



COURT OF APPEAL FOR ONTARIO

CITATION: Di Michele v. Di
    Michele, 2014 ONCA 261

DATE: 20140403

DOCKET: C56711 and C56712

MacPherson, Cronk and Gillese JJ.A.

In the Matter of the
Partition
    Act
, R.S.O. 1990, c. P.4, ss. 2 and 3

And in the Matter of the
Mortgages
    Act
, R.S.O. 1990, c. M.40, s. 24

And in the Matter of the
Trustee
    Act
, R.S.O. 1990, c. T.23, ss. 5(1), 16(1) and 16(2)

And in the Matter of the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194, rules 14.05(c), (d) and (e)

BETWEEN

Roberto Di Michele

Applicant (Appellant/

Respondent by way of
    cross-appeal)

and

Antonio Di Michele, Estate Trustee of the Estate of
    Adalgisa Di Michele, deceased, Antonio Di Michele, Michele Di Michele,
909403
    Ontario Limited, Marsica Investments Limited, Cesidio Ranieri, Gilberto
    Olivieri, Alberto Ramelli
, Capital One Bank and Avrum Slodovnick, and The
    Director of Titles, party pursuant to s. 57(14) of the
Land Titles Act


Respondents (
Respondents/

Appellants by way of
    cross-appeal
)

AND BETWEEN

909403 Ontario Limited, Marsica Investments Ltd.,
    Cesidio Ranieri and Alberto Ramelli

Applicants
    (Respondents/

Appellants by way of
    cross-appeal)

and

Antonio Di Michele also known as Tony Di Michele,
    Michele Di Michele also known as Michael Di Michele, and
Roberto
    Di Michele also known as Robert Di Michele

Respondents (
Appellant/

Respondent by way of
    cross-appeal
)

D. Loucks, for the appellant/respondent by way of
    cross-appeal

Mark Ross, for the respondents/appellants by way of
    cross-appeal

Heard: February 24, 2014

On appeal from the judgment of Justice Beth A. Allen of
    the Superior Court of Justice, dated February 6, 2013, with reasons reported at
    2013 ONSC 870, 86 E.T.R. (3d) 178.

Gillese
    J.A.:

[1]

This appeal raises significant questions about the scope of an estate
    trustees power to mortgage property governed by the
Land Titles Act
,

R.S.O. 1990, c. L.5.

OVERVIEW

[2]

Adalgisa Di Michele died on September 5, 1996, leaving behind her three
    sons: Roberto, Michele and Antonio. Under Mrs. Di Micheles will (the Will),
    Antonio was named the estate trustee.  Because the three brothers have the same
    last names, I will refer to each of them by their first names.

[3]

The Will provided that after all debts had been paid, Mrs. Di Micheles
    estate was to go, in equal shares, to those of her issue alive at the date of
    distribution.

[4]

On March 21, 2002, in his capacity as estate trustee, Antonio registered
    a Transmission by Personal Representative to take title to the family home that
    his mother had owned and lived in until her death.  The home was located at 269
    Angelene Street, Mississauga, Ontario (the Property) and is within the land
    titles system.  By that point, all the estate debts had been paid and it was
    ready for distribution.

[5]

Roberto and Michele never registered on title any interest in, or claim
    to, the Property.

[6]

Starting in 2002, Antonio was embroiled in personal litigation with 909403
    Ontario Limited, Marsica Investments Ltd., Cesidio Ranieri and Alberto Ramelli
    (collectively Marsica or the respondents).

[7]

In June 2008, Antonio put up the Property as security in favour of Marsica
    by means of a mortgage (the Mortgage).

[8]

In 2010, Marsica obtained judgment for $1.5 million against Antonio.

[9]

In 2011, Marsica brought an application in which it sought to have the Property
    sold.

[10]

Roberto (the appellant) lived with his parents on the Property for
    many years prior to their deaths.  He and his wife have continued to live on
    the Property until the present time.  He says that he and his brothers agreed
    that after their mothers death, the Property would be his.

[11]

Roberto brought a counter-application, disputing Marsicas right to sell
    the Property and asserting sole entitlement to it.

[12]

By judgment dated February 6, 2013 (the Judgment), among other things,
    the trial judge:

1.

declared that the Property vested in Antonio, Roberto and         Michele
    on March 21, 2002, in equal one-third shares;

2.

declared the Mortgage to be valid;

3.

ordered the partition and/or sale of the Property in          accordance
    with the interests of the parties entitled to share in     it; and

4.

dismissed Robertos counter-application.

