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Door opened to abuse as beneficiaries left in the cold

Appeal court decision deems estate trustee to be true owner of family home
|Written By Yamri Taddese

When Adalgisa Di Michele died in 1996, she left her house to three of her children. None of them now owns any part of the Mississauga, Ont., home thanks to a recent Ontario Court of Appeal decision on the power of an estate trustee that lawyers say leaves a door open to abuse.

A system that treats an estate trustee as a true owner of a property also opens the door to abuse, says Mark Ross.

The will named one of Di Michele’s sons, Antonio, as an estate trustee for the home all of her children were to inherit. But years later, when he was facing a personal litigation matter in 2002, Antonio put up his mother’s property as security. In 2010, he lost the litigation and his opponents brought an application for the sale of the home.

Di Michele v. Di Michele hinged on the question of whether Antonio’s opponents could take the home. One of the siblings, Roberto, lived in the home with his mother and was under the impression he would take it upon her death, according to the ruling.

In an April 3 decision that highlighted the scope of an estate trustee’s power, the Ontario Court of Appeal found Antonio’s opponents in the personal litigation were entitled to the entire value of the house and not just the one-third share belonging to Antonio as per his mother’s will.

The ruling found an estate trustee is the true owner of a property unless the home is sold.

In the appeal, Roberto alleged Antonio was involved in a fraud in which he misrepresented himself as the owner of their mother’s home when in fact he was just a trustee of the estate. But the court, citing s. 63 of the Land Titles Act, disagreed.

“As a result of these provisions, it is clear that Antonio had the legal right to grant the mortgage,” wrote Justice Eileen Gillese on behalf of the court.

“Antonio was in the same position as if he had become the registered owner of the property under a transfer for valuable consideration: Land Titles Act, s. 63. A registered owner has the right to grant a mortgage over his or her land: Land Titles Act, s. 93(1),” she wrote.

Before the appeal, the trial judge had found that since the 2002 action was against Antonio personally and not in his capacity as an estate trustee, he would only have to give his opponents one-third of the home’s value. But the appeal court found the mortgage put up as a security was binding on the whole of the property.

“Second, the beneficiaries’ entitlement under the will did not amount to a property interest in the property,” wrote Gillese.

“The will does not give the beneficiaries a specific bequest on the property. Rather, it gives them a contingent interest in the residue of the estate.”

She added: “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.”

In effect, the ruling gives no consequence to the abbreviation “TWW” under a land title, which refers to a trustee with a will, says Toronto lawyer Mark Ross.

A system that treats an estate trustee as a true owner of a property also opens the door to abuse, according to Ross.

“Under the Estate Administration Act, if there’s an unfettered power to sell given to an estate trustee, [the trustee] can sit on it for as long as he wants and he doesn’t have to sell it within three years, 10 years, 15 years .

. . and until he sells it, nobody has any interest in that property,” he says.

“That is an issue — that you have an unfettered right to sell. But it’s open to abuse,” he adds, noting some beneficiaries may delay selling a property to avoid creditors. For beneficiaries with an estate trustee, the message is to act on getting the property sold so they can recover their entitlements, Ross suggests.

That an estate trustee can act like a true owner is a novel issue, he notes.

Real estate lawyer Morris Sosnovitch says it’s true the decision means real estate lawyers no longer have to investigate a title if it lists a trustee with a will. But the court’s decision to relieve lawyers of that investigation is against the trend of urging them to probe even the slightest signs of fraud, he says.

The court in this case was lax on the due diligence expected of real estate lawyers, he adds, pointing to a section of the ruling that states that after Antonio offered the property as a security, his opponents were entitled “to operate on the assumption that Antonio was acting lawfully in granting the mortgage.”

Says Sosnovitch: “This is pretty incredible given the stringencies we’re expected to govern ourselves by with respect to fraud.”

Another concern relates to the treatment of the beneficiaries in this case.

“Even though the court in this decision did not find a fraud . . . the fact is that fraud was perpetrated on the innocent beneficiaries of the estate,” says Sosnovitch.

  • Anna Gouchie
    You would think if you live in the house pay the bills on the house and the taxes and who would think you had to do more please ok let's make it paper legal crap ok what ever ..l just know the legal system don't work
  • Anna Gouchie
    And lou that is BS please who wouldn't want it that's just there for cases for people that don't have any time but to make Sure the other parties can screw there siblings
  • Anna Gouchie
    Well l think if l left my property to my kids and paid my legal fees which is not not cheap l would hope that is were the property goes l think this court was all fixed and a bunch of bullshit ..because now my father who works hard and 65 still has to work because now he's homeless because of all this now l know legal papers mean nothing nothing and lm so upset that this happens..and l really think his lawyer was not worth a penny he paid..that's my opinion and lwill not have to waste my money on legal papers for when l die because l know it means nothing thanks to the so called legal system all corupt. .
  • Lou Landry
    From my brief summary, it appears - to coincide with your titled blog; there is a "window" In R.S.O. 1990, c. E.22, s. 9 (1) "..Properties NOT converted within three years after the death of the deceased IS, subject to the Land Titles Act..."

    There the beneficiaries had missed that deadline etc.
    With great regards,
    Lou
  • Shirley Craven
    My Mum died 2012 without a will. There are 5 of us, 3girls 2 boys. We were ushered into our sister in law's lawyer's office barely a day or so after the passing. with everything so fresh we decided that the 2 boys were best as joint trustees. Until the papers came from the court saying they were trustees, everything was fine and talked about. The minute the approval came through, one brother did a drastic turn and changed, threatening, verbally abusive, emotionally abusive. Mom was the sole owner of property that was also the residence for my 2 sisters, who were the caregivers. The one brother threatened to have them evicted, the house declared unfit, and the other brother did nothing. So no one was there to look after our rights. I ended up having to pay for a lawyer to keep him in line What needs to be out there is an organization that beneficiaries can reach out to without having their inheritance eaten up by legal fees
  • noel berthiaume
    WOW someone totally missed out on this one. Let's hope this one will stand alone way out in left field, as a fall ball. I thought the act clearly established that only the debts of the deceased were a lien on the property of the deceased.
  • mark ross
    This decision did not open the door. The door to abuse is always open whenever there is any trust. The testator's wishes are commonly an unfettered right to sell, which gives an opportunity to abuse. Perhaps people should be appointing more than one trustee. Or not giving an unfettered right to sel
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