COURT FILE NO.: CV-17-132347
DATE: 20201005
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ANTONIO GIANCOLA and ANGELINA GIANCOLA
Plaintiffs
– and –
ALEXANDRE DOBRYDNEV
Defendant
Christopher Belsito, for the Plaintiffs
Arkadi Bouchelev, for the Defendant
HEARD: Via Zoom September 29, 2020
REASONS FOR DECISION
EDWARDS J.:
Overview
[1] A real estate agreement between the parties that was entered into on March 12, 2017 has had a tortured history through the judicial system, resulting in a second motion for summary judgment that I heard on September 29, 2020. These are my reasons granting summary judgment to the Plaintiffs in the amount of $306,130.54.
The Litigation History
[2] To give some meaning and understanding to these reasons, a brief review of the litigation history is in order. While this matter involves the purchase of a residential home with a scheduled closing date of July 28, 2017, as these reasons will make clear the transaction never closed resulting in a statement of claim being issued by the Plaintiffs in August 2017. Ultimately, the matter came before me on December 21, 2018 by way of a motion for summary judgment where no one appeared on behalf of the Defendant. A request to adjourn the motion was sent to the court by the Defendant by way of a faxed handwritten note dated December 20, 2018. The purported reason for his adjournment request was that the Defendant had been involved in a motor vehicle accident and had been injured, thus precluding his ability to attend court.
[3] I refused the request for an adjournment. My reasons for granting summary judgment in favour of the Plaintiffs were released on January 2, 2019. The Defendant, as was his right, then filed a Notice of Appeal. The appeal was administratively dismissed despite indulgences being granted by the Court of Appeal.
[4] The Defendant then brought a motion in this court to set aside my Judgment, which was heard by Charney J. on August 16, 2019. The Defendant’s motion was unsuccessful. Ultimately, the Defendant brought a motion before me pursuant to Rule 59.06(2)(a), a motion that I heard on September 17, 2019. I granted the Defendant’s motion and set aside my Judgment of January 2, 2019. In my Reasons of September 17, 2019, I imposed a strict timetable on the parties to allow for the hearing of this motion for summary judgment in a timely fashion. Unfortunately, the COVID-19 pandemic interceded and this motion ultimately came before me on September 29, 2020 for disposition.
The Facts
[5] While the facts of this case are reviewed in my Reasons of January 2, 2019, they are worth repeating:
[2] The Plaintiffs and Defendant entered into an Agreement of Purchase and Sale (“the Agreement”) on March 12, 2017, for the purchase of the Plaintiffs’ residence municipally known as 34 View North Court, Vaughan, Ontario (“the Residence”). The Agreement required the Defendant to provide a deposit of $50,000. The Agreement had a closing date of July 28, 2017.
[3] The Plaintiffs were represented in the real estate transaction by their real estate solicitor, Laith Hahn (“Mr. Hahn”). They were also represented by a real estate agent, Santo Sessa (“Mr. Sessa”). Initially the Defendant was represented by his real estate lawyer, Mr. David Cohen, and subsequently replaced by Ranat Begaliyev (“Mr. Begaliyev”).
[4] Some time prior to July 24, 2017, the Defendant approached the Plaintiffs directly and requested that they provide a vendor take-back mortgage in the amount of $150,000. The Plaintiffs refused to provide a vendor take-back mortgage.
[5] On July 26, 2017, Mr. Hahn wrote to Mr. Begaliyev to confirm that Mr. Begaliyev was representing the Defendant with respect to the closing of the Agreement and advised that he would be delivering the vendor’s closing package.
[6] On July 26, 2017, Mr. Begaliyev responded to Mr. Hahn and advised that the vendor’s closing package had been received and further requested a one-month extension in which to close the Agreement.
