CITATION: Falagario v. Falagario, 2016 ONSC 648
COURT FILE NO.: CV-12-444364
DATE: 20160127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FRANK FALAGARIO AND PAMELA CONDE
Plaintiffs
– and –
APOLLONIA FALAGARIO ALSO KNOWN AS POLLY FALAGARIO ALSO KNOWN AS POLLY CARTAGENESI, NICOLE CARTAGENESI ALSO KNOWN AS NICOLE D’AMBROSIO AND MICHAEL CARTAGENESI ALSO KNOW AS MICHAEL CARTAGENSI
Defendants
J. Lester Davies and Joan Anderson, for the Plaintiffs
Eric D. Freeman, for the Defendants other than Apollonia Falagario
Apollonia Falagario, Self-represented
HEARD: January 4, 5, 6 and 7, 2016
REASONS FOR JUDGMENT
JUSTICE W. MATHESON
[1] In this action, the plaintiffs seek to set aside the conveyance of the family home by their father, Michele Falagario, to himself and his grandson, Michael Cartagenesi, as joint tenants. Michele has since passed away and, given the joint tenancy, the house is now in his grandson Michael’s name, rather than forming part of Michele’s Estate. The house was Michele’s only significant asset. Under Michele’s will, his three children would benefit from that asset. Two of his three children are the plaintiffs, and one sister, Apollonia, is a defendant. The defendant Michael Cartagenesi is one of Apollonia’s three children.
[2] At trial, the action proceeded against only two of the defendants, the grandson Michael and his mother Apollonia.
[3] Given the overlapping last names of various family members, the trial was conducted mainly using first names. I follow that practice in these Reasons for Judgment.
[4] Although a number of issues were raised in the pleadings, at the outset of the trial, counsel to the plaintiffs indicated that the claim had become more focused over the course of the litigation. Subject to some remedial questions, the parties represented by counsel agreed that the issue for trial was as follows:
Does Michael Cartagenesi hold the property municipally known as 363 Highfield Road, Toronto Ontario M4C 2V7 (the “Highfield property”) in trust for the Estate of Michele Falagario?
[5] This trust claim is made primarily based upon the law of resulting trust, but undue influence is also alleged.
[6] Although Apollonia was self-represented at trial, she had the same statement of defence as the other defendants and did not put forward a different position at trial.
Family Background
[7] Michele was born in Italy in 1923. His wife Grace was also born in Italy. The plaintiff Frank is their eldest son. He was born in 1947 in Italy. The defendant Apollonia is their middle child and was born in 1952 in Italy. The plaintiff Pamela is their youngest daughter. She was born in 1967 in Canada. The defendant Michael is one of their grandchildren and was born in 1976 in Canada. There are six other grandchildren.
[8] Michele, Grace, Frank and Apollonia came to Canada from Italy in or around 1964. The family has lived in Canada since that time. In Canada, Michele worked in a manufacturing facility. At the time of the events that are the focus of this case, he was retired.
[9] Despite his many years living and working in Canada, Michele continued to speak only Italian and not English. At most, he had a little broken English. His children, all of whom testified, all speak English to varying degrees and Italian to varying degrees. Although the potential use of an Italian interpreter at trial was discussed, at the outset of trial counsel indicated that they did not anticipate the need for one. I am satisfied that the witnesses understood the questions asked of them sufficiently, but observe that Apollonia’s English is poor.
[10] In 1967, Michele and Grace purchased the Highfield property as joint tenants. At the outset, the family all lived in this house. Frank moved out in 1970 and Pamela moved out in 1989, sometime after they each married. Both Frank and Pamela proceeded to have children. Apollonia, even though she married and had three children, lived at the Highfield property for most of her life except for a few brief periods. Apollonia lives at the Highfield property to this day.
[11] Michele’s wife Grace died in July 1984. After she passed away, Michele became the sole owner of the Highfield property. It was and remained Michele’s only significant asset.
[12] Michele made a will in 1984 after his wife passed away, leaving his Estate in equal shares to his three children. All three children knew about this will.
[13] In 1994, Michele gave powers of attorney for personal care and for property to Apollonia, although she testified that she has never used them. As well, she was added to his bank account, which became a joint account.
[14] It is common ground that by 2003, Michele was dependent upon Apollonia for his day-to-day care. For a period of time, he also had twice daily visits by a personal care worker, but Apollonia lived in the house, prepared his meals, took him to his appointments and generally took care of him. Other family members visited and assisted from time to time, and Michele stayed with Pamela once when Apollonia was away and once when Apollonia was recovering from a surgery.
