COURT FILE NO.: 8043/17 (Sarnia)
DATE: 20180312
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Pamela Houghton-Jukes
Applicant
– and –
Jennifer Lyn Gough and Gregory Merrill Houghton, in their capacity as estate trustees for the estate of Catherine May Moniot
Respondents
Aaron Pearl, for the Applicant
Michelle Theberge, for the Respondents
HEARD: November 29, 2017
REASONS FOR JUDGMENT
S.K. CAMPBELL J.
INTRODUCTION
[1] Each party claims entitlement to the sum of $51,462.56, currently being held by the accountant of the Superior Court of Justice. These reasons will consider the basis for each party’s claim for entitlement. The determination of the entitlement requires a consideration of the law of inter vivos gifts.
[2] The application in this matter was issued on March 9, 2017. The respondents – Jennifer Lynn Gough and Gregory Merrill Houghton (“Mrs. Gough” and “Mr. Houghton” or “the respondents”) – had commenced an action by Statement of Claim on February 24, 2017. The applicant – Pamela Houghton-Jukes (“Mrs. Houghton-Jukes” or “the applicant”) – filed a Notice of Intent to Defend that action on March 27, 2017.
[3] That application was before the court on July 5, 2017. At that time, Bondy J. made an order directing that certain funds be paid into court to the credit of the action 8043/17.
[4] Pursuant to a motion brought in the context of the respondent’s action, Raikes J. made an order on July 24, 2017 which consolidated the two proceedings. The proceeding, as consolidated, was heard by me on November 29, 2017.
[5] After the matter was argued, I was contacted by the Trial Co-ordinator advising that the counsel for the applicant, Mr. Pearl, had sent the court an e-mail asking that I be given a copy of the decision of Videchak v. Giarrantano, 2009 29914, 49 E.T.R. (3d) 120 (Ont. S.C.). Counsel for the respondent, Ms. Theberge, objected to Mr. Pearl’s request. On December 6, 2017, I released an endorsement asking that the parties either come to an agreement as to what was to happen with Mr. Pearl’s request or that they make arrangements for a conference with me to determine what was to happen.
[6] Apparently, counsel agreed that they would each make brief written submissions. The court received Ms. Theberge’s submissions, dated December 21, 2017, and Mr. Pearl’s submissions, dated January 11, 2018. I have reviewed those submissions.
BACKGROUND
[7] There is no significant dispute as to the factual matrix in this proceeding. Nonetheless, the facts need to be set out in some detail to provide the proper context for this decision.
[8] Catherine May Moniot (“Catherine”) had four children. Ms. Houghton-Jukes, Mrs. Gough, Mr. Houghton, and one other child. Catherine and her husband, Ambrose Merrill Houghton (“Ambrose”), owned, as joint tenants, property in the City of Sarnia in the County of Lambton, known municipally as 996 Eastlawn Avenue (“the Eastlawn property” or “the property”). Ambrose died on or about the 1st day of April 1979, and by virtue of her survivorship, Catherine became the sole owner of the property.
[9] By 1987, Catherine was spending a significant part of each year in the southern United States of America. She decided the Eastlawn property to her daughter, Ms. Houghton-Jukes. It appears, the plan was that Catherine would reside in the property during the summer and spend her winters in Florida, U.S.A.
[10] By deed/transfer registered April 30, 1987, as Instrument No. 595144, the property was conveyed to the applicant. That deed/transfer reserved to Catherine a life interest in the lands and premises. That reservation is contained in the deed/transfer but the terms of the life interest are not specified. Consideration for the transaction was $60,000.
[11] Ms. Houghton-Jukes deposed that she paid to her mother a deposit in the amount of $5,000. The balance of the consideration for the transfer of the property was referred to as a “vendor take back mortgage”. This was a mortgage from the applicant to Catherine for $55,000. The mortgage/charge was registered April 30, 1987 as Instrument No. 595145.
[12] The principal of the mortgage/charge was $55,000. It bore interest at the rate of 5.5 percent and was to be paid monthly at the rate of $400 per month. The mortgage/charge was fully due in five years from the date of its registration, being May 1, 1992.
