citation: "2552272 Ontario Ltd. v Legal Biegel Management Inc., 2017 ONSC 2369" parties: "2552272 Ontario Ltd. v Legal Biegel Management Inc. and Kevin Wayne Biegel" party_moving: "2552272 Ontario Ltd." party_responding: "Legal Biegel Management Inc. and Kevin Wayne Biegel" court: "Superior Court of Justice" court_abbreviation: "ONSC" jurisdiction: "Ontario" case_type: "trial" date_judgement: "2017-04-25" date_heard: "2017-04-07" applicant:

• "2552272 Ontario Ltd." applicant_counsel:
• "Elena Mazinani" respondent:
• "Legal Biegel Management Inc."
• "Kevin Wayne Biegel" respondent_counsel:
• "Louis Vittas" judge:
• "Carole J. Brown" summary: > The applicant sought declarations for an abatement in the purchase price, damages for unfinalized work, and damages for an encroachment, or alternatively, damages for breach of contract and misrepresentation, following the purchase of a commercial property. The dispute centered on the actual lot size versus the advertised size, and the existence of a road widening allowance and an encroachment. The court found that the Agreement of Purchase and Sale (APS) clearly indicated a road widening allowance and that the purchaser had waived due diligence rights and confirmed no other representations outside the APS. Applying the principle of caveat emptor, the court noted the purchaser had ample opportunity to conduct title searches and inspections, which would have revealed the discrepancies. All claims were dismissed, as no breach of contract or misrepresentation by the vendor was found, and no basis for the claimed damages or abatement was established. interesting_citations_summary: > This case reinforces the principle of caveat emptor in commercial real estate transactions, particularly when the Agreement of Purchase and Sale (APS) contains clauses requiring the buyer to conduct due diligence and waiving claims against the seller for information discoverable through such diligence. It highlights that specific disclosures within the APS regarding potential road widenings or property dimensions, coupled with the buyer's waiver of conditions, can negate claims of misrepresentation or breach of contract, even if the advertised property details differ from the conveyed title. The decision emphasizes the merger doctrine, where rights merge upon conveyance unless specific warranties survive closing. final_judgement: > The application is dismissed. The respondents are entitled to their costs on a partial indemnity basis in the total amount of $8,631.05, inclusive of HST and disbursements. winning_degree_applicant: 5 winning_degree_respondent: 1 judge_bias_applicant: 0 judge_bias_respondent: 0 year: 2017 decision_number: 2369 file_number: "CV-17-567824" source: "https://www.canlii.org/en/on/onsc/doc/2017/2017onsc2369/2017onsc2369.html" cited_cases: legislation: [] case_law:
  • title: "Fraser-Read v. Droumtsekas, [1980] 1 SCR 720" url: "https://www.canlii.org/en/ca/scc/doc/1979/1979canlii55/1979canlii55.html" keywords:
• Commercial real estate
• Agreement of Purchase and Sale
• Caveat emptor
• Due diligence
• Misrepresentation
• Breach of contract
• Abatement
• Road widening allowance
• Encroachment
• Merger doctrine areas_of_law:
• Real Estate Law
• Contract Law

Court File and Parties

COURT FILE NO.: CV-17-567824 DATE: 20170425 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2552272 Ontario Ltd., Applicant AND: Legal Biegel Management Inc. and Kevin Wayne Biegel, Respondents

BEFORE: Carole J. Brown, J.

COUNSEL: Elena Mazinani, for the Applicant Louis Vittas, for the Respondent

HEARD: April 7, 2017

Endorsement

[1] The applicant brings this application for the following relief:

1. A declaration that the Commercial Agreement of Purchase and Sale (“APS”) dated October 27, 2016 for the acquisition of land located at 225 Sheppard Ave. W., Toronto is valid and binding;
2. A declaration that the vendor pay to the plaintiff an abatement in the purchase price of $184,000;
3. A declaration that the vendor pay to the purchaser $10,000 for failure to finalize the work stipulated in the municipal building permit application;
4. A declaration that the vendor pay to the purchaser $90,000 as regards an encroachment on the lands, which affect the purchaser’s ownership and use of the property;
5. In the alternative, damages in the amount of $284,000 for breach of contract and misrepresentation by the vendor.

[2] As regards the first issue, the respondents accept that the APS is valid and binding, such that this is not in issue in this application.

The Facts

[3] Pursuant to the Parcel Register, the property, which is the subject of this matter, 225 Sheppard Ave. W., Toronto was purchased in June 2016 by Legal Biegel, a company incorporated to manage the business affairs of Mr. Kevin Biegel, an immigration lawyer, and registered on June 14, 2016. Legal Biegel subsequently placed the property on the market for sale with Re/Max on October 20, 2016. The purchase price listed was $1,399,000. The MLS listing information for the property described it as property with a total area of 4400 ft.², with a road widening allowance incorporated into the 110 foot depth measurement.