[7] On July 27, 2017 the Defendant sent a text message to Mr. Sessa, which provided:
My proposal for closing of the deal:
Option 1: Reduce the price of the property from $1167 to 999k and change closing day from July 28th, 2017 to September 7th, 2017
Option 2: cancelling the deal and refunding the buyer’s deposit of 50k
Option 3: Court trail (sic):
a. Refund of 50k deposit
b. Refund of projecter (sic) commersial (sic) profit from the rent of the discussed property in the amount of $$$ per month and/or per year
c. Compensation for hidden information about structural damage of foundation and basement flooding - $$$. This information was not disclosed by the selling MLS listing and home owners
[8] On July 28, 2017, Mr. Hahn wrote to Mr. Begaliyev confirming that the Defendant had requested an extension of the closing for a period of 30 days, with an indication that the Plaintiffs would be prepared to extend the transaction until September 7, 2017 on various conditions.
[9] On July 28, 2017, Mr. Begaliyev responded to Mr. Hahn by email indicating that the Defendant had rejected the Plaintiffs’ proposal and further suggested that the purchase price should be reduced to $999,000, and that the closing date be moved to September 7, 2017. Mr. Begaliyev further advised in his email that if the Plaintiffs were not prepared to agree to those conditions the Plaintiffs could return the Defendant’s deposit and the Agreement could be cancelled, failing which the Defendant would file a claim alleging that there were material deficiencies in the property, including flooding and cracks in the fundament (sic) of the basement which were concealed and not disclosed to him by the Plaintiffs.
[10] On July 28, 2017, Mr. Hahn responded to Mr. Begaliyev and denied the Defendant’s allegations of any defect in the basement, and further advised that the Plaintiffs were ready and willing to close the transaction as of July 28, 2017, the closing date specified in the Agreement.
[11] Late in the afternoon of July 28, 2017, Mr. Begaliyev responded to Mr. Hahn indicating that his client was not going to close the Agreement and that the reason related to “some material defects of the subject property” which were not disclosed to the Defendant at the time of closing. Mr. Begaliyev completed his email to Mr. Hahn indicating that his client was prepared to close on September 7, 2017 at a price of $999,000.
[12] The Agreement did not close on July 28, 2017. The Defendant is therefore prima facie in breach of the Agreement. The Defendant has not produced any evidence with respect to the allegations that he has made either through his lawyer or through his text to Mr. Sessa, suggesting that there was some defect in the basement of the residence. (While my Reasons of January 2, 2019 reflect that the Defendant had not produced any evidence to support the aforesaid assertion on the motion now being heard, evidence has been produced by the Defendant).
[13] As the sale of the property did not close as required on July 28, 2017, the Plaintiffs re-listed their property and sold the property on March 6, 2018, accepting an offer of $925,000. This sale closed on May 9, 2018. There is no evidence before me that the Plaintiffs’ efforts in mitigating their damages by the sale of their property for the aforesaid price of $925,000, represented anything other than reasonable efforts on their part to mitigate their damages.
Position of the Defendant
[6] I will address the position of the Defendant first, as it will provide a better understanding of the issues in this motion for summary judgment brought by the Plaintiffs. The essence of the Defendant’s position is that a few days prior to the closing, he visited the residence and noticed an area of the basement floor which had been plastered over. It is the position of the Defendant that when he initially attended at the property on March 12, 2017, the plastered area of the basement floor had been covered with a carpet.
[7] The Defendant alleges that when he inspected the property on July 21, 2017 and noticed the defect in the concrete floor, he inquired of the Plaintiffs and was informed that in 2013 the foundation walls of the residence had cracked “as a result of an earthquake” and “that the basement had flooded up to eight feet”.
[8] The Defendant alleges that during his discussion with the Plaintiffs, while the Plaintiffs discussed the particulars of the work done to repair the damage, Mr. Giancola refused to produce any of the repair documentation nor any information with respect to a claim to his insurance company. The Defendant alleges that the Plaintiffs acknowledged that they never applied for a building permit for the repairs done in 2013.
[9] The Defendant is in the business of home renovations and alleges that as a result of the observations that he made on July 21, 2017, together with the information he received from the Plaintiffs, that he became very concerned. The Defendant argues that the Plaintiffs intentionally concealed the repairs to the basement floor by covering them with a large carpet when he initially attended at the property on March 9, 2017.
