Court File and Parties

COURT FILE NO.: CV-13-18965 DATE: 20180202

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Richard R. Colasanti, James A. Colasanti, W. Kelly Colasanti, and Tracy Jo Lee Gitke, Trustees of the Estate of Ronald Colasanti, deceased Plaintiffs

– and –

1808278 Ontario Inc. Defendant

COUNSEL: Rodney M. Godard, for the Plaintiffs Myron W. Shulgan, Q.C. for the Defendant

HEARD: January 8, 9 and 10, 2018

Reasons for Judgment

Carey J.:

[1] The plaintiffs, as trustees of their late father’s estate, claim on a promissory note between Ronald (“Ron”) Colasanti and 1808278 (“180”) for $171,000, plus interest. The defendant, 180, asserts various defences, chief of which is that there was insufficient consideration for the note to be a binding contractual obligation.

[2] The defendant admits that the note is otherwise properly enforceable. The claim must fail, 180 argues, for lack of consideration because the bargain underlying the note was for something that the plaintiffs did not own.

Background and Summary of Evidence

[3] The Town of Kingsville (“the Town”) found themselves, around the turn of the millennium, dealing with the fallout of being too popular. They were suddenly facing a building boom. Specifically, a greenhouse boom. The historically quiet agricultural community on the north shore of Lake Erie was becoming a destination location for greenhouses. While the sun component for the crops raised in these “hothouses” might be free, the water need for these hydroponic operations came with costs. With the average greenhouse operation requiring up to 45,460 litres (10,000 imperial gallons) per acre of greenhouse, the Town was facing a strain on financial and infrastructure resources needed to satisfy the needs of all of the community.

[4] Thus it was that the Town Council devised a water allocation system that required commercial greenhouses to have in place a plan for sufficient capacity and delivery of water for their greenhouse operations, prior to receiving approval to build.

[5] It was this process that led to companies controlled by Ron Colasanti applying for and receiving from the Town an allocation of water in relation to 88 acres controlled by them along the Graham Sideroad. Although initially the Colasanti companies were exploring expansion of their greenhouses, they eventually decided to subdivide the property for sale. This followed the construction of a pipeline built by the Town along the Graham Sideroad abutting the Colasanti property. The cost of the project – $225,000 was amortized over 10 years and recovered by a levy on the property of $22,000 per year for 10 years.

[6] When one parcel was sold for a proposed greenhouse operation an assessment was conducted by the Town and the Union Water Supply System. They determined the amount of water that the project would require, per acre of greenhouse. Ron Colasanti transferred that amount of capacity approval to the buyer for a price and the Town approved the building permits needed. The capacity approval was not included in the purchase price of that land.

[7] In 2009, the defendant corporation controlled by Nick Mastronardi and his sons became aware of another Colasanti controlled parcel abutting the Graham Sideroad. 180 eventually purchased that parcel for $640,000. The Agreement of Purchase and Sale included paragraphs relating to the levy and the exclusion by the seller of “the water capacity assessment” from the purchase price.[^1]

[8] It was also agreed that the remaining local improvement charges being assumed by the defendant buyer would be deducted from the purchase price. This resulted in a credit to the buyer of $88,276.

[9] Chris Mastronardi, a 50 percent owner of 180, testified for the defendant. He said he had no background with the family greenhouses until 2009. He said that he understood that water services needed for a greenhouse operation were part of the sale price as the property was advertised as “fully serviced.” He looked at the property with his brother Benji. He said he was aware a new water main had been installed along the Graham Sideroad. He said that he thought the price sought was too high and that his father advised against buying. He was initially unaware of the credit for the local improvement levy. He said he was unaware of the Town’s position that Ron Colasanti owned the rights to any unused water allocation, until after a site plan his company submitted was approved. When the building permit was requested he was told it would not be granted until the necessary water allocation was transferred.

[10] He testified that because the $20 million, 25-acre greenhouse project was all set to proceed he reluctantly entered into an agreement to pay the Colasantis for the water allocation rights.

[11] This agreement was signed and put in place within about two weeks of learning of the Town’s position. That agreement provided for 352,000 imperial gallons of water per day per acre. 180’s plan was upgraded for 50 acres of greenhouse and there was a new agreement entered into by 180 with Colasanti that guaranteed 400,000 gallons a day per acre. This was forwarded to the Town and the needed approval and permits were issued.

[12] The promissory note that is the subject of this action followed the agreement. It allowed for payment over time of the $171,000. No payments have ever been made. Chris Mastronardi says he never had any intention of paying on the note because it was his position that he had already bargained for and received rights to water for his proposed greenhouses. He agrees he did not set out his objections or intentions to the plaintiffs before the transfer of the water allocation to 180.

