Court File and Parties
COURT FILE NO.: 14-4065-SR DATE: 2017/06/12 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Ronald Jeffrey Culbert, Plaintiff
– and –
Timothy Culbert, Timothy Culbert as Trustee of the Estate of the Late Marjorie Culbert and Jessica Culbert, also known as Jessica McCoag, Defendants
COUNSEL: Simon J. Adler, for the Plaintiff J. Scott Thomson, for the Defendants
HEARD: May 23, 25, 29 and 30, 2017
THE HONOURABLE MR. JUSTICE G.E. TAYLOR
Reasons for Judgment
Introduction
[1] Ronald Culbert (“Ron”) and Timothy Culbert (“Tim”) are brothers and are the sons of Marjorie Culbert (“Marjorie”). Jessica Culbert, whose married name is Jessica McCoag (“Jessica”) is the daughter of Tim.
[2] Ron purchased a house at 71 Elizabeth Street in Guelph, Ontario in 2002 (“the property”). By early 2007, Ron was experiencing difficulties of a personal nature which adversely affected his financial situation. He was significantly in arrears on the mortgage on the property. He turned to his family for help. Tim and Marjorie agreed to advance funds to bring the mortgage into good standing. Funds were advanced to the mortgagor in February, 2007 and the mortgage was brought into good standing.
[3] By way of a transfer dated October 10, 2007, which was effected by Robert Hamilton, a solicitor, based on an Acknowledgment and Direction purportedly signed by Ron, title to the property was transferred to Marjorie. Marjorie died on December 20, 2008 and title to the property passed to Jessica pursuant to Marjorie’s Will.
[4] Ron says his signature on the Acknowledgment and Direction was a forgery and therefore the transfer was ineffective in law to convey ownership of the property to Marjorie and subsequently to Jessica. Tim says the transfer of title was part of the agreement reached with Ron to avoid the mortgagor foreclosing on the mortgage on the property. Tim says he saw Ron sign the Acknowledgment and Direction.
Facts
[5] Ron purchased the property in March, 2002 for $147,900. In July, 2005 he remortgaged the property for $154,125. Other than the value of the property when it was purchased as set out in the Transfer/Deed of Land, no other evidence was presented as to the value of the property at any other point in time up until the present.
[6] By early 2007, Ron was in difficulty financially and was suffering from significant health problems including clinical depression. He was no longer working. He was in arrears on the mortgage. He contacted Marjorie and Tim hoping to obtain some financial assistance. There was a suggestion that he convey the property so that Jessica could reside there while she was attending University of Guelph. He refused the suggestion that he transfer title to the property. An agreement was reached that Marjorie and Tim would bring the mortgage into good standing and make the ongoing mortgage payments in return for Jessica residing in the property while attending university.
[7] Ron’s evidence is vague about whether the basement was to be finished and made into an apartment for he and his then girlfriend to reside in while Jessica lived in the remainder of the house. Tim’s evidence is that he advanced $12,000 in February, 2007 to bring the mortgage into good standing. He says the agreement with Ron was that all amounts paid to bring the mortgage into good standing and the mortgage payments up to August 1, 2007 were to be repaid by Ron as of August 1, 2007. If the debt owing was not repaid, Ron had the option to convert the basement of the house into living quarters and pay rent, or move out entirely so that Jessica could live at the property while attending university.
[8] Ron did not repay the debt owing to Tim and Marjorie by August 1, 2007. On August 3, 2007, Tim arrived with heavy equipment and two employees. They began to clean up the property to prepare it for occupancy by Jessica. According to Ron, Tim evicted him from the property. According to Tim, the property was in a serious state of disrepair and required significant work in order to bring it up to habitable standards. Tim was surprised to learn that nothing had been done by Ron to convert the basement into suitable living quarters. Tim therefore told Ron that he would have to vacate the premises. It is common ground that Ron departed the property on August 3, 2007 and except for one brief overnight stay a day or two later, has not resided in the property since then.