[15] Michele made a new will in October 2003, naming Apollonia as the executor and providing that Apollonia would receive two-thirds of the Estate and Frank and Pamela would each receive one-sixth of the Estate. The plaintiffs were not aware of this will until after their father passed away, but now accept it as valid. It was signed on October 7, 2003, after Michele met with Dino J. Cirone, a lawyer who was fluent in Italian. If the Highfield property is being held in trust, as the plaintiffs contend, it would form part of Michele’s Estate and would be dealt with under this will.
[16] Apollonia testified that in 2003, her father told her he wanted to change his will, and it was she who found Mr. Cirone after looking specifically for an Italian-speaking lawyer. She took her father to see the lawyer, but was not present for their entire discussion. Her father dealt directly with Mr. Cirone. After their meeting, Mr. Cirone asked that Apollonia obtain a note from her father’s doctor about his capacity. It appears from the lawyer’s file that this request was made at least in part because Michele could not remember the names of all of his grandchildren at the meeting. In any event, Apollonia requested a doctor’s note and her father’s general practitioner provided one, certifying that Michele was “fully capable + clear mentally”, with “no deficit”. No medical evidence was called to dispute this assessment or to provide a later medical assessment of Michele’s mental condition.
[17] Michele did not tell Frank or Pamela that he had changed his will.
Events regarding the Highfield property
[18] Pamela testified, without any specific expertise, that the Highfield property is worth about $800,000. Its precise value is not needed for this trial, but counsel made the common sense observation in final argument that the value has likely increased along with the Toronto real estate market.
[19] Although the Highfield property was originally purchased with a mortgage, that mortgage was paid off and, for many years, the Highfield property was mortgage-free. This was apparently a source of pride for Michele. However, in about 2005, through fraud, a mortgage was registered against the Highfield property.
[20] One of Apollonia’s children, Nicole, and Nicole’s boyfriend, were undertaking a rebuild of a property on Coxwell Avenue in Toronto. There was some discussion about them borrowing $30,000 to $40,000 from Michele for the first stage of the building project. However, on December 8, 2005, a charge was placed against the Highfield property in favour of Manulife Bank of Canada in the amount of $262,500. This was done without any knowledge of or participation by Michele. It came to his attention in 2007 after Manulife’s counsel sent a demand on that mortgage for approximately $109,000. Nor is it suggested that Apollonia knew about it. It appears to have been orchestrated by Nicole and/or her boyfriend.
[21] Although this fraud is relevant to some extent to the factual background of this case, it is not, itself, the subject of this action. It has already been addressed in other litigation and related power of sale proceedings.
[22] Apollonia is especially unsophisticated about legal and financial matters. When the demand letter on the loan arrived from Manulife’s counsel in 2007, Apollonia passed it along to Roy Varjacic. Mr. Varjacic was a friend who also provided advice to Apollonia, and to Michele, although he does not speak Italian and it was not suggested in the trial evidence that he had any special qualifications to give advice about financial or legal matters.
[23] With the assistance of Mr. Varjacic, a lawyer was retained to deal with the litigation arising from the fraudulent mortgage. Money was needed to pay the lawyer. In 2008, Apollonia presented the plaintiffs with a letter dated March 21, 2008, signed by her, asking each of them to contribute to the legal fees.
[24] The March 21, 2008 letter signed by Apollonia was not prepared by her. It was prepared by Mr. Varjacic with the potential assistance of his wife. Given Apollonia’s limited English, it is inconceivable that anyone who knew her would think she had prepared it. In her testimony, Apollonia could not even say whether or not its contents were true. On the trial evidence, the letter contained some statements that were true and others that were in error. For example, it wrongly named the bank in question as Scotiabank.
[25] Apollonia testified that she had also asked her siblings for money verbally at an earlier stage.
[26] Neither the accuracy of the letter nor the question of earlier requests is especially material because there is no question about the plaintiffs’ response to the request to help pay the legal expenses. When the plaintiffs learned of the mortgage problem, apparently caused by Apollonia’s daughter Nicole and her boyfriend, the plaintiffs declined the request to contribute toward legal fees. They both thought that since the problem was caused by Nicole, it should be dealt with by Apollonia’s part of the family. They both testified that they said they would not help pay the legal expenses, and Michele was told that they refused to do so.
