LORI LEA KINCH Plaintiff - v. -, 2003 ABQB 291

Kinch v. Kinch, 2003 ABQB 291 Date: 2003 03 28 Action No. 4804-6050 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF GRANDE PRAIRIE BETWEEN: LORI LEA KINCH Plaintiff - and - DEAN NORMAN KINCH Defendant [Note: An Erratum has been filed on June 17, 2003; the correction has been made to the text and the Erratum is appended to this Judgment.] _______________________________________________________ REASONS FOR JUDGMENT of the HONOURABLE MR. JUSTICE PETER M. CLARK _______________________________________________________ APPEARANCES: Robert M. Lewis Lewis & Chrenek, Grand Prairie, AB for the Plaintiff Renée R. Cochard

McBean Becker, Edmonton, AB for the Defendant INTRODUCTION [ 1 ] Lori Lea Kinch (“the Plaintiff”) and Dean Norman Kinch (“the Defendant”) met in 1996. They lived common-law for approximately 18 months and were married on March 29, 1999 in Las Vegas, Nevada. They separated on January 26, 2000, the marriage having endured for a total of 273 days. There are no children of the marriage. The Plaintiff has a child from a previous marriage who, at the time of trial, was 10 years of age. The Defendant did not stand in loco parentis to this child.

There are no claims for spousal or child support. [ 2 ] Both parties are seeking a divorce and a division of property. [ 3 ] The marriage is at an end. Both parties wish to be divorced and the parties were advised at the outset of the trial that the divorce would be granted. The property issue is somewhat more problematical to the extent that claims are advanced on the basis of constructive trust for the period prior to the marriage and under the Matrimonial Property Act for the period during the marriage.

BACKGROUND [ 4 ] At the time the Plaintiff and the Defendant met, the Plaintiff was separated but not yet divorced from her first husband. She was residing in a mobile home on farm property in the vicinity of Grande Prairie. The farm property had been in the Plaintiff’s family for some time and was owned by the Plaintiff, her brother and her sister. The Plaintiff was employed as a bookkeeper in Grande Prairie and, in addition, was involved in the business of raising and training of race horses. [ 5 ] The Defendant works in the oil field servicing industry.

He operates his business through a company, Caltech Controls Ltd. (“Caltech”), a company that he incorporated in 1995. The Defendant was carrying on this business prior to his relationship with the Plaintiff. [ 6 ] The Defendant owned and resided in a home at 7648 Patterson Drive in Grand Prairie, Alberta. During the initial stages of the relationship, the parties spent time in both residences before a decision was made to cohabit. There is some dispute as to when cohabitation actually commenced. What is clear is that the Defendant disposed of his residential property in the latter part of 1997.

His furniture was moved into the Plaintiff’s residence and the parties thereafter took up cohabitation. [ 7 ] After the commencement of cohabitation but prior to the marriage, the Plaintiff and her brother acquired their sister’s interest in the farm property. The property was thereafter subdivided with each of the Plaintiff and her brother taking a separate parcel. The Plaintiff’s brother retained the larger parcel of the two but the Plaintiff received what was the smaller but arguably more valuable piece of property. The Plaintiff’s parcel consisted of bare land.

This parcel was registered in the Plaintiff’s name alone. Her mobile home was moved onto the property with the assistance of the Defendant. The Defendant assisted with the relocation of the mobile home and constructed skirting around the bottom of the mobile home once it was in place.

[ 8 ] The Defendant had constructed a small shed on the family property prior to the subdivision. This shed was subsequently moved to the Plaintiff’s property. The Defendant purchased material for and built a barn on the Plaintiff’s property. In addition, he paid many of the expenses incidental to the development of the Plaintiff’s property including costs involved in subdivision and servicing. The Defendant bought and stored piping on the property which was subsequently used for the purpose of developing corrals and fencing.

