Feng (Re), 2021 ABQB 908

Court of Queen’s Bench of Alberta Citation: Feng (Re), 2021 ABQB 908 Date: 20211112 Docket: B201 075556 Registry: Calgary In the Matter of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 , as Amended Between Herbert Ginn and Elise Ginn Applicants (Plaintiffs) and Jianwen Feng and Qi Lian Feng Respondents (Defendants) Corrected judgment: A corrigendum was issued on November 17, 2021; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Endorsement of the Honourable Mr. Justice M. J.

Lema _______________________________________________________ A. Introduction [ 1 ] Judgment creditors of a bankrupt debtor want certain property recognized as still owned by her despite an ostensible sale to her father before her bankruptcy and as thus forming part of the bankruptcy estate. (The creditors acquired the bankruptcy estate’s rights in the possible estate asset.) [ 2 ] The now-discharged bankrupt resists, asserting a genuine sale.

[ 3 ] I find a genuine sale here and thus that the property is not part of the bankruptcy estate. B. Background [ 4 ] The Ginns rented a residential property in Calgary to Ms. Feng. They eventually discovered a marijuana grow operation in the property, which caused extensive (excessive-humidity-related) damage to it. [ 5 ] They made repairs, sued Ms. Feng for damages, and obtained a default judgment against her for approximately $70,000. [ 6 ] After she was sued but before the Ginns obtained judgment and before her bankruptcy, Ms.

Feng transferred two Calgary properties owned by her to her father. [ 7 ] Both properties were also settings for marijuana cultivation. One of them was eventually seized by law enforcement authorities as proceeds of crime and forfeited as such to the provincial Crown. [ 8 ] The other property is the focus of the current proceedings. [ 9 ] The Ginns contend that the ostensible sale of this property was effectively camouflage for Ms. Feng’s continued beneficial ownership of it. [ 10 ] They argue that the true character of that sale turns on the credibility of Ms.

Feng, that her denials of what they see as obvious involvement in marijuana-grow operations undercut her credibility, and that, accordingly, nothing she says about that property sale can be taken at face value. [ 11 ] Ms. Feng disagrees, asserting that no evidence pins her to any involvement, or at least any awareness of involvement, in any illegal activities (marijuana-related or otherwise). [ 12 ] In any case, she argues that the available evidence confirms a genuine sale to her father. C. Analysis Presumption of resulting trust not applicable [ 13 ] The Ginns’ central thesis is that Mr.

Feng provided no consideration for the transfer of the Harvest Oaks property to him. They argue that, accordingly, the presumption of resulting trust applies i.e. with Ms. Feng presumed to have retained beneficial ownership and Mr. Feng acquiring merely legal title. [ 14 ] Under that theory, Ms. Feng would bear the onus of showing that, in fact, both legal and beneficial ownership moved to Mr. Feng. [ 15 ] Per the Ginns, various markers (or “badges of fraud”) point to Ms.

Feng retaining beneficial ownership i.e. with her unable to displace the presumption of continued beneficial ownership by her. [ 16 ] The Ginns are plainly wrong about “no consideration.” [ 17 ] The evidence shows that Mr. Feng obtained a mortgage loan from the TD Bank in respect of his purchase of the property, that the mortgage proceeds ($192,500) were advanced by the Bank, and that they were paid to Ms.

Feng or at least to her credit (being used wholly or partly to clear her own mortgage debt to TD, with that mortgage being discharged from title as part of the closing process and replaced (on the new title to Mr. Feng) with his mortgage to TD). [ 18 ] The at-least-ostensible total purchase price for the property was $385,000. I will discuss below the payment (or possible payment) of the other half of the purchase price i.e. the $192,500 balance owing after payment over of the noted mortgage proceeds. [ 19 ] As for whether the ostensible purchase price was fair value for the property, Ms.

Feng’s evidence was that (1) she had purchased the property for $200,800 in 2001; (2) in setting the purchase price, she and her father relied in part on 2008 municipal-tax- assessment value; (3) she no longer had a copy of the 2008 assessment and could not remember the 2008 valuation figure; (4) the assessed value as of 2009 was $377,000 and (5) a realtor evaluation (presumably around the time of the sale) supported a time-of-sale valuation of $385,000. [ 20 ] The Ginns did not provide any appraisal or other evidence bearing on the property’s market value at the time of sale or otherwise. [ 21 ] Based on the available evidence, I find $385,000 to be a reasonable approximation of the property’s market value at the time of the sale. [ 22 ] By extension, I find that Mr.

