KAREN LYNN NAGY APPLICANT - v. -, 2022 SKKB 257

KING’S BENCH FOR SASKATCHEWAN Citation: 2022 SKKB 257 Date: 20 22 11 24 Docket: KBG-YT-00141-2022 Judicial Centre: Yorkton BETWEEN: KAREN LYNN NAGY APPLICANT - and - JO-ANN GRAVES AND DENNIS NAGY, EXECUTORS OF THE ESTATE OF BLANCHE MARIE THERESE NAGY AND PERSONALLY RESPONDENTS Counsel: Mary Lou H. Senko for the applicant Courtney S. Yaremchuk for the respondents JUDGMENT LAYH J. NOVEMBER 24, 2022 Background [ 1 ] Nine siblings of the Nagy family are engaged in a dispute respecting their mother’s estate.

Their mother, Blanche Nagy, died 10 years ago (November 13, 2012), 34 years after the death of their father, Joe Nagy. Of the nine children, Blanche named two children as her executors, Jo-Ann Graves and Dennis Nagy. The executors did not apply for letters probate until February 2021. Letters probate were issued April 16, 2021. [ 2 ] In her Last Will and Testament [Will], executed on May 26, 1983, 29 years before her death, Blanche directed that her estate be divided equally among seven of her children: Jo-Ann Graves, Katherine Reid, Claudette Pachal, Kirk Nagy, Karen Nagy, Timothy Nagy and Mark Nagy.

Without offering any reason in her Will, Blanche provided no gift to two sons: Dennis Nagy and David Nagy. All the children except Timothy are now alive. Timothy died in 2017 without a will, spouse or child so that his beneficiaries are his surviving siblings who will each receive one-eighth of his estate (including Timothy’s entitlement under Blanche’s estate). [ 3 ] In this application, Karen applies to have Dennis and Jo-Ann removed as executors. In their place she seeks to be

appointed as sole executrix of Blanche’s Will. In support of her application, all of the remaining beneficiaries under Blanche’s Will, (except Jo-Ann and Timothy), but including Claudette, Mark, Kirk and Katherine) have signed a “Renunciation and Consent” that Karen be appointed as the executrix.

Notably, David, although not mentioned in Blanche’s Will, has also signed a “Renunciation and Consent,” ostensibly because, under Timothy’s intestacy, he will receive a portion of his mother’s estate. [ 4 ] Karen offers a possible explanation why her mother may have chosen not to provide gifts to either David or Dennis: 8. My brother David informed me in August of 2021 that in 1980 Dennis worked out a deal with Mom to purchase the best quarter of land she owned at the time. No one except Dennis (and possibly Jo-Ann) is aware of the purchase price.

In that same time period, Mom paid off a bank loan in full for David, a total of $18,000 without David’s prior knowledge.

As a result of this deal, Dennis and David were not listed as beneficiaries in Mom’s will. (Affidavit of Karen Nagy sworn September 8, 2022 ) The Issue Raised by Karen’s Application [ 5 ] Karen’s application poses the issue whether, under s. 14.1 of The Administration of Estates Act, SS 1998, c A-4.1 [ Act ], the court is satisfied that Dennis and Jo-Ann have “failed to administer the estate in a reasonable and prudent manner” and their “removal…would be in the best interests of those persons interested in the estate.” [ 6 ] If the court is satisfied that both conditions have been met, the court will grant the requested order.

A Preliminary Matter – Notice of Objection to Affidavit Evidence [ 7 ] In response to the affidavit served and filed by Karen, the respondents, Dennis and Jo-Ann, filed a “Notice of Objection to Affidavit Evidence.” In response, Karen filed a “Response to Notice of Objection.” At the hearing before me, I commented that the affidavits of all parties contained a lot of information that was of “interest” to the historic dynamics of the Nagy family but were of little or no relevance to the decision that the court had to make.

Counsel agreed that rather than formally striking portions of affidavits, this decision would set out those facts that were of relevance to the court’s ultimate determination. Have Dennis and Jo-Ann Failed to Reasonably Administer the Estate? [ 8 ] One might ask, what are the hallmarks of managing an estate in a “reasonable and prudent” manner and have Dennis and Jo-Anne met this hallmark. Statutory provisions, case law and common sense inform the court of reasonableness.

Statutory Provisions – Section 14(1) of the Act [ 9 ] Respecting what legislation might inform the court as to the reasonableness of estate administration, s. 14(1) of the Act states that when an executor fails to apply for letters probate within 60 days of a testator’s death, any person interested in the estate may apply to the court and ask a judge to specify a time within which the executor must apply for letters probate. Where the executor fails to apply within the time limits imposed by the court, the executor’s rights cease.

