COURT FILE NO.: CV-16-178 (Owen Sound)
DATE: 20180604
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Pauline Joyce Sorel, Plaintiff
AND:
Doris Crane, Estate Trustee with a Will for the Estate of John Edward Crane, Defendant
BEFORE: Petersen, J.
COUNSEL: Anteneh Kassa, for the Plaintiff
Maggie Scull, for the Defendant
HEARD: March 22, 2018
ENDORSEMENT
INTRODUCTION
The Parties
[1] The Plaintiff, Pauline Sorel, commenced this action against John Crane on August 4, 2016. Mr. Crane filed a Notice of Intent to Defend on August 25, 2016. He served the Plaintiff with a Statement of Defence in September 2016, but did not file it prior to his death on January 31, 2017.
[2] Mr. Crane left a holograph will naming his children, Doris and Derek Crane, as executors. Derek renounced his right to act as an Estate Trustee. Doris obtained a Certificate of Appointment of Estate Trustee with a Will on July 21, 2017.
[3] Ms. Crane moves for an order permitting her to continue defending this action in her capacity as the representative of John Crane’s estate. She also seeks leave to file an Amended Statement of Defence and Cross-claim, which has been served on Ms. Sorel.
[4] Ms. Sorel has consented to the above orders and they are hereby granted. The style of cause for this proceeding is amended to reflect the change in Defendant.
Overview
[5] This action involves a dispute over ownership of a property on 6th Street East in Owen Sound, Ontario (hereafter, “the Property”).
[6] The deceased, John Crane, is the sole registered owner on title to the Property. He purchased it in September 2006.
[7] Ms. Sorel has resided at the Property from the date of its purchase until the present day. The Defendant claims that she is a tenant, but she claims to be the 100% beneficial owner of the Property.
[8] This action arose when Mr. Crane decided that he needed to sell the Property due to financial difficulties that he was experiencing in the spring of 2016. He offered to transfer title to Ms. Sorel in exchange for a lump sum payment, below market value. She declined. He then attempted to list the Property for sale, but Ms. Sorel commenced this action and registered a Certificate of Pending Litigation against title to the Property, effectively preventing the sale.
Motions before the Court
[9] Before me are two motions for summary judgement, one brought by each party.
[10] Ms. Sorel seeks:
i. a declaration that she is the owner of the Property pursuant to a contract between her and Mr. Crane and an order vesting title to the Property in her name, in fee simple;
ii. in the alternative, an order vesting title to the Property in her name, in fee simple, by way of a resulting trust;
iii. in the further alternative, a declaration that Mr. Crane was unjustly enriched by her contributions to the Property and an order vesting title to the Property in her name by way of a constructive trust; and
iv. in the further alternative, an order for damages in the amount of $144,000 for unjust enrichment, based on the principle of quantum meruit, plus pre-judgement and post-judgement interest.
[11] The Defendant seeks:
i. an order dismissing Ms. Sorel’s action;
ii. a declaration that the Property is owned solely by the deceased, John Crane;
iii. an order that Ms. Sorel vacate the Certificate of Pending Litigation she registered on title to the Property within 15 days;
iv. a declaration that Ms. Sorel is a tenant, whose tenancy at the Property is governed by the Residential Tenancies Act, 2006, S.O. 2006, c.17;
v. in the alternative, in the event that this court finds Mr. Crane was unjustly enriched by Ms. Sorel’s contributions, an order that monetary compensation is a sufficient remedy and, if necessary, an order that Ms. Sorel vacate the Property within 60 days, that the Property be listed for sale, that the Defendant have reasonable access to the Property in order to prepare it for sale, that the Property be sold, and that any money owing to Ms. Sorel by the Defendant be paid from the net proceeds of sale; and
vi. in the further alternative, in the event that this court finds Ms. Sorel has a beneficial ownership interest in the Property, an order that she vacate the Property within 60 days, that the Property be listed for sale, that the Defendant have reasonable access to the Property in order to prepare it for sale, and that that the Property be sold, with the net proceeds divided in accordance with the parties’ respective interests in the Property, as determined by the court.
[12] Both parties agree to have the claims and counter-claims in this action determined by way of summary judgement and I am satisfied that it is appropriate to do so pursuant to Rule 20.04(2)(b) of the Rules of Civil Procedure.
[13] Ms. Sorel has sworn affidavits in support of her position, with attached documentation relating to the issues in dispute. She was cross-examined by the Defendant, though neither party relies on the transcript of her cross-examination. Mr. Crane is deceased, so the evidence that can be marshalled in support of the Defendant’s position is limited, but his daughter Doris has sworn an affidavit setting out the facts within her knowledge and attaching documents relevant to the issues in dispute. Both parties have submitted as evidence documents prepared by Mr. Crane prior to his death, including hand-written journal excerpts and draft versions of his original Statement of Defence.
