COURT FILE NO.: CV-23-696578-00ES
DATE: 20231211
ONTARIO SUPERIOR COURT OF JUSTICE (ESTATES LIST)
IN THE MATTER OF THE ESTATE OF DONATO VALERIO, DECEASED
RE: MARY GRACE LOPRESTI, Applicant -and- PASQUALINO VALERIO, personally and in his capacity as a former attorney for property and attorney for personal care for Donato Valerio and in his capacity as the named estate trustee for the estate of Donato Valerio, Respondent
BEFORE: FL Myers J COUNSEL: Natalia R. Angelini, for the applicant Peter Askew, for the respondent HEARD: December 8, 2023
ENDORSEMENT
The Motion
[1] The applicant seeks to invalidate the codicil that made the respondent the sole ET of their father’s estate. The father’s will initially appointed both sibling parties as ET. The father purported to sign his codicil removing the applicant as an ET just weeks before he passed away.
[2] The respondent ET moves for leave to sell the 10-acre homestead in Markham, Ontario that is the principal asset of the estate.
[3] Instead of selling the homestead, the applicant wants the estate to sever the property to create two 5-acre parcels. She wants to keep her half of the property in kind. Under her proposal, the respondent will be free to sell his half.
[4] The applicant not only attacks the recent codicil, but she also applies to remove the respondent as ET altogether. If the applicant just set aside the codicil, then the will would make the two siblings jointly ETs. In that case, I strongly suspect that a deadlock would lead to a sale rather than a potentially lengthy and costly severance process. She needs to be the sole ET to implement her goal.
[5] To support her application to remove the respondent as ET, the applicant has adduced evidence containing significant allegations of financial wrongdoing committed the respondent to his parents and third parties over the past 15 years. She says that her parents did not trust the respondent in financial matters due to the harm he caused them with his own wrongdoing. She says they never would have made him the sole ET. Rather, she says she must be made the sole ET to fulfill her parents’ wishes (to which the respondent agreed) that the homestead be kept in the family for succeeding generations.
[6] The respondent’s evidence on the main application makes polar opposite allegations against the applicant and her husband. The father’s lawyer’s files, at first blush, support the respondent’s position that the father had capacity and deliberately wanted the respondent to be the sole ET. But there are clear factual disputes between the siblings concerning the risk of undue influence that require cross-examination at minimum. There is no way to resolve the credibility issues on this motion.
The Process to Date
[7] By consent order made by Sanfilippo J. dated May 30, 2023, the court imposed an agreed timetable for the steps in the application. The order imposed an interim freeze to prevent the respondent from dealing with the property. But it also scheduled this motion by the respondent to decide if the property should be sold prior to the main hearing of the application.
[8] I disagree with the applicant’s submission that the interim freeze precludes the sale of the property until her allegations are heard at the hearing of the main application. That is not what the order says. Rather, it says that the ET will not deal with the property, “without further court Order or agreement of the parties in writing.”
[9] Para. 14 of the order provides scheduled this motion, “in respect of the sale of the Markham Property.”
[10] The interim freeze cannot be read to prohibit a sale before the hearing of the main application when it expressly allows the respondent ET to deal with the land if authorized by a court order and it set the date for the respondent to try to obtain an order for the sale of the property on this motion.
[11] There will be no point in removing the respondent as ET if the homestead property is liquidated. Practically speaking, the sale of the property will determine the outcome of the application. The applicant only wants to attack the codicil and her brother’s position as ET to try to sever the property so she can keep her half in kind. If the whole property is sold, then there will just be money to split (in addition perhaps to a few chattels if not sold with the property).
[12] But this process, whereby a successful motion to sell the property may determine the outcome of the application, is what the parties agreed to put in place under the court’s order last May.
[13] The property is vacant and is a cost centre. The estate has no cash. The respondent has spent almost $30,000 of his own money maintaining the estate. The applicant has spent an additional $6,000 of her own.
[14] The applicant has obtained a report from a planner that says that the land can be severed in a few months for as little as $25,000. However, it is not admissible for the truth of its contents. The report is not written in the form of an expert report for Rule 53 of the Rules of Civil Procedure. It is not signed. It does not contain the mandatory information required by Rule 53.03 (2.1). It is not supported by a proper expert acknowledgement. It is not evidence adduced under oath. Appending it to the applicant’s affidavit does not make the report admissible. Sanzone v. Schechter, 2016 ONCA 566, at para. 16.
