COURT OF APPEAL FOR ONTARIO

CITATION: Di Michele v. Di Michele, 2014 ONCA 261

DATE: 20140403

DOCKET: C56711 and C56712

MacPherson, Cronk and Gillese JJ.A.

In the Matter of the Partition Act, R.S.O. 1990, c. P.4, ss. 2 and 3

And in the Matter of the Mortgages Act, R.S.O. 1990, c. M.40, s. 24

And in the Matter of the Trustee Act, R.S.O. 1990, c. T.23, ss. 5(1), 16(1) and 16(2)

And in the Matter of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 14.05(c), (d) and (e)

BETWEEN

Roberto Di Michele

Applicant (Appellant/

Respondent by way of cross-appeal)

and

Antonio Di Michele, Estate Trustee of the Estate of Adalgisa Di Michele, deceased, Antonio Di Michele, Michele Di Michele, 909403 Ontario Limited, Marsica Investments Limited, Cesidio Ranieri, Gilberto Olivieri, Alberto Ramelli, Capital One Bank and Avrum Slodovnick, and The Director of Titles, party pursuant to s. 57(14) of the Land Titles Act

Respondents (Respondents/

Appellants by way of cross-appeal)

AND BETWEEN

909403 Ontario Limited, Marsica Investments Ltd., Cesidio Ranieri and Alberto Ramelli

Applicants (Respondents/

Appellants by way of cross-appeal)

and

Antonio Di Michele also known as Tony Di Michele, Michele Di Michele also known as Michael Di Michele, and Roberto Di Michele also known as Robert Di Michele

Respondents (Appellant/

Respondent by way of cross-appeal)

D. Loucks, for the appellant/respondent by way of cross-appeal

Mark Ross, for the respondents/appellants by way of cross-appeal

Heard: February 24, 2014

On appeal from the judgment of Justice Beth A. Allen of the Superior Court of Justice, dated February 6, 2013, with reasons reported at 2013 ONSC 870, 86 E.T.R. (3d) 178.

Gillese J.A.:

[1] This appeal raises significant questions about the scope of an estate trustee’s power to mortgage property governed by the Land Titles Act, R.S.O. 1990, c. L.5.

OVERVIEW

[2] Adalgisa Di Michele died on September 5, 1996, leaving behind her three sons: Roberto, Michele and Antonio. Under Mrs. Di Michele’s will (the “Will”), Antonio was named the estate trustee. Because the three brothers have the same last names, I will refer to each of them by their first names.

[3] The Will provided that after all debts had been paid, Mrs. Di Michele’s estate was to go, in equal shares, to those of her “issue alive at the date of distribution”.

[4] On March 21, 2002, in his capacity as estate trustee, Antonio registered a Transmission by Personal Representative to take title to the family home that his mother had owned and lived in until her death. The home was located at 269 Angelene Street, Mississauga, Ontario (the “Property”) and is within the land titles system. By that point, all the estate debts had been paid and it was ready for distribution.

[5] Roberto and Michele never registered on title any interest in, or claim to, the Property.

[6] Starting in 2002, Antonio was embroiled in personal litigation with 909403 Ontario Limited, Marsica Investments Ltd., Cesidio Ranieri and Alberto Ramelli (collectively “Marsica” or the “respondents”).

[7] In June 2008, Antonio put up the Property as security in favour of Marsica by means of a mortgage (the “Mortgage”).

[8] In 2010, Marsica obtained judgment for $1.5 million against Antonio.

[9] In 2011, Marsica brought an application in which it sought to have the Property sold.

[10] Roberto (the “appellant”) lived with his parents on the Property for many years prior to their deaths. He and his wife have continued to live on the Property until the present time. He says that he and his brothers agreed that after their mother’s death, the Property would be his.

[11] Roberto brought a counter-application, disputing Marsica’s right to sell the Property and asserting sole entitlement to it.

[12] By judgment dated February 6, 2013 (the “Judgment”), among other things, the trial judge:

1. declared that the Property vested in Antonio, Roberto and Michele on March 21, 2002, in equal one-third shares;

2. declared the Mortgage to be valid;

3. ordered the partition and/or sale of the Property “in accordance with the interests of the parties entitled to share in it”; and

4. dismissed Roberto’s counter-application.