[14] It appears that all of the available evidence is in the record. In my view, the record is sufficient to make the necessary findings of fact. A summary judgement hearing is the least expensive, most expeditious and most proportionate way to arrive at a fair and just resolution of the action. If the action were to proceed to trial, the costs of the litigation would likely deplete the equity in the disputed Property, and thereby also deplete Mr. Crane’s estate, which consists primarily of the Property.
EVIDENCE AND FACTUAL FINDINGS
[15] Before turning to the legal issues raised by the motions, I will review the evidence, outline the parties’ respective positions on facts in dispute, and make some necessary factual findings.
Existence of a Domestic Relationship
[16] Ms. Sorel deposed that she and Mr. Crane met and began dating in 2003, then started cohabiting at some point in 2004. She has provided no details about where she claims they resided prior to September 2006. She deposed that they lived together in a domestic relationship (with her daughter and grandson) at the Property from the date of its purchase in September 2006 until their separation in December 2008. She acknowledged that Mr. Crane traveled frequently for work.
[17] The Defendant disputes the claim that Ms. Sorel and Mr. Crane cohabited or were ever romantically involved. Doris Crane deposed that her father and Ms. Sorel were only friends. She stated that he may have stayed with Ms. Sorel at the Property from time to time, but it was never conveyed to her that he and Ms. Sorel were living together, or were in a romantic relationship. She deposed that she was very close to her father and that he often stayed with her when he was not traveling for work.
[18] Ms. Sorel’s motion record includes an undated Valentine’s Day card that she received from Mr. Crane. In it, Mr. Crane expressed his deep affection and passionate love for her and his sincere hope that she felt the same way for him. I am persuaded by the handwritten message in the card that there was, at some point in time, a romantic relationship between them.
[19] I have no reason to reject Ms. Sorel’s uncontested evidence that the card was given to her in February 2007. On that basis, I find it unlikely that the two of them were cohabiting in a domestic relationship since 2004. The handwritten message in the card suggests that Mr. Crane was emotionally consumed by a new burgeoning relationship, not one that had been ongoing for 3 years.
[20] Moreover, in his original Statement of Defence, Mr. Crane specifically denied Ms. Sorel’s claim that they were cohabiting in 2004. He pleaded that he was living in West Montrose “between assignments” in the summer of 2006 and that Ms. Sorel was living with her daughter in rental accommodation in Owen Sound. This pleading is corroborated by documentary evidence in the record.
[21] Mr. Crane’s 2006 T4 statement of earnings, his 2006 T4E statement of employment insurance benefits, and his 2006 T5007 statement of WSIB benefits are all addressed to him at an address on Northfield Drive in West Montrose. A joint mortgage application submitted to a broker on August 2, 2006 lists Mr. Crane’s residential status as “live with parents” for the past 3 years at the same address in West Montrose. The joint application lists Ms. Sorel’s residential status as “rent” for the past 6 months at an address on 16th Street East in Owen Sound. The West Montrose address appears on a number of other mortgage and related documents signed by Mr. Crane in September 2006.
[22] Based on the documents in the record, I conclude that Mr. Crane and Ms. Sorel were not cohabiting prior to the purchase of the property in September 2006.
[23] With respect to the issue of whether they cohabited at the Property, Ms. Crane’s affidavit is of little assistance, since it merely states that she was never told they were living together. She obviously did not have knowledge of all of her father’s personal affairs (including his love affair with Ms. Sorel).
[24] There is no sworn evidence in the record from Mr. Crane, but his draft pleadings consistently deny that they cohabited. His original Statement of Defence states that they dated a few times but were never a couple. In an undated excerpt from his hand-written journal, Mr. Crane wrote that he and Ms. Sorel had a “friendly relationship for a few years” but “never cohabited”. In another undated entry, he wrote, “She is claiming we cohabited so that it would be family law act.”
[25] While Mr. Crane and Ms. Sorel may have been under the impression that a common law spousal relationship would entitle Ms. Sorel to possession and/or ownership of the Property under the Family Law Act, R.S.O. 1990, c.F.3, (“FLA”), that is incorrect. Possessory rights under s.19 of the FLA relate exclusively to a matrimonial home. Entitlement to equalization of net family property under s.5 of the FLA is similarly reserved for married spouses. Although resulting trust and constructive trust claims frequently arise in the context of the breakdown of a common law spousal relationship, satisfying the definition of “spouse” in s.29 of the FLA (and/or proving cohabitation) is not a prerequisite to a successful trust claim. Constructive trust and resulting trust claims are not restricted to domestic relationships between cohabiting spouses.
[26] Whether or not Mr. Crane and Ms. Sorel ever cohabited as a couple is not determinative of Ms. Sorel’s rights in this case. However, the nature of their relationship is relevant because it provides important context for the assessment of the evidence as a whole. The legal principles relating to resulting trust and constructive trust claims must be applied with sensitivity to the specific circumstances of each case. Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 at paras.20, 33 and 34.