[13] The applicant deposed that approximately one year after the transfer of the property, upon Catherine’s return to Sarnia, she advised the applicant that she wanted exclusive possession of the property. Catherine told the applicant that she wanted to live there with George, whom she intended to marry. That summer, Catherine and George were in fact married. The applicant stated that it was only at this time that she became aware of her mother’s life interest in the property.
[14] Ms. Houghton-Jukes and her husband, who had been residing at the property, moved out and purchased a new home in January of 1989. She states that notwithstanding what occurred, she and her mother continued to have a good relationship and spoke regularly. However, the applicant deposed that she stopped making payments on the mortgage/charge after they moved out of the property.
[15] George passed away in 1995. Catherine continued to reside in the property until her death in June of 2016.
[16] Mrs. Houghton-Jukes deposed, and it was not challenged, that in March of 2001 Catherine proposed to her that an agreement be prepared in respect of the outstanding balance on the mortgage/charge. I would note that the mortgage had been fully due May 1, 1992.
[17] The applicant and her mother drafted the agreement together. That agreement provided, notwithstanding that the mortgage was fully due May 1, 1992, that upon Catherine’s death the sum of $50,536.70 would remain owing on the mortgage/charge. It was specified that this amount could not be changed without the consent of Catherine or the applicant. The balance was to be paid in full within six months.
[18] A copy of the agreement is Exhibit F to the affidavit of the applicant, affirmed February 24, 2017. The document was signed by Catherine and Mrs. Houghton-Jukes, and witnessed by Mr. Ron Rowcliffe. Mr. Rowcliffe is stated to be the long-time solicitor for Catherine. Indeed, he is the one who prepared the deed/transfer and mortgage/charge referred to above.
[19] Mrs. Houghton-Jukes further deposed that on April 30, 2010, the 23rd anniversary of the mortgage/charge, she and Catherine scheduled another meeting with Mr. Rowcliffe. In her affidavit, the applicant made some comments with respect to her perception of Mr. Rowcliffe’s reaction to their attendance. In my view, and given the respondents’ concessions to which I will refer later, that evidence is irrelevant.
[20] Mrs. Houghton-Jukes stated that Catherine explained to Mr. Rowcliffe that she wanted to forgive the amounts owing under the mortgage/charge. He, in turn, explained that Catherine should mark on the agreement that the sum had been paid. When asked if there was anything further to be done, the applicant deposes that Mr. Rowcliffe advised that he would “discharge the mortgage” the following day. Attached as Exhibit F to the applicant’s affidavit, is a copy of the March 21, 2001 agreement that includes the words, “2010 April 30th Paid.” Below those words, appears the signature of Catherine and the words “witnessed” along with the signature of Ron Rowcliffe.
[21] I digress here to make some comment about the agreement. Mr. Rowcliffe is a senior member of the Lambton County Bar. While he apparently continues to be in practice, he declined to sign an affidavit with respect to his involvement in this matter. Exhibit M to the applicant’s affidavit is a letter Mr. Rowcliffe wrote to Glenn T. Dawson, previous counsel for the applicant. In that, he states he has no information respecting what, if any, payments were or were not made, nor was he ever requested to prepare a discharge.
[22] Mr. Pearl sent to Mr. Rowcliffe, by letter dated September 13, 2007, a copy of the March 21, 2001 agreement with the April 30, 2010 additions. Mr. Rowcliffe acknowledged that the signature identified under the second signature of Catherine was indeed his.
[23] Mrs. Gough and Mr. Houghton included in their responding record a letter from Ms. Theberge to Mr. Rowcliffe, confirming a conversation that she had with him on October 31 and November 3, 2007. I expressed the view at the beginning of submissions that this letter was not of any evidentiary value. I also expressed the view that Mr. Rowcliffe’s unsworn letters were evidence on which little weight could be placed. Its conclusion is of little import.
[24] Unfortunately, Catherine passed away June 1, 2016. Her Last Will and Testament, dated June 27, 2013, appointed Mrs. Gough and Mr. Houghton as her Estate Trustee. Mrs. Houghton-Jukes was not a beneficiary under the terms of this Will.
[25] Following Catherine’s death, Mrs. Houghton-Jukes entered into an agreement to sell the property on June 29, 2016. The transaction was scheduled to close July 29, 2016. The sale price was $189,900.
