Daye v. Daye Estate

Daye v. Daye Estate Court Supreme Court Date 2023-09-20 Citation 2023 NSSC 305 Docket No. 511359, No. 511359 Judge/Registrar/Adjudicator Bodurtha, John P. (Honourable Justice) Document Type Decision Decision Content SUPREME COURT OF Nova Scotia Citation: Daye v. Daye Estate, 2023 NSSC 305 Date: 20230920 Docket: No. 511359 Registry: Halifax Between: Heather Denise Daye Applicant v. Estate of Laura Wilhemina Daye, Tina Taylor and Tracey Daye Respondents DECISION Judge: The Honourable Justice John P. Bodurtha Heard: December 19-20, 2022, in Halifax, Nova Scotia Written Decision: September 20, 2023 Counsel: Jonathan Hooper for the Applicant Rebecca Hiltz LeBlanc, K.C. for the Respondents Sarah Douglas for the Respondents By the Court (Orally): Background [1] The Respondents, Tracey Daye (“Tracey”) and Tina Taylor (“Tina”), are the executors of the Estate of Laura Wilhemina Daye (the “Estate”). [2] The Applicant, Heather Denise Daye (“Denise”), is a sister of the Respondents. [3] The Respondents and the Applicant (together, the “Parties”) are all beneficiaries of the Estate and are three of the late Laura Wilhemina Daye’s nine adult children. The remaining six children are not parties to this proceeding. They are: Candace Daye; Delmore (Buddy Jr.) Daye; Gilbert Daye; Leslie Daye; Mark Daye; and, Melinda Daye (together, with the Parties, the “Beneficiaries”). Facts [4] The Daye family moved into the four-bedroom, uninsulated, century home in or about 1963. The property incurs significant heating and utility costs and is in need of extensive repairs and ongoing maintenance. [5] Since 2016, the late Laura Wilhemina Daye (“Laura”) lived in a long-term care facility operated by Northwoodcare Inc. (“Northwood”) in Halifax, Nova Scotia, until her death. [6] Laura died on October 18, 2021. When Laura died she owned property at 2319 Maynard Street, Halifax, PID #00155366 (the “Property”). [7] On April 16, 2014, Laura executed a Power of Attorney (the “POA”) appointing the Applicant, Denise, Melinda Daye (“Melinda”), and Delmore Daye (“Buddy Jr.”) as attorneys for property and financial affairs. [8] Shortly thereafter, the Applicant renounced her role as an attorney and Melinda and Buddy Jr. took over as attorneys upon their appointment (the “Attorneys”). [9] While Laura lived at Northwood, the Property and its maintenance was managed by the Attorneys. During that time, the Property was rented to various tenants. [10] On September 19, 1997, Laura executed a Will (the “Will”) appointing the Respondents as executors of the Estate (see Exhibit 3, Tab I). [11] Clause 3 of the Will reads as follows: 3. I GIVE, DEVISE AND BEQUEATH all my property of every nature and kind and wheresoever situate to my said Trustees upon the following trusts, namely: (a) To use their discretion in the realization or my estate, with power to my Trustees to sell, call in and convert into money any part of my estate not consisting of money at such time or times, in such manner and upon such terms as my said Trustees may in their absolute discretion decide upon, or to postpone such conversion or my estate or any part or parts thereof for such length or time as they may think best; (b) To pay out of and charge to the capital of my general estate my just debts, funeral and testamentary expenses and all estate, inheritance and succession duties or taxes whether imposed by or pursuant to the law or this or any other jurisdiction whatsoever that may be payable in connection with any property passing (or deemed so to pass by any governing law) on my death; (c) To stand possessed of and maintain as a separate trust, my lands and premises known as 2319 Maynard Street, Halifax, aforesaid, as a residence and to permit my daughters DENISE and/or TINA to enjoy full use and occupation thereof, for and during their lifetime, or until such time as DENISE and/or TINA inform my Trustees of their desire not to continue to use and occupy the said premises whereupon my Trustees may sell the said property and the net sale proceeds thereof shall form part or the residue or my estate; provided that should either DENISE and/or TINA take up the use and occupation of the property, all expenses incurred in maintaining the property for property taxes, fire insurance coverage, heat, electricity, water rates and general upkeep are to be paid by DENISE and/or TINA for the period of such use and occupation. (d) To give and/or transfer the rest and residue of my estate to my children, Melinda, Denise, Delmore William, Candace, Gilbert, Mark, Tina, Tracey and Leslie in equal shares, share and share alike, for their own use absolutely. [12] In summary, clause 3 of the Will directs the executors to take control of Laura’s assets, pay the Estate’s expenses and gift a Life Interest in the Property to the Applicant and to the Respondent, Tina (the “Life Interest”), before distributing the residue to all nine