[27] It is therefore necessary for me to make a determination as to whether or not Ms. Sorel and Mr. Crane cohabited as domestic partners at the Property. There are a variety of documents in the record that are addressed to Mr. Crane at the 6th Street East address at different points in time (e.g. bank statements for a joint account held by him and Ms. Sorel, utility bills addressed to both of them, homeowner’s insurance policy records and other correspondence addressed to him). Although some of these statements and bills are dated from late 2006 and 2007, they do not assist me in determining where Mr. Crane was residing during that time because they continue to be addressed to him (or to both of them) at the 6th Street East address up until 2016, and the parties agree that Mr. Crane was not living at the Property after December 2008. I find that these statements and bills reflect his mailing address, rather than his residential address.
[28] Other documents in the record are probative of the fact that he was living with Ms. Sorel at the Property in late 2006 and in 2007. The Transfer Deed of Land and the charging instrument used to register the 1st mortgage on the Property (in September 2006) both bear Mr. Crane’s signature and list the 6th Street East Property as his “address for service”. Mr. Crane’s 2007 Tax Return Summary also lists the 6th Street East address. It lists his marital status as “single”, which is not inconsistent with cohabitation, given the relative novelty of his relationship with Ms. Sorel at that time. His 2007 tax return was assessed by the Canada Revenue Agency on April 21, 2008, which means he would have filed the return in the winter of 2008, using the 6th Street East address. His 2008 tax return, which was assessed by Canada Revenue Agency on May 11, 2009, listed an address in Port Colborne, Ontario. He would have provided that address on his tax return when it was filed in the winter of 2009.
[29] Based on the evidentiary record as a whole, I am persuaded on a balance of probabilities that Mr. Crane was living in a domestic relationship with Ms. Sorel at the Property in Owen Sound from the date of its purchase in September 2006 until they separated in December 2008.
Purchase of the Property
[30] The Property was purchased for $150,000 in September 2006. Mr. Crane obtained mortgage financing with a $20,000 down-payment, $10,000 of which he received from Ms. Sorel. Title to the Property was registered in his name alone.
[31] Mr. Crane’s account of how the purchase came about is set out in his journal entries and draft pleadings, as well as his original Statement of Defence. He wrote that Ms. Sorel was in distress in the summer of 2006 because she and her daughter were being evicted from their rental accommodation and she had nowhere to live. She contacted him for assistance because she wanted to purchase a house but did not have enough money to do so. They looked at few homes together with a real estate agent, including the 6th Street East Property. He decided to purchase the Property as an investment and offer to rent it to her. He told her that he had $10,000 but required $20,000 for a down-payment to secure mortgage financing. She agreed to loan him $10,000 on the understanding that he would let her live at the Property with her daughter and grandson rent-free for one year, until her loan was repaid. It was understood that she would pay all the utilities as part of their rental agreement.
[32] Ms. Sorel’s version of the events is very different. She deposed that the Property was purchased for her, her daughter and her grandson in September 2006. She had $10,000 available for a down-payment. She applied for mortgage financing to purchase the Property but was denied because of poor credit and low income. Mr. Crane agreed to assist her by obtaining mortgage financing, which required that title to the Property be placed in his name alone. Mr. Crane paid $10,000 toward the down-payment in order to secure the necessary financing. That payment was a gift to her. They agreed that they would cohabit at the Property and share the carrying costs, but it was always understood that the Property belonged to her exclusively. Mr. Crane’s name was placed on title “out of generosity and convenience only”.
[33] Ms. Sorel attached a mortgage loan application to one of her affidavits, purporting to show the unsuccessful application that she made before seeking Mr. Crane’s assistance to finance the purchase of the Property. The document dated August 2, 2006 is, in fact, a joint mortgage loan application made by both Mr. Crane and Ms. Sorel. It shows that Mr. Crane was earning $80,000 annually and Ms. Sorel was earning $24,752 at the time. There is no evidence that Ms. Sorel attempted to secure financing on her own.
[34] The record includes a cancelled cheque showing that Ms. Sorel paid $350 for an appraisal of the Property in mid July 2006.
Carrying Costs
[35] According to Ms. Sorel’s evidence, she and Mr. Crane opened a joint bank account when they purchased the Property in September 2006. She said that they both contributed to the account, which was used to make the mortgage payments. She explained that Mr. Crane initially contributed to the mortgage payments, even though the house belonged to her, because he was living there with her.
[36] Ms. Sorel deposed that, when they separated in December 2008, they agreed that she would remain at the Property and assume all the expenses associated with the carrying costs, because the Property had been purchased for her benefit. She claims they agreed that Mr. Crane would remain the registered owner, but that the Property belonged to her.
[37] There are internal inconsistencies in Ms. Sorel’s evidence regarding who paid the carrying costs after the separation. She deposed that she “paid for all the costs associates with the care, maintenance, and ownership of the Property” from December 2008 to present. She then qualified her evidence by stating, “I believe John continued to pay some of the mortgage for a number of months after our separation. However, I have from, at least, December, 2010 made all the mortgage payments.”
