Fray, Personally and in his Capacity as the Administrator of the Estate of Evans v. Evans
[Indexed as: Fray v. Evans]
Ontario Reports Ontario Superior Court of Justice, McSweeney J. March 14, 2017 137 O.R. (3d) 280 | 2017 ONSC 1528
Case Summary
Real property — Co-ownership — Tenants in common — Respondent holding 10 per cent interest in house and his wife G holding 90 per cent interest as tenants in common — G's interest vesting equally in respondent, appellant and appellant's brother by operation of s. 9(1) of Estate Administration Act three years after G's death in 1992 — Respondent living in house since then, paying taxes and discharging mortgage — Relevant date for determining each party's interest in house being date upon which they became tenants in common in 1995 — Respondent credited for tax and mortgage payments — Respondent's claim for monthly maintenance expenses offset by notional occupation rent that he should have been paying — Estate Administration Act, R.S.O. 1990, c. E.22, s. 9(1) .
G died intestate in 1992. She was survived by her husband, the respondent, and by her two sons from a first marriage, the appellant and his brother. The largest asset in the estate was a house. As tenants in common, G and the respondent held interests in the house of 90 per cent and 10 per cent, respectively. The respondent continued to live in the house after G's death, paying the taxes and retiring the mortgage. He did not pay any occupation rent. The respondent brought an application for a declaration that he was the sole owner of the house. The Court of Appeal set aside the decision of the application judge, found that the appellant had a one-third interest in the residue of G's estate, and directed a reference to determine the value of the estate and the appropriate quantum of the appellant's share.
Held , the house should be sold and the proceeds distributed in accordance with these reasons.
By operation of s. 9(1) of the Estates Administration Act , G's 90 per cent ownership interest in the house vested equally in the respondent and G's two sons three years after her death. There were no other assets in the estate on the date of vesting. Accordingly, the residue of the estate was zero. The respondent held a 40 per cent ownership interest in the house, and the appellant and his brother each held a 30 per cent interest. The respondent's claim for monthly living expenses was offset by the notional occupation rent that he should have been paying.
Tarling v. Tarling, [2008] O.J. No. 3009, 43 E.T.R. (3d) 177, 168 A.C.W.S. (3d) 899 (S.C.J.), consd
Other cases referred to
Statutes referred to
Estates Administration Act, R.S.O. 1990, c. E.22, s. 9(1) Succession Law Reform Act, R.S.O. 1990, c. S.26, s. 45(2) [as am.]
DECISION on reference directed by the Court of Appeal
Shawn M. Philbert, for applicant. Ian M. Hull, for respondent.
MCSWEENEY J. : —
Introduction
[1] This is a reference in an estate matter directed by the Court of Appeal reported as Fray v. Evans, [2013] O.J. No. 5881, 2013 ONCA 776. The Court of Appeal set aside the decision of Edwards J. dated March 4, 2013 and substituted its own order as follows [at para. 39]:
(i) that the appellant [Richard Evans] has a one-third interest in the residue of Gail's [his mother's] estate;
(ii) directing a reference to determine the residue of the estate and the appropriate quantum of the appellant's share of his mother's estate. This should include, but not be limited to, an identification of the charges paid for the residence, the debts and expenses of administration, any occupation rent due on account of the appellant's interest in the residence; and
(iii) that the respondent [Carlton Fray] in his capacity as administrator is to pass his accounts.
Facts
[2] This is the decision on the reference directed at 1(ii). In conducting the reference, I must take as a starting place the facts as found by the application judge, where those findings were not disturbed by the Court of Appeal, and those findings and conclusions reached by the Court of Appeal. For ease of reference, the key facts as summarized by the Court of Appeal are reproduced below [at paras. 3-15]:
Gail Evans ("Gail") died intestate on July 30, 1992. She was survived by her two sons from a first marriage, the appellant and Donald, and by her second husband, the respondent Carlton Eugene Fray.
The respondent, a real estate agent, was the administrator of her estate.