[26] Shortly before scheduled closing, Mrs. Houghton-Jukes was advised by her real estate counsel, Mr. Wallace Lang, of the existence of an undischarged mortgage/charge. Notwithstanding the fact that the discharge of the mortgage/charge was not secured, the transaction closed August 2, 2016. Apparently, to complete the transaction Mr. Lang had to undertake to hold back the entire proceeds of sale.
[27] After the real estate transaction was completed, there was some correspondence between the applicant and respondents through counsel. The issue of the amount outstanding on the mortgage, if any, was not resolved. The respondents commenced an action by Statement of Claim dated February 24, 2017, claiming the sum of $50,536.07 in damages and ancillary orders. As noted, the applicant commenced her application dated March 9, 2017. The application sought a declaration that no amount was owing under the mortgage/charge and that it should be discharged, among other ancillary orders.
[28] The sale proceeds were held by Mr. Lang until the order of Bondy J. was made, on consent of the parties, on July 5, 2017. Pursuant to that order, the sum of $51,462.56 was paid to the account of the Superior Court of Justice in Ontario, to be held in trust to the credit of the application and action under Court File No. 8019/17. That sum was the $50,536.07 referred to in the March 21, 2001 agreement, plus interest. The funds continue to be held by this court.
ISSUES
[29] The applicant stated the issue as being a determination of whether Catherine made an inter vivos gift to Mrs. Houghton-Jukes by amending the agreement to forgive the balance owing on the mortgage?
[30] The respondents stated that there were two issues. Firstly, is the purported amending agreement valid? Secondly, did Catherine make an inter vivos gift to Mrs. Houghton-Jukes? However, during the course of oral submissions, counsel for Mrs. Gough and Mr. Houghton made certain acknowledgements which, in my view, resolved the first issue. I will deal with that concession in due course.
[31] Therefore, I conclude that the only issue to be determined is whether Catherine made an inter vivos gift to Mrs. Houghton-Jukes of the balance owing on the mortgage?
POSITION OF THE PARTIES
[32] The applicant and respondents agree on what constitutes the elements of a legally held inter vivos gift in Ontario: see McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 24. The elements are:
An intention to make a gift on the part of the donor without consideration or expectation of remuneration;
An acceptance of the gift by the donee; and
A sufficient act of delivery or transfer of the property to complete the transaction.
[33] The parties further agree that the onus to establish all three elements is on Mrs. Houghton-Jukes, as the recipient of the gift. The applicable onus is the civil standard of a balance of probabilities: see Singh Estate (Trustee of) v. Shandil, 2007 BCCA 303, 32 E.T.R. (3d) 207.
[34] Mrs. Houghton-Jukes argues that the mortgage/charge is, in effect, a loan and that forgiveness of a loan has been held to constitute an inter vivos gift. Further, that Catherine intended to make a gift without consideration or remuneration, and that this intention was documented in her own handwriting in the April 30, 2010 addendum. Catherine met with her lawyer, Ron Rowcliffe, presented the addendum, and he witnessed it.
[35] After I received oral submissions, counsel for Mrs. Houghton-Jukes provided me with the decision of Videchak. He submits that this stands for the proposition that a discharge of a mortgage/charge is not required for the completion of a gift of a mortgage.
[36] In summary, Mrs. Houghton-Jukes submits that she has satisfied all of the elements to establish a gift by Catherine to her. Therefore, the applicant is entitled to the payment of the funds currently held in court.
[37] In oral argument, Mrs. Gough and Mr. Houghton acknowledge that the applicant had established two of the elements of an inter vivos gift. Firstly, there was an intention by Catherine to make a gift without consideration or expected remuneration. It is acknowledged that the intention was demonstrated by the addendum to the March 21, 2001 agreement. It is further acknowledged that the gift was accepted by the applicant.
[38] It is the respondents’ position that the third element, delivery, was not been proven. Counsel emphasized that delivery is an important element, as it allows the donor to change his or her mind.
