Court File and Parties

COURT FILE NO.: CV-18-590-00 DATE: 2022-04-28

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N: Yvan Gauthier J. Lester, for the Plaintiff Plaintiff

- and -

John Harold White M. Cupello, for the Defendant Defendant

HEARD: November 29, 30, December 1, 6, 2021, at Thunder Bay, Ontario Via Zoom

Before: Mr. Justice W.D. Newton

Reasons For Judgment

Overview

[1] This case demonstrates the perils of not seeking the advice of a lawyer or a realtor early on in a real estate transaction and of having the same law firm act on both sides of that transaction.

[2] Mr. Gauthier and Mr. White agreed that Mr. Gauthier would purchase Mr. White’s house. Mr. Gauthier paid $40,000 cash in four instalments to Mr. White and, before the proposed closing date, began renovation and repair work on the house. The same law firm acted for both and prepared closing documents stipulating a purchase price of $40,000. The real estate transaction never closed because Mr. White argued that Mr. Gauthier was to pay a further $40,000 to close the transaction. Mr. White had a $25,000 mortgage on the property that was not discharged on closing.

[3] Mr. Gauthier sues for specific performance or an order vesting title in the property to him. Alternatively, he seeks damages for breach of contract and unjust enrichment given the work he performed on the property.

[4] Mr. White counterclaims for a declaration that the agreement was for $80,000 in total and seeks damages for breach of contract and loss of use and occupation of the property. Further, there is an additional counterclaim for $25,000 for the conversion of a trailer located in the trailer park owned by Mr. Gauthier. Mr. White says he purchased the trailer from another party but Mr. Gauthier claimed he was given the trailer for rental arrears owed by that other party.

The Evidence

The Real Estate Deal

Yvan Gauthier

[5] Yvan Gauthier owns a trailer park and a few rental properties in the Longlac area. He has known John White for several decades.

[6] He testified that, about seven years prior to the aborted real estate transaction, Mr. White offered to sell him his property because Mr. White owed about $20,000 in land taxes. At that time, Mr. Gauthier was not interested in the property.

[7] In the summer of 2017, because of his family situation, he became interested in the property and approached Mr. White. Mr. White told him that he then owed $40,000 and would sell the property to him for $40,000. According to Mr. Gauthier, the agreement was that he could start doing some renovation work inside the house while Mr. White continued to live there with the transaction closing and the transfer of possession occurring on June 1, 2018. As Mr. White had a large assortment of scrap vehicles on the property, he would allow Mr. White time after closing to remove the scrap. Mr. White was to be responsible for utilities and taxes up to closing. Mr. Gauthier testified that Mr. White told him that he had a mortgage of about $5,000 which he would pay off when it was time to close.

[8] Mr. Gauthier testified that he paid in cash in four instalments. Four receipts signed by Mr. White were produced. On October 6, 2017, he paid $25,000 and the receipt signed by Mr. White also includes the words “paid on house 15,000 left to pay.” There is another receipt dated October 24, 2017, for $8,000 and “payment on the house $7000 left to pay” is written on that receipt. The next receipt is dated November 28, 2017, for $4,000 and has the words “payment on the house $3000 left to pay” written on it. The final receipt is dated December 3, 2017, for $3,000 and the words “final payment on the house” are on that receipt. Mr. Gauthier testified that the first receipt is in his handwriting and the remaining receipts were written by his girlfriend, Michelle McGraw. The receipts were made out in advance and, when he took the cash to Mr. White, Mr. White would count the cash and sign the receipts. Mr. Gauthier kept the original receipt and gave the carbon copy to Mr. White.

[9] Mr. Gauthier began renovations, first in the basement, and spent about $30,000 to make repairs and improvements to the house. Receipts totaling a little over $27,000 were produced.

[10] He testified that Mr. White told him that he had received a letter in about February 2018 indicating that he owed $25,000 on the mortgage, rather than $5,000. He said that he told Mr. White that the mortgage would need to be cleared off at closing. The next day Mr. White approached him asking him if he would accept the transfer of the house only but not the property and Mr. Gauthier refused to do so. He said that he told Mr. White to approach the bank to see if he could put up a vehicle for collateral on the mortgage. The next time they spoke Mr. White said that the bank would transfer the mortgage into Mr. Gauthier’s name and Mr. Gauthier refused to agree to that. As the closing date approached, he said that Mr. White was attempting to get a loan but that, after closing, his loan was refused. Then Mr. White asked Mr. Gauthier for a further $40,000 for the property.

[11] Mr. Gauthier had used the Buset law firm for some of his real estate transactions previously, so he contacted that firm to handle the real estate transaction. To save costs, Mr. White agreed to use a lawyer at the same firm.

[12] Ms. Burns of that firm telephoned him while he was at Mr. White’s property. Mr. White was present and able to hear Mr. Gauthier’s conversation with Ms. Burns via speakerphone. According to Mr. Gauthier, Ms. Burns also spoke to Mr. White directly at that time and had some questions for him.

