Court File and Parties

COURT FILE NO.: CV-18-589436 DATE: July 12, 2018

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jannette Lucas Dela Vega and Norberto Menor Dela Vega v. Lira Marie Pineda, Arnello Oliver Pineda and Amnon Kestelman;

BEFORE: MASTER C. WIEBE

COUNSEL: Sarah J. O’Connor for the plaintiffs; Stephen M Panzer for Lira Marie Pineda and Arnello Oliver Pineda.

HEARD: June 21, 2018.

REASONS FOR DECISION

[1] The plaintiffs seek an order granting leave to register a Certificate of Pending Litigation (“CPL”) on the title to a property located at 103 Armitage Cresent, Ajax, Ontario (“the Property”). The Property contains a two story, 2,000 square foot residential home presently owned by Lira Marie Pineda and Arnello Oliver Pineda (together “the Pinedas”) and leased to a third party. The Pinedas oppose the motion.

[2] For the reasons stated herein, I dismiss the motion.

Background

[3] Based on the evidence presented, I find the following relevant facts.

[4] Jannette Lucas Dela Vega (“Jannette”) and Lira Marie Pineda (“Lira”) are sisters. Jannette is married to Norberto Menor Dela Vega and Lira is married to Arnello Oliver Pineda.

[5] In 2003 Jannette and Norberto purchased the Property. Because they needed the help of Ms. Dela Vega’s parents in getting the mortgage for the purchase from the Toronto Dominion Bank (“TD”), they gave her parents, Teodora and Feliciano Cahigas, a small interest in the Property and put their names on title as well. In 2004 the Dela Vegas put a second mortgage on the title to the Property.

[6] In July, 2006, Jannette started defaulting in the mortgage payments. The Dela Vegas wanted to stay in the Property, but Mr. Cahigas refused to assist with the mortgage. Jannette asked Lira to guarantee the mortgage, which Lira refused to do.

[7] In August, 2006, Jannette lost her job and could not carry the TD mortgage. TD started taking mortgage enforcement proceedings in the fall. In October, 2006 Lira offered to purchase the Property and assume the two mortgages. The Dela Vegas allege that there was then an oral agreement between them and the Pinedas whereby the Dela Vegas and Pinedas agreed that the Pinedas would acquire the Property, assume the mortgages and hold the Property in trust for the Dela Vegas until Jannette got a job, with the Dela Vegas to pay the running costs of the Property in the meantime. Alternatively, the Dela Vegas allege a resulting trust. The Pinedas deny both.

[8] The Property was transferred to the Pinedas on December 1, 2006. Both parties used one lawyer, the defendant Amnon Kestelman, to complete the transaction. The Authorization and Direction documents signed by both parties make no reference to the alleged trust agreement. The Pinedas obtained a loan from the Royal Bank secured by a first mortgage and topped it up with their own money to obtain the $231,875.94 needed to discharge the TD first mortgage. The loan and mortgage documents make no reference to the alleged trust agreement. The Dela Vegas allege that they paid the Land Transfer tax, but there is no corroboration for this assertion.

[9] The Property had a 2006 property assessment value at the time of $291,000. An appraiser appraised the Property as having a value of $305,000 as of October 31, 2006.

[10] The Pinedas were not aware of the second mortgage on the Property at that time. Lira became aware of this mortgage in 2006, and obtained a loan from HSBC Finance Mortgages secured by a mortgage on the Pineda’s residence in Ajax to obtain the $37,500 needed to discharge the second mortgage on the Property.

[11] The Dela Vegas lived in the Property with Ms. Cahigas. The Dela Vegas paid $1,050 bi-weekly into the Pinedas’ bank account from December, 2006 to January 2012. From January, 2012, the Dela Vegas paid $900 bi-weekly into that account. The Pinedas paid the running costs for the Property from that account. The Dela Vegas paid for the utilities in addition and directly. The Dela Vegas’ payments to the Pinedas were irregular.