beneficiaries. [13] The Respondents assumed their responsibilities as executors shortly after Laura’s death. In accordance with their obligations as executors, the Respondents immediately proceeded to deal with the administration of the Estate by reviewing the financial records and account statements from the former Attorneys. After reviewing the documents, the Respondents were each satisfied that the account activity was reflective of the expenses required for their late mother’s care and maintenance of her assets, namely, the Property. [14] An application for a Grant of Probate for the Estate was filed on January 20, 2022, under Probate Court File Number 67955. The Probate Court of Nova Scotia issued the Grant of Probate on March 29, 2022. [15] The Estate has approximately $10,000 of outstanding liabilities. The Property and a chequing account are the only known assets of the Estate. [16] A third-party tenant currently resides at the Property under a year-to-year lease. Procedural History [17] The Applicant filed an Application in Chambers in Probate Court on December 8, 2021, seeking an Order directing the executors to apply for the Grant of Probate and permitting the Applicant to move into the Property, pursuant to the Life Interest (the “Application”). [18] The Respondents filed a joint Notice of Objection on February 11, 2022. The Respondents, personal representatives of the Estate, take the position the Estate has insufficient funds to permit Denise to enjoy the Life Interest and the Property must be sold. [19] Six additional Notices of Objection were filed in or around February, 2022, by the remainder of Laura’s children (all beneficiaries of the Estate). These additional Notices reflect similar grounds as those submitted by the Respondents. In sum, all Beneficiaries have voiced their opposition to this Application on the basis that the Property must be sold to pay the Estate’s liabilities. [20] The Respondents disclosed documents in April and August of 2022, and through their respective Affidavits. The Respondents have made extensive disclosure in an effort to satisfy the Applicant of the financial status of the Estate. Issue [21] The issue is whether the Life Interest contained in clause 3(c) of Laura’s Will, allowing the Applicant to take up residence in the Property owned by the Estate, abates if the Estate is de facto insolvent. Analysis Money Owing to the Estate [22] The Applicant alleges that the Estate has failed to take steps to recover money owing to it. It alleges various misdeeds on the part of the Attorneys, Melinda and Buddy Jr. [23] Any activities undertaken by the Attorneys acting under the authority of a Power of Attorney executed by Laura were prior to her death and prior to the personal representatives having authority over the Estate. The Applicant has not offered any authority to support her position that the personal representatives are required to look behind activities undertaken during the testatrix’s lifetime. [24] There is no evidence to suggest that the activities undertaken with respect to Laura’s accounts and property were not undertaken at her own direction. There is no evidence before the Court to support the allegation that there is money owing to the Estate as a result of the Attorneys’ activities, or at all. [25] The Respondents submit that they, as the personal representatives of the Estate, have identified the assets of the Estate exclusive of the assistance of Melinda Daye. The personal representatives have authority to deal with the testatrix’s bank accounts and are aware of the Estate’s ownership of the Property. The Respondents’ statement of the financial status of the Estate is based on their personal knowledge of the assets of the Estate. Executors are satisfied the Attorneys committed no financial misdeeds [26] The Applicant argues that the Estate has failed to recover monies ostensibly owed to the Estate by the Attorneys and that, if this money was recovered, the Estate could meet its liabilities without selling the Property. The Respondents argue this claim is an assertion being advanced by the Applicant, presented as fact. [27] It is well established that the authority of an estate’s personal representative(s) only arises upon the death of the testator. Likewise, the authority granted by a power of attorney extinguishes on the death of the donor or grantor (testator). In Guide to Powers of Attorney (2002), M. Jasmine Sweatman, (Aurora, Ontario: Canada Law Book Inc, 2002) at 21, citing Axler v. Axler (1993), 50 ETR 93 (Ont Ct Gen Div): “At common law, an attorney’s authority may also be terminated by the death […] of the grantor…”. [28] I agree with the Respondents that there is no obligation on the part of a personal representative to initiate an application for an accounting from a former attorney without evidence of misdeeds, based solely on one beneficiary’s unfounded allegations. “Executors