McLean v. Morrison, 2015 ONSC 1600
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Dan McLean
Plaintiff
– and –
Shernell Morrison and Carol Morrison
Defendants
Dan McLean in Person
Rahul Shastri for the Defendants
HEARD: March 11 and 12, 2015
Justice Belobaba:
1This property dispute began as an application that was converted into an action. I heard the application on September 24, 2014 and concluded that two inter-related issues should be tried: (1) whether the ‘trust agreement’ was valid and binding; and (2) whether the property was intended to be a gift.
2The parties agreed that five of the affidavits filed on the application (two from Dan McLean, two from Shernell Morrison and one from her mother Carol Morrison) would stand as their examinations in chief and would be supplemented by viva voce evidence at the trial. The parties also agreed to time-limited cross-examinations. The evidentiary phase of the trial was thus completed in one day. Closing arguments followed the next morning.
3The dispute involves a five-acre farm property in Marmora, Ontario about two hours by car from Toronto (“the Property.”)[1] The plaintiff Dan McLean once owned the Property but fell behind in mortgage payments. When the Property came on the market under a power of sale, Dan decided that he wanted to re-purchase it.[2] Because one of the tenants had used the residential dwelling as a marijuana grow-op, there was significant mould and other damage. An environmental assessment report made clear that extensive renovations would be needed to make the dwelling habitable.
The plaintiff’s position
4Dan says that it was his “plan” to re-purchase and renovate the property by using Shernell and her mother Carol[3] as a front to buy the property (in trust for him) and contract the necessary repairs. Dan did not want to attract the attention of either his former mortgagee or the town’s building inspector because he feared that the planned re-acquisition and renovation would end up being much more costly.
5Shernell and Carol agreed to execute the agreement of purchase and sale. The purchase price was $135,000. Dan provided the $5000 deposit, paid a further $48,000 by bank draft and the balance via an $85,000 second mortgage on his Toronto home. Dan says that he also provided Shernell with more than $50,000 in cash to pay for the required renovations.
6In order to document these arrangements, Dan prepared a Trust Agreement that made clear that Shernell and Carol were purchasing the Property on his behalf and that he was the beneficial owner; that he was solely responsible for the mortgage payments, all of the operating expenses and all of the repairs and renovations; and that when the Property was sold, the defendants would receive 10 per cent of any net profit for their services as trustees. Shernell signed the Trust Agreement but Carol did not.
7Dan says he has spent more than $200,000 in the re-purchase and renovation of the farm property. He says he is now living at the Property much of the time - he calls it his “home” - and he hopes eventually to recoup his investment.
8Dan asks the court for an Order confirming that he is the beneficial owner of the Property and that the Property should be transferred to him.
The defendants’ position
9Shernell and Carol tell a very different story. Dan and Shernell were dating. Dan was in love with Shernell and wanted to “set her up” with her own house and property. When he first mentioned the Property in Marmora, he said nothing about any “plan” to re-purchase it and nothing about the defendants purchasing the property in trust for Dan. Instead, Dan told Shernell that he was giving her the Property as a gift; that he would pay the $5000 deposit and the $48,000 cash on closing and she would pay off the $85,000 mortgage and pay for all of the required renovations. At one point, shortly after the closing, when Dan said he would also “take care” of the mortgage payments, Shernell assumed that this was simply part of Dan’s overall gift to her.
10Shernell concedes that she signed the Trust Agreement about four months after the closing but says she did so under duress during a heated argument that resulted their first break-up. That Dan physically forced her to sign the Trust Agreement and she relented. This was the first time she had ever heard about a trust arrangement or saw the Trust Agreement. Shernell says that she and her mother have paid $52,740 for the renovations.
11Carol’s evidence supported her daughter’s version of events. She agreed to go on title to help Shernell with the mortgage application. Dan never mentioned any trust arrangement. Carol says the first time she saw the Trust Agreement was in Dan’s affidavit in this litigation. To help her daughter pay for the renovations, Carol re-financed her home.
12Shernell and Carol ask that this court decide the two trial issues in their favour: that the Trust Agreement is not valid and binding; and that the Property was indeed intended as a gift.
Analysis
13I begin by stating the obvious: this case turns completely on credibility. Unfortunately, as is often the case in family or near-family disputes, there is little in the way of documentary evidence and there are significant gaps and omissions in each party’s testimony. Much of the ‘evidence’ presented by the primary parties, Dan and Shernell, was indeterminate and could equally support either side’s version of what happened.
14This is not a case where I can say with any confidence that one side was more credible that the other. The most that I can reasonably and fairly conclude (for the reasons set out below) is that on the first issue, whether the Property was being held in trust, I found the defendants’ evidence to be more believable; and that on the second issue, whether the Property was intended as a gift, I found the plaintiff’s evidence to be more believable.
15In the result, I order that the defendants must transfer the Property to the plaintiff and the plaintiff must reimburse the defendants for expenses incurred. Unfortunately, given the overall lack of persuasive evidence about who paid for what, my final tabulation of the reimbursement amount payable to the defendants will be equally upsetting to both sides.
(1) Is the trust agreement valid?
