The Estate of Pandke v. Lauzon et al.
[Indexed as: Pandke Estate v. Lauzon]
Ontario Reports
Ontario Superior Court of Justice
Gordon J.
January 6, 2021
154 O.R. (3d) 307 | 2021 ONSC 123
Case Summary
Evidence — Hearsay — Testator writing two cheques to her son and daughter-in-law in the weeks before her death — Surviving spouse was beneficiary of residue of estate and applied for return of funds — [page308] Application allowed in part — Cheque to daughter-in-law was a gift and did not have to be returned — Hearsay evidence of testator's intention admissible under exception to demonstrate declarant's intention or state of mind — Evidence corroborated by independent evidence and presumption of undue influence rebutted — Cheque to son was not a gift — Hearsay evidence admissible but not corroborated — Presumption of undue influence rebutted but presumption of resulting trust not rebutted.
Trusts and trustees — Resulting trust — Testator writing two cheques to her son and daughter-in-law in the weeks before her death — Surviving spouse was beneficiary of residue of estate and applied for return of funds --Application allowed in part — Cheque to daughter-in-law was a gift and did not have to be returned — Hearsay evidence of testator's intention corroborated by independent evidence and presumption of undue influence rebutted — Cheque to son was not a gift — Presumption of undue influence rebutted but presumption of resulting trust not rebutted.
C and W had been married for 25 years when C was hospitalized with cancer. After her discharge from hospital on August 4, it was agreed that she would live with S and M, her son and daughter-in-law, as W did not have the physical capacity to care for her. On August 18, M negotiated a cheque for $35,000 signed by C and payable to M, with the memo line indicating that it was for rent. On August 22, S negotiated a cheque for $90,000 signed by C and payable to S, with the memo line indicating that it was for medical expenses. The two cheques together represented the large majority of C's liquid assets. C died on August 25. Her will made small gifts of personal property and devised the residue of the estate to W. A codicil revoked the appointment of W as executor and appointed S in his place, but W was still to inherit the residue of the estate. W applied to have M and S return the $125,000 on the grounds that the cheques were not gifts and that C both lacked capacity and was subject to undue influence. When W passed away, the application was continued by his estate.
Held, the application should be allowed in part.
The cheque for $35,000 was a gift to M. M deposed that C instructed her to use the money to pay off S's truck loan and line of credit, not wanting M and S to suffer financially from S having quit his job to help care for C. M also acknowledged that amount of the cheque had been left blank, and that she paid the truck loan in the amount of about $13,000 and the line of credit in the amount of about $7,400. That evidence of C's instructions was hearsay, but it was admissible under the exception arising when a declarant's statement was adduced to demonstrate the declarant's intentions or state of mind when the statement was made. It also would have been admissible under the principled approach to hearsay. There was a potential for S or M to dominate C's will thereby raising a presumption of undue influence, but that presumption was rebutted. It was reasonable that C would offer a financial gift to S and M to express her gratitude for their efforts and financial sacrifice. There was corroboration in the form of independent evidence that S had left his employment to look after C, and that S and M had a truck loan and line of credit. C was aware of the amount that M had entered on the cheque because she transferred that amount into her account the next day to cover the cheque.
The cheque for $90,000 was not a gift and the amount had to be returned to W's estate. S deposed that C gave him a blank cheque which he filled out at C's request, with C expressing concern that she would not have time to change her will to [page309] remove W as a beneficiary and expressing a wish that S be able to do home renovations for her benefit and not suffer financially. Those statements were admissible for the same reasons that the statements to M were admissible. However, statements from a close friend of C to the effect that C intended to leave everything to her sons did not have sufficient indicia of reliability to admit them into evidence. The evidence presented by S contained several frailties that rendered the evidence insufficient to overcome the presumption of resulting trust. First, it was peculiar that S filled out the cheque in the absence of any suggestion that C was incapable of doing so. Second, the memo line could have simply stated that it was a gift rather than being for medical expenses. Third, the comment that C did not want S to suffer financially was not compelling in light of the cheque presented to M a week earlier. Fourth, C's wish to be able to benefit from home renovations contradicted her statement that she would not have time to change her will. Further, there was no admissible evidence to corroborate C's intention to gift the $90,000. The presumption of undue influence was not rebutted.
