CITATION: Ferreira v. Macedo et al., 2015 ONSC 2656 COURT FILE NO.: CV-14-499908 DATE: 20150424
Superior Court of Justice - Ontario
B E T W E E N:
Antonio Ferreira Applicant
- and -
Gildo Macedo and Maria Pia Pagiula Respondents
Samuel Kazen, for the applicant Peter D. Woloshyn, for the respondents
HEARD: April 14, 2015
F.L. Myers J.
REASONS FOR DECISION
Background
[1] The applicant Antonio Ferreira applies for a partition order. He seeks the sale and 50% of the proceeds of 28 Harvie Avenue, Toronto. This is the property in which the respondents, his brother-in-law and sister-in-law, have resided and for which they have been solely responsible since late 1996.
[2] In my view, the applicant is entitled to the sum of $13,000 from the proceeds of sale of the property if and when the respondents sell it. In all other respects, the application is dismissed.
The Facts
[3] In 1993, the applicant and his wife were interested in purchasing the Harvie Ave. property. As they could not afford the property alone, the applicant invited his wife’s brother, the respondent Gildo Macedo, to purchase the property with him. They purchased the property on July 30, 1993 for $159,000.
[4] The property is a multi-story house. The parties agreed that the applicant and his wife would occupy the main floor and basement and that the respondent would occupy the second floor. To document their agreement, the parties entered into a trust and indemnity agreement dated July 29, 1993.
[5] The trust agreement was drafted by their lawyer on a standard form that was meant to be used to record trust terms where the trustee was not also a beneficiary. Accordingly it defines the applicant as the “Beneficial Owner(s)” and the respondent Macedo as the “Trustee(s)”. It recites that the Trustee(s) purchased the property on behalf of the Beneficial Owner(s). That was never the parties’ intention. Their intent was that the respondent Macedo was to be trustee for himself and the applicant 50/50. This is recorded in paragraph 1 of the agreement.
[6] Paragraph 2 of the agreement provides that the Beneficial Owner(s) shall pay all acquisition costs, mortgage payments, legal costs, realty taxes, and utilities associated with the properties. This would be correct had Mr. Macedo been included in the definition of Beneficial Owner(s). However, as drafted, the agreement appears to make the applicant responsible for 100% of the operating costs.
[7] The parties were not misled however. On the purchase, the applicant paid $13,000 and the respondent paid $8000 toward the down payment. The parties obtained two mortgages to fund the remainder of the purchase price. Aggregate monthly mortgage payments were approximately $1,150. At first, the parties agreed that total expenses for the house, including mortgage, were $1,600 a month. The applicant paid $900 per month and the respondent paid $700 per month. The differential reflected the fact that the applicant and his wife occupied two floors while the respondent occupied only one. Approximately one year later, the parties agreed to increase their respective monthly contributions to costs to $950/$750.
[8] Paragraph 4 of the trust agreement prohibits Mr. Macedo from transferring or encumbering the property without the permission of the Beneficial Owner(s). Paragraph 5 requires the Trustee(s) to account to the Beneficial Owner(s).for any rent received from the property. Both of these paragraphs too should be read, if necessary, as if both the applicant and Mr. Macedo fall within the definition of Beneficial Owner(s).
[9] In late 1996, the applicant decided to move his family to another house in Woodbridge. He says that he expected Mr. Macedo to sell the property and split the proceeds. Mr. Macedo did list the property for sale in late 1996. In April, 1997, Mr. Macedo entered into an agreement of purchase and sale to sell the property for $160,000. That is, there was no capital appreciation in the value of the house in the four years since its purchase. In any event, that transaction did not close.
[10] Although the applicant denies knowing anything about the aborted sale, he recalls speaking to Mr. Macedo and asking for his $13,000 down payment back around that time.
[11] Once the applicant left the property, he stopped making any payments toward it. Mr. Macedo was left with 100% of the mortgage and caring costs.
[12] It is the respondents’ position that the applicant abandoned whatever interest he had in the property. The real estate market in the late 1990s was flat. The applicant applied his funds towards his own new home and left the respondents free to deal with the property.
[13] For a brief period in 2000 to 2001, the respondents rented out the second floor of the property for $400 per month. For the most part however, they occupied the whole house with their son.
