Court File and Parties
Court File No.: CV-23-37
Date: 2025/02/28
Ontario Superior Court of Justice
Re: Caralee Madelyn Paul (the Applicant)
And
Jeffrey Dean Baker (the Respondent)
Before: Marc R. Labrosse
Applicant Counsel: Kenneth Wise
Respondent Counsel: G. Edward Lloyd
Heard: June 10, 2024 and November 20, 2024
Reasons for Decision
Overview
[1] This Application was filed under the Partition Act, R.S.O. 1990, c. P.4, for the sale of the jointly owned property known municipally as 7 Main Street, Odessa, Ontario (the “Property”). The joint owners are the applicant, Caralee Madelyn Paul, and the respondent, Jeffrey Dean Baker.
[2] The applicant seeks the following relief:
a. An order that the Property be immediately listed for sale and sold pursuant to the direction of the court;
b. An order for directions by the court in respect of the conduct of the sale of the Property;
c. An order that the net proceeds of sale of the Property be divided equally as between the applicant and the respondent after accounts are taken and adjustments are made as ordered by the court;
d. A mandatory order requiring the respondent to vacate the Property along with his personal belongings prior to listing it for sale;
e. An order permitting the applicant to enter the Property prior to listing it for sale for the purpose of making it presentable for sale including painting, cleaning and other cosmetic activities.
[3] The application initially proceeded on June 18, 2024 and was adjourned as a result of a number of new issues brought forward by the respondent just prior to the original hearing date. The application was adjourned to allow the parties to obtain better evidence to address some of the issues raised, particularly the issue of hardship and the circumstances of the transfer. The application was also adjourned to allow the respondent an opportunity to obtain a firm mortgage commitment to potentially buy out the interest of the applicant.
[4] After further evidence was obtained, in particular, evidence from the lawyer who acted on the transfer of the Property to the applicant and the respondent jointly, the matter proceeded to adjudication. Of note, the respondent did not file any additional evidence in respect of his ability to buy out the interest of the applicant.
[5] For the reasons set out herein, the court concludes that the applicant is properly a joint tenant with the respondent and that they both retain a 50% beneficial interest in the Property. The applicant is entitled to partition and sale and there is no basis to deny that right. The first step is to consider an accounting to determine the adjustments based on eligible expenses and what the parties have contributed to the Property.
[6] As for the sale process, the court indicated during the application that it would allow the respondent a brief opportunity to make a suitable offer to the applicant to purchase her 50% interest (subject to adjustments) before the Property is listed for sale. This can only be done after the adjustments are determined. As part of that process, the parties must turn their minds to the expenses incurred for the Property in respect of the amounts paid towards the mortgage, property taxes, insurance, and maintenance, to determine each party’s share of the net proceeds of sale. If the parties are unable to agree on adjustments to the net proceeds of sale, they will reappear before Justice Labrosse at a 9:00 a.m. time to have the issue adjudicated, with each party filing an affidavit and allotted 20 minutes to argue their position.
[7] If the parties can agree on the adjustments, Justice Labrosse will remain available to address the terms of sale if necessary. However, if the parties are unable to agree, they will return to this court to have the terms of sale decided, including the listing price and acceptance process. The parties are encouraged to make explicit offers on how the terms of sale should proceed and the court will consider those offers if further appearances are required as this will impact the costs awarded.
The Relevant Facts
[8] The Property is the Baker family home. The respondent and his sister, Amy Baker, inherited the Property from their father. They each owned a half share and were cohabitating in the home. The cohabitating siblings had signed an agreement which included a clause that if either sibling wished to leave the home, one sibling would purchase the other sibling’s interest in the Property or, in the alternative, the Property would be sold.
[9] In the spring of 2018, Amy Baker exercised her right pursuant to the agreement and requested that the respondent purchase her interest in the home, failing which she would require that it be sold. The Property was then unencumbered.
[10] The respondent was financially unable to purchase his sister’s share or pay the ongoing costs relating to the home. As a result, the respondent and Ms. Paul agreed that she would assist by pledging her credit to obtain financing for the Property and by contributing to the ongoing costs. In exchange, Ms. Paul would be a 50% beneficial owner. The applicant and the respondent were in a relationship at the time.