It is the Defendant’s undisputed evidence that he spent in excess of $35,000.00 on improvements to the Plaintiff’s property. [ 9 ] The Plaintiff’s son resided with the parties. The parties shared costs. The Defendant was responsible for the utility costs and the Plaintiff bore the cost of groceries. The parties shared various expenses on an ongoing basis but there is no suggestion that their funds were ever commingled – at least the Plaintiff’s funds were never commingled with those of the Defendant. The reverse is not quite so clear. [ 10 ] Each of the parties owned their own vehicles.

The Defendant used snowmobiles for his work and had two snowmobiles at the time of separation. He had given one of the snowmobiles to the Plaintiff’s son but he has specifically disclaimed the return of that snowmobile and makes no claim with respect to it. The Defendant does seek to have the Arctic Cat snowmobile returned.

The Defendant also acquired an old truck that was used on the Plaintiff’s property for farm purposes but was neither licensed nor used for travel off the farm. [ 11 ] The Defendant was assisted by his father and, less often, his sister and mother in carrying out some of the improvements that were made to the Plaintiff’s property. The Defendant’s father constructed, at his personal expense, some of the stalls in the barn and oak feeders for the horses. [ 12 ] Caltech purchased a rental property in Grande Prairie in July of 1996 and sold the property on June 12, 1998.

Caltech realized a profit on this sale of approximately $40,000.00. The proceeds of the sales of the Caltech rental property and the Defendant’s principal residence were used to purchase two quarter sections of land. The first parcel, the Northwest quarter of 6-71-6-W6M was purchased by Caltech in July of 1997 at a cost of $110,000.00. The second parcel, the Southwest quarter of 6-71-6-W6M was purchased by the Defendant personally in September of 1998 at a cost of $120,000.

Both of these parcels were vacant land. [ 13 ] The Defendant’s brother subsequently purchased and moved a mobile home onto one of the parcels of land where he now resides. When the marriage came to an end, the Defendant moved in with his sister in Grande Prairie for a short period of time and thereafter moved in with his brother. [ 14 ] The Plaintiff’s family has a long history of involvement in the race horse industry. The Defendant became interested in horse racing during the course of his relationship with the Plaintiff and began buying, racing, and selling horses.

Subsequently, he and his father were engaged as partners in their horse racing activities. The evidence with respect to the buying, selling and racing of horses is not particularly clear or helpful. From the evidence that was adduced, I have concluded that there was not a great deal of value in the equine interests of the parties. The horse racing business does not appear to have been profitable and is not really a material consideration in this application. [ 15 ] Both parties had RRSP investments prior to meeting each other.

The evidence suggests that the values of the RRSP’s have not increased in value to any great extent. [ 16 ] The court file with respect to this action discloses a number of court applications by the parties. There were allegations of abuse against the Defendant. The allegations were never substantiated. There was a period during which there were reciprocal restraining orders outstanding. It is my understanding that a restraining order was originally obtained by the Plaintiff for the purpose of precluding the Defendant from attending at her property for the purpose of taking possession of his personal property.

Other court applications involved applications by the Defendant for the return of his personal items that belonged to him prior to cohabitation. POSITION OF THE PARTIES [ 17 ] Mr. Lewis, on behalf of the Plaintiff, takes the position that the assets of both parties are the subject of the application on the basis of either a constructive trust or under the provisions of the Matrimonial Property Act . Mr. Lewis suggests that the lands owned by the parties tend to balance each other out. Mr. Lewis has focussed more particularly on the retained earnings of Caltech.

He has attempted to persuade the Court that the Plaintiff has a significant interest in the increased value of Caltech as reflected in the increase in

the value of the company. [18] In her opening remarks at the trial of the matter, Ms. Cochard, counsel for the Defendant, stated to the Court that the issues indispute were not all that difficult. She suggested that the Plaintiff has neither contributed to nor does she have any interest in Caltech; shehas not contributed in the acquisition or maintenance of the agricultural properties acquired by the Defendant, and the RRSP’s are a“wash”. She also suggested that the buying, racing and selling of horses is, at best, a “red herring”. Ms.

Cochard takes the position onbehalf of the Defendant that the real issue involves the very significant improvements made by the Defendant to the Plaintiff’s propertyand the substantial increase in the value of the Plaintiff’s property as a result of these improvements. [19] The parties were unable to agree on an appropriate property division. They seek the direction of the Court for adetermination of how the division should take place. This is most regrettable in view of the very significant costs involved in the legalwrangling. Ms.