[38] Mr. Crane’s version of the events can be gleaned from his original Statement of Defence and draft pleadings. It also includes some internal inconsistencies. According to his pleadings, although Ms. Sorel was only supposed to reside at the Property rent-free for one year, at which point her $10,000 loan to him would be repaid, she in fact lived there rent-free from September 2006 until October 2011, while he paid the mortgage payments and municipal property taxes.
[39] Mr. Crane pleaded that: After the first year of her tenancy, Ms. Sorel was supposed to deposit rent payments into his personal account, but she did not make the payments. He was earning substantial income at that time and did not notice that months had passed without any rental deposits from her. Once he noticed, he confronted her and asked when she would begin to pay rent. She promised to do so and to make up the missed payments as soon as her financial situation stabilized, but she then continued to default on the payments. He confronted her a few times and she always had a hardship excuse for not paying rent. He was earning a very good wage at the time and therefore “let it slide”.
[40] Mr. Crane also pleaded that: He provided monthly rental receipts to Ms. Sorel so that she could claim the rent payments on her income tax return and obtain tax rebates, even though she was not actually paying him any rent. He declared the non-existent rental income on his own tax returns because she promised to pay him back some day.
[41] Mr. Crane also pleaded that: In or about 2010, he advised Ms. Sorel that he was considering selling the Property because he could no longer afford it. She wanted to remain at the Property, so she proposed that she would assume responsibility for the mortgage and property taxes. They opened a joint bank account in 2010 for the purpose of stopping the mortgage payments from being withdrawn from his personal account. He felt unable to monitor the transactions in his own account. Mortgage payments were being automatically withdrawn without rental deposits being made by Ms. Sorel and he would not notice this until months had passed. He believed that opening a joint account for the mortgage payments would ensure that Ms. Sorel made the necessary rent deposits, because there would otherwise be insufficient funds in the joint account to cover the mortgage payments. Mr. Crane pleaded that he drove to Owen Sound in 2010 “specifically to open this joint account”.
[42] According to Mr. Crane’s pleadings, Ms. Sorel did not actually begin covering the mortgage payments until November 2011. In one of his undated hand-written journal notes, he wrote: “After the 10gs she lent me she always had an excuse why she could not pay rent and it come out of my account until 2012.” He acknowledged in his pleadings that her deposits to the joint bank account covered the mortgage payments from November 2011 up until this action was commenced. He also pleaded that she claimed the deposits as rental payments on her income tax returns and that he declared her deposits as rental income on his returns. The record shows, however, that Mr. Crane did not declare any rental income on his tax returns in 2012 and 2014.
[43] Neither Ms. Sorel’s nor Mr. Crane’s version of the events is entirely consistent with the documentary record, which is the best available evidence regarding who paid the carrying costs for the Property.
[44] Bank statements in the record show that their joint bank account was open in October 2006, which is contrary to Mr. Crane’s assertion that it was opened in 2010. The mortgage payments were not, however, being withdrawn from the joint account in 2006 and 2007, as alleged by Ms. Sorel.
[45] Bank statements in the record show that the monthly mortgage payments (increasing over the years from $741.19 to $1,028.61) were consistently withdrawn from Mr. Crane’s personal account from November 1, 2006 until January 2013. The statements show that there were transfers from the joint account into Mr. Crane’s personal account in June 2009 ($1,800), August 2011 ($500) and thereafter monthly from October 2011 until November 2012 (in the amount of either $930 or $1,030, roughly corresponding to the monthly mortgage payments at that time). The source of those funds is unclear from the bank statements, but based on the evidence as a whole, I find that Ms. Sorel made deposits to the joint account and the funds were then transferred to Mr. Crane’s account to cover the mortgage.
[46] Based on all of the evidence, I conclude that Mr. Crane made the monthly mortgage payments from October 2006 until September 2011 (with the exception of June and July 2009), at which point Ms. Sorel assumed responsibility for the mortgage payments. The record shows that the property taxes were included in the mortgage payments and were remitted to the municipality by the mortgagee.
[47] The bank records reflect that mortgage payments continued to be withdrawn from Mr. Crane’s personal account until January 2013, but the withdrawals for December 2012 and January 2013 were reversed and the money was repaid to his account. Those same two mortgage payments were then withdrawn from the joint bank account. This is likely the point at which Mr. Crane instructed the bank to begin making the mortgage withdrawals from the joint account to ensure that Ms. Sorel would be solely responsible for the payments. I find that he confused the opening of the joint account with his direction to the bank to withdraw the payments from the joint account, and that he also confused the date when this occurred, thinking that it was in late 2010, when in fact in was in late 2012.