The Respondent’s Motion to Sell the Property
[15] The respondent’s request to sell the property is straightforward. He submits it is the basic statutory and fiduciary duty of an estate trustee to realize on the assets of the estate so as to pay debts, expenses, and liabilities and then to distribute the estate assets, such as they are, to the beneficiaries under the will.
[16] The deceased’s will has the standard clauses concerning asset realization by the ET. The will says nothing to suggest that the deceased intended that the homestead be kept or distributed in kind. No doubt the ET has the discretionary authority to distribute assets in kind if the estate can meet its obligations otherwise. But, the respondent submits, neither the applicant nor the court has the legal authority to compel the ET to undertake a complex real estate transaction, like a municipal severance, which will delay administration of the estate and leave creditors unpaid with liabilities and expenses mounting in the interim.
[17] Even if the land is severed, it will still need to be sold to meet expenses and debts unless other assets yield sufficient proceeds to do so or someone else funds the estate in the interim.
[18] The respondent submits that he is required to sell the land to pay the deceased’s relatively modest debts and to prevent further costs from being incurred in the illiquid estate. Moreover, as a 50% beneficiary, he wants the property sold and maximum funds distributed as soon as possible before further expenses are incurred needlessly.
[19] The applicant is unable to show that upon severance of the land into two halves, the respondent’s half will sell at the same price as would be obtained for his one-half share of the whole. It could be the same, more, or less. It is a business risk.
[20] The applicant has made no suggestion as to how the two halves of severed land are to be split between the parties. One half will have the parents’ house. Presumably, that is the half that the applicant wants to keep. How will the lots be drawn to account for the fact that the house is on one half? How will values be equalized fairly? Will the other piece of vacant land have road access, utility services, zoning to make it usable or saleable? Is this just an invitation to years of litigation?
[21] The applicant’s inadmissible planner’s report says that severance can be accomplished quickly and for a very modest cost. What if it takes longer or costs more?
[22] If the applicant wants to sever the land to keep one half, the respondent submits, the applicant is free to buy the land when it goes up for sale and then she can proceed with a severance on her own account.
[23] It is particularly noteworthy that the respondent’s motion to sell is principally based on financial facts. He says that the estate needs to sell the land to pay debt, to prevent expenses from being incurred, and because a severance application is an uncertain, expensive process that the estate cannot afford to fund.
[24] The respondent’s motion to sell the land motion tries to avoid the determination of the issues about his alleged misconduct that forms the principal basis of the application.
The Applicant’s Late Cross-Motion is Adjourned
[25] Late in the day on November 30, 2023, the applicant delivered a cross-motion for the appointment of an ETDL to try to sever the property. The cross-motion was not contemplated in Justice Sanfilippo’s order last May. The applicant did not obtain an appointment for court time to hear the cross-motion. There is no agreed schedule.
[26] The respondent delivered a responding motion record containing an affidavit of the respondent sworn December 3, 2023. The affidavit raised issues concerning the last-minute delivery of the cross-motion.
[27] I was initially inclined to hear the late cross-motion because the submissions in favour of the appointment of an ETDL to try to sever the property were effectively the same as the applicant’s submissions against the respondent’s proposed sale of the property.
[28] But the applicant raised another issue.
[29] On realizing that the respondent’s motion to sell the property did not involve an assessment of the merits of her application, the applicant included in her cross-motion record copies of her affidavits delivered for the main application. This is proper under Rule 37.10 (2)(e).
[30] Counsel for the applicant submitted that for her cross-motion the respondent could not rely on the affidavits filed by him in the main application because they had not been included in his responding motion record. They were filed with the court, visible on Caselines, and known to all. They could have been included in the respondent’s motion record as of right under Rule 37.10 (3)(b). But the respondent’s counsel had not done so in the few days available to him to respond.
[31] The applicant’s counsel submitted, correctly in my view, that she was entitled to know in advance and prepare for argument on the basis of a fixed and proper responding motion record. She submitted that she would be prejudiced in her cross-motion by allowing the respondent to rely on his evidence in response to the applicant’s main application evidence because the respondent’s original affidavits were not included in his motion record filed in response to the cross-motion.
