Partition in Sale Proceedings – Hull on Estates #69

July 24, 2007 Hull & Hull LLP Hull on Estates, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED Tags: , , , , , 0 Comments

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In this episode of Hull on Estates, Natalia and David have a discussion about partition in sales proceedings, and use the case of Suttick and Schwenger, which deals with a family cottage.

Click "Continue Reading" for the transcribed version of this podcast.

Partition in Sale Proceedings – Hull on Estates Podcast #69

Posted on July 24th, 2007 by Hull & Hull LLP

David Smith: Hello and welcome to Hull on Estates. You’re listening to Episode #69 of our continuing podcast series.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.  Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills. Now, here are today’s hosts.

David Smith: Good afternoon Natalia.

Natalia Angelini: Good afternoon David, how are you?

David Smith: I’m doing well Natalia. Natalia, I understand that the topic that we’re going to talk on today is Partition and Sale Proceedings, particularly as they relate to estate matters. And in particular, there is a decision of a newly, a relatively newly appointed judge, His Honour Justice Newbold in the case of Suttick and Schwenger.

Natalia Angelini: That’s right.

David Smith: I wonder, perhaps in terms of going on with this matter and talking about it in some detail, can you give us a little summary of the fact situation?

Natalia Angelini: Sure.  Essentially what happened here is we have the unfortunately all too common situation where the family is fighting over the cottage. And in this case there was a husband and wife, husband pre-deceased the wife in 1985.  And the wife ended up dying in 2002.  And her three children were beneficiaries under the terms of her Will of the family cottage. And they were to be owners of the cottage as tenants in common. And what happened is the cottage had a west lot and an east lot.  It had been severed years prior and what the children had decided to do was to have a new cottage built on the east lot by the sister. So we have two brothers and a sister. The sister, let’s call us Debra.  Debra was to build this cottage on the east lot and she was to have exclusive use of that cottage with her husband. And there were a lot of facts in dispute in this case.  But what we do know is that a dispute arose between Debra and her brother Charles who was building the cottage for her.

David Smith: That’s right, Natalia.  I’ll just pop in at this point and just sort of make the observation that potentially, there’s potential here for really complicated litigation.  Because as I understood the fact situation Charles, who was an architect by training, had designed and built the cottage which had a lot of problems with it and was not something that Debbie particularly liked. Notwithstanding the fact that it was on the east half of the lot, whereas the west half of the lot was the family cottage in which Charles resided. And so you had this classic situation really where, because of the nature of the property, it was on a peninsula, and was bordered on each side be water.  It was really an ideal situation to divide the lot in two and give one half to one sibling and one half to the other sibling, wasn’t it?

Natalia Angelini: That’s right.  But unfortunately, when you’ve got strive between brothers and sisters, you know, in this case at least, it just didn’t work out that way and couldn’t work out that way.

David Smith: I think also probably it was complicated by the fact that the Will provided an equal three way split among the siblings, right?

Natalia Angelini: That’s right.  And Charles and the other brother argued at the hearing that the mother’s intention was that if they could not share the cottage, that one sibling or another could buy out the other. And he relied on a document signed by his mother that was made a couple of years after her Will. And the court found that it was not a testamentary document.  And her intention as stated in the Will was clear that it was to be owned equally by the three of them as tenants in common. 

David Smith: What did the Judge ultimately decide then, Natalia?

Natalia Angelini: The Judge ultimately decided that the property should be partitioned.  And the brothers had argued that that would not be possible because it had already been severed years before. But the Judge found that a severance with the approval under the Planning Act is still different from a partition and that the partition could take place. And so what he decided to do was to grant the west part of the land to Debra and the east part to the brothers to share together. And keep in mind, the brothers had always expressed an intention that they could own it jointly. 

