Stevens v. Stevens

CATHERINE MARY STEVENS (Applicant / Respondnet in appeal) and IAN STEVENS,
ROYAL BANK OF CANADA, and CROWN ATTORNEY (LIDIA NAROZNIAK) (Respondent /
Appellant in appeal)

Ontario Court of Appeal

J. Simmons, E.A. Cronk, R.G. Juriansz JJ.A.

Heard: May 30, 2006
Judgment: July 10, 2006
Docket: CA C44282

Proceedings: affirming Stevens v. Stevens (2005), 2005 CarswellOnt 4642, 15 C.P.C. (6th) 43, 20 R.F.L. (6th) 453 (Ont. S.C.J.)

Counsel: Larry W. Keown for Appellant, Royal Bank of Canada

Robert K. Bickle for Respondent

Subject: Civil Practice and Procedure; Family; Property; Estates and Trusts

Civil practice and procedure — Judgments and orders — Amending or varying — Who may vary or amend

On September 17, 2004 order was made in matrimonial proceeding between husband and wife vesting title to par-ties’ former matrimonial home in wife retroactive to date of parties’ separation, July 31, 1998 — On November 30, 2000, bank filed writs of seizure and sale against husband concerning unsatisfied judgment — Wife’s application for declaration that writs were not applicable to matrimonial home was granted — Bank’s cross-application for order varying effective date of vesting order to September 17, 2004, or in alternative to be granted standing to appeal vest-ing order, was dismissed — Application judge held that he had no jurisdiction to alter or vary vesting order or to grant bank standing to appeal from it, as only party to original proceeding was entitled to appeal or to apply for or-der to amend or vary — Bank appealed — Appeal dismissed — Application judge did not err in concluding that vest-ing order was based on conclusion that constructive trust existed in favour of wife, with result that husband’s interest in matrimonial home vested in wife as of date of separation — Although vesting order judge did not mention retroac-tivity or constructive trust in his reasons, fact that he signed vesting order presumes that he was aware of its terms — Vesting order judge held that understanding had been reached between husband and wife concerning matrimonial home that was enforceable in equity — Granting of vesting order retroactive to date of parties’ separation was not inappropriate.

Family law — Family property on marriage breakdown — Determination of ownership of property — Application of trust principles — Resulting and constructive trusts — Matrimonial homes

On September 17, 2004 order was made in matrimonial proceeding between husband and wife vesting title to par-ties’ former matrimonial home in wife retroactive to date of parties’ separation, July 31, 1998 — On November 30, 2000, bank filed writs of seizure and sale against husband concerning unsatisfied judgment — Wife’s application for declaration that writs were not applicable to matrimonial home was granted — Bank’s cross-application for order varying effective date of vesting order to September 17, 2004, or in alternative to be granted standing to appeal vest-ing order, was dismissed — Application judge held that he had no jurisdiction to alter or vary vesting order or to grant bank standing to appeal from it, as only party to original proceeding was entitled to appeal or to apply for or-der to amend or vary — Bank appealed — Appeal dismissed — Bank’s argument that vesting order was ineffective as against it on basis that its interests were not contemplated or protected under vesting order as third creditor execu-tion creditor was not accepted — Bank was put on notice of trust claim by wife concerning matrimonial home, and bank failed to seek to intervene in matrimonial proceeding — Bank’s writs were ineffective as against former matri-monial home — Wife became entitled to husband’s interest in matrimonial home prior to date on which bank ac-quired any legal rights as execution creditor of husband — At time of parties’ separation, husband agreed to transfer all of his right, title and interest in matrimonial home to wife provided that wife satisfied certain conditions — Wife satisfied conditions prior to date on which bank obtained and filed its writs of seizure and sale — Equities as between wife and bank compel dismissal of appeal.

Cases considered by E.A. Cronk J.A.:

Ferguson v. Ferguson (1994), 7 R.F.L. (4th) 384, 116 D.L.R. (4th) 707, 1994 CarswellOnt 448 (Ont. U.F.C.) — distinguished

Maroukis v. Maroukis (1984), [1984] 2 S.C.R. 137, 34 R.P.R. 228, 12 D.L.R. (4th) 321, 54 N.R. 268, 5 O.A.C. 182, 41 R.F.L. (2d) 113, 1984 CarswellOnt 268, 1984 CarswellOnt 803 (S.C.C.) — distinguished

Martin v. Martin (1992), 38 R.F.L. (3d) 217, 89 D.L.R. (4th) 115, 8 O.R. (3d) 41, 55 O.A.C. 9, 1992 CarswellOnt 226 (Ont. C.A.) — considered

