CITATION: Forbes v. 112069 Ontario Inc. et al., 2016 ONSC 1163

COURT FILE NO.: 164/15

DATE: 2016/02/17

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Danny Forbes

Applicant

A N D:

112069 Ontario Inc., and Richard Waxman a.k.a. Rick Waxman

Respondent

BEFORE: Justice J.R. Turnbull

COUNSEL: Scott Buchanan, for the Applicant

Dennis Touesnard, for the Respondents

HEARD: February 11th, 2016

E N D O R S E M E N T

[1] The applicant Danny Forbes has brought this application seeking a declaration that he is the beneficial owner of the property described as Part 10, Range East of Plank Road, Oneida (hereinafter “the property”). In this motion, the applicant seeks a Certificate of Pending Litigation in respect of the property. That motion for the Certificate of Pending Litigation is disputed by the respondents.

Overview of the Facts

[2] Mr. Forbes asserts that he lived at the property in question from 1953 until 1976. He left the property (which was owned by his family since the 1950s) and returned to primarily reside at the property from 1986 until 2002 when he moved to a nearby property. He ultimately permanently returned to live at the property in 2007 and has lived there since that time.

[3] The applicant has sworn that his parents purchased the property in the 1970s and owned it until June 25th, 2010. At that time, it was sold to 1122069 Ontario Inc. (hereinafter 112) for the price of $141,000.00. 112 is a closely-held personal corporation of the named respondent Richard Waxman, also known as Rick Waxman.

[4] The applicant asserts that in 2008, his father fell quite ill and his parents were concerned about how to manage this rural property. The applicant has sworn that because of his relationship with his parents and his contributions to the maintenance of the property over the years, his parents offered to sell it to him for half its appraised value.

[5] As a result, the applicant obtained an appraisal of the property by Steven Elliot, who appraised it at $282,500.00. His report is attached to the supporting affidavit as Exhibit B.

[6] Mr. Forbes agrees that he was unable to obtain financing to purchase the property. Hence, he approached Richard Waxman, who was at that time a friend and business acquaintance. Mr. Waxman allegedly suggested that he get a mortgage to assist Mr. Forbes with the property and use some of the equity for another joint business venture in which both parties were involved. He offered to purchase the property through 112. Mr. Forbes asserts that it was to be purchased in trust for his [Danny Forbes’] benefit. The transfer, a copy of which is found at Tab C of the applicant’s affidavit, does not indicate that Richard Waxman or his corporation is a trustee of the land that was being conveyed.

[7] Mr. Forbes has sworn that to pay the purchase price, 112 obtained a $190,000.00 mortgage. The mortgage from the Montour Family Trust is found at Exhibit D.

[8] After adjustments, the final purchase price of the property was $136,797.00, which is less than half of the appraised value. Mr. Forbes asserts that this was in accordance with the offer of his parents to allow him to purchase the property at approximately one-half of its value. Hence, the mortgage exceeded the sale price by $53,203.00, which was received by 112.

[9] Mr. Forbes alleges that he had entered into an oral agreement with Mr. Waxman that he would make payments on the mortgage, and when the mortgage had been paid in its entirety, the property would be reregistered in his name. He understood that he could pay out the mortgage at any time without any penalty. Mr. Forbes asserts that in and around July 2012, he requested mortgage statements from Mr. Waxman to determine how much money would be required to discharge the mortgage, but he never received those statements despite numerous oral requests.

[10] Mr. Forbes alleges that he has made monthly payments for the mortgage and property insurance in the amount of $1,500.00 and at the time of swearing his affidavit, he swore that he has paid $72,000.00 towards the purchase of the property. However, he has not affixed to his affidavit any evidence, either in the form of cheques, receipts, or bank statements showing that he has paid any or all of those payments and the course of such payments.

[11] He further alleges that he has made numerous improvements to the property during the past six years.

[12] In July of 2014, Mr. Forbes alleges that Mr. Waxman informed him that it was necessary to have a rental agreement in place so that Mr. Forbes could borrow against the equity in the property. That tenancy agreement was ultimately signed and is found at Exhibit E. On the front of that tenancy agreement, there is a hand written “date of sale to Danny Forbes (open)”. Mr. Forbes alleges he requested Mr. Waxman to put their agreement in writing. He swore that he provided him a letter of agreement dated July 1st found at Exhibit F to his affidavit. Allegedly Mr. Waxman told him he would have his lawyer review it but that was never returned to the applicant. In due course, Mr. Forbes searched the parcel register for the property and discovered that it had been mortgaged to an amount in excess of $300,000.00 without his knowledge or consent.

