Lutz v. Lutz, 2012 ABQB 300

Court of Queen ’ s Bench of Alberta Citation: Lutz v. Lutz, 2012 ABQB 300 Date: 20120508 Docket: 1101 11490 Registry: Calgary Between: Lucas Lutz Applicant - and - Eric Lutz Respondent _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice M.C. Erb _______________________________________________________ [ 1 ] This special application arises from a dispute between two brothers over ownership of a residential property purchased in northeast Calgary in 1999.

The Applicant is seeking a termination of the co-ownership together with an order transferring the property to his name alone. The Respondent agrees that there should be an order terminating co-ownership and a transfer of his interest to the Applicant, but only upon fair compensation being paid to him for his contribution toward the equity in the property. [ 2 ] There is no written agreement between the parties setting out any terms or conditions regarding their co-ownership of the property. The Certificate of Title shows both brothers as joint tenants.

[ 3 ] The central factual issue is whether, as the Respondent submits, the two purchased the property together as an investment or whether, as the Applicant submits, the Respondent simply co-signed the mortgage and went on title because his brother, then 19 years of age, was too young to do so independently. [ 4 ] The legal issue is whether the Respondent has an interest in the property, and if so, what is the nature of that interest. Factual Narrative [ 5 ] Those facts which are not disputed may be succinctly stated. The Applicant, Lucas Lutz, and the Respondent, Eric Lutz, are brothers.

In 1999, the two, then 19 and 25 years of age respectively, were residing with their grandparents on a farm near Strathmore, Alberta. Lucas Lutz decided that he wanted to move to Calgary. Upon hearing this, his brother Eric decided he would like to do the same. Lucas made some preliminary inquiries about qualifying for a mortgage. Although he was earning a good income working in a trucking business he owned with his grandfather, he was not able to qualify for a mortgage on his own.

Apparently this was due to his youthful age and his correspondingly short employment and credit history. [ 6 ] Their father, Harold Lutz, appears to have suggested that the brothers acquire a property together and he found one in the newspaper that interested them. [ 7 ] The property, located in northeast Calgary, was purchased for $146,900. Eric co-signed both the principal mortgage from the Royal Bank of Canada for $144,788.31 and the second mortgage from Calvert Mortgage. Lucas paid the closing costs of $550. The second mortgage comprised funds for the down payment.

Thereafter, Lucas made all mortgage payments directly to the mortgagors over the years and that second mortgage was discharged in 2011. The letter from Calvert Mortgage on the discharge was sent only to Lucas Lutz. [ 8 ] Eric made payments to Lucas in the amount of $400 per month although he admits these payments were not consistent. Both parties agree that the payments were made either in cash or by cheque. By 2004, Eric was making the payment by email transfer and those transfers are documented.

Both brothers say they made payments with cash for various expenses but neither has any clear idea how much these payments were. Lucas describes Eric’s payments as sporadic and states that they were rent payments based on a verbal agreement he says he had with Eric. Eric disagrees and says they were contributions towards the mortgages. [ 9 ] Both brothers moved into the property after the closing in 1999. It remains Lucas’ principal residence. Eric moved out in late 2006 and has never returned to the property.

He has made no payments for any purpose since that time. [ 10 ] At different times during the period 1999 to 2006, there were three renters in the house. A cousin resided there for a year and paid $400 per month in rent. When she moved out, another individual resided there for about one year and also paid $400 per month in rent. A younger cousin resided there while attending school and paid no rent until he finished his studies at which point he paid $300 per month. All rental payments were made directly to Lucas.

At no time did Eric ask for a share of the rental payments and there is no evidence that he inquired about what use the rents were put to during this entire period. After Eric moved out, Lucas rented Eric’s former space to another individual who also paid $400 per month in rent. When this individual’s girlfriend moved in as well, the rent went up by $200 per month. [ 11 ] Both brothers made payments for utilities and telephone usage. Eric ceased doing so after he moved out. Some of Eric’s payments are documented.

Lucas also has records of the payments he made for utilities, television, internet and telephone bills since 1999. [ 12 ] Lucas paid the property taxes each year without any contribution from Eric. Lucas also paid for the maintenance and upgrades to the property such as landscaping, interior flooring, fencing, furnace and appliances without any contribution from Eric. Is Eric Lutz a co-owner of the property holding it in joint tenancy with his brother?

[ 13 ] As Moen J. noted in Lemoine v. Smashnuk, 2008 ABQB 193 , the Law of Property Act , RSA 2000, c. L-7 (the “ Act ”) defines a “co-owner” in s. 14 (

a) as either a joint tenant or a tenant in common. Here, the parties are named as joint tenants on the Certificate of Title which, pursuant to s. 15(1) of the Act, allows either of them to apply to the Court for an order that the co-ownership be terminated. To be clear, the appearance of the parties’ names as joint tenants on the Certificate of Title is not conclusive on the matter of ownership. [ 14 ] It is well established that to create a joint tenancy, there must be evidence that the four requisite unities have been established.