[9] Ron testified that at no time did he agree to transfer title to the property to Marjorie or anyone else. He says that was never part of the arrangement. Rather he was going to allow Jessica to reside in the property while attending University of Guelph in return for him being relieved of all financial obligations in relation to the property during the period of Jessica’s occupancy. Ron testified about a conversation he had with Marjorie in September or October, 2007 in which the issue of title to the property was raised. He refused the suggestion that he transfer title of the property to Tim.
[10] Ron testified that he had no contact with Tim after the day in early August, 2007 when he was evicted from the property. Ron testified that he did not meet with Tim at a coffee shop in Guelph on September 27, 2007. He also said that at no time did he meet with Tim to sign any documents authorizing the transfer of title to the property. Ron denied that the signature on the Acknowledgment and Direction dated September 27, 2007 authorizing Robert Hamilton to transfer title to the property on his behalf was his. Ron said that he only learned in 2012 that title to the property had been transferred to Marjorie and then to Jessica.
[11] Atul Singla was qualified as an expert in the field of handwriting analysis and comparison of known and unknown signatures with a view to determining if such signatures were written by the same person. Dr. Singla compared the purported signature of “R. Culbert” on the Acknowledgment and Direction with 16 documents known to contain samples of Ron’s signature. He concluded that there were obvious discrepancies between the known signatures and the questioned signature and concluded that the signature “R. Culbert” on the Acknowledgment and Direction was a forgery.
[12] Robert Hamilton, the solicitor who acted for Marjorie in relation to the transfer of title to the property, did not meet with Ron nor speak with him by telephone. The Acknowledgment and Direction was prepared in his office. No one from his office witnessed Ron sign the Acknowledgment and Direction. His recollection is that the unsigned Acknowledgment and Direction was faxed to Tim for the purpose of having it executed by Ron. The document was returned with the signature “R. Culbert” on it. He did not take any steps to authenticate the signature.
[13] Tim’s position as of the opening of trial was that he was present and witnessed Ron’s signature on the Acknowledgment and Direction. At his examination for discovery, Tim testified that he met Ron in a coffee shop in Guelph and handed him the document that his mother had provided to him from her lawyer. He watched Ron sign the document.
[14] Tim’s trial testimony was given after a weekend break following the testimony of Dr. Singla. Tim testified that during the weekend he struggled to reconcile his clear recollection of Ron signing of the Acknowledgment and Direction in his presence and Dr. Singla’s testimony that the signature on the document was a forgery. He said that while standing in line to purchase a coffee in a coffee shop he recalled that after Ron had signed the Acknowledgment and Direction, Tim went to the counter to purchase coffees for he and Ron. He left the document at the table with Ron. When he returned to the table where Ron was sitting he gave Ron his coffee and retrieved what he thought was the document which he had left on the table. Tim then theorized that while he was gone, Ron must have switched the document which he had signed for the one which was eventually examined by Dr. Singla.
[15] Tim testified that he was present at the lawyer’s office when the Acknowledgment and Direction was prepared. He took a copy of the document from the lawyer’s office in order to take it to Ron in Guelph for execution. The Acknowledgment and Direction was not faxed to him. The document which he presented to Ron at the coffee shop did not have a fax header on it. Exhibit 15, which is that the original Acknowledgment and Direction, with the forged signature, has a fax header line at the top.
[16] Tim testified that during September and October, 2007 he operated Culbert Trucking, a business nominally owned by Marjorie. He said Culbert Trucking had a fax number at the time. Ron testified in re-examination that at no time in or around the relevant period did he have a fax number.
[17] Ron was not cross-examined about the revelation which occurred to Tim over the weekend which intervened during the course of the trial.
