COURT FILE NO.: 16-68991
DATE: 2019/07/31
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Demitrious Kargakos, Plaintiff/Responding party
AND
The Estate of George Kargakos Thomas Stamoulis, Defendants
AND
The Estate of George Kargakos, Plaintiff by Counterclaim/Moving party
AND
Demetrious Kargakos, Christina Kargakos, Canadian Imperial Bank of Commerce and Paula Sousa, Defendants by Counterclaim
BEFORE: Madam Justice H. J. Williams
COUNSEL: John H. Yach for the Moving party
Gigi Costanzo for the Responding party
HEARD: January 31, 2019, with supplementary written argument
ENDORSEMENT
Overview
[1] The Estate of George Kargakos is seeking an order for possession of a property on Kent St. in Ottawa and some related orders.
[2] The responding party is Demitrious[^1] Kargakos, the son of the late George Kargakos.
[3] At the outset of the hearing of the motion, the estate’s lawyer advised that production-related issues in its motion materials had been resolved and that the only issue before the court related to the Kent St. property.
[4] The parties also advised that they have consented to an order consolidating this action (#16-68891) with a related application (#16-67615) and continuing the two proceedings under the style of cause and file number of this action.
Background
[5] The property at 292 Kent St., Ottawa was co-owned by the father and son, George and Demitrious (“Jim”) Kargakos.
[6] Father and son purchased the property in the early 1980s. The property was initially registered in their names as joint tenants. The father had a 60 per cent interest in the property and the son a 40 per cent interest.
[7] For more than 30 years, the son operated a convenience store on the ground floor of the property and rented an apartment on the upper floors to a tenant.
[8] The store was a partnership between the father and the son.
[9] The son says that he and his father had agreed that, when the father died, the son would become the sole owner of the property, in exchange for having operated the store and managed the property.
[10] The estate says that the son retained all of the profits generated by both the store and the tenancy. The son says that his parents registered a $100,000.00 mortgage against the property in 1986 and that the mortgage was paid through revenue from the store. The son says that the store’s revenues financed renovations to his parents’ home and provided financial assistance to his sister and her spouse. The son also says that the father regularly took cash from the store’s cash register and cigarettes, lottery tickets and food from the store without paying for them.
[11] The father and the son had a falling out and the father severed the joint tenancy in April, 2014, creating a 50-50 tenancy in common.
[12] The estate says that the father later learned that the son had misappropriated money from a joint bank account held by the father and the son’s mother and that the son had also used that account to make payments on a line of credit the son had secured against the father’s home to buy a second Kent St. property that was registered in the son’s name.
[13] The father and the son attempted to negotiate an agreement that would see the son buy the father’s interest in 292 Kent St. but the negotiations failed.
[14] The son closed the store in November of 2015.
[15] The father died in January of 2017 at the age of 89.
[16] The estate says that the son has failed to maintain the property and that its condition has deteriorated since the store was closed in 2015. The estate says that the City of Ottawa issued by-law violation orders against the property in June of 2017, including an order related to vermin, and that the son refused to provide the estate with any information about what work, if any, was done to address the city’s concerns.
[17] The estate says that when it made arrangements to inspect the property, the son changed the locks and prevented the inspection from taking place.
[18] The estate believes the tenant left the property in the spring of 2018 at the latest and that the property has been vacant since that time.
[19] The estate also says that the son has refused to consent to a mortgage against the property for purposes of generating funds to pay for repairs.
[20] The estate had been concerned about mounting municipal tax arrears, although the son’s lawyer said that the son paid the amount owing the day before the hearing of the motion.
[21] The estate seeks an order under Rule 45.01 of the Rules of Civil Procedure for exclusive possession and sale of the property.
[22] For his part, the son argues that an order to sell the property would effectively decide a key issue in his action against the estate without the benefit of a trial. The son argues that he should have an opportunity to convince a court that his father had agreed that he would own the property when the father died.
[23] The son argues that the property has a special sentimental value to him and that, if he is granted sole ownership of the property, he will re-open the convenience store. The son says that he would also like to pass the property on to his son, in his words, “in keeping with a Greek tradition.”
[24] The son also argues that the sale of the property would trigger a capital gain and an associated tax obligation that he would not incur if he is ultimately found by a court to be entitled to sole ownership of the property.
Issue
[25] The main issue on the motion is whether the property at 292 Kent St., Ottawa should be sold.
Analysis
[26] For the reasons below, the relief sought by the estate in respect of the sale of the property shall be granted.