[13] Roberto appeals. He asks this court to set aside the Mortgage and that part of the Judgment giving relief under the Partition Act, R.S.O. 1990, c. P.4, and order that he replace Antonio as the estate trustee.

[14] Marsica cross-appeals, arguing that the trial judge erred in finding that the Mortgage binds only Antonio’s one-third interest in the Property.

[15] For the reasons that follow, I would allow the appeal in part and allow the cross-appeal.

BACKGROUND

The Will

[16] The key provisions in Mrs. Di Michele’s Will are set out below. As will become evident, the breadth of the power to postpone sale given to the estate trustee is significant to the resolution of this appeal.

I GIVE, DEVISE AND BEQUEATH all of my estate, both real and personal, … unto my Trustee upon the following trusts, namely:

a) To pay all my just debts, funeral expenses and testamentary expenses …;

b) To pay out of the residue of my estate all [duties and taxes];

c) To deliver all the rest and residue of my estate then remaining to my issue alive at the date of distribution in equal shares per stirpes.

IN ORDER TO CARRY OUT the provisions of this my Will, I give my Trustee power to sell, call in and convert into money, all of my estate at such time or times, in such manner and upon such terms as my Trustee in his discretion may decide upon, with power and discretion to postpone such conversion of such estate or any part or parts thereof, for such length of time as he may think best, and I hereby declare that my Trustee may retain any portion of my estate in the form in which it may be at my death … for such length of time as my Trustee in his discretion may deem advisable, without responsibility for loss, to the intent that investments or assets so retained shall be deemed to be authorized investments for all purposes of this my Will. [Emphasis added.]

Antonio Acts as Estate Trustee

[17] On December 16, 1997, Antonio obtained a Certificate of Appointment of Estate Trustee with a Will. The estate’s only asset was the Property.

[18] On March 21, 2002, the Property was transferred to Antonio by Transmission by Personal Representative.

[19] The Property had been the Di Michele family home for several decades. The parents of the Di Michele brothers lived on the Property until their deaths. The father died in 1987 and the mother in 1996. The mother gained title to the Property on her husband’s death.

[20] At the time of the Property transfer to Antonio, he signed a certificate confirming that all the estate debts had been paid.

The 2002 action against Antonio

[21] In 2002, Marsica commenced an action against Antonio in connection with a failed real estate investment scheme (the “2002 action”).

[22] A trial date was scheduled for March 31, 2008. In the weeks leading up to trial, it appeared that the matter would settle on the basis of a payment over time secured by a mortgage from Antonio over his cottage property in Bala, Ontario.

[23] Antonio's lawyer, Avrum Slodovnick (“Slodovnick”) told Marsica’s lawyer Simon Schonblum (“Schonblum”) that the settlement was 99% completed and that Antonio was just waiting for the blessing of his financial advisor.

[24] The estimated length of the trial was 10 days. On the basis that the parties were so close to a settlement, counsel agreed to vacate the trial date.

[25] Shortly after the trial date was vacated, Schonblum searched title for the Bala cottage property and found that Antonio had registered a $350,000.00 mortgage against it on April 4, 2008, thereby exhausting the remaining equity in the property.

Antonio seeks adjournment of 2002 action and grants the Mortgage

[26] On June 4, 2008, a pre-trial conference was held in relation to the 2002 action. At that point, the trial was scheduled to proceed on June 16, 2008. Antonio sought an adjournment of the trial because he did not have his financial evidence in order.

[27] Faced with yet another possible delay in the trial and in light of Antonio having encumbered the Bala cottage property after having offered it to Marsica as security, Marsica was concerned about securing funds for a possible judgment in the 2002 action.

[28] A suggestion was made that Antonio might provide mortgage security in exchange for an adjournment so that Antonio could provide further documents and obtain a forensic accounting.

[29] The parties were caucusing separately. At one point, Slodovnick pulled Schonblum out of his room and said that Antonio had given him instructions to mortgage the Property as security for any judgment that might follow trial. In exchange, Marsica was to consent to an adjournment to allow Antonio to obtain a forensic accounting.

[30] Slodovnick then showed Schonblum a parcel register for the Property. On the face of the parcel register, under “Owners’ Names”, it said Antonio Di Michele. Under “Capacity” were the initials “TWW”, which stand for “Trustee With a Will”.