[12] The Pinedas allege that these were rent payments under lease agreements between the parties. There is in fact a lease document dated December 23, 2011 which contains the signatures of Jannette and Lira, which specifies a five year term, and which specifies a $900 bi-weekly rent. There is no lease document for the earlier period, although Lira alleges that there was one that was lost. The Dela Vegas allege, on the other hand, that these payments were the running costs of the Property, that there were not leases, and that the December 23, 2011 document was fabricated in 2015 when the Pinedas were arranging mortgage financing for the purchase of a condominium and needed proof for the bank that the Property was generating an income for them.

[13] In 2009 Jannette got a job, and says she made a request to have the Property returned to the Dela Vegas. That return did not happen.

[14] In 2009 the Property was listed by the Pinedas. An agreement of purchase and sale was entered into by the Pinedas in November, 2009 with a third party, but the sale did not close due to issues with the purchaser. There was no reference to the alleged trust in these documents.

[15] In mid-2015 Ms. Cahigas moved out of the Property and did not return. The Pinedas purchased a Scarborough condominium at that time. On August 25, 20155 the Pinedas replaced the Royal Bank mortgage on the Property with a new Royal Bank mortgage in the amount of $530,000. On September 15, 2015 the Pinedas entered into a lease agreement with Ms. Cahigas and a niece of Mr. Pineda whereby those two rented the condominium for a period of five years.

[16] This September 15, 2015 lease document is quite similar to the above noted lease document dated December 23, 2011. There is an issue as to the genesis of the September 15, 2015 lease agreement. Jannette alleges that it was generated in June, 2015, and was used at the behest of the Pinedas to fabricate the lease document dated December 23, 2011 to show their bank that the Property was producing income for the Pinedas. Lira alleges, on the other hand, that the December 23, 2011 lease agreement had been in place as indicated in the document since 2011 and was used as a template to create the September 15, 2015 lease document.

[17] In 2016 Jannette says she demanded a return of the Property for the purpose of sale. Again, that did not happen. Jannette also says she demanded and did not get a satisfying explanation from the Pinedas for the lack in reduction of the Royal Bank mortgaged debt given the years of payments on that mortgage. The Dela Vegas stopped paying in June, 2016 and moved out. The Pinedas subsequently rented the Property to a third party for a monthly rent of $1,750.

[18] On January 4, 2018, Jannette and Norberto commenced this action seeking a declaration that they have an equitable interest in the Property on account of expressed, constructive or resulting trust. They also claimed a CPL in relation to the Property. They then brought this motion originally returnable February 1, 2018. The motion was adjourned twice to allow material to be filed, translations of key documents to be obtained and cross-examinations to take place.

Issues to be Determined

[19] Based on the submissions, I find that the following issues need to be determined:

a) Is there a triable issue as to the plaintiff’s claim to an interest in the Property? b) Do the equities favour the motion?

Analysis

Is there a triable issue as to the plaintiff’s claim to an interest in the Property?

[20] The first part of the governing test on such a motion is the same as the test on a motion to discharge a CPL obtained on an ex parte motion under section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”), namely the plaintiff must show only that there is a triable issue as to whether the plaintiff has a reasonable claim to an interest in the Property; see Hupka v. Aarts Estate at paragraphs 45 and 46. This means that the plaintiff need not establish that she will succeed in her claim to an interest in the Property, but only that there is an issue worthy of a trial in that regard. The defendant has the higher onus, namely the onus of showing that there is no such triable issue.

[21] In such a motion the court must review all of the evidence put forward by the parties in making its determination. Furthermore, the court need not accept the pleadings or the affidavit evidence uncritically; see Avan v. Benarroch at paragraph 18.

[22] The Dela Vegas’ primary claim to an interest in the Property is based on the doctrine of resulting trust. This is the doctrine of equity whereby there is a rebuttable presumption with gratuitous transfers, namely a rebuttable presumption that the transfer was intended to create and resulted in a trust with the transferee holding the subject matter in trust for the transferor; see Pecore v. Pecore, 2007 SCC 17, [2007] 1 R.C.S. 795 at paragraph 24. The transferee can rebut the presumption by proving that the transfer was a gift.

