Siegel v. Siegel, 2011 ABQB 540

Court of Queen ’ s Bench of Alberta Citation: Siegel v. Siegel, 2011 ABQB 540 Date: 20110902 Docket: 4801 143680 Registry: Calgary Between: Heather Elaine Siegel Plaintiff - and - Reginald William Siegel Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.B. Sulatycky _______________________________________________________ [ 1 ] This application is to determine the enforceability and implementation of an Agreement which purports to exempt certain property from division under the Matrimonial Property Act , R.S.A. 2000, c M-8, (the “M.P.A.”).

Facts: [ 2 ] The Plaintiff, Heather Siegal, and the Defendant, Reginald Siegal, entered into a Pre-Marital Agreement (the “Agreement”) on July 21, 1988. The Agreement purported to exempt from matrimonial property, investments totaling $75,000 for the wife, as listed in

Schedule B, and farmland, equipment and a commodities account totaling $230,000 for the husband, as listed in

Schedule A. The

property listed in Schedules A and B will be collectively termed “the scheduled property”. Following the end of their marriage, the husband and wife are now seeking to have their assets divided and the terms of the Agreement clarified in reference to the husband’s farmland. [ 3 ] The disputed property consists of three separate parcels of farmland totaling 1,590 acres, which have been farmed by the husband since before the marriage. [ 4 ] According to the evidence given by the parties during questioning, the husband did not hold legal title to the farmland until the mid-1990s, after the couple was married.

Before acquiring legal title the husband had a leasehold interest in the land, which later became a freehold interest after the husband fully paid the mortgages on the properties. The mortgages registered against the farmland were solely in the name of the husband. [ 5 ] According to the statutory declaration of the husband, the total value of the farmland today is $531,700, less approximately $67,000 in mortgages (although the wife disputes the valuation). The husband does not have any notable assets in bank accounts or other financial investments.

The farmland makes up a significant percentage of the husband’s total assets. [ 6 ] The wife has purportedly exempt assets of $239,530.09 in several bank accounts and other investments covered by the Agreement. [ 7 ] The wife claims that the husband did not accurately disclose his interest in the farmland to her prior to the marriage and therefore, that she was unaware of the nature and effect of the Agreement. As a result, she argues that the Agreement should not be enforced by the Court.

In the alternative, she argues that the Agreement should be interpreted as exempting only the interest in the farmland held by the husband at the time of marriage, not the interest acquired during the marriage. She argues that any increase in the value of the farmland acquired by the husband by paying off the mortgages and purchasing title should therefore not be exempt under the Agreement.

Further, the wife claims that she contributed to the acquisition of the farmland during the marriage and is therefore entitled to a share of the increase in its value between the date of marriage and the date of the termination of the marriage. [ 8 ] Based on a plain

interpretation of the Agreement, the husband takes the position that the wife gave up all claims to the farmland regardless of whether the mortgages on the farmland had yet to be fully repaid on the date of marriage. As such, the wife should not be entitled to any increase in the value of the farmland during the period of marriage. Issues: The request by the wife for distribution of the farmland as joint property raises two issues: 1. Is the Agreement enforceable? 2. If the Agreement is enforceable, does it preclude the wife from claiming any interest in the farmland? 1.

Is the Agreement is enforceable? [ 9 ] Section 37(1) of the M.P.A. permits spouses to enter into a written agreement excluding property from the division scheme set out in

Part I of the M.P.A. The most notable effect of such an agreement is to set aside the presumption of equal distribution of

property at the dissolution of the marriage under section 7(4) of the M.P.A. [10] For a marriage contract to be valid and enforceable the parties must understand the nature and effect of the agreement, beaware of the potential relinquishment of a claim otherwise available under the M.P.A., and execute the agreement freely and voluntarily:see section 38(1). M.P.A. [11] As a general principle, if all the formal requirements are met, courts are reluctant to interfere with a domestic contract absentevidence of unconscionable conduct or evidence that one party is unable to protect his or her own interests.

This is the case despite thefact that it results in a party to the agreement receiving less than he or she would have been received under the statutory division offamily property: Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, and Clayton v. Clayton (1998), (ON SC), 40O.R. (3d) 24, 38 R.F.L. (4th) 320.

