R. v Fontana, 2017 ONSC 2964

Court File and Parties

COURT FILE NO.: CR-12-00007701 DATE: 20170516 CORRIGENDA: 20170524

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN – and – ANNA FONTANA Defendant

Counsel: Phyllis Castiglione, for the Crown Stefano Fortini, for the Defendant

HEARD: February 27 and March 21, 2017

REVISED REASONS FOR SENTENCE

The text of the original decision has been corrected with the text of the corrigendum (released today’s date)

EDWARDS J. :

Introduction

[1] After a trial, Anna Fontana (“Fontana”), was found guilty of fraud over $5,000 and theft by conversion. The facts of this case are set forth in my Reasons for Decision released on January 16, 2017. The essence of the fraud arises out of a loan (“The Loan”) made by Mrs. Edda Marie Favretto-Post (“Edda”) in the amount of $150,000 to Fontana. The loan was intended to be used to establish a restaurant.

[2] As I found in my Reasons, while Fontana may have had honest intentions when she initially accepted the loan, she very quickly chose to use the loan proceeds for personal purposes as well as for gambling. Out of the $150,000 only $12,000 was repaid. No further payments were made by Fontana since the early part of 2011. A statement of restitution was filed as Exhibit 3 which establishes that Edda seeks restitution in the amount of $150,000, which is comprised of the outstanding principle of $138,000 plus interest, plus “pain and suffering”. Even if the Court was to infer a nominal rate of interest of 3%, it is not difficult to see how interest would exceed the $150,000 reflected in the statement of restitution.

Factual Background

[3] As reflected in my Reasons for Decision Fontana and Edda developed a friendship, as a result of which Edda agreed to lend Fontana the money which she needed to set up a restaurant. The loan of $150,000 was evidenced by way of a promissory note signed by Fontana. The loan was interest-free for the first year and was repayable in five years.

[4] As reflected in my Reasons, the loan was made for the sole purposes of establishing a restaurant. While I found that Fontana had honest intentions in her aspirations to set up a restaurant when she initially accepted the loan proceeds, she quickly changed course and used the funds for personal purposes as well as gambling.

[5] As I stated at paragraph 38 of my Reasons:

…When Fontana failed in her efforts to set up a restaurant and began using the money for personal purposes, she did so dishonestly. To use the words of the Supreme Court in Zlatic, the ordinary individual would have little difficulty concluding that Fontana’s actions were dishonest. Her initial actions may have been honest; but they became dishonest very soon after she accepted the money and she became frustrated in her efforts to set up a restaurant.

[6] According to the Victim Impact Statement filed as Exhibit 2, Edda is 76 years of age and the loss of the $150,000 has had a significant impact on Edda’s life. I quote two paragraphs from the Victim Impact Statement, which make clear that impact:

…My lifestyle has been dramatically and severely impacted. I can no longer enjoy wining and dining, no longer visiting art galleries and no longer being able to attend and enjoy other artistic activities. Not to mention not having the ability to afford and enjoy any vacations in these “Golden Years”…I asked myself how this person that I trusted could abuse that trust and friendship. Did she ever think outside herself? I trusted you!

[7] While the evidence at trial did not establish what in law would be considered a breach of trust, the evidence nonetheless clearly established a breach of a friendship, a breach that Fontana took advantage of for her own personal benefit without any consideration for Edda.

Fontana’s Personal Circumstances

[8] Fontana is 55 years of age and has been married for 36 years to Renato Fontana. They have three adult children ranging in ages from 25 to 34 years of age.

[9] Fontana completed grade nine and was last employed as a sales representative with a car dealership approximately nine years ago. Since then she has not been employed and presently receives Ontario Disability Support Program (“ODSP”) of approximately $2,300 monthly, jointly with her husband.

[10] There is no suggestion in the evidence that Fontana committed the fraud as a result of any dependence on illicit drugs or alcohol. It was suggested during the sentencing submissions that she was “addicted” to gambling. While the evidence establishes that Fontana did use a substantial part of the loan proceeds for gambling, I do not have expert evidence that confirms she had a gambling “addiction”.