[13]

Roberto appeals.  He asks this court to set aside the Mortgage and that
    part of the Judgment giving relief under the
Partition Act
, R.S.O.
    1990, c. P.4, and order that he replace Antonio as the estate trustee.

[14]

Marsica cross-appeals, arguing that the trial judge erred in finding
    that the Mortgage binds only Antonios one-third interest in the Property.

[15]

For the reasons that follow, I would allow the appeal in part and allow
    the cross-appeal.

BACKGROUND

The Will

[16]

The key provisions in Mrs. Di Micheles Will are set out below.  As will
    become evident, the breadth of the power to postpone sale given to the estate
    trustee is significant to the resolution of this appeal.

I GIVE, DEVISE AND BEQUEATH all of my estate, both real and
    personal,  unto my Trustee upon the following trusts, namely:

a)  To pay all my just debts, funeral expenses and testamentary
    expenses ;

b)   To pay out of the residue of my estate all [duties and
    taxes];

c)
To deliver all the rest and residue of my estate
    then remaining to my issue alive at the date of distribution in equal shares
    per stirpes
.

IN ORDER TO CARRY OUT the provisions of this my Will,
I give
    my Trustee power to sell
, call in
and

convert into
    money
,
all of my estate at such time or times, in such manner and
    upon such terms as my Trustee in his discretion may decide upon, with power and
    discretion to postpone such conversion
of such estate or any part or
    parts thereof,
for such length of time

as he may think best
,
    and I hereby declare that
my Trustee may retain any portion of my estate
    in the form in which it may be at my death  for such length of time as my
    Trustee in his discretion may deem advisable,
without responsibility
    for loss, to the intent that investments or assets so retained shall be deemed
    to be authorized investments for all purposes of this my Will. [Emphasis
    added.]

Antonio Acts as Estate Trustee

[17]

On December 16, 1997, Antonio obtained a Certificate of Appointment of
    Estate Trustee with a Will. The estates only asset was the Property.

[18]

On March 21, 2002, the Property was transferred to Antonio by
    Transmission by Personal Representative.

[19]

The Property had been the Di Michele family home for several decades. 
    The parents of the Di Michele brothers lived on the Property until their
    deaths.  The father died in 1987 and the mother in 1996.  The mother gained
    title to the Property on her husbands death.

[20]

At the time of the Property transfer to Antonio, he signed a certificate
    confirming that all the estate debts had been paid.

The 2002 action against Antonio

[21]

In 2002, Marsica commenced an action against Antonio in connection with
    a failed real estate investment scheme (the 2002 action).

[22]

A trial date was scheduled for March 31, 2008.  In the weeks leading up
    to trial, it appeared that the matter would settle on the basis of a payment
    over time secured by a mortgage from Antonio over his cottage property in Bala,
    Ontario.

[23]

Antonio's lawyer, Avrum Slodovnick (Slodovnick) told Marsicas lawyer
    Simon Schonblum (Schonblum) that the settlement was 99% completed and that Antonio
    was just waiting for the blessing of his financial advisor.

[24]

The estimated length of the trial was 10 days.  On the basis that the
    parties were so close to a settlement, counsel agreed to vacate the trial date.

[25]

Shortly after the trial date was vacated, Schonblum searched title for
    the Bala cottage property and found that Antonio had registered a $350,000.00
    mortgage against it on April 4, 2008, thereby exhausting the remaining equity
    in the property.

Antonio seeks adjournment of 2002
    action and grants the Mortgage

[26]

On June 4, 2008, a pre-trial conference was held in relation to the 2002
    action.  At that point, the trial was scheduled to proceed on June 16, 2008. 
    Antonio sought an adjournment of the trial because he did not have his
    financial evidence in order.

[27]

Faced with yet another possible delay in the trial and in light of Antonio
    having encumbered the Bala cottage property after having offered it to Marsica as
    security, Marsica was concerned about securing funds for a possible judgment in
    the 2002 action.

[28]

A suggestion was made that Antonio might provide mortgage security in
    exchange for an adjournment so that Antonio could provide further documents and
    obtain a forensic accounting.

[29]

The parties were caucusing separately.  At one point, Slodovnick pulled
    Schonblum out of his room and said that Antonio had given him instructions to
    mortgage the Property as security for any judgment that might follow trial.  In
    exchange, Marsica was to consent to an adjournment to allow Antonio to obtain a
    forensic accounting.

[30]

Slodovnick then showed Schonblum a parcel register for the Property.  On
    the face of the parcel register, under Owners Names, it said Antonio Di
    Michele. Under Capacity were the initials TWW, which stand for Trustee With
    a Will.