Miller v. Miller (1996), 20 R.F.L. (4th) 191, 132 D.L.R. (4th) 763, 89 O.A.C. 187, 1996 CarswellOnt 804 (Ont. C.A.) — considered

Peter v. Beblow (1993), [1993] 3 W.W.R. 337, 23 B.C.A.C. 81, 39 W.A.C. 81, 101 D.L.R. (4th) 621, [1993] 1 S.C.R. 980, 150 N.R. 1, 48 E.T.R. 1, 77 B.C.L.R. (2d) 1, 44 R.F.L. (3d) 329, [1993] R.D.F. 369, 1993 CarswellBC 44, 1993 CarswellBC 1258 (S.C.C.) — referred to

Soulos v. Korkontzilas (1997), 212 N.R. 1, 1997 CarswellOnt 1489, 9 R.P.R. (3d) 1, 46 C.B.R. (3d) 1, 32 O.R. (3d) 716 (headnote only), 146 D.L.R. (4th) 214, 100 O.A.C. 241, 17 E.T.R. (2d) 89, [1997] 2 S.C.R. 217, 1997 CarswellOnt 1490 (S.C.C.) — referred to

Statutes considered:

Family Law Act, R.S.O. 1990, c. F.3

Generally — referred to

s. 10 — referred to

s. 10(1)(a) — referred to

Rules considered:

Rules of Civil Procedure, R.R.O. 1990, Reg. 194

Generally — referred to

APPEAL from judgment reported at Stevens v. Stevens (2005), 2005 CarswellOnt 4642, 15 C.P.C. (6th) 43, 20 R.F.L. (6th) 453 (Ont. S.C.J.), granting wife’s application for declaration that writs obtained by bank were not appli-cable to matrimonial home.

E.A. Cronk J.A.:

I. Background

1 On September 17, 2004, Flynn J. of the Superior Court of Justice made an order in the matrimonial proceeding between the respondent, Catherine Mary Stevens, and her then husband, Peter Henry Nagtzaam, vesting title to the parties’ former matrimonial home in Ms. Stevens, retroactive to July 31, 1998 — the date of the parties’ separation (the “Vesting Order”).

2 However, on November 30, 2000, the appellant, Royal Bank of Canada (the “Bank”), had filed writs of seizure and sale against Mr. Nagtzaam concerning an unsatisfied judgment arising from Mr. Nagtzaam’s default under a loan advanced to him by the Bank in 1999.

3 Following the Vesting Order, when the Bank declined to lift its writs of seizure and sale in respect of the parties’ former matrimonial home, Ms. Stevens applied for a declaration that the writs were not applicable to the matrimo-nial home, among other relief. In response, the Bank cross-applied for an order amending or varying the effective date of the Vesting Order to September 17, 2004 (the date of Flynn J.’s order) or, in the alternative, granting the Bank standing to appeal the Vesting Order.

4 Both applications were heard by Reilly J. of the Superior Court of Justice on August 22, 2005. By judgment dated September 12, 2005, the application judge granted the declaratory relief sought by Ms. Stevens and dismissed the Bank’s cross-application.

5 The application judge held that only a party to an original proceeding is entitled to appeal or to apply for an or-der under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to amend or vary a final judgment. Accordingly, he concluded that he had no jurisdiction to alter or vary the Vesting Order or to grant the Bank standing to appeal from it. He, therefore, declined to interfere with the Vesting Order in any respect.

6 The application judge further held that Flynn J. had granted the Vesting Order based on his conclusion that a constructive trust existed in favour of Ms. Stevens, with the result that Mr. Nagtzaam’s interest in the matrimonial home vested in Ms. Stevens as of the date of separation. It followed that, as of July 31, 1998, Mr. Nagtzaam had no further proprietary or other interest in the matrimonial home, and no writ of seizure and sale thereafter obtained by a creditor of Mr. Nagtzaam could attach to that property.

II. Issues

7 The Bank appeals from the application judge’s judgment on several grounds. In my view, the grounds of appeal advanced by the Bank are subsumed in the following two broad issues:

(1) Whether the application judge erred in his interpretation of Flynn J.’s decision regarding the basis for the retroactive Vesting Order; and

(2) Whether, in the circumstances, the retroactive aspect of the Vesting Order is effective as against the Bank.

III. Discussion

(1) Decision of Flynn J.

8 The Bank argues that the Vesting Order was made under the authority of s. 10 of the Family Law Act, R.S.O. 1990, c. F.3, rather than in reliance on principles of constructive trust and that Flynn J. neither ordered nor intended that the Vesting Order have retroactive effect. I disagree.