[11] On July 10 and 11, 2018, there were three transactions. In the first transaction, Amy Baker transferred her interest in the Property to Jeffrey Dean Baker for $150,000. The second transaction was to add Caralee Madelyn Paul to the title as joint owner. The third transaction had a mortgage registered on title to the Property in the amount of $190,000. The chargors for the mortgage were Mr. Baker and Ms. Paul.
[12] With the assistance of a lawyer, Mr. Bradley Fochesato, the parties executed a trust agreement specifying that they held the Property as equal beneficial owners. Ms. Paul and Mr. Baker then became joint tenants of the Property and co-mortgagors. Mr. Fochesato was cross-examined and gave evidence that the sole purpose of the trust agreement was to avoid the payment of a land transfer tax. In addition, Mr. Fochesato affirmed that he properly advised Mr. Baker independently. Mr. Baker never raised any concerns about his ability to understand the lawyer with the lawyer.
[13] The trust agreement confirms that when Mr. Baker received the full ownership of the property following the transfer from Amy Baker, he was holding title to the property for both Mr. Baker and Ms. Paul as joint tenants. This confirmed Ms. Paul’s 50% beneficial interest in the Property, which was established once Amy Baker was paid out for her interest in the property from the mortgage proceeds obtained through the mortgage co-signed by Ms. Paul. There were no issues raised with the trust agreement in Mr. Baker’s initial affidavit other than he could not recall why it was signed.
[14] Mr. Baker's objections, on the basis that he suffers from cognitive challenges, only came to light in his second affidavit.
[15] Mr. Baker’s evidence surrounding the agreement between the parties was that Ms. Paul was purchasing Amy Baker’s half share of the Property. This is what Mr. Baker said he believed was happening when the services of Mr. Fochesato were utilized. Mr. Baker testified that he did not understand the nature of these transactions and that he was incapable of instructing Mr. Fochesato to structure the transaction in any way. He claims that it was Ms. Paul who instructed the lawyer.
[16] Ms. Paul provided an accounting of the payments that she made towards the mortgage and property taxes. She claims to have contributed $30,763 to the mortgage and $8,106.04 to the property taxes. A handwritten accounting was provided of these payments which essentially claims that Ms. Paul made the full amount of the initial payments from August 2018 until May 2019. She then did not make a payment until December 2019 when the parties seem to have started alternating bi-monthly payments. Ms. Paul then made the COVID relief payments until October 31, 2020. Then Mr. Baker assumed the bi-monthly payments until May 2021 when the parties seem to alternate again. Overall, Ms. Paul claims to have made 51 mortgage payments plus 12 COVID relief payments which were reduced mortgage payments during the COVID pandemic. Mr. Baker made 56 mortgage payments.
[17] There is little to no evidence in the record as to why Ms. Paul stopped paying the mortgage at times and how Mr. Baker reacted. The only evidence is that Mr. Baker then assumed the responsibility for making the mortgage payments after Ms. Paul stopped making them and then they alternated at times. The parties were still a couple for a certain period of time, and it is unclear as to what transpired within their relationship which resulted in the change in payments.
[18] In addition, when the parties signed on to the new mortgage, they both received $18,737.38 from the mortgage proceeds. There is no explanation in the evidence as to why either party received this amount. Ms. Paul’s evidence is that she used a portion of the funds received from the mortgage to cover legal fees related to Mr. Baker’s buyout of his sister’s share of the Property. Mr. Baker did not properly explain his understanding of the $18,737.38 payment that he received.
[19] On April 20, 2020, Ms. Paul ended her relationship with Mr. Baker but continued to make mortgage payments. After the separation Mr. Baker continued to reside at the Property. Despite being co-owners, Ms. Paul was never given a key to the Property and had no access, despite requesting it three times over a period of four years. In the summer of 2022, Mr. Baker married another woman with whom he resided at the Property until her passing in the summer of 2024.
[20] It was also Mr. Baker’s evidence that he rented part of the Property to a tenant in 2022 for $800.00 per month. He did not provide a proper accounting of the amounts received, nor did he share any of the rental income with Ms. Paul. The respondent stated that the tenant did not pay regularly. He estimates having received $5,200.00 without providing any supporting documents.