[31]

The parties ultimately reached an agreement, under the terms of which: Marsica
    agreed to adjourn the trial; Antonio granted security for any judgment that
    might arise in relation to the 2002 action by means of a blanket mortgage of
    $350,000.00 on the Bala cottage property and the Property; and the parties
    agreed to jointly retain a forensic accountant and split the cost of a review
    of further productions from Antonio of the books and records relating to the
    real estate investment (the Agreement).  The parties were to return for a
    further pre-trial conference in November 2008.

[32]

On June 6, 2008, in his capacity as Antonios lawyer, Slodovnick
    registered the mortgage against the Property.

Antonio's defence struck and
    judgment obtained in 2002 action

[33]

On April 1, 2010, Antonios defence was struck by order of Master Dash. 
    On June 22, 2010, Antonios appeal of Master Dash's order was dismissed.

[34]

On October 11, 2010, the trial proceeded as an undefended trial before
    Stinson J.

[35]

By judgment dated October 14, 2010, Stinson J. awarded Marsica damages
    against Antonio in the sum of approximately $1.5 million.

Attempted enforcement of judgment in
    2002 action

[36]

Acting on the judgment obtained in the 2002 action, the respondents obtained
    a writ of seizure and sale.  They filed the writ against the Property with the
    Sheriff in the Peel region.

[37]

The Sheriff posted a notice at the Property that there would be a
    sheriffs sale.  Roberto and his wife were living in the house. Roberto had
    lived at the Property while his parents were alive and continued living there
    after their deaths.  By the time of trial, he had lived on the Property for
    some 50 years.  He claimed that after his mothers death, he and his brothers
    had agreed that the Property would be his.

[38]

Robertos lawyer wrote to counsel and the Sheriff to advise that he
    would be bringing an application to assert his interest in the Property.

The Application and
    Counter-Application

[39]

The respondents brought an application in which they sought, among other
    things, the sale of the Property.  Roberto brought a counter-application in
    which he asserted sole ownership of the Property.  He sought, among other
    things, an order directing Antonio to transfer the Property to him and
    appointing him in Antonios stead as the estate trustee.

[40]

The two matters were converted into trials and heard together.

[41]

At trial, Michele took no position and filed no documents.  Antonio
    appeared on his own behalf.  He denied knowledge of the Will, his appointment
    as the estate trustee, and that the Property had been transmitted to him.

THE TRIAL DECISION

[42]

The trial judge rejected Antonios evidence, stating that he was a most
    unreliable and deceptive witness.  She rejected his claim that someone else applied
    for the Certificate of Estate Trustee with a Will in his name and then
    registered the transmission of the Property to him as estate trustee without
    his knowledge.  She found that Antonio was aware of the Will, of his
    appointment as estate trustee, and that the Property had been registered in his
    name as estate trustee.

[43]

The trial judge set out the parties positions on the many issues that
    had been raised.

[44]

She then analysed and rejected Robertos arguments that the Mortgage was
    fraudulent and invalid because Antonio had given it and he had no interest in
    the Property.  She concluded that while Antonio was not forthright about the
    nature of his interest in the Property  that he held title only as estate
    trustee and that he shared beneficial interest in the Property with his two
    brothers  this alone did not place him within the bounds of fraud as defined in
    s. 1 of the
Land Titles Act
.  Antonio was the registered owner of the
    property, he was not posing as a fictitious person, and there was no forgery.

[45]

The trial judge also rejected Robertos argument that Antonio had no
    property interest in the Property when he gave the Mortgage, though she did not
    conclude that Antonio owned the whole Property.  In her view, the Property automatically
    vested in the estates beneficiaries (the three brothers), three years after
    Mrs. Di Micheles death, pursuant to s. 9 of the
Estates Administration Act
,
    R.S.O. 1990, c. E. 22.  As a result, rather than owning the whole Property as
    estate trustee, Antonio owned only the third of the property to which he was
    beneficially entitled under the Will.  The trial judge took note of s. 10 of
    the
Estates Administration Act
, which provides that nothing in s. 9
    derogates from a power granted to an estate trustee in a will.  She concluded
    that although the Will gave the estate trustee the power to sell the Property and
    to postpone such sale for such length of time as he deems advisable, this did
    not evidence a clear intent to oust s. 9 and delay the vesting of the estate.

[46]

The trial judge concluded that the Mortgage was valid.  However, because
    she found that the brothers beneficial interests in the Property had vested by
    the time that Antonio granted the Mortgage in 2008, she concluded that Antonio
    could only have granted a mortgage against his interest in the Property.

[47]

The trial judge further found that because the 2002 action was against
    Antonio personally, and not in his capacity as the estate trustee, he could
    only give as security that which he owned in his personal capacity.