There was no indication that C lacked the mental capacity to make the gifts in question. Nor was there any evidence that S or M influenced the redemptions and transfers that C had made to fund the $90,000 cheque. And, although the presumption of resulting trust had not been rebutted with respect to that cheque, it was not a situation of elder abuse, actual undue influence or deliberate misappropriation of funds warranting punitive damages.
Barkacin v. Wasiak, [2009] O.J. No. 4793, 2009 ONCA 807, 72 R.F.L. (6th) 318, 182 A.C.W.S. (3d) 679, affg 2008 CanLII 70847 (ON SC), [2008] O.J. No. 5450, 64 R.F.L. (6th) 262, 2008 CarswellOnt 8162, 174 A.C.W.S. (3d) 192 (S.C.J.); Brisco Estate v. Canadian Premiere Life Insurance Co. (2012), 113 O.R. (3d) 161, [2012] O.J. No. 5732, 2012 ONCA 854, 299 O.A.C. 283, 16 C.C.L.I. (5th) 45, 82 E.T.R. (3d) 211, 224 A.C.W.S. (3d) 349; Geffen v. Goodman Estate, 1991 CanLII 69 (SCC), [1991] 2 S.C.R. 353, [1991] S.C.J. No. 53, 81 D.L.R. (4th) 211, 127 N.R. 241, [1991] 5 W.W.R. 389, J.E. 91-1059, 80 Alta. L.R. (2d) 293, 125 A.R. 81, 42 E.T.R. 97, 27 A.C.W.S. (3d) 930; Keljanovic Estate v. Sanseverino, 2000 CanLII 5711 (ON CA), [2000] O.J. No. 1364, 186 D.L.R. (4th) 481, 132 O.A.C. 19, 34 E.T.R. (2d) 32, 96 A.C.W.S. (3d) 685 (C.A.); McNamee v. McNamee (2011), 106 O.R. (3d) 401, [2011] O.J. No. 3396, 2011 ONCA 533, 335 D.L.R. (4th) 704, 280 O.A.C. 372, 69 E.T.R. (3d) 38, 4 R.F.L. (7th) 13, 204 A.C.W.S. (3d) 857, 2011 CFLG para. 26,688; Morreale v. Romanino, [2017] O.J. No. 2257, 2017 ONCA 359, 278 A.C.W.S. (3d) 450, 30 E.T.R. (4th) 21; Mroz (Litigation guardian of) v. Mroz (2015), 125 O.R (3d) 105, [2015] O.J. No. 1284, 2015 ONCA 171, 250 A.C.W.S. (3d) 719, 4 E.T.R. (4th) 171, 330 O.A.C. 324
Statutes referred to
Evidence Act, R.S.O. 1990, c. E.23, s. 13
APPLICATION for a declaration of resulting trust.
Spencer Ball, for applicant.
Gary Marcuccio and Jessica Bryce, for respondents.
GORDON J.: —
Overview
1In the weeks preceding her death, Carol Pandke ("Carol") advanced $125,000 to her son Steven Lauzon ("Steven") and his [page310] wife Marnee. She did so while married to William Joseph Pandke ("William"). William brought this application for, among other things, return of the funds. He has since passed away and the application has been continued by his estate.
Factual Background
2Carol and William were married on July 31, 1992. They had resided together for almost 25 years when on July 26, 2017, Carol was diagnosed with pancreatic cancer and given only months to live. She died on August 29 of that year.
3Following Carol's diagnosis, she was hospitalized until August 4. On her discharge, it was agreed she would live with Steven and Marnee as William did not have the physical capacity to provide the care she would require. The hospital provided her with a "pain pump" that allowed her to self-administer pain medication intravenously. She was in and out of the hospital until her death.
4On August 18, Marnee negotiated a cheque signed by Carol and payable to Marnee for the sum of $35,000. On the memo line of the cheque was written "For Rent".
5On August 22, Steven negotiated a cheque signed by Carol and payable to Steven for the sum of $90,000. On the memo line of the cheque was written "Medical Expenses".
6Together these two cheques represented the large majority of the liquid assets held by Carol.