[21] Ms. Paul severed the joint tenancy on May 11, 2022 and has since sought to sell the Property to discharge the joint mortgage and pay off debts.
Issues and the Law
[22] It is the applicant’s position that, without any agreement limiting her ownership in the Property, the applicant is entitled to 50% of the net proceeds of sale.
[23] The court identifies the following issues that require adjudication:
a. If the court should order a sale of the Property under s. 3 of the Partition Act;
b. What importance should be attributed to the trust agreement;
c. Whether trust principles apply;
d. Whether unjust enrichment principles apply;
e. How the proceeds of sale should be distributed between the parties.
Partition and Sale
[24] Section 3 of the Partition Act allows any person with an interest in land to bring an action or make an application for the partition of such land, or for the sale thereof under the court’s directions, if the court considers the sale to be more advantageous to the parties interested.
[25] It is not disputed that, pursuant to the Partition Act, the court has a broad discretion in making orders upon partition and sale of a Property. As set out in Sauve v. Davidson, 2024 ONSC 2091, that discretion includes the power to make all allowances and give such directions as will result in equity to the parties. The court has the jurisdiction to refuse to force a sale where there is evidence of oppression.
[26] The respondent advances that the agreement was always that Ms. Paul was purchasing Amy Baker’s interest and that the mortgage should have been her responsibility alone. In support of that contention, he points to the fact that Ms. Paul alone paid for the mortgage for the first 16 months following the transfer of the Property. Mr. Baker states that he did not address the applicant’s default as a result of his dyslexia and that he could not constantly make complaints about this. The problem is that he could not show an instance where he made even one complaint.
[27] The respondent states that it is clear as to what the agreement was between the parties given that Ms. Paul made all the mortgage payments for the first 16 months and then reneged on their agreement. In sum, the respondent relies on the nature of the personal relationship, his disability, and the fact that the applicant paid the mortgage for the first 16 months, to support his version of the narrative. The respondent states that this is proof that Ms. Paul only purchased Amy Baker’s half share of the house, subject to the mortgage.
[28] The respondent argues that the trust agreement was a gift from himself to Ms. Paul as no consideration was paid for it. Accordingly, there is a presumption that there is a resulting trust unless there is clear evidence to the contrary. The respondent states that if the trust agreement is valid then Ms. Paul holds the share of the Property transferred to her by the deed in trust for Mr. Baker.
[29] I disagree. There is an absence of information about what the agreement was between the parties for the payment of the mortgage during the relevant period. At times they are alternating and at other times one or the other is making two payments a month. There is also no information about what happened when Ms. Paul stopped making both monthly payments in May 2019. At this time, the parties were still in a relationship. Their relationship ended in April 2020. While the respondent suggests that the applicant reneged on her deal, they remained a couple for almost a year after the change in who made the mortgage payments. There is no evidence to establish that Ms. Paul reneged on any deal. There are also no written communications about a change in the agreement and neither party has made any reference to discussions amongst them about why the respondent took over the payment of the mortgage and why things changed thereafter.
[30] In addition, they both received $18,737.38 from the mortgage proceeds. There is no explanation as to why the respondent would receive such a significant payment. It certainly goes against the suggestion that this was solely the applicant’s mortgage and that she was solely responsible for the payment of the mortgage. Furthermore, when looking at the trust agreement, it was signed in circumstances where the respondent acquired his sister’s interest in the Property in exchange for $150,000.00 of mortgage funds. The bottom line is that there is nothing clear about what the arrangement was or how it may have evolved. The court must make inferences based on the available evidence.
[31] The court highlights that the law of equity presumes bargains, not gifts: see Pecore v. Pecore, 2007 SCC 17, para 24. The burden is on the individual who receives a gratuitous transfer of Property to rebut the presumption of bargain by proving that it was intended as a gift at the time of transfer.
[32] The respondent argues that the trust agreement was never consented to by his client as a result of his learning difficulties. This argument has little merit given that the trust agreement has a very small role to play in this analysis. I attribute limited weight to the trust agreement because it was not intended to reflect an agreement in respect of either party’s interests, although it coincides with the receipt of mortgage funds to pay out Amy Baker. Its purpose was to avoid the payment of land transfer tax. It was not meant to reflect a situation where one person received more than what they should have in the bargain.