[31] The parties ultimately reached an agreement, under the terms of which: Marsica agreed to adjourn the trial; Antonio granted security for any judgment that might arise in relation to the 2002 action by means of a blanket mortgage of $350,000.00 on the Bala cottage property and the Property; and the parties agreed to jointly retain a forensic accountant and split the cost of a review of further productions from Antonio of the books and records relating to the real estate investment (the “Agreement”). The parties were to return for a further pre-trial conference in November 2008.

[32] On June 6, 2008, in his capacity as Antonio’s lawyer, Slodovnick registered the mortgage against the Property.

Antonio's defence struck and judgment obtained in 2002 action

[33] On April 1, 2010, Antonio’s defence was struck by order of Master Dash. On June 22, 2010, Antonio’s appeal of Master Dash's order was dismissed.

[34] On October 11, 2010, the trial proceeded as an undefended trial before Stinson J.

[35] By judgment dated October 14, 2010, Stinson J. awarded Marsica damages against Antonio in the sum of approximately $1.5 million.

Attempted enforcement of judgment in 2002 action

[36] Acting on the judgment obtained in the 2002 action, the respondents obtained a writ of seizure and sale. They filed the writ against the Property with the Sheriff in the Peel region.

[37] The Sheriff posted a notice at the Property that there would be a sheriff’s sale. Roberto and his wife were living in the house. Roberto had lived at the Property while his parents were alive and continued living there after their deaths. By the time of trial, he had lived on the Property for some 50 years. He claimed that after his mother’s death, he and his brothers had agreed that the Property would be his.

[38] Roberto’s lawyer wrote to counsel and the Sheriff to advise that he would be bringing an application to assert his interest in the Property.

The Application and Counter-Application

[39] The respondents brought an application in which they sought, among other things, the sale of the Property. Roberto brought a counter-application in which he asserted sole ownership of the Property. He sought, among other things, an order directing Antonio to transfer the Property to him and appointing him in Antonio’s stead as the estate trustee.

[40] The two matters were converted into trials and heard together.

[41] At trial, Michele took no position and filed no documents. Antonio appeared on his own behalf. He denied knowledge of the Will, his appointment as the estate trustee, and that the Property had been transmitted to him.

THE TRIAL DECISION

[42] The trial judge rejected Antonio’s evidence, stating that he was a “most unreliable and deceptive witness”. She rejected his claim that someone else applied for the Certificate of Estate Trustee with a Will in his name and then registered the transmission of the Property to him as estate trustee without his knowledge. She found that Antonio was aware of the Will, of his appointment as estate trustee, and that the Property had been registered in his name as estate trustee.

[43] The trial judge set out the parties’ positions on the many issues that had been raised.

[44] She then analysed and rejected Roberto’s arguments that the Mortgage was fraudulent and invalid because Antonio had given it and he had no interest in the Property. She concluded that while Antonio was not forthright about the nature of his interest in the Property – that he held title only as estate trustee and that he shared beneficial interest in the Property with his two brothers – this alone did not place him within the bounds of fraud as defined in s. 1 of the Land Titles Act. Antonio was the registered owner of the property, he was not posing as a fictitious person, and there was no forgery.

[45] The trial judge also rejected Roberto’s argument that Antonio had no property interest in the Property when he gave the Mortgage, though she did not conclude that Antonio owned the whole Property. In her view, the Property automatically vested in the estate’s beneficiaries (the three brothers), three years after Mrs. Di Michele’s death, pursuant to s. 9 of the Estates Administration Act, R.S.O. 1990, c. E. 22. As a result, rather than owning the whole Property as estate trustee, Antonio owned only the third of the property to which he was beneficially entitled under the Will. The trial judge took note of s. 10 of the Estates Administration Act, which provides that nothing in s. 9 derogates from a power granted to an estate trustee in a will. She concluded that although the Will gave the estate trustee the power to sell the Property and to postpone such sale for such length of time as he deems advisable, this did not evidence a clear intent to oust s. 9 and delay the vesting of the estate.

[46] The trial judge concluded that the Mortgage was valid. However, because she found that the brothers’ beneficial interests in the Property had vested by the time that Antonio granted the Mortgage in 2008, she concluded that Antonio could only have granted a mortgage against his interest in the Property.

