Court File and Parties
COURT FILE NOs.: CV-18-1319 AND CV-18-583 DATE: 2019-03-13 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MILIJANA CVETKOVIC Applicant – and – PATRICK PERRIER Respondent
Counsel: Nathaniel Read-Ellis – Counsel for the Applicant Dennis G. Crawford - Counsel for the Respondent
HEARD: March 11, 2019
Reasons for Judgment
The Honourable Justice James W. Sloan
[1] This action involves competing claims to ownership of properties known as 192 and 194 Wentworth Avenue in Kitchener, Ontario.
[2] The applicant claims ownership of 100% of the property while the respondent claims a 50% ownership.
[3] The property was purchased by the applicant’s parents in 1996 and she began living at 192 Wentworth in 1997. Her sister began living next door at 194 Wentworth Avenue.
[4] In 2003 title was transferred from the parents to the two daughters.
[5] In 2008, the sister asked the applicant to buy out her interest in the property which she agreed to do and she sought out mortgage financing.
The Applicant’s Position
[6] The applicant could not qualify for a mortgage on her own and asked the respondent, who was her boyfriend, to co-sign the mortgage.
[7] The lawyer handling the purchase of the property sent a letter to the bank indicating that the property would be held such that the applicant would own 90% and the respondent would own 10%.
[8] The mortgage lender demanded that the parties be registered on title as 50% co-owners of the property or they would not provide mortgage financing.
[9] It is the applicant’s position that the respondent would not have a beneficial interest in the property but would hold a 50% interest in trust for the applicant.
[10] The applicant’s plan was to rent out 194 Wentworth to help pay the mortgage and that she did not expect the respondent to pay the mortgage or any other ownership expenses on the property.
[11] The respondent did not pay any consideration for the transfer of the 50% interest in the property and it was not until October 2016 that he made a claim for a beneficial interest.
[12] Shortly after the closing of the property, the respondent began renting and continued to rent 194 Wentworth for $1,000 per month until this dispute arose in 2016, when he began paying less than $1,000 per month.
[13] The dispute over the quantum of rent arose when the respondent deducted the cost of paint and his labour for repainting 194 Wentworth in 2016.
[14] The applicant paid the costs of ownership, including maintenance and insurance.
[15] At pages 76 to 78 of the transcript of the respondent’s cross examination of April 24, 2018, when asked about what the parties’ intentions were with respect to taking title, he gives confusing answers when asked about what the percentage of ownership was supposed to be.
[16] At question 435 he indicates that he has always been confused about what the percentage ownership was supposed to be. His answer to question 438 indicates that the applicant’s intention was that the ownership would be 90% in her favour.
[17] At questions 439-442 he again seems to confirm that there was to be 90/10 split but the bank would not loan the money on that basis and required title to be taken on a 50-50 basis.
[18] In answer to question 443 he indicated”
…“in heart of heart I knew it was 50 – 50 because I am losing my job and everything moving into that house because it I had a lot of upkeep to do in it. And like I said it was 10 – 90 I would have been out of there a long time ago. That would have been nothing to me”
[19] While the respondent may use the word purchase, there is no increase in what the respondent contributes when the suggested registered ownership changed from 90/10 to 50/50. But for the bank, the structure of the deal remains the same.
[20] Before the transfer from her sister, the applicant owed $78,000 for her one-half share of the property. After the purchase, the applicant owed approximately $100,000 for her one-half share of the property. The applicant submits it would make no economic sense for her to do this.
[21] Because the sisters agreed that the value was $212,000, the applicant argues that this translates into $11,000 of equity that she was contributing to the purchase.
[22] The applicant submits that if the respondent was part owner of the property he would have moved in shortly after closing at the end of April 2008 rather than waiting until the summer. No evidence was presented to the court of where the applicant was living in April 2008 and what, if any, steps he would have to take before he moved in or when the applicant’s sister was moving out.
[23] Although Rebecca Barrows is a friend of the applicant, she testified to a conversation that took place between the parties on May 10, 2008, where the parties were discussing the respondent renting 194 Wentworth because the applicant’s sister was leaving.
[24] The subject mortgage was renewed in 2013 and around that time the respondent began paying $900 rather than $1,000 per month because he was having financial difficulties.