[23] The Del Vegas allege that their transfer of the Property to the Pinedas in 2006 was such a gratuitous transfer. In her factum and argument, Ms. O’Connor clarified this position. She argued it applied only to the equity portion of the Property. She argued that there was “no consideration” given or received for the value of the Property that was not covered by mortgage security. The evidence does indicate that the value of the Property on December 1, 2006, the date of the transfer, ranged from $291,000 to $305,000 and that the amount that was required by the Pinadas to discharge the first and second mortgages totaled $269,375.97, leaving a balance of “gratuitous” equity in the hands of the Pinedas of between $21,624.03 and $35,624.03.

[24] The Pinedas argue in response that this is a warped view of the transaction, and that there was more than reasonable consideration given to the Dela Vegas for the transfer. First, Mr. Panzer pointed out that the transaction was one whereby the Pineda got the Property, assumed the mortgage debt and allowed the Dela Vegas to remain as occupants and tenants. It was the end result of a process whereby Jannette sought help from her family to remain in the house after she lost her job and could not carry the mortgage debt. That help in these circumstances had value to the Dela Vegas. Had this help not been provided, the Dela Vegas may not have remained in the house, as the TD had embarked on mortgage enforcement. Second, the transfer to the Pinedas allowed the Dela Vegas to forgo the additional charges the TD would no doubt have charged the Dela Vegas for the sale under the mortgage. These are usually not insignificant amounts. Third, the assumption of mortgage secured debt in an amount of between 88% and 92% of the value of the Property is not indicative of a gratuitous transfer at all. This was a substantial debt that Pinedas assumed personal liability to pay. In addition, they paid almost $9,000 of their own cash to discharge the first mortgage and encumbered their own residence to discharge the second mortgage. Fourth, Mr. Panzer pointed out that in cross-examination (at question 273 of the transcript) Jannette admitted that there was consideration for the transfer and that that this consideration was the assumption by the Pinedas of the mortgage secured debt. This admission contradicts the resulting trust theory.

[25] I agree with all of these points by Mr. Panzer. The assertion that there was a “gratuitous” transfer of between 8% and 12% of the value of the Property is not a reasonable position, and does not take into consideration the totality of the evidence of the consideration that was involved as described above. Furthermore, the admission by Jannette that there was consideration for the transaction is virtually conclusive on this point. I find that there is no triable issue of a resulting trust for the purpose of this motion.

[26] The Dela Vegas take another position in their Statement of Claim, namely that there was an oral agreement between Jannette and Lira in 2006 whereby the Dela Vegas agreed to transfer the Property to the Pinedas and the Pinedas would hold the Property in trust for the Dela Vegas until Jannette got a job and demanded the return of the Property, with the Dela Vegas to live in the Property and pay the running costs of the Property in the meantime. The trust agreement, so the argument went, was not to be disclosed to the Pinedas’ bank given the financial position of the Dela Vegas. This argument is reflected in Ms. O’Connor’s factum, and was suggested in oral argument. The Pineda’s deny this alleged oral trust agreement, and assert that the arrangement in 2006 between the parties was a straight forward transfer and lease back.

[27] Having reviewed the evidence, I find that there is no triable issue of the Dela Vegas’ alleged oral trust agreement. First, there is no corroboration of this alleged oral trust agreement at the time it was alleged to have been made. The transfer makes no reference to it. The Acknowledgment and Direction concerning the transfer that was given to the mutual lawyer for the parties, Mr. Kestelman, does not mention it. Importantly, the new mortgage debt documents make no mention of it. There is no contemporary letter, email or text-message between the parties in the evidence that mentions it. I find this absence telling, as the Dela Vegas would reasonably have wanted to memorialize this agreement in some written form, if it in fact existed. After all, Jannette is well educated and had by 2006 worked extensively in and with banks. She has a diploma in pharmaceutical technologies and a one year diploma in business accounting. She worked at two major banks in the 1990’s as a data center processing worker and at Symcor Inc. for several years investigating bank errors when she was released in 2006. I note as well that neither the lawyer, Mr. Kestelman, nor the mother, Ms. Cahigas, support the Dela Vegas position as to the existence of this trust agreement. Finally, and most importantly, the Dela Vegas’ position essentially asserts what amounts to a conspiracy between the parties to mislead the Pinedas’ bank as to the true ownership of the Property. For this to be accepted to the point of encumbering the Pinedas’ title with a CPL there needs to be contemporary corroboration of the oral trust agreement, and there is none.