[27] Throughout the relevant time, Apollonia was living on government assistance, and it was not suggested that she had the financial resources to contribute the funds needed to retain the litigation lawyer. Nor is it suggested that Michele had the financial resources. The person who did contribute significant funds was Apollonia’s son, Michael. He contributed at least $15,000. He did so before the above-mentioned letter was given to each of the plaintiffs. On his evidence, which I accept on this point, he contributed somewhat more after that date, totaling about $20,000, which was ultimately repaid to him.
[28] Although the trial evidence about the Manulife litigation and its settlement is scant, it is agreed between the parties that the mortgage was eventually discharged as a result of litigation, without payment by Michele, and that Manulife agreed to look to Nicole and possibly also her boyfriend for the debt. From Michele’s standpoint, this was a very successful outcome.
[29] Michael’s willingness to provide money to pay the lawyer features prominently in the transfer challenged in this litigation. As discussed below, Michele told the lawyer assisting with the impugned transfer that Michael had “saved the house.”
[30] In 2008, Michele loaned at least $23,000 to his grandson Jason and $30,000 to Mr. Varjacic. In his testimony, Mr. Varjacic acknowledged that the loan to him remains unpaid. He owes that money to Michele’s Estate and plans to pay it when the Estate is addressed, which has not yet taken place. Further charges were placed on the Highfield property on May 6, 2008 in the amount of $100,000.00, and on May 4, 2009 in the amount of $50,000.00, both in favour of The Toronto-Dominion Bank. The use of the other mortgage proceeds remains unexplained.
Impugned transfer
[31] At age 87, about eight months before his death, Michele transferred the Highfield property to himself and his grandson Michael as joint tenants.
[32] Michael testified that his grandfather had said “thousands of times” that he was giving the house to him, and had done so in front of other family members including Pamela. The plaintiffs testified that Michele had not done so in their presence. Two other witnesses testified about verbal statements along these lines. Apollonia initially did not give this evidence, but after more specific prompting did so. A family friend, Maria Montesano, also testified that Michele had sometimes said something along these lines. Her evidence was that this was done in Pamela’s presence, and Pamela had said she was not interested in the house because she had already received certain jewelry, which was what she cared about.
[33] Considering all the trial evidence, I conclude that Michael is exaggerating when he says his grandfather mentioned transferring the house to him “thousands of times”, but that it was mentioned by Michele on some occasions. I do not conclude that Pamela was lying in her testimony, only that she either did not recall it being mentioned or the mention was so casual as to be of no particular significance. No one suggests that Michele specifically said that he was taking steps to legally transfer the house in his lifetime, and the plaintiffs were not told when the transfer was actually done.
[34] The first documentary reference to Michele potentially transferring the house during his lifetime is a memorandum in the file of the lawyer who acted on the ultimate transfer, Charles Wagman. In November of 2008, he directed his law clerk, Zelia Luciano, to prepare to transfer the Highfield property from Michele to Michael for “natural love and affection”. Both Mr. Wagman and Ms. Luciano testified at trial.
[35] Mr. Wagman was called to the Bar in 1977, and has a general practice with an emphasis on civil litigation. He does some real estate work as part of his practice, especially for estate purposes. Ms. Luciano had been a law clerk for about 25 years by the time of trial, and has experience in real estate work.
[36] I found both Mr. Wagman and Ms. Luciano to be credible witnesses. They were both responsive to questioning, both limited their answers to what they did know, and both frankly stated what they did not know and what they did not do. Their evidence was, in significant part, corroborated by other participants in the process including Ms. Montesano, Michael and Mr. Varjacic.
[37] Mr. Wagman testified that he was approached by Mr. Varjacic to assist Michele with the transfer of the Highfield property. Mr. Wagman had acted for Mr. Varjacic on prior occasions. Ms. Luciano also knew Mr. Varjacic, as a client of the firm.
[38] Ms. Luciano tried to reach both Michele and Michael regarding the proposed transaction. There are handwritten notes on the November 2008 memorandum, made by Ms. Luciano, recording her attempts to reach them. She testified that she did not hear back right away. At some point, she did reach Michael, who provided some background information needed for the real estate documents.
[39] Significant steps were taken to move forward with the transfer about fourteen months after the initial contact with Mr. Wagman. The file contains a number of documents dated February 10, 2010. On that date, at least Mr. Varjacic and Michele came to the lawyer’s office and saw Ms. Luciano. There is a handwritten memo from her in the file that records a conversation she had with Mr. Varjacic at that time. Her handwritten note indicates as follows: “Roy Varjacic told me that Michele Falagario originally wanted to transfer the Highfield property to his daughter (Michael Cartagensi’s mother) because she is the one (the only one) that takes care of her father and has been for several years. The reason why it was not being transferred to Michael’s mother is because she receives government assistance.”