[47] The trial judge further found that because the 2002 action was against Antonio personally, and not in his capacity as the estate trustee, he could only give as security that which he owned in his personal capacity.

[48] Accordingly, the trial judge found the Mortgage to be enforceable only against Antonio’s one-third interest in the Property.

[49] She then ordered partition or sale of the Property in accordance with the interests of the parties entitled to share in it.

THE ISSUES

[50] The appellant raises a number of issues that can be summarized as follows. Did the motion judge err in:

1. finding that the Mortgage was valid;

2. finding that the respondents were entitled to a remedy under the Partition Act; and

3. failing to appoint Roberto as the estate trustee?

[51] The respondents raise one issue by way of cross-appeal. Did the motion judge err in:

4. failing to find that the Mortgage bound the entire Property?

ANALYSIS

1. Was the Mortgage valid?

[52] The appellant makes three arguments going to the validity of the Mortgage. First, he submits that Antonio had no interest in the Property, either personally or in his capacity as estate trustee, over which he could grant a mortgage. Second, he argues that the respondents were not bona fide purchasers for value without notice. Third, he says that the lawyers involved at the time that the Mortgage was granted were unaware that Antonio was not the legal owner of the Property. Consequently, he contends, the Mortgage was a product of Antonio’s fraudulent representation that he was the owner of the Property and, therefore, is a nullity.

[53] I would not accept any of these submissions.

(a) Did Antonio have an interest in the Property?

[54] The appellant’s first submission – that Antonio had no interest in the Property – cannot stand in light of the relevant statutory provisions.

[55] Section 2(1) of the Estates Administration Act provides that upon a person’s death, all of that person’s property vests in the estate trustee:

All real and personal property that is vested in a person without a right in any other person to take by survivorship, on the person's death, whether testate or intestate and despite any testamentary disposition, devolves to and becomes vested in his or her personal representative from time to time as trustee for the persons by law beneficially entitled thereto, and, subject to the payment of the person's debts and so far as such property is not disposed of by deed, will, contract or other effectual disposition, it shall be administered, dealt with and distributed as if it were personal property not so disposed of. [Emphasis added.]

[56] Pursuant to s. 120 of the Land Titles Act, on Mrs. Di Michele’s death, the land registrar was entitled, upon receiving an application from the estate trustee, to register the estate trustee as owner in place of the deceased:

On the death of the sole registered owner or of the survivor of several joint registered owners of freehold land, such person shall be registered as owner in the place of the deceased owner or owners as may, on the application of any person interested in the land, be appointed by the land registrar, regard being had to the rights of the several persons interested in the land and in particular to the selection of any such person as for the time being appears to the land registrar to be entitled according to law to be so appointed, subject to an appeal to the Divisional Court in the prescribed manner by any person aggrieved by an order of the land registrar under this section. [Emphasis added.]

[57] Section 63 of the Land Titles Act provides that in respect of registered dealings with land, the person registered in the place of a deceased owner is in the same position as if that person had taken the land under a transfer for valuable consideration:

Any person registered in the place of a deceased owner or to whom a patent is issued as executor[,] administrator or estate trustee or in any representative capacity shall hold the land or charge, in respect of which the person is registered, upon the trusts and for the purposes to which the same is applicable by law and subject to any unregistered estates, rights, interests or equities subject to which the deceased owner held the same, but otherwise in all respects, and in particular as respects any registered dealings with such land or charge, the person shall be in the same position as if the person had taken the land or charge under a transfer for valuable consideration. [Emphasis added.][^1]

[58] As a result of these provisions, it is clear that Antonio had the legal right to grant the Mortgage. The Property vested in him, as the estate trustee, on his mother’s death: Estates Administration Act, s. 2(1). He was entitled to be registered as owner of the Property in his mother’s stead: Land Titles Act, s. 120. He had the Property transferred into his name. He was thereafter the person registered in the place of his mother, the deceased owner: Land Titles Act, s. 63. The Mortgage was a registered dealing with the Property. Antonio was in the same position as if he had become the registered owner of the Property under a transfer for valuable consideration: Land Titles Act, s. 63. A registered owner has the right to grant a mortgage over his or her land: Land Titles Act, s. 93(1).[^2]

[59] Accordingly, it cannot be said that Antonio had no interest in the Property that entitled him to grant the Mortgage.