[48]

Accordingly, the trial judge found the Mortgage to be enforceable only
    against Antonios one-third interest in the Property.

[49]

She then ordered partition or sale of the Property in accordance with
    the interests of the parties entitled to share in it.

THE ISSUES

[50]

The appellant raises a number of issues that can be summarized as
    follows.  Did the motion judge err in:

1.

finding that the Mortgage was valid;

2.

finding that the respondents were entitled to a remedy under      the
Partition
    Act
; and

3.

failing to appoint Roberto as the estate trustee?

[51]

The respondents raise one issue by way of cross-appeal.  Did the motion
    judge err in:

4.

failing to find that the Mortgage bound the entire Property?

ANALYSIS

1. Was the Mortgage valid?

[52]

The appellant makes three arguments going to the validity of the
    Mortgage.  First, he submits that Antonio had no interest in the Property,
    either personally or in his capacity as estate trustee, over which he could
    grant a mortgage.  Second, he argues that the respondents were not
bona fide
purchasers for value without notice.  Third, he says that the lawyers
    involved at the time that the Mortgage was granted were unaware that Antonio
    was not the legal owner of the Property.  Consequently, he contends, the Mortgage
    was a product of Antonios fraudulent representation that he was the owner of
    the Property and, therefore, is a nullity.

[53]

I would not accept any of these submissions.

(a)

Did
    Antonio have an interest in the Property?

[54]

The appellants first submission  that Antonio had no interest in the
    Property  cannot stand in light of the relevant statutory provisions.

[55]

Section 2(1) of the
Estates Administration Act
provides that
    upon a persons death, all of that persons property vests in the estate
    trustee:

All real

and personal

property
    that is vested in a person
without a right in any other person to take
    by survivorship,
on the person's death
, whether testate or
    intestate and despite any testamentary disposition,
devolves to and
    becomes vested in his or her personal representative
from time to time
    as trustee for the persons by law beneficially entitled thereto, and, subject
    to the payment of the person's debts and so far as such property is not
    disposed of by deed, will, contract or other effectual disposition, it shall be
    administered, dealt with and distributed as if it were personal property not so
    disposed of. [Emphasis added.]

[56]

Pursuant to s. 120 of the
Land Titles Act
, on Mrs. Di Micheles
    death, the land registrar was entitled, upon receiving an application from the
    estate trustee, to register the estate trustee as owner in place of the
    deceased:

On the death of the sole registered owner
or of the survivor of several joint registered owners
of freehold land,
    such person shall be registered as owner
in the place of the deceased
    owner or owners
as may
, on the application of any person
    interested in the land,
be appointed by the land registrar, regard being
    had
to the rights of the several persons interested in the land and
in
    particular to the selection of any such person as for the time being appears to
    the land registrar to be entitled according to law to be so appointed
,
    subject to an appeal to the Divisional Court in the prescribed manner by any
    person aggrieved by an order of the land registrar under this section.
    [Emphasis added.]

[57]

Section 63 of the
Land Titles Act

provides that in
    respect of registered dealings with land, the person registered in the place of
    a deceased owner is in the same position as if that person had taken the land
    under a transfer for valuable consideration:

Any person registered in the place of a
    deceased owner
or to whom a patent is issued as executor[,]
    administrator or estate trustee or in any representative capacity shall hold
    the land or charge, in respect of which the person is registered, upon the
    trusts and for the purposes to which the same is applicable by law and subject
    to any unregistered estates, rights, interests or equities subject to which the
    deceased owner held the same, but otherwise in  all  respects,
and  in
    particular as respects any registered dealings with such land or charge, the
    person shall be in the same position as if the person had taken the land or
    charge under a transfer for  valuable consideration.
[Emphasis added.]
[1]

[58]

As a result of these provisions, it is clear that Antonio had the legal
    right to grant the Mortgage.  The Property vested in him, as the estate
    trustee, on his mothers death:
Estates Administration Act
, s. 2(1)
.
He was entitled to be registered as owner of the Property in his mothers
    stead:
Land Titles Act
, s. 120.  He had the Property transferred into
    his name.  He was thereafter the person registered in the place of his mother,
    the deceased owner:
Land Titles Act
, s. 63.  The Mortgage was a
    registered dealing with the Property.  Antonio was in the same position as if
    he had become the registered owner of the Property under a transfer for
    valuable consideration:
Land Titles Act
, s. 63.  A registered owner
    has the right to grant a mortgage over his or her land:
Land Titles Act
,
    s. 93(1).
[2]

[59]

Accordingly, it cannot be said that Antonio had no
    interest in the Property that entitled him to grant the Mortgage.