[40] Mr. Varjacic testified that he did have a conversation with Ms. Luciano along those lines. He said that the handwritten note was not inaccurate, but it was incomplete. He testified that Ms. Luciano specifically asked about Apollonia and whether she would object or complain about the transfer and Mr. Varjacic indicated that Apollonia could not help the situation because she was on welfare or disability and that Michael had helped financially. This was a reference to Michael helping with the legal fees needed to address the fraudulent mortgage.
[41] Ms. Luciano testified that she did not recall what she did with her memo about her conversation with Mr. Varjacic, but normally she would leave memos on the top of the file so that Mr. Wagman would see them when he next met with the client. In this instance, Mr. Wagman did not see the memo, or the reference in it to it being Apollonia who took care of Michele.
[42] The file contains a number of other documents dated February 10, 2010. Among them, there are two copies of an Acknowledgment signed by Michele, an Acknowledgment and Direction to undertake the transfer signed by both Michele and Michael and witnessed by Ms. Luciano and an “in preparation” transfer document showing the transfer of the Highfield property from Michele to Michele and Michael as joint tenants.
[43] Based on Ms. Luciano’s testimony, I conclude that Michele came in to sign documents along with Mr. Varjacic and possibly a neighbour. All documents were signed in the presence of Ms. Luciano and not Mr. Wagman.
[44] The meeting between Michele and Mr. Wagman did not take place until February 24, 2010, and the transfer was not registered until March 5, 2010. Neither Mr. Wagman nor Ms. Luciano could recall why the above documents were dated on February 10, 2010. Ms. Luciano testified that while she did not specifically recall, she believed that when she found out that Michele did not speak English, she held the documents until there could be a meeting that included an interpreter.
[45] Neither Mr. Wagman nor Ms. Luciano spoke Italian. When Michele attended for his meeting on February 24, 2010, he brought Maria Montesano with him to translate. I accept Ms. Montesano’s evidence that she was a frequent visitor to the Falagario home. She was a long-time close friend of the family, especially Apollonia, and used to live in the neighbourhood. When she married and moved, she frequently visited her mother-in-law, who also lived on Highfield. She would then go to visit Apollonia and regularly saw and talked with Michele. She had known the family for years.
[46] Ms. Montesano testified that on her regular visits to see Apollonia she saw Michele in the kitchen area on the main floor, on her way to the basement area where Apollonia lived. She would stop and visit with him. She testified that on one occasion in 2010, Michele asked her if she would accompany him to a lawyer’s office to translate for him. She agreed to do so.
[47] Ms. Montesano’s first language is Portuguese, but she speaks Italian and English as well. No one suggested at trial that her Italian or her English was inadequate. I found her English adequate.
[48] Ms. Montesano testified that when Michele asked Ms. Montesano to go with him to see the lawyer, he told her that he wanted to give the house to Michael. She asked him why since he had previously told her that he planned to give the house to Apollonia. He said that Apollonia did not want the house and when he had problems with the law, Michael helped him. She asked again about Apollonia, who was her close friend, and he said he trusted Michael to look after his mother.
[49] On February 24, 2010, Ms. Montesano took Michele to his meeting at the Wagman & Sherkin law firm and sat in on the meeting with Mr. Wagman in order to translate. Mr. Wagman testified that he specifically told her to translate word for word and I accept her evidence that she did so.
[50] Mr. Wagman made a handwritten note during the meeting. As well, he has some independent recollection of the meeting.
[51] Mr. Wagman testified that he began with a general discussion, which caused him to conclude that Michele knew what he was doing, as set out in his notes. Ms. Montesano also testified on this subject. In the relevant time period she saw Michele regularly. I accept her evidence that at the time of the meeting with Mr. Wagman, Michele’s mind was clear. She had no reason to be untruthful at trial, as the plaintiff, Pamela, fairly conceded in her testimony. There was a paucity of evidence at trial to support any suggestion that Michele did not know what he was doing at this time.
[52] Mr. Wagman asked about the people in the family and was told about Michele’s three adult children and his seven grandchildren. He asked and was told that the house was Michele’s only significant asset. He did not ask about wills. Since the house was the only asset, he testified that prior wills were academic.