[27] Rule 45.01(1) provides that the court may make an interim order for the custody or preservation of any property in question in a proceeding or relevant to an issue in a proceeding, and for that purpose may authorize entry on or into any property in the possession of a party or a person not a party.
[28] Rule 45.01(2) provides that where the property is of a perishable nature or likely to deteriorate or for any other reason ought to be sold, the court may order its sale in such manner and on such terms as are just.
[29] Based on the evidence:
• that the convenience store was closed in November, 2015;
• that municipal tax arrears were permitted to accumulate;
• that the City of Ottawa issued by-law contravention orders against the property in June, 2017;
• that the son prevented the estate from inspecting the property and resisted the estate’s efforts to mortgage the property to pay for repairs; and
• that the tenant moved out and the property has been vacant at least since the spring of 2018;
I am satisfied that the property is likely to deteriorate and lose value if it is not sold.
[30] There are also other reasons that the property ought to be sold. (See para. 36, below.)
[31] Further, s. 2 of the Partition Act, R.S.O. 1990, s. P.4 provides that all parties interested in land in Ontario, including tenants in common, such as the father and the son, “may be compelled to make or suffer partition or sale of the land, or any part thereof, whether the estate is legal and equitable or equitable only.”
[32] The onus is on the party opposing partition or sale to persuade the court that partition or sale should not be ordered. (Davis v. Davis, 1953 CanLII 148 (ON CA), [1954] O.R. 23 (C.A.))
[33] The court’s discretion to refuse an application for partition or sale is very limited; there must be malicious, vexatious or oppressive conduct to justify the refusal to grant partition or sale. (Brienza v. Brienza, 2014 ONSC 6942 at para. 25, citing Silva v. Silva, 1990 CanLII 6718 (ON CA); Osborne v. Myette, [2004] O.J. No. 3383 (S.C.J.); Latcham v. Latcham, 2002 CanLII 44960 (ON CA), [2002] O.J. No. 2126 (C.A.), affg. [2001] O.J. No. 5291 (Div. Ct.); Fellows v. Lunkenheimer (1998), 21 R.P.R. (3d) 142 (Ont. Gen. Div.); Kalita v. Freskiw Estate, [1998] O.J. No. 5180 (Gen. Div.); Jakubiszyn v. Tekielak, [1991] O.J. No. 2362 (Gen. Div.); Garfella Apartments Inc. v. Chouduri, 2010 ONSC 3413, [2010] O.J. No. 2900 (Div. Ct.).)
[34] The son argues that an order selling the property prior to a trial of the issues would be oppressive to him for the following reasons:
(a) The property has special sentimental value to him and damages could not adequately compensate him for the loss of the property. If he is awarded sole ownership of the property at trial, he plans to re-open the convenience store;
(b) If the property is sold, he would be denied the remedy he is seeking at trial, which is sole ownership of the property;
(c) The sale of the property would trigger a capital gain; and
(d) He argues that the sale proceeds he will receive from the sale of the property could be less than what he may be entitled to receive in damages and costs whereas an order granting him sole ownership of the property would adequately compensate him. He also argues that the damages to which he is entitled at trial may be difficult to assess.
[35] The case law shows that malicious, vexatious or oppressive conduct that would bar a remedy under s. 2 of the Partition Act is more than unreasonably refusing to accommodate the wishes of the other co-owner (Brienza, supra, at para. 27, citing Peters v. Peters, [2000] O.J. No. 1849 (S.C.J.)) or subjecting the other owner to the tax consequences of a sale of the property (Brienza, supra, at para. 27, citing Glick v. Carr, [1991] O.J. No. 1588 (Gen. Div.); Cogan v. Cogan, (2003), 11 R.P.R. (4th) 235 (Ont. S.C.J.).)
[36] I find that the son’s reasons for opposing the relief sought by the estate do not rise even to the level of unreasonable accommodation of his wishes. The estate has good reason to take possession of and sell the property, including preservation of the value of an asset in which the estate has an interest and accessing funds that are property of the estate.
[37] In respect of the son’s argument that a sale of the property should not be ordered before his action is tried, I am not satisfied that damages would not adequately compensate the son if he is successful at trial. I note that, in his statement of claim, the son requested damages in the alternative to his request for property-specific remedies. The son has not presented evidence to suggest that the property is unique, other than in respect of the sentimental value he attaches to it. The estate’s motion materials suggest that at trial, the estate would argue that the son’s abandonment of the convenience store in November, 2015, his willingness to allow the property to fall into disrepair and his resistance to the estate’s efforts to inspect and repair the property call into question the strength of his emotional attachment to the property.
