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Trusts - Resulting Trusts (3)

. Bradshaw v. Hougassian

In Bradshaw v. Hougassian (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal against a trial ruling that found a partial purchase-money resulting trust in real property:
[8] A purchase money resulting trust can arise “when a person advances funds to contribute to the purchase price of property, but does not take legal title to that property”: Nishi v. Rascal Trucking Ltd., 2013 SCC 33, [2013] 2 S.C.R. 438, at para. 1. There is a rebuttable presumption that the parties to the purchase “intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution”: Nishi, at para. 1. This presumption now applies to transactions involving parents and adult children: Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at para. 36.

[9] The appellants rely on a line of authority that adopts Professor D.M.W. Waters’s statement that a person claiming a resulting trust “must also prove that he or she acted throughout as a purchaser”: D.M.W. Waters, M. Gillen and L.D. Smith, Waters’ Law of Trusts in Canada, 5th ed. (Thomson Reuters, 2021), at p. 421. See e.g., A.M.K. Investments Ltd. (Trustee of) v. Kraus, 1996 CanLII 8268 (Ont. S.C.), at para. 11; Krates Keswick Inc. v. Crate, 2017 ONSC 6195, at para. 56; Hornstein v. Kats, 2020 ONSC 870, at para. 204.

[10] According to the appellants, this means that it was the respondent’s burden to establish that Violet had acted in a manner consistent with having an ownership interest in the property throughout the time that she lived there. They argue that the trial judge erred by ignoring this supposed precondition for finding a purchase money resulting trust.

[11] The appellants’ argument reflects two misunderstandings of the applicable legal principles. First, the doctrine of purchase money resulting trust focuses on the parties’ intentions at the time the purchase money is advanced: see Nishi, at paras. 2, 30, 41; Pecore, at para. 59; Andrade v. Andrade, 2016 ONCA 368, 131 O.R. (3d) 532, at para. 63. Accordingly, to the extent that there can be said to be any requirement that the claimant have “acted … as a purchaser”, this requirement only applies at the point that the purchase money is advanced. Evidence about how a claimant conducts themselves afterwards may be relevant, but only to the degree that it sheds light on what they intended when they advanced the purchase money: Nishi, at para. 2. Professor Waters’s statement that the claimant must act as a purchaser “throughout” should accordingly be understood as referring only to the time of the transaction itself.

[12] Indeed, Myers J. expressly recognized this in Krates Keswick, citing Pecore, and noting that “[a]ll evidence of subsequent events … must be assessed only as it relates to the existence of non-existence of the intention to own or to gift the property at the time of its purchase”: Krates Keswick, at paras. 59-60.

[13] Second, the requirement that the claimant have “acted … as a purchaser” means nothing more than that they must not have meant the money they advanced to be either a gift or a loan. This point is made clear by the full passage in Waters’ Law of Trusts in Canada, at p. 421, which states:
Though the claimant can establish that he or she owned and paid over the purchase money, he or she must also prove that he or she acted throughout as a purchaser. It is not only the intention to make a gift that will prevent the finding of a resulting trust. If the claimant who advanced the money was doing so simply in order to lend money to the transferee who acquired title to the property, then the claimant’s relationship with the transferee is that of a creditor with a debtor, and no trust arises. [Emphasis added.]
[14] In the case at bar, the trial judge properly focused on what everyone understood was the key disputed issue, namely: whether the money Violet had contributed to the down payment was meant to be a loan to Jack, as he maintained, or whether she had meant to acquire an ownership interest in the property. On all the evidence, the trial judge concluded “that Jack did not establish that Violet made a loan to him of $10,000.00”. Having made this finding, there was no need for him to consider whether Violet had “acted … as a purchaser” in any other sense.

[15] However, Professor Waters’s formulation of the legal test raises a further question: is it the claimant’s burden to “prove” that the money advanced was not a loan, or does the presumption of resulting trust place the onus on the opposing party to prove that the money advanced was either a loan or a gift? Framed another way, is the presumption of resulting trust merely a presumption that purchase money was not meant as a gift, or is there equally a presumption that the money advanced was not a loan?

[16] The trial judge considered this issue and, following the conclusion reached by M.T. Doi J. in Caroti v. Vuletic, 2022 ONSC 4695, at paras. 603-04, determined “that the presumption of resulting trust arises once a transferor shows that they made a monetary contribution to the purchase price of the property, without any additional requirement to prove that they acted in the character of a purchaser”.

