) ) CRESCENZO A. VILLA, also known as ENZO VILLA Applicant – v. –, 2013 ONSC 2202

CITATION : Villa v. Villa, 2013 ONSC 2202 COURT FILE NO.: 03-140/11 DATE: 20130430 ONTARIO SUPERIOR COURT OF JUSTICE IN THE ESTATE OF EMILIA VILLA, deceased BETWEEN: ) ) CRESCENZO A. VILLA, also known as ENZO VILLA Applicant – and – RENZO VILLA Respondent ) ) ) ) ) ) ) ) )) ) Ian K. Latimer , for the Applicant Salvatore Guerriero , for the Respondent ) HEARD: February 6, 2013 B. P. O’marra j. Reasons for judgment overview [ 1 ] Emilia Villa was a widow who died March 4, 2011. She was 91 years old. Her two surviving sons have been unable or unwilling to agree on a headstone for her grave.

That casts light on the acidic relationship between the brothers. [ 2 ] Renzo Villa opposes an application by his brother Enzo Villa to pass accounts for the period Enzo was appointed as their mother’s Continuing Power of Attorney from April 16, 2007 to her death on March 4, 2011.

Renzo also opposes Enzo’s claim for compensation and for the payment of legal and accounting fees out of the Estate. issues and analysis Did Enzo provide, in the proper form, enough information for this Court to approve the accounts? [ 3 ] Renzo states that Enzo has not provided information in the proper form and has not provided enough information for the Court to pass the accounts. Enzo responds that he has provided complete accounting to Renzo, including all bank statements and investment reports, and a spreadsheet of all transactions.

Renzo failed to object or point to a single questionable transaction. [ 4 ] Enzo has provided the following documents regarding their mother’s assets: (

a) Statement of Original Assets on April 16, 2007 listing BMO chequing account number and amount; GIC account number and amount; Term Deposit Account and amount; Norton Property 1/3 legal interest (no amount); and personal property “unknown”. (

b) Spreadsheet of transactions listing income (with dates and sources); expenses (with dates and to whom); monthly bank balances with total expenses; and yearly summaries. (

c) Statement of Investments, listing date, descriptions of investment, and how much was purchased or realized, with account number and total amounts.

(

d) Statement of Unrealized Assets on March 4, 2011, listing the BMO chequing account of the same number with the amount($966.41) and personal property “unknown”. (

e) Statement of all money and investments on March 4, 2011, listing chequing account number and amount; term investmentnumber and amount; TFSA account number and amount; mutual fund account and number; term investment account number andamount; and personal property “unknown but unchanged from Statement of Original Assets”. (

f) Statement of Liabilities on March 4, 2011, listing accounting fees $3,220.50 (invoices dated July 6 and July 8, 2011), andlegal fees $7,165.95 (invoice dated August 9, 2011). (

g) Summary of compensation, listing capital and income received and disbursed; care and management fees; and acompensation calculation

summary, including yearly totals of capital received, income received, capital disbursed, income disbursed andtotal. (

h) Summary of care and management fees, listing the average value of assets per year, care and management fees per year,including the beginning balance, ending balance and average balance. [5] Section 32(6) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (“SDA”) requires an attorney to keep accounts of alltransactions involving the property in accordance with the regulations. Regulation section 2(1) prescribes the following form of accountsand records: (

a) List of all incapable person’s assets as of the date of first transaction, including real property, money, securities, investments,motor vehicles, other personal property; (

b) Ongoing list of all assets acquired and disposed of, including date and reason, and from or to whom acquired or disposed; (

c) Ongoing list of all money received, date, reason for payment, particulars of account and into which deposited; (

d) Ongoing list of all money paid out, amount, date, purpose, and to whom paid; (

e) Ongoing list of all investments made, amount, date, interest rate, type of investment; (

f) List of all incapable person’s liabilities as of date of first transaction; (

g) Ongoing list of liabilities incurred or discharged, date, nature of and reason for liability; (

h) Ongoing list of all compensation taken by attorney, amount, date, method of calculation; and (

i) List of assets, value of each, used to calculate attorney’s care and management fee. [6] An attorney is required pursuant to section 6(1) of the SDA to retain all records and accounts until he ceases to have authorityand is discharged by the court on the passing of accounts under s. 42 of the SDA. [7] In Zimmerman v. Fenwick, Justice Strathy stated that proper accounting is a condition precedent to being awardedcompensation, as “without a proper accounting the court is unable to assess the conduct of the fiduciary and to determine thecompensation to which he or she is entitled”.