The largest asset in the estate was a residential property ("the residence"). It had previously been owned by Gail and her first husband and was the childhood home of their two sons. For financial reasons, Gail had been forced to sell the residence after her first husband left the marriage but she subsequently repurchased it in 1982 as a tenant in common with the respondent. She held a 90 percent interest in the residence and the respondent a 10 percent interest. She and the respondent lived there.
Since Gail's death, the respondent has occupied the residence, paid the taxes and other expenses and also caused the mortgage to be discharged in 2012. He paid no occupation rent to the estate.
At the date of Gail's death in 1992, based on the respondent's estimate of value, the residence was worth $200,000. As of the date when the application was heard in March 2013, it had a value of approximately $650,000.
In 1992, the net value of the estate was found by the application judge to be $95,745.61.
In 1992, the respondent as administrator paid $1,763.89 to each of the sons. He then paid nothing more to the appellant until 15 years later when in August 2007, he paid him $2,000. Between 2007 and October 2011, the respondent paid $27,850 to the appellant and between November 1999 and October 2011, he paid $22,250 to Donald. The receipts for payment stated:
Received from Carl E. Fray [amount] toward the yet to be determined amount of [my] inheritance from the estate of Gail M. Fray.
In addressing these payments, the application judge found at para. 18 of his reasons that:
Clearly, the parties were treating the situation as if Richard and Donald held an interest in the estate which was appreciating in value.
The parties conducted their affairs as if Donald and Richard held a specific interest in the real property and the payments by Carlton to them reflected the increased value of their share as a result of the appreciation of the real property.
In November 2011, the appellant retained counsel who wrote to the respondent's counsel and broached the subject of the completion of the administration of Gail's estate. The respondent took the position that the appellant had been paid in full.
Unable to agree, on October 3, 2012, the appellant caused a transmission of interest to be registered on title to the residence. The ownership interest was described as 30 percent in favour of each of the appellant and his brother and 40 percent in favour of the respondent.
The respondent then commenced an application in December 2012 requesting a declaration that he was the sole owner of the residence and that the brothers' entitlement had been satisfied. He sought repayment of $11,108.24 from the appellant and $5,508.24 from Donald.
The parties agreed that pursuant to the Succession Law Reform Act, R.S.O. 1990, c. S.26, the respondent was entitled to a preferential share of $75,000 and one third of the residue of Gail's property. The two sons were also each entitled to one third of the residue.
The respondent as administrator never passed his accounts. There was no evidence of any release signed by the beneficiaries, and there was no court order of discharge.
[3] At the time of the hearing of the reference before me, none of the above facts had changed. Moreover, the parties confirmed that Carlton Fray, as administrator, still had not passed his accounts.
Findings of the Court of Appeal
[4] The Court of Appeal made the following findings:
(a) the net value of the estate was $95,745.61 on the date of death (this fact was described by the Court of Appeal as "conceded" on the appeal);
(b) both the respondent, Richard Evans, and his brother Donald are entitled to one-third of the residue of their mother's property;
(c) the only property in issue between the parties is a residential property, specifically the house in which Mr. Fray resides, located at [number omitted] Glengarry Road, Mississauga, Ontario (hereafter the "house" or the "home");
(d) the valuation date for calculating entitlement to a preferential share pursuant to the Succession Law Reform Act, R.S.O. 1990, c. S.26 is the date of death. The net value of the estate, being greater than $75,000, entitled the surviving spouse, Carlton Fray, to a preferential share, but did not entitle him to his late wife's property absolutely;
(e) the application judge erred in valuing the parties' interest in the residue of the estate as of the date of death. The Court of Appeal found that [at para. 36] "[t]he residue of an estate is crystalized and determined after the deceased's property has been collected and debts and expenses paid including those associated with the administration of the estate";
(f) the house was not sold by the estate within three years of death. As a result, the application judge found that, by operation of s. 9(1) of the Estates Administration Act, R.S.O. 1990, c. E.22, three years after Gail Evans' death, her ownership interest in the real property (being 90 per cent of the house) vested equally in the three beneficiaries.