[32] In light of the applicant’s submission, the respondent would have been left without any ability to rely on his response to the applicant’s evidence of wrongdoing in the main application that she intended to use on her cross-motion to appoint an ETDL.
[33] As the applicant’s cross-motion to appoint an ETDL was not contemplated in the order that set up this hearing and was served very late, I determined that for the applicant to use her main application material, fairness required that the respondent be given time to put his previously-filed affidavits inside motion record covers, with a proper index, so he could refer to his evidence in response to the applicant’s evidence. The court was entitled to have a full evidentiary record before it to determine an important motion.
[34] Moreover, the applicant was entitled to time to prepare once the full evidentiary record was fixed.
[35] Therefore, I determined that the applicant’s last-minute cross-motion to appoint an ETDL would not proceed with the respondent’s motion to sell the property.
[36] An adjournment to fix the evidentiary record does not need to be for very long. As all court documents are now dealt with electronically, the respondent’s counsel can upload new motion record covers with a revised index and then hyperlink the existing affidavits to the new record covers.
[37] I find that it would have been unfair to allow the late cross-motion to be heard without giving the respondent time to take the wholly inconsequential step of re-delivering his existing evidence so that (a) there would be a full evidentiary record on the motion; and (b) the applicant would have ample time to prepare knowing the full record. To proceed otherwise would have countenanced “gotcha” tactics by allowing a late filing without an agreed schedule to enable a hearing on one side’s evidence alone. That would neither be fair in process nor allow for a fair determination of the substance.
[38] On my ruling that the cross-motion was adjourned, counsel for the applicant sought to withdraw the request that the respondent be required to re-deliver his pre-existing evidence in a new motion record before he can use them on the motion. I declined to alter my ruling however. Doing so would have required the applicant to proceed without knowing the full record in advance so as to be able to prepare fully and properly for the motion. I took counsel at her word on that submission.
[39] Moreover, allowing the motion to be withdrawn would incentivize counsel who might be inclined to bring unfair motions based on utterly trivial procedural points designed to seek an unfair leg-up on their colleagues opposite. I make no finding about the motivation for the motion before me. But I am cognizant that allowing the motion to be withdrawn without consequence would create a very bad precedent in favour of a very poor tactic of the type that the court and the bar in Toronto Region have been trying to eliminate for many years.
[40] The court needs a full record to decide the key issues in the case. All counsel are duty-bound to ensure that a fair process exists for the court to hear both sides. The applicant ought to have proposed a schedule for her cross-motion long ago and dealt expressly with issues concerning the scope of the evidentiary record.
[41] It does not lie in the mouth of someone who brings a motion late in the day to rely on contentless, technical rules to limit the other party’s ability to respond fairly and or to limit the court’s ability to have the full evidentiary record before it.
The Applicant’s Response to the Motion to Sell the Property
[42] As noted above, the applicant’s response to the respondent’s motion to sell the property was, for all intents and purposes, the same as her motion to appoint an ETDL. Therefore, by adjourning off the cross-motion, I was not precluding the applicant from making any of her arguments. If the applicant succeeds in deferring a sale of the property by the respondent, there will be ample time to consider the manner by which the applicant will proceed with an effort to sever the land.
[43] The applicant submits that there are sufficient chattels available to meet the modest debts of the estate. She has suggested realization values for the chattels. But there is no evidence of a jobber to assess the liquidation value of an assortment of used chattels. If any have material value – such as vehicles – it is possible that a liquidation could provide some period of funding given that the debts and expenses of the estate are indeed modest.
[44] I asked the applicant’s counsel whether the applicant was proposing to fund all costs and expenses to indemnify the estate if the land was to be held for months or years to allow a severance to be attempted. Counsel advised that the applicant recognized this risk and is prepared to do so. She also advised, without evidence, that the applicant has third party funding available.
[45] But the existence of funding could also support the respondent’s submission that the applicant should just buy the land and do whatever she wants with it.
[46] The applicant’s claim is more nuanced. She adduces evidence that the deceased father did not trust the respondent son due to numerous historic acts of wrongdoing. She says that the father wanted the land passed down to his children and grandchildren.