[14] In 2000, the respondents made wills. As part of their estate planning, on August 18, 2000, in consideration of two ($2.00) dollars, Mr. Macedo transferred the property to himself and his spouse, the respondent Maria Pia Pagiula as joint tenants. The applicant caught wind of the title transfer and registered the trust agreement on title. Apparently, it took his lawyer several months to do so from late 200o to early 2001. The applicant never told the respondents that he had registered the trust agreement. The respondents only learned of this in 2013.
[15] The applicant says he had a further conversation with the respondent Macedo in May, 2003 in which he once again said that he only wants his $13,000 back and then “I’m out”. He says that Mr. Macedo refused. Mr. Macedo recalls responding that he would pay the applicant his $13,000 from the proceeds of any sale.
[16] Nothing further happened until this application was commenced. The applicant asserts his 50% of beneficial ownership entitles him to a sale, 50% of the proceeds, adjustments for his $13,000 down payment, and approximately $8,000 that he says he paid to renovate the basement. He also seeks an accounting for 50% of the rent received by the respondent Macedo.
[17] The property is currently worth approximately $450,000 after real estate commission. That represents capital appreciation of approximately $300,000 since the applicant left the premises and stopped contributing financially toward it in 1996.
[18] It is the respondents’ position that the applicant abandoned his rights. Alternatively, they calculate the applicant’s portion of unpaid mortgage payments and carrying costs, adjusted for the time value of money, to exceed 50% of the current value of the property claimed by the applicant. However, the respondents give no credit for the fact that they occupied the full property after the applicant moved out. The respondents would have been entitled to be put in the position that they would have been in had the applicant complied with the agreement. Peleshok Estate v. Peleshok, 2011 ONSC 3156 at para. 123. Had the respondents insisted that the applicant continue to meet his obligation to pay, he would have rightly looked to them to mitigate their loss by renting out his bottom two floors. Instead, they took over those floors for themselves. In an accounting, the applicant would be entitled to credit for imputed rent. Mostovac v. Mostovac, 2010 ONSC 2593 at para 59. Unlike the Mostovac case however, there is no evidence before the court as to the value of forgone rent. I have no ability to determine whether implied rent would wipe out all, some, or only a small portion of the applicant’s unpaid expenses.
[19] In fact, there is little evidence to support any of the calculations relied upon by both sides. The respondents’ assertions of interest rates and caring cost adjustments are numbers picked by their counsel who then provides compound interest calculations in his factum. If I thought that the case properly came down to a taking of accounts, I would have no alternative but to refer the matter to a Master given the lack of evidence on this issue.
[20] In my view however, the claim is not properly resolved by partition and an accounting.
Analysis
[21] As a starting point in the analysis, I agree with the applicant that he did not lose equitable title by failing to pay his share of expenses. The respondents never notified the applicant that as a result of his breaches, they were purporting to terminate the trust agreement. Moreover, breach of executory payment obligations is not a ground for rescission of an agreement. The applicant did not lose his 50% interest due to abandonment. Peleshok Estate v. Peleshok, 2011 ONSC 3156, at paras. 61-80.
[22] The respondents say that the limitation period expired, at the latest, 10 years after Mr. Macedo transferred the property to himself and his wife jointly in 2000. The applicant relies upon section 42 of the Real Property Limitations Act R.S.O 1990, c.L.15 which seems to defer the commencement of a limitation period for a claim to recover land or rent brought by a beneficiary against a trustee under an express trust until after the time at which the land or rent has been conveyed to a purchaser for valuable consideration. The parties disagree as to whether the payment of two dollars recited in the transfer in 2000 was a transfer for valuable consideration. The applicant says that two dollars is not valuable consideration. The respondents rely upon law that a two dollar payment can be “good consideration” under the Assignments and Preferences Act, R.S.O. 1980 c.A.33. I am doubtful that the transfer in this case is what section 42 contemplates. However, I was provided with no law to explain the purpose or application of this section or any other sections that might apply differently in respect of a limitation period in this matter. I do not view the resolution of the case under an unusual section whose application has not been explained as satisfactory.
[23] It seems to me that rather than dealing with technical legal arguments, these parties’ rights ought to be resolved in equity. They are family. They commenced their investment as partners - a fiduciary relationship. Their legal rights were expressly made subject to an equitable trust. The partition remedy is ultimately discretionary (Di Felice v. 1095195 Ontario Ltd., 2013 ONSC 1 at paras. 109 to 111). Everything about this case points to a conclusion formed in fairness as between the parties.
