Olympia Trust Company v Totten, 2012 ABQB 488

Court of Queen ’ s Bench of Alberta Citation: Olympia Trust Company v Totten, 2012 ABQB 488 Date: 20120802 Docket: 1101 02285; 1001 17750 1201 00599; 4801 143709 Registry: Calgary

1101 02285 Between: Olympia Trust Company Plaintiff - and - James Douglas Totten and Dawn Michelle Riley Totten Defendants AND 1001 17750 Between: Home Trust Company Plaintiff - and - James Douglas Totten and Dawn Michelle Riley Totten Defendants AND 1201 00599 Between: Katherine Bryck a Litigation Representative for George Totten Plaintiff

- and - James Douglas Totten and Dawn Michelle Riley Totten Defendants AND 4801 143709 Between: James Douglas Totten Plaintiff - and - Dawn Michelle Riley Totten Defendant Corrected judgment: A corrigendum was issued on August 10, 2012; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice R. J.

Hall _______________________________________________________ [ 1 ] George Totten (“George”) is the Plaintiff in what has been referred to as the “Debt Action”, against his son James Totten (“James”) and his daughter-in-law Dawn Michelle Riley Totten (“Dawn”).

[ 2 ] Two other actions were foreclosure actions by the trust company Plaintiffs against James and Dawn who are the registered owners of a matrimonial home in Calgary. Finally, there is a fourth action in which James filed a Statement of Claim for divorce and division of matrimonial property against Dawn as the Defendant. [ 3 ] The matrimonial home (the “Lands”) was foreclosed upon by Home Trust Company and Olympia Trust Company in the foreclosure actions. The Lands were sold, the mortgagees were paid out, and there remained in court approximately $111,650.

At that time James and Dawn were the joint owners of the property. Dawn made application to have one-half of the amount in court paid to her. The law firm of Soby Boyden Lenz had acted for James and had filed a caveat against the property protecting themselves for their legal fees. On December 5, 2011, Master Prowse ordered, inter alia : (

a) Dawn was to be paid half of the money in court; (

b) Soby Boyden Lenz was to be paid $8,950.90 out of the monies in court; (

c) The provisions of the Order were stayed if George filed a Statement of Claim against Dawn and James outlining George’s entitlement to the proceeds or a portion thereof, serving such Statement of Claim on or before January 13, 2012. If he did so, the parties were directed to appear before “this Court” for further direction and Dawn was granted the right to apply to the Court for an Order to lift the stay. [ 4 ] No appeal was taken from that Order. George filed the Debt Action by the time allotted.

Since that time he has amended the Debt Action, first to claim a constructive trust, and secondly to claim a resulting trust and equitable mortgage, alleging an interest in the Lands. [ 5 ] George seeks to have the funds that are presently in Court attached by Court Order until such time as the Debt Action has been completed.

Dawn makes application in the foreclosure actions to lift the stay granted by Master Prowse, so as to allow his order granting her 50% of the funds in Court to be carried out. [ 6 ] In addition, James brings an application in the divorce action, seeking to have the funds in Court frozen or attached, pending the determination of George’s Debt Action. All three applications were heard at once in a special chambers application before me. [ 7 ] George established a pattern of paying monies into James’ account, by way of cheque. These cheques were deposited by George directly into James’ account.

Most of the cheques provided by George have a hand written note on the bottom left-hand corner indicating “loan”. However, as the cheques were directly deposited by George, neither James nor Dawn would have seen the “loan” notation on the cheques which appears to me to have been written to create evidence to satisfy the Canada Revenue Agency. George made regular monthly payments into James’ account in amounts of $5,000 or $6,000 or $7,000, for a lengthy period of time. These payments started somewhere near the beginning of the marriage between James and Dawn. They continued until the marriage was breaking down.