[17] As the trial judge noted, there are some conflicting decisions on this issue from courts in other provinces. However, this question has now been laid to rest by the Supreme Court of Canada in Nishi v. Rascal Trucking Ltd., which unambiguously states that the presumption of resulting trust is a presumption “that the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution”: Nishi, at para. 1.

[18] Rothstein J. stated further that “[t]he presumption can be rebutted by evidence that at the time of the contribution, the person making the contribution intended to make a gift to the person taking title”: Nishi, at para. 2. However, he went on to explain that the term “gift” in this context is synonymous with an intention on the part of the contributor not to acquire a beneficial interest in the property, stating at para. 37:
In Canada, our jurisprudence is that there is no difference between the intention to make a gift and the intention that the transferor not hold a beneficial interest. In other words, in the case of a gratuitous transfer, there is a gift at law when the evidence demonstrates that, at the time of the transfer, the transferor intended the transferee to hold the beneficial interest in the property being purchased.
[19] After Nishi, it is no longer necessary to distinguish loans from gifts in the resulting trust analysis. The presumption of resulting trust will be defeated if it is established that the person who contributed the purchase money did not intend to acquire a beneficial interest in the property. This can be established by demonstrating that the money advanced by the contributor was meant as either a loan or as a gift.

[20] In Singh v. Kaler, 2017 ABCA 275, the Alberta Court of Appeal considered this issue and concluded, at paras. 26-27:
[P]re-Rascal Trucking and Pecore case law has been overtaken and it is no longer appropriate to require the person advancing the funds to prove he or she was “acting throughout as purchaser”. Once the claimant proves the “basis fact” ..., that is, they made a contribution to the purchase price, the legal presumption of resulting trust applies.

This is not to suggest that when a true lender advances funds to assist in the purchase, a resulting trust arises. There are significant differences between a lender and an investor or purchaser. However, when the presumption applies, the onus is on the title holder to rebut the characterization of investor by proving the purchaser was, in fact, a lender.
[21] The trial judge followed Singh, as it was adopted in Caroti. Applying the presumption of resulting trust, he put the onus on Jack to establish that the money Violet had contributed to the house purchase was a loan. This was the correct approach.

[22] I also see no reversible error in the trial judge’s conclusion that Jack had not met his onus on this issue. The trial judge properly considered all of the evidence, including the evidence that Jack had covered most of the expenses associated with the property for most of the years that Violet lived there, and the evidence that she had not included the property among her assets when she filed for bankruptcy in 2006. This evidence was all potentially relevant to the question of what Violet’s intentions had been when she paid the $10,000 down payment in 1980, but none of it was determinative.
. Surridge v. Ross

In Surridge v. Ross (Ont CA, 2024) the Ontario Court of Appeal considered the interplay between the doctrines of resulting trusts and unjust enrichment - here in a family law context:
[5] The respondent brought a motion for summary judgment pursuant to r. 16 of the Family Law Rules, O. Reg. 114/99 and the appellant brought a cross-motion for partial summary judgment. The motion judge granted summary judgment in favour of the respondent on the issue of unjust enrichment. He found that the parties had received legal advice before closing, that title was taken by them as equal owners, and that there is no suggestion that a mistake was made in how title was taken. He also found that the respondent had proven deprivation flowing from his unilateral payments toward the equity of the property, namely the down payment and all mortgage and property expenses, and that these payments enriched the appellant. The motion judge found that there was no contract between the parties that provided a juristic reason for the enrichment, nor was there any evidence of it constituting a gift from the respondent to the appellant. This prima facie case for an absence of juristic reason was not rebutted by the appellant. The motion judge also allowed the respondent credit for the installation of the new furnace and agreed with the respondent that the cost of the basement repairs ought to be shared equally by the parties.

....

[8] In our view, the appeal must be dismissed. The motion judge did not err in his application of the law of unjust enrichment. The record supported his findings that the appellant had been enriched by the payments made by the respondent and that no juristic reason for this enrichment existed.

[9] The motion judge reviewed the relevant jurisprudence, including Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 31-43 and Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at paras. 44-46, wherein the established categories of juristic reason are set out. As noted above, the motion judge found that the respondent established a prima facie case for absence of juristic reason and the appellant had not rebutted it. He explained that there was no evidence that the parties had turned their minds to the consequences of separating, particularly in respect of servicing the mortgage debt and the outcome of the property itself.

[10] The motion judge should have addressed in his reasons whether there was evidence of donative intent at the time the property was acquired in joint names and when the payments at issue were made. In gratuitous transfer situations, the actual intention of the grantor is the governing consideration: Kerr, at para. 18, referring to Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795.