7When she died, she had a will that had been signed on August 26, 2010. It appointed William as her Executor. It made small gifts of personal property and devised the residue of the estate to William provided he survived her for a period of at least 30 days. On November 24, 2015, Carol signed a codicil in which she revoked the appointment of William as her Executor and appointed Steven in his place. She otherwise confirmed that William was to inherit the residue of her estate.
8Steven and Marnee take the position that the cheques payable to them were gifts from Carol. William was of the view that Carol did not make the gifts, was subject to undue influence by Steven and Marnee and in any event lacked the mental capacity to make the gifts.
The Applicable Law
9The Court of Appeal for Ontario, in the case of Mroz (Litigation guardian of) v. Mroz (2015), 125 O.R. (3d) 105, [2015] O.J. No. 1284, 2015 ONCA 171 provided the following summary of the law of resulting trusts when applied to the transfer of assets from a parent to an adult child [at paras. 72 and 73]: [page311]
When a parent gratuitously transfers property to his or her adult child, the law presumes that the child holds the property on resulting trust for the parent: Pecore, at para. 20. The burden of rebutting the presumption is on the child. In determining whether the presumption has been rebutted, the trial judge must begin his or her inquiry with the presumption and then weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the parent transferor's actual intention at the time of the transfer: Sawdon Estate, at paras. 67-71.
The kind of evidence relevant to determining the transferor's actual intention at the time of transfer depends on the facts of the case: Pecore, at para. 55. A court may consider evidence of the transferor's conduct after the transfer, so long as it is relevant to the transferor's intention at the time of the transfer: Pecore, at para. 59.
10One of the ways to rebut the presumption of resulting trust is to establish that the transfer was a gift. To establish a gift, three elements must be established: (1) the donor's intention to make the gift; (2) acceptance of the gift by the donee; and (3) a sufficient act of delivery or transfer of the gift. (See McNamee v. McNamee (2011), 106 O.R. (3d) 401, [2011] O.J. No. 3396, 2011 ONCA 533.)
11Within the element of the donor's intention, issues may arise as to the voluntariness of the act (whether it was made as a result of the undue influence of another) and the mental capacity of the donor (whether he or she had the mental capacity to understand substantially the nature and effect of the transaction). (See Barkacin v. Wasiak, 2008 CanLII 70847 (ON SC), [2008] O.J. No. 5450, 2008 CarswellOnt 8162 (S.C.J.), affd [2009] O.J. No. 4793, 2009 ONCA 807.)
12Undue influence may be actual or presumed. Actual undue influence requires that a person's free will be overborne by an act of coercion or fraud. (See Keljanovic Estate v. Sanseverino, 2000 CanLII 5711 (ON CA), [2000] O.J. No. 1364, 186 D.L.R. (4th) 481 (C.A.).)
13Presumed undue influence arises when the potential for dominance of one party over the other is inherent in the relationship between them. When it is alleged that a child has exercised undue influence over a parent, the presumption arises only when it has been established that there is the potential for the child to dominate the will of the parent. The test requires that I consider the whole of the relationship between the parties to determine if there was the potential for domination rather than looking for a specific act of coercion or domination. (See Morreale v. Romanino, [2017] O.J. No. 2257, 2017 ONCA 359.)
14When there is a presumption of undue influence, it may be rebutted by establishing that the donor made the gift of his or her own full, free and informed thought. (See Geffen v. Goodman Estate, 1991 CanLII 69 (SCC), [1991] 2 S.C.R. 353, [1991] S.C.J. No. 53.) [page312]
15In my consideration of the issues raised in this matter, I must also bear in mind s. 13 of the Evidence Act, R.S.O. 1990, c. E.23 which provides that in an action by or against heirs or next of kin, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.
Analysis
16The respondents concede that the two cheques were gratuitous and result in a presumption of resulting trust. However, they say the presumption is rebutted by the evidence that the cheques were gifts. The main issue in this application is whether the respondents have satisfied me on a balance of probabilities that Carol intended the transfers as gifts.
The cheque for $35,000
17In Marnee's affidavit sworn May 30, 2018, she deposed that on August 16, 2017 Carol approached her, gave her a cheque for $35,000 and instructed her to use the money to pay off Steven's truck loan and credit line. She said Carol told her she was giving her the cheque because she knew Steven had quit his job to help care for her and she did not want them to suffer financially because of this.
