent legal advice.

[22] The Applicants submit that the presumption of resulting trust is not rebuttable in this case as Mr. Popovski testified that he probably did not discuss with the Lapajkoskis the nature of gifts, the distinction between gifts and resulting trusts or the presumption of resulting trust. It is argued then that the Lapajkoskis could not have known the nature of the transaction they were entering into and its full consequences. The Applicants rely on Reid Estate v. Reid 2010 ONSC 2320, 57 E.T.R. (3d) 35.

[23] It would be incorrect, however, to find actual intention of the transferor based on only one fact of a multi fact narrative. Case law considering the issue can be instructive but should not be determinative as it is the totality of the evidence that should be weighed in context when rendering a finding of actual intention. The Court in Reid, for example, considered much more than the particulars of the advice that the transferor received from her lawyer. Also relevant was the fact that the transferor’s estate plan at the time of the disputed transfer was to divide her estate equally between her two children, and the fact that the transfer “was simply part of a larger estate plan”. The transferor died before she finished putting her plan into place: paras. 133 and 80.

[24] The fact that Mr. Popovski failed to explain the nature of gifts, the distinction between gifts and resulting trusts or the presumption of resulting trust is not determinative of actual intention in this case. Rather, it is the entirety of the evidence considered in the context of the case that is determinative. In my view, having considered the totality of the evidence in this case on a balance of probabilities, I am satisfied that there is sufficient evidence to rebut the presumption of resulting trust and to conclude that the true intention of the Lapajkoskis in May 2007 was to transfer title to the home to MD as a joint tenant as a complete and unconditional gift. The respondent has satisfied her onus in this regard.

[25] In May 2007 MD was living with her parents, giving and enjoying love, devotion and companionship, and was a beneficiary to the home by wills made in 1998. The loving relationship ceased abruptly in October 2009. The only evidence that the Lapajkoskis never intended to confer a legal interest in the home to MD comes from SL many years after the transaction and after the breakdown of the relationship. Her evidence is self-serving, inconsistent with that of Mr. Popovski and could not be tested by cross-examination.

[26] In contrast, Mr. Popovski’s evidence is objective, consistent with that of MD’s and his notes taken at the time of transfer and it was tested by cross-examination. He discussed the desired transaction with the Lapajkoskis in Macedonian, ensured that they understood the permanent consequences of the transfer specifically in terms of their ongoing control of the home, offered other alternatives to achieve their goal to transfer ownership that were refused and was fully satisfied that the Lapajkoskis knew what they were doing and wanted to do it. He then acted on their instructions in effecting the transfer.

[27] Further, there is no credible evidence with respect to undue influence in May 2007. Even if undue influence can be presumed simply because of the relationship of elderly parents and child, the presumption would be rebutted in this case due to the overwhelming evidence as noted above that Mr. and Mrs. Lapajkoski were acting independently, duly informed, and with their own free will. Finally, there is no credible evidence that as of May 2007 the Lapajkoskis were not mentally fit.

[28] In October 2009, for reasons that remain in dispute, the relationship between MD and her parents broke down and became irreparable. Mr. Popovski specifically warned the Lapajkoskis in May 2007 that the transaction they were asking him to effect on their behalf could not be undone even if the relationship broke down in the future. While such a fate was unthinkable in 2007, it ultimately came to be. And as Mr. Popovski advised in May 2007, the inter vivos gift cannot be undone simply because the giftors changed their minds after a breakdown in the relationship.

2. Severance of the Joint Tenancy

[29] The Applicants argue in the alternative that if the May 2007 transfer is found to be a valid enforceable inter vivos gift, the joint tenancy was severed by the May 2010 transfer.

[30] A joint tenancy may be severed by disposition, mutual agreement or a course of dealing, Hansen Estate v. Hansen, 2012 ONCA 112, at para. 32.

[31] The Applicants have not argued the validity of the May 2010 transfer. They submit, however, that the Respondent severed the joint tenancy created by the May 2007 transfer by acting on her own share when she unilaterally, and without prior notice to the Lapajkoskis, took the full legal ownership of the home by the May 2010 transfer. By doing so, it is argued, she severed the unities of time, title and interest.

[32] I disagree. In effecting the May 2010 transfer, MD did not alter the Lapajkoskis beneficial interest or right of survivorship in the home. The wording of the declaration of trust is clear in that notwithstanding the fact that legal title to the home is registered in MD’s name alone, she holds her parents interests in the home in trust. No one could interfere therefore with the right of survivorship of the Lapajkoskis being given effect to at the time of death of MD. The joint tenancy cannot be said to have been severed by the May 2010 transfer.

[33] The law recognizes that a joint tenancy may be unilaterally severed through an act by one joint tenant executing and registering a conveyance to themselves: Murdoch v. Barry (1975), 1975 360 (ON SC), 64 D.L.R. (3d) 222. But other courts have not endorsed the severance of a joint tenancy by unilateral declaration: Walker v. Dubord, 14 B.C.A.C. 81, (B.C.C.A.); Sorensen’s Estate v. Sorensen, 1977 ALTASCAD 53, [1977] 2 W.W.R. 438 (Alta. S.C.A.D.), 90 D.R.R. (3d) 26. In Sorensen’s Estate, the Court examined the conduct and intentions of the parties involved and held that it was not intended by them to sever joint title: para. 17. Similarly, in this case it was not the intention of MD to sever the joint tenancy; this is clear in the wording of the declaration of trust.