[4] A Commercial Agreement of Purchase and Sale (“APS”) was entered into on October 27, 2016 between Legal Biegel as the vendor and Shahnaz Hatami and Elena Mazinani as purchasers. Following negotiations and counter offer, the parties agreed upon a purchase price of $1,350,000. The closing was to be January 16, 2017. The APS was executed by Shahnaz Hatami and Elena Mazinani, as purchasers and Mr. Biegel, as vendor. Where additions and deletions to the APS were made, or where provisions were waived by the purchaser, each of the purchasers initialed them on the APS.

[5] All parties to the transaction were represented by one real estate agent.

[6] On January 10, 2017, six days prior to closing, an amendment to the APS was executed, which amended the Agreement of Purchase and Sale to indicate the buyer to be 2552272 Ontario Limited, a corporation at arm’s length with the parties. The amendment to the APS also indicated that “Shahnaz Hatami and Elena (Elnaz) Mazinani agree that the Corporation is an arm’s length party and that they shall be responsible to complete the sale in accordance with the terms of the agreement of purchase and sale and original provision below as stated in the original terms of the agreement of purchase and sale, if for any reason the amended corporation herein as buyer does not complete”.

[7] The evidence before this Court indicates that Shahnaz Hatami is the mother of Elena (Elnaz) Mazinani, that Shahnaz Hatami is the owner and sole shareholder of the corporation and that her daughter, Elena (Elnaz) Mazinani is a director. The law firm of Ms. Mazinani is the tenant of the property.

[8] The sales transaction closed on January 17, 2017 and title to the property was conveyed to the purchaser.

Position of the Parties

Position of the Applicant

[9] It is the position of the applicant that the vendor is in breach of the APS as it did not convey a 40 x 110’ lot as covenanted and represented, but only conveyed a 40 x 95’ lot. The applicant further states that the listing agreement and APS specified a property of 4400 ft.², but that only 3800 ft.² was conveyed. A requisition letter sent January 11, 2017 on behalf of the purchaser raised an objection, which the applicant states goes to the root of title, but, nevertheless, completed the transaction under protest, reserving its rights to claim and sue for damages or an abatement of the purchase price.

[10] The applicant submits that the offered purchase price was based on the square footage advertised by the seller and has calculated the abatement sought on the basis of the square footage advertised verses that conveyed, based on an evaluation provided by Re/Max.

[11] The applicant states that the property was inspected and all due diligence with respect to the property was conducted. The purchaser acknowledged that no professional advisor was consulted prior to signing the APS.

Position of the Respondents

[12] It is the position of the respondents that caveat emptor remains a force to be reckoned with in Canada by the credulous or indolent purchaser of property, and relies on Bertram Oliver Fraser-Read et al v Droumtsekas, et al, [1980] 1 SCR 720 (SCC).

[13] It is the position of the respondents that the listing information described the land as containing a road widening allowance incorporated into the lot depth and, based on the information in the listing, should have caused the prudent purchaser to make further inquiries in that regard.

[14] The respondents maintain that the APS fully set forth all of the information necessary and included, in the schedules, clauses in favour of the purchasers, permitting them to conduct independent examinations of the premises, including surveys and all due diligence as regards the property and title searches. Either they did such examinations, and were satisfied, or they did not do any due diligence as regards the commercial land transaction and continued to proceed with the property in any event.

[15] The respondents maintain that the purchaser obtained title to what was bargained for and set forth in the APS, namely Part 2 on Plan 64R16663, together with a right-of-way over Part 1, and that the title was good and free from encumbrances. At no time did the vendor make any representations to the applicant that it held title to Part 1 on Plan 64R16663, as Part 1 was, at all material times, owned by the City of Toronto.

[16] The respondents submit that there was no warranty as regards the lot size or square footage of the property, the verification of which was the responsibility of the purchaser.

[17] The respondents submit that there is no evidence of any damages payable by the vendor to the purchaser.

The Law and Analysis

An MLS listing, prepared by Christina Rodriguez for Re/Max, indicates a total area for the property of 4400 ft.² and a lot size of 40 x 110., with road widening allowance incorporated in the 110 foot depth.

[18] The APS contained the following terms and provisions. Pursuant to the conditions of the Agreement, the applicant had the right to examine title and conduct any searches of the property until December 1, 2016. The Agreement further provided the applicant with the opportunity, at its sole discretion, to conduct its due diligence regarding, inter alia, the property’s zoning, use, limitations and restrictions and that the agreement would be null and void if such conditions were unsatisfactory to the applicant. The applicant waived these conditions.