The onus of demonstrating unconscionable conduct or duress rests with the party making the claimand is evaluated based on the cumulative effect of any transgressions or improprieties. [12] Based on the information provided by the parties, there is no issue of duress when the Agreement was signed in July 1988.The wife does claim, however, that the husband fraudulently or negligently misrepresented the state of his assets at the time of marriageby not disclosing the exact interest he had in the farmland described in

Schedule A. [13] In this case, however, the husband did disclose to the wife that he had an interest in the farmland and that there was moneyowing on the farmland, which would suggest that he did not have unencumbered title. After receiving independent legal advice, the wifedid not inquire about the property or seek additional information about the proposed exemption. If the wife was unaware of the exactinterest owned by the husband in the farmland, that does not take away from the fact that she was aware that she was giving up her claimto the farmland: see Tardif v. Campbell, 2008 ABQB 776, 63 R.F.L. (6th) 220, at paras. 40-43 for a similar

interpretation. [14] The husband’s failure to provide a more accurate disclosure of his interest in the farmland can be distinguished from the typeof misleading disclosure that was found to exist in Rick v. Brandsma, 2009 SCC 10, [2009] 1 S.C.R. 295. In that case, the SupremeCourt of Canada departed from the distribution arrangement set out in a separation agreement on the basis that the husband’s disclosurewas misleading, the wife was psychologically vulnerable, and the legal advice provided to the wife was not sufficient to compensate forher vulnerability.

In the case at bar, there is no evidence that the husband attempted to mislead the wife or that the wife waspsychologically vulnerable at the time she received legal advice regarding the effect of the Agreement. Even if the husband’s disclosureregarding the nature of his interest in the farmland can be characterized as incomplete, there is no evidence that this was part of acumulative series of transgressions or improprieties.

Without this type of evidence, the Court considers the Agreement to be a reflectionof the mutual desire of the parties and indicative of their substantive intentions at the time of marriage: see Miglin v. Miglin, at para 83. [15] In considering whether a domestic contract is enforceable, in addition to the common law rules that there be no duress, undueinfluence or unconscionability, the court considers whether the current circumstances were within the contemplation of the parties at thetime the agreement was formed. The Supreme Court of Canada stated in Hartshorne v.

Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550at para. 47 that “[w]here the current circumstances were within the contemplation of the parties at the time the agreement was formed,and where their agreement and the circumstances surrounding it reflect consideration and response to these circumstances, then theplaintiff’s burden to establish unfairness is heavier.” In that case, when the parties married, the husband had significant assets and thewife had none.

The parties entered into a pre-marital agreement that had the effect of exempting most of the husband’s assets fromdivision under the matrimonial property division regime. The parties each had legal advice and the agreement did reserve the wife’s rightto spousal support. The effect of the agreement was to leave the wife with approximately 20 per cent of the matrimonial assets when themarriage ended, some twelve years later.

The Court found that the financial and domestic arrangements between the husband and wifeunfolded just as the parties had expected and as such the agreement was enforceable. [16] In the case at bar, both the husband and the wife exempted property under the Agreement. This indicates that they consideredthe possibility of a breakdown in the marriage and intended that in the event of a breakdown, each would have separate assets uponwhich to rely.

It appears that the parties contemplated and provided for the circumstances in which they now find themselves. [17] Bastarache J.’s comments in Hartshorne, at para. 67 are helpful: Once an agreement has been reached, albeit a marriage agreement, the parties thereto are expected to fulfill the obligations that theyhave undertaken. A party cannot simply later state that he or she did not intend to live up to his or her end of the bargain. It is true that, insome cases, agreements that appear to be fair at the time of execution may become unfair at the time of the triggering event, depending

on how the lives of the parties have unfolded. However, in a framework within which private parties are permitted to take personal responsibility for their financial well-being upon the dissolution of marriage, courts should be reluctant to second-guess their initiative and arrangement, particularly where independent legal advice has been obtained. [ 18 ] I take notice of the fact that the reference to “fairness” in the Hartshorne decision relates to a specific requirement under the British Columbia legislation that the fairness of the agreement be determined.