Feng provided consideration to Ms. Feng of (at minimum) half of the prevailing market value i.e. via the $192,500 mortgage advance. [ 23 ] The Ginns acknowledged the existence of both Ms. Feng’s and Mr. Feng’s TD mortgages and that the proceeds of the latter ($192,500) were advanced to or to the credit of Ms. Feng on the sale.

[24] By definition, this was not a no-consideration or nominal-consideration sale within the meaning of the resulting-trust caselaw: Miller v Walker, 2006 ABQB 424 (Macklin J.) (paras 29-34) (consideration found, in part, in incurring joint liability on amortgage); Petrick (Trustee of) v Petrick, 2019 BCSC 1319 (Francis J.) (paras 55-68) (consideration found for same reason); andReddin v Mills, (BCSC) (Hood J.) (para 109) (existence of “nominal consideration” did not oust presumption ofresulting trust). [25] In this circumstance (with at least “half value” consideration provided), and all aside from the “other half” consideration(discussed below), the presumption of resulting trust is not engaged.

Onus of proof with presumption of resulting trust not applying [26] The consequence, per Pecore v Pecore, 2007 SCC 17, is that the Ginns, as challengers of the ostensible sale, bear the onus ofshowing that the sale was not as it appears i.e. was not an actual sale of Ms. Feng’s entire legal and beneficial interest in the property: The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transferis challenged, the presumption allocates the legal burden of proof.

Thus, where a transfer is made for no consideration, the onus isplaced on the transferee to demonstrate that a gift was intended: see Waters’ Law of Trusts, at p. 375, and E. E. Gillese and M.Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110. This is so because equity presumes bargains, not gifts. The presumption of resulting trust therefore alters the general practice that a plaintiff (who would be the party challenging thetransfer in these cases) bears the legal burden in a civil case.

Rather, the onus is on the transferee to rebut the presumption of aresulting trust. [paras 24 and 25] [emphasis added] Exploration of other half of claimed consideration ($192,500 cheque) [27] On the nature of the transaction, the focus then shifts to the payment, or possible payment, of the other half of the proceeds. [28] Here is Ms. Feng’s evidence on this aspect: The remaining amount of $192,500 for the purchase price was paid to me following the transfer [which occurred on February 25, 2008]by cheque dated April 2, 2008.

The reason for the delay [from February 25, 2008] was that my father had to borrow money to come upwith the remainder of the purchase price, and he was not able to get the full amount until the end of March 2008.

Attached as Exhibit“G” is a copy of the April 2, 2008 cheque and deposit slip. [29] Exhibit G is a copy of what appears to be a cheque (“033”) dated April 2, 2008, in the amount of $192,500, payable to“___Wen Feng” (name partly obscured, as explained below), and signed with what appear to be Chinese characters. [30] The cheque is partly obscured by what appears to be a deposit slip apparently placed over the left side of the cheque andcopied at the same time.

That obscuring includes the part of the cheque (upper left-hand corner) customarily bearing the name andaddress of the chequing-account holder. [31] The copy of the deposit slip is poor; however, it seems to be a “TD Canada Trust” document, refers to “$192,500.00”, seemsto date from April 2018, and has the general shape and appearance of a deposit receipt. [32] The signature markings are not identical to, but appear to generally match, Mr. Feng’s Chinese-character signature as itappears on a power of attorney (in favour of Ms.

Feng) signed by him in November 2008 (Exhibit H to her affidavit), as well as hissignature on the affidavit of transferee associated with the sale. [33] Ms. Feng’s first name, per her affidavit, is “Jianweng.” However, she is described as “Jianwen” in the style of cause in theseproceedings, and the same (“Jianwen”) spelling of her first name is featured on her pre-transfer title to the property in question and in thetransfer of land.

The Ginns did not argue that the apparent cheque payee (“___ Wen Feng”) was not intended to be a reference to Ms.Feng. [34] The apparent cheque and deposit slip are consistent with Ms. Feng’s evidence about the other half of the sale proceeds. [35] The Ginns’ counsel cross-examined Ms. Feng on both consideration dimensions (cheque and mortgage portions): Q: I put it to you that you never got any true consideration from your father. … I will pull up [on the Webex screen] a copy of thecheque [Ex G to Ms.

Feng’s affidavit]. … you claim that this $192,500 was paid to you by your father on the purchase of 82 HarvestOaks (HO) [i.e. the property in question]. Is that your evidence? A: I purchased the 82 HO property? Q: Your father … when you claim to have sold it to him. A: This is the cheque that my father [used to] purchase my house [i.e. the 82 HO property]. Q: The transfer was done on February 21, 2008. Can you explain why you did not receive the cheque until April 2, 2008?

