Court File and Parties
COURT FILE NO.: FC-17-00055146
DATE: 20230103
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Philip George Karatzoglou Applicant
– and –
Rosetta Commisso and Evangelia Karatzoglou Respondents
COUNSEL:
Jerrod K. Grossman, for the Applicant
Elliot Birnboim and Hailey E. Corrigan, for the Respondent, Rosetta Commisso
Jared Teitel for the Respondent, Evangelia Karatzoglou
HEARD: December 8, 2022
REASONS FOR DECISION
J. Di Luca J.:
[1] This is a summary judgment motion by the second respondent, Evangelia Karatzoglou (“Lisa”), seeking dismissal of the claims made against her by the first respondent, Rosetta Commisso (“Rosa”).[^1]
[2] The applicant in this proceeding is Philip Karatzoglou (“Phil”). He and Rosa are former married spouses. The second respondent, Lisa, is Phil’s mother (and Rosa’s former mother-in-law).
[3] The claims at issue in this summary judgment motion are found in Rosa’s Amended Answer dated, August 6, 2019, at paras. 7-9. For ease of reference, Rosa seeks the following:
a. An Order that the Phil holds a beneficial interest in the matrimonial home at 55 Rainbow Valley Crescent, Markham, Ontario;
b. An Order that the Phil holds a beneficial interest in the property at 176 Bullock Drive, Markham, Ontario; and,
c. An Order for damages for unjust enrichment in an amount to be determined or in the alternative, an Order that Rosa has a constructive trust interest in the matrimonial home at 55 Rainbow Valley Crescent, Markham, Ontario, arising from unjust enrichment of the respondent, Lisa, from Rosa’s contributions to the matrimonial home at 55 Rainbow Valley Crescent, Markham, Ontario.
[4] This motion arises from a case management Endorsement, dated October 11, 2022, by Himel J., wherein she directed that this motion be heard on a peremptory basis given the delay that has been occasioned in this matter. Himel J. also directed that the motion address two issues: (1) summary judgment on Rosa’s claims against Lisa; and, (2) in the alternative, a request to strike Rosa’s pleadings and a determination of the case by way of an uncontested trial.[^2]
[5] I should also note that in that same Endorsement, Himel J. denied Rosa’s request for a motion to amend her pleadings to make a claim for an unequal division of net family property. Himel J. found that, in view of the delay in the proceedings, it would be prejudicial to Phil and Lisa to have such a motion brought this stage of the proceedings.
Legal Principles on Summary Judgment Motions
[6] Rule 16 of the Family Law Rules sets out the procedure on a motion for summary judgment. It provides that a summary judgment motion can be brought on all, or any part of, a claim or defence in a case. Rule 16(6) provides that where there is no genuine issue requiring a trial, the court shall make a final order accordingly.
[7] On a motion for summary judgment, the court must also consider Rule 2(2) and (3) of the Family Law Rules which direct that the primary objective of the rules is to enable the court to deal with cases “justly”, which includes: ensuring that the process is fair to all parties; saving time and expense; dealing with the case in ways that are appropriate to its importance and complexity; and, giving appropriate resources to the case while taking account of the need to give resources to other cases, see Jassa v. Davidson, 2014 ONCJ 698 at paras. 40 and 42.
[8] In Hryniak v. Mauldin, 2014 SCC 7 at para. 49, the Supreme Court of Canada discussed the test for summary judgment under Rule 20.04(2)(a) of the Rules of Civil Procedure, which is also applicable to summary judgment motions in the family law context. The Court directed as follows:
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[9] The Court further directed judges considering summary judgment motions as follows at para. 66:
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring a trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interests of justice. Their use will not be against the interests of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
[10] In assessing the evidence to determine whether there exists a genuine issue requiring a trial, the court can resort to expanded powers set out in Rule 16(6.1) of the Family Law Rules. These powers mirror those in the civil rules as discussed in Hyrniak above. While these powers are presumptively available, the court is not required to resort to them to make up for a party’s evidentiary shortcomings, see Duhaney v. McLean-Duhaney, 2020 ONSC 6564 at para. 44, citing Mega International Commercial Bank (Canada) v. Yung, 2018 ONCA 429 at para. 83 and Broadgrain Commodities Inc. v. Continental Casualty Company (CNA Canada), 2018 ONCA 438 at para. 7.