[47] The applicant says that her brother promised their father that he would not sell the land. Her evidence is supported by a former caregiver to the deceased who heard some of these conversations which became quite animated at times.
[48] The respondent has adduced evidence of text messages from the caregiver that might raise credibility issues with her evidence. The codicil that the applicant attacks also contains a $50,000 legacy in favour of the caregiver. I do not know if she understood that by supporting the applicant she was putting her $50,000 legacy at risk.
[49] The applicant submits that while this application is outstanding and the respondent’s authority as ET is in question, he has no legal right to sell the estate’s property. She submits that in all cases an ETDL is required if an estate proposes to transfer property while an ET’s authority is in question in litigation.
[50] The applicant relies upon a quotation from her law partner Ian Hull’s book, Challenging the Validity of Wills that introduces a chapter on ETDLs. The author writes:
Where there is a court action touching upon the validity of the will of a deceased person, the authority of the appointed Estate Trustee is thereby called into question. If the assets of the estate require attention during the litigation then you must obtain a Certificate of Appointment of Estate Trustee During Litigation. This rule replaces the previous appointment of an Administrator/ Administratrix Pendente Lite. [Emphasis added]
[51] That bolded statement goes a step too far in my view. The author cites no law for such a definitive statement. It may be that it is such a clear point strategically and tactically that he is telling practitioners that there is no point trying to proceed otherwise. But that is not the same as saying that there is a mandatory rule of law requiring that an ETDL always be appointed to attend to assets during litigation in which a will (or codicil) is attacked.
[52] Unless or until a court removes the ET’s authority, he or she remains ET. That is why parties typically agree to interim preservation orders such as the one made in this case on consent. Preservation orders would not be required if the law automatically prevented an ET from attending to assets while the will is in question.
[53] I do not agree that the mere bringing of this application deprived the ET of his legal authority under the deceased’s will to convey title to estate property. An ET who takes a material step while his or her position is questioned in litigation will certainly be at risk of microscopic review and will face serious criticism if the step is deemed improper. He or she may well face liability for steps taken under a will that is not probated that are later found to have been wrongful.
[54] In Lugarich v. Fabris, 2021 ONSC 7294, Penny J. authorized an ET, who was a lawyer, to complete a sale while the will that appointed him as ET was under challenge. As in this case, the responding party argued, “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.” See: para [2].
[55] Penny J. held at para. 15:
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.
[56] Despite the ET being a lawyer, Penny J imposed tight directions restricting the manner of sale of the property in that case:
[16] For 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).
[57] The respondent ET before me is not a lawyer. But he agrees to the implementation of the same restrictions including the holding of the proceeds of sale in trust by a lawyer.
[58] I know of no reason parties cannot agree to a court order that allows an ET to bring a motion, such as this one, to approve a proposed sale of property by the ET. There is no rule of law of which I am aware that positively requires the imposition of an ETDL to transfer any property while litigation is pending in which the ET’s authority is questioned.
[59] In this case, the applicant is a 50% beneficiary of the estate. That raises issues of fiduciary duties that need to be considered as discussed below.
[60] In any event, the applicant submits that an ETDL is needed in this case because the warring parties are each equal co-owners of the property and have very different goals. She submits that in light of their animus, this is a case where the property of the estate needs protection by a neutral steward.
[61] The applicant goes further and submits that the ETDL should be empowered to apply to sever the property to distribute the severed halves in kind. She does not deal with whether the ETDL should be considering the ability of the estate to fund itself in the interim or whether the ETDL should be exercising any business judgment as to the timing, cost, or likelihood of success of a severance application, or the likely effect of a successful severance on the values of the resulting parcels.
Analysis
[62] I fear that the parties have lost the forest for the trees.
[63] There are two equal beneficiaries. Both have equal rights or interests in the residuary property of the estate. Neither is free to simply impose his or her will on the other willy-nilly. No matter who is ET, she or he will have a duty to avoid conflicts of interest, to act impartially as between beneficiaries, and to act in the best interests of the estate.
