Court File and Parties
COURT FILE NO.: CV-21-00661845-00ES DATE: 2021-11-02
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE ESTATE OF Joseph Lugarich, deceased
RE: JOSEF LUGARICH, Applicant
AND:
ANTOINE-RENE FABRIS and VICTORIA ELLEN EDLUND, Respondents
BEFORE: Penny J.
COUNSEL: Dagmara Wozniak for the Applicant R. Douglas Elliott for the Respondents Antoine-René Fabris and Victoria Ellen Edlund
HEARD: November 2, 2021
ENDORSEMENT
1This is a motion by the respondents for an order: a) authorizing Mr. Fabris to complete the sale of the property municipally known as 10 McCully Street, Toronto, Ontario to the buyers, Rudy Brock Langeballe and Bernadette Liza Langebella, in accordance with the terms of an agreement of purchase and sale dated June 7, 2020; and, b) that the net proceeds of sale be deposited into the trust account of Brown and Fabris LLP to be held on behalf of the Estate of Joseph Lugarich until further order of court.
2The parties agree that the Buyers are bona fide third-party purchases without notice and that the sale of the property to them should be concluded. There is only one disputed issue on the motion. The applicant, Josef Lugarich Jr., takes the position that Mr. Fabris, the named Estate Trustee under the will of the Deceased, should not complete the sale and that the completion of the sale should be done by an as yet unappointed estate trustee during litigation, the need for which is in dispute in this litigation and not before me on this motion.
3At the conclusion of oral argument, I ordered that: a) Mr. Fabris would complete the sale on behalf of the Estate, b) the net proceeds of sale would be held by Brown and Fabris LLP in trust until further order of the court; c) Mr. Fabris would retain an independent real estate solicitor to act for the Estate on the sale closing; d) the applicant would have the right, before closing on November 30, 2021, to have his real estate valuator inspect the property; and, e) the issue of whether there needs to be an estate trustee during litigation, as well as several other outstanding issues, will be argued at a 2 ½ hour motion fixed for February 24, 2022 at 10:00 AM. I indicated that I would issue reasons for my decision shortly. These are the reasons.
Background
4The Deceased died on December 6, 2019. He made a Last Will and Testament dated November 13, 2018. In the 2018 Will, the Deceased appointed Mr. Fabris, who is a lawyer, as the Estate Trustee and left the entirety of his Estate to his late wife’s daughter, Victoria Elund. The Deceased’s son, the applicant, is challenging the validity of the Deceased’s 2018 Will. In December 2019, the applicant filed a Notice of Objection with the Court which had the effect of preventing the issuance of a Certificate of Appointment of Estate Trustee to Mr. Fabris. The parties agree that the will challenge issues of capacity and undue influence will require a trial. The case is in its early stages still. In a case management endorsement of September 28, 2021, I ordered that the sale of the property was an urgent issue that needed to resolved as soon as possible and, for that purpose, timetabled this motion for argument today.
The Applicant’s Opposition to Mr. Fabris
5Relying on Class v. Smith, 2018 ONSC 623, the applicant argues that Mr. Fabris ought not to be the one to complete the transaction or be involved in handling any assets of the Estate because:
(i) he is a party litigant;
(ii) he is in an adversarial position to the applicant; and
(iii) he is in a conflict with the Estate in relation to his handling of the sale after being put on notice of the will challenge.
6This last argument is based on the applicant’s allegation that Mr. Fabris’ sale of the property as Estate Trustee under the 2018 Will has given rise to a breach of trust claim against him because he erroneously relied upon the 2018 Will as authority for entering into the sale agreement when he knew that the validity of the 2018 Will was being challenged and his actions have caused the Estate damages because the property is worth more today than it was in June 2020.
7I am unable to accept any of these arguments. Class is an estate trustee during litigation case. The disputed issue of the need for the appointment of an estate trustee during litigation is not before me on this motion. That issue remains to be decided in a future motion.
8The applicant’s arguments fundamentally misunderstand his position in this litigation. The 2018 Will is valid until proven otherwise. The applicant is not a beneficiary under the 2018 Will. Mr. Fabris, therefore, owes no fiduciary duties to him; those duties are owed to Ms. Eland. Under a prior will, the applicant was a one-half beneficiary along with Ms. Eland. But, until there is a final court determination that the 2018 Will is invalid, the applicant is not a beneficiary and does not have the rights of a beneficiary under the 2018 Will. For this reason, the applicant does not have a claim against Mr. Fabri for breach of trust; what he has is his litigation claim seeking to invalidated the 2018 Will that might, someday after a trial, put him in the position of having a claim for breach of trust against Mr. Fabri.