are not bound to advance claims on the urging of a beneficiary”: Re Bibby Estate, 2009 ABQB 321, at para 45. The Applicant has advanced no legal authority to support her position. [29] The Applicant does not say where in law this positive obligation on the Respondents originates. There is no legal authority presented for the assertion. When pressed, the Applicant said it was relying on the standard fiduciary duty of the executors. That may be the case, but the burden is still on the Applicant to present evidence rather than bare assertions. For instance, the Applicant argued that the Respondents could consider raising the rent, once again, with no evidentiary basis that the rent being collected is below fair market value. There is no market analysis of comparable rents for similar properties (uninsulated, century old homes with broken windows) in the area. Nor is there any evidence on how the provincial rent cap would affect increasing the amount of rental income on the property. No authorities were presented to the Court stating that executors are required to raise funds to pay off Estate debts. [30] The Applicant testified on cross-examination that she had no involvement in the upkeep of the Property or payment for Laura’s care. I find her allegations are based on an analysis of the bank records which resulted in the chart of unidentified withdrawals (see Exhibit 2) and a disregard to the sworn statement of the executors who swore that they investigated the transactions on Laura’s account and were satisfied (see Exhibits 3 and 4). Each of the executors were cross-examined on the transactions and both, particularly Tracey, said there was nothing improper. This was further supported by Tina, saying they had a couple of questions and they went to the bank to check them out. I find the executors properly performed their due diligence. They did not discover anything prior to their assumption of authority that gave them pause or cause for concern. [31] There is no obligation in law for the Respondents to launch proceedings against the Attorneys on the basis of the Applicant’s unfounded assertions. As personal representatives, I find the Respondents have satisfied themselves that no money was squandered from Laura’s funds. [32] If the Applicant is of the view that the Attorneys squandered Laura’s money during her lifetime, then, as a daughter of the Power of Attorney’s donor, the Applicant may have other remedies against the Attorneys but that is not something on this Application that this Court has to determine. [33] The Probate Court has jurisdiction to hear this matter as stated in the Probate Act, R.S.N.S. 2000, c 31 (the “Act”) at section 8(1)(c): Power of courts 8 (1) Each court may (a) issue grants; (b) revoke or cancel grants; (c) effect and carry out the judicial administration of the estates of deceased persons through their personal representatives, and hear and determine all questions, matters and things in relation thereto necessary for such administration; (d) order any person who has been named as an executor of a will to appear and probate or renounce executorship of the will; (e) order any person who witnessed a will to prove the will; (f) order a person to comply with this Act; (g) appoint guardians and take the accounts of guardians under the Guardianship Act. Should the Life Interest Abate [34] A Life Interest is defined as follows in MacDonald Estate (Re), 2008 NSSC 253: 24 Principles of Property Law, Third Edition, by Bruce Ziff (Carswell: 2000) writes that a Life Interest may be created under a will or conveyance by carving a limited freehold interest out of the larger fee simple. At Page 162, he writes: ‘Unlike the fee simple, no special terminology is needed for the creation of a life estate at common law. . . . This means that there is no strict code of construction for the life estate. Occasionally, a question of interpretation arises concerning whether a life estate has been give away, or whether some lesser right has been conferred, such as a mere permission (or licence) to use the land. Gifts reserving a ‘privilege’ to live on the land, allowing ‘free use’, permitting the donee to ‘use’ the property, with a gift over ‘[w]hen she no longer needs’ the premises, or the conferring of a right to occupy a dwelling house rent-free, have been found to confer a life estate.’ 25 In Anger & Honsberger Chapter 6 Section 20.10(b) Ms. LaForest writes: ‘In cases of wills the Courts have always been more ready to try to ascertain the testator’s intention than in cases of deeds. ... In the absence of words of limitation, however, the devisee would take a life estate and a life estate would also be created by express words to that effect.’ [35] The Applicant argues clause 3(c) of the Will is clear and grants her a Life Interest in the Property. The Court and the Respondents do not disagree with this statement; however, we are both of the same view that the Applicant has failed to take into consideration the other parts of clause 3 of the Will. [36] The Will gifts the Life Interest to, not only the Applicant, but also to the Respondent Tina, contrary to the Applicant’s suggestion of a sole Life Interest to her, contained at page one (1) of her written submissions. As a donee of the Life Interest, the Respondent Tina’s Life Interest in the Property is equally impacted on this Application as that of the Applicant. The Respondent Tina, is prepared to see the Property sold in satisfaction of its liabilities. [37] The Parties are all equal beneficiaries of the residue of the Estate, along with their siblings. Clause 3(d) of the Will directs that all nine Beneficiaries will receive the residue in equal shares (see Exhibit 3, Tab I, Clause 3(d)). [38] The Respondents argue that selling the Property should result in a gift of the residue to all of Laura’s children, including the Applicant, after payment of the debts. This is an unfortunate situation where there are not enough assets to pay the Estate’s debts without a gift abating. [39] It is settled law that, when estate assets are sufficient to pay all debts but not all bequests in the Will, the estate is not insolvent. The bequests in a Will will abate if their liquidation is required to meet the estate’s liabilities: D.A. Howlett, Estate Matters in Atlantic Canada (Scarborough: Carswell 1999) at 132-133. [40] Oosterhoff on Wills, Albert H. Oosterhoff, et al, 8th ed (Toronto: Thomson Reuters, 2016) at pp. 515 and 519 of his text describes abatement as follows: Abatement is the pro rata reduction of the amounts or quantities of testamentary gifts when the estate is insufficient to pay the debts and gifts in full. Absent a contrary direction in the will, the order in which assets are liable to pay debts is determined by well-defined rules. […] The common law order of abatement for testamentary gifts is: (1) residuary personality; (2) residuary real property; (3) general legacies, including pecuniary legacies from residue; (4) demonstrative legacies; (5) specific bequests of personality; and (6) specific devises of real property. […] [41] An estate may become insolvent because the personal representatives distributed the assets to beneficiaries prematurely, while there were creditors with valid claims against the estate. When this happens, the creditors may follow the property into the hands of the beneficiaries and recover it or they may exercise their rights against the personal representatives for mismanagement of the estate to satisfy their debts: D.A. Howlett, Estate Matters in Atlantic Canada (Scarborough: Carswell 1999) at 132-133. [42] In CIBC v Foley Estate, 161 Nfld. & P.E.I.R. 228, the deceased died unmarried and without issue. His parents were the sole beneficiaries of his estate on intestacy. The estate administrator paid all debts of the estate, excepting three insured bank loans, understanding that the insurance would be applied to satisfy this debt. The balance of the estate was distributed to the beneficiaries. [43] As a result of circumstances unknown to the estate administrator at the time the distribution to the beneficiaries was made, the insurance was invalid as a result of an exclusion clause and the three bank loans remained unpaid. The bank successfully sued the estate administrator for the value of the assets he had distributed to the beneficiaries of the estate in satisfaction of the outstanding debt. This case illustrates the liability imposed upon an administrator or executor who distributes an estate prior to ensuring the estate’s liabilities are satisfied. [44] This is similar to the case at bar. The proceeds available in the Estate’s bank account are insufficient to satisfy the Estate’s liabilities. The Estate’s only substantial asset is the Property. To avoid a sale of the Property in favour of the Life Interest could render the Estate insolvent and expose the personal representatives to personal liability for the outstanding debt. [45] It is settled law that the personal representatives have a duty at common law to ensure all Estate debts are paid prior to distributing any bequests to named beneficiaries: Jennifer A. Greenan, The Executor’s Handbook 2019, 6th ed (Toronto: Lexis Nexis 2019), at 86. Further, the Act and the Will’s instruction each support a finding that the Life Interest must abate to meet the Estate’s liabilities. [46] As described in Oosterhoff, supra at p. 528, “Before any beneficiary under a will becomes entitled to any property the testator has given her, the testator’s debts must be paid”. Where the estate is solvent, but there are insufficient assets to pay bequests, the creditors must first be paid in full: Thomas G. Feeney, The Canadian Law of Wills, 3rd ed, vol 1 (Toronto: Butterworths 1987), at 251. [47] Section 83(3) of the Act, while relating specifically to insolvent estates