Gerhardt v Miller Estate, 2018 SKCA 99

Court of Appeal for Saskatchewan Docket: CACV3200 Citation: Gerhardt v Miller Estate , 2018 SKCA 99 Date: 2018-12-13 Between: Alicia Gerhardt Appellant (Petitioner) And Estate of Kyle Jacob Miller Respondent (Respondent) Before: Ottenbreit, Caldwell and Whitmore JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Ottenbreit In concurrence: The Honourable Mr. Justice Caldwell The Honourable Mr. Justice Whitmore On Appeal From: FLD 269 of 2017, Regina Appeal Heard: October 11, 2018 Counsel: Kaylea G. Lax for the Appellant Jyoti S. Haeusler for the Respondent Ottenbreit J.A. I.

Introduction [ 1 ] Alicia Gerhardt appeals a Chambers judge’s decision dated January 30, 2018, dismissing her application for an order under The Family Property Act , SS 1997, c F-6.3 [ FPA ], to declare $78,354.40 from the Estate of Kyle Jacob Miller [Estate] to be family property and to be vested in her. [ 2 ] For the reasons hereinafter set forth, the appeal is dismissed. II. Facts and Background [ 3 ] Ms. Gerhardt and Kyle Miller had a common-law spousal relationship for approximately nine-and-a-half years. They separated in the summer of 2016.

Consequent on that separation, they entered into an interspousal contract dated August 12, 2016 [Contract]. [ 4 ] The Contract dealt both with property and spousal maintenance issues. It stipulated that Mr. Miller would retain exclusive ownership and possession of the family home and all the assets and equipment of his company, K.J.M. Construction Ltd. Each party would keep their Canada Pension Plan benefits, their vehicles and the personal property in their possession. The dog, Lily, would live with Ms. Gerhardt. Mr. Miller retained assets of greater aggregate value than Ms. Gerhardt so the Contract required Mr.

Miller to make payments to Ms. Gerhardt. [ 5 ] The two aspects of the Contract that are the subject of this appeal concern Ms. Gerhardt’s vehicle lease payments and the equalization payments to be made by Mr. Miller. The Contract provided that Mr. Miller would continue to make all the required lease payments on Ms. Gerhardt’s 2016 Audi Q5 vehicle for the “duration of the current lease term”, although details of those payments were not set out. Mr. Miller was also to pay to Ms.

Gerhardt to equalize property the sum of $50,000 in installments of $10,000, payable on the first day of the first five months following the execution of the Contract. [ 6 ] The Contract contained the usual clause stating the Estate was bound by the terms of the Contract. However, it contained no clause providing Ms. Gerhardt with any security for Mr.

Miller’s obligations to pay the vehicle lease and equalization payments. [ 7 ] Although the Contract did not provide any details of the terms of the lease payments, the evidence before the Chambers judge was that the vehicle had been leased for four years beginning in May 2016 for $1,021.36 per month. Mr. Miller began making this payment after the Contract was signed. [ 8 ] The equalization payments were to begin on November 1, 2016. Mr. Miller made payments on November 1 and December 1, 2016, but requested that Ms. Gerhardt return the second payment because of financial difficulties. She did so. Mr.

Miller later repaid a portion of that to her. The exact amount he repaid was in dispute. Ms. Gerhardt deposed that Mr. Miller only repaid $2,500 of the second $10,000 payment, while the executrix of the Estate deposed that he had repaid $9,500 of it. [ 9 ] Mr. Miller died on January 9, 2017, before he had completed his payment obligations to Ms. Gerhardt with respect to either the vehicle lease or the property equalization. In due course, Ms.

Gerhardt made an application for division of family property. [ 10 ] The Estate is apparently insolvent, although it is common ground that there are assets in the Estate, including money.

III. Decision of the Chambers Judge [ 11 ] Ms. Gerhardt applied under the FPA for an order against the Estate that monies payable to her with respect to the vehicle lease and equalization be vested in her. She argued that there were still 40 payments totalling $40,854.40 owing on the vehicle lease and $37,500 owing on the family property equalization. She submitted that the total amount owing for both payments should be held in trust for her by the Estate as her share of the family property and that such amount should not constitute part of Mr. Miller’s estate. The Estate argued the amount owing to Ms.

