Court File and Parties

COURT FILE NOS.: CV-23-82461 and CV-23-80990 (Hamilton) DATE: 2024/08/20 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Salvatore Rizzo, personally and as Estate Trustee for the Estate of Ignazia Rizzo, Eduardo Rizzo, personally and as Estate Trustee for the Estate of Ignazia Rizzo, and the Estate of Ignazia Rizzo, Applicants – and – Angela Farruggia, also known as Angela Rizzo, personally and as an Estate Trustee for the Estate of Ignazia Rizzo, Respondent

AND BETWEEN:

Angela Farruggia, also known as Angela Rizzo, Applicant – and – Salvatore Rizzo, personally and as Estate Trustee for the Estate of Ignazia Rizzo, Eduardo Rizzo, personally and as Estate Trustee for the Estate of Ignazia Rizzo, and the Estate of Ignazia Rizzo, Respondents

COUNSEL: Marc Munro, Counsel for the Applicants (Salvatore Rizzo, Eduardo Rizzo, and the Estate of Ignazia Rizzo) Ben Fortina, Counsel for the Respondent (Angela Farruggia)

HEARD: February 21, 2024, and in writing

THE HONOURABLE JUSTICE I.R. SMITH

Reasons for Decisions on Applications

Introduction

[1] Salvatore (Sam) Rizzo, Eduardo (Ed) Rizzo and Angela Farrugia, also known as Angela Rizzo (to whom I shall refer by their first names to avoid confusion), are siblings. They bring competing applications concerning the estate of their late mother, Ignazia Rizzo, who died in 2021. In her will, Ignazia named all three siblings as executors and trustees of her estate and provided that her estate be divided equally among them (apart from some specific bequests of furniture). Importantly, for the purposes of this litigation, Ignazia’s will provided that a market appraisal of her residence, a house in Hamilton (the “house”), should be obtained so that Sam could exercise a right of first refusal should he be interested in purchasing it.

[2] Sam is interested in purchasing the house, but there has been significant disagreement between the siblings about the price at which that sale should be executed. The administration of the estate is in a state of deadlock. Accordingly, Angela has brought an application which seeks, among other things, an order that the house be listed for sale and sold forthwith, and Sam and Ed have brought an application which seeks an order, among other things, that Angela be removed as executor and trustee of Ignazia’s estate.

[3] For the following reasons, I conclude that Sam and Ed’s application should be allowed, that Angela should be removed as executor and trustee, and that Angela’s application should be dismissed.

Background

[4] Ignazia died on July 29, 2021. At the time of her death, she had modest liquid assets [1] and personal property. Her chief asset was the house, which is located at 9 King’s Forest Drive, Hamilton. Ignazia’s will appoints her three children as executors and trustees of the will. It directs that any debts, taxes and estate expenses be paid. It then directs that certain pieces of furniture should be delivered to Sam. The residue of Ignazia’s estate is directed to be divided equally among the three siblings. Included in that residue is the house, which the will addresses specifically as follows (at para. 4(1) of the will):

A market appraisal of my house located at 9 King’s Forest Drive, Hamilton, … is to be obtained and if my child, SALVATORE RIZZO, is interested in purchasing same for fair market value then he is to have the first right of refusal; his share of residue may be used by him to act as the down payment for the purchase of the property; if such share is not immediately available, the Estate and all of the Executors of my Estate will co-operate in any way possible to assist my son SALVATORE RIZZO in completing the purchase from the Estate including, without limiting the generality of the foregoing, dealing with any banking or financial matters in regard to same.

[5] As I have said, Sam is interested in purchasing the house from the estate. Rather than incur the cost of obtaining an appraisal as contemplated by the will, the three siblings simply agreed that Sam’s purchase price would be $660,000.00, leaving that amount less tax and transaction costs to be distributed among them. Sam’s share would effectively become his downpayment on the house and he would arrange mortgage financing to pay out Ed and Angela.

[6] Despite the agreement achieved by the siblings, on October 7, 2021, counsel for Angela, Mr. Fortino, wrote to counsel for Sam, Andrea Mota, and said that Angela was willing to accept $220,000 as her one-third share of the house but that that amount would be “net of any possible estate tax exposure.” He added that any such taxes “shall be borne solely by the remaining beneficiaries.” Sam rejected this proposal, which he regarded as inconsistent with the direction contained in the will that debts, taxes and estate expenses be paid by the estate.