[18] Elizabeth Falvey (Elizabeth), Marjorie’s sister, testified that when Ron was experiencing financial difficulties, Marjorie asked to borrow money which she in turn would loan to Ron. Elizabeth’s husband refused to loan Marjorie the money because he believed Ron would not repay the loan. Elizabeth testified that she and Marjorie discussed Ron being paid out the amount of the outstanding mortgage and title to the property being transferred to Marjorie. Elizabeth understood that Tim was going to make the mortgage payments so that his children could live in the property while they attended school in Guelph. She understood the house would be owned by Marjorie and Tim.
[19] In cross-examination, Elizabeth testified that Marjorie told her Ron would not sign title to the property over to Tim. She also testified in cross-examination that she could not remember Marjorie telling her that Ron had agreed to transfer title to the house to her.
[20] I have no hesitation in concluding that Tim’s evidence about the execution of the Acknowledgment and Direction is a fabrication. When confronted with the clear and unequivocal evidence of Dr. Singla that the signature on the Acknowledgment and Direction was a forgery, Tim then concocted the story about Ron switching documents while he was in line getting coffee in an attempt to explain the difficulty which he knew was before him. Because of Tim’s obvious prevarication, I also have no hesitation in concluding that he forged Ron’s signature on the Acknowledgment and Direction.
[21] I find that there was an agreement between Ron, Marjorie and Tim that the mortgage on the property would be brought into good standing, the mortgage payments would be made between February and August, 2007 and that beginning in September, 2007, Jessica would occupy the property while she attended the University of Guelph. I find that it was not a term of the agreement that Ron would transfer title to the property to Marjorie, Tim or anyone else. Tim, and perhaps Marjorie, wanted to have Ron relinquish his interest in the property but he refused. Accordingly, Tim took it upon himself to forge Ron’s signature on the Acknowledgment and Direction in order to transfer title to the property without Ron’s knowledge or approval.
[22] Jessica testified that she resided in the property from September, 2007 until she completed her Master’s degree in 2012. She did not pay rent. She moved from the property in 2013. Since then she has rented the property. She testified about receiving a telephone call from Ron in early 2013 inquiring about whether she had completed her education because he wanted to move back into the property. She told Ron he would have to speak to Tim.
[23] Jessica produced incomplete records of the income and expenses for the property. The records begin in September, 2011 and end in March, 2013. During that period of time, the net income generated by the property was approximately $14,925 which is exclusive of mortgage payments. Since November, 2013, the property has been continuously rented to a family. The rent is exclusive of utilities and is in the approximate amount of the mortgage payments.
[24] Based on the evidence presented at the trial, I conclude that the income from the property has generally been sufficient to cover the expenses including the mortgage payments. Jessica also incurred no rental expense while attending University of Guelph.
Analysis
[25] Section 155 of the Land Titles Act reads:
Subject to this Act, a fraudulent instrument that, if unregistered, would be fraudulent and void is, despite registration, fraudulent and void in like manner.
[26] Section 159 of the Land Titles Act provides:
Subject to any estates or rights acquired by registration under this Act, where a court of competent jurisdiction has decided that a person is entitled to an estate, right or interest in or to registered land or a charge and as a consequence of the decision the court is of opinion that a rectification of the register is required, the court may make an order directing the register to be rectified in such manner as is considered just.
[27] The case of Morris v. Donegan, 2015 ONSC 3093 is factually similar to the present case. In Morris v. Donegan, the trial judge concluded that someone other than the plaintiff had signed the Acknowledgment and Direction authorizing the transfer to the defendant of all but five percent of the plaintiff’s ownership interest in the property. At paragraphs 126 and 127, the trial judge stated:
It is not necessary for me to find that this was a fraudulent conveyance within the meaning of the Fraudulent Conveyances Act because the Acknowledgment and Direction to transfer all but 5% of the ownership interest of Ms. Morris to Mr. Donegan on May 23, 2014 was a fraudulent instrument. As a fraudulent instrument, it was fraudulent and void, and remains fraudulent and void, despite registration: section 155 of the Land Titles Act, RSO 1990, c. L. 5.
