In the decision of Scholz v. Scholz,1 the British Columbia Court of Appeal issued a unanimous decision upholding the decision of the British Columbia Supreme Court.2 Madam Justice Neilson, writing for the court, ruled on the issues of constructive trust, resulting trust and proprietary estoppel.
In 2001, the appellant, Ruth Scholz (“Mrs. Scholz”) had built a coach house on the property of her son, Michael Scholz (“Michael”) and daughter in law, Carolyn Scholz (“Carolyn”). Michael and Carolyn had bought the property in 1998, and then built their own house on that land in 2001. As Mrs. Scholz was, at that time, recovering from hip surgery and requiring additional help, Carolyn and Michael invited her to build a coach house that she could live in on their property. Mrs. Scholz paid approximately $94,000.00 to build the home and lived there until 2011. To help Mrs. Scholz, Carolyn and Michael arranged and paid for nannies who provided meals and household support to Mrs. Scholz.
In 2007, Michael and Carolyn bought another property where they planned to build a home. They initially planned to build a self-contained unit in that home for Mrs. Scholz, but those plans fell apart. In 2011, Michael and Carolyn listed their home (with the coach house) for sale. They accepted an offer of approximately $3,000,000.00. Arrangements were made for Mrs. Scholz to move into an apartment and Carolyn and Michael moved Mrs. Scholz’s belongings to the apartment – albeit without her knowledge and while she was on vacation with her daughter.
Mrs. Scholz asked Carolyn and Michael for a share of the proceeds of sale of the house, in light of the fact that she had expended funds to build the coach house. Michael and Carolyn refused and Mrs. Scholz brought an action against them and filed a certificate of pending litigation on the property, on the basis that there had been an oral agreement that Mrs. Scholz would obtain an interest in the coach house and the land on which it was built. Mrs. Scholz also claimed resulting trust and constructive trust.
At trial, the judge dismissed Mrs. Scholz’s claims of resulting trust, constructive trust and proprietary estoppel.
On the issue of resulting trust, Justice Saunders found that the components of a resulting trust were not found in the case. He found that Mrs. Scholz had not made a contribution to the purchase price of the property itself, nor was there any agreement between the parties that Mrs. Scholz was to receive an ownership interest in the land. Rather, Justice Saunders, held that the evidence showed that Mrs. Scholz had intended her son and daughter in law to hold the value of the coach house in trust for her as it depreciated through the years she lived there.
As for constructive trust and unjust enrichment, Mr. Justice Saunders could find no evidence that there had been an “enrichment” or increase in the value of the property due to the presence of the coach house.
On the issue of proprietary estoppel, the trial judge held that there was nothing in the evidence to support a finding that Mrs. Scholz could have reasonably expected to share in the profit of the prospective sale of the property.
Still, despite determining that there was no recourse to these equitable remedies, Justice Saunders turned to the decision of Lord Denning in Hardwick v. Johnson3 and found that the facts supported a finding that there was a family relationship with an implicit legal agreement. That agreement would see Mrs. Scholz receive a “fair measure of compensation upon termination of her occupation of the Coach House..The most reasonable mechanism, and one which I find appropriate to impute to the parties, is that the value of the Coach House would be viewed by them as depreciating at a fixed rate on a declining balance, from year to year….”4 Justice Saunders set the appropriate rate of depreciation at 10%, which would see Mrs. Scholz receiving from her initial input of $94,000.00, approximately $36,756.00.
Mrs. Scholz appealed the decision of Justice Saunders.
In reviewing Justice Saunders’s decision, the Court of Appeal noted that the rulings on resulting trust, constructive trust and proprietary estoppel were findings of fact such that they attracted a high degree of deference. Neilson J.A. considered whether there were errors in Justice Saunders’s findings such that they could be overturned.