[7] Notwithstanding her counsel’s letter, on October 11, 2021, Angela signed a handwritten agreement with Sam and Ed in which they agreed that the closing date for the sale of the house to Sam would be November 15, 2021, and that “all remaining taxes of the estate … will be paid by” Ed, Angela and Sam.

[8] Nevertheless, Mr. Fortino wrote again on November 18, 2021, and advised that Angela had not agreed to be responsible for her part of the estate’s taxes or expenses and that her agreement to receive $220,000 represented “a compromise position … in relation to the value of the home given the current real estate market.” Counsel made it clear that he acted for Angela only in her capacity as a beneficiary of the will, not as a trustee.

[9] Sam and Ed sought to retain counsel specializing in wills and estates, one Bruno Uggenti. Mr. Uggenti wrote to Mr. Fortino on February 1, 2022, advising that he had not yet been retained to act for the estate and that he would not agree to act until either all three trustees agreed to retain him, or Angela renounced her position as a trustee, which she had previously expressed an intention to do.

[10] On February 10, 2022, Mr. Fortino wrote to Ms. Mota, Sam and Ed, complaining that the file had “gone stagnate” [sic]. He claimed that there had been further discussions pursuant to which Ed and Sam had agreed that Angela would receive $240,000 from the sale of the house “in exchange for transferring her interest in the property to the remaining beneficiaries.” Mr. Fortino added that Angela was prepared to renounce her position as estate trustee, but that she “will no longer tolerate any delays.” Failing a quick resolution of the matter, he had instructions to launch an application to compel the sale of the house.

[11] After several requests that Angela sign a renunciation document drafted by Mr. Uggenti’s office, on March 28, 2022, Mr. Fortino wrote that although Angela was willing to renounce her position, she had not received any response to her proposal that she receive $240,000 net of taxes and expenses “in exchange” for which “she will transfer all her right, title and interest to the remaining beneficiaries…” Mr. Fortino’s letter demands payment within 30 days “on a tax-free neutral basis.” He added that “the remaining beneficiaries will absorb any tax liability that may be applicable with respect to the transfer.”

[12] On April 11, 2022, Mr. Uggenti wrote to Mr. Fortino and Ms. Mota and advised that he had not understood that Angela’s renunciation was contingent on her receiving $240,000. He asked Mr. Fortino to clarify what he meant by “tax-free neutral basis” and closed his letter by saying that he could do no further work on the file without Angela’s renunciation. As he put it, “we have now hit a roadblock.”

[13] Mr. Fortino’s responding letter of April 19, 2022, and a subsequent letter dated April 26, 2022, failed to address the issue of renunciation but instead complained that Sam had not yet obtained financing to pay out Angela and Ed. Sam deposes that he will not have any problem obtaining financing when the time comes to pay out his siblings.

[14] In a letter dated May 9, 2022, Mr. Fortino repeated Angela’s position that she was prepared to accept $240,000 net within 60 days in exchange for the transfer of “all her right title, and interest in the property…”, her renunciation of her position as executor and trustee, and a release of any further entitlement under the estate. Otherwise, Angela said she would commence an application in the court. Angela’s proposal was not acceptable to Sam and Ed. Angela launched her application in her capacity as a beneficiary of the will only. Sam and Ed then launched their application in their capacity as estate trustees and beneficiaries. The parties blame each other for the stalemate and the delay it has caused.

Positions of the parties

[15] Sam and Ed say that Angela should be removed as estate trustee because she cannot be trusted to carry out her obligations in accordance with Ignazia’s wishes as those wishes are expressed in the will. Angela has also put herself in a conflict of interests which requires her removal. In a nutshell, contrary to the will, Angela is unwilling to accept that her one-third share of the estate residue is a share that is net of debts, taxes and estate expenses. Instead, she insists that any such liabilities must be absorbed by her brothers alone, and not at all by her. Since this is unacceptable to Sam and Ed, and because it is contrary to the terms of the will, and because Angela refuses to renounce her position as an estate trustee until she receives which she regards as her rightful share of the estate, the estate cannot be administered. It is deadlocked. The only solution is to remove Angela as estate trustee and allow Sam and Ed to administer the estate pursuant to the terms of the will. They will obtain a valuation of the fair market value of the house as at the date of Ignazia’s death and Ed and Angela will each receive one third of that value from Sam after the estate’s taxes, debts and expenses have been paid.

