Tag: resulting trusts
This week on Hull on Estates, Natalia Angelini and Arielle Di Iulio discuss the court’s application of the presumption of resulting trust in Kent v Kent, 2020 ONCA 390 (CanLII).
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Paul Zigomanis (“Paul”) died on April 20, 2015 as a result of an explosion that destroyed the home he lived in for 24 years (the “Brimley House”). At the time of Paul’s death, title to the Brimley House was in the name of Paul’s parents, John Zigomanis (“John”) and Mary Zigomanis (“Mary”).
A passerby who was driving by the Brimley House at the time of the explosion, and impacted by it, brought an action for negligence and under the Occupiers’ Liability Act as against Paul’s Estate and John’s Estate (Zambri v Cooperman, 2018 ONSC 7679). A motion was brought by the Estate Trustee During Litigation of Paul’s Estate, Jonathan Cooperman, (the “ETDL”) to determine whether the Brimley House was an asset of Paul’s Estate or John’s Estate, as this was an important issue that had to be determined before the litigation could proceed (Zigomanis Estate, 2017 ONSC 6855).
As there were more assets in John’s Estate, than in Paul’s Estate, the interested parties in the litigation would suffer an adverse consequence were it determined that the Brimley House properly belonged in Paul’s Estate.
The primary position of the ETDL was that a trust relationship was established between Paul’s parents and Paul, whereby a resulting trust arose between John and Mary and Paul and that title to the Brimley House “resulted back” to Paul upon John’s death on December 31, 2014.
On December 31, 1990, John and Mary took title as joint tenants to the property where the Brimley House was eventually built on, for $270,000.00, as joint owners. In May, 1991, Mary and John signed a deed transferring the Brimley House to Paul for “natural love and affection”. The Court found that Paul ultimately paid John and Mary $140,000.00 for the Brimley House. It was further held by the Court that the family understood that John and Mary were always going to help Paul to purchase a home.
After moving into the Brimley House, Paul developed a drug addiction. Thereafter, on August 1, 1996, Paul transferred the Brimley House to Mary and John for $2.00. Mary and John put all the insurance, taxes and utility bills into their names and had the bills sent to their own home, however, Paul would transfer $500.00 per month to them for the payment of these expenses. It was understood by the family that this was done in order to protect the Brimley House from the potential repercussion of Paul’s substance abuse problems.
Mary died on March 23, 2013, leaving her Estate to John, who at the time suffered from dementia. Shortly thereafter, Gail MacDonald (“Gail”) and Violet Cooper (“Violet”), Paul’s sisters, who were managing John’s affairs, realized that Paul stopped making regular payments to their parents towards the Brimley House and offered to have the Brimley House transferred to Paul, immediately. Importantly, this letter was written well before the explosion giving rise to the litigation, took place.
John died on December 31, 2014, leaving his Estate to Gail, Violet and Paul, equally. Gail was named as the Estate Trustee of John’s Estate. Before Paul’s death, Gail, through her counsel, and Paul, through his counsel, were engaged in settlement negotiations with respect to the Brimley House. The draft minutes of settlement exchanged included the following: “AND WHEREAS Mr. Zigomanis asserts that the Brimley Road property was transferred to the Deceased to be held in trust for the benefit of Mr. Zigomanis”. The Court held that this particular piece of evidence was indicative of the fact that it was always understood by the family that Paul was the beneficial owner of the Brimley House.
Paul died intestate and he did not have a spouse or any children. His beneficiaries were Gail and Violet, and the sole beneficiaries of his Estate.
Analysis and Decision
The Court was satisfied that, on a balance of probabilities, and in considering all of the evidence, John and Mary transferred both legal and beneficial title to the Brimley House to Paul in 1991, for valuable consideration. As such, no presumption of a resulting trust applied to this transaction.
The Court further held that the nominal consideration for which Paul transferred the Brimley House to John and Mary triggered the presumption of a resulting trust, such that the Court had to determine what Paul intended at the time of the 1996 transfer.
Based on the evidence considered, the Court found that the presumption of a resulting trust could not be rebutted, such that Paul was the true owner of the Brimley House, because John and Mary intended to transfer the legal title back to Paul, once they were reassured in his ability to control ownership. As a result, the Brimley House was ordered to be returned to the trustee of Paul’s Estate, effective January 1, 2015, being the following day after the death of John.
