





CITATION:
Remo Valente Real Estate (1990)
          Limited v. Portofino Riverside Tower Inc., 2011 ONCA 784



DATE: 20111214



DOCKET: C53256



COURT OF APPEAL FOR ONTARIO



Doherty, Goudge and Epstein JJ.A.



BETWEEN



Remo Valente Real Estate (1990) Limited



Plaintiff (Appellant)



and



Portofino Riverside Tower Inc., Westview Park Gardens
          (2004) Inc., Portofino Corporation and Dante J. Capaldi



Defendants (Respondents)



Gino Morga and Michelle D. Reynolds, for the appellant



William V. Sasso and Jacqueline A. Horvat, for the respondents



Heard: October 24, 2011



On appeal from the order of the Divisional Court (Hambly, Murray
          and Ray J.J.) dated February 24, 2010, with reasons by Hambly and Ray J.J. reported
          at 2010 ONSC 280, 68 B.L.R. (4th) 66.



Goudge J.A.:




INTRODUCTION

[1]

On November 22, 2002, the appellant, a real estate company, signed a
    listing agreement with the respondent Portofino Riverside Tower Inc. (Portofino
    1) to sell the condominium units in a building to be constructed by Portofino
    1 on land it owned.

[2]

On May 3, 2005, Portofino 1 transferred its legal title to the land to
    Westview Park Gardens (2004) Inc., which then changed its name to Portofino
    Corporation.  Both names appear in the style of cause referring to this
    respondent, which I will refer to as Portofino 2.  When Portofino 1
    transferred the legal title to Portofino 2, it simultaneously transferred the
    equitable title in the land to a limited partnership, Portofino (2005) Limited
    Partnership (the Limited Partnership).  The respondent Dante Capaldi owned
    Portofino 1, Portofino 2 and the corporate general partner of the Limited
    Partnership.

[3]

On May 9, 2005, Portofino 2 locked the appellants agents out of the
    project and at about the same time retained another real estate agent.

[4]

The appellant subsequently sued the respondents for oppression under the
Ontario Business Corporations Act
, R.S.O. 1990, c. B. 16 (the 
OBCA
)
    and for breach of contract.  At trial, the trial judge found that the claim for
    oppression succeeded, and awarded the appellant $1,883,097.26 together with
    costs.  The trial judge did not address the breach of contract claim.

[5]

On appeal to the Divisional Court, the finding of oppression was
    reversed.  The Divisional Court allowed the appeal and dismissed the appellants
    action in its entirety.  Like the trial judge, it did not address the contract
    claim.

[6]

The appellant comes to this court with leave.  For the reasons that
    follow, I conclude that the Divisional Court was correct to dismiss the
    oppression claim, but incorrect to dismiss the breach of contract claim without
    addressing it.  That claim has never been tried.  In the circumstances of this
    case, I think it should be.  I would therefore allow the appeal and remit the
    contract claim for trial.

THE FACTS

[7]

Remo Valente is the principal of the appellant.  He and three other
    individuals, including the respondent Capaldi, were the owners of Portofino 1
    through their personal corporations.  Portofino 1 owned land in Windsor on
    which it planned to build a condominium development.  The appellant had an
    exclusive listing agreement with Portofino 1 pursuant to which its real estate
    agents began marketing and selling the condominiums in the project in 2003.

[8]

Problems among the four owners resulted in Capaldi buying out the others
    and becoming the owner of Portofino 1 in January 2005.  He then undertook a
    corporate restructuring.  On May 3, 2005, Portofino 1 transferred the legal
    title to the lands to Portofino 2 and the equitable title to the Limited
    Partnership.  Shortly thereafter, on May 9, 2005, the appellants real estate
    agents were locked out of the project and their role in marketing the project
    ended.  Portofino 2 subsequently listed the property with another realtor.

[9]

The appellant commenced this action on November 15, 2005.  It claimed
    relief against oppression under s. 248 of the
OBCA
and damages for
    breach of contract.

THE TRIAL DECISION

[10]

In his reasons for judgment, the trial judge dealt extensively with the
    appellants oppression claim.  Indeed, the oppression claim appears to have
    been the focus, perhaps the only focus, of the case advanced by the appellant
    at trial.  The trial judge did not address the breach of contract claim and
    made no finding of breach of contract.