[11] The modern approach to summary judgment motions requires that parties put their “best foot forward”, see Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753 at para. 9. The court can assume that the party responding to a summary judgment motion will present the evidence it intends to rely on at trial in order to prove that its claim or defence has a chance of success. In the vernacular, the responding party must “lead trump or risk losing”, see 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 1995 CanLII 1686 (ON CA), 21 O.R. (3d) 547 (C.A.) at p. 557, Duhaney at paras. 39-41 and Sharma v. Sharma, 2018 ONSC 862 at para. 38.
Summary of Facts
(a) Background of the Parties
[12] Phil and Rosa were married on July 18, 1997. They separated on February 23, 2014. They have one adult son, Lucas.
[13] Lisa and her late husband, Christos Karatzoglou (“Christos”) immigrated to Canada from Greece in the 1960’s. Lisa worked as a preschool teacher and Christos ran a car repair shop. They have two children, the applicant Phil and his older brother, Bruce. Lisa and Christos worked hard and managed to save money for investments, which include the two properties subject to Rosa’s claims: a home on Rainbow Valley Crescent; and a business premise on Bullock Drive.
(b) Rainbow Valley Crescent
[14] In 2004, Lisa and Christos purchased the Rainbow Valley Crescent home for $230,999.00. The home was initially registered in both their names, though it was not their principal residence. Christos passed away in 2006 and the title to the home passed to Lisa solely.
[15] Around 2003 Phil, Rosa and Lucas were living in a subsidized apartment. Phil and Rosa wanted to find a better place to raise their son. According to Rosa, she and Phil initially intended to purchase the Rainbow Valley Crescent home themselves, but her poor credit prevented them from obtaining financing. When it became clear that she and Phil could not buy the home, Phil’s parents agreed they would buy the home and let them live in it as long as they paid the expenses. Phil denies this. According to him, home ownership was not possible at the time given their family’s financial circumstances. Phil and Lisa maintain that the home was purchased by Lisa and Christos as an investment.
[16] Neither Phil nor Rosa appear to have contributed any funds to the purchase of the Rainbow Valley home and were never on title. That said, in questioning Lisa agreed that Phil gave her money towards the down payment, though she later sought to correct this evidence through a letter from counsel. Rosa also suggests in her evidence that Phil contributed to the down payment, but she is unclear on the amount or the source of the funds.
[17] In November 2004, Phil signed a rental agreement with his parents for the home. The rental agreement provides that the premises shall only be occupied by Phil and Lucas. It makes no reference to Rosa, though in questioning Lisa agreed that she knew at the time that Rosa would be living there as well. Rent was initially $1,800 per month and was later increased to $2,000 per month.
[18] Phil, Rosa and Lucas lived at the home. It appears that the rent payment covered utilities, property taxes, insurance and mortgage payments on the home. The rent paid did not provide for significant profit to Lisa and Christos and later, Lisa. That said, from 2008 to 2021, which is the period during which bank records could be obtained, Lisa received $304,700 in rent from Phil.
[19] When Rosa left in 2014, Phil and Lucas continued to reside at the home. Phil continued to make monthly rental payments. Rosa disputes the assertion that rent was paid by Phil. She claims that insufficient records have been produced substantiating the continued payment of rent. She also notes that Lisa never claimed rental income on her income tax returns.