Neilson J.A. found no error on the issue of resulting trust in that there was no evidence that Mrs. Scholz had transferred property to Michael and Catherine, had not contributed to the purchase price of their property and had not intended to acquire an ownership interest in the house. As for the claim of constructive trust, Justice Neilson held that there was no error in Justice Saunders’s ruling, on the basis that “there was no evidence the respondents had been unjustly enriched by the presence of the coach house on their property…”5
On the proprietary estoppel claim, Neilson J.A. found again there was no error on Justice Saunders’s part. Justice Neilson made reference to the British Columbia Court of Appeal’s decision in Trethewey-Edge Dyking District v. Coniagas Ranches Ltd.6 Neilson J.A. summarizes a three-part test respecting proprietary estoppel from that case as follows:
..First, did the respondents as the owners of the legal right to the property do something to encourage the appellant to believe they did not intent to rely on their right? Second, has the appellant acted to her detriment because of that? Third, would it be unconscionable for the respondents to go back on the assumption they have allowed the appellant to make?7
On her review of the facts and the test, Neilson J.A. notes that the trial judge held that the case did not support a finding that there was a reasonable expectation that Mrs. Scholz would share in the profits from the sale of the property in the future. Furthermore, Justice Neilson concluded that Mrs. Scholz benefited from the living arrangement (by not paying for rent or utilities, and by receiving other support from the couple) such that any claim of detrimental reliance could not be made out. Neilson J.A. also noted that any claim that Mrs. Scholz would have made other living arrangements if she had known she was not to receive a share of the future sale price, was not supported by evidence on the record. And so, the Court of Appeal upheld the trial judge’s finding that proprietary estoppel does not apply in this case.
The Court of Appeal was then asked to consider whether the rate of 10% depreciation was in error. Justice Neilson held that the characterization of a “legal relationship on a family relationship” was appropriate and that the decision was a proper exercise of judicial discretion in the interest of fairness. The Court of Appeal therefore deferred to the trial judge on this count as well, and declined to alter the rate of depreciation.
As a result, Mrs. Scholz was unsuccessful in claiming constructive trust, resulting trust or proprietary estoppel in respect of the coach house she built and paid for on her son’s property. The trial judge, however, did reach out to find a remedy for Mrs. Scholz, by relying on its discretion, and the reasoning of Lord Denning in Hardwick v. Johnson to find that legal duties flowed from the family’s relationship. While the outcome was short of what Mrs. Scholz originally sought, the court was able to find at least a partial remedy which was ultimately upheld by the Court of Appeal.
—
1. 2013 BCCA 309 (CanLII) Link
2. 2012 BCSC 1172 Link
3. [1978] 2 All E.R. 935, [1978] 1 W.L.R. 683 (C.A.)
4. At paragraph 33
5. At paragraph 27
6. 2003 BCCA.197 (CanLII) [hereinafter Tretheway] Link
7. At paragraph 31; cite to paragraphs 64 to 73 of Tretheway
Menu
Written by: WEL Partners
Posted on: February 21, 2014
Categories: Commentary
In the decision of Scholz v. Scholz,1 the British Columbia Court of Appeal issued a unanimous decision upholding the decision of the British Columbia Supreme Court.2 Madam Justice Neilson, writing for the court, ruled on the issues of constructive trust, resulting trust and proprietary estoppel.
In 2001, the appellant, Ruth Scholz (“Mrs. Scholz”) had built a coach house on the property of her son, Michael Scholz (“Michael”) and daughter in law, Carolyn Scholz (“Carolyn”). Michael and Carolyn had bought the property in 1998, and then built their own house on that land in 2001. As Mrs. Scholz was, at that time, recovering from hip surgery and requiring additional help, Carolyn and Michael invited her to build a coach house that she could live in on their property. Mrs. Scholz paid approximately $94,000.00 to build the home and lived there until 2011. To help Mrs. Scholz, Carolyn and Michael arranged and paid for nannies who provided meals and household support to Mrs. Scholz.
In 2007, Michael and Carolyn bought another property where they planned to build a home. They initially planned to build a self-contained unit in that home for Mrs. Scholz, but those plans fell apart. In 2011, Michael and Carolyn listed their home (with the coach house) for sale. They accepted an offer of approximately $3,000,000.00. Arrangements were made for Mrs. Scholz to move into an apartment and Carolyn and Michael moved Mrs. Scholz’s belongings to the apartment – albeit without her knowledge and while she was on vacation with her daughter.
Mrs. Scholz asked Carolyn and Michael for a share of the proceeds of sale of the house, in light of the fact that she had expended funds to build the coach house. Michael and Carolyn refused and Mrs. Scholz brought an action against them and filed a certificate of pending litigation on the property, on the basis that there had been an oral agreement that Mrs. Scholz would obtain an interest in the coach house and the land on which it was built. Mrs. Scholz also claimed resulting trust and constructive trust.
At trial, the judge dismissed Mrs. Scholz’s claims of resulting trust, constructive trust and proprietary estoppel.
On the issue of resulting trust, Justice Saunders found that the components of a resulting trust were not found in the case. He found that Mrs. Scholz had not made a contribution to the purchase price of the property itself, nor was there any agreement between the parties that Mrs. Scholz was to receive an ownership interest in the land. Rather, Justice Saunders, held that the evidence showed that Mrs. Scholz had intended her son and daughter in law to hold the value of the coach house in trust for her as it depreciated through the years she lived there.