18The money was used to pay the truck loan in the amount of $12,995.10 and the line of credit of $7,433.62.
19When cross-examined on her affidavit, Marnee acknowledged that Carol was in the hospital on August 16, that they had not been discussing the truck loan or line of credit and she did not know how Carol would have known of the existence of the debts. She further acknowledged that when she was given the cheque the amount was left blank and that she filled it in.
20Carol's banking records at CIBC reflect an internet transfer of $35,000 on August 17, 2017 from her and William's joint line of credit to her personal account on which the $35,000 cheque to Marnee was drawn. The cheque was cashed that same day and cleared on August 18.
Admissibility of Marnee's evidence of what Carol told her
21Marnee's evidence as to what Carol told her regarding the $35,000 cheque is hearsay. It is admissible before me only if it falls within a traditional exception to the hearsay rule or meets the threshold requirements of necessity and reliability. [page313]
22In my view, the statement of Carol is admissible under the exception to the hearsay rule that arises when a declarant's statement is adduced in order to demonstrate the intentions or state of mind of the declarant at the time when the statement was made. In this instance, the statement is adduced to demonstrate Carol's intention to make the gift.
23I am also of the view that the statement would be admissible under the principled approach to hearsay. Obviously, the necessity requirement is met as Carol has passed away. With respect to reliability, I must look to circumstantial guarantees of trustworthiness arising out of the circumstances in which the statement was made. Importantly, my analysis at this stage has nothing to do with the credibility or reliability of Marnee as she has been cross-examined on her evidence. In determining the admissibility of the evidence of Carol as hearsay, I assume the statements were made by her and look to the circumstances for guarantees of trustworthiness.
24I find this hearsay evidence to meet the threshold for reliability for several reasons. To begin with, it was made by Carol to a close family member at a time when she knew she was dying. Second, there was no motive for her to have lied. Third, her actions in preparing and signing a cheque payable to Marnee were consistent with the statements attributable to her.
Was it a gift?
25I accept the evidence of Marnee with respect to the cheque for $35,000.
26Carol was terminally ill. She had gone to live with Steven and Marnee who assumed full responsibility for her day-to-day care. She believed Steven to have left work in order to stay with her and provide for her. It was reasonable to infer there would be financial consequences to them as a result. She had not, it seems, been asked to pay anything to remain with them. In these circumstances it strikes me as completely reasonable that she would offer a financial gift to Steve and Marnee to express her gratitude for their efforts and the financial sacrifice they were making. It also explains why she inserted the words "For Rent" on the cheque -- because she regarded the money as a form of compensation to them for having taken her in.
27I acknowledge that the cheque was for significantly more than what was owing on the line of credit and truck loan and that Marnee filled in the amount of the cheque. However, Carol was obviously aware of and accepting of the amount because she arranged a transfer of funds into her account of $35,000 the next day in order to cover the cheque. [page314]
Corroboration
28As indicated by the Court of Appeal for Ontario in Brisco Estate v. Canadian Premiere Life Insurance Co. (2012), 113 O.R (3d) 161, [2012] O.J. No. 5732, 2012 ONCA 854, s. 13 of the Evidence Act is not to be given a narrow interpretation when considering the scope of the evidence capable of corroborating the evidence of the interested party. In that case the court confirmed the nature of the corroboration requirement as being such as to enhance the probability of the truth of the witness's evidence upon a substantive part of the case raised by the pleadings.
29The required corroboration exists in this instance. There is independent evidence that Steven had left his employment to look after Carol. There is independent evidence that he and Marnee had a truck loan and a line of credit. The independent proof of these facts enhances the probability of the truth of Carol's stated intention to gift them the money in question.
The cheque for $90,000
30In his affidavit of May 31, 2018, Steven deposed that on or about August 22, 2017 his mother wrote him a cheque for $90,000 expressing concern that she would not have the time to change her will but that she wanted her sons to have it. He says his mother told him that she wanted him to be able to do renovations to his home and did not want him to suffer financially because he became unemployed in caring for her.