[20] In August of 2021, Lisa sold the home to third parties for $1,000,000. After discharging the mortgage, paying fees, taxes and expenses, Lisa gifted $503,246.47 to Phil as an advance on his inheritance. The balance of $445,772.35 was paid into Lisa’s investment account. A further $10,450.00 was also received from the real estate agent following closing. Lisa paid capital gains tax of $181,035.04 based on the increase in value of the home. According to Lisa, she did not make a corresponding gift to her other son, Bruce. However, she explains that she has arranged to leave Bruce her current home on her passing.
[21] Phil used the money gifted by Lisa as a down payment on a new home, where he now resides with his current partner and son. The purchase of the new home occurred on the same day as the sale of the Rainbow Valley Crescent home and the transaction was handled by the same lawyer. According to Phil, Lisa had been ready to sell the home for some time and once she learned that Phil was looking to buy a home, the timing was right to sell as Lisa did not want to deal with tenants.
[22] Rosa disputes the claim that the money was a gift against a future inheritance. In her view, the gift was a payment to him reflecting the fact that he is the beneficial owner of the home. She notes that Phil essentially “ran” the home for Lisa. She also questions the veracity of Lisa’s claim that she sold the house in order to “simplify her life.” The real reason behind the sale of the home, was simply that Phil wanted to buy a new home with his current partner.
[23] Rosa claims that she paid for all the furniture at the residence and that she used funds given to her by her late mother towards renovations done at the residence. As well, she explains that she was a stay-at-home mom. She undertook all the household duties which permitted Phil to be gainfully employed and advance his career.
[24] Rosa explains that when she left the home, she left behind all the furniture and her belongings. She essentially started over again with nothing.
[25] Phil denies that Rose bought all the furniture, though he agrees she may have bought some. He maintains that there were no renovations done to the home during his marriage to Rosa. Lastly, he explains that her departure from the home was due to criminal charges and related drug addiction issues. While she took some personal items with her, she never sought the return of any other items in the years that followed.
(c) Bullock Drive
[26] The business premise on Bullock Drive was initially purchased by Lisa and Christos in August of 1990. Phil would have been 15 years old at the time. The title to the building passed solely to Lisa upon Christos’ death in 2006. There was no mortgage on the property at the time. Again, neither Phil nor Rosa ever contributed funds to the purchase of this property nor were they ever on title.
[27] Christos operated a car repair business called “Almost Racing” at the Bullock Drive premise until his death. The business was then taken over by Phil who left a job with a Volkswagen dealership to take on the business. Phil claims the business name “Almost Racing” was gifted to him by Lisa in or around 2007, though there is no documentation confirming this.
[28] In 2017, Phil and Rosa’s son, Lucas, also joined the business, which continues to operate out of the Bullock Drive premise. Phil incorporated “Almost Racing” in 2019.
[29] Lisa has limited or no knowledge of the daily operations of the business. She does not own or control any aspect of the incorporated business. A bank account that had been previously used by the business had been jointly held by Lisa, but that ended once the company was incorporated.
[30] Phil does not pay Lisa rent for the business premise. Instead, he pays property taxes, maintenance fees and condo shop fees, which are essentially all the expenses associated with the property. He pays these amounts directly and not through Lisa. According to Phil, this is the arrangement that his father originally had with the business premise. His mother simply extended the arrangement that was in place when he took over the business.
Analysis and Findings
[31] I start by addressing Rosa’s claim that Phil holds a “beneficial interest” in relation to the Rainbow Valley Crescent residence and the Bullock Drive business premise.
[32] Lisa’s primary argument is that Rosa lacks standing to advance a trust claim on behalf of Phil. She relies on the decision of Morris v. Nicolaidis, 2021 ONSC 2957, wherein McGee J. states as follows at paras. 32-40:
[32] At the heart of this motion is an interesting question. Can a person advance a trust claim on behalf of a former spouse in order to increase that spouse’s net family property and consequently, benefit the person’s claim for, or defense to an equalization payment?
