COURT FILE NO.: 4739/14
DATE: 2018/01/30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Steven Augustine Janicek, Jr. and Franklin Mark Janicek
Applicants
– and –
John James Janicek, Andrew Ladislaus Janicek and Marianne Frances Janicek
Respondents
Gemma Charlton, for the Applicants
Douglas Skinner, for the Respondent John James Janicek
HEARD: December 6, 2017
Justice J.C. George
[1] The Applicants are trustees for the estate of their mother Anne Emily Janicek (“textatrix”), who passed away on October 11, 2012. They seek direction and advice in relation to para. 4(d) of the will, which provides as follows:
As soon as possible after the date of my death, my Trustee shall obtain from a licensed farm appraiser, an appraisal of the home farm at 7534 Courtright Line, Alvinston, Ontario, as to its fair market value at the date of my death. It is my wish that this home farm be kept within the Janicek family if possible. In accordance with that wish if any of my children, or a combination of the same, shall wish to purchase the said farm, they may do so at 75% of the appraised fair market value provided that they enter into an Agreement of Purchase and Sale with my Trustee within one year from my date of death with a closing date no longer than 60 days from the date of the Agreement of Purchase and Sale. In the event that none of my children, or combination of same, have agreed to purchase the said farm, within the prescribed time, the same shall be sold by my Trustee at a price to be determined by my Trustee in his sole and unfettered discretion. The proceeds from the sale of the said home farm, whether to a child(ren) or on the open market, after deduction of the cost of the same (legal fees and disbursements and real estate commission) if any, and any capital gains tax which may be attributed to the said farm shall be paid to the following beneficiaries in the following percentages:
(i) Andrew Ladislaus Janicek – 30%
(ii) Steven Augustine Janicek Jr. – 10%
(iii) Marianne Frances Janicek – 25%
(iv) Franklin Mark Janicek – 25%
(v) John James Janicek – 10%
[2] They also seek an order for vacant possession of the family farm (“property”) as against the Respondent John James Janicek, who has continued to occupy and farm it. Andrew Janicek and Marianne Janicek are not participating in this litigation, although it appears Andrew supports the Applicants. All parties are the testatrix’s children and beneficiaries.
[3] An appraisal was obtained that assessed the fair market value of the property (as of December 7, 2012) at $1,315,000.00. The Applicants felt this was too low and obtained a second appraisal in April 2013. This estimated the value to be $1,700,000.00 as of October 11, 2012.
[4] On April 17, 2013, John offered to purchase the farm for $986,250.00 – 75% of the first appraisal. This offer included the farm equipment on the property. The Applicants rejected it ostensibly because it included the discounted price for equipment (which was not contemplated by the will), and because they believed other beneficiaries should still have the opportunity to present offers.
[5] On October 8, 2013 the Applicants and Andrew jointly submitted an offer to purchase the property - not including the equipment - for $986,250.00. This was followed by a second offer from John for $986,250.00 that did not include chattels.
[6] The Applicants suggest a tenancy-in-common with all children, except Marianne, holding an interest. Or alternatively, that it be put on the market and sold with the proceeds distributed according to the percentages set out at the end of clause 4(d). John’s position is he has the right to purchase it alone at the discounted price.
[7] A resolution seemed likely when, in 2015, the four brothers executed a Memorandum of Understanding that would have had the property transferred to them with each paying one quarter of the price. This fell apart when the Applicants advised John, who has continued to farm the land, that he must sign a lease pending final sale, at $200 per acre. He refused. In any event, they were unable to negotiate the remaining details of the memorandum with John reverting to his original position that he alone should purchase and own the property.
[8] Prior to her death the testatrix had been renting parts of the property to Frank and John for $100/acre. Para. 4(m) of the will provides that:
Pending the sale of the said home farm, my Trustee is authorized to continue to rent the said home farm to my sons, Franklin Mark Janicek and John James Janicek, at the same price they were paying just prior to my death, notwithstanding that one is one of my Estate Trustees.
[9] While the Applicants maintained the above noted rental arrangement for the years 2013 and 2014, they felt it unfair to the other beneficiaries to continue the discounted rate further. They sought to increase the rent to $250.00, ultimately settling on $200.00. As indicated, John was advised that a lease would be required, and while he has refused to execute one he has been paying $200/acre.
[10] In August 2013, the Applicant’s solicitor proposed to John that all five children own the land as tenants in common, taking title based on the percentages set out in the will. John declined, taking the view that this did not accord with his mother’s intentions. When you consider the percentages set out in clause 4(d), it is easy to see why John would not favour this outcome.