16I am not persuaded on the evidence before me that the Trust Agreement is valid and binding. There were a number of problems in Dan’s evidence about this particular document:
He says he and Shernell signed the Agreement at his mother’s house and that his mother witnessed their signatures. But his mother’s signature only appears on the witness line beside Dan’s signature, not Shernell’s. Dan himself signed the witness line beside Shernell’s signature;
Dan could easily have provided an affidavit from his mother or called her as a witness at the trial but chose not to do so;
Carol did not sign the Trust Agreement. Dan says in his affidavit that “we were all present at the [lawyer’s]office” but Carol “indicated she had to go someplace and would come back later to sign it” and never did. Note the reference to the lawyer’s office, not his mother’s house. Also, as Carol pointed out, if she had really been there she would not have left “to go someplace” – and how long does it take to sign a piece of paper?
There is no mention of any Trust Agreement or anything about beneficial ownership in the lawyer’s reporting letter to the defendants’ following the closing;
The day of execution is not filled in on the date line.
17When I add to the above concerns, Shernell and Carol’s evidence that no trust arrangement was ever mentioned by Dan until four months after closing; Shernell’s evidence that the Property was being given to her as a gift; and her evidence about the violent argument during which she was physically forced to sign the Agreement (even though I make no specific finding in this regard) I can only come to the following conclusion. I am not persuaded on the evidence before me that the Trust Agreement, although apparently signed by both Dan and Shernell, is a valid and genuine document and that Dan is the beneficial owner of the Property.
18If Dan is unable to rely on the Trust Agreement, his claim for beneficial ownership runs aground on the basis of ss. 4 and 9 of the Statute of Frauds,[4] which provide in essence that agreements about an interest in land must be in writing.[5] Neither of the two exceptions apply. This is not a case where one party is attempting to avoid a trust obligation by relying on the Statute of Frauds. The plaintiff has not established that the defendants knew at the time of the transfer that they were to hold the Property in trust for him.[6] Nor is this a case where the doctrine of part performance would support an otherwise oral agreement. The plaintiff’s actions (paying, in essence, the purchase price) are equally consistent with the defendants’ allegation that the monies were paid as part of the overall gift.[7]
19In short, Dan has not established the core claim of his original application. He has not established on the evidence before me “that the Property is held by the defendants in trust for the plaintiff and belongs exclusively to [him] in fee simple.”
(2) Was there a gift?
20I find, for the reasons set out below, that the defendants have not established on the evidence before me that the Property was given to Shernell unconditionally and irrevocably as a gift.
21There is no dispute about the general proposition that the donee (i.e. the defendant Shernell) has the overall burden of proof.[8] Nor is there any disagreement about the fact that Dan and Shernell had been dating for about ten months and were romantically involved when the alleged gift was made. This doesn’t mean that gifts cannot be given in a romantic context - many are. But it does mean that a court should carefully examine the evidence about what was really intended and reasonably expected in order to ensure that the resulting decision accords with this evidence.
22Even if I accept that Dan never mentioned or discussed his “plan” to use Shernell and her mother as a front to re-purchase his former property and I find that he offered the Property to Shernell in some fashion in the context of their then-romantic relationship, I am still not persuaded on the evidence before me that Dan intended and that Shernell reasonably understood and expected that the Property was being given to her as an unconditional and irrevocable gift and was hers to keep even if Dan and Shernell broke up within hours or days of the closing.
23The following items gave me pause and raised serious doubts about what was intended and expected:
Dan was a 50 year old construction manager with a relatively modest income and an existing $260,000 mortgage on his Toronto home. Why would he agree to spend $200,000 or more to acquire and extensively renovate a farm property two hours east of Toronto as a gift for a girlfriend that he knew and was dating for less than a year?
One of Dan’s journal entries, made three months before closing, is about an appointment with his lawyer “to ask him about a trust agreement between Shernell, Carol and me.”
Even if I accept that Dan did not disclose his “plan” to the defendants and simply told Shernell that he wanted to “set her up” with her own home, I find it highly unlikely that Shernell would have left her job and family in Toronto to move by herself to a farm property two hours away and “board horses” especially when there is evidence that she was afraid of horses.
It is more likely that Dan and Shernell discussed the possibility of moving together to the Property. Indeed, Shernell noted in her evidence that “I assumed we would move there together.”
I am not persuaded that when Dan replied, “No, I want you to have it” that Shernell reasonably believed and expected that the Property would be hers to keep, even if the relationship ended a day or two later. I note that Shernell testified that the ‘gift/not a gift’ discussion would vary depending on the status of their relationship: “When we’re together, the house is mine ... when we’re not together, the house is not mine.” In other words, that the gift of the Property was contingent upon a continuing relationship – a not unreasonable condition.
And if the suggestion is that Dan’s desire to “set up” his then girlfriend with a property that she could list and sell even if they broke up, with her keeping all of the profit, this does not make a great deal of sense given Dan’s relatively modest financial situation and the reality of his own $260,000 mortgage.