[10] The Defendant filed two expert reports in support of his position that the repairs to the basement floor were significant repairs that should have been disclosed as part of the Agreement. The Defendant argues, by reference to the evidence of these experts, that the concrete patch was not consistent with repairs of a minor water leak but rather was indicative of a major structural crack in the foundation.
[11] The Defendant maintains that with the knowledge he was provided concerning the cause of the repairs to the basement floor, he was not prepared to close the transaction without a significant reduction in the purchase price to reflect - what he suggests, would be the additional cost that he could potentially incur to properly repair the structural integrity of the residence. The Defendant denies that his failure to close was not a last-minute tactic to get out of the Agreement given the dramatic downturn in the real estate market.
[12] The Defendant takes issue with the position advanced by the Plaintiffs that he did not have the necessary funds to close the transaction, and argues that the evidence clearly demonstrates that he did have the funding to close the Agreement of Purchase and Sale.
Position of the Plaintiffs
[13] The Plaintiffs’ position is a total denial of the allegations made by the Defendant that there was any kind of major leak or structural defect to the foundation of the residence. The Plaintiffs further deny that as it relates to the concrete patch on the basement floor, that this was covered on March 9, 2017 when the Defendant initially went over the residence prior to submitting his Offer to Purchase.
[14] In support of the Plaintiffs’ position, evidence was provided from the Plaintiffs’ real estate agent, Mr. Sessa, who appended to his affidavit photographs that were taken prior to the listing of the residence. The photographs, if this court accepts that they were taken prior to the Defendant’s Offer to Purchase, and further if this court accepts that the photographs in fact reveal the state of the basement floor as it would have been revealed to the Defendant when he visited the residence on March 9, 2017, would ultimately confirm the Plaintiffs’ position that there was no carpet covering the patch on the basement floor as testified to by the Defendant.
[15] The Plaintiffs argue that what the Defendant is attempting to do is to set up a credibility fight between the Defendant and the Plaintiffs as it relates to the state of the basement floor, and whether there was any latent defect of which the Plaintiffs were aware that was never revealed to the Defendant. The Plaintiffs’ response is a total denial of the fundamental facts alleged by the Defendant.
The Legal Principles
[16] The Plaintiffs seek summary judgment pursuant to Rule 20, and as such this court must determine whether there is a genuine issue requiring a trial.
[17] As the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, at para. 49 makes clear, there will be no genuine issue requiring a trial when a motions judge is able to reach a fair and just determination on the merits. A fair and just determination of the merits can only be achieved if:
a) the process allows the motions judge to make necessary findings of fact;
b) the process allows the motions judge to apply the law to the facts; and
c) it is a proportionate and more expeditious and less expensive means to achieve a just result.
[18] The first step in a motion for summary judgment, is for the court to determine whether there is a genuine issue requiring a trial based on the evidence. In the event the court determines that there is a genuine issue requiring a trial, the court should then determine if the need for a trial can be avoided by utilizing the powers set forth in Rule 20.04 (2.1) of the Rules of Civil Procedure. In that regard, the court is provided the following powers:
a) to weigh the evidence;
b) to evaluate the credibility of a deponent; and
c) to draw any reasonable inference from the evidence.
[19] The powers set forth in Rule 20.04 (2.1), as set forth above, are available to the motions judge to give effect to the goals set forth in Hryniak at para. 65 of timeliness, affordability and proportionality.
[20] Even prior to the changes to Rule 20, in what some have described as the paradigm shift enunciated by the Supreme Court in Hryniak, it has always been the case that a responding party to a motion for summary judgment must put their “best foot forward” or risk summary judgment being awarded. The responding party to a motion for summary judgment must put their best foot forward, as the court is entitled to assume that the record in a motion for summary judgment contains all the evidence that the parties may present at trial: see Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 27.
[21] In terms of the onus, the moving party on a motion for summary judgment has the onus of establishing on a balance of probabilities that there is no genuine issue requiring a trial. Once the moving party has discharged its evidentiary burden that there is no genuine issue requiring a trial, then the burden shifts to the responding party who has the onus of establishing that their defence has a real chance of success, i.e., that there is a genuine issue that requires a trial: see Faltas v. Macerollo, 2020 ONSC 1450, at paras. 12-16.