(g) the Court of Appeal upheld [at para. 35] the application judge's finding that the vesting of the real property "was consistent with the parties' expectations", and with their unanimous belief "that their respective interests were appreciating in value".
What is, and is not, to be Determined on this Reference?
[5] The Court of Appeal has directed [at para. 39] that I identify the residue of the estate and "the appropriate quantum of [Richard Evans'] share of his mother's estate". In reaching this determination, I am directed to include consideration of various expenditures. As described further below, there is no longer any residue in the estate, and determination of Richard Evans' share will require sale of the house, which is now owned by all beneficiaries as tenants in common.
[6] I note that in a separate subparagraph of its order, the Court of Appeal directed Carlton Fray as administrator to pass his accounts. The passing of accounts is not before me. As of the time of hearing of this reference on November 14, 2016, I was advised that Mr. Fray had still not passed his accounts. His failure to do so means that as a matter of law, the estate has not yet been "wound up" despite the fact that Ms. Evans died over close to 25 years ago.
[7] At the hearing of the reference, Mr. Fray's counsel urged me to find that there is still insufficient information before me to make the determination of quantum required by the reference from the Court of Appeal. To the extent that he is relying on his own failure to pass accounts pursuant to the Court of Appeal's express direction, I can give no effect to his submissions.
[8] Further, Mr. Fray urged the court to extend the scope of this reference to entertain his arguments in support of the following propositions:
(a) The net value of the estate ($95,745.61), as found by Justice Edwards and affirmed by the Court of Appeal, is not accurate. It should be reduced to take into account pre-death expenses. In support of his position, Mr. Fray filed over 1,000 pages of receipts and calculations which he alleges describe financial dealings between himself and his late wife over the ten plus years of their marriage. Mr. Fray did not produce this material at the time he brought his application in 2012. He argues that the Court of Appeal decision opened the door for reconsideration of the net value of the estate at date of death. He submits that the net value is in fact less than his preferential share. He argues that he is therefore entitled to his late wife's property absolutely, and that all interest of her sons in her property is eliminated.
(b) The deceased's son Donald Evans, because he did not participate in the appeal, is thereby disentitled to any "benefit" from the outcome of this reference. Donald Evans' share of his mother's property should therefore be split 50-50 by Carlton Fray and Richard Evans. (This submission is not supported by Richard Evans.)
(c) Carlton Fray's preferential share of $75,000, calculated at the date of death, should be adjusted for inflation.
[9] I find that none of these issues is open for consideration before me. Each is outside of the parameters of the reference directed by the Court of Appeal, and is also res judicata .
[10] With respect to the value of the estate as of the date of death, as referenced earlier this fact was conceded before the application judge and Court of Appeal. It is therefore res judicata , and not subject to revisiting on this reference.
[11] Similarly, the issue of Donald's entitlement was not disputed by Carlton Fray before the Court of Appeal, which found expressly that [at para. 14] "[t]he two sons were . . . each entitled to one third of the residue". Again, this issue has been determined and is not open to being revisited on this reference.
[12] With respect to the $75,000 preferential share, counsel for Mr. Fray was unable to cite any authority for the proposition that his preferential share should increase.
[13] Richard Evans argued that the Succession Law Reform Act provides no mechanism by which the preferential share may be increased or decreased, and is payable in a fixed amount. He points to the clear wording of the statute. Section 45(2) of the Succession Law Reform Act states ". . . the spouse is entitled to the preferential share absolutely " (emphasis added).
[14] I agree with this submission. However, I find that the issue of the value of the preferential share is also res judicata specifically. The Court of Appeal found as follows on this issue [at para. 25]:
The quantum of the preferential share is fixed by regulation, and the application regulation is that which was in force at the deceased's date of death. As agreed by the parties, given that Fail died in 1992, the preferential share amounted to $75,000.
The Proper Role of the Estate Administrator
[15] Richard Evans urged me to find that the actions of Mr. Fray in advancing the above arguments, which seek by alternative means to eliminate or reduce the portion of the estate which is available to the deceased's sons, is inconsistent with his role as administrator. Put simply, Richard Evans argues that Carlton Fray is asking the court to prefer his own interest as a beneficiary over that of himself and his brother. In doing so, he is [in] conflict with his role and obligations as estate administrator.