[11]

In disposing of the oppression claim, the trial judge first concluded
    that the appellant was a creditor of Portofino 1 and therefore an appropriate
    complainant under s. 248 of the
OBCA
.  He based this finding on his
    interpretation of the provision of the exclusive listing agreement entitling
    the appellant to payment before closing of fifty percent of the commissions on
    the sales it had made, if the necessary condition was met.  That condition
    provided that the appellant was entitled to receive fifty percent of those
    commissions 45 days from the day in which the necessary pre-sales have been
    achieved to satisfy the condition in the Project Financing commitment.

[12]

The trial judge found that the essence of this condition was a clear
    determination that the project was in fact going ahead, and that this was
    evidenced in this case by Portofino 1 giving formal notice to purchasers on
    January 11, 2005 waiving its right to cancel the project if it did not look to
    be financially viable.  In his view, this met the condition.  In addition,
    while the trial judge acknowledged that there was at that point no formal
    project financing commitment in place, he found at para. 74 of his reasons that
    financing arrangements had been worked out in principle with the Bank of
    Montreal and had simply not been formalized:
Remo Valente Real Estate
    (1990) Ltd. v. Portofino Riverside Tower Inc.
(2007), 86 O.R. (3d) 667
    (S.C.).

[13]

Having thus found the appellant to be a creditor, and therefore entitled
    to be a complainant under s. 248 of the
OBCA
, the trial judge went on to
    find that the respondents had conducted the affairs of Portofino 1 and
    Portofino 2 in a manner oppressive or unfairly prejudicial to the appellants interests. 
    In particular, he found that the real reason that the corporate restructuring
    was undertaken was to block the appellants ability to collect the commissions
    owed to it by rendering Portofino 1 an empty shell, as the minority judgment
    in the Divisional Court put it:
Remo Valente Real Estate (1990) Ltd. v.
    Portofino Riverside Tower Inc.
(2010), 68 B.L.R. (4th) 66, at para. 72.

[14]

Following a subsequent accounting conducted by the trial judge to
    determine the appropriate remedy under s. 248, he found the respondents jointly
    and severally liable to the appellant for $1,883,097.26.  Finally, he awarded
    the appellant costs in the amount of $253,817.98.

THE DIVISIONAL COURT DECISION

[15]

Under s. 255 of the
OBCA
, an appeal from an order pursuant to s.
    248 is to the Divisional Court.  In this case, the Divisional Court rendered
    two sets of reasons.

[16]

The majority dealt only with the conclusion of the trial judge that the
    appellant was a creditor and therefore a proper complainant under s. 248.  They
    held that the trial judge erred in this finding because, in their view, no
    financing was ever obtained from the Bank of Montreal, and the trial judge was
    therefore wrong to find that the condition in Bank of Montreal financing had
    been satisfied, therefore entitling the appellant to payment of fifty percent
    of the commissions.  The majority concluded that since the condition in the
    exclusive listing was not shown to be satisfied, neither Portofino 1 nor
    Portofino 2 owed anything to the appellant when the action was commenced or
    when it was tried.  Hence the appellant was not a creditor and therefore could
    not be a complainant under s. 248.

[17]

The majority concluded their reasons by saying about the breach of
    contract issue only that the trial judge made no finding of breach of
    contract.  They then allowed the appeal, and dismissed the action in its
    entirety, including the breach of contract claim.

[18]

In his minority reasons, Murray J. agreed with the result reached by his
    colleagues, and, like the majority, he did not deal directly with the contract
    claim.  He focused on the oppression claim and concluded that at the time of
    the corporate restructuring, the proposed Bank of Montreal financing had not
    been finalized.  The condition in that financing for payment of fifty percent
    of the commissions could therefore not be met.  He found that the trial judge
    made a legal error in holding that it had been met, and that therefore the
    appellant was a creditor of Portofino 1.

[19]

Murray J. went on to find that in any event the corporate restructuring
    could not constitute oppression of the appellant for two reasons.  First, the
    appellants exclusive listing agreement did not protect it from the
    refinancing, which in turn opened the possibility of replacement of the
    appellant as project realtor.  As he put it, it is not the function of the
    oppression remedy to rewrite commercial agreements.