Cochard, on behalf of the Defendant, made an observation during the course of argument that this is a classic example ofa situation where the wife has taken the position that “what is mine is mine and what is his is mine”. It became apparent during thecourse of the trial that this characterization was not that unrealistic. [20] Counsel is relying on the Matrimonial Property Act and have also provided me with the following legal authorities: Brad v. Brad 186 A.R. 205; Hantel v. Hilscher 2000 ABCA 84 , 7 R.F.L. (5th) 108; Peter v. Beblow, (SCC), [1993] 1 S.C.R. 980; Pickelein v.

Gilmore (BC CA), 27 R.F.L. (4th) 51; Randle v. Randle (1999), 1999 ABQB 954 , 3 R.F.L. (5th) 139; Walsh v. Bona 2000 NSCA 53 , 5 R.F.L. (5th) 188; Brokopp v. Brokopp 1996 ABCA 4 , 19 R.F.L. (4th) 1; Kazmierczak v. Kazmierczak 2001 ABQB 610 , 22 R.F.L. (5th) 321; Mazurenko v. Mazurenko, 1981 ABCA 104, [1981] A.J. No. 23; McAlister v. McAlister, [1997] A.J. No. 232; Tocker v. Tocker, [2000] A.J. No. 978; Potter v. Potter,[2001] A.J. No. 1497. ANALYSIS [21] The property issues arising during the course of the marriage are governed by the Matrimonial Property Act,

Chapter M-8and, in particular, Sections 7 and 8 thereof. Property acquired during the marriage or increasing in value during the marriage fall intomatrimonial property but the division is subject to the provisions of s. 8 which deals specifically with the matters that are to beconsidered in making a distribution. The following subparagraphs have application: 8 ... (

a) the contribution made by each spouse to the marriage and to the welfare of the family, including any contribution made asa homemaker or parent; (

b) the contribution, whether financial or in some other form, made by a spouse directly or indirectly to the acquisition,conservation, improvement, operation or management of a business, farm, enterprise or undertaking owned or operated by one or bothspouses or by one or both spouses and any other person; (

c) the contribution, whether financial or in some other form, made directly or indirectly by or on behalf of a spouse to theacquisition, conservation or improvement of the property; (

d) the income, earning capacity, liabilities, obligations, property and other financial resources (

i) that each spouse had at the time of marriage, and (ii) that each spouse has at the time of the trial; (

e) the duration of the marriage;

... (

m) any fact or circumstance that is relevant. [ 22 ] The constructive trust claims of the parties seek redress for unjust enrichment. Peter v. Beblow states at p. 987: The basic notions are simple enough. An action for unjust enrichment arises when three elements are satisfied: (1) an enrichment, (2) a corresponding deprivation, and (3) the absence of a juristic reason for the enrichment. These proven, the action is established and the right to claim relief made out.

At this point, a second doctrinal concern arises: the nature of the remedy. “Unjust enrichment” in equity permitted a number of remedies, depending on the circumstances. One was a payment for services rendered on the basis of quantum meruit or quantum valebat (sic). Another equitable remedy, available traditionally where one person was possessed of legal title to property in which another had an interest, was the constructive trust. ... [ 23 ] Specific assets are targeted: 1. The Lori Kinch agricultural/residential property.

This property is legally described as Lot 2, Plan 9826095, Part SE-3-71-6-W6M and is located on the Northwest corner of Highway #40 and Correction Line, County of Grande Prairie #1, Alberta. An appraisal of this property was conducted by Sidney G. Cumming of Pomeroy Appraisals Ltd. on January 17, 2002. This property has been assigned a “Spring 1997" value of $220,000.00 and a “January 17, 2002" value of $350,000.00. Both of these valuations are noted to be exclusive of the mobile home, bins, sheds and personal chattels.