[22] As this motion for summary judgment raises issues as it relates to a latent defect versus a patent defect, it is worth briefly summarizing the distinction between a latent defect and a patent defect.
[23] A patent defect is defined in a decision of the Ontario Court of Appeal in McCallum v. Dean, [1956] O.J. No. 345, at para. 5, as follows:
Patent defects are such as may be discovered by inspection and ordinary vigilance on the part of the purchaser, and with respect to them the primary rule is caveat emptor.
[24] A succinct definition of latent defect is set forth in the decision of LaForme J. in Swayze v. Robertson, [2001] O.J. No. 968, at para. 27:
A ‘latent defect’ as it relates to the case at bar is in effect some fault in the structure that is not readily apparent to an ordinary purchaser during a routine inspection. And ordinarily, if a vendor actively conceals a latent defect, the rule of caveat emptor no longer applies and the purchaser is entitled, at their option, to ask for a [rescission] of the contract or compensation for damages.
[25] In this case, the Plaintiffs rely on the principle of caveat emptor. Where a defect falls within the definition of a patent defect, a vendor is not bound to call attention to such defects and the rule of caveat emptor applies: see Capel v. Martin, 2008 CanLII 13612, at paras. 29-32.
[26] Mulligan J. in Ricchio v. Rota, 2011 ONSC 6192, at para. 25, further confirms that the law in Ontario is still caveat emptor with respect to patent defects. As Mulligan J. states at para. 25:
…In other words, if prudent purchasers can see and observe the defect, they take the property as they find it. Having observed the problem prudent purchasers can protect themselves in contract by requesting repairs before closing, reducing the purchase price, or by refusing to remove any condition about a home inspection and allowing the contract to be terminated.
[27] In contrast to a patent defect, if the vendor of a residential dwelling actively conceals a latent defect then the rule of caveat emptor no longer applies, and the purchaser is entitled to either seek rescission of the contract or compensation for damages: see Capel, at para. 11, per Eberhard J.
Analysis
[28] At the heart of the Defendant’s argument is the suggestion that because of the credibility issues raised by the conflicting stories of the parties, that there is a genuine issue for trial. The conflicting stories relate to the state of the basement floor when the Defendant first saw the residence on March 9, 2017, just prior to submitting his Offer to Purchase.
[29] The Defendant says that the basement floor in the area of the fresh concrete was covered with a carpet, and thus he never saw this defect prior to submitting his Offer. The Defendant says that the Plaintiffs deceived him by covering up an obvious defect in the basement floor.
[30] The Defendant’s story goes much further. In his evidence he states that when he went to the residence on July 21, 2017, the carpet was no longer on the basement floor and he could see the fresh concrete. The Defendant maintains that when he saw the fresh concrete, he engaged the Plaintiffs in a discussion as to what had happened.
[31] The Defendant maintains in his evidence that when he asked the Plaintiffs about the area of the basement floor where there was fresh concrete, that the Plaintiffs described a massive flood in the basement (eight feet deep) which had occurred in 2013. The Defendant maintains that he then engaged the Plaintiffs in a discussion about how repairs were done and requested information about who did the repair work. The Defendant further maintains that the Plaintiffs refused to provide this information.
[32] The Plaintiffs’ evidence about what happened when the Defendant first saw the residence on March 9, 2017 and what happened when he returned to the residence on July 21, 2017, is diametrically opposed to that of the Defendant. In March 2017, the Plaintiffs’ evidence is that the basement floor was not covered by a carpet as maintained by the Defendant, and further that the area of the basement floor with fresh concrete was there to be seen by anyone, including the Defendant. This evidence is corroborated by photographs taken by the Plaintiffs’ realtor that show the floor was bare concrete; it was not covered in a carpet.
[33] The Plaintiffs’ evidence is further corroborated by the Plaintiffs’ realtor, Mr. Sessa, who confirms in his affidavit that he was aware of the area of the basement floor with fresh concrete and this was not hidden from any potential purchaser. The evidence of Mr. Sessa further corroborates the Plaintiffs’ evidence, that the reason for the fresh concrete was a minor water leak in the basement that occurred in 2013 and that there were no further leaks. The evidence of Mr. Sessa in that regard is not challenged. I accept the evidence of Mr. Sessa.