(b)

Were the respondents
bona fide
purchasers for value without notice?

[60]

With respect to this submission, I begin by noting that the questions of
    value and consideration were not raised before the trial judge.  Issues ought
    not to be raised for the first time on appeal.  In any event, however, the
    contention that the respondents were not
bona fide
purchasers for value
    without notice must fail.

[61]

The first question is whether the respondents were
bona fides

when they took the Mortgage.  In my view, the fact that Antonios lawyer
    offered the mortgage as security eliminates any question of a lack of
bona
    fides
.  Because Antonios lawyer offered the Property as security, the
    respondents were entitled to operate on the assumption that Antonio was acting
    lawfully in granting the Mortgage.  They were not obliged to go behind that
    implicit representation.

[62]

The next question is whether the respondents gave value for the
    Mortgage.  This, too, is easily disposed of.

[63]

The Mortgage was granted as part of the Agreement.  In exchange for the
    Mortgage, the respondents agreed to adjourn the trial and share the cost of the
    forensic accountant that Antonio required.  Even if the adjournment alone does
    not constitute value within the meaning of the term 
bona fide

purchaser
    for value without notice, the cost of the forensic accountant borne by the
    respondents clearly does.

[64]

I turn next to the question of notice.


[65]

The appellant points to the fact that the Property register shows
    Antonio as holding the Property in the capacity of TWW, meaning Trustee With
    a Will.  He says that this shows that the respondents had actual notice of the
    Will.  Accordingly, he says, the respondents could not have simply accepted the
    Mortgage as security  they had to first inquire into whether Antonio could
    lawfully mortgage the Property.

[66]

I would reject this argument.  In my view, s. 62(2) of the
Land
    Titles Act
provides a complete answer to it.

[67]

It is correct that when the parties entered into the Agreement, they were
    aware that Antonio held the Property as estate trustee. As the appellant points
    out, the lawyers for both parties had the parcel register in hand at that time
    and the parcel register showed Antonio as owner but in the capacity of TWW (Trustee
    With a Will).

[68]

However, s. 62(2) of the
Land Titles Act
provides that: (1) describing
    the owner of land as a trustee shall be deemed
not
to constitute notice of
    a trust, and (2) the description (of the owner as trustee) does
not
impose a duty on the person dealing with the owner to make inquiry as to the power
    of the owner in respect of the property.  Section 62(2) reads as follows:

Describing the owner of
freehold or
    leasehold
land
or of a charge
as a trustee
, whether
    the beneficiary or object of the trust is or is not mentioned,
shall be
    deemed not to be a notice of a trust
within the meaning of this
    section,
nor shall such description impose upon any person dealing with
    the owner the duty of making any inquiry as to the power of the owner in
    respect of the land or charge
or the money secured by the charge, or
    otherwise,
but, subject to the registration of any caution or inhibition,
    the owner may deal with the land or charge as if such description had not been
    inserted.
[Emphasis added.]



[69]

Thus, Antonios description as TWW (Trustee With a Will) is deemed not
    to be notice of a trust and it imposed no duty on the respondents to make any
    inquiry as to his power as owner to charge the Property.

[70]

Further, s. 62(2) provides that the owner may deal with the land as if
    the description as a trustee had not been inserted.  This is subject to the registration
    of any caution or inhibition.  However, in the present case, no caution or
    inhibition had been registered on the title to the Property.

[71]

Accordingly, I would reject the appellants contention that the
    respondents were not
bona fide
purchasers for value without notice.

(c)

Were the Lawyers operating under a misapprehension that Antonio was the
    owner?

[72]

In light of the evidence about the parcel register, the appellants
    contention that the parties were all labouring under a misapprehension that
    Antonio was the owner of the Property must fail and with it, his argument that
    the Mortgage was obtained by fraud on Antonios part.  In this regard, the
    appellant has confused the notion of a fraudulent transaction with a valid
    transaction that might amount to a breach of trust.  The former may invalidate
    the transaction.  The latter does not.  Rather, it gives rise to an action by
    the beneficiaries against the trustee.

[73]

While Roberto and Michele may have recourse against Antonio for what
    appears to be a breach of his obligations as the estate trustee, that does not
    mean that the Mortgage was granted fraudulently nor does it render the Mortgage
    invalid.

(d)

Conclusion

[74]

For these reasons, I would dismiss this ground of appeal.

2. Were the respondents entitled to a remedy under the
Partition
    Act
?

[75]

The appellant contends that even if the Mortgage were valid, an order
    under the
Partition Act

could not be made because Marsica does
    not have a crystallized right of possession.