A: My father [was] very late because [his] friend in Vancouver paid [him] that money, and in return the friend would have [his]children have a wedding in China, and my father arranged the wedding in China for them. … I trust my father. Q: And [your] evidence is that the remaining consideration was by way of a pay-out of [your] existing mortgage registered on the

[82 HO] property in the equal amount of $192,500? [quoting from para 10 of Ms. Feng’s affidavit – “When my father purchased the property from me, he took out a mortgage from the Toronto-Dominion Bank in the amount of $192,5000 which was registered against title as instrument no …. On February 25, 2008]. So, my question is, in addition to [that] cheque, the remaining consideration came from a mortgage your father got from TD Bank, correct? A: Yes. Q: And your evidence is that the money for the cheque we just looked at was provided by your father’s friend from Vancouver?

A: I am not very clear about that part … I could ask … this is his business. I know about this thing, but I do not know the details exactly. Q: You never got any true consideration from your father for the 82 HO sale. A: Now … talking about the consideration … the bank would be welcome to come to make an assessment or evaluation of the value of the house. My husband wanted us to sell it quickly so he could bring our family back to China, but my mother liked Canada and she did not want to go back, so my father said he would buy the house in this case. Because of this, I divorced my husband.

Q: I put it to you that the transfer of the [82 HO and the other property transferred by Ms. Feng to her father at the same time] were done to prevent law-enforcement agencies from seizing them [on account of] criminal activity. A: No, it is not the case. Before I sold [another property], we were selling houses and buying houses for the purpose of investments, as investments. Ginns’ “consideration” arguments [ 36 ] I have already concluded that Mr.

Feng provided at least $192,500 in consideration, via the TD mortgage advance for which became liable. [ 37 ] Here are their arguments about the balance (cheque portion) of the consideration: • “[Mr. Feng] bought [the 82 HO property] from the proceeds of crime”; • “Ms. Feng claims that her father obtained [the $192,500 paid-by-cheque portion of the purchase monies] from a friend in Vancouver, [but the monies] came from proceeds of crime, same as [with the other property transferred by Ms. Feng to Mr. Feng]”; • “it was not [Mr. Feng’s] funds [that were] used to purchase the properties; it was [Ms.

Feng’s] money from proceeds of crime”; • “[Ms. Feng] was not selling [these properties] to her father; she was hiding them form discovery and seizure”; • “[after acknowledging the TD-mortgage portion of the purchase price and asserting effectively that Mr.

Feng paid no additional consideration] the consideration was grossly inadequate”; • “[alternatively] any additional [i.e. beyond mortgage] consideration was [paid] from the proceeds of crime”; and • “the [name] portion of the cheque is [obscured] … we cannot see in fact where that cheque originates from … the bank account number on the bottom of the cheque does correspond with [one of the] bank account numbers on [an exhibit to a police officer’s affidavit reflecting] certain bank account information seized from [another property] in 2009 … if [one] reviews that information, one will see all the different accounts that [Ms.

Feng] had in her name … [the account in question] could also be connected to [Mr. Feng] as well.” Analysis of those arguments [ 38 ] Despite the Ginns’ assertions, nothing in the record undercuts Ms. Feng’s evidence that Mr. Feng paid her the $192,500 represented by the cheque in question: • the police affidavit indeed lists the account number reflected on the cheque, but it sheds no light on the identity of the account holder.

While the bank, branch, and account number are listed, the entry for “name”, which I take to mean “name of account holder” is “U/K”, which I take to mean “unknown.” The same entry includes “PAID TO: [MS. FENG]”, but no context is provided to explain the source of that entry or what it signifies i.e. other than (apparently) that certain funds from that account were paid to Ms. Feng. This contrasts to other bank account information showing accounts in Ms. Feng’s name and at least one in Mr. Feng’s name. All to say: this police-affidavit information does not undercut or diminish the force of Ms.

Feng’s evidence that this cheque represented funds of her father being paid to her; • the Ginns’ further assertions -- that, if $192,500 was actually paid to her, it was sourced from “proceeds of crime” – are not supported by any evidence in the record. While the Ginns may have their suspicions, nothing in the record confirms or even points to any illegal source(

s) of the funds compromising the balance (whatever it was – at least $192,500) in the account on which the cheque was drawn and at that time; and • the Ginns argued that Ms. Feng failed to produce adequate banking records and that an adverse inference should be drawn against her as a result. But the Ginns did not cross-examine her on her affidavit (which included her cheque-related evidence) i.e. in advance of the oral hearing. Plus (as reflected in the above cross-examination excerpts) they did not undermine her testimony about the source(

s) of the funds in the account in question or that the account belonged to her father. While she initially testified as to her understanding of the source of the funds (father’s friend), she later said she was not entirely sure and that (effectively) this was her father’s business i.e. what

funds he had in his bank account and their source(

s) were his affair. (I note here that Mr. Feng died earlier this year. I also note the likely difficulty, during the course of the current proceedings, of obtaining bank records from 2008.) Ginns’ credibility concerns re Ms. Feng [ 39 ] More generally, the Ginns asserted that considerable evidence points to Ms. Feng being centrally involved in a sophisticated, long-running, and wide-ranging illegal marijuana grow-op business.