31When cross-examined on his affidavit, Steven said his mother told him that she wished to eliminate William from her will but that he did not otherwise know what she intended to do. He admitted that what Carol had given him was a blank cheque, which he filled in at her request and she signed. When asked why the cheque referenced "medical expenses" he explained that he had asked what his mother wanted him to insert and she replied "I don't care. Just write medical expenses."
32There was evidence from other witnesses that she intended to speak to a lawyer concerning her will and had made efforts to do so, but the only other person to say what changes she intended to make was Dorothy Klein a woman who was a close friend of Carol's for many years. In her affidavit she deposed that she and Carol discussed her wishes and that Carol personally told her that she intended to leave everything to her sons. She said that she intended for Steven to have a bit more as she depended on him a lot for help and advice. [page315]
33When cross-examined on her affidavit she was asked when Carol told her this. She replied that Carol told her this repetitively in the last five years of her life.
Admissibility of Carol's statements
34The statements Carol made to Steven are admissible for the same reasons the statements she made to Marnee are admissible. They evidence her state of mind at the time the cheque was signed and given to him. There also exist the same indicators of reliability.
35With respect to the statements made by Carol to Ms. Klein there is little detail aside from them having been made "repetitively in the last five years of her life" and no context from which to assess their reliability. There is no evidence of how often she repeated this, under what circumstances or when it was last stated. As Ms. Klein was not present when the cheque was delivered and had no knowledge about it, the statements cannot be admissible with respect to Carol's state of mind when the cheque was given to Steven. In my view, there are not sufficient indicia of reliability to allow them into evidence.
Was it a gift?
36There are significant difficulties with the evidence as presented by Steven.
37First, it is somewhat peculiar that Steven filled out the cheque. There is no suggestion by him anywhere that Carol would have been incapable of doing so and no explanation of why he was asked to do it.
38Second, there is the reference on the cheque to "Medical Expenses". On its face, this reference does not in any way accord with the conversation he relates with his mother in which she indicates her wish to give her money to her sons. One might wonder why she did not simply ask him to note it as a gift, if that is what it was.
39Third, the statement attributed to her that she did not want him to suffer financially because he had left work to care for her is not compelling in light of her having, only a week earlier, given Marnee sufficient funds to retire their truck debt and line of credit and leave them with almost $15,000 in cash. It is all the more unlikely if she was concerned that she would die shortly, since presumably Steven would return to work when he was no longer required to care for her.
40Fourth, the explanation given by Steven on cross-examination with respect to the renovations is not compelling. He said the following: "My mom expected to live there and live there for a long [page316] time. And her renovation ideas were suggestions on how she could improve her view to the river and found that our bathroom was too small, and she wanted it to be bigger if she was going to stay there." However, that would specifically contradict her concern that she would not have time to change her will. That is, if she intended to be with them for a long time -- long enough the see the renovations complete and enjoy them -- surely, she would have had sufficient time to change her will. Indeed, there is evidence that she had an appointment scheduled for the day after she died for the very purpose of reviewing her will with a lawyer. These two aspects of her statement are clearly contradictory.
41These frailties render the evidence insufficient to overcome the presumption of resulting trust.
Corroboration
42In any event, there is no admissible evidence to corroborate Carol's intention to gift the $90,000 as required by s. 13 of the Evidence Act.
The issue of capacity
43The applicant has also suggested that Carol lacked the mental capacity to make the gifts in question. The suggestion is made largely because of the odd references provided on the cheques -- one as for rent and the other for medical expenses.
44There were no medical records entered into evidence. There is no expert opinion on her capacity or lack thereof. There is no evidence of the specific drugs she was administering for pain or the dosage levels.
45What we do know is that she was suffering from terminal pancreatic cancer. We know from the evidence filed that she required pain medication and that it made her drowsy at times. We know that she endured three or four surgical procedures during the month of her illness from which we may reasonably infer periods of convalescence during which she may not have had full capacity. However, we also know from the evidence that she was awake and alert a good deal of the time. That she continued to communicate regularly with family members and colleagues. That she did what she could to assist in the sale of her home and that she spoke to her broker and gave him instructions to deal with her investments. I do not doubt that there were times when she would not have had the capacity to do many of these things. But there were times when she could and did.