[16] I agree with this submission: it is settled law that estate administrators and trustees owe a fiduciary duty to the beneficiaries of the estate. He or she must at all times be even-handed in dealing with the beneficiaries. His/her role as estate administrator requires avoidance of situations where that duty conflicts with his/her own self-interest: the administrator must act for the benefit of all beneficiaries equally, and may not prefer his or her own interest.
[17] From the time he obtained court approval to administer his late wife's estate, Carlton Fray was legally obligated to be even-handed in his dealings with all beneficiaries. This is not an action for breach of trust brought by the sons of Gail Evans against Carlton Fray. The court finds, however, that it is inconsistent with his role as estate administrator for Carlton Fray to now raise arguments which would benefit himself at the expense of the two other beneficiaries and disentitle them to what the Court of Appeal has found to be owing to them as a share of their mother's estate.
Significance of Statutory Vesting of Property
[18] As found by the application judge and the Court of Appeal, the real property owned by the deceased as at the date of death vested in the beneficiaries on July 30, 1995 by operation of subsection 9(1) of the Estates Administration Act.
[19] In the evidence before the court, there were no other assets in the estate as of the date of vesting. Accordingly, as there was no other property to contribute to any residue, I find that on July 30, 1995, all the property in the estate was legally transferred to the beneficiaries by operation of the vesting provision. Put another way, as of July 30, 1995, the residue of the estate was zero, as on that date the 90 per cent interest of the estate of Gail Evans in the home transferred to Mr. Fray as her surviving spouse and her two sons as tenants-in-common, each as to a 30 per cent interest in the property.
[20] On July 30, 1995, the legal ownership of the house changed, but the parties' arrangements did not; Carlton Fray continued to live in the house and pay the expenses required in order to do so. His accountability for living in a house which was only partly his (10 per cent prior to vesting, 40 per cent after the vesting of his 30 per cent share), however, shifted at that time. In particular, as of July 30, 1995, Carlton Fray's obligation to account to the estate for his use of an estate asset (the house) became an obligation owed to the two other owners of the property.
[21] Effective July 30, 1995, Carlton Fray became effectively a fiduciary of the home and a de facto trustee of the property. From that date to the present, he has effectively acted on behalf of the other beneficiaries to maintain their interest in the house.
The Remaining Question for Determination
[22] All parties want the house sold and to realize their interest in it. The determination left to be made on the reference is what a fair manner would be to determine the quantum of each party's interest.
[23] The Court of Appeal directs that relevant considerations should include, but not be limited to,
(a) an identification of the charges paid for the residence;
(b) the debts and expenses of administration;
(c) any occupation rent which may be owed by Carlton Fray.
The Position of the Parties on the Reference
[24] Carlton Fray is now in his mid-80s. He wants to sell the house and move abroad to live. He therefore seeks to realize his interest in the house as soon as possible. He would like appropriate credit for the money he has put into the home over the years that he has lived in it. He takes the position that his stepsons have done nothing to maintain the asset and that he has done all the work, and should see the benefit from doing so.
[25] In support of his position, he has filed documentation showing mortgage, property tax, house insurance and other expenditures made in relation to the house.
[26] Richard Evans does not significantly dispute this position. He takes the position, however, that his stepfather has been living in and has had the benefit of the whole house since July 30, 1995, when he and Donald Evans became tenant-in-common owners of the property. If Mr. Fray is to be credited with expenditures he has made to maintain the home, Richard Evans argues that he should also be charged an occupation rent to reflect the fact that he was living in a house owned 60 per cent by the Evans brothers.
[27] The parties are agreed that an "informality" characterized their dealings with each other over the years. They also agree that over a period of many years Mr. Fray gave amounts of money to each of his stepsons, which varied in quantum and frequency, but which were paid "toward the yet to be determined amount of [my] inheritance from the estate of Gail M. Fray". I direct that these amounts are to be deducted from each brother's portion of the sale proceeds.