In May 2009 George ceased advancing these monthly funds. [ 8 ] In 1999, George, James and Dawn became the joint owners of the Lands. The purchase price for the Lands, $140,000, was paid by George in cash. James and Dawn did not contribute to the purchase price. The intention was for James and Dawn to build their dream home. [ 9 ] In November 2000 the three owners of the Lands obtained a construction mortgage in the amount of $450,000 from CIBC. CIBC would not give the mortgage to James and Dawn alone; however, with George on the title, and on the mortgage, the construction mortgage was granted.

In November 2002 a further mortgage in the amount of $100,000 was obtained from CIBC by the three parties for the purpose of completing the construction of the house on the property. [ 10 ] In 2008 the mortgages to CIBC matured. CIBC would not renew the mortgages. Home Trust agreed to provide funds secured by a mortgage, and pay out the CIBC mortgages. It is alleged by James that, as a condition of lending, Home Trust required that George be removed from title to the Lands, though the logic of that escapes me.

[ 11 ] George transferred his interest on title as a joint tenant to James and Dawn. The consideration on the face of the transfer is $1.00. In the Affidavit of Transferee executed by James the consideration is listed as “$1.00 plus natural affection that a parent has for a child.” [ 12 ] In December of 2009 James and Dawn obtained a second mortgage in the amount of $218,499 from Olympia Trust Company. [ 13 ] On January 10, 2010 James and Dawn separated. Shortly thereafter the mortgages to Home Trust Company and Olympia Trust Company went into default and both lenders commenced foreclosure actions.

The property sold in foreclosure. [ 14 ] At the root of the Debt Action is the question as to whether the payments made by George were gifts or loans. The evidence of George and James is that the monthly advances were always intended to be loans; whereas Dawn believed them to be gifts. With respect to the $140,000 used to purchase the Lands, George maintains that there was a verbal agreement between him and James and Dawn that, at such time as the property was sold, he would be repaid his $140,000, and he would be entitled to one-third of the increase in equity of the property.

There is no written agreement to that effect. Dawn denies that any such agreement was ever sought or provided. [ 15 ] George wishes to see the stay contained in Master Prowse’s Order to be continued. He argues that the arrangements reached between him, James and Dawn gave him an interest in land and that, while it was not registered, he is the beneficiary of either a constructive or resulting trust. He maintains that his action and the evidence filed in support of his action establish a serious question to be tried and that he will suffer irreparable harm if the stay of enforcement is refused.

He maintains that the balance of convenience weighs in favour of continuing the stay of enforcement. The Court notes that he has not filed any undertaking as to damages; however, if I decide to continue the stay, I can require him, as a condition of that stay, to provide suitable security as to damages. Acknowledgement by Dawn [ 16 ] Two documents are produced by James, purportedly signed by him and Dawn, acknowledging a debt owed by them to George for these transactions. Dawn denies she signed them.

She says she did sign a document under duress and without reading it, but that it is neither of the documents produced by James. She denies entering any agreement, or giving any meaningful acknowledgement of debt. The Monthly Payments [ 17 ] Assuming, without deciding, that the monies provided monthly by George to James were loans, that does not create an interest in land. No security was sought or provided for such loans. The monies provided were used for whatever purposes James applied them. They were not paid directly by George to the mortgage companies.

No written memorandum charging the lands was entered into between George on the one hand and James and Dawn on the other. Therefore, the argument of George that the funds in Court should continue to be held on the basis that the monthly payments created an interest in the Lands, fails. The Purchase of the Lands [ 18 ] Turning to the purchase of the Lands, George paid the full purchase price and he, James and Dawn were listed as the joint tenancy owners of the lands.

It is deposed by James that the Home Trust Company would not fund a mortgage with George on title, and thus the three joint tenants transferred the land to James and Dawn as joint tenants so the new mortgage could proceed. As stated above, I am very skeptical of this explanation. [ 19 ] George alleges that the $140,000 he had contributed to the purchase of the Lands was contributed on the basis that, when the Lands were sold the mortgages would be paid out, then he would be repaid his $140,000, and then he would receive one-third of the remaining equity.