[13] Several charges have been registered by 112 against the property and, at the time of this motion being brought, the two mortgages were outstanding on title in favour of the Effort Trust Company. The first mortgage carries an interest rate of 8% per annum while the second carries an interest rate of 14% per annum. On learning of these mortgages, the applicant felt that Mr. Waxman did not intend to agree to register the property in his name as agreed.

[14] Not surprisingly, Mr. Waxman’s version of events differs somewhat. Mr. Waxman swore that he and the applicant agreed that Mr. Waxman would purchase the property and that Mr. Forbes could stay in the home. Because Mr. Waxman did not have the financial means to purchase the property outright, the only way he could afford a loan to purchase the property was to have the property registered in his name or his company’s name so it would be available as security for a mortgagee. Accordingly, it was agreed he would purchase the property through 112. and that the applicant would be responsible for making all the payments against the mortgage. He asserts that after one year it was expected Mr. Forbes would qualify for financing of his own and that he then would purchase the property back from 112 and discharge the mortgage. At the time that he purchased the property back, it was expected that Mr. Forbes would not only pay off the outstanding balance of the mortgage but would also pay him in full for the outstanding balance that had been owed to him by Mr. Forbes on a $42,000.00 loan plus interest which had accrued since 2003.

[15] Mr. Waxman asserts that none of the forgoing occurred. He swears that Mr. Forbes did not service the debt during the first year and has never put himself in a position where he has qualified for financing so he could purchase the property outright from him. Mr. Waxman asserts that Mr. Forbes borrowed money from the extra $53,000.00 available on the mortgage, after the sale proceeds had been drawn down, and used those amounts to make interest payments against the mortgage. He assets Mr. Forbes never paid him any money out of his own pocket. He estimates that in all Mr. Forbes drew down approximately $35,000.00 from the available mortgage funds. He further asserts that Mr. Forbes has made no payments since approximately 2013 notwithstanding the fact he has continued to reside at the property.

[16] Hence, without any source of revenue coming in from the property, Mr. Waxman swore that he was forced to borrow against the property again to cover the existing costs of borrowing (the mortgage payments) and to reimburse himself for the $42,000.00 loan plus interest which had accrued at 6% per annum.

[17] Mr. Waxman denies that there is any basis for Mr. Forbes’ assertion that he has a beneficial interest in the property and asserts that he has contributed absolutely nothing to value of the property since residing there.

Analysis

[18] There does not seem to be any dispute that the value of the property was approximately $280,000.00 at the time of the transfer to 112 The reason why the property was able to be purchased at such a reduced value, was because of the arrangement the applicant had with his parents to purchase the property at half its fair market value. For the respondents to suggest that the applicant had no interest in the property is illusionary. It appears from the affidavit material that this property was to be held in trust for the applicant pending his ability to pay out the existing mortgage, accrued interest thereon, and the $42,000.00 loan and interest. It appears that Mr. Waxman has refinanced the property to repay himself the $42,000.00 plus accrued interest. However, it is clear that the applicant arguably has a real interest in this property and that a Certificate of Pending Litigation should issue. There is a triable issue.

[19] The applicant has resided at this property for a long period of time. It has been within his family for a long period of time. I do not find that damages would act as adequate compensation for the applicant in such circumstances.

Conclusion

[20] I find that it would be equitable to grant a Certificate of Pending Litigation but on the following terms:

a) The applicant shall pay $1500.00 per month in carrying costs to the respondent commencing March 1st, 2016 and thereafter on the first of each month until final conclusion of this litigation.

b) This action shall be placed on the list of cases to be tried at Simcoe, Ontario commencing June 13th, 2016. The estimated time of this trial is 3 days and if it is to be any longer, the parties are to immediately notify the trial coordinator who will arrange a conference call with me.

c) The parties are to exchange full productions in support of their positions on or before March 15th, 2016.

d) Examinations for discovery are to be completed on or before April 15th, 2016.

e) A judicial pretrial of this matter shall be held in Simcoe on May 27th, 2016 at 10:00 a.m.

[21] The applicant is entitled to his costs of this motion fixed in the sum of $2000.00 including disbursements and HST, in the cause.

Turnbull, J.

DATE: February 17, 2016