As for constructive trust and unjust enrichment, Mr. Justice Saunders could find no evidence that there had been an “enrichment” or increase in the value of the property due to the presence of the coach house.
On the issue of proprietary estoppel, the trial judge held that there was nothing in the evidence to support a finding that Mrs. Scholz could have reasonably expected to share in the profit of the prospective sale of the property.
Still, despite determining that there was no recourse to these equitable remedies, Justice Saunders turned to the decision of Lord Denning in Hardwick v. Johnson3 and found that the facts supported a finding that there was a family relationship with an implicit legal agreement. That agreement would see Mrs. Scholz receive a “fair measure of compensation upon termination of her occupation of the Coach House..The most reasonable mechanism, and one which I find appropriate to impute to the parties, is that the value of the Coach House would be viewed by them as depreciating at a fixed rate on a declining balance, from year to year….”4 Justice Saunders set the appropriate rate of depreciation at 10%, which would see Mrs. Scholz receiving from her initial input of $94,000.00, approximately $36,756.00.
Mrs. Scholz appealed the decision of Justice Saunders.
In reviewing Justice Saunders’s decision, the Court of Appeal noted that the rulings on resulting trust, constructive trust and proprietary estoppel were findings of fact such that they attracted a high degree of deference. Neilson J.A. considered whether there were errors in Justice Saunders’s findings such that they could be overturned.
Neilson J.A. found no error on the issue of resulting trust in that there was no evidence that Mrs. Scholz had transferred property to Michael and Catherine, had not contributed to the purchase price of their property and had not intended to acquire an ownership interest in the house. As for the claim of constructive trust, Justice Neilson held that there was no error in Justice Saunders’s ruling, on the basis that “there was no evidence the respondents had been unjustly enriched by the presence of the coach house on their property…”5
On the proprietary estoppel claim, Neilson J.A. found again there was no error on Justice Saunders’s part. Justice Neilson made reference to the British Columbia Court of Appeal’s decision in Trethewey-Edge Dyking District v. Coniagas Ranches Ltd.6 Neilson J.A. summarizes a three-part test respecting proprietary estoppel from that case as follows:
..First, did the respondents as the owners of the legal right to the property do something to encourage the appellant to believe they did not intent to rely on their right? Second, has the appellant acted to her detriment because of that? Third, would it be unconscionable for the respondents to go back on the assumption they have allowed the appellant to make?7
On her review of the facts and the test, Neilson J.A. notes that the trial judge held that the case did not support a finding that there was a reasonable expectation that Mrs. Scholz would share in the profits from the sale of the property in the future. Furthermore, Justice Neilson concluded that Mrs. Scholz benefited from the living arrangement (by not paying for rent or utilities, and by receiving other support from the couple) such that any claim of detrimental reliance could not be made out. Neilson J.A. also noted that any claim that Mrs. Scholz would have made other living arrangements if she had known she was not to receive a share of the future sale price, was not supported by evidence on the record. And so, the Court of Appeal upheld the trial judge’s finding that proprietary estoppel does not apply in this case.
The Court of Appeal was then asked to consider whether the rate of 10% depreciation was in error. Justice Neilson held that the characterization of a “legal relationship on a family relationship” was appropriate and that the decision was a proper exercise of judicial discretion in the interest of fairness. The Court of Appeal therefore deferred to the trial judge on this count as well, and declined to alter the rate of depreciation.
As a result, Mrs. Scholz was unsuccessful in claiming constructive trust, resulting trust or proprietary estoppel in respect of the coach house she built and paid for on her son’s property. The trial judge, however, did reach out to find a remedy for Mrs. Scholz, by relying on its discretion, and the reasoning of Lord Denning in Hardwick v. Johnson to find that legal duties flowed from the family’s relationship. While the outcome was short of what Mrs. Scholz originally sought, the court was able to find at least a partial remedy which was ultimately upheld by the Court of Appeal.
—
1. 2013 BCCA 309 (CanLII) Link
2. 2012 BCSC 1172 Link
3. [1978] 2 All E.R. 935, [1978] 1 W.L.R. 683 (C.A.)
4. At paragraph 33
5. At paragraph 27
6. 2003 BCCA.197 (CanLII) [hereinafter Tretheway] Link
7. At paragraph 31; cite to paragraphs 64 to 73 of Tretheway
Author
View all posts