He alleges that his interest never changed, notwithstanding the transfer by him of his one-third joint interest in the property to Dawn and James. However, he never obtained a mortgage from James and Dawn. He never obtained a written agreement from James and Dawn indicating his continuing interest in the lands; he never filed an equitable charge against the lands, nor a caveat

claiming an interest in the Lands. [ 20 ] His counsel maintains that George’s interest in the Lands became a beneficial one when he transferred his legal interest, and that it created a trust with Dawn and James being the trustees and him being the beneficiary as to the $140,000 that he had contributed to the property and as to a one-third interest in the equity of the Lands. No trust agreement was ever entered into. However, he maintains that a constructive trust was created.

Alternatively, George maintains that, as the transfer of the $140,000 by him was a gratuitous transfer, the Court should presume a resulting trust in his favour. [ 21 ] I am not called upon to decide the merits of his case; however, George must demonstrate a serious issue to be tried in order for the stay of enforcement to continue in force. [ 22 ] George had an interest in the Lands when they were purchased; a 1/3 ownership, subject to the mortgages registered against title. He transferred his interest for $1.00.

The affidavit of transferee sworn by James cites natural love and affection of a parent for a child as the consideration; this is legalese for a gift: see Smith Estate v. Smith , 1995 Carswell Ont 2888 . [ 23 ] The reason given by George and James for George coming off title, that Home Trust wanted him off title, makes no sense and is not independently supported by any evidence from Home Trust.

The transfer of George’s interest has indices of a gift to his son and daughter-in-law. [ 24 ] The Court should be wary of undocumented claims by a parent to a beneficial interest in the property of a divorcing child and spouse. I am very wary here. [ 25 ] Grounds do not exist here for either a Mareva Injunction or an attachment under the Civil Enforcement Act (“C.E.A.”).

George fails to meet the test of a strong prima facie case ( Mareva Injunction ), or a reasonable likelihood that this action will succeed and that the respondent is dealing with her assets other than for the purpose of meeting living expenses (a C.E.A. attachment). [ 26 ] In order for an injunction to issue here, George must satisfy the Court that: (

a) there is a serious question to be tried that he has an interest in the land. His claim must not be frivolous or vexatious; (

b) that George would suffer irreparable harm if his application was refused; and (

c) that the balance of convenience favours the granting of the injunction. [ 27 ] The claim that George has a beneficial interest in the Lands and therefore in the monies in court is dubious to me. He transferred away his interest. He did so without condition, without an equitable charge, without a mortgage, and for an alleged reason that makes no sense. He never availed himself of the protections that are provided by the Land Titles Act . [ 28 ] However, I am concerned by the documents placed before me.

James has placed into evidence as Exhibits 3 and 4 to his Affidavit sworn November 14, 2011, two documents that are dated November 14, 2010. Both are photocopies. Both purport to be signed by each of Dawn and James. Exhibit 3 provides in part: Both parties agree that the debts outstanding are owed and must be repaid to the creditors from the sale proceeds of the matrimonial residence . . . both Dawn and James acknowledge that Home Trust Company, Approved Mortgage Ltd. and George Totten are owed the principal funds that they have advanced to finance the residence . . .

These debts will be retired from the sale proceeds prior to any subsequent distribution of funds to either Dawn and/or James.

[ 29 ] Exhibit 4 discusses James and Dawn seeking to obtain financing. It goes on to state: As such, the undersigned agree that whatever funds that are advanced must be repaid (with applicable interest terms) prior to any disbursement of sale proceeds to either Dawn and/or James and subjugated to be debt owed to the first and second mortgage holders and prior to the loan from George L.

Totten in the amount of $650,000.00. [ 30 ] Dawn denies that she signed either of these documents, maintaining that her signature has been forged. [ 31 ] Dawn does state that she signed some document that her husband insisted she sign, but says she did so under duress and without reading the document. She denies that the document she signed is either of Exhibits 3 or 4 referenced above. No such document as that to which she admits signing is in evidence. [ 32 ] George is not a party to either Exhibits 3 or 4 above. As such, the documents, if genuine, do not give George a direct contractual right.