[39] Counsel submitted that courts will not perfect an imperfect gift by ignoring delivery. That requirement is well-established where a type of property is regulated by its specific form, and a gift by a non-compliant document is imperfect in these circumstances. To complete the gift, a discharge of the mortgage/charge had to be registered. That did not occur and therefore there was no gift.
[40] Catherine did not take the steps necessary to obtain a discharge of the mortgage/charge. While the court ought not to speculate, the respondents’ counsel submitted that it is reasonable to conclude that she did not do so because she changed her mind or never formed the intention in the first place.
[41] Counsel further submitted that initially the applicant referred to the mortgage/charge as having been paid. It was only after she commenced her application that she referred to the mortgage/charge as being forgiven. The April 30, 2010 addendum simply stated “Paid”. It was submitted that this is not consistent with being a gift.
[42] Counsel for the respondents submitted that Videchak does not stand for the proposition advanced by the applicant. It was submitted that the case is factually distinguishable, and in Videchak it is not clear that the court considered the legal requirements of a properly constituted gift.
DISCUSSION
[43] As set out above, the parties agree as to the essential elements of a legally valid gift set out in McNamee. This is a recent reiteration of the long- established law on inter vivos gifts.
[44] As noted, the parties agree that the first two elements are satisfied. That is, Catherine intended to make a gift without an expectation of remuneration. Secondly, the applicant accepted that gift. At issue is whether or not there was a sufficient delivery or transfer to complete said gift.
[45] Mrs. Houghton-Jukes deposes that Mr. Rowcliffe stated he would prepare a discharge of the mortgage/charge. In his correspondence, Mr. Rowcliffe writes that he does not recall stating he would prepare a discharge of the mortgage/charge. The letter of Mr. Rowcliffe is unsworn. Neither party sought to examine him. However, whether he stated he would or not, a discharge was not prepared and/or registered. I am left to consider whether there was sufficient delivery on that basis.
[46] The respondent’s factum noted that it was initially the applicant’s position that the mortgage had been repaid. In my view, nothing turns on that observation. All parties agree that Catherine intended to make a gift and the applicant accepted that gift.
[47] Initially, in support of this proposition, the respondents referred to correspondence from the applicant’s counsel. I accept that in conceding that Catherine intended a gift, that the respondents are resiling from the position that the agreement is not valid. However, if the respondents had pressed this position, I would have no difficulty in rejecting it. There was no serious challenge that the addendum was not in Catherine’s handwriting, signed by her, and witnessed by her long-time solicitor. Any deficiencies with the document are relevant to the third element of whether there was a sufficient act of delivery.
[48] As previously mentioned, counsel agreed that the onus is on Mrs. Houghton-Jukes, as the recipient, to establish that the requirements of an inter vivos were met, and that onus is on the civil standard of a balance of probabilities.
[49] During submissions, counsel for the respondents appeared to suggest that there may be some question as to Catherine’s mental capacity to appreciate the nature of the transaction. Again, this is based entirely on an unsworn letter from Mr. Rowcliffe and will be accorded no weight.
[50] As I have stated, the letter from Mr. Rowcliffe is of little value. Further, the suggestion that Catherine had compromised mental capacity is contradicted by the fact that subsequent to writing and signing the addendum, Catherine executed a Will on the 27th day of June, 2013. The respondents submitted that Will to the court for administration, and a Certificate of Appointment was issued. The beneficiaries of that Will were Catherine’s children, save for Mrs. Houghton-Jukes. In my view, the suggestion that Catherine may have lacked mental capacity is not supported by the totality of the evidence. I reiterate, Catherine’s intention to give a gift was conceded in submissions before me.
[51] The second element necessary to establish a valid inter vivos gift is proof of acceptance. That element is often easily established. The vexing issue in this matter is whether or not delivery was effective.
[52] Counsel for the respondent submitted that the requirement of delivery is a check on impulse; it functions to allow the donor to further consider the matter and possibly change their mind.
[53] In support of that proposition, the applicant refers to page 161 of Bruce Ziff’s The Principles of Property Law, 5th ed (Toronto: Carswell, 2010) where Professor Mr. Ziff explains his view as to why there is the requirement of delivery. In my view, whatever reason for the requirement, it is clear that sufficient delivery is an element of a valid inter vivos gift and has been since the earliest cases.