[53] With respect to the reason for the transfer, Mr. Wagman’s note indicates as follows:
Michael looks after Michele – son of [Apollonia] – just Mike → wants him to get home.
he wants his house to go to Michael
he knows he cannot r[change] his mind
[54] Mr. Wagman was left with the impression that only Michael was looking after Michele. Michael did have a good relationship with his grandfather, and did help out from time to time. But he did not live at the Highfield property anymore and was not Michele’s primary caregiver.
[55] Given that Michael was the only person to provide financial assistance in connection with the Manulife power of sale proceedings, I conclude that Michele was referring to that help only.
[56] Mr. Wagman recalls Michele telling him that he was not leaving anything to his other two children because he was disappointed that they would not help him with the power of sale/Manulife problem and Michael had come through for him and saved the house. He wanted to reward Michael for doing that and he also mentioned that his other two children were not seeing him all that often. Mr. Wagman found Michele’s explanation for favouring Michael to be clear and reasonable.
[57] At that meeting, Mr. Wagman was not told that Apollonia was Michele’s primary caregiver. He was also not told that Apollonia was on government assistance or that she had a very substantial judgment against her. There was a writ of execution against her, her daughter Nicole and Nicole’s boyfriend for about $188,000, arising from her co-signing a mortgage with them on the Coxwell property. It is not clear on the trial evidence whether Michele even knew about the default judgment, but Michael agreed in cross-examination that it was a potential reason not to transfer the house to his mother. In any event, Michael testified that Michele knew he would always take care of his mother, and I accept that to be the case bearing in mind all the trial evidence.
[58] I do not find that Mr. Wagman’s misimpression about who was Michele’s primary caregiver detracts from his client’s intention. Michele’s intention was clear: to give Michael the house because Michael had “saved the house.”
[59] With respect to why the transfer was to Michele and Michael as joint tenants, rather than to Michael outright, Mr. Wagman testified that it was he who suggested a joint tenancy. He made this suggestion to protect Michele during his life, in that he was still living at the Highfield property and would have a right of possession. Neither Mr. Wagman nor Ms. Luciano could recall why the documents that were apparently prepared earlier were already drafted for a joint tenancy.
[60] After the meeting, Mr. Wagman instructed Ms. Luciano to complete the transfer to Michele and Michael in joint tenancy. He did not review the real estate documents themselves with Michele.
[61] The transfer was registered to Michele Falagario and Michael Cartagensi as joint tenants on March 5, 2010. It is not clear why the transfer was registered as Michael “Cartagensi” when it appears that his legal name is Michael “Cartagenesi”.
[62] By letter dated April 19, 2010, Mr. Wagman reported on the transaction to Michele and Michael. His letter states that the transfer was for “natural love and affection” “with rights of survivorship”. This is consistent with the Land Transfer Tax Statement, which provides, as the explanation for nominal consideration: “Transfer from Grandfather to Grandfather and Grandson. Natural love and affection.”
[63] None of Michele’s children were told about this legal transaction before it was done. Even Apollonia was not told of it. She learned about it later, from Michael.
[64] At trial, the defendants attempted to assert that Michele was unhappy with the plaintiffs. The defendants relied on Frank’s failure to name his first son after Michele (where Michael was named after Michele). I accept Frank’s evidence that this did not significantly impair his relationship with Michele. His son was born in 1971, many years before Michele’s first will was made in 1994. And in that will, Michele left his Estate to his three children equally and he made Frank one of the executors. The other main assertion was that Frank did not come to visit his father either at all or enough, late in his life. I accept Frank’s evidence that he did visit, although the frequency dropped off, and in the last six months or so he did not visit at all. Pamela visited regularly but obviously did less than Apollonia. Michele did mention to Mr. Wagman that they were visiting less frequently.
[65] Michele passed away on December 14, 2010, at age 87. Michael exercised his right of survivorship and arranged to have the title to the Highfield property registered in his name in April 2011. Michael obtained a mortgage from the Royal Bank of Canada for $480,000, and used the proceeds to discharge the two Toronto-Dominion Bank mortgages, as well as to pay off others debts, including his grandfather’s funeral expenses.
[66] After their father’s passing, the plaintiffs learned of the 2003 will and the 2010 transfer. This action was commenced in January 2012, and a Certificate of Pending Litigation was obtained on January 31, 2012.
Analysis
[67] In final argument, the plaintiffs relied primarily on the law of resulting trust as set out by the Supreme Court of Canada in Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, and related cases. However, there was also some argument advanced based upon the law of undue influence. I have therefore addressed both in considering whether the impugned transfer should be set aside.
Resulting trust
[68] As of Pecore, it is well-settled that a presumption of resulting trust generally applies to gratuitous transfers between a parent and an adult child. This is because equity presumes a bargain, not a gift: Pecore, at para. 24.