What can be gathered from these provisions is an executor who acts reasonably would ordinarily apply for letters probate within 60 days of the death of the testator. Dennis and Jo-Ann did not apply for letters probate for over eight years. [ 10 ] The reasons offered by Jo-Ann for not applying for letters probate or otherwise reasonably administering her mother’s estate are not convincing.

She offers three. [ 11 ] First, she states in her affidavit sworn October 12, 2022, that she did not take “immediate steps” to administer her mother’s estate because she “was advised by a bank employee that due to the small amount of money in my mother’s bank account, I would not need to probate the Estate at all.” (para. 5) Of course, what a bank employee may or may not require to release funds of a deceased is scant advice to rely upon. Jo-Ann must have known that her mother owned land (indeed two quarter sections of land) at the time she died.

Furthermore, whether or not Jo-Ann thought letters probate were necessary, she had other responsibilities to administer the estate, for example, file income tax returns. [ 12 ] Second, Jo-Ann states in her affidavit that “none of my siblings were eager to finalize the estate until the matter was brought up in 2019.” (para. 8) To justify one’s inattention and inactivity as executrix of an estate because of an absence of complaint from beneficiaries is an odd justification and one that fails to bring one’s administration of an estate into what the court would consider reasonable or prudent.

Furthermore, by 2019 her mother had been deceased for seven years and from 2019 when she states her siblings intervened, it took until April 2021 to overcome her inertia and finally obtain letters probate. [ 13 ] Third, although Dennis continued to live on his mother’s farmland and occupy her house, Jo-Ann states that Karen did not inquire about Dennis’ payment of rent for the use of the land or home until April 2019.

Even then, Jo-Ann states at para. 9 of her affidavit that upon Karen’s inquiry, she “did not tell her [Karen] that Dennis was collecting rent, paying taxes and putting the remainder in an Estate account.” [Emphasis added] Karen’s inquiry approximately seven years after her mother’s death was understandable; Jo- Ann’s response was not. [ 14 ] I find that the delay in applying for letters probate or to act on any other affairs arising from her mother’s estate is contrary to the statutory expectation that an executor should apply for letters probate within 60 days of a deceased’s death. The reasons

that Jo-Ann provides for her inactivity show a lack of prudent and reasonable attention to the administration of her mother’s estate. Statutory Provision –

Section 35 of the Act [ 15 ] Another well-known duty of an executor is to account, a duty set out in s. 35 of the Act . It states: 35(1) An executor or an administrator must render a just and full account of the executorship or administration within two years after the grant of letters probate or letters of administration. [ 16 ]

Section 35 of the Act allows executors two years after the grant of probate to render a full accounting. However, implicit in this two-year rule is the expectation that an executor would have ordinarily applied for letters probate more proximate to the date of death – the Act sets 60 days – than 8 ½ years. As well, a “just and full accounting” implies that accounting records have been kept since the date of the testator’s death.

Dennis and Jo-Ann did not open an estate account until after they received letters probate and then at their lawyer’s office. [ 17 ] For approximately nine years Dennis has lived on his mother’s farmland, including the house on the home quarter until the land was sold. In October 2019, when legal counsel for Karen and the other siblings pressed for an accounting of the revenues the estate had received (the farmland had been leased to a third party), they received a reply from the executors’ law firm on February 2, 2022, informing them that no estate tax returns had been filed.

However, as legal counsel advised, the executors would “try to obtain the income taxes if still in print somewhere or ask the accountant to obtain historical records to the extent possible when filing all income tax returns.” (Affidavit of Karen Nagy sworn September 8, 2022, Exhibit I-1.9) [ 18 ] Respecting the revenue and expenses associated with Blanche’s two quarter sections of farmland, the reply was a single paragraph, not a balance sheet, with obviously rounded numbers and without any receipts or offers of receipts.

In that paragraph, Dennis reported that the 192 acres of cultivated land and 40 acres of grass resulted in annual total payments over nine years ranging from $5,760.00 to $9,040.00.

He described the estate expenses as: taxes of approximately $13,000.00; insurance premiums of approximately $9,000.00; new windows for approximately $20,000.00; new shingles for approximately $6,000.00; a 16′ x 30′ addition to the house at an approximate cost of $9,000.00; trackhoe work for brush clearing of $3,800.00; and Dennis’ equipment use, fuel and time for farmland improvements of approximately 200 hours at $100.00 per hour average ($20,000.00). [ 19 ] The court finds this “accounting” unacceptably vague and apparently constructed and approximated after the expenses were incurred.