[11] Further, as the Supreme Court states in Kerr, at para. 96:
The title to property may also reflect an intent to share wealth, or some portion of it, equitably. This may be the case where the parties are joint tenants of property.
[12] However, given the presumption of resulting trust where money or property is advanced by only one party, the onus is on the appellant to demonstrate donative intent: Pecore, at para. 25; Kerr, at para. 19. It is clear from the motion judge’s reasons as well as the record that the onus was not met in this case.
. Falsetto v. Falsetto

In Falsetto v. Falsetto (Ont CA, 2024) the Court of Appeal considered domestic purchase-money resulting trust and gifting issues, here where a father-in-law paid half the matrimonial home expenses and the trial judge concluded "that he intended to gift [the wife] her interest in the property":
a. Luigi and Albert’s Real Estate Business

[3] Luigi and Albert have been engaged in the business of buying and redeveloping real estate together in the Ottawa area since around 1990. Many of their properties are located on Lisgar Street, and have been acquired with the intention that they will be redeveloped together. Legal title to these co-owned properties varies. Sometimes Albert is the sole owner registered on title, sometimes it is Luigi, and in some instances they have both been on title. Where title is not registered in both names, their practice has been to subject 50 percent of the legal title to a trust in favour of the unregistered party, making that party a beneficial co-owner. The beneficial ownership is not reflected on title but, in each instance, is documented in co-tenancy agreements executed in 2014 and 2019.

....

[17] The application judge correctly stated the general legal principles applicable to the dispute: for most categories of relationships, including the one involved here, there is a rebuttable presumption of a resulting trust where one party makes a transfer of property to another for no consideration: Pecore v. Pecore, 2007 SCC 17, [2007] 2 S.C.R. 795, at para. 24. A purchase money resulting trust is a type of resulting trust. It arises “when a person advances funds to contribute to the purchase price of property, but does not take legal title to that property”: Nishi v. Rascal Trucking Ltd., 2013 SCC 33, [2013] 2 S.C.R. 438, at para. 1. Where the person taking title is not the minor child of the person advancing the funds, there is a presumption that “the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution”: Nishi, at para. 1.

[18] Paula argued on appeal that having a third party take title to avoid merger under the Planning Act is a bar to relying on the presumption of resulting trust. This proposition is not supported by the case law and is inconsistent with general principles. Where a resulting trust is presumed, the onus is on a party seeking to rebut that presumption to establish that the purchaser intended to make a gift: Lattimer v. Lattimer, (1978), 1978 CanLII 1547 (ON SC), 18 O.R. (2d) 375, at p. 378 (H.C.). This is not a matter of constructive or deemed intention, but of establishing actual intention, requiring a case-by-case evaluation of the evidence to ascertain the gratuitous transferor’s actual intention on the balance of probabilities: Schwartz v. Schwartz, 2012 ONCA 239, 349 D.L.R. (4th) 326, at paras. 42-43. The intention to avoid merger does not necessarily entail the intention to make a gift.

[19] The presumption of resulting trust would seem obviously to apply to the purchase of the half interest in 415 Lisgar, for which Luigi supplied half the down payment and the closing costs. The application judge, however, found that Luigi must have advanced the funds with the intention of making a gift to Paula, because there was no other way to avoid the operation of the Planning Act, and avoiding the operation of the Planning Act was Luigi’s sole purpose.[2]

[20] There are several problems with the application judge’s chain of reasoning.

[21] First, the application judge’s characterization of Luigi’s intention is incomplete. What is left inexplicably in shadow is that Luigi’s purpose in participating in the transaction was to purchase 415 Lisgar as an investment property – to become its co-owner in a joint business venture with Albert. Luigi always intended to – and did – earn income from the property.

[22] There is an overwhelming amount of evidence in support of Luigi’s testimony in this regard. This includes all of the evidence of his history of similar business transactions with Albert, his advancement of the purchase money and closing costs, his post-purchase management and renting out of the property, and his eventual payment of a share of the property taxes. This evidence all tends to affirm the presumption of resulting trust: Nishi, at paras. 1-2; Andrade v. Andrade, 2016 ONCA 368, 131 O.R. (3d) 532, at paras. 64, 78-81. The application judge erred in concluding that this evidence did not assist in discerning whether Luigi intended to retain a beneficial interest rather than provide Paula with a gift. Luigi’s history of dealing with the property – including his on-going payment of expenses – would have made a gift that much more extravagant and that much less likely.