[16] Angela says that she has been willing to renounce her position as estate trustee as long as there is a resolution of her share of the estate and blames the delay in doing so on her brothers. Accordingly, their application should be dismissed. To resolve the deadlock, Angela submits, the court should order the sale of the house so that the proceeds can be distributed. In addition, since Sam has been living in the house since Ignazia’s death [2], Angela argues that he should be paying occupation rent until the disposition of the house is finalized.

[17] Sam and Ed take the position that Angela’s application is an abuse of process given that it is Angela who has caused the administration of the estate to grind to a halt. Moreover, as Angela’s application is brought in her capacity as a beneficiary only, and not as a trustee of the estate, it is submitted that she has no standing to seek either of the heads of relief she claims.

Discussion

Angela’s application

[18] I agree with Sam and Ed that Angela’s application must be dismissed.

[19] Insofar as she seeks the sale of the house, she has no standing to seek that relief. As the Court of Appeal wrote in DiMichele v. DiMichele, 2014 ONCA 271, at para. 71, “the law is clear: only persons entitled to the immediate possession of an estate in property may bring an action or make an application for its partition or sale.”

[20] Angela is not entitled to immediate possession of the house because she has no property interest in the house. Her interest is, instead, in the residue of Ignazia’s estate. Again, in DiMichele, supra, the Court of Appeal made this point plainly (at paras. 103–104):

Second, the beneficiaries’ entitlement under the Will did not amount to a property interest in the Property. The Will does not give the beneficiaries a specific bequest of the Property. Rather, it gives them a contingent interest in the residue of the estate. In this regard it will be recalled that the Will provided that the residue of the estate was to go to Mrs. Di Michele’s “issue alive at the date of distribution”. Accordingly, to become entitled, a beneficiary had to be alive on the date of distribution. Until distribution, the beneficiaries had only a contingent beneficial interest in the residue of the estate, as well as the personal right to compel the estate trustee to duly administer the estate.

A contingent beneficial interest in an estate does not give rise to a property interest in any specific asset of the estate, prior to or absent an appropriation of such asset to the beneficiary by the trustee: Spencer v. Riesberry, 2012 ONCA 418, 114 O.R. (3d) 375 (Ont. C.A.), at para. 37.

See also, Addante v. Ruscica, 2022 ONSC 2148, at paras. 12–14; 24–25.

[21] Accordingly, Angela has no standing to force the sale of the house.

[22] Similarly, Angela’s claim for occupation rent must also fail. In making this claim in her factum, Angela impliedly refers to herself as a “joint owner” of the house. As we have already seen, however, she is no such thing. Her interest is in the residue of the estate; she has no property interest in the house. Further, the law relating to occupation rent makes it plain that a claim for same must be made by a joint owner of the property in question (see, for example, Cormpilas v. Ioannidis, 2020 ONSC 4831, at paras. 16–17; 21–22). Again, then, Angela has no standing in her personal capacity to make a claim for occupation rent.

[23] I add here the observation that had the parties been able to resolve the sale of the house promptly and as Ignazia intended, with Sam purchasing the house from the estate, there would be no issue at all as to Sam living rent-free in the house since the death of Ignazia. Sam should by now be the owner of the house, with the right to live in it and the responsibility to cover all costs associated with doing so, or to dispose of the property or otherwise use it as he sees fit. Instead, the dispute between the parties has prevented the sale (and the distribution of the residue of the estate), while Sam bears the costs of utilities, property taxes, and insurance for the house. Ed and Angela have been prevented from having access to their share of the estate, and Sam has been prevented from exercising the rights of ownership.

[24] In my view, as will be developed below, Angela bears the greatest responsibility for the deadlocked position in which the parties find themselves, and the delay which has ensued.

[25] For these reasons, Angela’s application is dismissed.

Sam and Ed’s Application

[26] I agree with Sam and Ed that Angela should be removed as an executor and estate trustee in this matter. To this extent, their application is allowed.

[27] At a minimum, it is evident that the three siblings have been incapable of co-operating on the administration of this estate, that there is animosity between them, and that, therefore, at least one of them should be removed so that progress may be achieved (Dewaele v. Roobroeck, 2020 ONSC 7534, at paras. 51–56). In this case, Angela has offered more than once to renounce her position as an executor and estate trustee; she has not moved for the removal of either or both of her brothers; and they have moved for her removal. For these reasons alone, it appears most sensible to order Angela’s removal as a means of resolving the deadlock that has plagued this estate.