[11] John has several grievances with the Applicants. He says he was not made aware of the second appraisal until after the option period ended, and did not receive a copy of it until several weeks after that. He views the competing offers to purchase as a ruse to frustrate him, with the ultimate goal being a sale on the open market. He points to the fact Steven is a banker who resides in New Jersey, and that Andrew lives in London with no farming interests. He acknowledges that Frank farms, but that he also has a career in sales. John is a farmer by trade, and argues that his mother’s desire to keep the property in the family must have contemplated him as the primary owner and operator. He deposes that he had discussions with his mother about the sale of the property, and that he made an offer to purchase it shortly before her death. He stresses the significance in his mother directing that, pending sale, he be permitted to rent the property at the same price he was paying prior to her death.
[12] He is quite suspicious of the Applicants current position for several reasons, most notably because their response to his offer was to submit an identical one (minus the chattels) making no mention of the fact that, in their view at least, the first appraisal was too low. This, he argues, is evidence of their intention to frustrate a sale to him. He tendered additional evidence on this point, including emails that reveal a certain level of hostility.
[13] He further argues that the Applicant’s final offer, which was all the siblings would own it as tenants in common - taking title based on the percentages set out at the bottom of clause 4(d) - is not in accordance with the will, and is further evidence of their intention to obstruct.
[14] John submits that the Applicants should sell to him at the discounted rate provided for in the will, based on the first appraisal. He seeks to continue to rent and possess the property pending sale.
[15] The Applicants argue that if the testatrix had wanted to exclude those children who did not farm, she would have explicitly done so. She did not. There is no indication within the will that any one child, or combination of children, was preferred.
[16] To the request for vacant possession, the Applicants are concerned with John’s refusal to sign a lease while continuing to insist on farming the property. They also note that John is now housing his cattle in the barns, but failing to pay rent for this use. That being the case, they argue the status quo is untenable and that John must leave the premises until ownership issues are resolved.
[17] Counsel spoke at length about the “armchair rule”. I will not dwell on this as the state of law is clear - I am to put myself in the place of the testatrix at the time she made her will, and concentrate on the “circumstances which then existed and which might reasonably be expected to influence” the testatrix in the disposition of her property; Kaptyn Estate (Re) 2010 ONSC 4293, [2010] O.J. No. 3347. There is no dispute that the testatrix’s intention was for the property to remain in the family.
[18] At the same time, she clearly foresaw obstacles that might prevent that and gave considerable thought to what was to occur should her deadlines not be met. What is significant is that in no case – either in terms of a preferred purchaser or in the distribution upon a sale – was John granted special status.
[19] These are the issues. First, how should the property be administered? Should it be sold at a price to be determined by the Applicants, in their sole and unfettered discretion – what I will interchangeably refer to as “the open market”? Or at 75% of the appraised value to one or more of the children? Second, should I order vacant possession?
[20] Jurisdiction to address these matters emanate from both the Trustee Act, R.S.O. 1990, c. T.23, and Rules of Civil Procedure. Section 60 of the Trustee Act provides that:
A trustee, guardian or personal representative may, without the institution of an action, apply to the Superior Court of Justice for the opinion, advice or direction of the court on any question respecting the management or administration of the trust property or the assets of a ward or a testator or intestate.
[21] Rule 14.05(3)(a)(d) of the Rules of Civil Procedure provides that:
(30) A proceeding may be brought by application where these rules authorize the commencement of a proceeding by application or where the relief claimed is:
(a) The opinion, advice or direction of the court on a question affecting the rights of a person in respect of the administration of the estate of a deceased person or the execution of a trust; and
(b) the determination of rights that depend on the interpretation of a deed, will, contract or other instrument, or on the interpretation of a statute, order in council, regulation or municipal by-law or resolution.
[22] While not raised in argument, there is an issue respecting the effective dates of the two appraisals. In my view, the first appraisal is invalid as it did not assess the property’s value at the time of the testatrix’s death. The will is quite clear on this. It does not say “on or about” or “near” her date of death. It reads “at the date of my death”. The second appraisal was effective as of the date of death. Consequently, nobody made an offer at 75% of a properly appraised value within the one year deadline, which suggests that the property should be sold on the open market. John would likely find this to be an unjust result given he was unaware of that second appraisal during the first year, but I note that neither he, nor anyone else, ever attempted to purchase the property on this scale. In the event that I am wrong, I will proceed with the analysis assuming that all of the competing offers were validly made and in accordance with the will.