No receipts were offered to substantiate the expenses. Such accounting does not accord with what the beneficiaries might expect of a reasonable and prudent executor. [ 20 ] At para. 55 of the brief of law submitted on behalf of Dennis and Jo-Ann, one finds the statement, “An accounting of the estate was provided to the Applicant’s lawyer in February 2022.” This accounting proffered by Dennis and Jo-Ann through their law firm on February 2, 2022 falls far short of the expectations set out in Rule 16-52 of The Queen’s Bench Rules that accounts to be filed must: 16-52(1) … (

a) be verified by the affidavit of each personal representative in Form 16-52; (

b) contain a true and perfect inventory of the property of the deceased; and (

c) include: (

i) an account showing the assets and liabilities of the deceased at date of death; (ii) an account showing all receipts and disbursements, including the amount distributed to each beneficiary; (iii) an account of all property remaining on hand and all liabilities remaining unpaid; (iv) a statement setting out the manner in which it is proposed to distribute the remaining assets, including the proposed amount of compensation claimed by the personal representative, the amount of lawyers’ fees and the amounts proposed to be distributed to each beneficiary of the estate in full discharge; and (

v) any further accounts or information that may be necessary or that may be required by the examining officer or the Court. Statutory Provision – The Trustee Act [ 21 ] The lack of an estate account after nine years of estate revenue and expenses and the lack of filing estate tax returns does not accord with the duties of a trustee as set out in s. 7 of The Trustee Act, 2009, SS 2009, c T-23.01 .

Section 7 states that in discharging his or her duties and exercising his or her powers, a trustee must exercise that degree of care, skill and diligence that a person of ordinary prudence would exercise, having regard to the skill, experience and qualifications of the trustee. [ 22 ] The court finds that Dennis and Jo-Ann have not met this standard. Aside from the “approximate” approach to estate expenses and the lack of receipts and invoices, what consequences might yet befall the estate for income liability remains to be discovered.

One would expect that obtaining the usual clearance certificate from Canada Revenue Agency, necessary to complete the administration of the estate, will be an onerous task. Karen states that despite repeated requests about the estate’s income tax status, the executors have not provided any clarification. [ 23 ]

Section 9 of The Trustee Act, 2009 states that trustees shall discharge their powers solely in the interests of the beneficiaries of the trust and they shall not permit a situation to arise in which their interests conflict in any way with the discharge of their duties or in which trustees may derive a personal benefit.

[ 24 ] In particular, Dennis has lived in his mother’s house apparently without paying any rent, clearly a benefit to him, without apparent compensation to the estate. Furthermore, his reporting calls into question the legitimacy of expenses attributed to the estate, including the $9,000.00 addition to the house. Family’s Wishes [ 25 ] If the overarching responsibility of an executor is to safeguard the deceased’s estate for the well-being of the beneficiaries, then the voices of the beneficiaries should be heard.

In this instance all the beneficiaries of the estate, except Jo-Ann, are of one mind: they want Jo-Ann and Dennis removed as executors and, in their stead, they want Karen to be appointed executrix. Notably, even David, who received no gift under his mother’s Will (but who will pro-rata share his deceased brother’s (Timothy) share of his mother’s estate) has also consented to Karen’s appointment. [ 26 ] Surprisingly, Jo-Ann states at para. 34 of her affidavit that Karen is speaking for the other beneficiaries but without any supporting affidavits from any of them. Jo-Ann states: 34.

Karen says that she speaks for all of the other beneficiaries, however, none of them have provided affidavits in support of her application. None of my siblings have mentioned their support for Karen’s application to me. Furthermore, the only documents my siblings have signed regarding this matter is a Renunciation and Consent of Beneficiary for which I do not know the circumstances surrounding their signing those documents.

I am not certain that my siblings fully understand the nature of the application that has been brough [sic] against Dennis and myself. [ 27 ] Jo-Ann is correct that none of the beneficiaries served and filed supporting affidavits. In the court’s view they have done much better.

Each has signed a document, accompanied by an affidavit of execution, stating: I [name of beneficiary] of [location], being a [daughter or son] of the deceased and beneficiary entitled to a share in the Estate of Blanche Marie Therese Nagy, DO HEREBY RENOUNCE my right to become executor of the estate of the deceased and CONSENT to the appointment of the daughter of the deceased, KAREN LYNN NAGY, of the City of Regina, in the Province of Saskatchewan, as executrix of the estate of the deceased without bond. [ 28 ] Jo-Ann was served with the above consent signed by each of her siblings before she swore her affidavit.

How she could misconstrue their respective positions in this application is perplexing.