The Spring 1997 appraisal reflects a property that was essentially bare land and is noted to have “no functional utilities as of Spring 1997". The January 17, 2002 valuation notes that there have been significant improvements to the property including private septic and water well, a mobile home, small shed and grain bin – all of which have been excluded from the valuation. Included in the valuation are 34' x 80' (2720 sq. ft.) barn with 10 ft. ceiling height, cold frame, tin roof, power, and concrete floor. There are also two automatic water bowls, fencing, pipe corrals, and a range fence.

The property is presently being used for residential and agricultural purposes. The highest and best use suggested by the appraisal report is for industrial use. The Plaintiff has received a very significant financial benefit with respect to this property. The Defendant has spent approximately $35,000 of his own money improving the Plaintiff’s property. There has been skirting for the trailer, construction of the barn, construction of the shed, the installation of utilities, and the construction of fences and corrals. Has there been a corresponding deprivation? There has, without question.

The Defendant has improved the Plaintiff’s property through financial contribution and through the application of personal time and effort. The Defendant has personally constructed the improvements. The time and effort expended improving the Plaintiff’s property has limited the time that he has available to improve his own property. There is an absence of juristic reason for the enrichment. There is and has been no obligation between the parties which would justify the unjust enrichment in favour of the Plaintiff. There is no juristic reason for the enrichment. 2. Dean Norman Kinch agricultural property. Mr.

Kinch has personally purchased the Southwest quarter of 6-71-6-W6M. This property has been appraised by Sidney G. Cumming of Pomeroy Appraisals Ltd.. The appraisal is stated to be effective January 17, 2002. The parcel in question is stated to have an appraised value of $174,000.00. The valuation is stated to exclude machinery, mobile, equipment, livestock, bins, and personal chattels.

This property has appreciated through the passage of time. This parcel was purchased by the Defendant in September 1998, approximately seven months prior to the date of marriage. The Defendant purchased the property using his own money. The Plaintiff has made no contribution to or with respect to this property. It has been suggested during the course of the evidence that the material increase in the value of this property occurred since the date of separation. This property is subject to neither a constructive trust nor a claim under the Matrimonial Property Act . 3. Caltech Controls Ltd.

I have not had the benefit of proper financial information with respect to this asset. In particular, I have not had a chance to review all of the financial statements of Caltech. For reasons that will become apparent, this is not a significant shortcoming. It is accepted that there has been an increase in retained earnings of the company in the approximate amount of $63,000. Caltech acquired a parcel of land described as part of the Northwest quarter of 6-71-6-W6M in July 1997 at a cost of $110,000. This property is the subject of an appraisal by Sidney G. Cumming of Pomeroy Appraisals Ltd..

The appraisal effective, January 17, 2002, assigns a value to this parcel of $152,000.00. [ 24 ] Caltech realized a gross profit of approximately $40,000 with respect to the sale of the Caltech residential property. There has been an increase in the value of the agricultural property owned by Caltech. This company was owned by the Defendant prior to his relationship with the Plaintiff and has been operating successfully since 1995.

The success of the company is due solely to the efforts of the Defendant and I have been unable to determine that there has been any contribution of any kind whatsoever from the Plaintiff. There is no evidence that the Plaintiff has contributed directly or indirectly to Caltech. She has not contributed either monetarily or through the expenditure of time and effort to the company. It is inappropriate to accord any portion of the increase in value of Caltech to the Plaintiff. [ 25 ] I am not prepared to find that the Defendant has been unjustly enriched as a result of the increase in the value in his assets.

The increase in value is attributable to him and to him alone. The Plaintiff has not experienced any deprivation whatsoever. CONCLUSION [ 26 ] I have concluded that the Plaintiff has no claim against the Defendant either on the basis of a constructive trust or under the provisions of the Matrimonial Property Act . The marriage is of very short duration. The Plaintiff has not met the test of contribution or entitlement. [ 27 ] The Plaintiff has been unjustly enriched as a result of significant increase in the valuation of her assets. The Defendant has experienced a corresponding deprivation. Mrs.