[11] Part of the sentencing submissions was Exhibit 7, a medical report from Doctor Matta who has been providing medical care to Fontana over the last 10 years. The report establishes that Fontana has a number of medical problems, including chronic lumbar degenerative disc disease, gall stones, Hepatitis C and depression. The Presentence Report establishes that Fontana is presently taking methadone, which she has been using for physical pain due to herniated discs. She has been taking methadone for the last nine years.

[12] Also filed, as Exhibit 9, was a report prepared by Doctor Brian Taylor who has been providing the methadone treatment to Fontana for the last four years. Doctor Taylor notes that he has been treating Fontana for opioid dependency. Doctor Taylor, in his report, states:

In both medicine and law, we deal with human beings every day. I hope that both professions can recognize that poor personal choices are at the core of many medical and legal indiscretions. Although I am not privy to the exact details surrounding Mrs. Fontana’s legal case, I am uncertain of the purpose and need for incarceration of a grandmother, when perhaps less stringent punishments can be effected…

[13] I take from Doctor Taylor’s aforementioned comments that Fontana did not provide all of the details that resulted in her conviction. The fact that Fontana chose not to provide Doctor Taylor with all of the details and the fact that Doctor Taylor does not appear to have enquired into those exact details, detracts from Doctor Taylor’s uncertainty concerning the need for incarceration of a grandmother.

[14] Fontana is no stranger to the criminal law. She has prior convictions beginning in 1980 for using a stolen credit card, uttering and possession of stolen property. This was followed by a conviction in 1982 for theft under $200, which was then followed with a conviction in 1985 for false pretences under $200. Finally, there is a conviction in 1996 for fraud over $5,000. The Crown acknowledges that the criminal record is dated and that there has been no subsequent involvement with the criminal law since 1996.

Position of the Crown

[15] The Crown, while acknowledging that a conditional sentence is available on the facts of this case, takes the position that a conditional sentence is not appropriate and that this Court should impose a sentence of three years. It is noted by the Crown that no efforts have been made since Fontana’s arrest to make any restitution to Edda.

[16] While the Crown acknowledges that the circumstances of the fraud did not involve a legal breach of trust, it was nonetheless a breach of a friendship which was based on trust.

[17] The Crown emphasizes denunciation and deterrence as the primary factors warranting a period of imprisonment. As for the aggravating factors, the Crown notes Fontana’s prior criminal record and the fact that she has made no restitution. It is further noted that the fraud was perpetrated on a vulnerable victim, and relies on s. 718.2(a)(iii.1) which allows the Court to increase a sentence where there is evidence that the offence had a significant impact on the victim, considering the victim’s age and other personal circumstances including the victim’s health and financial situation. The Victim Impact Statement filed by Edda leaves little doubt with respect to the impact on Edda’s health and financial situation.

[18] As for mitigating factors the Crown suggests that there are few to none, and notes that there was no guilty plea and no restitution. As for remorse, the Crown referred the Court to that part of the Presentence Report where Fontana expressed, to the author of the Report, remorse for her actions and an expression that she would repay the monies if she had the means to do so. Her expressions of remorse needs to be viewed in the context of further comments made to the author of the Presentence Report, where the following is noted:

Mrs. Fontana stated that she feels extremely guilty for her actions and did not want to bring about any distress and or hurt towards this elderly victim. However, both her and her husband stated that they feel that the “money came to her and she did not go looking for it”.

[19] In addition to a period of incarceration of three years the Crown seeks a restitution order in the amount of $150,000, as well as a fine in lieu of forfeiture in the amount of $138,000 with three years to pay.

Position of the Defence

[20] Counsel for Fontana argues that the appropriate sentence is an 18 month conditional sentence with a lengthy period of probation. As for restitution, it was initially suggested that Fontana could pay restitution at the rate of $500 per month. I adjourned the sentencing hearing to allow Fontana to put further evidence before the Court with respect to her ability to pay a restitution order.