If substantial cash withdrawals or expenses are not substantiated with receipts the attorneywill be personally liable. Zimmerman v. Fenwick 2010 ONSC 2947 at para. 34. McMillan v. McMillan (1874) 21 Gr. 369 (Ontario Ch.). [8] In Re: Assaf Estate, Justice Strathy cited with approval the following statement from Macdonell, Sheard and Hull on probatepractice: “… only exceptional misconduct should deprive him or her of the right to remuneration.

In general although an executor may be guiltyof neglect or defaults these, if not dishonest, and capable of being made good in money, do not deprive the executor of the right tocompensation although they may influence the amount allowed”. Re: Assaf Estate, (ON SC), [2009] O.J. No. 1086. [9] In Zimmerman v.

Fenwick at para. 38, Justice Strathy found that the accounts presented by the attorney in that case were“inadequate, incomplete, and in many respects false” as the accounts failed to identify the loans the attorney made to himself out of thetrust property as well as other payments made out of the trust property for the attorney’s own benefit. [10] It appears that the information provided by Enzo is sufficient to meet the accounts requirements set out in section 2(1) of theregulation to the SDA.

Enzo has listed his mother’s assets at the date of the first transaction, kept an ongoing list of all assets required,disposed of, and monies received or paid out as well as investment transactions. He did not, however, list the value of their mother’spersonal property. [11] Renzo alleges that Enzo listed only the bank account numbers and not the names associated with that bank account whichwould have revealed a mixing of funds. [12] There is a legitimate question regarding the liabilities of the Estate as of March 4, 2011 including bills for legal andaccountant fees incurred and billed after March 4, 2011.

For reasons that I will set out later in this judgment these fees can be paid for by

the Estate in any event. [13] Enzo met his duty of keeping contemporaneous and accurate records as required by the SDA. Did Enzo Breach His Fiduciary Duty as Power of Attorney? [14] S. 32 of the SDA states that an attorney “is a fiduciary whose powers and duties shall be exercised and performed diligently,with honesty and integrity, for the incapable person’s benefit”. Indeed, because an attorney “must make decisions on behalf of thedonor” the status of an attorney is closer to that of a trustee than an agent. McDougald Estate v. Gooderham (ON CA), [2005] O.J. No. 2432. Richardson Estate v.

Mew, 2009 ONCA 403, quoting with approval from Tiffin Estate v. Tiffin, 2004 SKQB 60 , 2004S.K.Q.B. 60. [15] There are two standards of care set out in the SDA – the degree of care, diligence and skill of a person of ordinary prudenceand the conduct of his or her own affairs (section 32(7)) or, if receiving compensation in the business of managing the property of others(section 32(8)). However, recent cases have held that the higher standard does not automatically apply when a person claimscompensation. Garonsky (Committee of) v. Brown [2002] O.J.

No. 880. [16] Enzo was clearly in a fiduciary relationship with his mother. Renzo alleges that Enzo breached his fiduciary duty for threereasons: (

a) That he improperly mixed his personal assets with their mother’s assets; (

b) that he improperly invested in a mutual fund; and (

c) that he improperly decided that the Norton property passed on survivorship as Enzo failed to rebut the presumption of aresulting trust. improper mixing with personal assets [17] The strongest of Renzo’s allegations is his claim that Enzo breached his fiduciary duty by improperly mixing his ownpersonal assets with that of his mother’s assets.