In view of my finding that the Acknowledgment and Direction resulting in the transfer was a fraudulent instrument, I find that the transfer itself was fraudulent and therefore void. Ms. Morris retains the ownership interest purportedly transferred to Mr. Donegan on May 23, 2014. She continues to hold an undivided 50% ownership interest in 108 Vivians Crescent as a joint tenant. I therefore order the Director of Land Titles to rectify the register under section 159 of the Land Titles Act, which reads as follows: [section set out above].
[28] I adopt the same reasoning in the present case. Ron’s signature on the Acknowledgment and Direction was forged by Tim. Accordingly it is a fraudulent instrument on which the subsequent transfer was based. Therefore, the transfer was fraudulent and void. Ron continues to be the beneficial owner of the property and is entitled to rectification of the registration of the purported transfer to Marjorie.
[29] I have concluded that the agreement reached between Ron and Marjorie and Tim was that Ron would relinquish possession of the property for the period of time that Jessica was attending University of Guelph. In return, Tim assumed responsibility to bring the mortgage into good standing and maintain the property including making all mortgage payments while the property was occupied by Jessica. I reject the submission by Tim that he made a loan to Ron in February, 2007 of approximately $12,000 in order to pay the mortgage arrears and that he made a further loan of the amount of the mortgage payments from February to August, 2007, the terms of which were that the loans were to be repaid on or before August 1, 2007 failing which Ron would convey title to the property to Marjorie.
[30] I have considered whether to direct a reference to determine the income and expenses of the property during the period from August, 2007 to the present. Notwithstanding the limited evidence presented at the trial on the issue of the finances of the property, I have decided that it would not be appropriate to direct a reference. From the evidence that was presented, it appears to me that there was a rough equivalence between the income and expenses. In my view, the time and expense required to conduct a precise calculation of the income and expenses of the property is not justified because, as I have stated, I am satisfied that at the end of the process the result would be that there would be very little difference between the income and expenses over the period in question. Rule 1.04 (1.1) of the Rules of Civil Procedure directs that orders and directions be proportionate to the importance and complexity of the issues and to the amount involved in the proceeding. In my view, the principle of proportionality leads to a conclusion that the defendants should be permitted to retain the income generated by the property during the period of their possession and that they should also be responsible for all expenses incurred in relation to the property including mortgage payments.
[31] I have given consideration to the issue of the increase in value of the property subsequent to August, 2007. As I have previously indicated, no evidence was presented with respect to the value of the property at any point in time after August, 2007. To the extent that Ron may be seen to obtain a benefit as a result of any increase in property value, that concern is offset by the clear and obvious dishonest conduct of Tim in forging Ron’s signature on the Acknowledgment and Direction.
Conclusion
[32] For these reasons, there will be judgment in favour of the plaintiff directing that the register of title to lands and premises in the City of Guelph and Province of Ontario being PT LOT 698, SOUTH OF ELIZABETH ST., PLAN 161 AS IN RO688297; GUELPH, P.I.N. 71338 – 0012 be deemed to have been rectified by expunging, cancelling and deleting therefrom instrument WC189966 registered on October 10, 2007 as fraudulent and void.
[33] There will be an order that the defendants are entitled to retain all income generated by the property from August 1, 2007 to May 31, 2017 and that they are responsible for making all mortgage payments, and paying all taxes, utilities and other maintenance expenses in relation to the property for that same period of time. To avoid any uncertainty, from and after June 1, 2017 Ron will be entitled to all income generated by the property and be responsible for all expenses in relation to the property including mortgage payments.
[34] If counsel are unable to agree on the appropriate disposition as to costs they may make written submissions. The written submissions on behalf of the plaintiff are to be delivered to my office within 14 days of the release of these Reasons, not to exceed three pages in length exclusive of a Bill of Costs and Costs Outline. Responding submissions are to be delivered to my office within 28 days of the release of this these Reasons, not to exceed three pages in length.
G.E. Taylor, J.