[69] In cases where the transferor is deceased and the dispute is between the transferee and a third party, the presumption of resulting trust has an additional justification. In those cases, it is the transferee who is better placed to bring evidence about the circumstances of the transfer: Pecore, at paras. 26 and 36.
[70] The effect of the presumption is to shift the burden of proof to the recipient of the alleged gift to establish that it was a gift, on a balance of probabilities: Pecore, at para. 43.
[71] In this case, because Michael is an adult grandchild, not an adult child, the defendants do not concede that the principles set out in Pecore apply, though they do not strongly argue this point. I conclude that the presumption of resulting trust does apply. The underlying principle that equity presumes a bargain applies equally to this relationship. At most, a grandchild could be a step more distant from the transferor, which would be another factor in support of a presumption of a resulting trust, not the converse. I see no significant distinction between these relationships, especially in the circumstances of this case.
[72] There is therefore presumption that the impugned transfer was a resulting trust, not a gift.
[73] Having determined the proper presumption to apply, the court must weigh all the evidence relating to the actual intention of the transferor to determine whether the presumption has been rebutted: Pecore, at para. 55.
[74] It falls to Michael to prove that Michele intended to gift the Highfield property including the right of survivorship to him: Pecore, at para. 53. I conclude that Michael has met his burden to prove that the transfer was a gift.
[75] There is ample evidence before me that demonstrates that Michele intended a gift to his grandson. Most significant is the evidence of Michael’s role in putting forward at least $15,000 for the legal fees required to address the fraudulent mortgage that had been registered against the Highfield property and related proceedings. There is no dispute on the evidence that he put forward those funds, where none of Frank, Pamela or Apollonia did so. And there is no question that the Highfield property was at risk in the sense of it being the subject of power of sale proceedings. There is also no question that the Highfield property was where Michele and Grace raised their family, and where Michele continued to live. From Michele’s standpoint, as recounted by a number of trial witnesses, Michael “saved the house.” For this, Michele intended to give him the house.
[76] While there was considerable trial evidence about the actual transfer, I accept the plaintiffs’ submission that not every single aspect of that transaction was fully explained in the trial evidence. This is not especially surprising given that details can be lost with the passage of time. However, the evidence of Mr. Wagman and Ms. Montesano, the only two people present at the meeting with Michele in which he gave his instructions, is entirely consistent on the subject of Michele’s intentions. Ms. Montesano questioned Michele about his intentions before they even went to the lawyer’s office, given her loyalty to Apollonia, and was told that he intended to give Michael the house because when Michele had problems with the law, Michael helped him. During the meeting, Mr. Wagman questioned Michele and he said that Michael had come through for him and saved the house and he wanted to reward him for doing that. He also mentioned that he was disappointed that two of his children did not help him with the power of sale problem and that they were not coming to see him all that often.
[77] It is unexplained why Michele did not mention Apollonia to Mr. Wagman. I conclude on the trial evidence that Michele was primarily focused on what Michael did to save the house, and he knew that Michael would take care of his mother. It is also possible that he was aware of two possible reasons why it would be disadvantageous to give the house to Apollonia, specifically that it might compromise her government assistance and because she was the subject of a large judgment debt that time. It has not been proved that he knew of these things, but if he was, they would be consistent with an intention to give the house to Michael.
[78] I am satisfied based on Mr. Wagman’s evidence that he recommended the joint tenancy approach and that he explained the effect of giving this gift to Michael. Obviously, it would have been preferable if someone had gone through the real estate documents with Michele with the assistance of an Italian interpreter. On the evidence, I conclude that this was not done. However, these largely standard form documents effectively implemented the transaction that Michele had given instructions to complete. There was no inconsistency between Michele’s instructions and the terms of the standard form documents.
[79] The plaintiffs also rely on some evidence that at earlier stages Michele intended to give the house either to Apollonia or to Michael outright. The plaintiffs submitted that there was an inadequate explanation for the changes. I disagree. The change from an outright transfer to a joint tenancy has been explained by Mr. Wagman. As for the evidence about giving the house to Apollonia, that mainly comes from Ms. Luciano’s note of her conversation with Mr. Varjacic. That information did not come directly from Michele. Further, that same note recorded Michele’s intent to give the house to Michael, not Apollonia. I do not find that this evidence detracts from the evidence of Michele’s intentions as told to Mr. Wagman and Ms. Montesano.