[64] The court can and will intervene where an ET purports to exercise his or her discretion in bad faith or based on irrelevant or improper considerations. Walters v. Walters, 2022 ONCA 38,
[65] If the parties are in a hopeless conflict, an ETDL may well be required no matter who did what to whom decades ago. But the ETDL will not be a hired gun to implement the appointing beneficiary’s wishes. As a fiduciary, the ETDL will be required to consider the best interests of the estate. The ETDL will have fiduciary duties and discretionary authority that must be conducted as a fiduciary. An ETDL will have to consider things like: Can the estate afford to hold the property while a severance is sought? Is a severance value-enhancing or at least not destructive of value? Is severance possible in a reasonable time and at a reasonable cost? Will a severance application be stillborn, for example, if the respondent opposes it at the municipality?
[66] I may be wrong, but it seems to me that for a severance to be attempted, the proponent needs to first have a plan of survey showing the severed lots being proposed. How will the ETDL draw those lots fairly and equalize value?
[67] I am not prepared to authorize a sale today. The respondent has not shown that there is yet any real urgency provided that the modest debts of the estate and modest accruing costs can be funded in the near term. Nor am I prepared to authorize a severance today. Nor am I prepared to appoint an ETDL as proposed by the respondent (had I not adjourned the cross-motion). While the proposed ETDL is beyond reproach as a professional, the applicant’s intent in seeking his appointment is not to make him a neutral steward of the assets of the estate.
[68] The parties are fighting a sibling fight for control of their father’s estate rather than figuring out the economics and mechanics of proceeding fairly as co-owners of a valuable piece of property.
[69] Ignoring the estate for a moment, co-owners of land who cannot agree on how to deal with property have a prima facie right to seek partition and sale in this province. This is especially the case where ongoing funding of accruing costs is uncertain. Sale is the presumptive answer. Why would this outcome be any different with an estate interposed? As noted by Penny J. above, liquidation is the presumptive expectation of an estate trustee – subject to a discretionary authority to do otherwise.
[70] If the applicant wants to avoid a sale, she needs to propose terms to either attract the respondent or an ETDL (and presumably the court if the ETDL agrees with her and is then challenged by the respondent).
[71] The applicant can buy the respondent out either now or by being the highest bidder in a public sale. A private agreement now will likely save both sides commission and costs.
[72] If the applicant wants to try to drag the respondent along with a severance application, I do not know where applicant has been since last May. The applicant has had 6.5 months since Justice Sanfilippo’s May 30, 2023 order to bring a fully formed and economically modelled plan forward by now.
[73] To forestall a sale, the applicant needs much more than a general, high level planner’s piece on the possibility of a severance and her own list of presumed chattel realization values (that is highly suspect on its face). She needs to buy out the respondent or come forward with a fully costed, doable plan that keeps the estate whole and sees the beneficiaries receive funds within the few short months that liquidation would likely take in any event.
[74] To attract the respondent, a neutral ETDL, or the court, I expect that she will have to fund the severance application and fund the estate in the interim. The creditors of the estate should not have to be kept waiting by her severance application.
[75] If the applicant has too little time to do that work now, that falls on her. She was the one who let six months pass before even bringing her cross-motion. The applicant has done much work to advance nasty allegations against the respondent and vice versa. But the applicant’s work on the current economic issues seems to be at a preliminary stage.
[76] I am struggling to come up with terms to allow the applicant a further brief period to formulate and propose a mechanism to go forward. She needs to say with specificity how much time she needs and what she proposes to do in the interim while she formulates her full plan for review.
[77] Counsel are directed to arrange a one-hour case conference before me at 8:30 a.m. on a day during the week of December 18, 2023 to discuss and make submissions on proposed terms to go forward to allow the applicant to proceed as set out in the immediately preceding paragraph. The applicant’s counsel is directed to discuss any proposed terms with counsel to the respondent before the case conference.
[78] The parties are on notice under Rule 50.13 (6) that at the case conference I may impose terms to allow the applicant some time to come back with a full plan or I may order a sale as sought by the respondent.
[79] The applicant also sought to require the parties to attend mediation before the decision is made on this motion. The May 30, 2023 order required mediation to be held within 90 days of the close of pleadings or at a later date as counsel may agree. The parties agreed to schedule this motion before the 90-day period expired.
[80] Now is the time for the parties to agree on an outcome.
FL Myers J
Date: December 11, 2023