Renzo states that Enzo never had express authority to move the money from the Estateinto his personal name. [18] Renzo relies on the evidence of the BMO manager who testified that Enzo requested the mutual funds in their mother’s namebe cashed and placed in his personal account. Renzo claims that Enzo only listed the account numbers in the statement of investments,rather than name the account it is under, as it would have listed the accounts as being under Enzo’s personal name. Renzo also relies onthe BMO manager’s testimony that Enzo purchased mutual funds using the CPP death benefit cheque.

Renzo further claims that theBMO POA was used for these transactions as the CPOA ceased to be effective at the material time. In particular, Renzo claims thatEnzo, on April 1, 2011, acted under an expired CPOA to deplete all the liquid assets of their mother’s Estate by unilaterally transferringthem to a joint account of the two brothers. [19] Enzo may very well have mixed the funds from the Estate with his personal funds and with the joint account in the name ofhe and Renzo. That would, in a strict sense, be a breach of fiduciary duty. However, the amounts involved are all listed in the accountsprovided.

It appears that such actions by Enzo were misguided rather than malicious breaches. [20] When estate money is mixed with private money the onus is on the fiduciary to distinguish the estate funds and pay the estatefunds back first and make good any loss to the estate. If Enzo cannot distinguish or separate the funds all of the property will beconsidered the property of the Estate. Re: Saskatchewan General Trusts Corp. (1938) (SK CA), 3 D.L.R. 544 (Sask. C.A.). Re: Norman (ON CA), [1951] O.R. 752 (Ont. C.A.). McTaggart v. Boffo et al. (1976) (ON SC), 10 O.R. (2d) 733 (Ont.

O.H.C.) improper investment in mutual funds [21] Renzo alleges that Enzo’s investment in mutual funds was risky and a breach of his fiduciary duty to their mother. At the timeof the investment their mother was 87 years old and needed the funds for her personal use and care. [22] Section 27(3) of the Trustee Act expressly authorizes trustees to invest in mutual funds. Trustee Act, R.S.O. 1990, c. T. 23. [23] The mutual funds ultimately returned a profit on their investment. I do not find merit in Renzo’s allegation that the

investments were such a risk as to be a breach of Enzo’s fiduciary duties. improper accounting of legal interest in the norton property [24] Renzo claims that Enzo did not provide proper accounting of the Norton property. Renzo complains that he and Enzo lenttheir names to the legal title for no valuable consideration and were holding it in trust for their mother. Enzo claims that the legal effectof the transfer was that they all held a 1/3 interest in the property as their mother intended. Thus, it passed to Renzo and Enzo on herdeath by their joint survivorship.

Enzo further claims that Renzo was a party to the transaction and did not object until February of 2012and so should be estopped from questioning the legal effect of the transfer. [25] In Pecore v. Pecore, when a parent gratuitously transfers property to his or her adult children a rebuttable presumption arisesthat the adult children are simply holding the property in trust for their parent. To rebut the presumption, one would need to show thatthe parent intended the right of survivorship to operate otherwise the assets will be treated as part of the parent’s estate. Pecore v.

Pecore 2007 SCC 17 , [2007] 1 S.C.R. 795. [26] In the present case there is evidence that the mother transferred the property to her two sons and that she intended the propertyto be shared by them and she also wished to avoid probate fees. This clearly rebuts the presumption of a resulting trust as the result isexactly what she intended some six years before her death and is equally fair to both of her sons. conclusion re: alleged breach of fiduciary duty [27] It appears Enzo’s only possible breach of his fiduciary duties was to mix his mother’s Estate monies with his personalmonies.

However, if the numbers reveal that there is no money unaccounted for this would suggest an honest but misguided mistake. The appropriate remedy would be for Enzo to pay back the money to his mother’s Estate. From the accounts available it seems thatEnzo should be able to distinguish his mother’s Estate from his own assets. [28] This breach of fiduciary duty is far less egregious than that found in the recent case of Diament Estate v. Ockrant.

OntarioCourt of Appeal upheld the motion judge’s findings that a grandson who provided inadequate accounting (even after a court order), usedfunds in the donor’s accounts for investments in his own name, and failed to ensure that there was sufficient funds in the accounts tocover the grandparents’ living expenses, despite making undertakings to the contrary, breached his fiduciary duty and committed a fraudin doing so. Diament Estate v.