[33] In the present case, the respondent was going to have to sell the Property to allow his sister to realize on her interest. The applicant was able to assist in obtaining a mortgage to pay off the sister and then she contributed significantly to the payment of that mortgage without ever actually living in the home. Both parties received over $18,000 from the mortgage proceeds which demonstrates that there was an obvious agreement that the respondent would benefit from the mortgage proceeds over and above paying out the respondent’s sister.
[34] The applicant has addressed a number of arguments against partition and sale such as equity, unjust enrichment, resulting trust and the purchase money resulting trust. I briefly address these issues in the following summary of legal principles:
a. In Ferreira v. Macedo, 2016 ONSC 951, para 36, the Divisional Court recognized that the right to partition and sale may only be denied under exceptional circumstances such as when there is evidence of malice, oppression, or vexatious intent by the applicant.
b. Courts have upheld trust agreements as binding documents that establish ownership interests, even if the agreement was primarily made for tax purposes: see Karakatsanis v. Georgiou, para 19.
c. Property held in joint tenancy implies an equal ownership interest between co-owners unless a different intent is documented. Courts presume joint tenants intend to share ownership equally. In addition, documented agreements and consistent ownership contributions rebut a presumption of a resulting trust: see Chechui v. Nieman, 2017 ONCA 669, paras 30-35; Jackson v. Arthur, 2015 ONSC 1140, paras 226-27.
d. Paying for some of the mortgage and taxes is demonstrative as conduct of a co-owner or co-mortgagor: see Roberts v. Hyland, 2017 ONSC 2164, para 144.
e. A purchase money resulting trust arises when one party contributes funds towards the acquisition of a property, but the property is registered in another person’s name. The law presumes that the contributor did not intend to make a gift and instead they retain an equitable interest proportionate to their contribution: see Nishi v. Rascal Trucking Ltd., 2013 SCC 33, para 1.
f. The presumption of a resulting trust does not apply where there is evidence of financial contributions or an agreement about co-ownership, even if contributions are unequal: see Dhillon v. Brar, 2019 ONSC 4066, paras 16-17.
g. Unequal financial contributions do not negate a common intention to share ownership equally. A resulting trust can be rebutted by demonstrating a mutual understanding and agreement to share property ownership: see Argatoff v. Argatoff, para 21.
h. A pledging of credit and the payment of a mortgage constitutes consideration such that a presumption of resulting trust will not arise: Holtby v. Draper, 2017 ONCA 932, para 66.
i. It is well established that a claim for unjust enrichment must satisfy three elements: (1) the enrichment to the applicant; (2) a corresponding deprivation to the respondent; (3) the absence of a juristic reason: see Kerr v. Baranow, 2011 SCC 10, para 32.
j. When suspicious circumstances are raised, the evidence must be made out on a balance of probabilities. The evidence must be scrutinized in accordance with the gravity of the suspicion: see Vout v. Hay, para 24.
[35] In consideration of the above legal principles, the evidence is clear that the parties made a bargain for the applicant to become a 50% joint owner of the Property. The respondent was in a difficult position of having to sell the Property and the parties arranged for the respondent’s sister’s interest to be paid out of a joint mortgage. The evidence of the lawyer who acted on the transaction leads me to conclude that the applicant understood the documents he was signing. He received over $18,000 from the mortgage proceeds. This does not happen in a vacuum and certainly not if the applicant was solely responsible for the mortgage. There is no indication that the applicant was solely responsible for the mortgage registered on the Property. This would be inconsistent with the available evidence from that time and how the respondent later assumed the mortgage payments.
[36] When considering the trust agreement, it clearly acknowledges the 50% joint ownership of the parties. While the intent of the trust agreement was to avoid land transfer tax, its legal effect cannot be ignored and is consistent with the transaction that placed the property in joint ownership. Although it is not dispositive of this application, it supports the court’s finding that the parties were to have a joint ownership of the Property.
