Teixeira v. Estate of Markgraf et al.

[Indexed as: Teixeira v. Markgraf Estate]

Ontario Reports Ontario Superior Court of Justice, Whitten J. January 20, 2017 136 O.R. (3d) 144 | 2017 ONSC 427

Case Summary

Gifts — Inter vivos gifts — Delivery — Deceased instructing her executor to deliver cheque in amount of $100,000 to applicant shortly before her death — Executor doing so — Deceased mistakenly believing that she had enough funds in her account to cover cheque — Applicant unable to cash cheque after deceased's death because of shortfall in account — Gift by cheque not complete until cheque has cleared — Sufficient act of delivery not occurring — Gift not valid — Estoppel by convention not applying.

Shortly before her death, MM decided to reward her neighbour, the applicant, for his kindness to her. She wrote a cheque for $100,000 in the applicant's favour and instructed HM, who would ultimately become the executor of her estate, to deliver it to him. HM did so. The applicant was unable to cash the cheque, as MM's account did not contain sufficient funds. By that time, MM, who had not been aware of the shortfall, had died. The applicant brought an application to enforce payment.

Held, the application should be dismissed.

The necessary elements for a valid inter vivos gift are (1) an intention to donate; (2) an acceptance; and (3) a sufficient act of delivery. The first two elements were made out. However, a gift by cheque is not complete until the cheque has cleared. Since MM did not have sufficient funds in her account, she could not deliver the gift. The gift was not perfected and was not valid.

Estoppel by convention had no application in the circumstances of this case. While everyone thought that MM had the funds to satisfy the gift, the applicant did not change his position in reliance on that assumption.

Cases referred to Amalgamated Investment and Property Co. v. Texas Commerce International Bank Ltd., [1981] Q.B. 84, [1981] 1 All E.R. 923, [1981] 2 W.L.R. 554, [1982] 1 Lloyds Rep. 27 (C.A.); Ryan v. Moore, [2005] 2 S.C.R. 53, [2005] S.C.J. No. 38, 2005 SCC 38, 254 D.L.R. (4th) 1, 334 N.R. 355, J.E. 2005-1188, 247 Nfld. & P.E.I.R. 286, [2005] R.R.A. 694, 25 C.C.L.I. (4th) 1, 32 C.C.L.T. (3d) 1, 18 E.T.R. (3d) 163, 139 A.C.W.S. (3d) 1089

Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1)

Authorities referred to Ziff, Bruce H., Principles of Property Law, 6th ed. (Toronto: Carswell, 2014)

APPLICATION to enforce a payment.

Don Morris, for applicant. Andrew Keesmaat, for respondent.

[1] WHITTEN J.: — Maria Markgraf ("Mary") undoubtedly appreciated the kindness and courtesies of her long-time neighbour, Arlindo Teixeira ("Arlindo"). As she faced her death, she wanted to express her appreciation in a tangible fashion. Arrangements were made for her to be assessed by a social worker and consequently a lawyer to prepare her last testament. In that testament, she specifically provided for $100,000 bequest to Arlindo. In addition, with the help of Harry Claus Markgraf, her stepson (who would ultimately become the executor of her estate), she executed a cheque in the amount of $100,000 on her account at the Royal Bank of Canada ("RBC"), payable to Arlindo, and caused Harry to deliver that cheque to Arlindo within days before she passed away.

[2] Her testamentary wishes were honoured by Harry and Arlindo has received his bequest of $100,000.

[3] The $100,000 gift by means of the cheque has not actualized.

I. Issue

[4] The cheque for $100,000 was an inter vivos gift. That characterization applies, notwithstanding the creative efforts of counsel for Arlindo, to attach the cheque to contractual concepts in which the good acts of Arlindo, the neighbour, which included grocery shopping could be characterized as "consideration". At the time, the court mused that this would represent "a lot of groceries".

[5] The cheque was presented by Arlindo as instructed by Mary, through Harry within a day of its receipt. Not surprisingly, RBC given the amount wanted to investigate. Ultimately, the cheque was returned to Arlindo who, within days of Mary's demise, presented the cheque at his own bank. Although the cheque was not formally returned NSF, it appears that the account at RBC only contained $81,732.75. Mary had other products at RBC, namely, an RIF and a GIC, but without her specific instructions, these could not be tapped into to make up the shortfall.

[6] Arlindo has brought this application against the estate to realize the $100,000. As stated, this was a "gift". In his pursuit, Arlindo seeks to apply equitable concept such as estoppel by convention, to support his position, especially in light of Harry's co-operation as executor up to the point of receipt of legal advice.

[7] At the end of the day, the question becomes, "was this a valid enforceable gift?" In the resolution of this issue, one reflects on the notion, "can you give as a gift that which you do not have?"

II. Factual Background

[8] The basic facts are as described above. There is no need to describe the steps leading up to the will neither it nor its bequest is contested.

[9] The steps that Arlindo took to cash the cheque are as above. It could be added that Mary believed she had sufficient funds to cover the cheque. That was never the case.

[10] Harry, no doubt, relying on Mary's instructions and his belief of sufficiency of funds, acted in his new role as executor as if the cheque would be honoured. At some time, probably with the reality of legal advice and the fact that he could not dispense funds which were not there in their entirety, he could not continue to co-operate.

[11] In all probability, Arlindo was surprised by both the cheque and the bequest. He had acted as he did, without thought of compensation. There's no evidence that Arlindo acted to his detriment in anticipation of receiving this $100,000 via the cheque. No extravagant purchases, no commitment to others, no investments.

