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Estates & Wills & Trusts, Real Estate

OCA: lower court erred in finding woman had no money of her own

Toronto wills and estates lawyer Daniel Bernstein says a recent decision by the Court of Appeal is “insightful” in its take on beneficial ownership of a house through a resulting trust but he stresses the importance of documenting similar intentions.

The matter of Andrade v. Andrade, 2016 ONCA 368 (CanLII) involves a Toronto house that has been in the Andrade family for more than 40 years.

Purchased in 1974, the mother and widow Luisa Andrade lived in the property until her death in 2014. Legal title was first taken in the names of two of Luisa’s seven children, Henrique (Henry) Andrade and Maria Jesus Andrade.

Five years later, title was transferred to Henry Andrade and his brother Joseph Andrade, who remained on title thereafter as the legal owners of the house.

When Joseph died in March 2007, his widow Manuela Andrade transferred his half interest in the house into her own name. In 2009, Manuela brought an action against Henry and Luisa seeking a declaration that she was the beneficial owner of a half interest, and an order for partition and sale.

Luisa counterclaimed for a declaration that she was the beneficial owner and an order that Manuela and Henry transfer all of their right, title and interest to her. In 2011, Henry transferred his half interest to Luisa. In 2014, a few months before the trial commenced, Luisa died and the action continued against her estate and Henry.

At trial, the trial judge finding that Manuela was the beneficial owner of a half interest — rejecting the counterclaim that it was held by Joseph and Henry in trust for Luisa. The trial judge directed the house to be sold, with half of the net proceeds to be paid to Manuela, and awarded costs of $237,396 against Luisa’s estate.

In allowing the appeal by Luisa’s estate, Justice Katherine van Rensburg found the trial judge erred in failing to find a resulting trust in favour of Luisa.

“He made a palpable and overriding error of fact when he concluded that, at the time of the purchase and until she died, ‘Luisa had no money of her own.’ This error informed his analysis of the parties’ legal rights. It caused him to ignore the evidence of Luisa’s intention when the house was put in her children’s names, and five years later when Joseph went on title, that she would remain the beneficial owner,” Rensburg wrote for the Court of Appeal panel.

“Henry and Joseph held the house by way of resulting trust for Luisa who was, at the time of her death, its sole beneficial owner. Accordingly, I would dismiss Manuela’s action, declare Luisa’s estate to be the sole beneficial owner of the house, and order Manuela to transfer her legal half interest in the house to Luisa’s estate,” the decision continued.

Bernstein, a lawyer with Weltman Bernstein, says at the core of the matter was the issue of whether money originally coming from pooled resources of family members which is then given to a parent and used to buy property which is not registered in that parent’s name, results in that property belonging to the parent as a beneficial owner through the concept of a resulting trust.

“Even though the money was not earned in the strictest sense by the mother and was given to her by her children, the Court of Appeal found it was still her money,” Bernstein tells AdvocateDaily.com.

“The Appeal Court found the trial judge erred in depicting the money used to buy the house as the children’s money and thus not being capable of supporting an argument that the mother was the beneficial owner,” he says.

“By the children pooling their earned income and giving it to their mother over time to pay for family expenses, this money became their mother’s money and belonged to her. The children gifted the money to their mother knowing she would use it to support the family without strings attached. This included purchasing a house and paying for its upkeep and expenses such as a mortgage.”

Bernstein, who did not act in the matter and makes his comments generally, says evidence showed Luisa negotiated with and advertised for prospective tenants and collected rent.

“Furthermore, rent was payable to Luisa and deposited into her bank account. Evidence showed she paid for and handled all house expenses. The fact that she used money she received from her children to cover family expenses did not negate her intention that the house was to be hers nor did this money ‘belong’ to the children once they gave it to their mother to cover the family’s expenses,” Bernstein says.

“This is an insightful decision because the Court of Appeal not only looked at whether the mother had money but how that money was obtained by her. Even though the money was not strictly ‘her earned income,’ it came from paid employment of her children and voluntarily given to her to be used as she saw fit to cover family expenses for the benefit of the family as a whole,” he says.

Once the court established that Luisa did contribute to the purchase of the house — because she used “her money” — it looked to her intention and concluded that she did not intend to confer any benefit to the registered owners of the property to the exclusion of herself and her other children, Bernstein says.

“Furthermore, based on the evidence, it was the mother who took on the responsibility to pay for the house at the time of the purchase and during the next 35 years until she died,” he adds.

Bernstein says parties in a similar situation can enter into a trust agreement at the time of a transaction to avoid future disputes.  

“Parties may not realize the importance of evidencing such intention by written agreement,” he says. “Open and detailed dialogue with the parties’ lawyer as part of a proper retainer and understanding the genesis of a transaction can avoid such problems.”

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