[28] Second, there is in fact evidence of the lease arrangement that the Pinedas allege. Jannette admitted in cross-examination that none of the Dela Vega regular payments were made directly to the mortgagees. They all went into the Pinedas’ bank account which the Pinedas then used to pay charges including the mortgages. This is similar to many lease arrangement. In addition, while there is no lease document for the period 2006 to 2011, there is one dated December 23, 2011 with a term of five years that contains the signatures of both Jannette and Lira. Both admit that these signatures are real.

[29] Jannette has an explanation for this document that is puzzling. She alleges that it was generated in 2015 when the Pinedas were seeking financing to buy the condominium and the bank wanted proof that they were getting an income from the Property. In her supplementary affidavit sworn March 9, 2018 Jannette attaches emails between Lira and Jannette that suggest this fabrication. There is one in particular dated June 17, 2015 from Lira’s RBC email account to Jannette where Lira states that there is no existing lease agreement and that the bank is looking for one. She asks Jannette to “make a lease for 103.” She adds that Jannette should not worry as “we’re not going to have a problem when you want to take back the house from us.” There are then two emails from Jannette to Lira on Lira’s personal Yahoo email account dated the next day, June 18, 2015, purporting to enclose the lease document with December, 2011 dates.

[30] The Pinedas’ deny the authenticity of the June 17, 2015 email from Lira. Lira swears in her affidavit sworn May 22, 2018 that she was never allowed to receive and send personal emails on her RBC email account, and does not now have access to the RBC email account to verify the existence of the June 17, 2015 email. She denies making it. Concerning the June 18, 2015 emails, Lira states that she did get lease documents from Jannette at this time, but that they were the existing working copies of the December 23, 2011 lease document that she had requested in order to prepare the lease document for the condominium the Pinedas were purchasing in 2015. She also pointed out importantly that her version of the two Jannette emails of June 18, 2015 on Lira’s Yahoo account contain significant differences from the ones attached to Jannette’s affidavit.

[31] I do not accept the Dela Vega explanation of the December 23, 2011 lease document as being sufficiently credible to create a triable issue. In Jannette’s cross-examination, Mr. Panzer asked Jannette to disclose all of her electronic and computer files in order to verify the accuracy of these emails in her affidavit. She refused to do so. I draw an adverse inference that these computer records would not have corroborated her explanation of the lease document. Furthermore, the noted discrepancies between the June 18, 2015 emails in Lira’s Yahoo email account and those in Jannette’s affidavit suggest that the emails were altered by Jannette. The emails in Jannette’s affidavit contain added language indicating that the only difference between the two lease documents emailed by her to Lira that day was the date Jannette says she inserted into the document. In fact there are other differences between the documents, and these differences seem unlikely to have been made in the 41 minutes between Jannette’s two emails. The inference to be drawn is that the documents were pre-existing, and that the June 18, 2015 emails in Jannette’s affidavit were altered by her to make it appear as if the documents were being created at that time. Furthermore, there is no independent corroboration of the alleged need the Pinedas had in 2015 to show a stream of rental income from the Property for the bank. Finally, and most importantly, Jannette’s explanation amounts to yet another conspiracy to deceive the Pinedas’ bank. For such an explanation to be accepted to the point of encumbering the Pinedas’ title with a CPL there needs to be much more credible evidence in support.

[32] The Dela Vegas rely on other emails included in Jannette’s supplementary affidavit to argue that there was an oral trust agreement. There is an email dated October 1, 2010 purportedly sent by Lira from RBC email account to Jannette wherein Lira refers to the Property as “your house” and the Dela Vegas payments as payment made on the mortgage. There is a series of emails in May, 2016 between Jannette and Lira which indicate that Jannette is quite concerned that the Dela Vega payments have not diminished the mortgage principal. There is reference to a “renovation” that the Dela Vegas completed, although the motion material contains no particulars of this renovation. Lira’s emails again are shown as being from her RBC email account.