[54] The form of delivery may depend on the nature of the gifted property, the relationship to the parties, and other circumstances. There may be a change in delivery without a change in physical possession: see Standard Trust Co. v. Hill (1922), 1922 758 (AB CA), 68 D.L.R. 722 (Alta S.C. (App. Div.)). Delivery must divest the donor of control over the property and give control to the donee: see Kellas v. Chapman (1972), 1972 ALTASCAD 25, 27 D.L.R. (3d) 121 (Alta. S.C. (App. Div.)), aff’d Chapman v. Kellas (1973), 1973 1655 (SCC), 33 D.L.R. (3d) 128 (S.C.C.); see also Phinn v. Glover (1922), 1922 981 (ON SC), 63 D.L.R. 523 (Ont. S.C.).
[55] Counsel for the respondent argued that a gift of forgiveness of a balance owing under a mortgage can only be accomplished by a discharge of the mortgage. That in turn can only occur if the requirements of the Land Titles Act, R.S.O. 1990, c. L.5, are met by a registration of the discharge of mortgage/charge, or at the very least the execution of the discharge to be registered at a later time. In this case, it is clear that no discharge of mortgage/charge was registered and there is no evidence that one was even signed.
[56] In my view, a determination of this matter requires an understanding of what is a mortgage. In Walter M. Traub’s Falconbridge on Mortgages, looseleaf (consulted on 23 February 2018), (Aurora, ON: Canada Law Book, 2003), ch. 1 at §1:40, at pg. 7, the definition of a mortgage is considered. The simple definition is that, “A mortgage is a conveyance of land as a security for the payment of debt or the discharge of some other obligation for which it is given, the security being redeemable on the payment or discharge of such debt or obligation.” The statutory definition of mortgage in both the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, and the Mortgages Act, R.S.O. 1990, c. M.40, is defined in similar terms.
[57] In other words, a mortgage is a legal promise to give over property in the event of failed repayment that acts as a security for a debt or other obligation. The mortgage security, i.e. the land, is released from that legal promise upon full payment and/or discharge of the debt. In the usual course, a discharge of mortgage occurs when the formal document of full payment is registered. However, the courts in some circumstances, may order a discharge of a mortgage: see Mortgages Act.
[58] At the beginning of chapter 13 of Falconbridge on Mortgages, the author states:
It has long been settled that a mortgage security is personal estate. The mortgagee’s principle right is to the money and his or her right to the land is only as security for the money. So long as the equity of redemption was not extinguished the mortgagee’s beneficial interests in the land continued to be personal estate.
I accept this as authority for the proposition that mortgages are personal property.
[59] Mrs. Houghton-Jukes submitted that Brown v. Rotenberg, 1945 350 (ON SC), [1946] 1 D.L.R. 135 (Ont. H.C.), reversed in part, 1946 101 (ON CA), [1946] O.R. 363 (C.A.), supports the proposition that mortgages are personal property and may be the subject of a gift. I have reviewed the Court of Appeal’s decision, and respectfully find that it does not stand for the propositions as broadly stated by counsel. Brown v. Rotenberg dealt with delivery in the context of a donatio mortis causa (a gift after death) of a bank passbook, mortgages, and currency in a safety deposit box, not an inter vivos gift. Robertson C.J.O. concluded that when a donor delivered the key to the safety deposit box, there was valid delivery of the mortgages and currency. He stated that the second essential element of a valid donatio mortis causa, delivery, had been satisfied. The court did not require a formal assignment of the mortgage to complete the gift. The court accepted the delivery of the key as satisfying the requirement of delivery to the donee in establishing the requirement of a valid donatio mortis causa. In my view, delivery for both a inter vivos gift and a donatio mortis causa are, in effect, the same requirement.
[60] I find Videchak is a more analogous situation. There, the mother, Christina, gave a mortgagee and her daughter, Nina, in the amount of $56,000. The mortgage was stated to be due on demand. There also existed a letter written by Christina to a prior creditor that confirmed the mortgage was a gift and that it did not have to be repaid. Justice Matheson found that Christina had gifted to her Nina the sum of $56,000, being the balance owing on the mortgage. In reaching his decision, Matheson J. did not provide any analysis with respect to the three elements necessary to establish a gift.