Ockrant, 2012 ONCA 84. [29] S. 35 of the Trustee Act states that if a trustee acted “honestly and reasonably, and ought fairly to be excused for the breach oftrust, and for omitting to obtain the directions of the court in the matter for which the trustee committed the breach, the court may relievethe trustee either wholly or partly liable for personal liability for the same”. Trustees will not be liable for mere errors in judgment ifthey acted honestly and reasonably in their duties.

Since the accounts show that Enzo mixed Estate monies with his personal money, heshould be liable to repay those monies to the Estate but should still be entitled to some compensation. is enzo entitled to compensation? [30] Enzo claims that he is entitled to compensation at the prescribed rate.

Perfection is too high a test and there is nothingdisreputable in his management of his mother’s affairs to deny him compensation. [31] Renzo states that Enzo engaged in several acts of misconduct that should disentitle him to compensation in the entirety. [32] In this case, Enzo is claiming compensation at a reduced rate of $12,336.94. [33] Enzo will be required to pay back funds to the Estate that are properly related to his mother’s assets.

However, since he didnot maliciously misuse access to these funds he is entitled to compensation for the ongoing effort and grief of trying to resolve the assetsof this modest Estate with his brother Renzo. should legal and accountant fees be paid out of the estate? [34] Enzo claims that the accountant and legal fees should be paid out of the Estate as he only retained those services after Renzorefused to settle the accounts informally. Renzo alleges that the accountant and lawyer were retained solely for Enzo’s compensationclaim as an attorney and payment should not come from the account.

Renzo states that they are not liabilities of his mother’s Estate. [35] A trustee (or attorney) is entitled to full indemnity for any proper charges in administering the Estate but will only bereimbursed to the extent that the fees were “reasonably incurred for the purpose of performing their responsibilities in administering, ordistributing, the estate or trust. In each case there is a question whether the services were provided for advice and assistance to the clientin relation to his or her personal interest rather than those of the estate”. Joseph’s Estate, Re (1993), (ON SC), 14 O.R. (3d) 628 (Ont. Gen.

Div.). Martyn v. Taylor (ON SC), [2003] O.J. No. 1745 at para. 68.

[ 36 ] The answer to this question often depends on the outcome. In DeLorenzo v. Beresh the court held that “when there is litigation between the estate trustee and the beneficiaries related to the question of whether or not the trustee has properly discharged his duties, including timely steps to pass his accounts, different considerations apply in my view. Ultimately, the issue of whether the trustee is entitled to charge the estate with his legal fees may turn on the outcome and it should be determined on a passing of the accounts or court application, if not agreed to by the beneficiaries”. DeLorenzo v.

Beresh , 2010 ONSC 5655 at para. 23 . [ 37 ] While Enzo breached, to some degree, his fiduciary duties by mixing Estate funds with his personal funds, the extent of the breach is much less than alleged by Renzo and certainly not with malicious intent. It was in the interest of the Estate to defend this litigation as the accounts could not be passed and the litigation could not be resolved until Enzo defended the claims against him. The result is that the legal and account fees should be paid out of the Estate.

An attorney is permitted to seek expertise in managing the property. result [ 38 ] Order to go as follows: 1. Passing of Accounts for period April 16, 2007 – March 4, 2011. 2. Enzo is to separate and pay the proceeds of his mother’s Estate into a separate estate account. 3. Enzo is entitled to compensation set at $12,336.94. 4.

The accounting fees and legal fees being $3,220.50 and $7,165.95 respectively are to be paid out of the Estate. [ 39 ] I will consider further brief written submissions as to costs of this motion (no more than two pages) to be received at Judicial Administration within 15 days of the release of this Order. B. P. O’Marra J. Released: April 30, 2013 CITATION : Villa v. Villa, 2013 ONSC 2202 COURT FILE NO.: 03-140/11 DATE: 20130430 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: CRESCENZO A. VILLA, also known as ENZO VILLA Applicant – and – RENZO VILLA Respondent REASONS FOR JUDGMENT

B. P. O’Marra J. Released: April 30, 2013