[25] Although the respondent claims not to have known that he was paying more than half of the mortgage, mortgage information statements addressed to both parties appear to have been mailed out to his address of 194 Wentworth Avenue on a semi-annual basis. These statements clearly show the biweekly/monthly cost of the mortgage for principal, interest and taxes. Although the respondent argues that there is no evidence that he received the statements, he has attached mortgage statements to his affidavit commencing in 2011 which are mailed to both parties at his address of 194 Wentworth Avenue, Kitchener.
[26] On his cross-examination, the respondent stated he had an idea, “kind of knew all along from the get go” in 2008 that he was paying more than half the mortgage costs and after getting a mortgage payment history in 2013 he was able to confirm that fact.
[27] The applicant submits, based on the above facts that the respondent knew he was a tenant and that the rent exceeded one half the mortgage costs, if not in 2008 certainly by 2013.
[28] She further submits that when the respondent states that he did not find out until 2016 that he was over paying the mortgage, he was simply being untruthful.
[29] She further submits that the catalyst for this litigation came in June and July 2016, when the respondent wanted to be reimbursed for paint and his labour for painting his unit. This is something that a tenant might request, but certainly not an owner.
[30] The applicant relies on the cases of Pecore v. Pecore, 2007 SCC 17, Andrade v. Andrade, 2016 ONCA 368.
[31] The applicant submits that the transfer to the applicant was gratuitous & relies on the Pecore case with respect to the presumption of resulting trust for gratuitous transfers. The court stated at paragraphs 20 and 24 as follows;
20 A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original titleholder … While the trustee almost always has legal title, and in exceptional circumstances it is also possible that the trustee has an equitable title…
24 The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended…This is because equity presumes bargains not gifts.
[32] The applicant acknowledges not having declared rental income while also stating that she did not deduct mortgage and other expenses from such income. Similarly, she did not list any rental income in her bankruptcy filings.
[33] In the Andrade case the beneficial owner of property did not report the taxes which should have been reported based on her beneficial ownership. In spite of this the Ontario Court of Appeal stated at paragraphs 94, 95 and 96:
94 See also Korman v. Korman … where citing the same passage Nussbaum, and the Schwartz decision, this court confirmed that the motivation to shield property from a transferring spouse’s potential creditors does not in itself rebut the presumption of a resulting trust in a gratuitous transfer of property between spouses.
95 Similarly, in the present case, the analysis cannot begin and end with the tax treatment of the house. The court was entitled to consider the fact that Luisa’s tax filings are contrary to her estate’s argument that she was a beneficial owner of the property, as well as all of the evidence as to how this came to be. The tax treatment is some evidence of intention, but Luisa’s actual intention at the time of the transaction remains a question of fact to be determined on the whole of the evidence.
96 The fact that Luisa had no part in deciding how the house would be treated for tax purposes is inconsistent with any admission by her respecting her intention. Certainly the tax treatment can be explained other than as an acknowledgment by Luisa that her sons were the beneficial owners of the house. As such, what was in her tax returns sheds little light on whether it was Luisa’s intention to confer beneficial ownership of the property on her sons.
The Respondent’s Position
[34] The respondent purchased an undivided 50% interest in the subject property which is reflected both in the deed and mortgage documents registered against the property.
[35] The new mortgage paid off the old mortgage plus allowed for a payment of $40,000 to the applicant’s sister for her interest.
[36] The parties agreed to pay all expenses, including mortgage insurance, maintenance and taxes, equally.
[37] In 2016 the respondent discovered that he was paying more than one half of the expenses on the property.
[38] The respondent claims to have over contributed to the expenses in the amount of $53,661.42.
[39] When in 2016 the respondent requested that the property be sold, the applicant, for the first time, took the position that he was not a 50% owner of the property.
[40] The respondent loaned the applicant $25,364.68 in 2004 that she has not paid back. The applicant declared bankruptcy in 2011 without disclosing this unpaid loan to the respondent.
[41] For the applicant to succeed she must prove that all of the documentary evidence is incorrect. These documents include the land registration documentation for the transfer and charge, title insurance documentation, direction re title, acknowledgement and direction that she signed both as vendor and purchaser, statutory declaration, her tax returns and bankruptcy filing.