[19] The APS, section 26, confirms the terms, conditions and warranties of the Agreement were entirely in writing and that there were no other representations outside the Agreement. Except for any warranties intended to survive beyond the closing date of the Agreement, all other rights of the parties merged upon the conveyance of title on January 17, 2017.

[20] Schedule A of the APS provided as follows:

The Buyer acknowledges and accepts that the City is likely widening Sheppard Avenue and the measurements herein include a reserve road allowance incorporated in the depth of the Property. The Buyer confirms that they have sought council (sic) on this matter or waives their right to do so and shall complete the sale with no claims or actions against the Seller or listing broker.

[21] Pursuant to the waiver in Schedule A which was included for the benefit of the buyer, the purchasers waived their due diligence rights as regards reviewing fixtures and expenses to be provided by the seller, satisfaction regarding the use, zoning and compliance of the property, and the provision which was conditional upon the buyer determining, at the buyer’s own expense, that all environmental laws and regulations have been complied with, no hazardous conditions or substances existed on the land, no limitations or restrictions affecting the continued use of the property existed other than those specifically provided for in the APS and other provisions. Further, in Schedule A, the buyers waived the financing provisions in Schedule A.

[22] Notice of the potential road widening allowance was also provided under Schedule A of the APS.

[23] The parties confirmed in Schedule B that they had had the opportunity to consult with professional advisors prior to signing the Agreement.

[24] Requisitions were to have been provided by December 1, 2016, but were not provided until January 10, 2017, seven days prior to closing. The issue of lot size was raised in the requisition and it was indicated that the applicant would close under protest. The response of counsel for Legal Biegel indicated that the issues raised in the letter of requisitions did not go to the root of title, that the vendor is not obligated to respond to the said requisitions based on the fact that the requisition letter was received approximately 1½ months late and that the buyer had ample opportunity to conduct all due diligence and conduct all inspections required to verify the issues raised in the requisition letter.

[25] The APS clearly set forth the relevant information as regards the subject property, including the right of the applicant to examine title and conduct any searches to December 1, 2016.

[26] The terms of the APS included a deemed acceptance of seller’s title to the property except for any valid objection made by the specified date (APS ss. 8, 10). The APS further provided that the buyer acknowledged and accepted that the City would likely widen Sheppard Avenue and that the measurements in the APS included a reserve road allowance incorporated in the depth of the property. To date, no notice of such widening has ever been received from the City. Further, the buyer confirmed that they had sought counsel and would complete the sale with no claims or actions against the vendor (Schedule A).

[27] The applicant had the opportunity to examine title, conduct any searches of the property, confirm all measurements and information as provided in the listing information and agreement, and to do all due diligence. Schedule B of the APS confirmed that the buyer accepted the property as stated on title and would complete the transaction with no cause, claim or action against the seller or listing brokerage. There was ample opportunity for the purchaser to conduct all due diligence deemed necessary, including inter alia conducting independent examination of the premises and doing a title search. Either the purchaser did so or chose not to do so. In either event, I am satisfied that there were no valid objections that went to the root of title to the property and that all rights of the parties merged upon the conveyance of title, except for any warranties intended to survive beyond closing date, of which I have been made aware of none.

[28] I do not accept the applicant’s argument that the encroachment by the City and the transfer of Part 1 of the property to the City, which had occurred in 2001, was not discoverable on the Parcel Register. The Parcel Register clearly described the property as PT LT1277-1278 PL 1743 TWP of York PT 2, 64R16663, T/W TR87210, and also clearly set forth a Notice regarding the City. Had a title search been done, and these documents pulled and reviewed, as would normally occur, it would have been clear that Part 2, together with a right-of-way over Part 1 was being conveyed.

[29] Any failure to do the normal, requisite searches for such a commercial transaction must be laid at the feet of the applicant or its lawyers and not at the feet of the vendor.

[30] There is no evidence to establish that the determination of the property’s purchase price was based on the property’s total area, as urged by the applicant. It is the position of the vendor that the price was based on comparable properties in the area.

[31] As regards requisitions, the purchaser submitted its requisitions 41 days after the stipulated deadline in the APS. Nevertheless, the vendor did respond on January 11, and made it clear that the requisition as regards lot size did not go to the root of title as the reserve road allowance was clearly set forth in Schedule A of the APS and it was also specified that the City is likely widening Sheppard Avenue. Schedule A further indicated that “The seller is not aware of and has not received any notice of any kind whatsoever, that all or part of the purchased property will be expropriated at any time before or after closing, save and except road widening allowances. Further, Schedule B stipulated that “The buyer is advised to verify any information or measurements upon which they are relying… If measurements are not accurate the buyer accepts the property as per that stated on title on the registered plan and/or deed registration and will complete the transaction with no cause, claim or action against the seller or listing brokerage.