9 Although it is true that Flynn J. did not mention retroactivity in his reasons and that the words “in trust” or “con-structive trust” similarly do not appear in his reasons, Flynn J. signed the formal Vesting Order. Therefore, in the absence of evidence to the contrary, which does not exist in this case, it must be presumed that Flynn J. was aware of the terms of the Vesting Order, including its provision for retroactivity, and that he was satisfied that the Vesting Order reflected his disposition concerning the matrimonial home.

10 In any event, as I elaborate later in these reasons, I am satisfied that Flynn J.’s findings concerning the under-standing between Mr. Nagtzaam and Ms. Stevens at the time of their separation included the implicit finding that, from shortly after the date of their separation in July 1998, Mr. Nagtzaam’s interest in the matrimonial home was impressed with a trust in favour of Ms. Stevens. The retroactive nature of the Vesting Order accords with this key finding.

11 Although Flynn J. did not refer explicitly in his reasons to the doctrine of constructive trust, he did hold that an understanding had been reached between Mr. Nagtzaam and Ms. Stevens concerning the matrimonial home, which was enforceable “in equity”. He further held that Ms. Stevens acted in reliance on the understanding that Mr. Nagtzaam’s interest in the matrimonial home would be transferred to her in consideration for her payment of his debts and the spouses’ joint debts at the time of separation. Ms. Stevens fulfilled her part of this bargain.

12 In these circumstances, I agree with the application judge that Flynn J.’s reasons compel the conclusion that he based the Vesting Order on the equitable principles inherent in the constructive trust remedy. The Bank, quite prop-erly in my view, does not suggest that the remedy of constructive trust cannot have retroactive effect in a proper case. That Flynn J. also alluded to his authority under s. 10 of the Family Law Act to declare the ownership or right to possession of particular property does not displace this interpretation. As was noted by this court in Martin v. Martin (1992), 8 O.R. (3d) 41 (Ont. C.A.) and Miller v. Miller, [1996] O.J. No. 863 (Ont. C.A.) at paras. 11 and 12, s. 10 of the Family Law Act is procedural in nature. It is a vehicle through which questions of ownership or posses-sion may be determined and the declaratory relief authorized by s. 10(1)(a) must find a substantive basis elsewhere.

(2) Effectiveness of the Vesting Order As Against the Bank

13 The Bank contends that the doctrine of constructive trust was unavailable to ground a retroactive Vesting Or-der, because the imposition of such a trust in this case unjustly defeated the interests of intervening creditors (like the Bank) and because it also had the effect of “wiping out” the Bank’s writs. The Bank further submits that the pro-visions of the Family Law Act do not permit the court to oust execution creditors by granting a retroactive vesting order regarding property. It, therefore, argues that the retroactive aspect of the Vesting Order is ineffective as against the Bank.

14 In the circumstances of this case, it is my view that the Bank’s argument cannot succeed. I say this for several reasons.

15 First, many of the cases relied upon by the Bank in support of its position are concerned with the court’s juris-diction to grant vesting orders as a remedy for implementing the substantive powers contained in family law legisla-tion: see for example, Maroukis v. Maroukis, [1984] 2 S.C.R. 137 (S.C.C.); and Ferguson v. Ferguson (1994), 7 R.F.L. (4th) 384 (Ont. U.F.C.). But that is not this case. I have already concluded that the retroactive Vesting Order here was anchored in the equitable principles of constructive trust.

16 Second, several of the submissions advanced by the Bank constitute a collateral attack on the decision of Flynn J. rather than a challenge of the application judge’s decision. Such an attack is not open to the Bank.

17 Third, the Bank emphasizes that its interests were not contemplated or protected under the Vesting Order be-cause Flynn J. did not have an opportunity to consider the effect of a retroactive vesting order on third party execu-tion creditors. The application judge found as a fact, however, that the Bank was put on notice in June 2002 by Ms. Stevens’ then counsel that the effect of a successful outcome for Ms. Stevens in the matrimonial proceeding would mean that Mr. Nagtzaam would have no interest in the matrimonial home. The notice letter to the Bank from Ms. Stevens’ counsel was provided to the Bank at a time when it was an execution creditor of Mr. Nagtzaam and prior to Flynn J.’s order. Despite this advance notice that its interests could be adversely affected, the Bank took no steps to intervene in the matrimonial proceeding.

18 Fourth, and importantly, the warning contained in the notice letter provided to the Bank by Ms. Stevens’ coun-sel was expressed this way: “If Mrs. Stevens is successful in her claims, [Mr. Nagtzaam] would have no interest in the matrimonial home as he would hold his interest in trust for Mrs. Stevens” . In addition, the no-tice letter stated: “[Ms. Stevens] is claiming that Mr. Nagtzaam holds his one half interest in the matrimonial home in trust for her.”