[33] These emails have the same credibility problems that the above noted 2015 emails have. Lira denies them, and has no way of verifying their existence since they appear to be on her RBC email account to which she does not have access. Jannette refuses to disclose her computer drives or the native form of the documents to verify the existence and accuracy of these emails. I have already drawn an adverse inference against Jannette as a result.

[34] Furthermore, the 2016 emails (and indeed the 2015 emails discussed earlier) are particularly suspicious for another reason. As Mr. Panzer pointed out, it is undisputed that by 2015-16 the Property had suddenly and significantly increased in value. As a result, the Dela Vegas had at this time a motive to establish a proprietary interest in the Property that they did not have in the past. In addition, Jannette’s potential to manipulate electronic documents has already been discussed in relation to the 2015 emails. I am not, therefore, prepared to find that these emails create a triable issue as to the Dela Vegas claim to an interest in the Property.

[35] The Pinedas raised other issues. They rely on section 9 of the Statute of Frauds, R.S.O. 1990, c. C.19 which requires that all trusts in lands be in writing signed by the parties. That is obviously not the case here. However, Ms. O’Connor’s counter-argument carries weight. Equity will not allow the Statute of Frauds to avoid enforcement of an oral trust agreement that is relied upon; see Peruzza v. Spatone, 2010 ONSC 841 at paragraph 32.

[36] Mr. Panzer also argued that the Pinedas have a strong limitation defence, as the Dela Vegas took no steps to commence an action against the Pinedas after they refused to transfer the Property back to the Dela Vegas in 2009 when Jannette got a job and says she demanded the return of the Property. This action was brought in 2018 over 8 years later, namely well past the two year basic limitation period in the Limitations Act, 2002, S.O. 2002, c. 24, Sch.B, section 4. Ms. O’Connor made a strong argument in response. She referred me to section 4 of the Real Property Limitations Act, R.S.O. 1990, c. L. 15 (“RPLA”) which specifies a 10 year limitation period for any action for the recovery of land running from the date the right of recovery “first accrues.” This right of recovery may have accrued in this case in 2009. The RPLA is not affected by the Limitations Act, 2002. In the end, I do not find these additional issues raised by the Pinedas persuasive.

[37] However, as stated above, and for the reasons stated, I do not find that the Dela Vegas have shown sufficient credible evidence of either a resulting trust or an oral trust agreement to justify a CPL. I, therefore, do not find that the Dela Vegas have met their onus of showing that they have a triable issue as to a reasonable claim to an interest in the Property.

Do the equities favour the motion?

[38] This would usually be the end of the motion. However, I will comment on the equities as well. I do not find that the equities favour the motion for the following reasons.

[39] The factors the court will consider in this regard have been outlined by the leading authorities; see 572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (Ont. Master) and Perruzza v. Spatone, 2010 ONSC 841 (Ont. Master). They are the following: (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security.

[40] I will review these factors in order. The first of these factors is irrelevant. As to whether the land is unique, Ms. O’Connor conceded in oral argument that there is nothing unique about the Property for the Dela Vegas. At most, the Property was their matrimonial home where they raised their children, but this is a factor that could be applied to any other property they decide to live in. As to the intention of the parties, I have already found that there is insufficient evidence of an oral trust agreement at the time of the Property transfer in 2006. Therefore, I am driven to the conclusion that, based on the evidence presented in this motion, the intention of the parties was to transfer the Property to Pinedas with a lease back to the Dela Vegas.