[33] A claim for a constructive trust is a claim in equity that is privately held. It is not a public interest claim. The common law principle relating to private interest standing states that “one cannot sue upon an interest that one does not have.” (Watson, McKay & McGowan, Ontario Civil Procedure, at §11 Standing to Sue).
[34] The Court of Appeal for Ontario outlined the legal tests for private and public interest standing in Carroll v. Toronto-Dominion Bank, 2021 ONCA 38, a case in which a bank employee brought a civil suit against her employer because she believed that she had uncovered wrongdoing on the part of the bank against a third party. The Court of Appeal upheld the motion judge’s dismissal of the case under Rule 21.01 (1), agreeing with the trial judge’s analysis that the appellant lacked private interest standing because she did not have any financial interest in the outcome of the litigation, and had not pled any facts that demonstrated a direct personal legal interest in the trusts that were allegedly breached by the Bank.
[35] Carroll supra sets out that “…to have private interest standing, a person must have a direct personal legal interest in the issue,” and later, that the person must be “specifically affected by the issue,” reemphasizing at paragraph 33 that standing requires that the claimant have a “personal legal interest” in the outcome of the litigation.
[36] Can an equalization claim create a direct personal legal interest that confers standing to make a trust claim on behalf of a spouse or a former spouse?
[37] I find that it cannot. An equalization payment cannot change the titled or beneficial ownership of property between spouses. The equalization scheme in Ontario is not based upon a division of property, but rather, it recognizes a spouse’s non-financial contributions to a marriage by equalizing the increase in value in each party's net family property between the date of marriage and the date of separation, subject to variation per section 5(6) of the Family Law Act.
[38] A claim that a third person holds property in trust for a non-titled spouse, or that a non-titled spouse has a beneficial interest in property, or a monetary claim arising from the acquisition, maintenance or use of that property can only arise from the personal, direct deprivation of the non-titled spouse. An equalization claim is, at best, an indirect legal interest. It is therefore insufficient to confer standing to a person to make a trust claim on behalf of a non-titled spouse or former spouse.
[39] Even trust claims between married persons are exceptional because "[i]n the vast majority of cases any unjust enrichment that arises as a result of the marriage will be fully addressed through the operation of the equalization provisions of the Family Law Act," see Martin v. Sansome, 2014 CarswellOnt 759 (ONCA.) Writing for a unanimous court, Justice Hoy envisions in Martin, supra, that it will be a rare case in which monetary damages for unjust enrichment cannot be adequately addressed by an equalization payment; and in those cases, a variation of share per section 5(6) of the Family Law Act, should be invoked before consideration of a trust claim.
[40] Although not in evidence here, there may be a situation in which a meritorious trust claim is not advanced by a non-titled spouse. In such a case, the other spouse cannot step into the non-titled spouse’s shoes and advance the claim himself because he has no direct personal legal interest in the trust claim; but he could seek to vary the equalization between he and the non-titled spouse if the resulting payment is found to be unconscionable per section 5(6) of the Family Law Act.
[33] Rosa submits that while the decision in Morris is sound in relation to equitable trusts, it is distinguishable in this case on the basis that Rosa’s claim against Phil is an express trust claim. In effect, Rosa submits that Morris should be restricted to trust claims based on resulting or constructive trust principles.
[34] I disagree. Regardless of whether the scope of Morris should be so restricted, this is simply not an express trust case. A valid express trust requires three certainties: certainty of intention to create a trust; certainty of subject matter; and certainty of objects: Byers v. Foley (1993), 1993 CanLII 5506 (ON SC), 16 O.R. (3d) 641 (Gen. Div.), at para. 13, citing D.M.W. Waters, Law of Trusts in Canada, 2nd ed. (Toronto: Carswell, 1984), at p. 107. Where an express trust is created in relation to real property, section 9 of the Statute of Frauds, R.S.O. 1990, c. S. 19, requires that a trust agreement be in writing.