[23] The will is clear in that the testatrix wanted the property to remain in the family. However, this is quickly displaced once her deadline passes. At that point, she wants a sale and distribution at the percentages she sets out. The problem is, she does not say what should occur if there are competing offers made within the prescribed time. My task is to discern her intention in this respect, if I can.
[24] These are the steps I must follow when interpreting a will to determine intention:
First, I must interpret the words of the will alone;
Second, I must consider indirect evidence related to the surrounding circumstances (“armchair rule”);
Third, I am to consider direct evidence of intention if there is an equivocation/latent defect;
Fourth, consider statutory rules if applicable;
Fifth, consider the principles of construction but only if the intention is not clear from the preceding steps.
[25] If an intention cannot be ascertained, the provision is void for uncertainty and the Succession Law Reform Act (SLRA), or the common-law rules for void gifts not covered by the SLRA, should be applied.
[26] What was the testatrix’s intention respecting the disposition of the property? She provided very specific instructions:
Have an appraisal completed by a licensed appraiser to determine the fair market value at the date of her death.
Sell the property to a child or children at 75% of that appraised value, if possible.
Ensure that any agreement of purchase and sale to a child or children be entered into within one year of her death.
If an agreement of purchase and sale to a child or children is completed, the transaction must close within 60 days of said agreement.
If an agreement of purchase and sale to a child or children is not reached, or if one is reached but the transaction does not close within 60 days, the property is to be sold at a price to be determined by the trustees in their sole and unfettered discretion.
If sold at this stage, either to a child(ren) or on the open market, the sale proceeds are to be distributed unequally.
[27] Looking only at the testatrix’s words, she clearly wanted the farm to remain in her family. Having said that, she wanted it disposed of quickly and within a prescribed time, and she unambiguously directs an unequal distribution should the property not be sold to a child within that time.
[28] Therefore, having regard to the testatrix’s words alone, once a year passed from the date of her death her intention to dispose of the property as her trustees saw sit trumped her desire to keep it in the family. In other words, her intention to keep the property within the family then ceased being a mandatory instruction.
[29] Once a year passed, the property was to be sold at a price to be determined by the Applicants in their sole and unfettered discretion. No exceptions. Once again, I can see how John might find this to be an unjust result, as it is clear the only reason an agreement was not completed within a year was because of the Applicants uncertainty about what offer to accept. In light of that concern, I will continue further in the analysis.
[30] What is not clear from the will, is what is to happen if there are competing offers that are all made within a year of death. There are several possibilities. She might have intended that the first offer in time be accepted. She might have intended that the offer that included the most children as joint owners (or as tenants in common) be accepted. She might have intended that the offer from the child who is most likely to personally farm the property be accepted. She might have intended that an offer which included a certain combination of children be preferred to others. It is impossible to say. There is no indirect evidence of intention that would enable me to evaluate the surrounding circumstances while “sitting in the armchair” of the testatrix. I do not know what her intention was and there is no way for me to know. Furthermore, there is no extrinsic evidence of her intention.
[31] I am not helped by applying general principles of construction as, in reading the will as a whole, there is no guidance or direction in how para. 4(d) should be interpreted. No statutory principles assist either. What this means, unfortunately, is that the portion of para. 4(d) that stipulates the property be kept in the family and sold to a child or combination of children at 75% of the appraised value, is void for uncertainty.
[32] The question then becomes whether the SLRA operates to capture the property as residue of the estate, which would have it distributed equally between her children. Or whether the unequal distribution set out in that same clause should apply. Perhaps the better question is, given my conclusion that the first portion of para. 4(d) is void for uncertainty, does that mean the entire paragraph is void?
[33] The answer is found within s. 23 of the SLRA which provides that:
- Except when a contrary intention appears by the will, property or an interest therein that is comprised or intended to be comprised in a devise or bequest that fails or becomes void by reason of,
(a) The death of the devisee or donee in the lifetime of the testator; or
(b) The devise or bequest being disclaimed or being contrary to law or otherwise incapable of taking effect, is included in the residuary devise or bequest, if any, contained in the will.