Gerhardt was not family property subject to division. [ 12 ] The Chambers judge reviewed ss. 21 and 24 of FPA , noting that s. 24 provided that property distributed or disposed of in an interspousal contract is not subject to division under that part. He referred to several cases indicating that s. 24 had been consistently interpreted as meaning that property disposed of by a valid interspousal contract is not subject to distribution pursuant to the FPA . [ 13 ] The Chambers judge determined the Contract was an interspousal contract and was caught by s. 24 .

He noted that the Contract clearly and specifically dealt with the vehicle lease and equalization payments. As a result, he concluded that he could not deal with those matters and dismissed the application. He noted the remedy for breach of an interspousal contract was an action in contract, not an action under the FPA . IV. Analysis [ 14 ] Ms. Gerhardt first submits the Chambers judge erred by determining the amounts owing to her, which were the subject of the application, had been dealt with by the Contract and he was therefore unable to grant the application because s. 24 of the FPA applied.

She argues the Chambers judge thereby wrongly declined jurisdiction. [ 15 ] To deal with this submission, I turn first to the germane provisions of the FPA and the Contract. The first is the definition of family property in the FPA : “family property” means any real or personal property, regardless of its source, kind or nature, that, at the time an application is made pursuant to this Act, is owned, or in which an interest is held, by one or both spouses, or by one or both spouses and a third person, and, without limiting the generality of the foregoing, includes the following: (

a) a security, share or other interest in a corporation or an interest in a trust, partnership, association, organization, society or other joint venture; (

b) property over which a spouse has, either alone or in conjunction with another person, a power of appointment exercisable in favour of the spouse; (

c) property disposed of by a spouse but over which the spouse has, either alone or in conjunction with another person, a power to consume, invoke or dispose of the property; (

d) property mentioned in

section 28; [ 16 ]

Section 24 of the FPA reads as follows: 24

(1) Subject to subsection (2), but notwithstanding any other provision of this Act, family property, including a family home and household goods, that is distributed or disposed of by an interspousal contract, or with respect to which an interspousal contract provides for its possession, status or ownership, is exempt from distribution pursuant to this Part. [ 17 ]

Section 1.2 of the Contract reads as follows: 1.2 Unless otherwise specifically provided for herein, the words used in this Agreement are to have the same meaning as such words have in The Family Property Act and The Family Maintenance Act, 1997 of Saskatchewan, and any amendments thereto. [ 18 ] The clauses in the Contract regarding the lease and equalization payments read as follows: 8.3 Kyle and Alicia acknowledge and agree that they shall each keep their own vehicles, namely Alicia’s 2016 Audi Q5 which is currently leased and Kyle’s 2016 GMC Sierra truck valued at approximately $102,000, without further interest or claim from the other. 8.4 Notwithstanding any provision herein, Kyle and Alicia agree that Kyle shall continue to make all the required lease payments on Alicia’s 2016 Audi Q5 for the duration of the current lease term. … 11.1 As a result of the disparity in property as divided between Kyle and Alicia, Kyle agrees to provide Alicia an equalization payment in the sum of $50,000.

This payment is to be made by Kyle in five (5) installments in the amount of $10,000. The five (5) installments shall be paid by Kyle to Alicia on the first day of every month following the execution of this Agreement. [ 19 ] The proper characterization of the subject matter of Ms. Gerhardt’s application is essential to a determination of this matter. Both parties assume that the subject matter of the application, i.e., monies representing the amounts owing under the Contract, fall within the definition of family property set forth above. However, in my view, what is being sought by Ms.

Gerhardt is not family property at all. I will explain. [ 20 ] The Contract purports to divide all the family property. All real property and all tangible and intangible personal property,

including money, was divided by the Contract to be sure. However, clauses 8.3, 8.4 and 11.1 do not divide money as, for example, couldbe held in bank accounts or RSPs. Rather, the clauses speak to promises to pay money in the future. The lease payments were familydebt obligations of Ms. Gerhardt that were to come due monthly over the next four years, which Mr. Miller obligated himself to pay onher behalf. The obligation of Mr. Miller to Ms. Gerhardt was created by the Contract. Likewise, the payments to Ms. Gerhardtequalizing the division of family property were also a debt obligation of Mr. Miller to Ms.

