Kulay v. Janeen, 2011 ABQB 633

Court of Queen ’ s Bench of Alberta Citation: Kulay v. Janeen, 2011 ABQB 633 Date: 20111014 Docket: 0903 04173 Registry: Edmonton Between: Rita Kulay Plaintiff (Defendant by Counterclaim) - and - Nisha Janeen Defendant (Plaintiff by Counterclaim) _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice D.C. Read _______________________________________________________ [ 1 ] Melita (Rita) Kulay has lived in the Village of Spring Lake since 1996. Nisha Janeen is the registered owner of the home in which Ms. Kulay lives. Ms. Janeen purchased it shortly before Ms. Kulay moved in.

[ 2 ] Ms. Kulay claims that she and Ms. Janeen had an agreement. Ms. Janeen would purchase the home on Ms. Kulay ’ s behalf, and take out a mortgage to pay for the bulk of the purchase price. Ms. Kulay says they agreed that Ms. Kulay would pay the down payment and would pay Ms. Janeen sufficient funds to enable Ms. Janeen to make the mortgage payment each month and pay the taxes. Ms. Kulay says this arrangement was entered into because Ms. Kulay was unable to qualify for a mortgage and Ms. Janeen, as her friend, agreed to help her. Ms. Kulay brought action for a declaration that Ms.

Janeen holds bare legal title to the home as a trustee and demands that Ms. Janeen transfer the home to her, subject to Ms. Kulay being required to reimburse Ms. Janeen for the amount she paid to discharge the mortgage in 2007. [ 3 ] Ms. Janeen defends the action. She says that Ms. Kulay is her tenant and that any agreement they had respecting her buying the home on behalf of Ms. Kulay was varied years ago to become the present arrangement. Ms. Janeen acknowledges that Ms.

Kulay borrowed $6,000 and reluctantly agrees it was used as a part of the down payment for the home but says that when the lender of the $6,000 began to press for repayment of the loan, Ms. Janeen agreed to repay it. Ms. Janeen says that Ms. Kulay implicitly agreed at that time that their relationship would become one of landlord/tenant. Ms. Janeen's counterclaim claims in the alternative, that if there was a trust agreement, Ms. Kulay breached it and Ms.

Janeen is entitled to damages. [ 4 ] This matter came before me for a two day trial beginning September 15, 2011. [ 5 ] The home at issue is municipally described as 669 Lakeside Drive in the Village of Spring Lake and legally described as Plan 2219CL, Block 3, Lot 5 (the "Home"). It was purchased for $57,500. [ 6 ] The purchase transaction closed and title issued in the name of Nisha Janeen on January 16, 1996. A mortgage from Scotia Mortgage Corporation in the principal amount of $49,852 was also registered on January 16, 1996. This mortgage was discharged on July 16, 2007.

The only current registration against title is a caveat registered by Ms. Kulay on May 14, 2008, claiming an interest in land as a purchaser pursuant to a real estate purchase agreement dated January 16, 1996. [ 7 ] Ms. Kulay is 63 years of age and suffers from multiple sclerosis. Her evidence was that she and Ms. Janeen were good friends when the Home was purchased. She said she and a foster son searched for and found the Home with a realtor. When Ms. Kulay found it, she decided that it was a good deal and wanted to move into it herself.

She says that through negotiations she was able to reduce the asking price to $54,000. Satisfied with the price, she then called a friend named Adina or Dina Rose and arranged to borrow $6,000, borrowing the funds in cash. Ms. Kulay said she later introduced Ms. Rose to Ms. Janeen. Ms. Kulay also approached Ms. Janeen. She says that Ms. Janeen agreed with her to purchase the Home on Ms. Kulay's behalf and to take out a mortgage to pay the balance of the purchase price. The condition was that Ms. Kulay would pay Ms.

Janeen the amount required to make the mortgage payment each month, which payment included the property taxes. Ms. Kulay says that their agreement was that Ms. Janeen would 'carry' the title and transfer it when the mortgage was repaid. According to Ms. Kulay, this agreement was entered into because of Ms. Kulay's illness which made her unable to work. She was on social assistance and would never have qualified for a mortgage. [ 8 ] Since then, Ms. Kulay says she has paid the amount of $432 per month to Ms. Janeen. Usually, she provided Ms. Janeen with postdated cheques for a period of about six months at a time.