There is no such requirement under Alberta law: Tardif v. Campbell at para. 43 . This does not diminish the Court’s direction that courts should be reluctant to second- guess the contractual arrangement the parties have made and in this case, I find no reason to do so. [ 19 ] Accordingly, on the evidence and facts available to the Court at this time, there is no basis for setting aside the Agreement in its entirety. 2. Does the Agreement preclude the wife from claiming any interest in the farmland? [ 20 ] The answer to this question requires

interpretation of the Agreement. [ 21 ] The expressed intent of the parties and the effect of the Agreement is to exclude the operation of the M.P.A. The Agreement is to be the sole determinant of the division of the property of the parties. How the Agreement is to be applied to certain categories of property is less than clear. [ 22 ] Clause 3.2 of the Agreement provides that title to or possession of property shall confer entitlement “absolutely and free from any claim thereon by the other.” That clause standing alone would irrefutably signal a separate property regime.

However, there are specific provisions in the Agreement which appear to conflict with the general provision of clause 3.2. [ 23 ] If Clause 3.2 is to have general application there would be no need to be specific about categories of property. But in fact the Agreement does create such categories. Clause 2.1(

c) defines “separate property” and clause 2.1(

d) defines “joint family assets”. [ 24 ] The inclusion of the term “joint family assets” in the definition portion of the Agreement is curious because the term is not used anywhere else in the Agreement. Is it simply redundant? Is it to be completely disregarded when seeking to determine the intention of the parties. Or does it create a category merely by defining it? The Agreement was prepared by a lawyer and each of the parties had the benefit of legal advice before signing it. The reference to “joint family assets” in the circumstances must have been intended to have meaning in the context of the Agreement.

In my opinion the intention was to create a category of assets which consisted of “all real and personal property, stocks, bonds, business interests and investments of every nature and description owned directly or in trust by either party at the date of termination other than separate property” as described in the Agreement. Thus, notwithstanding that property is owned by one party it is nevertheless a “joint family asset” if it does not fall withing the description of “separate property”.

These specific provisions override the general provisions of clause 3.2 which purport to make title to, or possession of, property absolutely determinative. [ 25 ] Trying to determine if the parties intended to create a rigid separate property regime is further complicated by the use in two instances of the phrase “as provided elsewhere herein”.

The first instance is in Clause 5.1 which provides that a party shall not obtain an interest in the other’s scheduled property except “as provided elsewhere herein.” The second instance also relates to separate property being free and clear of any claim by the other party “except as provided elsewhere herein.” The use of that phrase twice in relation to separate property undermines the rigid

interpretation of the agreement sought by the husband. [ 26 ] Schedules attached to the Agreement list property which is owned by the husband (Schedule “A”) and by the wife (Schedule “B”). Those properties and “any future separate property purchased by either party” by definition are “separate property”. However, the increase in value of the scheduled properties and the properties acquired subsequent to the marriage are treated differently in the Agreement.

[ 27 ] Although clause 3.2 states that "title or possession of the property shall confer entitlement absolutely and free from any claim thereon by the other ", clauses 8.1 and 8.2 state otherwise. According to clauses 8.1 and 8.2, if the property was acquired subsequent to the marriage, title or possession of that property is not determinative of ownership, at the termination of the marriage. Rather, it appears that contribution to the property acquired subsequent to the marriage is determinative. [ 28 ] Clauses 8.1and 8.2 are included under the title “8.0 Property Acquired Subsequent to Marriage”.

They state: 8.1 Save and except for the matrimonial home and contents thereof, the parties agree that any and all property, whether real or personal, acquired subsequent to the marriage and to which both parties have contributed to the acquisition thereof shall, upon marriage termination, be divided between the parties on a pro rata basis equal to each party’s relative contribution to the acquisition of such asset whether such contribution be made from either of the parties separate account or from the joint family account. 8.2 Any asset acquired by either party from that party’s separate account or funds shall remain the property of that person including, but not limited to, any increase in value of that asset between the time of acquisition and separation, dissolution of marriage or death. [ 29 ] Clause 8.1 deals with 1) property 2) acquired by either party 3) during the marriage 4) using assets that were not in separate accounts or funds .