9The applicant’s arguments are both technical and theoretical. He has been unable to identify any need for, or benefit to the Estate, of replacing Mr. Fabri in order to conclude the sale of the property to the bona fide Buyers.
10There are, on the other hand, many reasons why not having Mr. Fabri complete the sale would be detrimental and inadvisable.
11First and foremost, the agreement for the sale of the property was made on June 7, 2020. The Buyers (who, it is now conceded, are bona fide purchasers for value without notice) are a young couple with young children who have been caught in limbo for over a year. They have shown great restraint in not suing the Estate for breach of contract and damages. Removing Mr. Fabris as Estate Trustee does not advance the closing of this transaction - it impedes it. With no Estate Trustee, there can be no closing. A replacement would have to be found. Short of a decision on the pending but disputed motion to appoint an estate trustee during litigation, there is no other way proposed by the applicant to replace Mr. Fabris. Thus, the removal of Mr. Fabris from the picture will inevitably add to the already intolerable delay in closing the sale purchase.
12Mr. Fabris is the named executor. He was chosen for that role by the Deceased. The fact that he does not have certificate of appointment is the result of the applicant’s notice of objection. The lack of a certificate does not release Mr. Fabris from his obligations as Estate Trustee. Mr. Fabris is not a beneficiary of the estate. He has no financial stake in the outcome of the applicant’s will challenge. As noted above, the applicant is also not a beneficiary estate. His financial stake is contingent on the success or failure of his challenge to the 2018 Will, a matter that will not decided for some time and, even then, only after a trial.
13Further, Ms. Eland has paid all of the carrying costs of the Estate, including the carrying costs of the property, out of her own pocket. More delay in concluding the sale equals more carrying costs to preserve the property, which is more expense to Ms. Eland; this is expense, I might add, which the applicant refuses to agree to reimburse from the Estate. The applicant, by contrast, has paid none of these costs. I agree with counsel for the respondents that the applicant is, in this sense, behaving like the proverbial dog in the manger.
14In a similar vein, Ms. Eland is the sole beneficiary under the 2018 Will. The costs of preserving the property are costs of the Estate. If the will challenge is unsuccessful, she will bear all of that cost; absent court order to the contrary, the applicant will bear none. Even if the will challenge is successful, Ms. Eland will still suffer the effect of half of those costs.
15Finally, Mr. Fabris is a member in good standing of the Law Society of Ontario. He is liable to account and is subject to stringent rules of professional conduct and rules governing the management of trust funds. There is no evidence whatsoever suggesting he represents a risk to the preservation of the assets of the Estate. Mr. Fabris’ has no obligation to speculate on the real estate or equities markets. His duty is to bring in, liquidate and hold the assets of the estate until distribution. That, based on the evidence, is precisely what he is doing, to the extent possible without a certificate.
16For all these reasons, I grant the order sought on the motion on the following terms:
(a) Mr. Fabris shall exercise the full authority of Estate Trustee in closing of the sale of the property to the Buyers on behalf of the Estate. By agreement with the Buyers, that closing shall take place on November 30, 2021;
(b) Mr. Fabris shall retain the services of an independent real estate solicitor to act for the Estate on the closing. That cost shall be a deduction from the gross purchase price on the statement of adjustments, to be paid by the Estate, along with other ordinary course adjustments. Included in those adjustments shall be the amount of lawn care expenses upon which, I understand, the parties have agreed;
(c) Mr. Fabris shall ensure that all closing documents, including the statement of adjustments, are provided to counsel for the applicant within two days after closing. Any concerns raised by the applicant shall not impede the closing of the property sale but may be dealt with subsequently in the context of the ongoing will challenge proceedings;
(d) the net proceeds of sale shall be held by Brown and Fabris LLP in trust for the benefit of the Estate pending written agreement of the parties or further court order to the contrary;
(e) the applicant shall have the right, if exercised expeditiously prior to November 30, 2021, to have his real estate valuator inspect the property for purposes of preparing an opinion of fair market value for use in the will challenge proceedings; and
(f) the motion for the appointment of an estate trustee during litigation, the reimbursement of certain Estate expenses and other matters, shall proceed for two and a half hours on February 24, 2022 at 10:00 AM (confirmed by the Estates List office).
17Costs of the motion shall be paid by the applicant to the Estate in the amount of $2,000 (all inclusive) forthwith.
Penny J.
Date: 2021-11-02