[13] Real estate documents were prepared and faxed to a local business on the afternoon of May 11, 2018. Mr. Gauthier picked up those documents for both himself and Mr. White and, later, they both attended in front of a commissioner for the municipality to have the documents executed on May 14.

[14] The closing date was extended from June 1 to June 4 because, as Mr. Gauthier understood it, Mr. White was to have financing to pay the mortgage off by June 4.

Nicole Desgroseilliers

[15] Ms. Desgroseilliers was the account clerk with the municipality and has been a Commissioner of Oaths for about 15 years. She knew Mr. Gauthier and Mr. White as members of the community. She recalls them both coming in to sign documents in her presence. She confirmed that she witnessed as each party signed. She confirmed that she did not explain any of the documents to either of the parties. She said that Mr. Gauthier was directing Mr. White where to sign, and that Mr. White signed where he was told to sign. The documents bear an execution date of May 14, 2018.

The Law Firm

Vanessa Scott

[16] Ms. Scott was a real estate clerk at the Buset firm. She prepared the purchase and sale documents and worked on both the purchase and the sale side of the file. She does not know who prepared the agreement of purchase and sale. She had discussions with both Mr. Gauthier and Mr. White and believed that money had already been exchanged. The first time she heard that Mr. White was seeking another $40,000 was June 18, 2018, when Mr. White’s mother said that she did not want the house sold for $40,000 but rather $80,000 because of the $25,000 mortgage. She testified that she was never told by Mr. White that the deal was for $80,000.

Kristi Burns

[17] Ms. Burns was the real estate lawyer retained by Mr. Gauthier. She has handwritten notes dated May 1, 2018, regarding her telephone conversation with Mr. Gauthier. She testified that the agreement of purchase and sale was prepared by one of the staff based on her instructions. She understood that Mr. Gauthier had already paid the purchase price. The documents were to be faxed to a local business as directed by Mr. Gauthier.

[18] She has an undated note which appears to be made after the aborted closing and a telephone conversation with Mr. Gauthier. Mr. Gauthier told her that Mr. White had showed him the mortgage statement and that he went to Sun Life to attempt to borrow against his pension. A further note dated June 7, 2018, records a telephone conversation with Mr. Gauthier who stated that Mr. White went for a loan.

[19] She testified that she never spoke to Mr. White.

Ryan Bodnar

[20] Mr. Bodnar was the lawyer at the Buset firm who represented Mr. White. He was told by a law clerk who had spoken to Mr. Gauthier that the “deal” was in place with the purchase price already paid. Although he has no notes, he testified that he spoke to Mr. White via telephone to confirm the “deal” and later again to review all the real estate documents. He testified that there were no questions from Mr. White about the real estate documents and that there is no mention of another $40,000 to be paid.

[21] The only notes that he does have record a subsequent conversation in which Mr. White said that the deal was for $80,000. Mr. Bodnar testified that he was “taken aback” with this assertion as all indications as reflected in the real estate documents prepared were that the full purchase price had been paid. He said that Mr. White had claimed he was unable to read but that Mr. White was reading from the agreements to him.

The Real Estate Documents

[22] The agreement of purchase and sale provided for the sale of the property for $40,000 and that the buyer submit a deposit of $40,000 by cheque payable to the vendor. Nowhere does it state that the $40,000 was already paid. The real estate documents were faxed to Mr. Gauthier and Mr. White on Friday, May 11, 2018, at 2:09 p.m.

John White

[23] John White testified that he has owned the property since 1982 and that, since the time he owned the property, he has never paid municipal taxes because he does not receive any services. He acknowledged that, by the time he entered into negotiations with Mr. Gauthier, he owed over $40,000 in taxes.

[24] He acknowledged that he received $40,000 from Mr. Gauthier over time to pay taxes and did in fact pay the taxes. As to additional funds owing, he said he had a mortgage for about $25,000 and that Mr. Gauthier was present when he opened a letter from the bank showing the mortgage statement. He said that the “deal” was therefore money to pay the taxes plus an additional $40,000 to cover the mortgage. He denied speaking to someone at the bank to have Mr. Gauthier take over the mortgage.

[25] He acknowledged receiving a copy of the receipt from Mr. Gauthier at each payment but denies that the notations contained on the receipt as to the purchase price were contained on the documents he received. He has not been able to locate his copies of the receipts and alleges that Mr. Gauthier has removed an ammunition box in which he kept his papers, including these receipts.

[26] He acknowledged that Mr. Gauthier began renovations before possession.

[27] With respect to the real estate documents, he testified that Mr. Gauthier brought the documents to him and then arranged for them to attend before the Town Clerk to sign the documents. He does not remember speaking with Mr. Bodnar and said that he never spoke to a lawyer before signing the documents. He acknowledged that he was in the room with Mr. Gauthier when Mr. Gauthier spoke to Ms. Burns but said that he did not speak to her. He thought he spoke to a “girl”. He said that he did not look at the documents until he attended with Mr. Gauthier to have the documents signed.