[48] The account from which the mortgage payments were withdrawn between February and May 2013 is unclear, but there were regular $900 or $1,000 monthly deposits from an unknown source to the joint bank account, and regular transfers of $901 out of the joint account into Mr. Crane’s personal account (corresponding to the monthly mortgage payments at that time). It is probable, in my view, that the mortgage payments were still being withdrawn from Mr. Crane’s personal account, despite the bank having been instructed to withdraw the payments from the joint account, and that Ms. Sorel was depositing money to the joint account so that it could be used by Mr. Crane to cover the mortgage payments. It would make no sense for Mr. Crane to deposit money to the joint account only to transfer it to his personal account, when he could easily deposit it directly to his own account instead. There is no evidence that anyone else was depositing money to the joint bank account. The monthly deposits were therefore most likely originating from Ms. Sorel.
[49] From June 2013 onward, the mortgage payments (ranging from $901 in 2013 to $919 in 2016) were withdrawn from the joint account on a monthly basis. Monthly deposits were made to the joint account in the amount of $1,000, which the parties agree came from Ms. Sorel.
[50] In summary, I find that Mr. Crane paid the mortgage and property taxes for the first five years, from October 2006 until September 2011 (except for June and July 2009), and Ms. Sorel paid the mortgage and property taxes for the ensuing five years, from October 2011 until the commencement of this action in August 2016.
Utilities and Insurance
[51] The evidence in the record shows that hydro and gas bills were paid from Mr. Crane’s account in November 2006. There are also receipts in the record indicating that he paid for furnace oil for the Property in February and October 2008. He was living at the Property at that time. There is no evidence that he paid any utilities relating to the Property after he moved out in December 2008.
[52] Ms. Sorel deposed that she paid for all the utilities after Mr. Crane moved out. She supplied an incomplete record of furnace oil receipts from 2009, 2010 and 2011, which partially corroborate her uncontested evidence that she was paying for utilities at that time. I note that her payment of utilities is not necessarily indicative of her having an ownership interest in the Property since rental agreements may require tenants to pay for their own utilities.
[53] The record shows that a new furnace and gas water heater were purchased and installed in December 2014 for $8,242. The purchase was financed with a five year loan to both Mr. Crane and Ms. Sorel, but the monthly payments are withdrawn from Ms. Sorel’s personal account.
[54] In her affidavit, Doris Crane deposed that her father held a policy of title insurance and mortgage insurance on the Property, but this is not supported by the record. Documentation in the record shows that Mr. Crane declined that insurance coverage when he obtained the mortgage loan in September 2006. However, the record confirms that Mr. Crane purchased and paid for a homeowner’s insurance policy commencing in January 2011. It was renewed annually until it was cancelled for non-payment in March 2014.
[55] There is no evidence that Ms. Sorel ever purchased any insurance for the Property or its contents.
Renovations to the Home
[56] Ms. Sorel deposed that, between 2008 and 2014, she commissioned and paid for renovations to the Property at a total cost of $22,820. She produced a single receipt from a contractor named Kyle Brown, detailing his fees for all the work allegedly performed during those years, including floor tile in the kitchen and front entry, drywall and taping, painting, stripping and sanding floors, re-facing and applying urethane to stairs, and installing trim, doors, crown molds, kitchen cabinets and 16 windows. The receipt is dated August 2, 2016 and is on letterhead from “Renovations Tile by Kyle”. Ms. Sorel claims that she paid for these renovations without any contribution from Mr. Crane.
[57] The Defendant challenges the authenticity of the receipt from Ms. Sorel’s contractor because a Business Name Search in October 2017 for “Renovations Tile by Kyle” produced no match in Ontario. The fact that the business was not registered is not, in my view, compelling evidence that the receipt was fabricated. It is not uncommon for contractors to perform handy-man work without incorporating and/or registering a business name. It is also not uncommon for contractors to perform work for cash, without issuing receipts. The fact that Ms. Sorel obtained a summary receipt in August 2016 to use as evidence in this proceeding is not necessarily indicative of fabrication.
[58] The Defendant does not deny that renovations occurred at the Property. She claims that Mr. Crane reimbursed Ms. Sorel for any renovation costs that were incurred. There is no sworn evidence from Mr. Crane, but his pleadings state that he “paid all renovations and repairs that the plaintiff advised him of”, including new wiring, new flooring, a new roof and new furnace, and he declared these expenses on his tax returns. He pleaded that he was not aware of any kitchen renovations having been done.
[59] Ms. Crane deposed that it was her “recollection from conversations with Mr. Crane that he in fact contributed large amounts of money to renovations at the Property.” She also recalled “multiple conversations with Mr. Crane, in which he indicated renovations were being done on the Property, including the kitchen. He would attend at the property relating to same and would typically do so with cash in hand.”
[60] Ms. Crane’s evidence on this point is hearsay, by necessity, since Mr. Crane passed away. Her evidence is vague in terms of amounts allegedly contributed by Mr. Crane, but it constitutes some evidence corroborative of his pleadings.