[76]

Marsica concedes this point.  However, it contends that the end result of
    enforcement of the Mortgage will be such an order and the relief ordered
    pursuant to the
Partition Act
was an attempt by the trial judge to save
    the parties the cost and trouble of going through the intermediate steps
    relating to foreclosure.

[77]

Marsica is likely correct about the trial judges motivation in ordering
    partition and sale.  However, the law is clear: only persons entitled to the
    immediate possession of an estate in property may bring an action or make an
    application for its partition or sale.

[78]

Section 3(1) of the
Partition Act
reads as follows:

Any person interested in land
in
    Ontario, or the guardian of a minor
entitled to the immediate possession
    of an estate therein
,
may bring an action or make an application
    for the partition
of such land
or for the sale

thereof
under the directions of the court if such sale is considered by the court to be
    more advantageous to the parties interested. [Emphasis added.]

[79]

This court has interpreted s. 3(1) and its predecessors as
    permitting only those entitled to immediate possession of the property to apply
    for partition: see
Morrison v. Morrison
(1917), 39 O.L.R. 163  (S.C.
    (A.D.)), at pp. 168 and 171-72; and
Ferrier v. Civiero
(2001), 147
    O.A.C. 196 (C.A.), at paras. 6 and 8.

[80]

Because the respondents were not entitled to immediate possession of an
    estate in the Property, they were not entitled to a remedy under the
Partition
    Act.


[81]

Accordingly, I would allow this ground of appeal.

3. Should Roberto be appointed Estate Trustee in Antonios stead?

[82]

In his counter-application, Roberto asked to be appointed as the estate
    trustee in Antonios stead.  The trial judge did not address this aspect of his
    counter-application.  Roberto renews his request in this court, saying that
    Antonio and Michele do not claim any interest in the estate and have shown
    that they have no interest in receiving a share of the estate.  Roberto also
    states that Antonio gifted his share of the estate to him.

[83]

Section 37(1) of the
Trustee Act
, R.S.O. 1990, c. T.23, empowers
    the court to remove a personal representative (which is another term for an
    estate trustee)
[3]
and appoint some other proper person.  Section 37(1) reads as follows:

The Superior Court of Justice may remove a personal
    representative upon any ground upon which the court may remove any other
    trustee, and may appoint some other proper person or persons to act in the
    place of the executor or administrator so removed.

[84]

The court will remove an estate trustee only if doing so is clearly
    necessary to ensure the proper management of the trust:
Re Weil
, [1961]
    O.R. 888 (C.A.), at p. 889.  Situations in which removal may be justified
    include where the estate trustee has acted in a way that has endangered the
    trust property or otherwise shown a lack of honesty, proper capacity, or
    reasonable fidelity:
Letterstedt v. Broers
(1884), 9 A.C. 371 (P.C.),
    at pp. 385-86;
Bathgate v. National Hockey League Pension Society
(1994),
16 O.R. (3d) 761 (C.A.), at p. 778.

[85]

Thus, on the record, it appears that there may be good reason to remove Antonio
    as the estate trustee.

[86]

However, in my view, Roberto is not a proper person to serve as his
    replacement.  I say this because Robertos personal interests would seriously
    conflict with the obligations he would undertake as the estate trustee.

[87]

As a general rule, a person will not be appointed as a trustee if that
    persons duties as trustee would conflict with either his or her personal
    interests or duties which that person has undertaken apart from as trustee: see
Re Parsons
, [1940] Ch. 973, at p. 983;
Re Moorhouse
, [1946] 4
    D.L.R. 542 (Ont. H.C.), at p. 544; and
Re Becker
(1986), 57 O.R. (2d)
    495 (Surr. Ct.), at pp. 498-99.

[88]

Two examples illustrate why Robertos appointment as replacement estate
    trustee would run afoul of the general rule precluding those in a conflict
    position from being named estate trustee.

[89]

The first example flows from the estate trustees overriding obligation
    to duly administer the estate.  As the legal owner of the Property, the estate
    trustee will have to comply with the court orders flowing from these
    proceedings, including those relating to the Mortgage.  However, the record
    makes it plain that Roberto claims the Property as his own and that he plans on
    appropriating the Property for himself.  Rather than respecting and
    implementing the court orders in respect of the Property, it seems likely that
    he will resist all actions associated with enforcement of the Mortgage.  In any
    event, his personal interests would be in conflict with his duties as the
    estate trustee in this regard.