[34] MD testified that the purpose of the May 2010 transfer was to preserve the right of survivorship for her parents, given her concerns about her parents’ capacity and the intentions of her sister DB. Her concerns may have been unfounded or misguided but I accept that they were genuine. In my view, MD acted with intention to preserve, (not to severe the joint tenancy) to benefit her parents.

[35] I find no evidence that either the Lapajkoskis or MD have acted in a way as to severe the joint tenancy: Hansen Estate v. Hansen, 2012 ONCA 112, at para. 38. The Applicants seek relief declaring that Stojan Lapajkoski is, by right of survivorship (and not as a result of the death of Mrs. Lapajkoski), the sole legal and beneficial owner of the home. The Respondent commenced an application for partition as a joint tenant of the home. Both parties unanimously treated their interests in the home as being jointly held and have chosen respective legal courses of action consistent with a mutual understanding of joint tenancy.

3. Entitlement to Compensation for Renovations

[36] There is no issue, in my view, that renovations took place in the home. Chester Bryan and Susan Coombs each gave uncontested objective evidence that virtually every room of the home had been redone and that everything at the home seemed brand new. The extent of the renovations is also apparent from the before and after photographs taken of the home.

[37] The issue before the Court is whether MD paid for the renovations and, if so, how much did she pay.

[38] MD estimates that she spent approximately $167,000 on renovations to the home. She seeks therefore to be compensated for the renovations on a quantum meruit basis from the proceeds of the sale of the home before these proceeds of sale are divided.

[39] To satisfy the onus upon her and prove that she paid for the costs of the renovations, MD provided disbursement summaries from all of her bank accounts from April 2005 to April 2009, arguing that the change in spending is consistent with the high cost of renovations.

[40] In my view, this evidence is deficient to substantiate the Respondent’s claim for the costs of renovations and improvements to the home. I am not satisfied on a balance of probabilities with the actual costs of the renovations or that the Respondent paid for the renovations. She has failed to satisfy the onus upon her. I make this conclusion for the following reasons:

i) MD testified that she oversaw and paid entirely for the renovations at the home. But for one exception, she is unable to recall the name of any of the 6 or 7 contractors she said she retained to complete the work.

ii) MD testified that she paid “mostly with cash” for the renovations in her affidavit dated September 24, 2014. Under cross-examination she stated she paid for all renovations entirely with cash.

iii) MD is unable to produce one receipt, bill, invoice or even one quote for the renovations.

iv) It was only after August 28, 2013, almost five years after the renovations were completed, that MD produced her list of renovations and improvements with the estimated costs of the enumerated items.

v) MD stated in her affidavit sworn September 24, 2014, that she “believed” she gave all receipts she received for the renovations to her father; on cross-examination she was certain she gave them to her father and that she observed him rip them up.

vi) The disbursement summaries from MD’s bank accounts lack supporting detail tracking where the funds were directed and for what purpose.

vii) There are significant amounts of money withdrawn and transferred from the Lapajkoskis’ bank accounts during the relevant time of renovations that are similarly unaccounted for.

viii) Mr. Trajcevski was the only contractor involved in the renovations that MD identified. He testified that he charged MD $35,000 to renovate the basement of the house. MD failed to identify the transaction(s) in her bank records which would have accounted for the cash payment to Mr. Trajcevski, the only contractor she could name.

[41] In my view the Respondent has failed to demonstrate on a balance of probabilities that she paid for the renovations with her own money.

Disposition

[42] For reasons given above, I make the following orders:

i) the certificate of pending litigation on the home is to be discharged;

ii) the home is to be sold and the net proceeds divided equally between Mr. Lapajkoski and the Respondent, as joint tenants;

iii) a reference to a Master of the Ontario Superior Court (Toronto), is directed in accordance with Rule 54.02(2)(b) of the Rules of Civil Procedure with respect to the conduct of the sale who, subject to his or her discretion, will determine issues relating to the listing agent, the listing price, an accounting of the net proceeds, the disbursement of net proceeds and any other issue to be determined concerning the sale of the home;

iv) costs of this proceeding, if any, are to be payable from the proceeds of the sale; and

v) the Respondent is to have carriage of the reference.

Costs

[43] The parties are encouraged to agree on an appropriate amount of costs for this proceeding. If the parties are unable to agree I will receive written submissions of not more than 2 pages, first from the Respondent within 30 days and then from the Applicants within 20 days thereafter. It would seem to me that the parties should be able to agree on an appropriate amount for costs.

CHIAPPETTA J.

Released: November 26, 2014

COURT FILE NO.: CV-12-0000-3102-00ES
CV-12-0000-3125-00ES

DATE: 20141126

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF THE ESTATE OF SPASIJA LAPAJKOSKI AND OF STOJAN LAPAJKOSKI

BETWEEN:

DRAGICA BELCHEVSKI AS ESTATE TRUSTEE FOR THE ESTATE OF SPASIJA LAPAJKOSKI and STOJAN LAPAJKOSKI BY HIS LITIGATION GUARDIAN

Applicants

– and –

MILKA DZIEMIANKO

Respondent

REASONS FOR JUDGMENT

CHIAPPETTA J.

Released: November 26, 2014