If those conditions are present, the parties agreed that 1) the property acquired 2) would be divided between the parties 3) on termination of the marriage 4) and would be divided on a pro rata basis equal to the parties’ relative contribution. In this situation, the title to the property could be in either party's or both parties' names. Regardless, it is to be divided between them on a pro rata basis relative to each party's contribution. It is not necessary to address whether any increase (or decrease) in value is to be divided.

This is necessarily implied from the fact that the value of the property is determined at the termination of the marriage. If both parties contributed to the property acquired subsequent to the marriage, they both have a right to a pro rata share of its value based on their contribution. Because the property value is to be determined on termination of the marriage, it necessarily includes any increase, or decrease, in value. [ 30 ] Clause 8.2 deals with 1) property 2) acquired by either party 3) during the marriage 4) using assets from that party’s separate accounts or funds .

If those conditions are present, the parties agreed that 1) the property acquired including any increase in the valuation of the property between the time of acquisition and separation, dissolution of marriage or death 2) would not be divided between the parties 3) on termination of the marriage 4) and would be held as a separate asset by the party who purchased it. It would seem that this could only occur if assets from only one of the parties' separate accounts or funds were used to acquire the property.

Title could presumably be in either party's name, but if only one of the party's separate funds was used, that party is entitled to keep the property or the value of the property, including any increase in its value. Only one party contributed and, as a result, only that party has a right to the property. [ 31 ] Clause 9.1 deals with 1) “separate property” 2) of each of the parties 3) at the date of the marriage. Separate property is defined by the Agreement in clause 2.1(

c) as those items listed in

Schedule A (for the husband) and

Schedule B (for the wife). The husband's

Schedule A separate property includes the farmland. The parties agreed that the ownership, control and enjoyment of separate property

a) owned on the date of marriage or

b) hereafter acquired is free and clear from claim. Thus 1) the leasehold and contingent interest in the farmland that was owned at the date of marriage and 2) “separate property” thereafter acquired by the husband is free from any claim by the wife. [ 32 ] Under clause 9.1, the wife agreed that she had no claim against the interest the husband had in the farmland at the date of marriage. The wife also agreed that she had no claim against any “separate property” that the Husband acquired after the date of marriage.

This raises the issue of whether the parties intended that property was to be classified as “separate property” even it was acquired, in whole or in part, using funds contributed by the other party.

It also raises the issue of whether the parties intended that property be classified as “separate property” if it was acquired, in whole or in part, because of non-financial contributions made by the other party. [ 33 ] A finding that the parties intended that one party would have no claim in the increase in value of “separate property” acquired by the other party during the marriage, despite the fact that both parties had contributed to its acquisition, conflicts with the intent of the Agreement interpreted as a whole. [ 34 ] The conclusion to which I am led is that the increase in value of scheduled property may be considered an asset in which both parties may have an interest.

[ 35 ] The final question is whether the parties have by the Agreement given up any interest which each may have in the property of the other. In my opinion, Clause 11.0 entitled “Mutual Release” is so ambiguous and incoherent that it cannot establish a rigid separate property regime when the other provisions of the Agreement read as a whole do not do so. The Clause 11.0 heading may enable the Court to speculate what it was intended to achieve.

But on a careful reading of the words used and a parsing of the phrases, no logical meaning can be extracted from the clause. [ 36 ] I conclude that the Agreement effectively avoids the operation of the M.P.A. but it does not eliminate any equitable entitlement which one party may have to the increase in value during the course of the marriage of the scheduled property of the other party. [ 37 ] Both parties have asked for costs.

The wife has had a greater measure of success than the husband and is entitled to costs under the appropriate column for all steps leading to the hearing and resolution of this application, including the appearance before the Honorable Mr. Justice Lutz. In addition, if this matter is to proceed to trial the wife is entitled to interim costs of $7,500 for the purpose of obtaining valuations of the farmland. Heard on the 29 th day of March, 2011. Dated at Calgary, Alberta this 2 th day of September, 2011. A.B. Sulatycky J.C.Q.B.A. Appearances: Joseph T. Schuck Brownlee LLP for the Plaintiff Michelle C.

Brandt Vogel & Company LLP for the Defendant