is instructive respecting the priorities ascribed to the distribution of assets and reads: […] (3) On the settlement of an insolvent estate the assets of the estate shall be distributed in the following order of priorities to those persons who have rendered their accounts, duly attested, in the following priority: (a) first - in payment of funeral expenses, including a headstone, to the extent such expenses appear reasonable; (b) second - in payment of probate taxes and court fees; (c) third - in payment of the personal representative’s commission and legal fees, on an equal footing; (d) fourth - in payment of reasonable medical expenses incurred during the last thirty days of the deceased’s life, on an equal footing; (e) fifth - in payment of all other debts. [48] At the time of Laura’s death, her only asset of significance was the Property. She had modest savings and income which were required to pay for her ongoing care in Northwood. Her Estate had approximately $10,000 in outstanding liabilities, broken down as follows: (a) Royal Bank of Canada Line of Credit - $8,000 (maxed out); (b) Northwood - $779.94; (c) Lawton’s Drugs for outstanding prescription fees, approximating $400. [49] The funeral expenses, taxes, and court fees required to administer the Estate are the first priorities to be paid. The outstanding liabilities noted above fall under the fourth and fifth priorities listed in section 83(3) of the Act. At law, these debts must be paid prior to disbursement of any bequests. It must also be noted that no executor’s fees have yet been calculated, which fees would also take priority over the distribution of bequests in the Will, falling within category three above. [50] I agree with counsel for the Respondent that the Estate’s liabilities have only increased since the date of death, owing to legal fees incurred in the present proceeding and the costs personally incurred by the Respondent, Tracey, for annual home insurance fees, for which she is owed reimbursement from the Estate. These liabilities, together with those noted above, are legitimate creditors against the Estate. [51] The priority of creditors was confirmed by the Nova Scotia Probate Court in Re Legge Estate, 2001 NSSC 156, at paragraph 21, where the above-noted order of estate assets that are to be used to satisfy estate liabilities was applied: Absent instructions to the contrary in a will, the payment of debts and expenses are to be paid as follows: first, out of the residuary personality; second, out of the residuary (not specifically devised) real property; third, out of general bequests; fourth, out of demonstrative bequests; fifth, out of specific bequests; and finally, out of specific devises of real property. [52] In Re Smith Estate, 2003 SKQB 361, the Saskatchewan Court of King’s Bench applied the order of asset liquidation from Legge Estate, supra, as its authority in a matter where an estate had potential liabilities making up half the estate’s value, and the beneficiaries could not agree on which bequests must abate to pay any judgments arising in those claims (at para. 15). The Court in Smith Estate candidly stated at paragraph 8: “Any recovery by these claimants will have to come from assets bequeathed in [the] will”. The Court directed that “… whatever abatement is necessary to settle the expenses, debts and liabilities will come …” from the above-noted list of priority liquidations of the assets (at para. 32). [53] Similarly in the case at bar, the Life Interest is the necessary and only abatement available to settle the Estate’s expenses. There are insufficient assets to gift all bequests after debts are paid, “… some beneficiaries will receive the benefits to which they were entitled under the will while other beneficiaries will not”: Jennifer A. Greenan, The Executor’s Handbook 2019, 6th ed (Toronto: Lexis Nexis 2019) at 86-87. [54] In Gyan-Dyck v Dyck Estate, 2017 BCSC 1647, the British Columbia Supreme Court considered whether a monetary bequest may be abated if the real property of the estate needed to be sold to pay debts. The Court summarized the law as follows: 19 The law is clear that if an estate has sufficient assets to pay its debts, it is considered to be solvent even if the estate does not have sufficient assets to pay specific bequests. [Authorities omitted.] As the passing of accounts has not yet occurred, it is too early to determine the solvency of the estate. If, once the accounts are passed, the assets are nothing more than the Property, the bequest may be considered abated. […] [Emphasis added] [55] In Re Barrett Estate, 139 Nfld. & P.E.I.R. 202, the Newfoundland Supreme Court held that all creditors were to be paid in full and certain gifts were to abate, in a case where the assets of the estate were insufficient to pay all debts and all gifts. The Court held all assets bequeathed under the will’s residuary clause had to be used first to pay the estate’s debts and determined the general bequests must be liquidated to cover the remaining debts (at para. 13). In that case, there were enough assets in the residuary and general bequests to cover all debts so that the specific legacies of the will were not subject to abatement (at paras. 