[28] He testified that he has a lot of problems reading and writing and demonstrated that he could, in fact read, although slowly, while testifying. He testified that he did not understand the documents that he signed including the statement of adjustments, cash statements, and the undertaking to discharge the mortgage.

[29] He said that he was moved out of his house by a “big bruiser” sent by Mr. Gauthier and then went to live at 101 Moose Street. He said that the rent there was $1,000 a month and that Mr. Gauthier took a generator worth $6,000 from him in lieu of the rent.

[30] He testified that he attempted to remove the scrap vehicle on the property, but that Mr. Gauthier prevented people from attending to remove the scrap.

Nancy Kyro

[31] Ms. Kyro was retained by counsel for Mr. White to prepare a market value appraisal. She does these appraisals for institutions such as banks and the Canada Mortgage and Housing Corporation. She estimated that the property had an estimated value, including improvements, at $95,000 as of June 7, 2021. She further concluded that the property had a value of about $72,000 based on comparables without improvements. The appraisal report contained the caveat that the appraiser could not be held responsible for the accuracy of the appraised value given that she was attempting to give a value for three years in the past and was not able to see comparable sale properties as at that date and could not know the condition of the property then.

The Trailer

Yvan Gauthier

[32] Mr. Gauthier owned a trailer park, and a tenant, Shawn Sokoloski, owed him for lot fees. When he moved out, Mr. Sokolowski told Mr. Gauthier that he could have the trailer for the arrears of lot fees. Shortly after this conversation, Mr. Gauthier noticed Mr. White and Jessie Krieger attempting to move into the trailer. Mr. Gauthier called the OPP to prevent Mr. White accessing the trailer.

John White

[33] Mr. White testified that he purchased the trailer from Shawn Sokoloski for $5,000 and paid cash first on October 12, 2018, of $2,000 and then later, a further $3,000.

Jesse Kryger

[34] Mr. Kryger was staying with Mr. White in 2018. He testified that he saw Mr. White give Mr. Sokoloski cash on two occasions for the purchase of the trailer and saw Mr. Sokoloski sign acknowledgement of receipts of funds.

Position of the Parties

Mr. Gauthier

[35] Counsel for Mr. Gauthier submits that Mr. White is not credible and that, after discovering that he owed more on his mortgage than he thought, attempted to seek another $40,000. Counsel points to the labour and materials furnished by Mr. Gauthier to improve the property and submits that the appropriate remedy is specific performance and an order vesting the property in Mr. Gauthier’s name.

[36] With respect to the trailer, counsel submit that Mr. White’s claim is against Mr. Sokoloski who sold something that was not his to sell because it had already been transferred to Mr. Gauthier for fees owing.

Mr. White

[37] Counsel for Mr. White argues that no contract was created because there is no meeting of the minds on the purchase price with Mr. White believing that he would receive another $40,000 on closing based on the agreement of purchase and his understanding that the purchase price was $80,000. If the property cannot be returned to him, he argues that he should be paid occupation rent equivalent to $1,000 per month of occupancy.

[38] Based on his evidence confirming the payment to Mr. Sokoloski he seeks damages for the unlawful conversion of the trailer.

Analysis and Disposition

[39] I am satisfied on the evidence that Mr. Gauthier is experienced in financial matters. I am also satisfied that Mr. White is not. However, I am unable to accept Mr. White’s evidence that he believed that the purchase price was $80,000.

[40] I conclude that he only sought additional funds for the purchase after he discovered that the mortgage was more than he thought. On this issue I accept the evidence of Mr. Gauthier and do not accept the evidence of Mr. White. I find the evidence as to the value of the property on the closing date inconclusive.

[41] I accept that Mr. White did not carefully read the real estate documents before he signed, and I am unable to conclude that the documents were explained to him by his lawyer given the complete absence of any notes recording such a conversation with his lawyer and the short time between receiving the material and the signing of the documents. However, that does not change my conclusion that he knew that the purchase price was $40,000. I am satisfied that, had the real estate documents reflected the sums already paid or there were clear notes documenting Mr. White’s understanding of the real estate documents then this litigation would not have reached this stage.

[42] With respect to the trailer, without the evidence of Mr. Sokoloski I am unable to determine, on a balance of probabilities, whether it is Mr. Gauthier or Mr. Sokoloski who has victimized Mr. White. The counterclaim is dismissed.

[43] Accordingly, an order shall issue vesting title in the property to Mr. Gauthier. If the mortgage has not been discharged, then counsel may make further submissions on the relief required. Given how the events unfolded, I grant Mr. White 120 days from the date of these reasons to remove the scrap on the property. If that is not done within 120 days, then the property will belong to Mr. Gauthier.

[44] The plaintiff may make written submissions with respect to costs within 20 days limited to three pages plus costs outline. Thereafter, Mr. White will have 20 days to respond, also limited to three pages plus costs outline. If no cost submissions are received within 20 days, then costs are deemed settled.

“Original signed by” The Hon. Mr. Justice W.D. Newton

Released: April 28, 2022