Kinch’s property is valued at $350,000.00. At the time of the trial, it was subject to an indebtedness in favour of her father in the approximate sum of $10,000.00. She thus has a property having a value of $340,000.00. The property at Spring 1997 had a value of $220,000.00 and was subject to a mortgage of approximately $14,500.00 thus having an exempt value of $205,500.00. Mrs. Kinch has enjoyed an increase of approximately $134,500.00 in the value of her land. [ 28 ] The Plaintiff’s property is located on the outskirts of the city limits of Grande Prairie.

Some of the increase in value may be attributable to the favourable location. The value of the land will continue to rise as a result of the proximity to Grande Prairie. It is noteworthy that the highest and best use of the property has been determined to be industrial. I have calculated that the Plaintiff’s property has increased by $134,500.00. There has been an unjust enrichment in favour of the Plaintiff or an increase in value that is divisible under the Matrimonial Property Act .

However calculated, the Defendant is entitled to share in the increase. [ 29 ] I have calculated that the Plaintiff’s property has increased by $134,500.00 from which amount should be deducted an amount as an adjustment for the fact that the property would have increased in value in any event simply because of the proximity to the City of Grande Prairie. In view of the very short duration of the marriage, I consider $13,450.00 or approximately 10% to be an appropriate discount figure. This leaves a divisible increase in value of $121,050.00.

[ 30 ] Given the Defendant’s actual financial contributions in excess of $35,000.00 and the role that he personally played in making the improvements, I find that he is entitled to one-half of that amount or $60,525.00. [ 31 ] The Defendant is entitled to take possession of all of his personal assets that remain on the Plaintiff’s property, including the Arctic Cat snowmobile. The monetary award in favour of the Defendant contemplates that the improvements to the Plaintiff’s property are to be left intact.

The Defendant is entitled to remove any piping that he purchased and stored on the property. [ 32 ] I have determined that the claim of the Defendant arises in part on the basis of constructive trust. This being so, the Defendant has acquired “an interest in the lands” owned by the Plaintiff and is entitled to register a claim against the property as security for the amount owing to him. [ 33 ] The Defendant has been successful throughout and is entitled to his costs.

Counsel have advised that they wish to speak to the issue of costs which I presume means the manner in which they are to be calculated in the circumstances. I invite counsel to speak to me with respect to the amount of costs. HEARD on the 25 th day of September, 2002. DATED at Grande Prairie, Alberta this 28 th day of March, 2003. __________________________ J.C.Q.B.A. An errata has been issued for the above judgment as follows: ERRATA OF THE REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE PETER M. CLARK Counsel: Robert M. Lewis, Q.C. Lewis & Chrenek, Grand Prairie, AB for the Plaintiff

Renée R. Cochard Cochard Gordon, Edmonton, AB for the Defendant On page 8, paragraph [27], the last two sentences should read: [27] ... The property at Spring 1997 had a value of $220,000.00 and was subject to a mortgage of approximately $14,500.00 thus having an exempt value of $205,500.00. Mrs. Kinch has enjoyed an increase of approximately $134,500.00 in the value of her land. Also on page 8, paragraph [28], the fourth sentence should read: [28] ... I have calculated that the Plaintiff’s property has increased by $134,500.00.

Also on page 8, paragraph [29] should read as follows: [29] I have calculated that the Plaintiff’s property has increased by $134,500.00 from which amount should be deducted an amount as an adjustment for the fact that the property would have increased in value in any event simply because of the proximity to the City of Grande Prairie. In view of the very short duration of the marriage, I consider $13,450.00 or approximately 10% to be an appropriate discount figure. This leaves a divisible increase in value of $121,050.00.

On page 9, paragraph [30] should read as follows: [30] Given the Defendant’s actual financial contributions in excess of $35,000.00 and the role that he personally played in making the improvements, I find that he is entitled to one-half of that amount or $60,525.00. Also on page 9, paragraph [33], the second sentence should read: [33] ... Counsel have advised that they wish to speak to the issue of costs which I presume means the manner in which they are to be calculated in the circumstances. ... Please replace the attached pages in your copy of the judgment.

DATED at Calgary, Alberta this 17th day of June, 2003. __________________________ J.C.Q.B.A.