[21] In that regard, further evidence was provided to the Court which establishes that Mr. and Mrs. Fontana live in a residence which is registered in Mr. Fontana’s name and is appraised by the Municipal Property Assessment Corporation (“MPAC”) in the amount of $583,000. Mr. Fortini suggested that the real estate comparables in the Fontana neighbourhood ranged in value between $400,000 and $617,000. I was advised that the Fontana residence is subject to a first mortgage of approximately $296,000 and a second mortgage of $90,000. Assuming the Fontana residence had an appraised value as established by the MPAC Assessment, there is approximately $190,000 in equity in the Fontana residence.

[22] In addition to the mortgages on title, Mr. Fontana has a line of credit of $14,000. There are credit card debts totalling approximately $21,000.

[23] Fontana receives ODSP on a monthly basis in the amount of $1,579. Mr. Fontana has CPP income of $687 per month. The combined family income is therefore $2,266.00.

[24] The Fontana residence was transferred from Mrs. Fontana’s name into her husband’s name on September 20, 2010. Edda’s loan to Fontana, as evidenced in her cheque, Exhibit 1, is dated September 27, 2010. The promissory note evidencing the loan is dated September 28, 2010.

[25] In relation to the timing of the loan with the transfer of title from Fontana to her husband, it is entirely suspicious given that both transactions occurred within a week of each other. Fontana declared bankruptcy, and in her statement of affairs filed with the trustee in bankruptcy she did not initially disclose the residence which she had transferred to her husband. Subsequent to the filing of her statement of affairs the trustee in bankruptcy did become aware of the transfer of title and in the report of the trustee, filed as Exhibit 11 at trial, the trustee in bankruptcy noted:

The bankrupt (Mrs. Fontana) transferred property (the family residence) to a non-arms-length party three years before the assignment at a time when she was solvent. This was a requirement of the mortgagee at the time.

[26] Mr. John Morgan, the trustee in bankruptcy, testified at trial. In relation to the transferred title between Mr. and Mrs. Fontana, Mr. Morgan testified that when the transfer took place there was no debtor creditor relationship between Mrs. Fontana and Edda. Mr. Morgan also testified that the transfer of title was due to a requirement of the mortgagee, i.e. the bank. Other than Mr. Morgan’s evidence, I heard no evidence from a bank representative confirming that the bank required title to be transferred from Mrs. Fontana to Mr. Fontana. Given that Fontana’s income is higher than her husband’s, it is very difficult to conceive of a situation why a bank holding a first mortgage would require title be transferred from the Fontana’s name alone to her husband’s name alone.

Mitigating and Aggravating Factors

[27] There are few, if any, mitigating factors that this Court should take into account in determining the appropriate sentence. Fontana elected, as was her right, to plead not guilty. The fact that Fontana did not plead guilty is not an aggravating factor.

[28] To this point in time there has been no restitution. At the sentencing hearing, after the Court’s request for further information concerning Fontana’s financial affairs, I was advised by Mr. Fortini that Fontana’s children were prepared to assist in making some restitution. Fontana’s children should be commended for stepping up to the plate to assist their mother in that regard. Unfortunately, the amounts that have been offered to assist in making restitution would still leave Edda substantially out-of-pocket as far as her life savings are concerned. What I did not hear from Fontana was any willingness to consider the sale of the family residence as a means to make restitution.

[29] As for the aggravating factors the obvious one relates to the breach of Fontana’s friendship with Edda, which while not amounting to a true legal breach of trust nonetheless was a breach of a friendship, that in my view is an aggravating factor that this Court should take into account in imposing sentence on Fontana (see R. v. Garrick, 2014 ONCA 747 at para. 24). I also take into account Edda’s circumstances, which include her health and financial situation together with her age, such that in my view s. 718.2(a)(iii.1) is a relevant aggravating factor that this Court should take into account in imposing an appropriate sentence.

Analysis

[30] One of the objectives of sentencing set forth in s. 718 of the Criminal Code (the “Code”) is to provide reparations for harm done to a victim. In this case the victim of the fraud was an elderly lady who has been deprived of a substantial part of her life savings, which has had a significant impact on her both from a health perspective and a financial perspective. To the extent the purposes and principles of sentencing can be properly applied to Fontana, it is this Court’s intention to see that proper reparations are made to Edda for the harm that befell her as a result of her friendship with Fontana.