[37] As previously stated, I disagree with the respondent that the evidence clearly shows that the applicant was solely responsible for the payment of the mortgage. While I appreciate that she did make the payments during much of the first year following the registration of the mortgage, there is no evidence to suggest that she would have reneged on the agreement, especially given that the parties continued to be in a relationship for almost a year thereafter. There is nothing to suggest that the respondent did not accept to take over the mortgage payments.
[38] I am satisfied that the decision to place the Property in joint names, facilitated by the trust agreement which acknowledges their joint ownership, along with the joint mortgage, represents a bargain made by the parties. They both received over $18,000 from the mortgage proceeds and each contributed significant amounts to the mortgage and property taxes. This is sufficient to rebut any presumption of a resulting trust if it exists.
[39] I am satisfied that the principles related to a resulting trust do not apply in this matter. Firstly, they both received an interest in the Property, the respondent received not only the access to mortgage financing but also received a significant payment of $18,737.38. Further, the applicant made significant contributions to the mortgage and property taxes. The presumption of a resulting trust has been rebutted as these were not gratuitous transfers.
[40] In addition, the circumstances of these transactions and the contributions of the parties rebut any allegations of unjust enrichment.
[41] Firstly, I disagree that the applicant was unjustly enriched by having agreed to become a joint owner of the Property and a joint borrower on the mortgage. The applicant contributed significant amounts on the mortgage and property taxes without having ever resided in the Property. She took on the liability for the mortgage and made important contributions to the payment of the mortgage. She provided consideration for what she obtained.
[42] In addition, I do not find that there was a corresponding deprivation by the respondent who was on the verge of losing the Property prior to entering into this arrangement with the applicant. He received a considerable amount from the mortgage proceeds and benefited from the mortgage payments made by the applicant. However, if the registration of the mortgage on the entire Property, including his 50% interest, is deemed to be a deprivation, there was clearly a juristic reason for that deprivation in the manner in which this transaction happened. This was the bargain that the parties made to prevent the respondent from losing the Property.
[43] I am satisfied based on the evidence of the lawyer who acted on the transaction that the respondent understood the transaction at the time. The respondent met with the lawyer and the joint ownership, joint mortgage and trust agreement represent juristic reasons which justify the nature of the transactions.
[44] In addition, the evidence does not demonstrate any oppression by the applicant, nor does it establish any undue influence or lack of understanding by the respondent. The respondent has failed to establish this on a balance of probabilities. On this last point, the respondent’s claim that dyslexia prevented him from understanding the nature of these transactions does not warrant a finding of oppression. The respondent has graduated from a post-secondary education program and has signed numerous other documents surrounding his ownership of the Property. These other documents have never been put in doubt. The applicant has not satisfied me that he was unable to appreciate the nature of these transactions. He participated and benefited from the transactions. He was represented by counsel and his actions do not suggest that he ever opposed the arrangements made with the applicant. That bargain was allowed to remain in place for several years. If the applicant had truly reneged on the deal that had been made, the time to object was when she stopped paying the mortgage or at least when the relationship ended.
Disposition
[45] For all of the above reasons I conclude that the applicant is properly entitled to the partition and sale of the Property as a result of her 50% joint ownership which will be subject to the following provisions:
a. Firstly, the parties must deal with the adjustments to be made based on their contributions as co-owners. I am not in a position to direct which expenditures are subject to being equalized. There was discussion about recognition for the unequal contributions to the mortgage, property taxes and insurance together with amounts paid to third parties for the ongoing maintenance costs of the Property. I will be seized of this issue if the parties cannot agree.
b. Once the adjustments are determined, if any, the respondent will have a period of 30 days to arrange for financing to buy out the interest of the applicant.
c. Thereafter, if the parties cannot agree, the Property will be listed for sale and I will oversee any disputes with respect to the listing of the Property, the sale process, and the division of net proceeds of sale.
d. Either party may request a virtual case conference with me at a 9:00 a.m. time to determine next steps.
Costs
[46] The parties are encouraged to resolve the issue of costs and, if unable to do so, may provide written submissions on costs after the sale process is concluded or agreed to. The written costs submissions shall not exceed three pages plus attachments.
Marc R. Labrosse
Date: February 28, 2025