[35] Even assuming that the “beneficial interest” pleaded in the answer is a claim of an express trust, there is simply no evidence before the court of any express trust agreement in relation to either property. In addition, there is no suggestion that the doctrine of part performance operates to permit recognition of any alleged verbal agreement notwithstanding the provisions of the Statute of Frauds.
[36] The claims advanced here can only be based on resulting or constructive trust principles. As such, while I am not bound by Morris, I find it persuasive and follow it. Rosa does not have standing to advance the trust claims on behalf of her former spouse.
[37] In terms of remedy, I note that in Morris, McGee J. relied on Rule 21 of the Rules of Civil Procedure to dismiss the claim. The motion in this case is framed as a summary judgment motion. In my view, the end result is the same. I am satisfied that a trial is not required to address the “beneficial interest” claims advanced in paragraphs 7 and 8 of Rosa’s amended answer. Those claims are dismissed.
[38] While this is sufficient to dispose of Rosa’s trust claims between Phil and Lisa, I will add the following.
[39] First, there can be no suggestion that the business property was the subject of either an actual or sham trust. The business property was purchased by Lisa and Christos when Phil was 15 years old. Christos operated his business out of the property until his death. The property passed to Lisa when Christos died. Phil continued operating his father’s business after his mother gifted him the business name. Phil incorporated the business in 2007. Lisa has no involvement in the business.
[40] There is a huge difference between owning a business and owning the property the business operates out of. Phil owns the business. His mother owns the property. The agreement between them is that he pays all the expenses of the business premise in exchange for using the property. This was how the business operated when it was a sole proprietorship operated initially by Christos and later by Phil. None of these facts give rise to an actual or sham trust claim to the business premise.
[41] Second, in terms of the Rainbow Valley Crescent residence, Rosa asserts that the property is essentially held in the form of a sham trust by Lisa to the benefit of Phil, and to the exclusion of Rosa. According to Rosa, this is a further distinguishing feature between this case and the Morris decision wherein McGee J. notes at para. 28:
These are not the circumstances of a sham trust, that is, a case in which a spouse has placed or transferred property into a trust without consideration in order to shield it from calculation within her net family property.
[42] A sham trust arises in instances where a trust settlor does not intend to part with the beneficial interest in a trust property, but executes documents to that apparent effect, see McGoey (Re), 2019 ONSC 80 at paras. 19-22. A sham trust is often undertaken in order to shield assets and avoid creditors or taxes.
[43] In this case, Rosa points to the lease agreement, on which she is not a party, as supporting an inference that what was really happening in this case is that Phil, Lisa and Christos, set up a sham trust to protect the residence from dissipation to her in the event that the relationship would end. Rosa also notes that the transfer of more than half the equity in the home as “a gift” to Phil immediately upon the sale of the house demonstrates that the intention all along was that the house was his.
[44] In my view, assuming Rosa had standing to advance this issue, a trial is not required to determine the matter. On the evidence before me, Phil and Rosa could not afford to purchase a home on their own. At the time of the purchase, they were living in a subsidized apartment and were subsisting on Phil’s modest income.
[45] Lisa and Christos purchased the home on Rainbow Valley Crescent as an investment. They then entered into a lease agreement with Phil, who paid rent for many years, including a lengthy period of time after Rosa left.
[46] This is not an instance where Phil purchased the home and with foresight of the potential demise of his relationship with Rosa, and in order to avoid losing half the house to Rosa, sought to install his parents as legal owners in his stead. I appreciate that during questioning, Lisa initially indicated that Phil contributed money towards the down payment on the home. However, she later sought to correct her answer through a letter from counsel and indicated that Phil did not contribute any money to the down payment. I also appreciate Rosa’s evidence that Phil paid the deposit on the home using money put aside from a second job with Christos, though I note there is no corroborating evidence on this issue. Ultimately, the whole of the evidence suggests that there was simply no way for Phil and Rosa to own this home on their own.