According to Ms. Kulay, she made these payments regularly. She lived in the home and she and Ms. Janeen had no discussions about their arrangement. This situation persisted until some time in early 2008 just after Ms. Rose died. At that time, she said, Ms. Janeen telephoned her and left a message saying that she, Ms. Janeen, was going to repay Ms. Rose and that she and Ms. Kulay would now have to renegotiate their 'rental' agreement as the amount that Ms. Kulay had been paying was now insufficient. Ms. Kulay said she did not agree to this and her reaction was to seek legal advice.

After obtaining legal advice, she filed the caveat. [ 9 ] In her evidence, Ms. Janeen was vague about the exact terms of the original agreement she made with Ms. Kulay. She said, however, that at some point the agreement changed and that, the obligation to repay Ms. Rose was or became that of Ms. Janeen. She has not actually done this, as yet, but says she is prepared to pay Ms. Rose's estate the amount owed. [ 10 ] Ms. Janeen says that the arrangement between her and Ms. Kulay has been that of landlord/tenant for many years. She says never in her "wildest dreams" did she think she was buying a house for Ms.

Kulay and that their arrangement, since "day 1" has included the right of Ms. Janeen to use half the property. She testified that she always had a trailer on the property and has used it as her summer home. She says that she promised Ms. Kulay she could use the Home as long as Ms. Janeen was still alive and would never evict her but she says that their arrangement has all of the earmarks of a landlord/tenant relationship because that is what it was.

[ 11 ] The issue is whether Ms. Kulay has proven that she has an interest in the Home held in trust by Ms. Janeen. [ 12 ] There is no written agreement between the parties. The only written document, an undated document called 'Statement of Account', was prepared by Ms. Janeen. [ 13 ] As Johnstone, J. concluded in Canada Trustco Mortgage Co. v. Wycott , 2002 ABQB 399 , an oral trust agreement is enforceable.

Section 7 of the Statute of Frauds , 1677 (Eng. 29 Car. 2) c. 3 requires that a declaration of trust be in writing. However, s. 8 of that Statute provides that trusts arising "by.. construction or implication of law" are of "like force" as if this "Statute had not been made".

In other words, a trust that arises by construction or implication of law may be enforced even if not in writing. [ 14 ] Trusts arising "by..construction or implication of law" include constructive and resulting trusts. [ 15 ] A resulting trust is one in which the legal title to property is in the name of one party, but the parties' intention, or inferred intention based on the circumstances, is that the beneficial interest will not rest with the holder of the legal title. The court in Rathwell v.

Rathwell , [1978] 2 S.C.R. 436, described the concept at paras. 29-30, as follows: An interest in the property is presumed to result to the one advancing the purchase moneys, or part of the purchase moneys. The principle is expressed thus in 19 Halsbury (3rd. ed.) para. 1372: 1372. Where property is bought with money belonging to a wife and conveyed to her husband, there is a resulting trust in favour of the wife in the absence of proof by the husband of a contrary intention on her part. [ 16 ] In Megarry's Manual of the Law of Real Property , 8th ed. (London: Sweet & Maxwell 2002), the author A.J.

Oakley at page 318, described resulting trusts in the context of real property at page 318, as follows: ... it is only in the absence of an express common intention that any beneficiary will need to fall back on resulting trust. Where the common intention instead has to be inferred, it will need to be inferred from the contributions and circumstances in which they were made; the main weight is thus on the contributions. The question is what in fact the inferred common intention was, and not what the court considers it might or ought to have been.

It is doubtful whether a common intention can be inferred from anything less than contributions to the purchase price. [ 17 ] I must consider Ms. Kulay's contributions and the circumstances in which they were made in order to determine what their common intention was at the time. [ 18 ] Ms. Kulay seemed to me to be a rather naive woman. Unlike Ms. Janeen who is a business woman and, on her own evidence has bought and sold many properties, Ms. Kulay is unsophisticated and did not question many aspects of her relationship with Ms. Janeen. Ms.

Kulay thought she had negotiated a price reduction from the asking price to $54,000 and was mystified as to why this was not the price that the Home was purchased for. Ms. Kulay seems to have had no idea that the amount of a down payment is not the only amount that must be paid when purchasing a house and that the final amount she owed would be greater. [ 19 ] Ms. Kulay testified that as well as paying the $6,000 as a down payment, and the obligation to pay Ms. Janeen sufficient funds each month to pay the mortgage and taxes, when the municipality required a septic system to be installed, Ms.