[61] Mr. Crane had numerous Home Depot receipts in his possession when he died. Doris Crane attached them to her affidavit and deposed that she did not know whether Mr. Crane paid the invoiced amounts directly or contributed cash to Ms. Sorel, who made the purchases, and then claimed the costs as a deduction on his income tax returns. Ms. Sorel worked at Home Depot. She deposed that she paid for the items relating to the home renovations and provided Mr. Crane with the receipts, not for reimbursement, but so that he could use them to claim a tax deduction. Most of the receipts show that purchases were made with a credit card belonging to Ms. Sorel.
[62] Considering the totality of the evidence, I find it most probable that Ms. Sorel paid for the supplies purchased at Home Depot and gave the receipts to Mr. Crane so that he could claim the expenses as a tax deduction against the rental income that he was declaring, even though no rent was actually being paid. I find that he reimbursed her for some of the expenses. However, it is unlikely that he would have been paying for all of the renovations on a house in which he did not reside and for which he had not received any rental income for five years. I therefore accept Ms. Sorel’s evidence that she also paid for some of the renovation costs.
[63] In an email to Ms. Sorel dated May 18, 2016, Mr. Crane wrote: “That house has cost me a lot of money over the years…. I know you put a lot of money into it also and I hope you can arrange to keep it.” These statements are consistent with my finding that both Mr. Crane and Ms. Sorel invested in renovations to maintain and improve the Property over the years.
ANALYSIS OF ISSUES
Statute of Frauds and Non-Existence of a Written Agreement
[64] The Defendant pleads and relies on s.4 of the Statute of Frauds, R.S.O. 1990, c.S.19, which states:
No action shall be brought to charge any executor or administrator upon any special promise to answer damages out of the executor’s or administrator’s own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person, or to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.
[65] The Defendant submits that the Statute of Frauds bars Ms. Sorel from securing title to the Property absent a written agreement or memorandum or note thereof.
[66] Ms. Sorel claims that there was a binding written agreement between her and Mr. Crane, conferring ownership of the Property on her. She deposed that Mr. Crane provided her with a hand-written note stating that the Property “truly belonged” to her and that he “would never attempt to sell, or otherwise deprive” her of the Property. She argues that no precise form of memorandum is prescribed by the Statute of Frauds and submits that a hand-written note suffices. Harvie v. Gibbons, 1980 ABCA 38, at para.16. However, she is unable to locate the hand-written note. She relies on statements made by Mr. Crane in email correspondence and in his Statement of Defence, which reference the note’s existence.
[67] In his original Statement of Defence, Mr. Crane pleaded that Ms. Sorel had asked him to give her a “note saying the property was her’s” and that he gave her “one or two notes”. In an email message dated May 18, 2016, Mr. Crane advised Ms. Sorel that, if she did not purchase the Property from him by the end of July, he would list it for sale on the market. In that message, he wrote, “I am sorry it has to be this way but that’s life I guess – The paper I sent you doesn’t mean a dam thing as long as its in my name.”
[68] Ms. Sorel submits that this email message, combined with Mr. Crane’s pleadings and her affidavit evidence, are sufficient to satisfy the requirements of the Statute of Frauds. She is correct that the entire contract need not be contained in a single written document in order to satisfy the Statute of Frauds. Several documents may be connected to each other by reasonable inference, with parole evidence if necessary, to constitute a sufficient written agreement. Harvie v. Gibbons, at paras.19-27. Ms. Sorel submits that it is reasonable to infer, from Mr. Crane’s pleadings and his email correspondence, that he agreed (in the missing note) to transfer title to her, then apologetically attempted to renege on the agreement.
[69] I am persuaded by the record that a hand-written note existed. However, I find that the record is insufficient to satisfy the requirements of the Statute of Frauds. Specifically, the evidence does not set forth the material terms of whatever agreement may have been reached between Mr. Crane and Ms. Sorel. There is no evidence of when the note was written or the circumstances of its preparation. Moreover, there is insufficient evidence about the precise content of the note. To the extent that there may have been a binding agreement contained in the note, the essential terms of the agreement are not made out. Harvie v. Gibbons, at paras.18.
[70] At the motion hearing, Ms. Sorel relied on the equitable doctrine of part performance as an exception to the Statute of Frauds. That doctrine operates in appropriate circumstances to prevent a party from avoiding liability under an agreement that is lacking written proof. Sigrist v. McLean, 2011 ONSC 7114, [2011] O.J. No.5865 at para.80.
[71] Ms. Sorel has neither pleaded nor established by evidence the facts required to prove part performance of a contract between her and Mr. Crane. In particular, she has failed to prove that her actions (eg. paying utilities, depositing money to the joint account, financing the purchase of a new furnace, paying for renovations) were all referable to a contract relating to the Property. She has also failed to provide clear evidence of the existence of a contract. Sigrist v. McLean, at paras.81-101. Although I am persuaded of the existence of a missing hand-written note, I am not satisfied, based on the evidence, that the note constituted a contract conveying an interest in the Property to Ms. Sorel.