They dismiss her repeated denials of involvement in and professed ignorance of various facets of that enterprise as implausible and, more significantly, as eclipsing her credibility, rendering all of her evidence in this proceeding suspect. [ 40 ] Ms.

Feng indeed denied involvement in the alleged enterprise and, where she may have been involved (e.g. assisting others by purchasing supplies such as diesel fuel), denied knowing what those others were actually up to. [ 41 ] She stressed that she has no criminal record, that she was not charged with criminal offences for certain facets of the enterprise and that, where she was charged on one or more facets, the charges were later stayed. [ 42 ] I do not have to determine the extent of Ms.

Feng’s involvement (if any) in the alleged illegal enterprise or her knowledge of the illegal activities (if any) of other persons. [ 43 ] The reason is that her (possible) involvement and (possible) knowledge do not actually bear on the issue of whether she sold her full (legal and beneficial) interest in the property in question to her father. [ 44 ] As noted, the mortgage portion was undoubtedly paid to her, by a reputable lender, which obviously advanced on the basis that Mr.

Feng was acquiring both legal and beneficial title to the property, and in the amount reported ($192,500). [ 45 ] Second, her evidence of the other (via cheque) half of the proceeds is corroborated by the cheque in question, apparently signed by her father and drawn on an account apparently belonging to him or at least with no evidence confirming the account belonged to Ms. Feng (i.e. with no evidence confirming that these were simply Ms.

Feng’s own monies being dressed up as a payment by her father to her). [ 46 ] And, even if the monies in that account were wholly or partly “proceeds of crime”, that would be neutral on the core question here i.e. whether Ms. Feng transferred her entire (legal and beneficial) interest in the property to her father. Regardless of the source(

s) of those account monies, the question is whether $192,500 (of whatever character) was paid out of that account (apparently not Ms. Feng’s own account) to her. [ 47 ] In any case, even if the “other half” proceeds were not paid by Mr. Feng to Ms. Feng, her receipt of $192,500 out of the mortgage advance is sufficient, on its own, to anchor a transfer of Ms. Feng’s full (legal and equitable) interest in the property to her father. [ 48 ] Here (as noted) the presumption of resulting trust does not operate. [ 49 ] The Ginns have not provided any evidence to support any theory that, after the transfer, Ms.

Feng and Mr. Feng owned the property (beneficially) in equal shares or any kind of co-ownership fashion. [ 50 ] And the Ginns did not point to any case law recognizing any kind of “default transaction” in the circumstances here i.e. of material (here, one-half) consideration being paid for a property, combined with an ostensible full transfer i.e. a situation where Ms.

Feng should be regarded as a continuing one-half beneficial owner. [ 51 ] Instead, with material consideration being provided, and the transfer documentation reflecting a full (legal and beneficial interest) transfer, no presumption or doctrine would point to anything less than a full-interest transfer occurring. [ 52 ] If this is what happened here (i.e. only proceeds of $192,500 being paid for property worth twice that), we would be in the territory of an undervalue transaction i.e. a fraudulent conveyance, where the Fraudulent Preferences Act , the Statute of Elizabeth , or other statutory or common-law tools are available to reverse or ameliorate the effects of undervalue transactions i.e. where full interests are transferred for less-than-full consideration. [ 53 ] But the Ginns did not pursue any such theories in the current proceeding.

Impact of post-transfer activities [ 54 ] The above conclusion (full legal and beneficial interest in the property moved to Mr.

Feng) is also corroborated by her uncontradicted evidence that: • the post-transfer mortgage payments were made by her father (largely funded out of rent payments made by various tenants) and, in (brief) periods with no tenants, by her mother on her father’s behalf; • the post-transfer property taxes were covered by those same (combined mortgage-and-tax) payments; • her father reported the post-transfer rental income as part of his annual tax filings; • utilities for the property were paid either by her father or by the tenants from time to time; • her father arranged and paid for property insurance post-transfer;

• certain repairs and maintenance (e.g. new windows) for the property, post-transfer, were paid by her mother on her father’s behalf (in any case, not paid for by Ms. Feng); • Ms.