[61] There is no suggestion that Catherine, during her lifetime, took any steps to enforce the mortgage. Mrs. Houghton-Jukes has acknowledged that no payments were made on the mortgage after Catherine returned to live in the property with her husband George on a full-time basis. That appears to have occurred in approximately 1988. On March 21, 2001, Mrs. Houghton-Jukes and Catherine attended with Mr. Rowcliffe and had him witness an agreement they entered into. That agreement was that the balance on the mortgage was $50,536.07 and that said amount could never be changed. The agreement further stipulated that upon Catherine’s death Mrs. Houghton-Jukes would be given six months to pay this amount.
[62] Subsequently, in 2010, Mrs. Houghton-Jukes and Catherine re-attended before Mr. Rowcliffe. It is not contested that Catherine wrote “paid” on the agreement. Catherine signed below the word “paid”, and Mr. Rowcliffe again witnessed her signature.
[63] Mrs. Gough and Mr. Houghton concede that it was Catherine’s intention to make a gift and that Mrs. Houghton-Jukes accepted that gift. However, the respondents assert that since Catherine did not sign a discharge of mortgage/charge document, there was insufficient delivery.
[64] I find the execution of the addendum, and the act of depositing it with Catherine’s solicitor, is a sufficient act of delivery. In my view, it is analogous to a mortgagee signing a mortgage statement. If the amount is then paid by the mortgagor they are entitled to a discharge. The failure of the mortgagee to have a discharge of mortgage/charge document prepared does not mean that the amount owing is not discharged.
[65] In this circumstance, it is in effect conceded that Catherine communicated to her lawyer that the amount of $50,536.07 had been “paid.” That is, there was no amount owing. What was gifted was the balance owing on the mortgage. I find it is reasonable to conclude that Catherine had taken all steps necessary to ensure that her daughter, Mrs. Houghton-Jukes, would not be required to pay the outstanding amount.
[66] Catherine made the effort to attend before a lawyer to sign the document that set the amount outstanding. The respondents acknowledge that the document accomplishes that. Catherine then re-attended approximately nine years later and, in the same fashion she evidenced the amount owing and indicated that it was no longer owing.
[67] Section 12(8) of the Mortgages Act provides:
When a mortgagee has died and all money due upon the mortgage was paid to him or her in the mortgagee’s lifetime or has been paid to a person entitled to receive the same after the mortgagee’s death or where in any other case it appears that all money due upon the mortgage has been paid and for any reason a discharge or reconveyance cannot be obtained without undue delay and expense the court may make an order discharging the mortgage.
[68] In this instance, I am of the view that Mrs. Houghton-Jukes could have demanded a discharge on that basis. In any event, s. 12(8) supports my view that the delivery of the addendum was a sufficient delivery to establish a gift of the balance owing on the mortgage.
[69] The requirement of a discharge of a mortgage/charge is a procedural requirement. It is a statement to the world at large that a debt has been repaid or is no longer owing. To conclude that a formal discharge of a mortgage/charge was required to perfect a gift of money, in my view, is too technical. The land registration system is created for the purpose of notice, not for the purpose of regulating all manners by which persons engage in real estate transactions.
[70] I find that Mrs. Houghton-Jukes has met her onus of establishing all three elements of an inter vivos gift. She is, therefore, entitled to the funds currently held in court.
COSTS
[71] I ask that the parties endeavour to resolve the issue of costs. If they are not able to do so, the applicant shall provide the court with brief written submission with respect to costs within 30 days. Submissions are not to exceed three (3) pages in length, not including any costs outlined. The respondents shall provide cost submissions similarly within 20 days of receipt of the submissions from the applicant.
Original signed by Justice Scott K. Campbell
Scott K. Campbell
Justice
Released: March 12, 2018
COURT FILE NO.: 8043/17 (Sarnia)
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Pamela Houghton-Jukes
Applicant
– and –
Jennifer Lyn Gough and Gregory Merrill Houghton, in their capacity as estate trustees for the estate of Catherine May Moniot
Respondents
REASONS FOR JUDGMENT
Scott K. Campbell
Justice
Released: March 12, 2018