The four unities are unity of title, unity of time, unity of possession and unity of interest; see Lemoine at paras. 27 - 29 , citing Havlik v. Whitehouse, 2000 ABQB 242 , 79 Alta.

L.R. (3d) 369 and Felske Estate 2007 ABQB 682 , 82 Alta L.R. (4 th ) 181. [ 15 ] There is no dispute in this case that unity of title and time exist given that both Lucas and Eric Lutz were named on the Certificate of Title as joint tenants and at the same time. [ 16 ] The two remaining unities – unity of possession and unity of interest - must be considered in the context of all of the circumstances, including what the parties intended and how they dealt with the property after it was acquired. [ 17 ] The evidence is conflicting regarding what the brothers intended with respect to ownership of the property.

However, what transpired after they both moved into the property is helpful in demonstrating that intention. [ 18 ] Lucas occupied the main floor and had the master bedroom to himself. Eric moved into the lower level and a tenant, at various times, also occupied part of that same area of the house. Eric resided in the house between 1999 and late 2006. He paid the same monthly amount to Lucas as did the tenants. Eric says he bought things for the property, such as a lawn mower and heating unit for the garage, but it appears he took those items with him when he moved out.

He may have made some payments on the insurance two or three times when he was residing there; Lucas states that this was to help him out during a time of tight finances. Conversely, there were times when Eric paid nothing towards the property; this appears to have been a similar accommodation by Lucas during difficult times. [ 19 ] Most notably, after Eric moved out, he did not return to the house, even for a visit. He paid nothing towards its upkeep. Lucas paid the mortgage for the down payment and the principal mortgage, the bulk of the insurance and all of the property taxes.

Eric made no contribution to improvements to the property. He appeared to have no interest in the house until it was time to renew the principal mortgage, at which point he claimed a full share of the property. At no time did he so much as inquire about the rents being paid by third parties or to what purpose they were being used. When he was in the property himself, he paid $400 per month, not to the mortgagor, but to his brother, and often, it is said, in cash. He kept few records until he started making email transfers.

There is no suggestion that Eric could have demanded or expected to occupy the property to any greater extent than his part of the lower level. There is no evidence that Eric even knew during the relevant period how much the mortgage and taxes were. While Eric put himself at personal financial risk by cosigning the mortgage, without more this does not create the unity of interest required for joint tenancy. [ 20 ] Further, I find that it was understood between the brothers that Lucas was the party intended to occupy the property and have control over it.

Eric Lutz assisted his brother in acquiring a property which Lucas Lutz was intended to own independently simply because the younger brother could not qualify on his own. Eric rented space in the premises for a period of time. The brothers helped each other out during the years that Eric was residing in the house. However, they did not have equal possession of the property. Accordingly, no unity of possession existed . [ 21 ] To a substantial extent, unity of interest and unity of possession are linked.

Where there are different interests, for example where one party one is a mortgagee and the other a renter, no unity of interest can be said to exist. The same facts could also lead to the conclusion that there is no unity of possession. [ 22 ] Accordingly, I find that the four unities are not present. Therefore, Eric Lutz is not a joint tenant of the property. He holds title to the property only as bare trustee and does not have the rights of a joint tenant including, specifically, the right of survivorship. [ 23 ] I find that in all the circumstances, Eric Lutz is a bare trustee.

As Moen J. stated in Lemoine at para. 42 , “a ‘bare trust’ is a trust where the trustee holds property without any duty to perform except to convey it to the beneficiary or beneficiaries upon demand.

The definition of a bare, naked or simple trust assumes two things: (1) that the beneficiary is able to call for the property on demand; and (2) either that no active duties were ever required by the settlor or that the active duties have been performed.” [ 24 ] Here, Eric Lutz had no active duties. At no time was he required to cover either of the mortgage loans personally, or anything else for that matter. In 2011, Lucas Lutz called on Eric Lutz to transfer the property to him. However, it appears there is an outstanding mortgage to the Royal Bank of Canada cosigned by Eric Lutz. in the amount of about $90,000.

There was no evidence before me that this mortgage has been discharged or that Lucas Lutz has made arrangements acceptable to the mortgagor that terminates the risk to Eric Lutz. Therefore, as was the situation in Lemoine , Eric Lutz continues to be at risk until such time as the mortgage he cosigned is discharged.

It would be unfair to remove him from title while he remains at such risk. [ 25 ] Accordingly, I order that Eric Lutz be removed from title when he is no longer at risk for the Royal Bank of Canada loan, as a co-signor or in any other capacity. [ 26 ] If the parties are unable to agree, costs may be spoken to within a reasonable period of time. Heard on the 26 th day of April, 2012. Dated at the City of Calgary, Alberta this 8 th day of May, 2012. M.C. Erb J.C.Q.B.A. Appearances: Mohamed Amery Caron & Partners LLP for the Applicant Jennifer Blanchard Norton Rose Canada LLP for the Respondent