[20]

Second, Murray J. looked to an indemnity provided by the Limited
    Partnership to the appellant, which the trial judge had before him, but had
    ignored.  Murray J. found that the Limited Partnership had provided the
    appellant with an irrevocable direction to indemnify the appellant for any commissions
    that Portofino 1 might be legally obligated to pay, so that all the assets once
    held by Portofino 1 were still available to satisfy any claim that the
    appellant might have.  Thus, contrary to the trial judges finding, the
    corporate restructuring did not render Portofino 1 without assets.  Murray J.
    concluded that the restructuring was not unfairly prejudicial to the
    appellants interests and therefore could not constitute oppression under s.
    248 of the
OBCA
.

[21]

Murray J. went on to deal with the trial judges finding against the
    respondent Capaldi personally (assuming there was oppression), his evaluation
    of the appellants reasonable expectations for the purposes of the oppression
    remedy, and his splitting of the case into two parts, the first about
    oppression and the second about accounting.  For the purposes of this appeal,
    it is not necessary to deal with these issues.

[22]

In the end, Murray J. agreed that the entire action, including the
    breach of contract claim should be dismissed.

[23]

After the Divisional Court issued its decision, the appellant moved to
    vary the judgment.  The appellant sought an order that the breach of contract
    issue be referred to this court as being beyond the monetary jurisdiction of
    the Divisional Court or alternatively, that the contract issue be referred back
    to the trial court for adjudication.  The Divisional Court issued supplementary
    reasons, finding that it did have jurisdiction to deal with the contract issue as
    part of the appeal of the oppression order.  It declined, however, to make any
    further order in response to this motion.

ANALYSIS

[24]

The appellant raises two issues in this court.  The first is the
    oppression issue.  The appellant argues that the Divisional Court erred in
    reversing the trial judges finding of oppression.  The second is the breach of
    contract issue.  The appellant says that the Divisional Court had no
    jurisdiction to dismiss its breach of contract claim, and further, that it
    erred in dismissing that claim since it has never been adjudicated.  The
    Divisional Court should at the least have referred the issue back to the trial
    court.  I will deal with each of these issues in turn.

THE OPPRESSION ISSUE

[25]

The respondents concede that the majority in the Divisional Court was in
    error in finding that no financing was ever obtained from the Bank of Montreal
    and in basing its decision on that.  However, I agree with Murray J. that the
    trial judge erred in interpreting the condition in the exclusive listing
    agreement that had to be met before the appellant was owed fifty percent of the
    commissions.  To reiterate, that condition required that the necessary
    pre-sales have been achieved to satisfy the condition in the Project Financing
    commitment.  This condition in the exclusive listing agreement required a
    formal project financing commitment to be in place.  The trial judge found that
    formal project financing had not been obtained at the relevant time.  He could
    not find that the condition was met without this.  He did so by finding the
    essence of the condition to be Portofino 1s decision that the project was
    going ahead.  That interpretation of the exclusive listing agreement constitutes
    an error of law.

[26]

I agree therefore that the trial judge was in error in concluding that the
    appellant was a creditor and therefore entitled to be a complainant under s.
    248 of the
OBCA
.

[27]

More importantly, I agree with Murray J. that regardless of whether the
    appellant can properly be found a complainant entitled to seek relief under s.
    248, the corporate restructuring that took place could not constitute
    oppression because of the indemnification of Portofino 1 provided to the
    appellant for any amounts owed to it.

[28]

I am significantly fortified in this conclusion by the exchanges in this
    court between counsel and the bench.  It is true that the written
    indemnification given to the appellant in 2006 by the Limited Partnership
    arguably fell short of providing the appellant with assurance that either the Limited
    Partnership or Portofino 2 were legally bound to indemnify Portofino 1 for its
    obligations to the appellant under the exclusive listing agreement.  For
    example, the written indemnification is unclear whether it constitutes a
    contract between the Limited Partnership and the appellant, or whether it is simply
    a gratuitous promise to the appellant.  Nor is it clear that the proposed
    indemnification covers all the obligations of Portofino 1 arising under the
    exclusive listing agreement.

[29]

However, any lack of clarity was dispelled by the admissions of
    respondents counsel in this court.  They could not have been clearer.  Counsel
    agreed that all three entities involved in the corporate restructuring  Portofino
    1, Portofino 2 and the Limited Partnership  are bound by the exclusive listing
    agreement.

[30]

The consequence of these admissions is clear for the appellants claim
    of oppression due to the corporate restructuring.  The appellant can enforce
    any claim it properly has under the exclusive listing agreement against the
    same assets after the restructuring as before.  It was not left by the
    restructuring to look only to an empty shell.  In these circumstances, its
    oppression claim cannot succeed.