[34] Given my finding of uncertainty, the starting point is the property’s inclusion in the residue. However, this is displaced if a “contrary intention appears by the will”. I find that there is such a contrary intention. The testatrix intended that the property be sold at the trustee’s discretion with the proceeds being unevenly distributed amongst her children. This, in effect, renders the two components of clause 4(d) severable. While there is uncertainty about what the Applicants are to do within that first year option period, there is no ambiguity whatsoever in respect of how the property was to be disposed of if a sale could not be accomplished in that time.
[35] The remaining question is whether the testatrix intended that the property be put on the market and sold with an unequal distribution, for reasons other than a failure to meet the one year deadline. Para. 4(d) reads that “in the event that none of my children, or combination of same, have agreed to purchase the same farm, within the prescribed time”. Did the testatrix only intend that the property be sold on the open market if the children failed to enter into an agreement because of time constraints, or did she intend that the property be sold on the market even when the children do not come to an agreement for reasons other than time, such as uncertainty that arises when more than one offer is made?
[36] I ask this question because, to direct an open market sale “in the event that none of my children, or combination of same, have agreed to purchase the farm” could mean either ‘in the event that none of my children agreed to purchase the farm because an offer was not made within a year’, or ‘in the event that none of my children agreed to purchase the property because too many offers were made and an uncertainty arose about which one to accept’.
[37] I find that the property was intended to be sold at the Applicants discretion if the time deadlines were not met, for any reason at all, including a failure due to uncertainty. Also, if the deadline was not met, again for any reason, the testatrix intended an unequal distribution in accordance with para. 4(d). This is the only logical conclusion. Principles of construction are most helpful here as, when you read the will in its entirety it is clear that the testatrix wanted a sale within the family, failing which, there was to be an unequal distribution of the sale proceeds. The unequal distribution she directs is in no way dependent on the form of the sale, or price. That being the case, and there being no other direction as to the property’s sale, means that an equal distribution would be contrary to her intention.
[38] The testatrix must have intended that the remainder of para. 4(d) (that deals with the distribution) continue in force even if the provision for the sale to children at a reduced price, fails. Under the presumption of legality, this intention is presumed to accord with the law.
[39] In the result, the property is to be sold at the Applicants discretion with the sale proceeds divided in accordance with the percentages provided for in para. 4(d).
[40] I turn now to the issue of vacant possession.
[41] John argues that he should be permitted to remain in possession until the sale is completed. This presents a problem. First, the testatrix’s will provides that the Applicants are “authorized” to rent the property to John at the same rate he was paying prior to death. If this was meant to be a mandatory provision she would have said so, and this would have foreclosed a vacant possession order. But she does not say that. Her language, and in my view intention, is permissive. She authorizes the Applicants to enter into that arrangement. We now know, given the request for vacant possession, that the Applicants in fact do not want John continuing to use or rent the property.
[42] The jurisprudence has made it clear that if a testatrix’s intention is contrary to the ordinary meaning of her words, the intention wins out. In this case, however, there is no indirect evidence about the surrounding circumstances that would allow me to conclude the testatrix intended anything other than what a plain reading of her will reveals – which is to permit the Applicants to rent the property at a reduced rate if they so desired.
[43] One could argue that because she gives John a lower percentage of the sale proceeds that her intention was to give him another benefit in the form of reduced rent. To balance the scales so to speak. However, she also “authorized” the Applicants to rent property to Franklin at a reduced rate, and he is to receive a higher percentage of the sale proceeds. I am therefore unable to conclude that para. 4(m) of the will was a compulsory instruction intended to balance the reduced percentage of sale proceeds due John.
[44] I make the order for vacant possession as requested.
[45] Of course, the Applicants and John may still agree to a sale, and or continue a rental arrangement in the meanwhile, but absent that, John must vacate the property in a reasonable period of time as directed by the Applicants.
[46] In summary, this is my direction:
The Applicants are at liberty to sell the property to whomever they chose and at a price they determine, in their sole and unfettered discretion.
The Applicants are to distribute the sale proceeds in accordance with the percentages provided for in para. 4(d) of the will.
An order for vacant possession will issue.
[47] If costs cannot be agreed on, I invite brief written submissions. The Applicants have 30 days. John 10 days after that to respond.
“Justice J.C. George”
Justice J.C. George
Released: January 30, 2018
COURT FILE NO.: 4739/14
DATE: 2018/01/30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Steven Augustine Janicek, Jr. and Franklin Mark Janicek
Applicants
– and –
John James Janicek and Andrew Ladislaus Janicek and Marianne Frances Janicek
Respondents
REASONS FOR DECISION
Justice J.C. George
Released: January 30, 2018