Kulay said she was also obliged to pay the cost for this. She said she was also required to pay the lawyer Ms. Janeen hired to transfer the land.

[ 20 ] As I have already said, Ms. Janeen's version of events is somewhat different. She does not directly deny that Ms. Kulay borrowed funds for the down payment but Ms. Janeen says that the obligation to repay is now hers. She testified that she entered into two different real estate agreements in respect to the Home. Two offers to purchase were made exhibits. The first was entered into by a corporation called Venture Building Maintenance. It was dated October 26, 1995 and specified that closing would be on November 24, 1995.

Under this agreement, the purchase price was $57,500 to be paid by an initial deposit of $500, financing of $54,625 and a cash to close of $2,375. The second was entered into by Ms. Janeen personally and was slated to close on January 15, 1996. Under the terms of this agreement, the purchase price remained $57,500 and there was an initial deposit of $500 but there was to be a further deposit of $3,000, financing of $48,875 and a cash to close of $5,125. [ 21 ] Ms. Janeen's evidence was that the sale contemplated by the first agreement did not close. The second did.

She said that it was sometime after the second agreement was entered into, that the arrangement with Ms. Rose changed. At first she said that she borrowed the money from Ms. Rose not Ms. Kulay. Then, she said that she spoke to Ms. Rose about repaying her directly after Ms. Kulay asked her to. Later, she said that she and Ms. Rose had a direct discussion in June of 2007, during which Ms. Rose told her that because of her health she wanted to get her affairs in order and asked Ms. Janeen to repay the $6,000. At first she denied using the $6,000 Ms.

Kulay said she paid her for the down payment but did not directly deny that Ms. Kulay had given it to her. Later in her evidence, she agreed that the $6,000 was used to pay the down payment. She also said that Ms. Rose had given her a cheque made out to her and she put this in the bank but she could not substantiate this with any documentation from her bank. Nor did she explain how this cheque was related to the payment of the down payment for the Home. She said, as well, that she did not ask Ms. Kulay to pay any amount for the septic system and said that Ms.

Kulay called her when repairs were required on the Home, over the years. [ 22 ] Where they differ, I accept the evidence of Ms. Kulay over that of Ms. Janeen. Although Ms. Rose has died and so cannot give evidence to substantiate what occurred, I accept the evidence of Ms. Kulay that she approached her friend Ms. Rose to obtain a loan for $6,000 to pay what she thought was the amount required for the down payment to purchase the Home. I am satisfied that it was Ms. Kulay and not Ms. Janeen who borrowed $6,000 from Ms. Rose. Although it is only in her handwriting, Ms.

Kulay produced a receipt dated November 24, 1995. This receipt makes specific reference to the loan of $6,000 and specifies that the funds are to be applied to the purchase of the Edmonton Beach property. (Edmonton Beach is the previous name of the village in which the Home is located). It makes little sense that Ms. Rose, who was a friend of Ms. Kulay, would lend money with no documentation of any sort, to Ms. Janeen whom she did not know until Ms. Kulay introduced her during the discussion about the Home. I am satisfied, as well, that Ms. Kulay gave the $6,000 to Ms.

Janeen and that these funds were used to pay the down payment for the Home. Ms. Janeen did not directly deny that she had received the funds and her evidence respecting a cheque from Ms. Rose was unclear and unsubstantiated. [ 23 ] Further, there is documentation which corroborates aspects of Ms. Kulay's version of events. She provided a quotation from Kev's Backhoe Services Ltd. sent by fax at the relevant time period, which is a quote for installation of a septic system for "Mr. Charles Spady at Edmonton Beach". Ms.

Kulay testified that Charles Spady was the realtor she dealt with during her negotiations for the purchase of the Home. Ms. Kulay also placed into evidence the flimsy from a money order payable to Kev's Backhoe. The payment is for $711.68 and is dated January 12, 1996. The remitter's signature is that of Ms. Kulay. [ 24 ] However, the document which is most corroborative of Ms. Kulay's version of events is the 'Statement of Account' document, which Ms. Kulay says she received from Ms. Janeen in January of 1996.