It’s interesting what the Judge did here because he really took all the factors into consideration when making his decision. One of the things he considered was the brothers’ desire to have a right of first refusal and have the property simply sold.  And he rightly, in my view, took into account that Debra would have been the only person losing out from that scenario because one of the brothers was significantly more wealthy than her and would have been able to buy the property. And not only that, I think it was clear that no one wanted this property to go outside of the family members, so that was another consideration. In addition, the brothers had wanted a right-of-way over the east lot if Debra had received the east portion of the land.  And His Honour, I think quite astutely, recognized that any contact between these siblings by granting a right-of-way would just lead to further complications.

David Smith: That’s right.  I think underscoring the whole issue here was the conflict between Charles and Debra.  Certainly the third brother was a bit neutral in the whole proceeding. What the case I think is useful for, and especially in the estates context, and I’d like to sort of segway now into sort of a general observation about estates and the usefulness of partition and sale proceedings. Certainly in our practice, Natalia, you and I both see many fights between siblings surrounding the family cottage. It really is a flashpoint for dispute, isn’t it?

Natalia Angelini: That’s absolutely right David.

David Smith: And as you pointed out in the Judge’s decision, there’s often a really emotional attachment to the property.  It may have been held by the family for generations. And so given a choice between partition and sale, it’s not really surprising, is it, that this Judge chose partition rather than sale, is it?

Natalia Angelini: Right.  It was the right result.  And not only that, under the Act and in the authorities, it’s clear that a partition should be ordered unless an injustice would result.

David Smith: Right.  And I think the preference is going to always be for partition when you’re talking about a cottage. Probably the other complication, we touched on this early, is on the one hand you’ve got the fact that the property is held in a certain way on title.  And then the complication is always the manner in which the Will speaks to the division of the residue. And here you had a three way split which the difficulty proved to be, how do you reconcile a three way split under the Will with a division of a property?  I mean it didn’t make sense here to divide the property three ways, did it? Because only, if you divide it three ways, the only way that would work would be for the person receiving the middle of the three portions to be without waterfront access.  And clearly that was not going to be desirable.

Natalia Angelini: Right.  And I think in this case, they were fortunate that Debra was happy to have either lot.  And so the Judge had some flexibility there.

David Smith: I think, you know, the other point here to and just as a general observation again from the context of an estate litigation lawyer, is the threat here that the property would be sold.  To my mind, it was really surprising that this even went to a hearing, because it’s conceivable that the Judge could have ordered a sale.  And that is what surprised me most about this case.  And any case like this is that the parties don’t or are unable to settle a case like this at mediation because it’s potentially tragic.  I mean, there’s no certainty that the Judge would do what you and I both felt was the right thing. Then again, you have to think that a lot of Judges may well be cottage owners and can have some real life experience that will allow them to consider how to resolve this kind of dispute in the best interests of the parties.

Natalia Angelini: Right.  And I think His Honour definitely picked up on the nuances in this case and came to the right result. Although I’m sure the brothers would disagree since they didn’t really get everything they wanted.

David Smith: Well that’s right.  I mean, I think their pitch was look, let’s all just share the cottage properties.  But it was clear that the relationship between the sister and the brother was not going to be amicable, certainly from her point of view. And I guess in closing what we maybe should just touch on Natalia, is perhaps the answer is obvious.  But let’s just pose the question. How do we avoid or how does a testator avoid this kind of conflict arising after he or she has passed away?

Natalia Angelini: That’s is a really great question.  I think it would call for prudent estate planning which is beyond the ambit of this podcast.  But I will say that at a minimum, that having a family conference where the children are apprised of the terms of the Will and the wishes of the testator are expressed, might go some way to help.

David Smith: Right.  I’d like to point out also for the benefit of our listeners, on our website in the Blogs directory, my recollection is fairly recently in the last month or so, I think Justin and Megan of our office either podcasted or blogged on the issue of how to avoid cottage fights.  And so it’s something to look for on our website. 

And so, Natalia, it was fun podcasting with you.  I’ll look forward to doing it again at a future time.

Natalia Angelini: Ditto, have a good day.

This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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