[42] The court must look at the applicant’s intention in 2008.
[43] The respondent submits that this was not a gratuitous transfer and is therefore different from the Pecore case.
[44] In this case the respondent gave consideration by becoming liable on the mortgage, and by paying the mortgage. He submits that the facts of this case are similar to the Ontario Court of Appeal decision in Holtby v. Draper, 2017 ONCA 932.
[45] In the Holtby case, Holtby and his new spouse (Draper) took joint title to a property (Lot 8) from Holtby and his first spouse, which they remortgaged to pay out Holtby’s first spouse. Draper made most of the mortgage and property tax payments on the property. The property was later transferred from Holtby and Draper, to Draper alone for natural love and affection.
[46] On separation from Draper, Holtby claimed Draper held all of Lot 8 in trust for him because he argued there had been a gratuitous transfer(s). The Court of Appeal stated at paragraph 6:
[6] As for Lot 8, I conclude that Mr. Holtby has made out his claim to a resulting trust, but only for 50% of this property. In relation to the initial transfer to Ms. Draper as joint owner, the trial judge erred (i) in placing the onus on her to rebut the presumption of resulting trust when Lot 8 was registered in the parties joint names; (ii) in concluding that Ms. Draper received a “gratuitous” transfer after failing to consider how the interest was acquired (by payment to Mr. Holtby’s first wife, with monies raised on a mortgage that was mostly serviced by Ms. Draper); and (iii) in failing to consider that Mr. Holtby’s Planning Act, R.S.O. 1990, c P.13 purpose for holding the property in joint names was consistent with an intention to make Ms. Draper a joint beneficial owner.
[47] The court held that Draper held one half of the property in trust for Holtby.
[48] Although the applicant initially denied that the respondent made any mortgage payments directly to the CIBC, when confronted with documentary evidence including cheques dated in 2013, she acknowledged that he had made cheques payable to the CIBC and then suggested that the respondent would do that and place the cheques in her mailbox.
[49] Based on the fact that the respondent was paying cheques directly to the CIBC, which cheques were being paid on the mortgage, the respondent submits that he was in fact paying the mortgage and not paying rent.
[50] Respondent further submits that the applicant did not claim his payments as rent because, in fact, they were not rent they were mortgage payments. Likewise the applicant did not advise her bankruptcy trustee that she was collecting rent because she was not.
[51] In addition, on her bankruptcy filings she stated that she paid her mortgage at the rate of $680 per month which is the approximate amount of half of the full mortgage payment. This can only mean that the respondent was paying the other half of the mortgage.
[52] Therefore, to me it appears on a balance of probabilities that the respondent guaranteed the whole mortgage and serviced at least half of the mortgage.
[53] There is no evidence establishing any intention to create a trust of any kind in favour of the applicant, or for the respondent to act as trustee.
[54] There are also no documents such as a lease to show that the respondent was a tenant. In addition, the applicant did not act like a landlord since she did not take steps to evict the respondent for nonpayment of rent or take any steps to collect the back rent she claims is owing.
[55] Sometime after the parties had a falling out in 2016 the applicant left a voicemail message, part of which reads:
This is not what we agreed upon, you are paying all of $900 where you lived, I offer you this and half ownership on that side, I did not say half ownership of the whole property.
[56] Although the applicant states this is an offer to settle and should not be in the material, the respondent submits the applicant has now talked about splits of 50/50, 75/25 and 90/10.
Applicant’s Reply
[57] All of the transactional documents carry little weight because they are simply essentially standard real estate forms needed to complete a real estate transaction.
[58] A resulting trust is not an equitable remedy, it is simply a fact situation that either exists at the time of the transaction or not. It has everything to do with the intention of, in this case, the applicant.
Findings
[59] Aside from the lawyer generated real estate transfer documentation there is a lack of even rudimentary documentation of what the parties’ intentions were after it was agreed that their deed would be registered to each of them equally as tenants in common. It is surprising and disappointing at the same time, because they (or at least the applicant) consulted a lawyer, who was aware that the initial instructions from his client(s) had been dramatically changed by the CIBC.