[28] Mr. Fray takes the position that if he is to be charged an occupation rent, then it is appropriate to also credit him with expenditures made to maintain the home.
Analysis
[29] I agree with the characterization of the parties' dealings over the years as "informal". As found by the Court of Appeal, upholding the application judge in this regard, all parties benefited from the arrangement in which Mr. Fray continued to live in the home and look after it, while the home continued to appreciate in value.
[30] I note that both parties allege that each other's claims are barred by limitation periods, and/or by the doctrines of laches and/or estoppel.
[31] Each party, by participating in an informal relationship, has failed to protect their interests by documenting their understanding as they might have done. In particular, Carlton Fray is now bound by the consequences of the ownership transfer from the estate which resulted from his failure to take steps as administrator to otherwise distribute the assets of the estate prior to July 1995.
[32] With respect to the residue question posed by the Court of Appeal, I have found that the residue of the estate is zero. The remaining question is "what is the appropriate quantum of [Richard Evans'] share of his mother's estate?" Given that the estate's only asset is now vested in the beneficiaries, the current question for determination is "what is the value of Richard Evans' 30 per cent interest in the home?"
[33] In these circumstances, where the house has not yet been sold, the court cannot calculate a dollar value answer to this question. What is possible on this reference, however, is to specify categories of credits and deductions that will apply with respect to net proceeds of the home when it is sold.
[34] In order to realize each beneficiary's interest in the house, it must be sold. From the net proceeds, the surviving spouse's preferential share must be deducted, and certain credits allowed to Carlton Fray as described below. From the proceeds that remain, the competing claims for living expenses vs. occupation rent will be considered.
[35] It is agreed that the house, as the only remaining asset of the estate, transferred out of the estate on July 30, 1995. I must therefore consider the relevant date from which to determine each party's interest in the house. I find that date to be the date on which they became tenants in common: July 30, 1995. Any amounts owing as between and among them from the estate prior to that date are not before me, as they were properly to be addressed in the passing of estate accounts.
[36] I therefore order as follows:
(a) the house is to be sold. All parties are to co-operate in the listing and selling of the home;
(b) once the net proceeds are realized (sale price of house less encumbrances, real estate commission if applicable, real estate legal fees), 10 per cent of the proceeds are to be paid immediately to Carlton Fray reflecting his original fractional ownership of the home.
[37] I further order that net proceeds of sale shall be subject to the following credits:
(a) $75,000 to be paid to Carlton Fray as his agreed preferential share;
(b) Carlton Fray shall receive the following credits for 60 per cent off the expenditures he made to maintain the property, for the benefit of all tenants in common, from July 30, 1995 to the present (the 60 per cent reflects amounts he paid to maintain each brother's 30 per cent ownership interest):
(i) mortgage payments: Mr. Fray paid the mortgage himself on the home until the mortgage was paid off in full. He is to be given a credit for 60 per cent of the principal amount of the mortgage at July 30, 1995, which amount was ultimately discharged by him;
(ii) home insurance: Mr. Fray is to receive a credit in the amount of 60 per cent of the total home insurance premiums paid from July 30, 1995 to the date of closing;
(iii) property taxes: Mr. Fray is to receive credit for 60 per cent of the property taxes paid on the home from July 30, 1995 to closing;
(iv) capital expenditures: Mr. Fray is to be credited with 60 per cent of the cost of roof replacement, tree removal and furnace repair expenditures documented by him at volume II of his affidavit sworn December 18, 2015 for a total credit of $6,146.58;
(v) none of the credits above are to be adjusted by any interest component, despite having been made over a period of many years. As referenced earlier, it is not just for Mr. Fray to benefit from his failure to articulate in a timely way his claims relating to the home.
[38] Once the above credits are taken, the remaining proceeds from the sale of the home (hereafter the "remaining proceeds") shall be divided among all three tenants in common.
