The recent case of Tarantino v. Galvano, 2017 ONSC 3535, raises a variety of issues familiar to estate litigators – powers of attorney, capacity, quantum meruit claims, the duty to account and the rules surrounding the removal of an estate’s executor.
In this case the deceased, Rosa Filippo Galvano (“Rosa”) had two daughters, Nellie Galvano (“Nellie”) and Giuseppina Bucci (“Giuseppina”), who died in 2007. Giuseppina had two daughters, Rosa Pignatelli and Tecla Tarantino (together, the “Grandchildren”), who are co-executors of Rosa’s estate with Nellie. After her father died in 1986, Nellie lived with and looked after her mother Rosa for the next 26 years, until Rosa’s death on February 20, 2012. As Justice Kristjanson states, “Nellie cared for Rosa at home, as Rosa became incontinent, as she could no longer walk, as she could no longer speak…and as she ultimately died in Nellie’s arms…This onerous burden was undertaken with love and attention.”
Rosa and Nellie owned the home together, with Rosa holding an 80.38% interest and Nellie holding a 19.62% interest. In her 2005 will, Rosa provided that her interest in the home would be sold and the proceeds brought into the estate. Nellie had a right of first refusal to purchase the home. Nellie was also Rosa’s attorney for property and personal care.
On March 3, 2008, on the advice and with the assistance of a solicitor, Nellie entered into an agreement between herself and Rosa which transferred Rosa’s interest in the home and 75% of Rosa’s pension income to Nellie, in exchange for Nellie acting as a caregiver for Rosa for the duration of Rosa’s lifetime (the “Agreement”). The Agreement was signed by Nellie personally and in her capacity as attorney for property for Rosa.
In January 2013, the Grandchildren commenced an application (which was converted into an action in 2016) against Nellie. Among other things, the Grandchildren sought an accounting from Nellie with respect to Rosa’s income and expenses, to set aside the house transfer, and to recover damages to the estate, including occupancy rent, from Nellie. Nellie raised a quantum meruit defence for services rendered and improvements to the house, and a counterclaim seeking declarations regarding Nellie’s entitlement to the house, the value of her services, and expenses.
While the facts raise several noteworthy issues, this blog will focus upon one particularly interesting question which was addressed by the court: in entering into the Agreement using the power of attorney for property, did Nellie breach her fiduciary duties under the Substitute Decisions Act (the “SDA”)? The court found that although Nellie upheld her end of the Agreement, the Agreement itself was void and the transfers of the house and of Rosa’s pension income were therefore invalid. The court had several reasons for reaching this conclusion.
First, because the Agreement was signed by Nellie personally and in her capacity as Rosa’s attorney for property, there was an implicit acknowledgement by Nellie that she had a fiduciary duty at the time of signing. Second, Rosa was incapable of managing her property and so her power of attorney had come into effect at the time the Agreement was executed.
In addition, the court reviewed the fiduciary obligations of an attorney for property and personal care as set out in sections 32(1) and 45 of the SDA, respectively. Justice Kristjanson then went on to note that subsection 66(3) of the SDA provides that the attorney for personal care should make decisions in accordance with wishes expressed when the person was capable, and otherwise, should make decisions in accordance with the person’s best interests. Subsection 66(4) of the SDA requires the attorney to take into consideration various factors in deciding what is in the incapable person’s best interests, such as the values and beliefs that the guardian (attorney) knows the person held when capable and believes the person would still act on if capable, as well as the person’s current wishes, if they can be ascertained.
The court concluded that pursuant to section 37 of the SDA, Nellie could only enter into the Agreement to transfer the house and pension income if it was “reasonably necessary” to provide for Rosa’s care, which it was not. As a fiduciary, an attorney for property is obligated to act only for the benefit of the grantor, putting her own interests aside. An attorney is also prohibited from using their authority for their own benefit unless “it is done with the full knowledge and consent of the donor”. Rosa lacked capacity at the time of the Agreement and the transfer of the house and pension income were therefore not done with Rosa’s full knowledge and consent.
The transfer of title to the house was thus set aside, and Nellie was, among other things, ordered to account for expenditures made in respect of Rosa’s care. Notwithstanding the foregoing, interestingly, Nellie’s quantum meruit claim was established. Rosa received excellent care for several years in very challenging circumstances (a benefit conferred) and Nellie was correspondingly deprived – she closed her businesses and worked full time for the benefit of her mother. It was further held that there was no juristic reason for the enrichment. Nellie believed she was keeping up her end of the bargain, even though the court voided the Agreement. In the absence of the Agreement, however, the court found that the services must still be acknowledged and paid for, to avoid an unjust enrichment.
In reviewing this case we are reminded that an incapable person’s best interests are absolutely paramount and although powers of attorney are often broadly worded, exercising authority as an attorney is always limited by this overriding consideration. I encourage readers to review Tarantino v. Galvano in full, as there are many other relevant issues covered and the decision is well-reasoned and insightful.