[80] The plaintiffs rely heavily on the decision in Reid Estate v. Reid Estate, 2010 ONSC 2320, 57 E.T.R. (3d) 35. That case involved the transfer of a house from an elderly mother to herself and her younger son in joint tenancy. She had two adult sons, aged 63 and 69, and her elder son challenged the transfer after she passed away. The court found that far from rebutting the presumption of resulting trust, the trial evidence confirmed the resulting trust. There was ample evidence that the transfer formed part of a larger estate plan through which the mother intended that both her adult sons would have a house. She always intended rough equity between them. However, she passed away before her estate plan was fully implemented. In further contrast to this case, in Reid Estate the court found that the primary purpose of the transfer was to save probate fees.
[81] The plaintiffs also rely on Reid Estate because of the course of conduct of the lawyer who acted on the transaction in that case. There was considerable evidence before the trial judge about that course of conduct. I agree that amongst the many details there are some points of similarity, but overall, the factual matrix of Reid Estate is quite different. In that case, the lawyer was a long-time family friend who, significantly, never actually met with her client over the course of doing the real estate transaction. Her client’s instructions changed over a relatively short period of time, yet she did not discuss them directly with the client when her instructions changed. The lawyer relied on a note from her client that had some oddities and deficiencies about it, yet, again, she did not discuss it directly with her client. These are only some of the differences.
[82] The plaintiffs further submit that the gifting of the Highfield property in return for Michael’s assistance in paying legal fees strains credulity. Plaintiffs’ counsel submitted in final argument that this was either not the case or Michele was out of touch with reality. He submitted that it made no sense to give someone a house worth about $800,000 ($650,000 net of mortgages) in return for about $15,000 or $20,000 of financial assistance. I disagree. This was not a commercial agreement to sell the Highfield property. Before the transfer, Michael “saved the house.” I have no difficulty accepting that a capable person could intend to give such a gift.
[83] The plaintiffs also raised an issue regarding the evidence of Mr. Varjacic. He was initially on the defendants’ witness list, but counsel advised after the trial commenced that he did not intend to call him. As a result, plaintiffs’ counsel called him in the plaintiffs’ case. However, plaintiffs’ counsel asked him only a few questions focused on his interaction with Ms. Luciano and her handwritten note of February 10, 2010. In final argument, plaintiffs’ counsel asked that I draw an adverse inference because the defendants had not, themselves, called Mr. Varjacic as a witness.
[84] The invitation to draw an adverse inference ordinarily arises because a witness with relevant evidence has not testified at all. In considering whether to draw such an inference, the court will consider whether the witness was under the control of a party and not called, without sufficient explanation: Sidney N. Lederman, Alan W. Bryant and Michelle K. Fuerst, The Law of Evidence in Canada, 4th ed. (Markham, ON: LexisNexis Canada, 2014), para 6.449.
[85] Here, the witness in question did testify. The plaintiffs have not drawn any case to my attention where an adverse inference was drawn in that situation. Indeed, it runs contrary to the general principle that where a witness is equally available to both sides, there should not be an adverse inference: Lambert v. Quinn (1994), 1994 CanLII 978 (ON CA), 68 O.A.C. 352 (Ont. C.A.), cited under para. 6.449 of The Law of Evidence in Canada.
[86] In that Mr. Varjacic did testify, I am not prepared to draw an adverse inference. However, I have considered to what extent the absence of evidence from him on areas where he was not questioned impinges on Michael’s onus to prove that the transfer was a gift. Mr. Varjacic was involved in an initial discussion with Mr. Wagman in November 2008, the outcome from which is recorded in a memo and forms part of the trial evidence. He was not asked detailed questions about that interaction, nor was he asked detailed questions about the steps he took in the litigation arising from the Manulife mortgage. Although these events form part of the background, I do not conclude that there has been a material omission in the evidence regarding Michele’s intentions at and around the time of the actual transfer in 2010.
[87] In conclusion, bearing all the trial evidence in mind, I find that Michele intended that the transfer be a gift, not a resulting trust.
Undue influence
[88] In final argument, the plaintiffs did not emphasize undue influence as the basis for the relief sought. This is not surprising given the trial evidence.
[89] The equitable doctrine of undue influence was developed to save people not from themselves but from being victimized by others: Goodman Estate v. Geffen, 1991 CanLII 69 (SCC), [1991] 2 S.C.R. 353, at para. 24, per Wilson J.
[90] “Influence” is dominating the will of another, whether through manipulation, coercion or outright but subtle use of power: Goodman Estate, at para. 41, per Wilson J.