(b) Were the respondents bona fide purchasers for value without notice?

[60] With respect to this submission, I begin by noting that the questions of value and consideration were not raised before the trial judge. Issues ought not to be raised for the first time on appeal. In any event, however, the contention that the respondents were not bona fide purchasers for value without notice must fail.

[61] The first question is whether the respondents were bona fides when they took the Mortgage. In my view, the fact that Antonio’s lawyer offered the mortgage as security eliminates any question of a lack of bona fides. Because Antonio’s lawyer offered the Property as security, the respondents were entitled to operate on the assumption that Antonio was acting lawfully in granting the Mortgage. They were not obliged to go behind that implicit representation.

[62] The next question is whether the respondents gave value for the Mortgage. This, too, is easily disposed of.

[63] The Mortgage was granted as part of the Agreement. In exchange for the Mortgage, the respondents agreed to adjourn the trial and share the cost of the forensic accountant that Antonio required. Even if the adjournment alone does not constitute value within the meaning of the term “bona fide purchaser for value without notice”, the cost of the forensic accountant borne by the respondents clearly does.

[64] I turn next to the question of notice.

[65] The appellant points to the fact that the Property register shows Antonio as holding the Property in the capacity of “TWW”, meaning “Trustee With a Will”. He says that this shows that the respondents had actual notice of the Will. Accordingly, he says, the respondents could not have simply accepted the Mortgage as security – they had to first inquire into whether Antonio could lawfully mortgage the Property.

[66] I would reject this argument. In my view, s. 62(2) of the Land Titles Act provides a complete answer to it.

[67] It is correct that when the parties entered into the Agreement, they were aware that Antonio held the Property as estate trustee. As the appellant points out, the lawyers for both parties had the parcel register in hand at that time and the parcel register showed Antonio as owner but in the capacity of “TWW” (Trustee With a Will).

[68] However, s. 62(2) of the Land Titles Act provides that: (1) describing the owner of land as a trustee shall be deemed not to constitute notice of a trust, and (2) the description (of the owner as trustee) does not impose a duty on the person dealing with the owner to make inquiry as to the power of the owner in respect of the property. Section 62(2) reads as follows:

Describing the owner of freehold or leasehold land or of a charge as a trustee, whether the beneficiary or object of the trust is or is not mentioned, shall be deemed not to be a notice of a trust within the meaning of this section, nor shall such description impose upon any person dealing with the owner the duty of making any inquiry as to the power of the owner in respect of the land or charge or the money secured by the charge, or otherwise, but, subject to the registration of any caution or inhibition, the owner may deal with the land or charge as if such description had not been inserted. [Emphasis added.]

[69] Thus, Antonio’s description as “TWW” (Trustee With a Will) is deemed not to be notice of a trust and it imposed no duty on the respondents to make any inquiry as to his power as owner to charge the Property.

[70] Further, s. 62(2) provides that the owner may deal with the land as if the description as a trustee had not been inserted. This is subject to the registration of any caution or inhibition. However, in the present case, no caution or inhibition had been registered on the title to the Property.

[71] Accordingly, I would reject the appellant’s contention that the respondents were not bona fide purchasers for value without notice.

(c) Were the Lawyers operating under a misapprehension that Antonio was the owner?

[72] In light of the evidence about the parcel register, the appellant’s contention that the parties were all labouring under a misapprehension that Antonio was the owner of the Property must fail and with it, his argument that the Mortgage was obtained by fraud on Antonio’s part. In this regard, the appellant has confused the notion of a fraudulent transaction with a valid transaction that might amount to a breach of trust. The former may invalidate the transaction. The latter does not. Rather, it gives rise to an action by the beneficiaries against the trustee.

[73] While Roberto and Michele may have recourse against Antonio for what appears to be a breach of his obligations as the estate trustee, that does not mean that the Mortgage was granted fraudulently nor does it render the Mortgage invalid.

(d) Conclusion

[74] For these reasons, I would dismiss this ground of appeal.

2. Were the respondents entitled to a remedy under the Partition Act?

[75] The appellant contends that even if the Mortgage were valid, an order under the Partition Act could not be made because Marsica does not have a crystallized right of possession.