[31] The principles of deterrence and denunciation are, generally speaking, fundamental to the sentencing process in cases involving fraud of the magnitude found in this case, particularly where the fraud involves a breach of friendship bordering on a breach of trust. This principle is amply demonstrated by the facts of R. v. Taylor, 2012 ONCA 809, where Rosenberg J.A. upheld a sentence of 21 months. The accused had defrauded an elderly lady of $126,000. Refusing to interfere with the trial judge’s sentence, Rosenberg J.A. stated at para. 36:

On the other hand, this was a serious offence. The appellant voluntarily placed herself in a position of trust in relation to the complainant. She became her attorney and the executor of her estate. The frail, elderly complainant was completely reliant on the appellant. This was not a one-time act but a planned and deliberate fraud committed over many months by someone whom the complainant looked upon as a friend. The appellant stole and then spent over $126,000, almost the complainant’s entire life savings. In such a case, the paramount objectives of sentencing must be deterrence and denunciation, and they cannot be adequately met by a conditional sentence.

[32] The fundamental principles of sentencing are well known and are set forth in s. 718 of the Code. In imposing an appropriate sentence the following objectives must be considered:

1. Denunciation of unlawful conduct;
2. Deterrence of the offender;
3. Separation of the offender from society where necessary;
4. Rehabilitation of the offender;
5. Providing reparation for the harm done to the victim; and
6. Promoting a sense of responsibility in the offender and acknowledgment of the harm done to the victim.

[33] In this case, while the nature of the fraud involving an elderly victim should generally attract a jail sentence, the Court must still consider another objective set forth in s. 718, that being the provision of reparation to the victim. On the facts of this case the other objectives of specific deterrence and rehabilitation of the offender are, in my view, of less concern given Fontana’s age and the support of the family that she has behind her.

[34] In considering the objective of reparation to the victim, the framing of an appropriate conditional sentence is another aspect of how this Court may develop an appropriate sentence for Fontana. Before doing so, I ask the fundamental question of whether a conditional sentence is available and whether it is appropriate. In that regard the Crown properly conceded that a conditional sentence is available, albeit not one that the Crown considers is appropriate. Pursuant to s. 742.1 of the Code, Fontana was not convicted of an offence where she faces a minimum term of imprisonment, nor are any of the preconditions in paragraphs (c) through (f) inclusive applicable. As such, this Court can consider the imposition of a conditional sentence if I am satisfied that the service of Fontana’s sentence in the community would not endanger the safety of the community, and that it would be consistent with the fundamental purpose and principles of sentence set forth in s. 718 to s. 718.2 of the Code.

[35] I have no evidence that would suggest allowing Fontana to serve her sentence in the community would in any way endanger the safety of the community. I am equally satisfied that specific deterrence is not a significant factor given Fontana’s age – this despite the fact there is evidence from Fontana’s criminal record of a predisposition towards fraudulent conduct. While jail may be considered the appropriate sentence that reflects denunciation and deterrence, a properly crafted conditional sentence may also give effect to the same principles.

[36] A sentence of true house arrest, while not the same as a jail sentence, will also impose significant restrictions on an offender’s liberty. In this case an appropriate jail sentence, reflected in the authorities to which I was referred by counsel, is anywhere from 18 months to 3 years depending on the various mitigating and aggravating factors present. Whether the sentence is served in a penitentiary or a provincial jail is a very close call, but I am satisfied that in this case a sentence of two years less a day is not inappropriate and thus a conditional sentence is available for the Court’s consideration.