Nothing could be clearer: they all want their sister, Jo-Ann, and their brother, Dennis, to be removed as executors and to be replaced by Karen. [ 29 ] Notwithstanding the clearest of terms in the Renunciation and Consent, for Jo-Ann to suggest that her five siblings who executed the document may not “fully understand the nature of the application” is to attribute to not just one of them, but to all of them, an astonishing measure of naivety and simplicity. [ 30 ] Furthermore, for Jo-Ann to state in her affidavit that she does “not know the circumstances surrounding their signing of the documents” suggests that something is amiss or suspect about the authenticity of her siblings’ signatures.

Jo-Ann offers this broad and implicating statement without any supporting evidence and notwithstanding that each person’s signature has been accompanied by an affidavit of execution. Has the Estate Neared Completion? [ 31 ] After letters probate had issued, the executors sold the two quarter sections of farmland for $500,000.00 in the fall of 2021 with the proviso that Dennis would buy back the subdivided 12 acres with the house for $100,000.00.

Title to the property shows that Dennis and Jo-Ann are now the joint owners of the acreage. [ 32 ] The executors have distributed $308,000.00 of the estate funds as follows: $49,500.00 to each of the six named beneficiaries still alive and named in Blanche’s Will (including Jo-Ann) and $5,500.00 to Dennis and David as their proportionate share of the eight siblings entitled to receive their deceased brother’s (Timothy) share of Blanche’s estate. [ 33 ] An obvious question arises: why change executors when the most substantial portion of the estate has now been sold at a price favourable to the estate? [ 34 ] A similar situation arose in Bereskin Estate, Re , 2014 MBCA 15 , 303 Man R (2d) 8 where most of the estate had been administered before the application to remove the executor, “such that it would be a waste of estate funds to appoint a trust company to complete the administration at this late date.” The court stated: [35] … While much of the administration may have been completed, what remains are the most contentious parts – the accounting and the litigation regarding the Margbell Holdings Ltd. shares.

Many decisions will have to be made as to the conduct of those proceedings – proceedings in which Mr. Zindler’s interests will be in direct conflict with those of the estate and many of the beneficiaries, including the Four Charities. Mr. Zindler has already demonstrated that, on contentious issues, he will act in his own interest rather than that of the estate and the opposing beneficiaries. [36] Further, there is important administration work to be done to wind up the estate, including the accounting, the winding up of two corporations, the taxation of legal fees and the passing of accounts. Mr.

Zindler’s past delays support the motion judge’s lack of confidence that he can complete the administration efficiently and expeditiously. These are sufficient reasons to substitute a neutral executor to oversee these proceedings, even at this stage of the litigation. [ 35 ] In this instance, the court finds that Dennis and Jo-Ann have shown a past and unexplained lack of diligence in administering their mother’s estate – the absence of probate for eight and one-half years, the lack of estate record keeping, an accounting

that offers little more than rounded approximations of expenses without receipts or invoices, the failure to file estate income tax returns,an apparent and unaccounted benefit to Dennis who lived in the estate property for several years – these all show a dereliction of dutyone expects of an executor. [36] I accept that the emphasis in this application should be on the future administration of Blanche’s estate and the risks towhich it will be exposed if Dennis and Jo-Ann continue to administer the estate.

Removal is not to punish them for past misconduct butrather to protect the assets of the estate and the interests of the beneficiaries. However, past misconduct that is likely to continue willoften be sufficient to justify removal: Radford v Wilkins, (Ont Sup Ct). [37] The court also finds a continued and current lack of understanding of what is necessary to discharge an executor’sduties. An appropriate estate accounting over a 12-year period should avail the beneficiaries of something more than roundedapproximations of expenses, all offered without receipts or invoices.

An apparent conflict of interest looms over the several years ofDennis’ residency in the estate’s property with little or no accounting. He is in a conflict of interest to resolve his apparent lack ofaccounting detail. [38] Finally, the court is concerned with the future administration of the estate, particularly providing the beneficiaries with afull estate accounting, the filing of estate income tax returns and the potential liability for income tax liability.

The consequences ofunpaid taxes – liability, interest and penalties – may potentially encroach on what would otherwise have been available to thebeneficiaries. To date Dennis and Jo-Ann have not provided any assurance to the beneficiaries that estate income tax returns will befiled. Upon whom – the beneficiaries or the executors – should potential liability for unpaid estate taxes fall? [39] The court accepts that it should not lightly interfere with the express wishes of a deceased person who has chosenpersons to administer their estate.

The court also accepts that Karen bears the onus of proving that the removal is necessary, that it is inthe best interests of the beneficiaries that Dennis and Jo-Ann be removed. [40] The court is satisfied that Karen has met this burden and that the removal of Dennis and Jo-Ann as executors ofBlanche’s estate is justified. [41] The costs of this application shall be set at $2,500.00 and shall be paid, jointly and severally, by encroaching upon theshare received or to be received by Dennis and Jo-Ann. J. D.H. LAYH