46On the evidence before me there is nothing to indicate that she lacked capacity at the specific times she signed the cheques in question. [page317]
The issue of undue influence
47Carol was an elderly woman dying in the late stages of pancreatic cancer. She was in pain, receiving intravenous pain medications, unable [to] provide herself with the care she needed, reliant upon Steven and Marnee and had moved from her home to theirs. Whether it was warranted or not, as of August 13, Steven had restricted William's access to Carol to 15 minutes per day, and only while she was in the hospital. The evidence is reasonably clear, by that time Steven had little time or use for William and was in control of his mother and her care.
48Having regard to these factors, I am satisfied there was the potential for Steven or Marnee to dominate the will of Carol. It follows that there was a presumption of their having unduly influenced Carol that is rebuttable by establishing that she made the gifts of her own full, free and informed thought.
49With respect to the cheque for $35,000 I am satisfied that the presumption is rebutted. I am satisfied that she would have wished to assist them financially at that time and the gift was made for purpose of doing so. It was confirmed by her movement of money between accounts the following day so that the cheque would clear.
50With respect to the cheque for $90,000 the presumption remains. The only evidence of her having made the gift of her own full, free and informed thought is the evidence of Steven, which is uncorroborated and fraught with frailty as noted above.
Unnecessary income tax triggered by the RRIF transfer
51When Carol took ill, she had a retirement income fund plan with a balance of about $119,668.
52On August 10, during a personal meeting with her financial advisor, she directed him to transfer $66,597 from the plan to her tax-free savings account. This triggered a withholding tax of $19,979. The net deposit to the TSFA was $46,618.
53On August 18, during a telephone conversation with her financial advisor, Carol directed him to redeem the balance of the RIF and have it deposited to her Canadian Imperial Bank of Commerce personal account. This resulted in a withholding tax of $15,484.
54Also, on August 18, she directed that full balance of the TFSA be transferred to her personal account at CIBC.
55It was the proceeds of these redemptions and transfers that funded the $90,000 cheque to Steven. The applicant submits that Steven should be responsible for the taxes triggered by the transfers and redemptions of the RIF because had they not occurred the plan could have been rolled over to William on a tax-free basis. [page318]
56There is no evidence to suggest that the dealings Carol had with her investment advisor were in any way tainted by Steven or Marnee. In fact, the investment advisor made clear notes of his dealing with Carol that were entered into evidence on consent. Those notes indicate he received directions specifically from Carol to carry out these transactions after having fully explained the income tax consequences that would result.
57Although it was suggested that because the investment advisor and Steven had previously worked together there may have been some sort of scheme between them, there was no evidence to support the notion that the investment advisor had acted in any way other than with complete professionalism.
58Steven cannot be responsible for the tax consequence of the investment decisions made by Carol.
Punitive damages
59The applicant framed this action as an incident of elder abuse wherein Steven and Marnee misappropriated a significant amount of money from Carol on her deathbed and asked that punitive damages be assessed.
60I decline to do so.
61Although the presumption of resulting trust has not been rebutted by the evidence of the respondents with respect to the $90,000 cheque, I am not satisfied there was the sort of elder abuse, actual undue influence or deliberate misappropriation of funds alleged by the applicant. Perhaps there was, but I am not persuaded of that on a balance of probabilities.
62The applicant is successful largely because of applicable legal presumptions and rules of evidence. The proved conduct of the respondents is not such as to warrant punitive damages.
63Steven's treatment of William during the last weeks of Carol's life lacked compassion, as did his actions as estate trustee following her death. However, in all of the circumstances it is my view his conduct did not rise to the level of malicious, oppressive and high-handed conduct required for an award of punitive damages.
Conclusion
64The respondent Steven Lauzon holds the sum of $90,000 paid to him, in trust for the Estate of Carole Pandke. As the applicant is the sole beneficiary of the estate, he is entitled to the payment. Accordingly, it is ordered that Steven Lauzon pay to the Estate of William Pandke the sum of $90,000 along with appropriate prejudgment interest. [page319]
65If the parties are unable to agree on costs, they may make written submissions to me, not to exceed five pages plus attachments each, within 45 days.
Application allowed in part.
End of Document