[23] Luigi’s intention with respect to the mode of purchase is another matter. He intended to purchase 415 Lisgar and – on his evidence – he intended to do so in a manner that did not trigger adverse Planning Act consequences. At first, he intended to accomplish this by registering himself on title as co-owner. When that option became impossible – due to financing considerations – he and Albert instead decided that Paula would take title to a 50 percent interest, subject to a trust in favour of Luigi.

[24] The application judge rejected Luigi’s evidence that he advanced the funds so as to obtain a beneficial interest in the property. But why? Because, she reasoned, this plan of action could not achieve the end that Luigi sought, an end she mischaracterized as avoiding the operation of the Planning Act. Here, for his actual end – of purchasing the property as co-owner for investment purposes – the application judge substituted the means he chose to achieve that end.

[25] The application judge’s conclusion – and the respondent’s argument - rests on the single case of Holtby v. Draper, 2017 ONCA 932, 138 O.R. (3d) 481. The respondent contends that Holtby provides a complete answer to Luigi’s application. But it does not.

[26] The facts in Holtby were in some ways similar to the instant case, but significantly more complicated. The saliant facts were these. Mr. Holtby co‑owned a parcel of land with his first wife. They were registered as joint tenants. Mr. Holtby owned an adjacent property registered solely in his name. After the dissolution of his first marriage, he married Ms. Draper. His first wife’s half-interest in the matrimonial home was transferred to Ms. Draper and they were registered as joint tenants. On the dissolution of that marriage, Mr. Holtby claimed that Ms. Draper held title to the half-interest as trustee for Mr. Holtby, who was the beneficial owner. The court disagreed, concluding that in all the circumstances, Mr. Holtby’s intention was that Ms. Draper hold title as joint tenant and not subject to a resulting trust. Among the reasons for this conclusion were the facts that in Holtby the presumption of advancement applied, Ms. Draper had contributed to the mortgage, and that, “[t]o achieve the intended goal under the Planning Act, it was necessary for the beneficial ownership of [the adjoining lot] to be different from the beneficial ownership of the farm property”: Holtby, at para. 69. Contrary to the respondent’s reading, Holtby did not hold that achieving the Planning Act goal was decisive in determining the transferor’s intention. The court simply considered it as one factor “consistent with the presumption of joint ownership [that] in no way refute[d] it”: Holtby, at para. 69.

[27] This case is materially different than Holtby, but the ultimate question is the same: what was the transferor’s intent at the time of the conveyance? Did Luigi intend to retain a beneficial interest in 415 Lisgar, as we are to presume, or did he intend to give Paula a gift? The application judge held that Luigi intended to give Paula a gift because he wanted to avoid merger and, on the application judge’s reading of the law, avoiding merger required that he give her beneficial ownership in order to achieve that end. But on Luigi’s evidence: (1) the end he was trying to achieve was to purchase 415 Lisgar as an investment property; (2) in so doing he wanted to avoid merging the title with 274 Nepean; and (3) he thought he could achieve this through having Paula take legal title while he retained the beneficial interest. The application judge rejected his evidence on the basis that because the plan could not have worked it therefore could not have been intended.

[28] The application judge found that her conclusion was bolstered by various decisions of this court which addressed the effect of conveyances of property undertaken to avoid creditors or the imposition of probate fees. She concluded that “a party cannot achieve one result for the purpose of avoiding a legal consequence prescribed by statute – in this case the Planning Act – and achieve the opposite result for other purposes.” This, of course, is a factor for consideration in determining what the transferor’s intention was. But on the evidence, Luigi’s intention in avoiding the consequences of the Planning Act – whether it was effective or not – was fully aligned with his intention in retaining beneficial title. The application judge’s conclusion does not follow.

[29] In sum, the application judge erred in making the presumed operation of the Planning Act determinative of the question of whether Luigi intended to make a gift of the purchase money or retain a beneficial interest in the property.

[30] To address one final argument raised by the respondent, I do not find it significant that after the transaction closed, nothing was ever done to transfer Paula’s legal interest to Luigi, and do not find that this supports the conclusion that Luigi’s intent was to make a gift. What would the point of such a transaction have been? The property had been purchased. Income was received. Expenses were paid. The state of affairs was entirely satisfactory to Luigi. There was no apparent reason for anyone to incur additional transaction costs – including land transfer tax – for no perceived benefit.

DISPOSITION

[31] I would allow the appeal, and grant the declarations sought: that Luigi is the beneficial owner of a 50 percent interest in 415 Lisgar and an order vesting title of Paula’s interest in him. ...



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