24 and 29). [56] In the case at bar, the specific legacies must abate. The Respondents argue that, absent the sale of the Property, the Estate would be rendered insolvent. As personal representatives, the Respondents would be personally liable to satisfy the Estate’s debts if they made bequests out of the Estate before addressing these liabilities. [57] I find that the Will itself directs the Respondents to take hold of the Estate’s assets and pay its debts, before any gifts may be distributed. Specifically, Clauses 3(a) and 3(b) instruct the Respondents as follows: (a) To use their discretion […] to sell, call in and convert into money any part of [the] estate…in such manner and upon such terms as [they] may in their absolute discretion decide […] (b) To pay out of and charge to the capital of [the] general estate my just debts, funeral and testamentary expenses and all estate […] duties or taxes […] [58] Laura intended the Life Interest be available to both the Applicant and to the Respondent Tina, for their use and occupation, if they choose assuming the Estate had sufficient assets to allow it. Similar to Smith Estate, supra, Laura did not contemplate her liabilities exceeding her liquid assets. However, unlike the facts of Smith Estate, explicit instruction on which bequests must abate to settle any Estate claims cannot be reasonably expected (at para. 9) because there is only one gift that is possible to abate to settle the claims on this Estate and that is the Life Interest. [59] The Life Interest is no different than any other bequest. It cannot be granted without rendering the Estate insolvent and without imposing liability on the personal representatives. The common law, statutory authority, and the Will all support a finding that the Property will likely need to be sold to satisfy the Estate’s liabilities, thereby abating the Life Interest. The Executors have authority to sell the Property [60] The Will and the Act provides the executors with discretion to sell the Property to pay the Estate debts. [61] Clause 3(a) of the Will states that the executors have the discretion to sell assets of the Estate to pay its debts. It directs the Respondents to use their discretion to “… sell, call in and convert into money any part of [the] estate … in such manner and upon such terms as [they] may in their absolute discretion decide …”. [62] In addition, section 50(1) of the Act reads: Sale of real property 50 (1) Subject to any will, a personal representative may sell the real property for the purpose not only of paying debts but also for distributing the estate among the persons beneficially entitled thereto, whether there are or are not debts and it is not necessary that the persons beneficially entitled to the real property concur in such sale, except where the sale is made for the purpose of distribution only. […] [Emphasis added] [63] The personal representatives of the Estate have the power of sale of the real property as stated in Oosterhoff on Wills, at page 62: (b) Testamentary Powers of Sale A testamentary power may be express or implied. If the personal representatives have been given an express power of sale, they may exercise it at any time, since the property does not vest in the beneficiaries [citing Shaw v Fluke, [1938] 4 DLR 770 (Ont SC)]. […] An implied power of sale also arises under the will and thus, if it exists, has exactly the same effect as an express power. An implied power arises if the will contains a direction to pay debts. […] [64] Clause 3 authorizes the Respondents to take charge of the Estate’s assets and deal with the Estate’s liabilities. The Respondents are authorized by statute and by the Will to sell the Property, should they choose, to pay the debts. Conclusion [65] I find the personal representatives of the Estate may sell the Property in order for the Estate to pay its debts. This accords with the requirements of the law and the instructions of the Will. The Life Interest to Denise, and to the Respondent Tina, must abate as a result. [66] Based on the evidence and authorities before the Court, I find that the Applicant has not met its burden for an order that the Applicant be permitted to enter the Property and enjoy the Life Interest under the Will. The Applicant’s application is dismissed with costs. The Respondents may proceed with the administration of the Estate and deal with the Property as they see fit. [67] I would ask counsel for the Respondents to prepare the order. If the parties are unable to agree to costs, I will accept written submissions within 30 days from the date of this decision. Bodurtha, J.