19 This language clearly put the Bank on notice of a trust claim by Ms. Stevens concerning the matrimonial home, at a time when it was open to the Bank to take action to protect its position. It also confirms that the matter of a trust claim was a live issue before Flynn J.

20 These facts lead to the inescapable inference that the Bank’s failure to seek to intervene in the matrimonial proceeding resulted either from execution creditor tactics or because the Bank ‘dropped the ball’. In these circum-stances, the Bank could hardly be heard to complain before the application judge (more than three years after the Bank received the relevant warning from Ms. Stevens’ matrimonial counsel) that the retroactive Vesting Order was fatally flawed or fundamentally unjust.

21 Fifth, I do not agree with the Bank’s contention that the Vesting Order is ineffective as against it because the prerequisites for the imposition of a constructive trust were not met in this case. I do agree, however, that the deter-mination of this issue required an evaluation and weighing of the equities as between the Bank and Ms. Stevens by the application judge. The application judge’s reasons do not permit me to conclude that this analysis was under-taken.

22 There is no issue between the parties that the leading authorities on the imposition of a constructive trust are the decisions of the Supreme Court of Canada in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217 (S.C.C.) and Peter v. Beblow, [1993] 1 S.C.R. 980 (S.C.C.). The relevant principles outlined in those cases need not be repeated here. I am satisfied that the application of these principles to the facts of this case establishes that the Bank’s writs are inef-fective as against the former matrimonial home. My reasons for reaching this conclusion may be briefly stated.

23 Justice Flynn determined that, at the time of the parties’ separation, Mr. Nagtzaam agreed to transfer all of his right, title and interest in the matrimonial home to his wife, provided that she paid his credit card and other accumu-lated debts. As I have said, Ms. Stevens did so. But Mr. Nagtzaam, when presented with a transfer document regard-ing the matrimonial home, refused to sign it. Against this factual backdrop, Flynn J. implicitly found that, from the time that Ms. Stevens paid the parties’ and Mr. Nagtzaam’s debts, Mr. Nagtzaam held his interest in the former mat-rimonial home in trust for his wife.

24 The parties separated in July 1998. Mr. Nagtzaam did not apply for a loan with the Bank until October 1999, and the Bank did not obtain a judgment and its writs against him until November 2000.

25 On this record, I am satisfied that Ms. Stevens paid the agreed debts on behalf of Mr. Nagtzaam prior to the date on which the Bank obtained and filed its writs of seizure and sale. Thus, when the writs were obtained, Mr. Nagtzaam had no interest in the matrimonial home to which the writs could attach. His former interest in the matri-monial home was now the subject of a trust in favour of Ms. Stevens. The Bank, as an execution creditor, could not enjoy any right to the matrimonial home different or greater than the right enjoyed by Mr. Nagtzaam. I note, in this regard, that when applying for a loan from the Bank in 1999, it appears that Mr. Nagtzaam made no mention of the matrimonial home or any interest therein when disclosing his assets to the Bank.

26 Justice Flynn’s reasons make clear his finding that Ms. Stevens became entitled to Mr. Nagtzaam’s interest in the matrimonial home prior to the date on which the Bank acquired any legal rights as an execution creditor of Mr. Nagtzaam.

27 I offer the following final observations. It is of some significance that, prior to Mr. Nagtzaam seeking a loan from the Bank, Ms. Stevens, who had continued to employ Mr. Nagtzaam following their separation, discovered that he was defrauding her company. The police were notified, as were several financial institutions, including the Bank, of the allegations of fraud against Mr. Nagtzaam. Ultimately, Mr. Nagtzaam was convicted of fraud.

28 The Bank chose to ignore Ms. Stevens’ warning and, nonetheless, advanced to Mr. Nagtzaam a loan upon which he subsequently defaulted. As I have said, approximately three years later, the Bank again chose to ignore a warning from Ms. Stevens delivered through her counsel — this time regarding the implications for the Bank of an outcome in the matrimonial proceeding favourable to Ms. Stevens.

29 In all the circumstances, I am of the opinion that the granting of the Vesting Order, retroactive to the date of the parties’ separation, was not inappropriate. On the somewhat unusual facts of this case, I have no hesitation in concluding that the equities as between Ms. Stevens and the Bank compel the dismissal of this appeal.

IV. Disposition

30 Accordingly, I would dismiss the appeal. Ms. Stevens is entitled to her costs of the appeal on a partial indem-nity basis, fixed in the amount of $5,900, inclusive of disbursements and Goods and Services Tax.

J. Simmons J.A.:

I agree.

R.G. Juriansz J.A.:

I agree.

Appeal dismissed.