[34] What occurred between the Plaintiffs and the Defendant on July 21, 2017, is also disputed by the Plaintiffs. Mr. Giancola acknowledges a discussion about the area of fresh concrete, but totally denies the suggestion of the Defendant that he told the Defendant anything about a major flood in the basement.
[35] If there was no other evidence to assist the court in resolving the factual inconsistencies in the evidence of the parties, I would have to agree with the submissions of counsel for the Defendant that this court should not resolve such issues of credibility on a summary judgment motion. However, while I am satisfied these inconsistencies do raise a genuine issue, I am still tasked with the requirements of Rule 20.04 (2.1).
[36] I am more than satisfied on the evidence before me that the interests of justice allow me to weigh the evidence; to evaluate the credibility of the parties’ evidence; and most importantly to draw any reasonable inference from the evidence.
[37] If the Defendant’s evidence is credible he would have this court believe that after he visited the residence on July 21, 2017, he came away from that meeting with the Plaintiffs with information that the house had sustained what can only be described as a very significant flood in the basement that rose to a depth of eight feet. As a person familiar with home renovations, the Defendant maintains that the information he received from the Plaintiffs on July 21, 2017 caused him great concern, both with respect to what had happened in 2013 as well as whether the repairs had been done to “Code”.
[38] Despite his expressed concern about the state of the basement floor and the information he says he was provided by the Plaintiffs on July 21, 2017, the Defendant did nothing until July 27, 2017 - the day before the scheduled closing. It is not in dispute that the Defendant had a lawyer assisting him with the closing of the Agreement. There is no evidence before this court that the Defendant raised any concern with either the Plaintiffs or his lawyer about the basement until July 27, 2017, when the record reflects both an email between counsel for the parties as well as a text message from the Defendant to the Plaintiffs.
[39] After the visit on July 21, 2017, the Defendant received a mortgage commitment on July 24, 2017 from a mortgage company for $875,250 - a commitment that left him over $200,000 short of what he needed to close the transaction. While the Defendant maintains in his evidence that he could have closed the transaction with his own funding as well as funding from his mother and girlfriend, what is particularly telling is that the Defendant first sought the agreement of the Plaintiffs to provide mortgage funding in the form of a vendor take-back mortgage. In seeking the Plaintiffs’ agreement to a vendor take-back mortgage, it is particularly important to note that the Defendant never mentioned his concerns about the basement floor and foundation. At a point in time when he knew he did not have the mortgage financing that he had expected, the Defendant never mentioned the concern he had about the state of repair of the basement floor and foundation. The fact that the Defendant never raised these concerns until the day prior to the closing of the Agreement weighs - in my view, very heavily against the Defendant’s credibility.
[40] The Defendant relies heavily on the evidence of two experts filed as part of his response to the Plaintiffs’ motion. Neither of the experts have reviewed the state of the basement floor of the residence, nor have they reviewed the state of the residence’s foundation. Counsel for the Defendant argues that this was not possible as the residence is no longer owned by the Plaintiffs. This, of course, states the obvious. However, it was open to the Defendant to serve a Summons to Witness on the present owner(s) utilizing the provisions of Rule 39.03. The experts rely heavily on the facts provided to them by the Defendant. If the facts relied upon by the experts are undermined by this court’s findings of fact, the substance of the experts’ opinions are fundamentally undermined.
[41] It was open to the Defendant to obtain the evidence of the present owners of the residence and he chose not to. This is particularly troublesome, as the court does have the indirect evidence of the present owners as reflected in the affidavit of Mr. Sessa. Appended to Mr. Sessa’s affidavit is an email from the realtor for the present owner, to which is appended a list of repairs the present owners required prior to closing the agreement they had with the Plaintiffs to purchase the residence; an agreement which was conditional on a home inspection. The present owners had an inspection done of the residence and required certain repairs to be completed as a condition of closing. Significantly, there is no mention of any problem with the basement floor nor any issue with the foundation.