John’s Estate’s Liability in the Litigation Related to the Explosion
Following the Court’s finding regarding the ownership of the Brimley House, Gail, as trustee of John’s Estate brought a motion for an order that John’s Estate did not owe a duty of care to the Plaintiff and was not liable under the Occupiers’ Liability Act.
The Court held that a relationship between the Plaintiff, a passerby, and John’s Estate, a non-owner of property, is not one in which a duty of care had previously been recognized. The Court further held that although John had some involvement with the Brimley House, it would not be a sufficient basis to find a relationship of proximity with the Plaintiff that would give rise to a duty of care.
Based on the above findings, the Court held that John’s Estate did not owe a duty of care to the Plaintiff and there was no other legal or equitable basis to find that John’s Estate had an obligation to manage the Brimley House on behalf of or to supervise Paul’s behaviour, including any liability under the Occupiers’ Liability Act.
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In a decision released last week, the Ontario Court of Appeal in Andrade v Andrade set aside a judgment and issued a decision that established sole beneficial ownership in a house by way of resulting trust. This decision provides an interesting analysis of the source of funds used to purchase property and the effect this can have on a resulting trust claim. It also provides an interpretation of the public policy principle that prevents a party from taking one position for tax purposes and another in respect of a claim in litigation.
Luisa Andrade (“Luisa”), a widow and mother of seven children, immigrated to Canada in 1969. Luisa’s children each left school as teenagers and began working to support the family. The children continued to contribute their wages to the family until they left the family home.
The family home was purchased in 1974. Luisa signed the offer to purchase and borrowed a cash deposit of $1,000. The bulk of the purchase was financed with two mortgages. Legal title was initially placed under the names of two of Luisa’s children, Henry and Maria, because Luisa was not employed and could not obtain the mortgage on her own. Five years later, legal title was transferred to Henry and another one of Luisa’s children, Joseph. Joseph died in 2014 and his widow, Manuela, commenced a claim seeking a declaration that she was the beneficial owner of the house. Manuela was successful at trial.
The Court of Appeal held that the trial judge committed a palpable and overriding error in concluding that Luisa had no money of her own as it caused him to ignore the evidence of Luisa’s intention to remain the beneficial owner. This caused him to ultimately reject the resulting trust claim. The Court of Appeal noted that the trial judge confused the question of whether Luisa had money with the source of her money. This resulted in a mistaken characterization of the money that was given to Luisa by her children and used by Luisa to pay for the house as the children’s money. However, in accordance with the legal principles of a gift, once the money the children earned was given to Luisa, it became Luisa’s money, “even if it was expected to be used, and was in fact used, for the support of the family, including to pay the mortgages”. The Court of Appeal observed that there was no evidence that Luisa’s bank account was a trust account nor that the money was earmarked for a specific purpose. Furthermore, it was the testimony of all the children that the money they gave to Luisa was her’s to use as she saw fit.
Once the Court of Appeal found that Luisa did have money of her own, it went on to find that her intention was not to benefit the legal title holders to the exclusion of her other children.
On another note, the trial judge found that this was not an appropriate case to impose a trust due to public policy concerns. At various times, Luisa rented out the upstairs apartments of the house. Although Joseph and Henry never received any rent from the house, they declared the rental income and claimed expenses. Luisa, on the other hand, never paid rent yet she claimed a rental tax credit. Specifically, the trial judge was concerned that it would be against public policy to recognize Luisa’s estate (as Luisa had since died) as the beneficial owner of the house when she had received tax credits claiming that she was not the beneficial owner.
The Court of Appeal found that while the “clean hands” doctrine and considerations of illegal purposes may bar a claim, actions unrelated to a claim will not necessarily bar a remedy. In the case at hand, the evidence was not that Luisa placed the house in her children’s names for strategic tax purposes. Rather, Luisa had done so because she was unable to obtain the mortgage on her own. As the equitable relief sought by Luisa’s estate was in relation to Luisa’s interest in the family home, the Court of Appeal found that her tax filings were not fundamental to that cause of action.