III. Analysis and Applicable Law

[12] The analysis of Professor Ziff as to the elements of a valid gift pervades the case law provided by both sides. In his text, Principles of Property Law, 6th (Toronto: Carswell, 2014), he establishes the necessary elements for a valid gift, namely, (i) an intention to donate; (ii) an acceptance; and (iii) a sufficient act of delivery (p. 160).

[13] There's no doubt using the words of Professor Ziff that Mary "voluntarily intended to divest" herself with $100,000, she believed she had in her account. It was her idea, the lead-up to the creation of the will revealed she possessed all of her faculties, the necessary mental capacity. She was the driving force behind the creation of the cheque, its delivery to Arlindo, by means of Harry and the accompanying instructions she provided (i.e., as to where to present the cheque). Therefore, element (i) is clearly established.

[14] "Acceptance of a gift involves an understanding of the transaction and a desire to assume title" (ibid., p. 116). Arlindo knew what he had to do with the cheque and took steps to realize the sum, first at RBC and eventually at his own bank. There is no doubt "acceptance" is made out.

[15] The third basis requisite for a gift is that "there must be an efficient delivery of the gifted property or some accepted substitute. As a rule the gift must be literally given away" (ibid., p. 116). Professor Ziff, in passing, notes that delivery is required for a gift but is a dispensable part of a contract. There's no evidence in this case of a contract either verbally or written. There's no evidence that if Arlindo did the nice things that he did he would receive a sum of money. He had no such expectation.

[16] "Delivery" as Professor Ziff points out, serves a "Reflective function", there are the steps that the individual engages in which reveal the commitment to the intention to give and relinquish control to the donee as referred to above. It is a check on "impulse" (ibid., at p. 167).

[17] Professor Ziff sites classical authority for the proposition that courts will not perfect an imperfect gift (ibid., at p. 162).

[18] Delivery by a cheque is problematic, the professor notes, as "a cheque is neither money nor representation of money, it is only a direction to the drawer's bank which can be countermanded (by the drawer) before it clears. Therefore, a gift by cheque is not complete until it has cleared and the intervening death of the donor could ruin the gift, at that point it can no longer be a simple and inter vivos transaction" (ibid., at p. 166).

[19] The cheque in this case was quite problematic, despite Mary's belief to the contrary, she did not have the necessary funds in the account upon which the cheque was drawn. Yes, there are other bank products which she had purchased, i.e., the RIF and the GIC, but the bank cannot willy-nilly transfer from those products that would take positive steps and written direction by Mary. She simply did not have what she sought to give therefore she could not "deliver". For that matter, Harry, as executor, even though he believed he had to follow through, could not have as there were insufficient funds.

[20] The gift was not perfected. It is not a valid inter vivos gift. This court, like other courts, does not have the power to be a financial deity who magically transfers funds to make everything good. The gift is unenforceable.

[21] It is necessary to deal in passing with the issue with the issue of estoppel by convention. Ryan v. Moore, 2005 SCC 38, [2005] 2 S.C.R. 53, [2005] S.C.J. No. 38 is determinative. Bastarache J., writing for the court, traces the history of the equitable principle of estoppel. There are various forms of the principle. Referring to Lord Denning in Amalgamated Investment and Property Co. v. Texas Commerce International Bank Ltd., [1982] Q.B. 84, [1981] 1 All E.R. 923 (C.A.), Lord Denning noted that the principle generally is a "rule of evidence, [and it] cannot give rise to a cause of action" (para. 51 of Ryan). In other words, estoppel presupposes a course of conduct which evidences a particular cause of action, in our cause, Harry acting initially as executor that he would honour the cheque. It is the cheque that is the gift not Harry's misguided belief that he could do that. Yes, his actions would prevent him by estoppel from asserting he never believed the cheque to be valid. But it doesn't matter what he did he could not have delivered any more than Mary could have without her directions to the bank with respect to the other products.

[22] Estoppel as a principle does not make the gift enforceable. Specifically, estoppel by convention requires that the parties have a mutual understanding or acceptance of a certain set of facts. Bastarache J. described the criteria, and I paraphrase:

(1) The party's dealings must have been based on a shared assumption of fact in law. (2) A party must have acted in reliance on the shared assumption or set of facts that is, resulting in a change to that particular party's legal position. (3) It would have been unfair or unjust to allow the other party to resile from the initial mutual assumption (para. 59).

[23] In our case, everybody thought Mary had the funds to satisfy the gift until the reality of the actual balance dictated otherwise. However, what did Arlindo do with that mistaken belief that changed his legal position? The answer is nothing. He was still in the same position he was before he received the cheque. He'd not done anything as a consequence of learning about the cheque, he was still a neighbour but he was a neighbour with an unenforceable cheque.

[24] So when Bastarache J. talks of the potential unfairness which founds notions of detriment in the last criteria and we apply that to our case, where is the unfairness? Mary could not give what she did not have. Likewise, Harry could not honour the cheque. Yes, it's unlucky for Arlindo who appeared to be poised for an increase in his net worth by $100,000, but it's not unfair; you cannot give away what you do not have to begin with. Nor can your intended beneficiary receive something out of nothing.

IV. Conclusion

[25] As probably overstated above, the gift cheque of $100,000 is not enforceable. The fact that the parties, excluding the bank, acted as it was, does not change that fundamental conclusion. Therefore, the application is dismissed.

[26] As for the question of costs, although the respondent has asked for substantial indemnity for costs, that is still within the discretion of the jurist, pursuant to s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[27] Counsel are invited to discuss entitlement and quantum of costs including the possibility of payment from the estate itself. In the event of a lack of unanimity, the exchange of costs submissions (no greater than 15 pages) and a bill of costs will be required, and should be submitted to the court along with any reply within 90 days of this judgment.

Application dismissed.

End of Document