[37] Recognizing that one of the objectives of sentencing in this case is to provide reparation to Edda, the sentence I intend to impose reflects that objective. Fontana shall serve a conditional sentence of two years less a day, the terms of which are as follows:

1. You shall keep the peace and be of good behaviour;
2. You shall appear before the Court when required to do so by the Court;
3. You shall report within three working days from today, in person to a supervisor, and thereafter report to the supervisor as required;
4. You shall remain within the Province of Ontario unless your supervisor provides written permission to leave the province or the Court provides permission;
5. You shall notify your supervisor of any change of address;
6. For the first nine months of your sentence you shall be confined to your residence under house arrest for twenty-four hours per day, seven days week. You may only leave your residence during those nine months for the following purposes: a. to attend scheduled medical appointments or for a medical emergency; b. to shop for the necessities of life on Saturdays between the hours of twelve noon and 5:00 p.m.; c. to attend a church or other religious institution once per week for no more than two and a half hours; and d. travelling to and from any of the aforementioned activities set forth in paragraphs a through c above. For the balance of your sentence you shall be confined to your residence between the hours of 9:00 p.m. and 9:00 a.m.;
7. You shall abstain from owning or possessing, or carrying any weapon;
8. You are to allow law enforcement officials, including the supervisor or designate, to knock at the door of your residence at any time between 6:00 a.m. and 12:00 midnight of any day, for the purposes of ensuring your compliance with the house arrest conditions of this Order. Your failure to present yourself at the door to the supervisor or designate within five minutes will be considered a breach of this condition;
9. You are to have no contact with Edda Marie Favretto-Post, except through counsel for the purposes of making restitution;
10. After the completion of the conditional sentence there shall be a period of probation for three years, on the statutory terms. You shall pay a fine in lieu of forfeiture on the terms set forth below;
11. You shall make payment of the restitution order in the sum of $150,000, in favour of Edda Marie Favretto-Post, on the terms more specifically set forth below.

[38] During the period of the conditional sentence Fontana shall make monthly restitution payments of $500, to be paid to Edda. More fundamentally, during the period of the nine months house arrest Fontana shall, by the completion of the nine months, have repaid the full amount of the outstanding restitution order.

[39] Fontana may suggest that such an imposition is impossible as she has no means to repay Edda. I disagree. While her monthly income is limited, she has a possessory interest in the family residence. There is no evidence that her relationship with her husband is anything other than one which is a loving, long-lasting relationship that has generated three adult loving and caring children. Edda was deprived of much of her life savings, the loss of which has had a significant impact on her both emotionally and financially. I see no reason why Fontana should not be forced into a situation where she may have to sell her family residence. This is particularly so, given the representation made by Fontana to Edda at the time when the loan was being considered that she had more than adequate equity in her home to make good on the loan.

[40] In making the order that I do, I recognize that the Court cannot force a sale of the family residence as title is presently in the name of Mr. Fontana. If title to the residence had not been transferred by Fontana seven days prior to the making of the loan, Edda could have sued Fontana and recovered her loan through the civil courts. These charges may never have made their way through the criminal courts if that transfer of title had never taken place.

[41] But those are not the facts. Fontana transferred title under what can only be described as highly suspicious circumstances. Fontana now has a choice. She either will, with the assistance and cooperation of her husband and family make full restitution to Edda within nine months of today’s date, or she faces the possibility of serving the remainder of her sentence in jail.

[42] In addition to the restitution order that I have made, I have considered the Crown’s argument that this Court should also impose a fine in lieu of forfeiture in the amount of $150,000, with 3 years to repay the fine. The restitution order that I have imposed is made pursuant to s. 738(1)(a) of the Code and forms part of the sentence. The broad objective of this restitution order reflects what is discussed in R. v. Zelensky, [1978] 2 S.C.R. 940 -specifically the objectives of emphasizing the sanction on Fontana, making Fontana responsible for compensating Edda’s loss, and providing a convenient, rapid and inexpensive means of recovery for Edda. I also note the comments of the Court of Appeal in R. v. Eizenga, 2011 ONCA 113, at para. 110 where Weiler J.A. stated that “a restitution order, which survives bankruptcy, is the only realistic way in which the victim will recover anything.”

[43] While a restitution order is part of the sentence imposed on an offender, a fine in lieu of forfeiture is not punishment being imposed on the offender - see R. v. Khatchatourov, 2014 ONCA 464 at paras. 55-56. As noted by Watt J.A. in R. v. Angelis, 2016 ONCA 675 at para. 51, since the imposition of a fine in lieu of forfeiture is not part of the global sentence imposed on an offender it is not to be consolidated with sentencing on a totality approach.