[13] The defendant now says the Town was wrong and acted illegally in recognizing the water allocation as transferrable by Ron Colasanti and not a right that passed with the land. He said he felt under financial pressure to move ahead with the greenhouse project and the most expedient thing to do was to agree to pay for the water allocation and get the approvals. He felt that fighting the Town for a building permit would not be as quick a solution.

Analysis

[14] This was not the proper forum to test the legality of the water allocation scheme. The Town of Kingsville was not a party to this action. It is clear that the protocol for the allocation of water was a creation of the Town. The Town chose in this case to treat it as a transferrable right. All parties treated it as such. The transfer took place by Colasanti in good faith on the promise to pay by 180. That promise by 180 was made in bad faith with no intention to keep the promise.

[15] The transfer of the allocation was the valuable consideration for the promissory note. Any dispute about its necessity was an issue between 180 and the Town. 180 entered into the agreement and signed the note admittedly under false pretences. It did not think it should have to pay for the transfer and never intended to do so.

[16] The assertion by Chris Mastronardi on behalf of the defendant, as to his reliance on the “fully serviced lot” notation on the property’s sale sign stretches credulity. The Statute of Frauds, s. 1(1) sets out the necessity of any agreement relating to land being “created by a writing signed by the parties.”[^2] Any purchaser of land, even for a family residence their real estate agent and lawyer let alone a commercial development, is obliged to ensure that their expectations are reflected in the Agreement of Purchase and Sale and the Land Transfer. If, in fact, as argued at trial, the words in the agreement that exclude “the water capacity assessment” from the purchase price were ambiguous or confusing, the defendants who were assisted by lawyers throughout their dealings with the plaintiffs could have sought clarification.

[17] While I accept that “allocation” and “assessment” are not usually synonymous, there was no evidence of any different understanding of that clause from that of the plaintiffs, called by the defendant. Mr. Mastronardi, the only witness for the defence showed little knowledge or interest in the details of the Agreement of Purchase and Sale, including the credit of over $88,000 towards the purchase price for the remaining payments levied on the land for the Graham Sideroad water pipe construction.

[18] Nick Mastronardi, Chris and Benji’s father had been in the greenhouse business in the area for many years. Chris and Benji worked with their father when they were younger. I cannot except Chris Mastronardi’s evidence that he believed that the water necessary for any amount of greenhouse development was included in the transfer of this parcel. The Town’s water allocation scheme had been in place for almost a decade at the time of the negotiations to transfer the parcel to 180. I reject that the company’s knowledge of the construction of the Graham Sideroad pipeline, combined with the words “fully serviced” on the For Sale sign would relieve the Mastronardis of any further enquiry of the Town or the Colasantis. Even if I accepted that Chris Mastronardi had an honestly held belief on that, I cannot conclude it was a reasonable conclusion for him to have made. To conclude otherwise would be to make a virtue of carelessness and inattention.

[19] I accept the evidence of Jay Colasanti that when he visited the Mastronardi brothers to enquire into the non-payment of the promissory, he was told that they did not intend to pay as they already owned the water allocation rights. He was offered “33 cents on the dollar” of the money owing on the note. He was told that if he did not accept that he would have to sue and would spend seven years in court and ultimately not get anymore.

[20] This evidence was not objected to nor cross-examined on. I do not accept that is inadmissible as privileged communication arising out of litigation settlement negotiations. There was no litigation and no negotiation. These were the words used in announcing 180’s intention to breach its obligation. It is admissible to assist in assessing the credibility of Chris Mastronardi.

[21] The meeting with the Mastronardi brothers is the first time that their true intentions are made clear. There was no mention of 180 being under financial pressure or not being properly advised by their lawyers. I accept the conversation as an attempt to bully the plaintiffs into an unfair settlement. It is consistent with 180’s deceitful signing of the promissory note. I do not believe Mr. Mastronardi’s evidence that he thought 180 bought the water allocation rights. I conclude that when the company learned that there was a new policy from the Town that would treat the allocations differently in the future, that the company felt they should be entitled to the same treatment.

Conclusion

[22] The defendant company negotiated with the Colasantis on the price to be paid for the allocation. The price came down and repayment over time was agreed to. The defendant’s assertion of being under economic duress was unsupported by any evidence and without merit.

[23] The plaintiffs are entitled to judgment in the amount of $171,000, plus pre-judgment interest from August 1, 2012 and their costs. I have received a Bill of Costs from the plaintiffs and a response from the defendants. I will receive any further submissions on costs from the plaintiffs within seven days of release of this judgment and from the defendant within seven days of the receipt of plaintiffs’ submissions.

Original signed “Carey J.”

Thomas J. Carey Justice

Released: February 2, 2018

[^1]: Agreement of Purchase and Sale from the property transfer - Exhibit 1 Tab 8 [^2]: Statute of Frauds, R.S.O. 1990 c. S.19.