In their lawyer’s letter to Dan, Shernell and Carol offered to transfer the Property if Dan would pay them $35,000 (to cover the expenses incurred to date.) The letter goes on to note that otherwise the Property would be sold, “accounting to you thereafter for the proceeds received.” If the Property was a gift, why the need for any “accounting” to Dan “for the proceeds received?”
24The most that I can find on the evidence before me is that Dan loved Shernell, they discussed marriage and Dan may well have offered to acquire and renovate the Property as a gift for Shernell on the mutually shared understanding that their relationship would continue and that once the renovations were complete, they would move in together or list the property for sale. The concept of a “conditional romantic gift” (one that is revocable if the condition is not satisfied) is finding acceptance in some American courts.[9] However, strictly speaking, this is not the basis for my decision. I find - for the reasons listed above - that the donee has not persuaded me that the Property was intended or reasonably expected to be a gift.
25In the result, the plaintiff’s request for an Order directing the Land Registrar to enter Dan McLean in the Land Registry as the owner of 678 Huff Road, Marmora, Ontario is granted.
(3) Accounting for monies paid
26I have concluded that Shernell and Carol must transfer the Property to Dan forthwith. However, in doing so, they should be fully reimbursed for all expenses incurred to date. The defendants are entitled to such reimbursement on the basis of unjust enrichment but also because of the basket clause in the original application that requested “such further and other relief as this Court deems just.”
27Unfortunately, the evidence about “who paid for the renovations” is unsatisfactory and unclear. Dan says he paid for all of the more than $50,000 in renovation expenses by regularly delivering cash to Shernell who would then pay the contractor. He points to the many hand-written entries in his daily journal noting these cash deliveries. Shernell denies receiving any such advances. She says that she and her mother paid $52,740 for the renovations, using their own funds, and that Dan’s so-called entries in his daily journal were wrongfully inserted by him (always at the bottom of the page) after he had received and reviewed the renovator’s bank statements. Further, says Shernell, her initials after two of the entries (to confirm her receipt of the funds) were forged.
28Of course, if Dan was fabricating these journal entries and forging Shernell’s initials, then he could easily have added Shernell’s initials to all of the entries, and not just two of them. Dan’s journal entries cannot be completely rejected.
29I am frankly unable to come to any precise conclusion about who paid how much for the renovations. In my view, it is inconceivable that Shernell herself was able to pay $50,000 for the renovations given her income ($400 a week) and monthly expenses. Most of Shernell’s documentary evidence is not determinative and the fact that the contractor invoices are in her name is a fact that is equally consistent with Dan’s “plan.” I do, however, accept Carol’s evidence, including her mortgage documentation, that she refinanced her home and gave Shernell a total of $32,740 “to assist her with the renovation of the Property.” This monetary amount is supported by the lawyer’s letter in which Shernell and Carol offered to transfer the Property for $35,000 – “to cover” the amount that her mother had provided for the renovations, said Shernell. The $32,740 amount is the most I can place on the defendants’ side of the ledger.
30I therefore find that the plaintiff should reimburse the defendants a total of $32,740 – actually, given that Carol agreed in her testimony that she still owes Dan $900 on a car-related matter, the correct total is $31,840.
Disposition
31To sum up: I have not been persuaded by the plaintiff that the Trust Agreement is valid and that he is the beneficial owner of the Property. I have also not been persuaded by the Defendants that the Property was a gift. Order therefore to go:
(i) directing the Land Registrar to enter the name of the plaintiff, Dan McLean, in the Land Registry as the owner of 678 Huff Road, Marmora, Ontario; and
(ii) directing the plaintiff, Dan McLean to pay $31,840 to the defendants, Shernell and Carol Morrison, within 90 days and no later than June 30, 2015.
32If any of the $31,840 has not been paid in full by June 30, 2015, the defendants may attend before me on two days notice to impose a charge on the Property, and if so the amount owing may be increased to reflect any related legal costs incurred by the defendants.
Released: March 17, 2015 Belobaba J.
COURT FILE NO.: CV-14-500181
DATE: 20150317
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Dan McLean
Plaintiff
– and –
Shernell Morrison and Carol Morrison
Defendants
REASONS FOR JUDGMENT
BELOBABA J.
Released: March 17, 2015
1The 5.7 acre farm property is located at 678 Huff Road, Marmora, Ontario.
2I will refer to the parties by their first names: Dan, Shernell and Carol.
3Carol was a home owner herself and added the necessary financial weight to qualify for the mortgage loan that was needed to pay down the purchase price.
4Statute of Frauds, R.S.O. 1990, c. S.19.
5Samad v Samad, [2008] O.J. No. 2582 (S.C.J.) at para. 24.
6Ibid., at paras. 26-27.
7Ibid., at paras. 35-36.
8McTaggart v Boffo, (1976) 1975 351 (ON SC), 10 O.R. (2d) 733 (H.C.J.) at 7.
9See for example Fierro v Hoel, 465 N.W. 2d 669 (Iowa Ct. App., 1990). Also see the discussion in Ruth Sarah Lee, “A Legal Analysis of Romantic Gifts” (Harvard Law School: John M. Olin Centre for Law, Economics and Business – Discussion Paper No. 43 / March, 2013) at Part III.B et seq.