[90]

The second example flows from the successor estate trustees obligation
    to take steps to recover, for the estate, any losses caused by the prior estate
    trustees defaults: see
Bennett v. Burgis

(1846), 5 Hare 295
    (Ch.), at p. 297.  This would require Roberto, if he were appointed the
    successor estate trustee, to consider taking action against Antonio for any losses
    that Antonio may have caused the estate in his capacity as the initial estate
    trustee.  But, it will be recalled, Roberto claims that Antonio made a gift to
    him of his interest in the estate.  So, if Roberto
qua
estate trustee
    found that he ought to pursue Antonio, would he have to consider attacking the
    gift?  It is self-evident that in such a situation, Robertos obligation if he were
    the estate trustee would conflict with his personal interests.

[91]

I would add that the foregoing examples stand apart from the
    respondents contention that the alleged gift from Antonio to Roberto of his
    interest in the estate was for the purpose of defeating, hindering or avoiding
    a creditor.  By virtue of accepting the gift of Antonios interest, Roberto
    would be complicit in such an act.  Thus, this allegation also raises serious
    questions about whether Roberto is a proper person to serve as estate trustee.

[92]

Accordingly, I would dismiss this ground of appeal.

THE CROSS-APPEAL

4. Did the Mortgage bind the entire Property?

[93]

The trial judge concluded that although the Mortgage was valid, it was
    binding only on the one-third share that she found Antonio was entitled to
    receive as a beneficiary under the Will.  In reaching this conclusion, the
    trial judge relied on s. 9 of the
Estates Administration Act
.

[94]

Section 9 of the
Estates Administration Act
reads as follows:

Real property not
disposed of, conveyed
    to, divided or
distributed among the persons beneficially entitled
    thereto
under section 17 by the personal representative
within
    three years after the death of the deceased

is

thenceforth
    vested in the persons beneficially entitled thereto under the will
unless such personal representative, if any, has signed and registered, in the
    proper land registry office, a caution in Form 1 ... [Emphasis added.]

[95]

The trial judge saw that the Will gave Antonio, as estate trustee, an
    unqualified power to postpone sale of the Property.  Nonetheless, in her view, there
    is no clear intention in the Will that  Anthony have discretion beyond three
    years to distribute the estate.

[96]

As a result, pursuant to s. 9 of the
Estates Administration Act
,
    the trial judge found that the Property vested in the beneficiaries three years
    after Mrs. Di Micheles death, in the same manner as if the estate trustee had
    conveyed it to them.  On this view, the vesting occurred before the Mortgage
    was granted.  Therefore, the Mortgage could attach only to Antonios one-third
    beneficial interest in the Property.

[97]

With respect, I do not agree.  In my view, the Mortgage is binding on
    the whole of the Property.  I reach this conclusion for three reasons.

[98]

First, s. 9 of the
Estates Administration Act
does not apply in
    the circumstances of this case.  Section 9 (and its predecessors) was not enacted
    to limit the powers given to an estate trustee under a will.  Rather, it was intended
    to give estate trustees additional powers, but only to the extent that the additional
    powers do not conflict with the provisions of the will.  The intention of the
    deceased, as expressed in his or her will, is always paramount:
Re Leblanc
(1978), 18 O.R. (2d) 507 (C.A.), at pp. 513-15.

[99]

This can be seen from s. 10 of the
Estates Administration Act
,
    which provides that nothing in s. 9 derogates from any right possessed by a
    trustee under the will.  Section 10 reads as follows:

Nothing
    in section 9 derogates from any right possessed by an executor or administrator
    with the will annexed under a will or under the Trustee Act or from any right
    possessed by a trustee under a will.

[100]

The
    paramountcy of the testators intention is confirmed in the jurisprudence.  Where
    a will gives the estate trustee a power to sell property at such times and in
    such manner as the estate trustee sees fit, s. 9 of the
Estates
    Administration Act

will not limit the scope of that power by
    requiring that the property vest after a specific period of time:
Re
    Proudfoot Estate
(1994), 3 E.T.R. (2d) 283 (Ont. Gen. Div.), at paras. 8
    and 11-12, vard on other grounds (1997), 19 E.T.R. (2d) 150 (Ont. C.A.).  See
    also
Re Leblanc
, at p. 515.

[101]

It
    will be recalled that the Will gave Antonio, as estate trustee, the power to sell
    the Property at such time or times, in such manner and upon such terms as my
    Trustee in his discretion may decide upon.  It went on to expressly provide
    that the estate trustee could postpone sale:

for such length of time as he may think best, and I hereby
    declare that my Trustee may retain any portion of my estate in the form in
    which it may be at my death  for such length of time as my Trustee in his
    discretion may deem advisable...

