Court File and Parties
COURT FILE NO.: CV-20-00088220-0000 DATE: 2023/02/24
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Luigi Falsetto Applicant – and – Paula Falsetto Respondent
Counsel: Geoffrey Cullwick, for the Applicant David Cutler, for the Respondent
HEARD: January 13, 2023
REASONS FOR JUDGMENT
RYAN BELL J.
Overview
[1] Luigi Falsetto applies for a declaration that his former daughter-in-law, Paula Falsetto, holds her interest in 415 Lisgar Street, Ottawa in trust for him, and an order vesting Paula’s interest in the property in him.
[2] Paula, together with her former husband and Luigi’s son, Albert Falsetto, are the registered owners of 415 Lisgar. The property was acquired in November 2011, when Paula and Albert were still married. In October 2011, Luigi and Albert’s real estate lawyer and Albert’s cousin, Frank Falsetto, told them the property was for sale. Luigi and Albert agreed that 415 Lisgar would be a good investment, along with other properties they owned in the area. Albert handled the negotiations with the vendor, and dealt with Frank and the bank on behalf of himself and Luigi. Luigi and Albert agreed on the purchase price. Luigi told Albert that Albert could sign the agreement in his name.
[3] Frank then advised Albert that he needed to take title jointly with another party to avoid title to 415 Lisgar merging with the neighbouring property under the Planning Act, R.S.O. 1990, c. P.13, s. 50(3). Albert proposed having Luigi added to both the title and the mortgage. The bank, however, did not have time to approve Luigi. Instead, Paula was added to the property’s title and the mortgage.
[4] The down payment and the closing costs for 415 Lisgar were paid by Albert and Luigi in equal shares. Over the years, Paula has played no role in managing or operating the property. She has not contributed to the mortgage or other expenses associated with the property. She has not received any income from the property.
[5] Luigi’s position is that he has a purchase money resulting trust in 415 Lisgar: the law presumes that Luigi, who advanced purchase money, intended to assume a beneficial interest in the property, and Paula has not adduced evidence rebutting the presumption.
[6] Paula submits that the Court of Appeal for Ontario’s decision in Holtby v. Draper, 2017 ONCA 932, is a complete answer to Luigi’s application. Paula maintains that the plan to avoid merger under the Planning Act cannot co-exist with a resulting trust in favour of Luigi. In other words, Luigi (and Albert) cannot have it both ways.
[7] For the following reasons, I agree with Paula. The application is dismissed, with costs.
Preliminary issue
[8] As a preliminary issue, Luigi moved, pursuant to r. 39.02(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for leave to file an affidavit sworn by Albert on November 30, 2022, after cross-examinations of Luigi, Paula, and Albert had been completed. After hearing submissions, I dismissed Luigi’s motion for brief oral reasons, with more detailed written reasons to follow. These are my reasons.
[9] The four-part test for granting leave is set out in First Capital Realty Inc. v. Centrecorp Management Services Ltd., 2009 CarswellOnt 6914 (Div. Ct.):
(i) is the evidence relevant; (ii) does the evidence respond to a matter raised on the cross-examination, not necessarily raised for the first time; (iii) would granting leave to file the evidence result in non-compensable prejudice that could not be addressed by imposing costs, terms, or an adjournment; and (iv) did the moving party provide a reasonable or adequate explanation for why the evidence was not included at the outset.
[10] A flexible, contextual approach is to be taken in assessing the criteria relevant to r. 39.02(2), having regard to the overriding principle outlined in r. 1.04 that the Rules are to be interpreted liberally to ensure a just and timely resolution of the dispute.
[11] The proposed evidence is, at most, of tangential relevance to the issues raised on this application. 415 Lisgar was acquired in 2011. Albert’s affidavit discusses a property at 9-11 Edina Street, Ottawa that was acquired, in Paula’s name, in 2007. In his affidavit, Albert states that despite Paula being the sole-named purchaser and title holder, it was intended that ownership of the property would be shared among Paula, Albert, and Albert’s cousin, Sam Falsetto. It is not apparent how the acquisition of a different property, involving different parties, four years before the acquisition of 415 Lisgar, is relevant to this application.