THE BREACH OF CONTRACT ISSUE

[31]

In this court, the appellant argues that the Divisional Court erred in
    dismissing its claim for breach of the exclusive listing agreement because the
    amount sought in that claim exceeded that courts monetary jurisdiction. 
    Secondly, the appellant says that its breach of contract claim has never been
    adjudicated and, at the very least, the Divisional Court should have referred
    the issue back for trial.

[32]

The respondents answer by saying that the appellant did not pursue its
    contract claim at trial and should not be permitted to do so now.  In any event,
    they say there has been no breach of the exclusive listing agreement.

[33]

There is no doubt that the trial and the proceedings in the Divisional
    Court both focused on the appellants oppression claim.  The proper
    interpretation of the exclusive listing agreement was raised, but only as
    relevant to whether the appellant was a creditor of Portofino 1 and therefore a
    proper claimant under s. 248 of the
OBCA
.  The appellant took this tack
    at trial in order to seek equitable relief under s. 248 that went beyond any
    damages that might be available for breach of contract.  As well, as its
    counsel told us, this was in part because, at that stage, the uncertainty of
    the indemnification left grave doubts that any contract damages award could be
    collected, since Portofino 1 was an empty shell.

[34]

Nonetheless, it is clear that at every stage of this litigation the
    appellant has raised its breach of contract claim  in its statement of claim,
    in the Divisional Court, and in its notice of appeal to this court.  It is
    equally clear that throughout, the respondents have treated this as a contract
    case to be argued on its merits, and have submitted that there has been no
    breach of the exclusive listing agreement.  In fact, a ground of appeal in
    their notice of appeal to the Divisional Court was that the trial judge failed
    to determine if a breach of contract had occurred.  Moreover, the appellant
    agrees with the respondents that the trial judge did not adjudicate the breach
    of contract claim.  While the trial judge recognized that this was not put
    forward as a contract case, in the sense that the appellant sought a remedy
    that extended beyond contract, I agree with the parties that he did not decide
    the contract claim.  Nor, however, did he find that the appellant had abandoned
    it.

[35]

In these circumstances, particularly when supplemented by the
    clarification of the extent of the indemnification given by the respondents in
    this court, I do not think the appellant can fairly be said to have at any
    stage relinquished its breach of contract claim.

[36]

The Divisional Court found it had jurisdiction to deal with that claim. 
    I agree.  Because of s. 255 of the
OBCA
, the respondents appeal of the
    oppression finding was to the Divisional Court.  That obviously encompassed the
    appeal from the resulting compensation order, although the amount of that order
    exceeded the $25,000 monetary limit for the court found in s. 19(1.1) of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43.  The breach of contract claim was
    factually intertwined with the oppression claim, but even it were viewed
    discretely, the monetary limit of the Divisional Court would not be triggered,
    since the trial judge made no order dismissing that claim.  Moreover, since the
    oppression claim and the contract claim were intertwined, to send the appeal of
    one to the Divisional Court and the appeal of the other to this court would be
    impractical and unwarranted.

[37]

In my view, while the Divisional Court had the jurisdiction to deal with
    the breach of contract claim, it erred in these circumstances in dismissing
    it.  The claim was not adjudicated by the trial judge.  He did not address the
    findings of fact or the legal arguments that might be relevant to adjudicating
    the contract claim.  It is an inadequate second best to adapt to that purpose
    the findings relevant to the oppression claim.

[38]

I conclude that the order that is just in the circumstances is to allow
    the appeal, but only to the extent of remitting the breach of contract issue
    for trial.  Since the trial judge is now retired, that trial must be before a
    different judge, unfettered by any previous findings of fact.  In light of the
    clarity that the respondents have now given to the indemnity, it may be
    appropriate that the Limited Partnership be joined with Portofino 1 and
    Portofino 2 as defendants, but that will be for the new trial judge to
    determine, if asked.

[39]

In summary, the appeal is allowed to this extent, but is otherwise
    dismissed.  In light of this disposition, the court will entertain written submissions
    for costs of the appeal, for the proceedings in the Divisional Court and for
    the trial.  Submissions are not to exceed ten pages, and must be filed within
    30 days of the release of these reasons.

RELEASED: December 14, 2011 (D.D.)

S.T. Goudge J.A.

I agree Doherty J.A.

I agree G.J. Epstein J.A.