[32] In the face of this, the purchaser proceeded to close the transaction.

[33] As previously stated, the applicant had the opportunity to do its due diligence, to conduct any and all searches and to obtain an abstract of title pursuant to the APS. Such searches would have clearly set forth the issues which it now raises.

[34] There were no representations outside the executed APS and all rights of the parties merged upon conveyance, with the exception of any warranties intended to survive beyond closing, of which I have been made aware of none.

[35] Pursuant to the APS, the vendor was obligated to convey Part Lots 11277 and 1278, Plan 1743, Township of York, being Part 2 on Plan 64R16663, which was conveyed. The vendor was not obligated to convey Part 1, as demanded by the purchaser in its requisition letter and could not have done so in any event, as it belonged to the City. Several provisions of the APS clearly indicated that the parties had turned their minds to the fact that Part 1 on Plan 64R16663 was part of a road allowance to the City of Toronto including the following:

1. Schedule “A” – “The buyer acknowledges and accepts that the City is likely widening Sheppard Avenue and the measurements herein include a reserve road allowance incorporated in the depth of the property. The buyer confirms they have sought counsel on this matter or waives the right to do so and shall complete the sale with no claims or actions against the seller or listing broker.”
2. Schedule “A” – “The seller is not aware of and has not received any notice of any kind whatsoever, that all or part of the purchased property will be expropriated at any time before or after closing, save and except road widening allowances.”
3. Schedule “B” – “… The buyer is advised to verify any information or measurements upon which they are relying… If measurements are not accurate the buyer accepts the property as per that stated on title on the registered plan and/or deed registration and will complete the transaction with no cause, claim or action against the seller or listing brokerage”.

[36] As regards the abatement, I find that there is no evidence to establish that the determination of the property’s purchase price was based on the property’s total area, as urged by the applicant. It was the evidence of the vendor on examination for discovery that the purchase price was based on the values of comparable properties in the Toronto area. Moreover, the reserve road allowance as regards the depth measurement of the lot was clearly set forth in the APS. Reference had also been made to it in the MLS listing. I find that there is no basis on which to award an abatement in the purchase price.

[37] Further, as regards the applicant’s claim for a declaration of payment of $90,000 regarding an encroachment on the lands affecting the purchaser’s ownership and use of the property, again, I am satisfied that the plaintiff had the opportunity to conduct searches of title, review parcel registers and surveys and do due diligence and if the purchaser had done so, would have been aware of the encroachment and right-of-way in favour of the property and the City’s intention to widen the road. Either the purchaser did not do so or chose to close the transaction despite the knowledge of the encroachment and potential road widening. There is no basis for an award of $90,000.

[38] While the applicant maintains that it is precluded from using the front portion of the property for parking or signage, there is no express provision of such limitation or restriction in the right-of-way agreement and no other evidence of any such express limitation.

[39] As regards a declaration that the vendor pay to the purchaser $10,000 for failure to finalize work stipulated in a municipal building permit, I am satisfied that the Toronto Building Department confirmed, on January 13, 2017, that the subject building permit relating to an outstanding work order had been closed. This is confirmed in email correspondence from Perry Christou of the City Building Department dated January 13, 2017, in evidence before this Court. Thus, there is no basis for an award of $10,000 for failure to finalize work.

[40] Further, I find that there is no basis for the alternative claim of damages in the amount of $284,000 for breach of contract and misrepresentation.

[41] I find that the applicant has not provided sufficient evidence of any damages, as claimed. Further, as above set forth, I find no basis for a finding of breach of contract, misrepresentation or fraudulent misrepresentation, based on all the evidence before this Court, the submissions of counsel and the jurisprudence provided. I am satisfied that the respondent did not breach any provision of the APS. The application is dismissed.

[42] As regards the constitution of this application, the respondent submitted that none of the documents relating to this transaction, including the APS, were signed by the individual respondent in his personal capacity, but only on behalf of the registered owner of the property, Legal Biegel, and, as such, the proceeding against Mr. Biegel should be dismissed. The applicant sought an order piercing the corporate veil. Based on my findings, and dismissal of the application, this issue need not be determined.

Costs

[43] The respondents are entitled to their costs on a partial indemnity basis in the total amount of $8,631.05, inclusive of HST and disbursements.

Carole J. Brown, J.

Date: April 25, 2017