[76] Marsica concedes this point. However, it contends that the end result of enforcement of the Mortgage will be such an order and the relief ordered pursuant to the Partition Act was an attempt by the trial judge to save the parties the cost and trouble of going through the intermediate steps relating to foreclosure.

[77] Marsica is likely correct about the trial judge’s motivation in ordering partition and sale. However, the law is clear: only persons entitled to the immediate possession of an estate in property may bring an action or make an application for its partition or sale.

[78] Section 3(1) of the Partition Act reads as follows:

Any person interested in land in Ontario, or the guardian of a minor entitled to the immediate possession of an estate therein, may bring an action or make an application for the partition of such land or for the sale thereof under the directions of the court if such sale is considered by the court to be more advantageous to the parties interested. [Emphasis added.]

[79] This court has interpreted s. 3(1) and its predecessors as permitting only those entitled to immediate possession of the property to apply for partition: see Morrison v. Morrison (1917), 1917 ONCA 536, 39 O.L.R. 163 (S.C. (A.D.)), at pp. 168 and 171-72; and Ferrier v. Civiero (2001), 2001 ONCA 5158, 147 O.A.C. 196 (C.A.), at paras. 6 and 8.

[80] Because the respondents were not entitled to immediate possession of an estate in the Property, they were not entitled to a remedy under the Partition Act.

[81] Accordingly, I would allow this ground of appeal.

3. Should Roberto be appointed Estate Trustee in Antonio’s stead?

[82] In his counter-application, Roberto asked to be appointed as the estate trustee in Antonio’s stead. The trial judge did not address this aspect of his counter-application. Roberto renews his request in this court, saying that Antonio and Michele “do not claim any interest in the estate” and “have shown that they have no interest in receiving a share of the estate”. Roberto also states that Antonio “gifted” his share of the estate to him.

[83] Section 37(1) of the Trustee Act, R.S.O. 1990, c. T.23, empowers the court to remove a personal representative (which is another term for an estate trustee)[^3] and appoint “some other proper person”. Section 37(1) reads as follows:

The Superior Court of Justice may remove a personal representative upon any ground upon which the court may remove any other trustee, and may appoint some other proper person or persons to act in the place of the executor or administrator so removed.

[84] The court will remove an estate trustee only if doing so is clearly necessary to ensure the proper management of the trust: Re Weil, 1961 ONCA 157, [1961] O.R. 888 (C.A.), at p. 889. Situations in which removal may be justified include where the estate trustee has acted in a way that has endangered the trust property or otherwise shown a lack of honesty, proper capacity, or reasonable fidelity: Letterstedt v. Broers (1884), 9 A.C. 371 (P.C.), at pp. 385-86; Bathgate v. National Hockey League Pension Society (1994), 1994 ONCA 1427, 16 O.R. (3d) 761 (C.A.), at p. 778.

[85] Thus, on the record, it appears that there may be good reason to remove Antonio as the estate trustee.

[86] However, in my view, Roberto is not a “proper” person to serve as his replacement. I say this because Roberto’s personal interests would seriously conflict with the obligations he would undertake as the estate trustee.

[87] As a general rule, a person will not be appointed as a trustee if that person’s duties as trustee would conflict with either his or her personal interests or duties which that person has undertaken apart from as trustee: see Re Parsons, [1940] Ch. 973, at p. 983; Re Moorhouse, 1946 ONSC 338, [1946] 4 D.L.R. 542 (Ont. H.C.), at p. 544; and Re Becker (1986), 1986 ONSC 2596, 57 O.R. (2d) 495 (Surr. Ct.), at pp. 498-99.

[88] Two examples illustrate why Roberto’s appointment as replacement estate trustee would run afoul of the general rule precluding those in a conflict position from being named estate trustee.

[89] The first example flows from the estate trustee’s overriding obligation to duly administer the estate. As the legal owner of the Property, the estate trustee will have to comply with the court orders flowing from these proceedings, including those relating to the Mortgage. However, the record makes it plain that Roberto claims the Property as his own and that he plans on appropriating the Property for himself. Rather than respecting and implementing the court orders in respect of the Property, it seems likely that he will resist all actions associated with enforcement of the Mortgage. In any event, his personal interests would be in conflict with his duties as the estate trustee in this regard.