[91] Equity will intervene and set aside a gift or transaction if procured by undue influence. This protection can be invoked either as a result of express influence or an unrebutted presumption of influence due to a relationship at or shortly before the gift or transaction: Goodman Estate, at paras. 24, 26, per Wilson J.
[92] In this case, the plaintiffs have not proved express influence. The trial evidence did not demonstrate that anyone had pressed Michele to transfer the house as he did. The claim must be, if anything, based upon a presumption of undue influence arising from a relationship.
[93] To determine whether there ought to be a presumption, the court must examine the relationship and ask whether the potential for domination is inherent in the relationship. A presumption has been found for some recognized categories of relationships, such as that between a solicitor and his or her client, as well as other relationships of dependency: Goodman Estate, at para. 43, per Wilson J.
[94] For gifts, it is enough to establish the presence of a dominant relationship. There is then a presumption of undue influence and the onus shifts to the defendant to rebut it: Goodman Estate, at paras. 45 - 46, per Wilson J.
[95] In final argument, the only specific relationship mentioned was the relationship of caregiver. Apollonia was Michele’s primary caregiver. The plaintiffs’ counsel also mentioned Mr. Varjacic and Michael as potential candidates for a relationship of influence.
[96] Mr. Varjacic apparently had some role in giving advice to Michele, but on the trial evidence it was informal and not the result of special qualifications or expertise. Michael was helpful to his grandfather both generally and specifically in relation to financing legal fees. However, I do not conclude on the trial evidence that Michele was dependent upon either of them.
[97] The best case for a presumption of undue influence relates to Apollonia, as primary caregiver. However, having heard her testimony, I cannot conclude that she was capable of “dominating the will” of her father through “manipulation, coercion or at right but subtle use of power.” She is a highly unsophisticated but loyal and hard-working daughter who took care of her father’s needs when he became elderly. She did not give him advice, nor was not suggested that she, in any way, attempted to influence him to do the transfer. Quite the contrary, she did not know about the transfer until afterward.
[98] Bearing all of this in mind, I conclude that there ought not be a presumption of undue influence in relation to either Michael or Mr. Varjacic, and the case for a presumption in relation to Apollonia is very weak. However, even if there was a presumption of undue influence, I find on the trial evidence that the defendants have met the onus to rebut it.
[99] At the relevant time, at and shortly before making the gift to Michael, the evidence shows that Michele intended the gift not as a result of pressure from anyone, but because of what Michael had done to save the house. Michele explained this to Ms. Montesano shortly before he met with Mr. Wagman, and he explained it to Mr. Wagman as well. There is no question that Mr. Wagman was independent. I accept his evidence that he would not take instructions from anyone other than Michele, and obtained Michele’s instructions at his meeting with him. At that meeting, Michele was free to frankly discuss his reasons, and he did so. Further, although there was evidence that Michele had declining physical health, the evidence did not establish that it significantly affected his mental faculties at the time of the transfer. His intentions and reasons for the transfer have been affirmatively proved, and the presumption rebutted.
Judgment
[100] I therefore dismiss this action.
[101] I repeat the comment I made at the close of the trial regarding the conduct of counsel. This type of case, involving a dispute between family members, can give rise to a difficult trial. Due largely to the highly professional conduct of counsel on both sides, that did not occur in this case. Counsel are to be commended for the manner in which they have conducted this litigation.
[102] If the parties are unable to agree on costs, the two defendants remaining in the action shall make their costs submissions by delivering brief written submissions together with a costs outline by February 15, 2016. The plaintiffs may respond by delivering brief written submissions and any other material by February 29, 2016. This timetable may be modified on agreement between the parties provided that I am notified of the new timetable by February 15, 2016. As discussed at the conclusion of trial, the parties may make written submissions regarding any other relief sought as a result of this judgment on the same schedule.
Justice W. Matheson
Released: January 27, 2016
CITATION: Falagario v. Falagario, 2016 ONSC 648
COURT FILE NO.: CV-12-444364
DATE: 20160127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FRANK FALAGARIO AND PAMELA CONDE
Plaintiffs
– and –
APOLLONIA FALAGARIO ALSO KNOWN AS POLLY FALAGARIO ALSO KNOWN AS POLLY CARTAGENESI, NICOLE CARTAGENESI ALSO KNOWN AS NICOLE D’AMBROSIO AND MICHAEL CARTAGENESI ALSO KNOW AS MICHAEL CARTAGENSI
Defendants
REASONS FOR JUDGMENT
Matheson J.
Released: January 27, 2016