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Listen to Will Challenge Litigation – Part 11
This week on Hull on Estate and Succession Planning, Ian and Suzana talk about the differences between quantum meruit and propriety estoppel. As with any add-on claims, the courts require solid corroboration. They also discuss claims of resulting trust and claims of constructive trust.
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In a recent Ontario decision, Tiedemann v Tiedemann, the court considered whether the deceased had intended to gift to his sister the balance of funds in a joint account held by the both of them.
The sister argued that her brother intended to gift to her the balance of the funds as he did not have a good relationship with his son. The son of the deceased, the sole beneficiary of his estate, contented the funds belonged to the deceased’s estate on the basis of a resulting trust. The court found as the deceased was the only contributor to the account, the sister had to rebut the presumption of a resulting trust and as she was neither his spouse nor his child, she derived no benefit from the presumption of advancement.
Referencing the Supreme Court of Canada decisions of Pecore v. Pecore and Madsen Estate v. Saylor, the court looked at the evidence to determine the deceased’s actual intention. The court found the testimony by the deceased’s lawyer and a bank employee indicated that the deceased was interested in providing his sister with the authority to manage his finances and had not intended to gift her funds.
Weighing the evidence, the court found on a balance of probabilities that the resulting trust had not been rebutted and the intention of the deceased was to have his sister assist with bill payments if he became incapable.
To learn more about joint accounts, listen to Episode HOESP #60 where Ian Hull and Suzana Popovic-Montag discuss Percore v Pecore or read the transcribed version.
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A person with more than one set of distinct interests or roles in the same estate may have a conflict of interest. This can create all sorts of problems and issues in an estate administration and is a driving concept in much estate litigation.
Say Joe Smith is the executor of an estate but also received gifts from his mother the testator during her lifetime. One of these gifts, say, came in the form of a transfer of a bank account into joint ownership between the two of them.
Wearing his executor’s hat (to use some traditional vernacular), Joe may have a duty to determine whether the bank account transfer was not a gift at all and actually subject to a resulting trust in which case the estate might have a claim to the asset. Joe may need to do so because, as executor, his duty is to identify estate assets and bring them into the estate.
However, wearing his hat as a recipient of the bank account, Joe is unlikely to want to give the bank account back to the estate.
In short, Joe may have a conflict of interest.
In such circumstances, Joe may need two lawyers, one to advise him as estate trustee, the other to protect him personally. Sometimes an executor’s conflict is such that he cannot continue to act as estate trustee.
While this example may be simple enough, there is a tremendous range of conflicts that can creep into estate matters.
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Listen to Karkus v. Cotroneo 2007
This week on Hull on Estates, Paul Trudelle and Diane Vieira discuss the case of Karkus v. Cotroneo 2007. The case addresses many of the issues that estate lawyers face on a daily basis, such as: proving or disproving gifts, slander of title and the importance of corroborative evidence.
The census-takers tell us that our population is rapidly ageing (the need for sound estate planning seems obvious). The challenges that Canadian society faces are likely profound and there is much gnashing of teeth and wringing of hands about the future. There is a certain irony to the fact that as the information age accelerates, driven by our pervasive youth culture, our population ages.
In the above context, it is worth considering what I believe to be the motivating factor or thinking behind the Supreme Court of Canada’s (“S.C.C.”) decisions in Pecore v. Pecore and Madsen Estate v. Saylor. The two recently released companion cases were eagerly anticipated by the estate bar and addressed the transfer of property by an ageing parent into joint ownership with one of their children.
The S.C.C. made it clear that the “presumption of resulting trust” is the general rule that applies to gratuitous transfers of property into joint ownership. The onus is therefore placed on the person who received the gift to demonstrate that a gift was, in fact, intended. The court also held that the “presumption of advancement” applied to transfers of property by parents into joint ownership with their minor children. The burden of rebutting such a presumption falls to the party challenging the transfer rather than the gift-receiver.
The transfer of property by an ageing parent, particularly funds into joint bank accounts, is becoming widespread. In the context of an ageing population, Rothstein J., writing for the majority of the court, specifically addressed why the presumption of resulting trust arose rather than a presumption of a gift.
As Rothstein J. noted in his decision: “… it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs. There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of their parent’s affairs”. In taking note of this stepped-up practice, the S.C.C. recognized the changing dynamics of Canada’s population and framed its decision accordingly.
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