[90] The second example flows from the successor estate trustee’s obligation to take steps to recover, for the estate, any losses caused by the prior estate trustee’s defaults: see Bennett v. Burgis (1846), 5 Hare 295 (Ch.), at p. 297. This would require Roberto, if he were appointed the successor estate trustee, to consider taking action against Antonio for any losses that Antonio may have caused the estate in his capacity as the initial estate trustee. But, it will be recalled, Roberto claims that Antonio made a gift to him of his interest in the estate. So, if Roberto qua estate trustee found that he ought to pursue Antonio, would he have to consider attacking the gift? It is self-evident that in such a situation, Roberto’s obligation if he were the estate trustee would conflict with his personal interests.

[91] I would add that the foregoing examples stand apart from the respondents’ contention that the alleged gift from Antonio to Roberto of his interest in the estate was for the purpose of defeating, hindering or avoiding a creditor. By virtue of accepting the “gift” of Antonio’s interest, Roberto would be complicit in such an act. Thus, this allegation also raises serious questions about whether Roberto is a proper person to serve as estate trustee.

[92] Accordingly, I would dismiss this ground of appeal.

THE CROSS-APPEAL

4. Did the Mortgage bind the entire Property?

[93] The trial judge concluded that although the Mortgage was valid, it was binding only on the one-third share that she found Antonio was entitled to receive as a beneficiary under the Will. In reaching this conclusion, the trial judge relied on s. 9 of the Estates Administration Act.

[94] Section 9 of the Estates Administration Act reads as follows:

Real property not disposed of, conveyed to, divided or distributed among the persons beneficially entitled thereto under section 17 by the personal representative within three years after the death of the deceased is … thenceforth vested in the persons beneficially entitled thereto under the will … unless such personal representative, if any, has signed and registered, in the proper land registry office, a caution in Form 1 ... [Emphasis added.]

[95] The trial judge saw that the Will gave Antonio, as estate trustee, an unqualified power to postpone sale of the Property. Nonetheless, in her view, “there is no clear intention in the Will that … Anthony have discretion beyond three years” to distribute the estate.

[96] As a result, pursuant to s. 9 of the Estates Administration Act, the trial judge found that the Property vested in the beneficiaries three years after Mrs. Di Michele’s death, in the same manner as if the estate trustee had conveyed it to them. On this view, the vesting occurred before the Mortgage was granted. Therefore, the Mortgage could attach only to Antonio’s one-third beneficial interest in the Property.

[97] With respect, I do not agree. In my view, the Mortgage is binding on the whole of the Property. I reach this conclusion for three reasons.

[98] First, s. 9 of the Estates Administration Act does not apply in the circumstances of this case. Section 9 (and its predecessors) was not enacted to limit the powers given to an estate trustee under a will. Rather, it was intended to give estate trustees additional powers, but only to the extent that the additional powers do not conflict with the provisions of the will. The intention of the deceased, as expressed in his or her will, is always paramount: Re Leblanc (1978), 1978 ONCA 1589, 18 O.R. (2d) 507 (C.A.), at pp. 513-15.

[99] This can be seen from s. 10 of the Estates Administration Act, which provides that nothing in s. 9 derogates from any right possessed by a trustee under the will. Section 10 reads as follows:

Nothing in section 9 derogates from any right possessed by an executor or administrator with the will annexed under a will or under the Trustee Act or from any right possessed by a trustee under a will.

[100] The paramountcy of the testator’s intention is confirmed in the jurisprudence. Where a will gives the estate trustee a power to sell property at such times and in such manner as the estate trustee sees fit, s. 9 of the Estates Administration Act will not limit the scope of that power by requiring that the property vest after a specific period of time: Re Proudfoot Estate (1994), 3 E.T.R. (2d) 283 (Ont. Gen. Div.), at paras. 8 and 11-12, var’d on other grounds (1997), 19 E.T.R. (2d) 150 (Ont. C.A.). See also Re Leblanc, at p. 515.

[101] It will be recalled that the Will gave Antonio, as estate trustee, the power to sell the Property “at such time or times, in such manner and upon such terms as my Trustee in his discretion may decide upon”. It went on to expressly provide that the estate trustee could postpone sale:

for such length of time as he may think best, and I hereby declare that my Trustee may retain any portion of my estate in the form in which it may be at my death … for such length of time as my Trustee in his discretion may deem advisable...