[39] Mr. Fray seeks to recover from the remaining proceeds the expenses of living in and maintaining the home throughout the period between July 30, 1995 to present. He denies that he should be ascribed any occupation rent for this period because his stepsons did not ask him to pay rent and are now out of time to do so.
[40] By contrast, Richard Evans denies that Carlton Fray should be able to deduct his living expenses, as he had exclusive use of the house and there is no basis on which the other owners were obligated to pay Mr. Fray's living expenses. With respect to the fact that Mr. Fray paid no rent for the 60 per cent of the house which he did not own, Richard Evans asks that an occupation rent be deducted from Mr. Fray's share of the remaining proceeds to reflect the fact that he was living in a home which was owned 60 per cent by himself and his brother since July 1995.
[41] Each party raises arguments of laches and limitation periods against each other. It is true that neither party moved in a timely way to assert the claims they are now making against the others' interest in the home. I find that the reason for lack of action was described by the application judge and referenced by the Court of Appeal: all parties benefited. In other words, no one had an interest in disturbing the arrangement.
[42] This is supported by the fact that no party led evidence of having sought partition and sale of the home at any time after July 1995. As tenants in common, it was open to any of them to do so, and to seek to realize their share in the property at a much earlier date. The fact is that they did not do so. Nor did they reduce their understanding of the all-party-benefitting "status quo" to writing. Again, this could have been done at any time over the years between the vesting of the ownership of the property in 1995 and the registration of transmission on title by Richard Evans in 2012, which action led Carlton Fray to bring the original application.
[43] All parties are therefore potentially prejudiced by their failure to assert their rights in a timely way.
[44] The record contained some evidence of Mr. Fray's living expenses and of rental prices for homes in the area. I note that neither party's evidence was as clear or comprehensive as it could be. However, the Court of Appeal released its decision in December 2013. More than three years have passed since that time. All parties have had ample time to put their best foot forward to substantiate their position. The goals of proportionality and finality in litigation both favour my reaching a final determination, to the extent that the evidence enables me to do so, which is fair to the parties and assists them in moving forward with their affairs.
[45] On the evidence filed, I find that 60 per cent of Carlton Fray's claim for monthly living expenses is wholly offset by a notional occupation rent payable by Carlton Fray to the Evans brothers for his enjoyment of their share of the house. That is, the living expenses and the occupation rent categories, each of which would potentially be barred by a range of doctrines, are, in the circumstances of this case, "a wash".
[46] Support for a set-off approach to resolving competing home maintenance vs. occupancy rent claims in an estate context is found in Tarling v. Tarling, [2008] O.J. No. 3009. In that case, the court considered claims by two brothers with respect to their deceased father's home, which they had inherited together. One son claimed occupation rent from his brother who had continued to live in the father's home for a period following his death; the other claimed reimbursement for half of his expenditures on the home during that time. As in the present case, the occupancy rent claim arose in response to a claim for half the upkeep costs of the home. Herman J. considered the fact that the occupying brother had enjoyed the use of the whole home but also had the responsibility of maintaining it; the other had enjoyed neither that benefit nor that burden. The court noted [at para. 149] that there was no evidence of financial loss to the non-resident brother from not being able to live in the home, and concluded that "the respective claims of [the brothers] can be set off against each other; they effectively cancel each other out".
[47] The present circumstances are analogous: Richard Evans and Donald Evans have not been financially compromised by not living in the house during Carlton Fray's residency there, and Carlton Fray has both maintained the home and had the benefit of exclusive occupancy. As in Tarling Estate , I find that the respective claims should be set off against each other as they effectively cancel each other out.
[48] I therefore order that the remaining proceeds are to be divided equally into three and to be paid to the benefit of each of Carlton Fray, Richard Evans and Donald Evans.
[49] From each of Richard and Donald's share shall be deducted the amounts previously paid to them by Carlton Fray: $27,850 to Richard Evans and $22,250 to Donald Evans. These amounts are to be paid to Carlton Fray.
[50] If the parties are unable to agree on costs, they may contact my judicial assistant to make an appointment to appear before me at 9:00 a.m. on a day I am sitting in Brampton to make submissions.
Order accordingly.