[12] The proposed evidence does purport to respond to statements made by Paula on her cross-examination. On her cross-examination, Paula stated:
(i) she only made claims for an ownership interest in properties that “have her name on it”; (ii) she was not aware that sometimes Albert would buy property for Luigi in Albert’s name alone, or that in other cases, Luigi would do the same for Albert; (iii) in the past, at Albert’s request, she signed documents for properties without reading those documents; and (iv) the manner in which 415 Lisgar was acquired and managed was the same for other properties that Paula and Albert owned.
[13] The clear purpose of the proposed evidence is set out at para. 4 of Albert’s affidavit:
I can explain how these statements are either misleading or false by discussing a property Paula and I once owned located at 9-11 Edina Street in Ottawa, Ontario (the “Edina Property”).
[14] Paula was not cross-examined on her statements when she made them. No reasonable explanation was provided as to why she was not cross-examined at the time. Albert’s statement in his affidavit that he had not turned his mind to the Edina Property until cross-examinations supports the view that these matters are of little relevance to the matter at hand.
[15] As to the alleged prejudice, Paula described the proposed admission of Albert’s affidavit as an attempt to impeach her credibility in relation to a separate, collateral transaction that Albert has known about all along. Paula submits that cross-examination or an adjournment would not remedy the prejudice if Luigi were granted leave to file Albert’s affidavit. As Albert himself observed in his affidavit, the Edina Property was acquired in 2007, 16 years ago.
[16] In conducting the four-part analysis for granting leave under r. 39.02(2), I was most troubled by the explanation proffered as to why this evidence was not contained in Albert’s previous affidavits (sworn March 18, 2022 and June 1, 2022) if it was considered to be relevant. Cross-examinations were conducted on August 9, 2022. The application was originally scheduled to be heard in October 2022. There is no reasonable or satisfactory explanation why this evidence was not provided until weeks after the application was originally scheduled to be heard.
[17] The delay is of particular concern given that Albert states that he turned his mind to the Edina Property at the time of the cross-examinations in August. Albert’s statement that he did not prepare his November 30, 2022 affidavit immediately following the cross-examinations because “the application hearing was originally scheduled relatively soon after for October 18, and I understand that the parties had to exchange factums in September” does not make sense. It certainly does not provide a satisfactory explanation for the delay.
[18] Having regard to the relevant factors, I denied leave to Luigi to admit Albert’s November 30, 2022 affidavit.
Analysis
[19] A resulting trust arises when title to property is in one party’s name, but that party, because they are a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner: Pecore v. Pecore, 2007 SCC 17, at para. 20. The presumption of resulting trust is a rebuttable presumption of law: 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: Pecore, at para. 24.
[20] The purchase money resulting trust is a type of gratuitous transfer resulting trust, where a person advances a contribution to the purchase price of property without taking legal title; gratuitous transfer resulting trusts presumptively arise any time a person voluntarily transfers property to an unrelated person or purchases property in another person’s name: Nishi v. Rascal Trucking, 2013 SCC 33, at para. 21. In the context of a purchase money resulting trust, the presumption is that the person who advanced purchase money intended to assume the beneficial interest in the property in proportion to his or her contribution to the purchase price: Nishi, at para. 29.
[21] The question in this case is whether a resulting trust can arise in circumstances where title to 415 Lisgar was put in Paula and Albert’s names, jointly, for Planning Act purposes.
[22] The Court of Appeal addressed this issue in Holtby, a matrimonial dispute. The central issue was ownership of property. The trial judge concluded that the appellant’s 50 per cent of the common shares in a corporation that held a farm and other property, and her 100 per cent interest in the lot adjoining the farm property, were beneficially owned by the respondent by way of a resulting trust. The appeal was allowed to the extent of declaring the appellant the joint owner, together with the respondent, of the adjoining lot.