[41] There was argument about damages, which is the subject of three of the eight factors. The Statement of Claim contains an alternative claim for damages “in the amount of $600,000 or current fair market value of 103 Armitage,” plus damages in the amount of $12,400 to discharge a lien on title. Ms. O’Connor argued that damages would be too difficult to calculate, too costly and inaccurate. I do not accept this argument. In the end, if the Dela Vegas prove their proprietary claim and the Property has been transferred or alienated in the meantime, the damages the Dela Vegas will have suffered will be the loss of the increase in equity that the Pinedas have enjoyed since 2006. This should be readily quantifiable. There is already evidence as to the value of the Property in 2006. Obtaining evidence of its value at the time of trial should not be difficult to obtain.

[42] If the Property is not transferred or alienated in the meantime, the Property will be available to honour the proprietary claim and the damages the Dela Vegas will have suffered will be the increased mortgage amount, the mortgage interest and the costs of discharging the lien, all of which should be easily quantifiable as well. If there were improvements by the Pinedas to be off-set against the damages, the valuation of same would be a challenge for the Pinedas and I fail to see why it would be insurmountable, particularly if there are invoices for the work done. There was no evidence in the motion that the Pinedas do not have the wherewithal to pay a damages judgment. I note that they still have the condominium. On balance, I find that the alternative claim of damages would be satisfactory.

[43] As to the factor of a willing purchaser, there is no evidence in the motion that the Pinedas intend to sell, alienate or encumber the Property. Jannette makes the unsubstantiated assertion in her affidavit sworn January 10, 2018 that the Lira “threatened she would sell the property.” There is no corroboration of this assertion, and I give it little weight, particularly in light of my general concerns about Jannette’s credibility.

[44] The final factor is the balance of harm between the parties. Ms. O’Connor referred me to the decision of Justice Sloan in T. G. Appliance Group v. Legend Homes, 2016 ONSC 7802 where a developer agreed to sell a condominium unit to an appliance provider in payment of a debt. The sale, which prohibited certificates of pending litigation, did not close, and the appliance company commenced an action and sought a certificate of pending litigation, which was granted. On the balance of harm factor, His Honour found at paragraph 26 that while the developer, a single purpose entity, had the benefit of being able to sell the other condominium units despite the existence of a certificate on one unit, the appliance company had no other means of securing its debt once all the condominium units were sold. I do not find this decision applicable to the case before me. As stated above, there is no evidence on this motion that the defendants are not able to satisfy the alternative remedy of a damages judgment.

[45] Ms. O’Connor referred me to two decisions with the argument that safeguarding a property interest is per se a harm that needs to be taken into consideration in the balancing exercise. She referred me to the decision of Master Jolley in Avan v. Benarroch, 2017 ONSC 4729 where the Master found in paragraph 39 that denying a certificate of pending litigation with a triable case of constructive trust in land would put the plaintiff in the position of being at risk of having no remedy against the land should it be transferred before trial. There was a similar concern expressed by the court in Hupka v. Aarts Estate at paragraph 104.

[46] I find these two decisions distinguishable from the case before me on the simple ground that in both of them the court found that there was a triable case as to the claimed interest in the land. That is not the case before me, as I have found insufficient credible evidence of such a triable case. Therefore, I need not be as concerned about safeguarding the plaintiffs’ claim against the Property. On the other hand, I note the evidence of Lira in her affidavit sworn January 25, 2018 that a CPL on the Property would interfere with the Pinedas’ rights of ownership such as refinancing and improvements, although no particulars of this assertion were provided. In the end, I find that the balance of harm factor favours neither side.

[47] I, therefore, do not find that the equities favour the plaintiffs’ motion.

Conclusion

[48] For the reasons stated above, I dismiss the motion.

[49] As required, the parties filed costs outlines for the motion at the end of the argument. The plaintiffs’ costs outline shows a claim for substantial indemnity costs figure of $29,700.30. The defendants’ costs outline shows a figure of $35,247.42.

[50] The defendants are clearly the successful party in this motion, and as a result deserve costs. The parties are encouraged to resolve the costs issue. If they cannot, the defendants may deliver further written submissions on costs of no more than three pages on or before July 23, 2018; the plaintiff may deliver responding written submissions on costs of no more than three pages on or before August 1, 2018; and the defendants may deliver reply submissions of no more than one page on or before August 3, 2018.

DATE: July 12, 2018

MASTER C. WIEBE