[44] This is not a case where the Court seeks to deprive Fontana of the proceeds of her crime. On all accounts the proceeds of the loan have long since been dissipated - hence Fontana’s bankruptcy. Parliament has however enacted s. 462.37(3) of the Code which provides a means for the sentencing Court to impose a fine in lieu of forfeiture. This section uses the word “may” as opposed to the word “shall” which is found in s. 462.37 (1). I therefore have a discretion as to whether to impose a fine in lieu of forfeiture. The first question however is whether subsection 3 even applies to the facts of this case. In my view they do. A fine in lieu of forfeiture is appropriate where the property - in this case the loan - has been rendered worthless or where the loan proceeds have been commingled with other property that cannot be divided without difficulty. Fontana’s banking records make it quite apparent that at least some part of the loan proceeds was used for the purpose of defraying personal expenses of Mr. and Mrs. Fontana. There is no evidence Mr. Fontana was aware of the loan or how it was used, but he must have been blind not to have asked the obvious question of where Fontana obtained the money to purchase a BMW.

[45] Fontana’s counsel opposes a fine in lieu of forfeiture, in part on the basis that the evidence is relatively clear she does not have an ability to pay a fine of $150,000. In essence, it is suggested that to impose a fine will be to set her up for a possible period of imprisonment. Ability to pay is, however, not to to be considered by the sentencing court in deciding whether to impose a fine in lieu of forfeiture, nor is it a factor in determining the amount of the fine. Rather, an offender’s ability to pay a fine is a factor to be considered in determining the time within which the fine is to be paid – see R. v. Lavigne, 2006 SCC 10 at para. 52. An offender who does not pay a fine in lieu of forfeiture does not face an automatic period of incarceration. Canada does not have a debtor’s prison. Rather, as noted in Lavigne, supra, at para. 47, when the time allowed for payment of the fine has expired the Court asked to issue a warrant of committal “may not do so unless it is satisfied that the offender has, without lawful excuse, refused to pay the fine”.

[46] On the facts of this case it is, in my view, entirely appropriate to impose a fine in lieu of forfeiture in the amount of $150,000. The amount of that fine shall be reduced on a dollar for dollar basis as restitution is made by Fontana to Edda. Under normal circumstances the Court would consider it appropriate to consider a fairly generous period within which to allow the fine to be paid. In this case, as I have imposed a requirement that Fontana make full restitution within nine months or face the possibility of serving the remainder of her sentence in jail, I am of the view that the appropriate time period for Fontana to have paid the fine is at the completion of her sentence. Thus, if Fontana has not made restitution within two years, Fontana may face a further period of incarceration that ranges between no less than two years and no more than three years – see s. 462.37 (4)(a)(v).

[47] In summary, it is the sentence of this Court that Fontana shall serve a conditional sentence of two years less a day, the terms of which are as set forth in paragraph 37 above. A restitution order shall also issue pursuant to s. 738 of the Code in the amount of $150,000, which restitution shall be made to Edda Marie Favretto-Post.

[48] As well, Fontana shall pay a fine in lieu of forfeiture in the amount of $150,000 within two years from today’s date. At the completion of your sentence you shall be on probation for three years, the terms of which incorporate the statutory terms set forth in para. 732.1(2)(a)-(c) and s. 732.1(3)(a)-(c) inclusive of the Code.

Justice M.L. Edwards

Released: May 24, 2017

NOTE: As noted in court, on the record, this written decision is to be considered the official version and takes precedent over any oral reasons read into the record. If any discrepancies between the oral and written versions, it is the official written decision that is to be relied upon.

CORRIGENDA

1. Paragraph [1] – the text of the original Decision has been corrected to substitute the words “fraud by conversion” to “theft by conversion” at the end of the first sentence and beginning of the second sentence.

ONTARIO SUPERIOR COURT OF JUSTICE HER MAJESTY THE QUEEN – and – ANNA FONTANA REASONS FOR SENTENCE Justice M.L. Edwards Released: May 24, 2017