[23] The Court of Appeal’s conclusions with respect to the adjoining lot are instructive:
As for [the adjoining lot], I conclude that [Mr. Holtby] has made out his claim to a resulting trust, but only for 50 per cent 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 [the adjoining lot] 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 moneys 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. Holtby, at para. 6.
[24] Regarding the Planning Act argument, the Court of Appeal stated, at paras. 68-69:
Finally, I turn to the trial judge’s conclusion about the reason for putting [the adjoining lot] into the parties’ joint names. Unlike with [the corporation], there the motive was not to defeat creditors. Rather, the trial judge accepted that, just as [Mr. Holtby’s first wife] was on title for Planning Act purposes, so was Ms. Draper. He specifically accepted the evidence of the solicitor who effected the conveyance that Ms. Draper went on title as a joint owner of the 50 acres [the adjoining lot] for Planning Act purposes.
Ms. Draper argues that the Planning Act argument does not assist any finding of resulting trust and if anything contradicts it. I agree. To achieve the intended goal under the Planning Act, it was necessary for beneficial ownership of [the adjoining lot] to be different from the beneficial ownership of the farm property. This is consistent with the presumption of joint ownership and in no way refutes it.
[25] Luigi submits that in Holtby, the Court of Appeal concluded that the purpose for adding the appellant on title – to address Planning Act issues – supported the appellant’s position, but there were other factors at play: (i) the parties were spouses at the time, and the trial judge reversed the presumption under s. 14 of the Family Law Act, R.S.O. 1990, c. F.3; and (ii) the trial judge’s conclusion that the transfer to the appellant was gratuitous was not supported by the evidence. Holtby, at paras. 64 and 66.
[26] Section 14(a) of the Family Law Act provides:
The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married, except that,
(a) The fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants.
[27] In this case, I am not dealing with a question of ownership of property between spouses. However, as a starting point, I note that prior to their marriage, Paula and Albert entered into a marriage contract that provides: “[p]roperty acquired after the date of marriage and held jointly by the parties shall be divided and distributed in equal shares as between the parties.” For 10 years, 415 Lisgar was owned by Paula and Albert as joint tenants. It was only in February 2022, after Paula and Albert’s relationship had broken down, that Albert severed the joint tenancy, such that 415 Lisgar is now legally co-owned by Paula and Albert as tenants in common.
[28] Paula submits that by assuming the mortgage obligation (which was subsequently renewed), and pledging her credit, she provided consideration for her interest in 415 Lisgar. Where consideration is provided, a presumption of resulting trust will not arise: Banihashemi v. Behshad, 2021 ONSC 1145, at para. 44.
[29] Luigi submits that Paula’s agreement to be the borrower on the mortgage, without more, does not constitute consideration. In Banihashemi, there was evidence that the legal owner contributed $50,000 to the purchase price and made some mortgage payments. Luigi relies on Bouffard v. Bouffard, 2020 ONSC 3079, where the court stated at para. 163, “[a] gift of a beneficial interest in a property is not established where a party is on title for the purpose of obtaining financing and remains liable on the mortgage with no contribution to the mortgage payments or the upkeep of the property.”
[30] I need not determine whether Paula provided consideration for her interest in 415 Lisgar because I am satisfied on the evidence that Luigi – the person who advanced the funds – intended a gift to Paula. When making a gratuitous transfer of property, the person who makes the transfer must have intended either to pass the beneficial interest (a gift) or retain it (a trust): Nishi, at para. 27.
[31] The relevant intention is the intention of the person who advanced the funds at the time of the contribution to the purchase price: Pecore, at para. 59; Nishi, at para. 30. A party’s actual intention is a question of fact to be determined based on the whole of the evidence: Schwartz v. Schwartz, 2012 ONCA 239, at para. 43. In Andrade v. Andrade (2016), 2016 ONCA 368, 131 O.R. (3d) 532, where a mother purchased a house and paid the mortgages but put title to the house in the names of her two sons, the Court of Appeal considered the relevant question to be whether the mother intended for her sons to have beneficial title, not whether the sons intended to hold the property in trust for their mother. Andrade, at para. 67. See also Nussbaum v. Nussbaum (2004), 9 R.F.L. (6th) 455 (Ont. S.C.), at paras. 20 and 32.