[102]

On
    a plain reading of these provisions in the Will, the estate trustee was given
    the power to postpone sale of the Property for whatever length of time he
    deemed advisable.  Thus, in my view, the trial judge erred in finding that the
    Will contained no clear intention that Antonio had the discretion to delay
    selling the Property beyond the three year limit in s. 9 of the
Estates
    Administration Act
.  Consequently, s. 9 did not apply and the Property did
    not vest in the beneficiaries.

[103]

Second,
    the beneficiaries entitlement under the Will did not amount to a property interest
    in the Property.  The Will does not give the beneficiaries a specific bequest
    of the Property.  Rather, it gives them a contingent interest in the residue of
    the estate.  In this regard it will be recalled that the Will provided that the
    residue of the estate was to go to Mrs. Di Micheles issue alive at the date
    of distribution. Accordingly, to become entitled, a beneficiary had to be
    alive on the date of distribution.  Until distribution, the beneficiaries had
    only a contingent beneficial interest in the residue of the estate, as well as
    the personal right to compel the estate trustee to duly administer the estate.

[104]

A
    contingent beneficial interest in an estate does not give rise to a property
    interest in any specific asset of the estate, prior to or absent an
    appropriation of such asset to the beneficiary by the trustee:
Spencer v.
    Riesberry
, 2012 ONCA 418, 114 O.R. (3d) 575, at para. 37.

[105]

The
    estate had not been distributed at the time that the Mortgage was granted. 
    Therefore, the beneficiaries contingent interests in the residue had not
    vested.  Hence, Antonio did not have a one-third interest in the Property at the
    time of the Mortgage.

[106]

Third,
    pursuant to s. 93(3) of the
Land Titles Act
, the Mortgage was
    registered free from any unregistered interest of the beneficiaries.  Section
    93(3) reads as follows:

The charge, when registered, confers upon the chargee
    a charge upon the interest of the chargor as appearing in the register subject
    to the encumbrances and qualifications to which the chargors interest is
    subject, but free from any unregistered interest in the land.

[107]

Under
    Ontarios land titles system, the rights of a
bona fide
purchaser (which
    includes a mortgagee) for value who has registered its interest in the property
    trump any prior unregistered interests in the property:
719083 Ontario
    Limited v. 2174112 Ontario Inc.
, 2013 ONCA 11,
28
    R.P.R. (5th) 1,
at para. 12;
MacIsaac v. Salo
, 2013 ONCA 98,
    114 O.R. (3d) 226, at para. 39.

[108]

In
    the present case, as I have already explained, the respondents were
bona
    fide
purchasers for value without notice.  They registered their interest
    (the Mortgage) in the Property.  Their interest would trump those with a prior
    unregistered interest in it.  Therefore, even if the beneficiaries had an
    interest in the Property that pre-existed the granting of the Mortgage, that
    interest was unregistered and therefore was trumped by the registered Mortgage.

[109]

Accordingly,
    the Mortgage binds the entire Property.

[110]

Thus,
    I would allow the cross-appeal.

DISPOSITION

[111]

Accordingly,
    I would allow the appeal in part and delete the references in the Judgment to
    relief under the
Partition Act
.  I would allow the cross-appeal and,
    therefore, delete para. 2 of the Judgment.

[112]

The
    appellant succeeded only in respect of the second issue, which the respondents
    had conceded and which occupied a very small part of the appeal.  In all other
    respects, the respondents were successful.  Accordingly, I would order costs in
    favour of the respondents, fixed at $13,500, all inclusive.

Released: April 3, 2014 (J.C.M.)

E.E. Gillese
    J.A.

I agree. J.C. MacPherson J.A.

I agree. E.A. Cronk J.A.





[1]
I have quoted this provision of the
Land Titles Act
as it exists today,
    rather than as it existed at the time of Mrs. Di Micheles death in 1996.  In
    1998, the Ontario legislature amended this provision to include a reference to
    estate trustees (the previous versions of s. 63 had referred only to executors and
    administrators, which are categories of estate trustees): S.O. 1998,
    c. 18, Sched. E, s. 126.  This amendment has no bearing on the issues
    raised in this appeal.



[2]
Section 93(1) reads as follows: A registered owner may in the prescribed
    manner charge the land with the payment at an appointed time of any principal
    sum of money either with or without interest or as security for any other
    purpose and with or without a power of sale.



[3]
A personal representative and an estate trustee are both defined as an
    executor, administrator, or administrator with the will annexed.  Under s. 1 of
    the
Trustee Act
personal representative is defined as an executor, an
    administrator, and an administrator with the will annexed) and under rule
    74.01 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, estate
    trustee is defined as an executor, administrator or administrator with the
    will annexed.