Resulting Trust and Constructive Trust
[72] Ms. Sorel also relies on principles of resulting trust and constructive trust to assert an ownership interest in the Property. Under s.10 of the Statute of Frauds, such trust claims are exempt from the written requirements of s.4 of the statute.
[73] Ms. Sorel submits that both she and Mr. Crane mutually intended, from the date of purchase of the Property, that title would be held by him in trust for her exclusive benefit. It is not necessary for her to prove a common intention in order to succeed with a claim of resulting trust. Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 at paras.15 and 24. The Supreme Court of Canada has ruled that, in gratuitous transfer situations between domestic partners – including the joint contribution by two partners to the acquisition of property, title to which is in the name of only one of them – the actual intention of the grantor is the governing consideration. Kerr v. Baranow, at paras.17 and 18.
[74] In this case, Ms. Sorel contributed 50% of the down-payment for the purchase of the Property and title was registered in Mr. Crane’s name alone. Ms. Sorel’s intention is therefore the governing consideration.
[75] In ascertaining her intention, I must begin with the presumption of a resulting trust that generally applies to situations of gratuitous transfers between domestic partners. Kerr v. Baranow, at paras.18-19. Although Mr. Crane and Ms. Sorel’s intimate relationship was short-lived, at the date of purchase of the Property in September 2006, they were romantically involved and were planning to cohabit as domestic partners (which they did until December 2008). It is therefore appropriate in the circumstances of this case to apply the presumption of resulting trust.
[76] The onus is therefore on the Defendant to rebut the presumption by demonstrating that Ms. Sorel’s $10,000 contribution to the down-payment was a loan and pre-payment for rental occupancy for one year. Kerr v. Baranow, at para.19.
[77] Mr. Crane’s account of Ms. Sorel giving him $10,000 as an advance on rent payments at the time of the purchase of the Property is implausible. She was earning low income and her savings were her only asset. She was hoping to purchase a property for herself, her daughter and her grandson to live. It is not credible that she would have loaned all of her savings to Mr. Crane, as an advance on rental payments to a landlord, so that he could purchase the Property as an investment. The fact that she paid for an appraisal of the Property before it was purchased is also inconsistent with her being a tenant.
[78] In my view, the Defendant has not established that Ms. Sorel is a tenant under the Residential Tenancies Act, 2006. A tenant is a person who pays rent for the right to occupy a unit owned by someone else. By Mr. Crane’s own account, Ms. Sorel paid no rent until the end of 2011. Mr. Crane took no steps to enforce his right as a purported landlord to collect rent or evict her during this time.
[79] Furthermore, Mr. Crane’s homeowner’s insurance policy coverage was for “personal property” (both dwelling and contents), not for a rental income property.
[80] The fact that Mr. Crane declared rental income on his tax returns and that Ms. Sorel claimed tax credits for rent payments, does not, in the particular circumstances of this case, amount to evidence of a rental agreement between them. It is undisputed that no rent was paid by Ms. Sorel in the five years from 2006 to 2011, yet the evidence shows that Mr. Crane declared rental income on his tax returns during those years. He mostly benefitted from this declaration because he also claimed renovation expenses (which he may not have actually incurred) and ultimately declared a net loss, thereby reducing his tax liability in four out of the first six years that he owned the Property.[^1]
[81] Ms. Sorel simultaneously benefitted from claiming a tax credit for non-existent rental payments during those years. I find that Mr. Crane and Ms. Sorel entered into a mutually-beneficial arrangement to evade paying taxes.[^2] The information in Mr. Crane’s income tax returns reflects this dishonest arrangement and does not constitute evidence of rental payments made by Ms. Sorel.
[82] There is no credible evidence of a rental agreement between Ms. Sorel and Mr. Crane. Ms. Sorel is not (and never was) a tenant at the Property. She did not loan $10,000 to Mr. Crane to facilitate his investment in the Property and/or as pre-payment for a year of rental occupancy.
[83] The record establishes that Mr. Crane and Ms. Sorel hoped to purchase the property together, as registered co-owners, but their joint application for a mortgage loan was rejected. I accept Ms. Sorel’s evidence that the Property was subsequently registered in Mr. Crane’s name solely for the purpose of overcoming her poor credit rating and inability to secure mortgage financing.
[84] I find that Ms. Sorel intended to acquire an ownership interest in the property when she contributed 50% of the down-payment to its purchase. She was neither loaning that money to Ms. Crane to enable his investment, nor pre-paying him rent as a tenant for one year, nor gifting the money to him.
[85] The Defendant has not rebutted the presumption of resulting trust that arises from Ms. Sorel’s 50% contribution to the down-payment for the purchase of the home. In these circumstances, when Mr. Crane acquired title to the Property a trust “resulted” to Ms. Sorel, whose contribution to the purchase of the Property was not reflected in the legal title.