[32] Luigi maintains that the “finance issue” with the bank, and not the Planning Act issue, was the “real reason” why Paula was added to the title. According to Luigi, he was the one proposed to be added to title to address the Planning Act issue. Paula was added because the bank could not approve Luigi for the mortgage in time.
[33] I reject this submission. On the whole of the evidence, I find that Luigi and Albert’s intentions were one and the same: to avoid merger under the Planning Act with a neighbouring property owned by Albert. Luigi and Albert discussed the purchase of 415 Lisgar together. Luigi was aware of the Planning Act issue, having received advice from Frank, through Albert, that a second party was needed on title to avoid merger with an adjoining property. Albert’s evidence is that he discussed adding Paula to title with Luigi and they agreed that they were “stuck” and “had no choice because there wasn’t enough time to get [Luigi] approved.” The bank’s internal notes confirm that Paula was added to title to deal with the merger issue.
[34] Luigi’s position, maintained throughout his cross-examination, that he never intended Paula to be a “real” owner of 415 Lisgar, belies this evidence and the Planning Act goal.
[35] Evidence of intention that arises subsequent to the purchase of the property must be relevant to Luigi’s intention at the time of the purchase: Pecore, at para. 59. Evidence that Luigi, not Paula, paid the mortgage, operated the property, and received income from the property does not assist in a finding that Luigi intended, at the time of purchase, to retain a beneficial interest in 415 Lisgar. His intent was to avoid merger under the Planning Act. On the other hand, Paula and Albert have remained on title together for more than 10 years and Luigi’s tax returns for a number of years reflected no ownership interest in 415 Lisgar. Both of these facts are consistent with an intention by Luigi at the time of purchase to pass the beneficial interest to Paula.
[36] The court’s decisions in Zacher v. Zacher, 2019 ONSC 1450 and Styres v. Martin, 2021 ONSC 1072 support the conclusion that a party cannot achieve one result for the purpose of avoiding a legal consequence prescribed by statute – in this case, the Planning Act – and achieve an opposite result for other purposes. In Zacher, the court considered the party’s intention in conveying ownership to avoid the imposition of probate fees. At para. 87, the court stated,
The fact that GST savings would arise on the Port Dover property being put in her name is secondary to her parents’ concern for her financial well-being and the need for her to have both legal and beneficial ownership of 14 Steeplechase. In any event, the applicants’ wish to avoid probate fees does not assist in a finding of a resulting trust but instead contradicts such a finding: see Holtby v. Draper, 2017 ONCA 932 at para. 69. In other words, the stated intent to avoid paying these fees supports the finding of an implied intent by the parents to deprive themselves of beneficial ownership of the property in favour of a gift to their daughter.
[37] In Styres, an unjust enrichment argument was advanced in circumstances where real property was transferred by the plaintiff to the defendant in connection with charges or pending charges against the plaintiff under the Excise Tax Act, R.S.C. 1985, C. E-15. The court in Styres concluded that an intent on the part of the plaintiff to put the property beyond the reach of the federal government is not necessarily inconsistent with an intent to gift it beneficially to the defendant, noting that “[i]ndeed, a transfer of the paper title to the defendant while retaining beneficial ownership to himself would not achieve the purpose of putting the Property beyond the government’s reach on a forfeiture.” Styres, at para. 103.
[38] In this case, I find that Luigi intended to pass beneficial ownership in 415 Lisgar to Paula in order to avoid a legal consequence under the Planning Act. Accordingly, no purchase money resulting trust arose in Luigi’s favour.
Disposition
[39] Accordingly, the application is dismissed with costs.
[40] In the event the parties are unable to agree on the costs of the application, they may make written submissions limited to a maximum of three pages, exclusive of relevant attachments. Paula shall deliver her costs submissions by March 10, 2023. Luigi shall deliver his responding costs submissions by March 24, 2023. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