Gerhardt created by the Contract. In short,clauses 8.3, 8.4 and 11.1 do not divide property at all, even though they are part of an overall settlement of the parties’ rights under theFPA. At most, the clauses create a new debt obligation of Mr. Miller. [21] In both the case of the Audi lease and the equalization amount there is no indication that the promised payments would bepaid from discrete funds in existence at the date of the Contract.

This factor is significant because the statutory definition of familyproperty requires that property must be owned by the parties or be in existence at the time of the application. Once that definition isincorporated into the Contract pursuant to clause 1.2, it may be assumed that it applies mutatis mutandis. In that case, the property dealtwith by the Contract must be property (money) in existence at the date of its execution. What is clear is that the two sums of moneysought by Ms.

Gerhardt are not identifiable family property divisible over time, such as an income stream or future payment of a debtobligation owing to the parties, or as property in existence when the Contract was signed. As such, the amounts to be paid in the futureby Mr. Miller or the Estate, pursuant to the terms of the Contract, are not family property. [22] With the foregoing in mind, I return to Ms. Gerhardt’s argument that the Chambers judge erred in finding s. 24 applied.

Thefunction of s. 24 is simply to exempt the family property that is provided for under the interspousal contract from distribution under PartV, unless the interspousal contract is unconscionable or grossly unfair.

Section 24 applies where the subject matter of the family lawproceeding is “family property” that has been “distributed or disposed of by an interspousal contract”. [23] The sums of money Mr. Miller was obligated to pay were not family property that was distributed or disposed of by virtue ofthe Contract. As explained above, the amounts were merely debts created by or assumed under the Contract. I therefore agree that theChambers judge erred in finding s. 24 applied in this case because the subject matter of the application was not family property.However, that error does not assist Ms. Gerhardt.

I will explain why. [24] Ms. Gerhardt submits that if s. 24 is inapplicable, the Chambers judge should nevertheless have applied s. 42 of the FPA tovest the money owing for the lease and equalization payments in her. She argues that she was entitled to an order under s. 42 thatrequired the Estate to pay her the money in priority to any unsecured creditors in accordance with s. 35(

e) of the FPA. [25]

Section 42 of the FPA allows a court to vest property dealt with under an interspousal contract. It reads as follows: 42 The court may, on application by a spouse who is a party to an interspousal contract, order the vesting of family property inaccordance with the terms and conditions of the interspousal contract. [26]

Section 35(

e) reads as follows: 35 Money paid or property transferred to a surviving spouse pursuant to a family property order is deemed never to have been part ofthe estate of the deceased spouse where a claim is made against the estate: (

e) by any creditor of the deceased spouse or of the estate, except where the court directs otherwise in the family property order. [27]

Section 42 is the legislature’s mechanism for ensuring that remedies under the FPA are still available to parties to aninterspousal contract, but only to the extent that any remedy is in “accordance with the terms and conditions of the interspousal contract”.Examples of vesting orders can be found in two cases: Nowakowski v Nowakowski, 2003 SKQB 172, [2003] 6 WWR 536, aff’d 2004SKCA 23, [2004] 8 WWR 611 (vesting of pension funds divided by an interspousal contract); and Rudulier v Rudulier (1999), (SK KB), 182 Sask R 23 (QB) at para 138 (vesting of RRSPs divided by the interspousal agreement).

In both cases, theproperty sought to be vested was in existence at the date of the execution of the interspousal contract and was to be transferred to one ofthe spouses by its terms. [28] Ms. Gerhardt’s reliance on s. 42 suffers from the same inherent problems as pertain to the application of s. 24. The subjectmatter of the application for a vesting order under s. 42 must be “family property”. As explained, a promise to pay money in the future,i.e., a debt in this case, is not “family property”.

Likewise, because the amounts payable are not referable to funds in existence on thedate the Contract was signed, they are not “family property”. Accordingly, there is no basis to apply s. 42. [29] With respect to s. 35(

e) of the FPA, this

section clearly applies only to family property orders. In this case there is no suchorder. [30] Accordingly, the Chambers judge was correct to dismiss Ms. Gerhardt’s application and find that her remedy, if any, was incontract. [31] Ms. Gerhardt’s appeal must fail. The appeal is dismissed with costs to the respondent in the usual way. “Ottenbreit J.A.” Ottenbreit J.A.I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Whitmore J.A.” Whitmore J.A.