[24] In my view, the equitable doctrines of laches, acquiescence, and waiver are applicable. In Peleshok, supra, Lauwers J. (as he then was) described the doctrine of laches as follows:
[106] The defendants rely on the doctrine of laches as explained by La Forest J. in M.(K.) v. M.(H.), 1992 31 (SCC), [1992] 3 S.C.R. 6 at para. 98:
A good discussion of the rule of laches in general is found in Meagher, Gummow and Lehane, [Equity Doctrines and Remedies (1984)] at pp.755-65, where the authors distil the doctrine in this manner, at p.755:
It is a defence which requires that a defendant can successfully resist an equitable (although not a legal) claim made against him if he can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant’s conduct or (b) caused the defendant to alter his position in reasonable reliance on the plaintiff’s acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb…
Thus there are two distinct branches to the laches doctrine, and either will suffice as a defence to a claim in equity. What is immediately obvious from all of the authorities is that mere delay is insufficient to trigger laches under either of its two branches. Rather, the doctrine considers whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable. Ultimately, laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine.
[25] It seems clear in the case law that a party who makes no payments towards property should not be entitled to claim any capital increase in the value of the property. See: Badii v. Badii, 2013 ONSC 4634 at para. 12 and Barker v. Barker, 2010 ONSC 408 at paras. 67-68, upheld on other grounds, 2011 ONCA 447.
[26] The applicant left the respondents paying mortgage, upkeep, and improvements for nearly 20 years. Even after he registered the trust agreement on title (without telling the respondents) he offered no funds and asserted only a desire for the return of his $13,000 deposit. In the words of the learned author’s quoted by the Supreme Court of Canada above, the applicant “caused the [respondents] to alter [their] position in reasonable reliance on the [applicant’s] acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb.”
[27] “The doctrine of laches is of great importance where persons have agreed to become partners, and one of them has unfairly left the other to do all the work, and then, there being a profit, comes forward and claims a share of it.” Lindley & Banks on Partnership, 18th ed. (London, Sweet & Maxwell, 2002). That is the case here.
[28] In my view, by standing idly by the applicant disabled himself from enforcing his equitable title. It would be fundamentally unfair for him to share in the capital appreciation of the property in the circumstances.
[29] The same result flows under the doctrines of acquiescence and waiver. The applicant knew in 2000 that the respondents had transferred title in breach of the trust agreement. They were acting as if the property was their own. While he now says he has little recollection, it is clear that the applicant viewed the matter as being sufficiently significant that although he was out of the country for a period of time, he sent his spouse to the lawyer who then spent many months clearing away administrative issues to allow the trust agreement to be registered on title. The applicant had full knowledge of his rights and delayed for 14 years while the respondents were treating the property as their own. It seems to me that the reasons of Lauwers J. in Peleshok, supra, at paragraphs 113 to 118 apply here as well.
[30] The only exception to these equitable defences is with respect to the $13,000 down payment paid by the applicant. The respondents are content to account for this payment and have consistently taken this position both historically and formally in this litigation. There is nothing unjust, then, in holding them to account.
[31] It seems to me that an order should go requiring the respondents jointly and severally to pay to the applicant the sum of $13,000 on the earliest of: their receipt of proceeds of any sale of the property, their receipt of proceeds of any refinancing of the property, or the death of either of them. This is an in personam remedy binding their consciences in equity. Accordingly, an order will go requiring the relevant land registrar to delete the trust agreement from title.
[32] The applicant did not prove his claim for renovation expenses. An accounting for rent received (of less than $15,000 in the aggregate, 15 or so years ago) is long delayed and would be wiped out by countervailing expense and, especially, the costs of the process. It is fundamentally inequitable to engage in that process at this very late date.
[33] The parties ought to be able to resolve costs themselves. If they cannot, the applicant may deliver up to 5 pages of submissions plus a Costs Outline by May 8, 2015. The respondents may respond with 5 pages of submissions and shall include their own Costs Outline by May 22, 2015. All costs submissions are to be made by searchable pdf attachment to an email to my Assistant. Case law, if any, shall not be provided but may be referenced by hyperlinks to another reporting service in the submissions.
F.L. Myers J.
DATE: April 24 2015
CITATION: Ferreira v. Macedo et al. 2015 ONSC 2656 COURT FILE NO.: CV-14-499908 DATE: 20150424
Superior Court of Justice - Ontario
B E T W E E N:
Antonio Ferreira Applicant
- and -
Gildo Macedo and Maria Pia Pagiula Respondents
REASONS FOR DECISION
F.L. MYERS J.
Released: April 24, 2015