This document clearly relates to the purchase of the Home and says this: Total Cost of House $57,500.00 Bank mortgage $48,875.00 CMHC fees $ 977.50 Total Mortgage $49,852.50 Down payment $ 8,625.00 Your down payment $ 6,000.00 Mortgage fee $ 75.00 House appraisal $ 219.00 Loan since 1994 $ 500.00 money borrowed $ 2,919.00

Total $ 3,419.00 Mortgage payment is due 1st of the month plese [sic] make sure the payment is in the bank before the 1st of the month. I would appreciate if you can pay the money as soon as possible. [ 25 ] There is a further typed line below what appears above. It says "Your loan payment to Nisha will be $285.00 per month". However, this line has been stricken in pen and underneath it the following is hand written: Melita can you please arrange to pay this amount $3419.00 As I have discussed with you I need the money and appreciate your response to this. Thanks Nisha [ 26 ] Ms.

Janeen agreed that she had written this document and agreed, as well, that the handwriting at the bottom of the document was hers. She said, however, that this document related to what she called the first offer to purchase which was cancelled when she reached agreement with Ms. Rose to repay the $6,000 loan. However, Ms. Janeen failed to explain in what way the failure to close of the first offer to purchase was connected with her agreement with Ms. Rose or, indeed, with Ms. Kulay.

Indeed, the numbers set out in the Statement of Account seem more related to the second offer to purchase agreement, the one that did close, than they do to the first. I note, for example, that the mortgage amount of $48,875 is the amount set out under the heading 'new financing' on the second purchase agreement. The number set out under that heading on the first agreement is much larger. I find that the 'Statement of Account' document relates to the second offer to purchase and not the first. [ 27 ] Ms. Janeen contradicted herself on numerous occasions during her testimony.

She seemed at first to deny that she had received $6,000 from Ms. Kulay, saying Ms. Rose gave her a cheque for the $6,000 which she deposited. However, she then said that the 'second agreement' with Ms. Rose arose because Ms. Kulay told Ms. Janeen that Ms. Rose was pressing her for payment and she was unable to repay the loan. That makes little sense unless it was Ms. Kulay that borrowed the funds. Ms. Janeen at first denied that the $6,000 she received was used for the down payment and then agreed that it had been.

She said, at first that when she drafted the 'statement of account' it was before she got the mortgage. She then said that she already had the mortgage when she drafted the document. She said at first that she and Ms. Rose had made their agreement that Ms. Janeen would repay the $6,000 at the time the 'second agreement' was entered into, that is in late 1995. Later, however, she said that she and Ms. Rose made their agreement in June of 2007. Because of these many contradictions, I am unable to accept Ms. Janeen's evidence. She has failed to prove a contrary common intention. [ 28 ] Instead, I find that Ms.

Kulay and Ms. Janeen did have an oral agreement, the important terms of which were as follows: Ms. Janeen would take title to the Home and apply for the mortgage. Ms. Kulay would pay $6,000 as a down payment and would pay $432 per month, which amount would completely cover the costs of the monthly mortgage payment as well as the property taxes. Ms. Janeen confirmed that these totalled $432 for the first three years. [ 29 ] Ms. Kulay lived up to the terms of this agreement. She borrowed $6,000 from Ms. Rose and paid it, in cash, to Ms. Janeen.

She paid the requested amount regularly and believed that she was paying a sufficient amount to cover the mortgage and the included real property taxes. [ 30 ] Most of Ms. Kulay's actions are consistent with her understanding that she had an agreement with Ms. Janeen that Ms. Kulay would be the ultimate owner of the Home. Ms. Kulay said, and I accept, that she paid cash to Ms. Janeen for the cost of the lawyer hired to transfer title. When it was determined that the municipality required the new owner to install a septic system when the property changed hands, Ms. Kulay paid at least part of the cost of this.

She also purchased a new stove for the Home. In addition, as was clear from the evidence of Ms. Kulay's friend, Alan Stebbings, Ms. Kulay took responsibility for doing many of the maintenance and repair tasks on the property. [ 31 ] I find that Ms. Janeen did decide at some time after she entered into the agreement with Ms. Kulay that she wanted to change its terms. Perhaps this was after she realized that Ms. Kulay could not pay the $3,419 that Ms. Janeen billed her on the 'Statement of

Account' document. Perhaps Ms. Janeen did then decide that she would repay Ms. Rose the $6,000 borrowed for the down payment. Perhaps she even spoke to Ms. Rose about this, as she says she did. However, Ms. Kulay denies that she and Ms. Janeen ever agreed to change their agreement or that Ms. Janeen ever mentioned the word 'rental agreement' or said she was going to repay the $6,000 owed to Ms. Rose until the telephone message she received from Ms. Janeen after the death of Ms. Rose. I find that Ms. Janeen did not discuss any change in the arrangement with Ms. Kulay and Ms.