[60] The evidence of both parties leaves a lot to be desired, and a great deal of the evidence from both parties appears to be self-serving.
[61] It is difficult to see how the applicant could have thought, or even known at the time of the transfer, that the respondent could hold part of the property in trust for her. The court was not presented with evidence of such knowledge or discussion.
[62] The applicant’s testimony must be considered very carefully. On the evidence before me she appears to play fast and loose with the truth, particularly when it comes to filing tax returns and signing legal and bankruptcy documents, some of which are under oath.
[63] There is no doubt based on the evidence before the court that she initially instructed her lawyer that the parties wanted to take title on the 90/10 split in ownership.
[64] When the bank refused to loan her the money on the basis of a 90/10 split, there is no evidence that she sought out a mortgage broker or approached her parents to assist with the financing.
[65] There is also no doubt that she wanted to keep the property “in the family” so to speak and so was essentially prepared to sign whatever documents were necessary, even if she knew they were untrue. The court was not apprised of why these particular residential homes were important to the applicant.
[66] Essentially, to keep the property and pay out her sister’s interest, she had to accept the title being registered on a 50/50 basis.
[67] There is also no evidence that she ever discussed with either of her lawyers how she would be able to “protect” “her” property if it was registered on a 50/50 basis with the respondent. This does not have a ring of truth to it.
[68] I find this totally inconsistent with her claim that she was to be a 100% owner of the property and the respondent was to only be a tenant. In addition, she admitted right from the start that the respondent was to have some ownership in the property.
[69] There is no evidence that she ever thought of how she would deal with the property in the future with the respondent’s name on the registered title, or what would happen if she passed away before he did.
[70] The respondent on the other hand, when asked about percentage ownership, is very unclear of what was happening, particularly when the transfer was taking place.
[71] It appears on the evidence before the court that if he did not or may not have known what the monthly mortgage payments were in 2008 he certainly did by 2013. Notwithstanding having this information, he did absolutely nothing to question why he was paying more than one half of the properties’ expenses.
[72] In fact, it appears he did nothing until the paint/labour issue arose in 2016. This seems very strange if he thought he was a 50% owner and should only be paying 50% of the expenses, (whatever those expenses were) rather than being a tenant and paying a monthly rent.
[73] He did however become liable to the CIBC for a mortgage of approximately $200,000. At the time that he became liable for the mortgage in 2008, there was economic uncertainty in the world and the applicant, to say the least, did not have a good credit rating.
[74] Based on the evidence before this court there was little if any equity in the property after the sister was paid her $40,000 and this would have been particularly true from CIBC’s perspective, if the property had to be sold under power of sale.
[75] Moving into the property is equally consistent with being an owner or being a tenant but in most cases a tenant would have some kind of a lease where an owner of course would not.
[76] Was there a gratuitous transfer of title?
[77] In this case the parties agree and the documentation confirms the following:
a) the parties jointly borrowed approximately $200,000 from the CIBC, b) the value of the property at the time was close to $200,000, c) the applicant’s sister was paid $40,000 from the mortgage proceeds, d) the applicant’s sister transferred her 50% interest in the property to the applicant and the respondent equally,
[78] On the above mentioned facts and based on the rational in the Holtby case, I find that there was not a gratuitous transfer of title. Both parties borrowed money from CIBC, both parties paid the applicant’s sister $40,000 and the applicant’s sister signed the deed (transfer) transferring her interest to both parties.
[79] I therefore dismiss the applicant Cvetkovic’s application in its entirety.
[80] The respondent (applicant in file number CV-18-583) may proceed with the partition and sale of the property.
[81] The partition and sale of the property is stayed for 60 days to allow the parties and in particular Cvetkovic, an opportunity to purchase Perrier’s interest in the property.
[82] If the parties are unable to agree on costs, Mr. Crawford shall forward his brief submissions on costs to me by March by 21, 2019. Mr. Read-Ellis shall forward his brief response to me by March 28, 2019. Mr. Crawford shall then forward his reply, if any, to me by April 2, 2019. Cost submissions may be sent to my attention by email, care of Kitchener.Superior.Court@ontario.ca. Cost submissions, excluding bills of costs, shall be limited to 5 pages using spacing of 1.5 and 12 pitch font.