[102] On a plain reading of these provisions in the Will, the estate trustee was given the power to postpone sale of the Property for whatever length of time he deemed advisable. Thus, in my view, the trial judge erred in finding that the Will contained no clear intention that Antonio had the discretion to delay selling the Property beyond the three year limit in s. 9 of the Estates Administration Act. Consequently, s. 9 did not apply and the Property did not vest in the beneficiaries.

[103] Second, the beneficiaries’ entitlement under the Will did not amount to a property interest in the Property. The Will does not give the beneficiaries a specific bequest of the Property. Rather, it gives them a contingent interest in the residue of the estate. In this regard it will be recalled that the Will provided that the residue of the estate was to go to Mrs. Di Michele’s “issue alive at the date of distribution”. Accordingly, to become entitled, a beneficiary had to be alive on the date of distribution. Until distribution, the beneficiaries had only a contingent beneficial interest in the residue of the estate, as well as the personal right to compel the estate trustee to duly administer the estate.

[104] A contingent beneficial interest in an estate does not give rise to a property interest in any specific asset of the estate, prior to or absent an appropriation of such asset to the beneficiary by the trustee: Spencer v. Riesberry, 2012 ONCA 418, 114 O.R. (3d) 575, at para. 37.

[105] The estate had not been distributed at the time that the Mortgage was granted. Therefore, the beneficiaries’ contingent interests in the residue had not vested. Hence, Antonio did not have a one-third interest in the Property at the time of the Mortgage.

[106] Third, pursuant to s. 93(3) of the Land Titles Act, the Mortgage was registered free from any unregistered interest of the beneficiaries. Section 93(3) reads as follows:

The charge, when registered, confers upon the chargee a charge upon the interest of the chargor as appearing in the register subject to the encumbrances and qualifications to which the chargor’s interest is subject, but free from any unregistered interest in the land.

[107] Under Ontario’s land titles system, the rights of a bona fide purchaser (which includes a mortgagee) for value who has registered its interest in the property trump any prior unregistered interests in the property: 719083 Ontario Limited v. 2174112 Ontario Inc., 2013 ONCA 11, 28 R.P.R. (5th) 1, at para. 12; MacIsaac v. Salo, 2013 ONCA 98, 114 O.R. (3d) 226, at para. 39.

[108] In the present case, as I have already explained, the respondents were bona fide purchasers for value without notice. They registered their interest (the Mortgage) in the Property. Their interest would trump those with a prior unregistered interest in it. Therefore, even if the beneficiaries had an interest in the Property that pre-existed the granting of the Mortgage, that interest was unregistered and therefore was trumped by the registered Mortgage.

[109] Accordingly, the Mortgage binds the entire Property.

[110] Thus, I would allow the cross-appeal.

DISPOSITION

[111] Accordingly, I would allow the appeal in part and delete the references in the Judgment to relief under the Partition Act. I would allow the cross-appeal and, therefore, delete para. 2 of the Judgment.

[112] The appellant succeeded only in respect of the second issue, which the respondents had conceded and which occupied a very small part of the appeal. In all other respects, the respondents were successful. Accordingly, I would order costs in favour of the respondents, fixed at $13,500, all inclusive.

Released: April 3, 2014 (“J.C.M.”)

“E.E. Gillese J.A.”

“I agree. J.C. MacPherson J.A.”

“I agree. E.A. Cronk J.A.”

[^1]: I have quoted this provision of the Land Titles Act as it exists today, rather than as it existed at the time of Mrs. Di Michele’s death in 1996. In 1998, the Ontario legislature amended this provision to include a reference to estate trustees (the previous versions of s. 63 had referred only to executors and administrators, which are categories of estate trustees): S.O. 1998, c. 18, Sched. E, s. 126. This amendment has no bearing on the issues raised in this appeal.

[^2]: Section 93(1) reads as follows: “A registered owner may in the prescribed manner charge the land with the payment at an appointed time of any principal sum of money either with or without interest or as security for any other purpose and with or without a power of sale.”

[^3]: A “personal representative” and an “estate trustee” are both defined as an executor, administrator, or administrator with the will annexed. Under s. 1 of the Trustee Act personal representative is defined as “an executor, an administrator, and an administrator with the will annexed”) and under rule 74.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, estate trustee is defined as “an executor, administrator or administrator with the will annexed”.