Statute of Frauds, R.S.O. 1990, c. S. 19
[38] At the hearing of the motion, the estate argued that any agreement between the father and the son that the son would become the sole owner of 292 Kent St. when the father died would be unenforceable because it was not in writing, contrary to s. 4 of the Statute of Frauds.
[39] The son’s lawyer argued that he was taken by surprise by this argument and requested an opportunity to provide additional material.
[40] The parties delivered supplementary written arguments on the Statute of Frauds issue.
[41] The son argues that the estate cannot raise the Statute of Frauds issue because it was not pleaded.
[42] The son also argues that s. 4 of the Statute of Frauds is subject to the doctrine of part performance; the son argues that after he operated the convenience store for more than 30 years on the basis of an agreement that he would inherit the property, the estate should not now be permitted to rely on s. 4 of the Statute of Frauds to prevent him from enforcing the agreement.
[43] In its supplementary argument, the estate requested leave to amend its statement of defence and counterclaim to plead the Statute of Frauds.
[44] I do not accept the son’s submission that it is too late for the estate to amend its pleading because more than two years have passed since the son issued his statement of claim. The provisions of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B apply to claims not defences.
[45] The estate argued that I should not decide the Statute of Frauds issue on this motion. I agree. The Statute of Frauds issue was not raised until after the parties had filed their evidence on this motion. It was not necessary for me to consider the Statute of Frauds issue to decide the issues on this motion and I have not done so.
Conclusion
[46] I make the following orders:
(1) This action (Ontario S.C.J. #16-68891) and the related application (Ont. S.C.J. #16-67615) shall be consolidated, continued and tried under the style of cause and file number of this action. The parties shall consider whether any further, related orders are required. If they are unable to agree, either party, at its/his option, may request a case conference with a master. I make this order under Rule 50.13(1) of the Rules of Civil Procedure.
(2) The estate shall have leave to amend its notice of motion and its statement of defence and counterclaim in the form attached at Tab 2 of the supplemental factum of the moving party.
(3) The estate shall, forthwith, be granted sole, exclusive possession of the property at 292 Kent St. on the terms in para. 50 of the factum of the moving party. Should the estate require directions and/or further orders in respect of the financing of any necessary repairs or the sale of the property, it may request a case conference with a master to request the directors and/or orders or, if appropriate, a reference under Rule 55 of the Rules of Civil Procedure.
(4) The proceeds of the sale of 292 Kent St. shall be paid into court to the credit of this action pending resolution or adjudication of this action and/or subject to a further order of this court. I make this order under Rule 45.02 of the Rules of Civil Procedure.
Costs
[47] The parties have provided me with costs outlines in accordance with Rule 57.01(6.)
[48] If the parties cannot agree on the costs of this motion,
• The estate may deliver written submissions of no more than three pages in length within 14 days of the date of this endorsement;
• The son may deliver written submissions in response of no more than three pages in length within 14 days of the date of receipt of the estate’s submissions; and
• The estate may deliver any reply submissions of no more than three pages in length within seven days of the date of receipt of the son’s submissions.
[49] The costs submissions may be filed by sending them to me, care of the trial coordinator.
[50] If, because of their summer vacations or for any other reason, the parties wish to amend the timetable I have set for their costs submissions, they may do so on consent, with notice to me, care of the trial coordinator.
Madam Justice H. J. Williams
Date: July 31, 2019
COURT FILE NO.: 16-68991
DATE: 2019/07/31
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Demitrious Kargakos, Plaintiff/Responding party
AND
The Estate of George Kargakos Thomas Stamoulis, Defendants
AND
The Estate of George Kargakos, Plaintiff by Counterclaim/Moving party
AND
Demetrious Kargakos, Christina Kargakos, Canadian Imperial Bank of Commerce and Paula Sousa, Defendants by Counterclaim
BEFORE: Madam Justice H. J. Williams
COUNSEL: Counsel, for the Plaintiffs/Respondents
Counsel, for the Defendant/Applicant
ENDORSEMENT
Madam Justice H. J. Williams
Released: July 31, 2019
[^1]: The name is spelled “Demetrious” in many of the documents filed on the motion. As the name was spelled “Demitrious” in the affidavit sworn by Mr. Kargakos Jr., I infer that “Demitrious” is the correct spelling.