Those documents if genuine, do provide evidence in support of George’s claim, that an agreement was reached that he would continue to have an interest in the proceeds of sale of the land. [ 33 ] These exhibits, purportedly signed by Dawn raise with me a serious question to be tried. If they are genuine and were freely executed by Dawn, they form an acknowledgment that George was granted an interest in the Lands. Were I to rule against continuing the stay, I would be precluding George from his alleged security in the lands or proceeds therefrom, without first allowing a trial of that issue.

Interference with that security interest would cause him irreparable harm, in that his alleged security would be lost. [ 34 ] The balance of convenience favours detention of the funds until the allegations of the parties can be heard. Because the funds will be preserved during the stay, on balance, neither party is grievously harmed by the stay. They are delayed, but not prevented, from recovering the funds. The Application by James [ 35 ] James seeks a freezing order which he says is brought under the Matrimonial Property Act . That Act makes no specific provisions for a freezing order.

The Court’s jurisdiction to freeze matrimonial assets arises under the Judicature Act 1980 c. J-1, s. 13(2). Rule 6.25(1) of the Rules of Court . [ 36 ] In order for the court to grant such an order James must show a strong prima facie case and a real and substantial risk that Dawn is dissipating or disposing of assets other than in the normal course to provide for herself and her children. [ 37 ] It is to be remembered that James granted a security interest to his lawyers to take $8,950 form his share of the funds, and that has occurred.

That is entirely inconsistent with the position he now takes in his application. James and Dawn owned the property as equal joint tenants, such that each of them are entitled to ½ of the monies in court under our Land Titles system. James seeks to freeze Dawn’s share as being matrimonial property, but he establishes no basis that would defeat the presumption in the Matrimonial Property Act of an equal division of funds. James’ application is more in the nature of bootstrapping his father’s application to hold the proceeds.

It is a tag team approach to keeping Dawn from the funds. [ 38 ] I find no merit in James’ application. No prima facie case has been made out. No evidence has been brought that Dawn is or will improperly dissipate the funds. James’ application is denied. Undertaking as to Damages

[ 39 ] As previously stated, George has not filed an Undertaking as to Damages. George resides outside the province and I have no evidence that he has assets in Alberta. In order to maintain this Stay of execution I direct that George must file in court an undertaking to pay any damages occasioned to Dawn arising from this stay, and must post security in relation to that undertaking in the amount of $15,000.00, or an irrevocable Letter of Credit from a Canadian Chartered Bank in the same amount.

Costs [ 40 ] As George has succeeded against Dawn, and Dawn has successfully resisted the application by James, George should have costs of his successful application payable by Dawn and Dawn should have costs from James. [ 41 ] Even though there is more than one Action involved here, I use my discretion, and by analogy to a Sanderson Order as to costs, direct a set off of Dawn’s obligation to George and James’ obligation to Dawn, such that James shall pay George one set of costs; which I set as $1,500.00 plus the reasonable disbursements incurred by George in respect of the various applications before me.

The costs will be ordered in the Debt Action, to which all three are parties. Heard on the 26th day of June, 2012. Dated at the City of Calgary, Alberta this 2nd day of August, 2012. R. J. Hall J.C.Q.B.A. Appearances: No Appearance for the Plaintiff Olympia Trust Company Doug Nishimura for the Defendant Dawn Michelle Riley Totten in all actions Wayne Barkauskas for the Defendant James Douglas Totten in all actions No Appearance for the Plaintiff Home Trust Company Kimberly Setrakov

for the Plaintiff Katherine Bryck a litigation representative for George Totten _____________________________________________________ Corrigendum of the Memorandum of Decision of The Honourable Mr. Justice R. J. Hall _____________________________________________________ Please be advised that the Appearances page has been corrected as follows: No Appearance for the Plaintiff Olympia Trust Company Doug Nishimura for the Defendant Dawn Michelle Riley Totten in all actions Wayne Barkauskas for the Defendant James Douglas Totten in all actions No Appearance for the Plaintiff Home Trust Company Kimberly Setrakov for the Plaintiff Katherine Bryck a litigation representative for George Totten