Feng did not live in the property at any point post-transfer; • her involvement in the circa-2013 renewal of the mortgage was limited to assisting and representing her father, who by that point had moved to China; and • her use of a portion of the property for cultivation of licensed-for-personal-use marijuana (project eventually abandoned) was with the permission of one or both of her parents (with her mother residing in a portion of the property for much, if not all, of the post-transfer period). [ 55 ] As well, her obtaining a power of attorney from her father is consistent with his need for assistance (arising primarily from his move to China) and her mother’s limited facility in English and resulting inability (or lesser ability) to represent the father. (And this is so even with the power of attorney including a provision authorizing her to transfer any of his properties into her own name, which provision she testified she was not aware of and, in any case, never exercised, and, in any case, does not necessarily equate to a power to vest beneficial ownership of any property in herself, versus taking legal title in her own name simply as trustee for her father.) [ 56 ] Her being asked to guarantee, and guaranteeing, the father’s mortgage debt to TD are (despite the Ginns’ assertions) not a signals or markers of continued beneficial ownership by her, instead being entirely consistent with his full ownership and primary liability on the mortgage and her secondary liability (and non-owner status) as guarantor. [ 57 ] All these post-transfer dimensions point to Mr.

Feng having acquired full (legal and beneficial) ownership of the property at the time of the purchase and provide additional corroboration of Ms. Feng having received both the mortgage proceeds and the matching amount of cash via the cheque in question. D. Conclusion [ 58 ] The Ginns have failed to discharge their onus to prove that the property transfer in question was not as it appeared. [ 59 ] The evidence confirms that Ms.

Feng transferred her full legal and beneficial interest in the property in exchange for combined consideration of $385,000 i.e. equal to or in the close neighbourhood of the property’s fair market value at the time. [ 60 ] Ms. Feng’s activities and source(

s) of income in the years leading up to the transaction, at that time, or since then have no bearing on whether the transaction in question occurred as it was papered, and it did. [ 61 ] With the property leaving Ms.

Feng’s orbit in the first few months of 2008, and no consideration outstanding to her after early April of that year, neither the property nor any rights arising from it formed part of her assets and thus her bankruptcy estate when she assigned into bankruptcy in 2016. [ 62 ] While she had no duty to report anything about that property to her trustee, she did disclose to the trustee that she had (many years earlier) owned the property and also that the Ginns had challenged and possibly were still challenging whether the property transfer to her father was proper. [ 63 ] No evidence shows that the trustee took any steps to investigate the transaction during the bankruptcy. [ 64 ] As noted, the trustee handed off the estate’s rights in respect of the transaction to the Ginns. [ 65 ] Unfortunately for them, the estate’s rights have proved empty. [ 66 ] Ms.

Feng moved her entire interest, for fair value, to her father long before her bankruptcy. [ 67 ] The Ginns’ rights as judgment creditors necessarily shifted from the property in question to the proceeds received by Ms. Feng. [ 68 ] As noted, apparently half of the proceeds were applied to clear her own mortgage. [ 69 ] As for the other half, the evidence does not show how those funds were used or if Ms.

Feng has any portion of them on hand. [ 70 ] In any case, any portion she still had on hand at the date of her bankruptcy would have vested in the trustee in bankruptcy and would not be available to the Ginns as individual creditors. (The handed-over rights from the estate were limited to the property itself, not its proceeds.) [ 71 ] All to say: the lands in question belong to Mr. Feng (and now, in light of his death, to his estate), not Ms. Feng. [ 72 ] Accordingly, I dismiss the Ginns’ application for a declaration that the subject property is beneficially owned, in whole or in part, by Ms. Feng. [ 73 ] Ms.

Feng is entitled to party-and-party level costs of the application under

Schedule C. [ 74 ] I thank both counsel for their helpful written and oral submissions.

Heard on the 9 th and 10 th day of November, 2021 via Webex. Dated at the City of Calgary, Alberta this 12 th day of November, 2021. M. J. Lema J.C.Q.B.A. Appearances: Geoffrey Boddy Jensen Shawa Solomon Duguid Hawkes LLP for the Applicants Ashley Hahn Miles Davison LLP for the Respondent Ms. Feng _______________________________________________________ Corrigendum of the Endorsement of The Honourable Mr. Justice M. J. Lema _______________________________________________________ Paragraph 52 changed (in part) to “or other statutory or common-law tools” Paragraph 74 changed (in part) to “their helpful written and oral submissions”