[86] However, I reject Ms. Sorel’s claim that she has a 100% ownership interest in the Property by way of resulting trust. She claims that Mr. Crane paid the other half of the down-payment ($10,000) as a gift to her and agreed to be named on title to the Property and in the mortgage documents “out of generosity and convenience only”.
[87] On this issue, Mr. Crane’s intention is the governing consideration. Mr. Crane’s financial circumstances were more favourable than Ms. Sorel’s at the time. He had fallen in love and was moving in with her to commence a domestic relationship. He may have been feeling generous in these circumstances, but I am not persuaded that he would have paid $10,000 toward the purchase of a home for her exclusive benefit and assumed sole responsibility for the mortgage loan liability, all out of grand generosity. It simply strains credulity.
[88] Mr. Crane paid all the monthly property taxes and mortgage loan payments for the first five years (with the exception of June and July 2009). He purchased insurance for the Property at his sole expense. It is not plausible that he would make such payments on a property in which he had no ownership interest, even after he and Ms. Sorel separated. They were no longer involved in a domestic relationship after December 2008. There is simply no credible explanation for his ostensible ongoing generosity toward her. It is more probable that he paid insurance premiums and made the mortgage and tax payments, while simultaneously seeking contributions from Ms. Sorel, on the understanding of a co-ownership arrangement. The initial joint mortgage application is consistent with Mr. Crane intending to co-own the Property equally with Ms. Sorel.
[89] I note that in Mr. Crane’s May 18, 2016 email message to Ms. Sorel, he offered to transfer title to the Property to her for $20,000, if she assumed the mortgage, stating then “it will be yours alone”. This suggests that he viewed the Property as being co-owned.
[90] I conclude that a 50% beneficial ownership interest by way of resulting trust is appropriate in the circumstances of this case, where Ms. Sorel not only contributed 50% of the down-payment, but also paid 50% of the mortgage loan payments and 50% of the Property taxes in the 10 years between when the Property was purchased and when she commenced this action.
[91] In my view, Ms. Sorel’s contributions to maintenance and renovations of the Property do not amount to unjust enrichment of Mr. Crane, giving rise to a greater than 50% ownership interest in the Property by way remedial constructive trust. They had purchased the Property as co-owners (with legal title registered in his name alone), but she enjoyed exclusive occupancy for many years. There is no evidence of deprivation suffered by her. Moreover, her status as a co-owner and the benefit she enjoyed as a resident provide sufficient juristic reason for her contributions. The doctrine of unjust enrichment therefore does not apply. Kerr v. Baranow, at paras. 30-32.
CONCLUSION
[92] I find that Ms. Sorel has a 50% beneficial ownership interest in the Property by way of resulting trust.
[93] The Estate of John Crane holds legal title and owns the other 50% beneficial interest in the Property. The Defendant is entitled to an order for sale of the Property, with the net proceeds from the sale to be divided equally between Ms. Sorel and the Estate of Mr. Crane.
[94] The Defendant is not, however, entitled to an order that Ms. Sorel vacate the premises in advance of the sale of the property.
[95] I order that the Property be jointly listed for sale within 30 days of this order, or such later date as the parties may agree to. The Defendant and Ms. Sorel are required to cooperate to prepare the Property for listing and to agree on a listing price and real estate agent (unless the parties agree to a private sale).
[96] Both the Defendant and Ms. Sorel will be required to consent to the terms of any Agreement of Purchase and Sale, including the closing date. If they are unable to reach agreement, either party may bring a motion before the court to resolve the issues in dispute. The net proceeds of sale shall be divided equally between the parties.
[97] The Plaintiff’s motion is granted, in part, as set out above. The Defendant’s motion is dismissed except for the order for sale of the Property.
[98] If the parties are unable to agree upon costs, brief written submissions may be made to the court, to my attention. Those submissions shall not exceed 2 pages, excluding Bills of Costs and any offers to settle. The Plaintiff’s submissions shall be delivered by June 25, 2018 and the Defendant’s submissions shall be delivered by July 9, 2018.
Petersen J.
Date: June 4, 2018
COURT FILE NO.: CV-16-178 (Owen Sound)
DATE: 20180604
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Pauline Joyce Sorel, Plaintiff
AND:
Doris Crane, Estate Trustee with a Will for the Estate of John Edward Crane, Defendant
ENDORSEMENT
Petersen J.
Released: June 4, 2018
[^1]: In 2006, he declared a net rental income loss of $2,072; in 2008, he declared a net loss of $7,658; in 2009, he declared a net loss of $8,567; and in 2011, he declared a net loss of $119.
[^2]: Mr. Crane’s pleadings indicate that the Canada Revenue Agency discovered this arrangement and he was having to pay back taxes as a result. This is also referenced in his email to Ms. Sorel on May 18, 2016, in which he wrote: “They are taking money out of my pensions for income tax arrears.”