All About Estates

A Change of Heart Does Not Create a Resulting Trust

In the recent decision of Hertendy v. Gault, 2020 ONSC 7555, the Court considered a mother’s summary judgment motion to set aside the transfer of her property to her daughter for no consideration.

Facts:

On October 28, 2011, Marian Hertendy appointed her daughter, Beverly Ann Gault, as her attorney for property and personal care. That same year, Marian signed a Will transferring her property at 837 Poonamalie Road in Smiths Falls (the “property”) to Beverly upon Marian’s death. Marian’s husband had also signed a Will in 2006 leaving the property to Beverly if Marian predeceased him.

Marian’s husband died on March 5, 2011 and the property was transferred to Marian. By late 2011, Marian had begun a relationship with another man. In March 2012, Marian had knee surgery which impaired her mobility. On April 12, 2012, Marian and Beverly attended a lawyer’s office (the same lawyer who prepared Marian’s 2011 Will) and while mother and daughter were seated in Beverly’s car (Marian could not get out of the car on account of her knee) Marian signed a Transfer which transferred her ownership interest in the property to Beverly, for no consideration. After the transfer, Beverly paid some of the property taxes and insurance on the property.

In 2017, there appears to have been a falling out between Marian and Beverly, and Marian removed Beverly from her Will. Marian then brought a claim against Marian, seeking a declaration that Beverly held her ownership interest in the property on a resulting trust for Marian. Marian claimed that she did not know the legal effect of the transfer and that the lawyer who registered the transfer was not acting for Marian but represented Beverly, and that Marian did not receive independent legal advice. Marian argued that the transfer occurred while Beverly was her attorney for property, and at a time when Marian was under Beverly’s control. Marian alleged the transfer occurred while she was depressed following her husband’s death and taking heavy pain medication due to her knee surgery.

Analysis:

Both sides agreed that this case was appropriate to be decided by summary judgment, as did the Court. The Court applied the rule from the Supreme Court of Canada’s decision in Pecore v. Pecore, 2007 SCC 17, that the presumption of resulting trust applies to transfers of property to adult children for no consideration and the onus was on the transferee, in this case, Beverly, to demonstrate that a gift was intended.

Much of the Court’s reasons focused on Marian’s credibility.  The Court rejected Marian’s evidence that she did she not intend to transfer the property to Beverly and only thought she was signing legal documents to enable Beverly to pay property taxes; this claim was countered by other evidence given by Marian that she knew she was transferring ownership of the property, and in particular, evidence of Marian’s discussions with her other daughter in which Marian advised that she had “changed her mind” about the transfer. The Court also disbelieved Marian’s evidence that she did not recall the contents of prior Wills which left the property to Beverly. Instead, the Court found that Marian was worried after her husband’s death about being able to afford the bills related to the property, including taxes.

On the subject of whether Marian would have intended to transfer the property to Beverly based on a vague promise of assistance to pay the bills, which payments would have amounted to far less than fair market value for the property, the Court found that this was in fact Marian’s intension when she transferred the property to Beverly.

Although Beverly had a power of attorney, Marian signed the transfer documents personally. There was insufficient evidence that Beverly unduly influenced Marian or that Marian suffered depression or other medical issues that would have rendered her mentally incapable of transferring the property. Although Marian may have been sad after her husband’s death, she began a relationship with another man later that year and went on a cruise. While Marian suffered physical limitations as a result of her knee surgery, these issues did not impair her ability to understand the document she signed to give effect to the transfer.  Nor was Marian vulnerable at the time of the transfer.

Decision:

The Court found that Marian intended to transfer the property to Beverly as a gift with the condition that Marian would retain a life interest in the property, provided that Beverly would help pay the ongoing household expenses and property taxes in particular. The Court rejected Marian’s evidence that she did not understand that she was transferring the property to Beverly, or that she did not discover the transfer until 2015 when she went to see another lawyer about a reverse mortgage. As such, the Court declined to declare that Beverly’s registered ownership interest was subject to a resulting trust in favour of Marian. Marian’s summary judgment motion was therefore dismissed.

Take Away:

This case shows that capable adults acting on their own accord will be held to the decisions they make regarding transfers of property, even if they regret their choices down the road.  Physical ailments and sadness do not in and of themselves amount to impaired cognition or vulnerability to undue influence. A change of heart does not create a resulting trust.

About Rebecca Studin
Rebecca Studin was called to the Bar in 2009. Before joining de VRIES LITIGATION LLP, Rebecca practised estates and commercial litigation at a full-service international law firm in Toronto. Rebecca’s estates experience includes will interpretation applications, will rectification applications, solicitor’s negligence actions, and other estates and trusts matters. Rebecca obtained her law degree from Osgoode Hall Law School after earning her honours bachelor of arts degree from Glendon College, York University. Following her call to the Bar, Rebecca was selected as a Fox Scholar and spent a year training as a barrister at the Middle Temple, Inns of Court, in London, UK.

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