[28] I add, though, that a review of the record makes it clear that Angela’s conduct has been the chief impediment to the efficient administration of the estate. First, the three siblings agreed to dispense with an appraisal and instead agreed to a price at which the house would be sold by the estate to Sam ($660,000). Nevertheless, on October 7, 2021, to the surprise of Sam and Ed, Angela insisted that her one third share of the proceeds of that sale ($220,000) be paid to her in full; that is, net of any taxes owed by the estate, which taxes would have to be paid from Sam’s and Ed’s shares of the residue. Not surprisingly, this was not acceptable to the brothers, there being no reason that Angela should have a greater share of the residue of the estate than the share to which they were entitled. The proposal was also contrary to the express terms of the will, which directed that the residue be paid out after the estate debts, taxes and expenses were settled.

[29] Then, in a handwritten agreement made on October 11, 2021, Angela agreed in writing to pay an equal share of the estate expenses. A little more than a month later, through counsel, Angela then insisted that she would not pay an equal share. When the stalemate dragged on, Angela then (in February and March 2022) increased the amount she was willing to receive from the sale of the house to $240,000 (again, net of any estate expenses). In exchange, Angela said that she would be willing to renounce her position as estate trustee. Despite requests that she renounce, she failed to do sign the necessary documents, presumably because her brothers did not accept her other terms.

[30] Sam and Ed take the position that Angela has taken unreasonable and inequitable positions, has several times varied her positions and reneged on agreements made, and has put herself in a conflict of interests, insisting on a greater share of the residue of the estate for herself while occupying the position of estate trustee with a duty to ensure that all beneficiaries are treated fairly and in accordance with the will. The only solution, they submit, is to remove Angela as a trustee and to have the brothers administer the estate without her, including by obtaining an appraisal of the house, having the estate sell the house to Sam at the appraised price, then distributing the residue of the estate, net of expenses, equally to the three beneficiaries, bearing in mind that Sam’s one-third share will effectively be his downpayment on the house.

[31] I agree both with the brothers’ assessment of the facts (that is, that Angela has been the chief cause of deadlock and delay by taking unreasonable and changing positions – even if the brother’s might have responded to Angela’s various proposals more promptly than they did), and that Angela has placed herself in a conflict of interests and failed to act as an estate trustee should. In this latter respect, Angela has attempted to leverage her position as a trustee to secure a greater share of the residue of the estate by offering to renounce that position in exchange for that greater share, thereby deadlocking the administration of the estate in the meantime. The existence of such a conflict is enough to justify Angela’s removal (Chambers v. Chambers, 2013 ONCA 511, at para. 96).

[32] For these reasons, Angela is removed as estate trustee of Ignazia’s estate. Sam and Ed will remain as estate trustees to administer the estate. They will, of course be bound by the terms of the will to carry out Ignazia’s intentions.

Appraisal date

[33] Part of the duties of the remaining trustees will be to arrange for an appraisal of the house so that a fair price for the estate’s sale of the house to Sam can be determined. During argument, the parties took differing positions respecting the effective date of the appraisal. They have since made further written submissions on this topic.

[34] Sam and Ed say that the appraisal should be as of the date of Ignazia’s death so as to avoid tax on any increase in the value of the house since that date. Angela says that the appraisal should be a present value appraisal so as to maximize the interests of all beneficiaries.

[35] However, both sides now agree that it is not necessary that I decide this issue. Accordingly, I make no determination respecting the proper appraisal date for the house.

Conclusion

[36] In summary, Angela’s application is dismissed. Sam and Ed’s application is allowed to the extent that (i) Angela is removed as an estate trustee and (ii) Sam and Ed are authorized to administer the estate in accordance with Ignazia’s will. The balance of the relief sought by Sam and Ed, including a passing of accounts, may be addressed at a later date.

[37] If the parties cannot agree on costs, Sam and Ed may serve and file brief written submissions respecting costs within 10 days of the release of these reasons directed to my attention by email to my judicial assistant at mona.goodwin@ontario.ca and Kitchener.SCJJA@ontario.ca. Angela may serve and file brief responding submissions with seven days of the service of Sam and Ed’s costs submissions. Sam and Ed may serve and file their written reply, if any, within four days of the service of Angela’s submissions. All costs submissions filed should address the issue of costs respecting the earlier motion to validate service, which issue was reserved to the application judge by Donohue J.

I.R. Smith J. Released: August 20, 2024

Notes

[1] During an initial period of co-operation between the parties, these liquid assets were distributed evenly between them. [2] Sam also lived in the house prior to Ignazia’s death.