[47] While the fact that the lease is only in Phil’s name is curious, I do not see that fact as suggestive of an intention to create a sham trust. Moreover, in terms of the sale of the residence, Lisa’s evidence is that she decided to give a house to each son as part of her estate planning. When the Rainbow Valley Crescent residence was sold, a large portion of the proceeds went to Phil so that he could purchase his current home. This was an early “inheritance.” The balance of the proceeds was split between a savings account that is held for Phil and payment of the capital gains tax in relation to the home. Lisa explains that she has made a provision in her will for own home to be transferred to her other son, Bruce, upon her death.
[48] When viewed cumulatively and in context, the evidence does not support an inference that Phil, Lisa and Christos entered into a sham trust agreement to shield the home from Rosa. Lisa and Christos bought the home and leased it to Phil so that Phil and his family would have a nicer place to live in. At the time, Phil and Rosa were in no position to buy the home on their own. This all happened well before the marriage ended or was coming to an end.
[49] I turn lastly to Rosa’s final claim against Lisa, which is an equitable trust claim based on unjust enrichment. In this regard, Rosa argues that Lisa was unjustly enriched by Rosa’s contributions to the Rainbow Valley Crescent residence. She seeks damages or in the alternative, a declaration of a constructive trust interest in the home.
[50] To establish unjust enrichment, Rosa must prove three things: (1) an enrichment of, or benefit to, Lisa; (2) a corresponding deprivation to Rosa, and (3) the absence of a juristic reason for the enrichments, see Kerr v. Baranow, 2011 SCC 10 at paras. 36-37, and Martin v. Sansome, 2014 ONCA 14 at para. 52
[51] In my view, a trial is not required to fairly determine this issue. Rosa’s claim for unjust enrichment is entirely based on the fact that she contributed furniture, some uncertain amount of money for “renovations”, cared for Lucas while Phil was able to work, and undertook ordinary domestic duties around the house. It is hard to see how any of these claims amount to an enrichment of or benefit to Lisa, who had no use of the home during the time period. The claim in relation to the furniture is meritless. It does not act as an enrichment to Lisa as it does not alter the value of the home. The claim for “renovations” is entirely vague and uncertain. There is no clear indication in the evidence as to what the “renovations” entailed or how much money Rosa contributed. The remaining aspects of the claim relate to the care of Lucas and performance of ordinary household duties. These matters would not result in an enrichment of or benefit to Lisa.
[52] This aspect of the claim is also dismissed.
[53] In reaching the conclusion that summary judgment should be granted on the claims by Rosa against Lisa, I am cognizant of the caselaw that suggests that partial summary judgment is often inappropriate because of the risk of inconsistent outcomes and the potential expense of a re-litigating overlapping claims, see Butera v. Chown, Cairns LLP, 2017 ONCA 783.
[54] In my view, that is not a risk in this case. The fact that Lisa may be a witness in the trial is not a sufficient basis upon which to deny summary judgment, especially in view of the basis on which I have determined that summary judgment ought to be granted.
[55] In terms of costs, I strongly urge the parties to agree on costs. If they are unable to do so, I will entertain brief written submissions, no longer than three pages in length, exclusive of appropriate appendices. Lisa’s costs submissions shall be served and filed within 30 days of the release of this decision. Rosa shall have 45 days to file her submissions. If Phil is seeking costs, his submissions shall also be served and filed within 30 days.
J. Di Luca J.
Released: January 3, 2023
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Philip George Karatzoglou Applicant
– and –
Rosetta Commisso and Evangelia Karatzoglou Respondents
REASONS FOR DECISION
J. Di Luca J.
Released: January 3, 2023
[^1]: To avoid confusion and for ease of reading, I will refer to the parties by their first names. I mean no disrespect in doing so.
[^2]: While the moving party’s factum on the motion addressed the alternative request for an Order striking Ms. Commisso’s pleadings, the issue was not pursued in oral submissions.