[42] Neither of the experts retained by the Defendant were provided with the information referenced in the inspection report completed for the present owners. The experts retained by the Defendant have relied almost exclusively on the Defendant’s own evidence - evidence that I reject as lacking in credibility. I place no weight on the experts’ evidence.
[43] The Defendant may argue it is unfair on a motion for summary judgment to require a party to obtain the evidence of a non-party utilizing the provisions of Rule 39.03. The law is clear, however, the court is entitled to assume on a motion for summary judgment that all of the evidence that would otherwise be before a trial judge has been presented on the motion for summary judgment. The fact that the Defendant chose not to put the evidence of the present owner before the court, is an omission which I consider in assessing the overall credibility of the Defendant. The Defendant chose not to put this evidence before the court, just as he has chosen not to put other relevant evidence before the court – specifically, the evidence of the mortgage company that committed to mortgage financing that left the Defendant over $200,000 short of what he needed to close the Agreement.
[44] The evidence of the mortgage company could have been of assistance to the court. It is not unreasonable to infer that the mortgage company would have conducted an appraisal of the property. If such an appraisal existed, it may have assisted the court in better understanding the state of repair of the residence. The evidence of the mortgage company may also have been important in understanding when the mortgage company was asked to provide financing to the Defendant; what amount was sought by the Defendant; and whether there was any change in what the mortgage company was prepared to advance to the Defendant - this is particularly important given the downturn in the real estate market after April 2020. None of this evidence was put before the court by the Defendant. His failure to do so is something I have considered in assessing the credibility of the Defendant.
[45] The Defendant purchased the residence knowing full well he could have made the Agreement conditional on a house inspection. He chose to put in a “clean” offer, knowing that such a strategy had a much better chance of him being able to purchase the residence where there were competing offers. What the Defendant could never have anticipated, is the substantial drop in the real estate market that resulted in the value of the residence dropping substantially by the time he had to close the Agreement.
[46] Rather than closing the Agreement, the Defendant concocted a story about the state of repair of the basement floor and the foundation of the residence to force the Plaintiffs to reduce the closing price on the residence to a price more reflective of the market conditions in late July 2017. I do not accept the Defendant’s evidence for the reasons set forth above.
[47] Even if I had accepted part of the Defendant’s story about the state of repair of the basement floor, I am more than satisfied that the state of repair was not hidden by a carpet as suggested by the Defendant. The repair to the concrete floor was there to be seen when the Defendant visited the property on March 9, 2017. Any defect was a patent defect. The Defendant could have submitted an offer to purchase that was conditional on an inspection of the property. The Defendant could have required written disclosure from the Plaintiffs addressing any concern about the basement floor. He chose to do neither prior to submitting his Offer to Purchase. The law of caveat emptor applies.
[48] As for the issue of damages, there was very little argument from the Defendant in opposition to the damages claimed by the Plaintiffs. There was no issue taken with respect to mitigation. On the evidence submitted, I see no reason to depart from my Reasons of January 2, 2019 and award the Plaintiffs damages which I fix in the amount of $306,130.54.
[49] The deposit of $50,000 shall be forfeited to the Plaintiffs and shall be credited against the judgment.
[50] The Plaintiffs sought an order declaring the Defendant a vexatious litigant. While his conduct during this litigation is not what the court expects of a litigant, it does not come close to the type of conduct that would result in an order declaring the Defendant vexatious. That part of the Plaintiffs’ motion is therefore dismissed.
[51] As for costs, I expect the parties to resolve the issue of costs. In the event the parties do not resolve the issue of costs, I will receive the parties’ written submissions limited to three pages in length, to be received by the court no later than October 30, 2020. If submissions are not received by that date, the court will assume the issue of costs has been resolved between the parties.
Justice M.L. Edwards
Released: October 5, 2020
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ANTONIO GIANCOLA and ANGELINA GIANCOLA
Plaintiffs
– and –
ALEXANDRE DOBRYDNEV
Defendant
REASONS FOR DECISION
Justice M.L. Edwards
Released: October 5, 2020