Kulay did not agree to change the arrangement and to become Ms. Janeen's tenant. Any subsequent agreement Ms. Janeen made with Ms. Rose is, of course, not binding upon Ms. Kulay. It is noteworthy, too, that Ms. Janeen has not, in fact, repaid Ms. Rose or her estate. [ 32 ] Most of Ms. Janeen's actions are inconsistent with her position that Ms. Kulay was a tenant. There is no written rental or lease agreement. She never issued Ms. Kulay any rental receipts.

She did not report the payments as rental income on her income tax until after these proceedings began. [ 33 ] On the basis of the 'Statement of Account', I conclude that Ms. Janeen did pay the initial $500 deposit. As well, she did pay out the mortgage although she continued to accept payments from Ms. Kulay after she had paid it out. As well, the mortgage payment and taxes did increase from time to time and Ms. Janeen did not request any increases in payments from Ms. Kulay. Ms. Janeen said that she did not tell Ms.

Kulay she had paid out the mortgage and did not tell her that the mortgage payment and the taxes had increased because of Ms. Kulay's status as a tenant. However, I conclude that the main reason that Ms. Janeen discussed almost nothing with Ms. Kulay is that she and Ms. Kulay had a falling out and were no longer friendly. [ 34 ] What is interesting about the parties' relationship is the fact that Ms. Janeen continued to use part of the property as a summer residence throughout. She moved a trailer onto the property. She erected a tent like gazebo structure and may have put paving stones down under the gazebo.

She made use of an old out house on the property and discharged sewage from the trailer until the municipality ordered her to stop. It is difficult to know on what basis Ms. Janeen used the property as she did. However, the fact that Ms. Janeen continued to use a part of the property is inconsistent with both a rental or a purchase relationship. [ 35 ] I conclude that the common intention of the parties at the time the Home was purchased was that Ms. Janeen purchased the Home on Ms. Kulay's behalf. The intention was that Ms.

Kulay would pay the down payment, pay enough to cover the mortgage and taxes, and that when the mortgage was fully paid, Ms. Janeen would tranfer the title to the Home to Ms. Kulay. [ 36 ] As a consequence, I conclude that Ms. Janeen holds title to the Home under a resulting trust. Ms. Kulay is the beneficial owner of the Home. [ 37 ] Ms. Janeen has certainly paid something for the Home over the years. She paid the initial deposit and has never had this repaid by Ms. Kulay. Ms. Kulay must repay this as a condition of obtaining title in her name. As well, Ms.

Janeen says the mortgage payment amount and the taxes went up and that Ms. Kulay's payments no longer covered these completely. She provided no evidence respecting the amount of the increases. [ 38 ] In ordinary circumstances Ms. Janeen would be entitled to claim from Ms. Kulay the amounts that Ms. Janeen had to pay to 'top up' the mortgage and tax payments. However, Ms. Janeen also had extensive use of the property over the years. I conclude that her 'top up' payments should be characterized as a form of rent to permit her use of the property. [ 39 ] Ms. Janeen also paid to discharge the mortgage.

She gave no evidence either of how much she paid to discharge it. That amount, less whatever portion of the payments made by Ms. Kulay after the mortgage discharge was not used to pay property taxes, must also be repaid to Ms. Janeen by Ms. Kulay as a condition of the transfer of title to Ms. Kulay's name. [ 40 ] I find that subject to the payments set out above, Ms. Janeen is a bare trustee of the property in the Home and must transfer title to the Home to Ms.

Kulay after payment of the amount required to be paid pursuant to paragraphs 33 and 35 of this judgment. [ 41 ] If the parties are unable to agree as to how much Ms. Kulay owes Ms. Janeen, they may approach a referee of this Court. [ 42 ] Costs may be spoken to if required.

Heard on the 15 th and 16 th day of September, 2011. Dated at the City of Edmonton, Alberta this 14 th day of October, 2011. D.C. Read J.C.Q.B.A. Appearances: Kevin D. Mah Simons and Stephens for the Plaintiff Nisha Janeen appeared on her own behalf