July 22nd, 2020
Families never expect their private arrangements to someday become the subject of a lawsuit. In my estate litigation practice, I frequently encounter situations where children are forced to bring a claim against a deceased parent’s estate to enforce a promise or an agreement made during that parent’s lifetime. One such situation arose in Tomek v Zabukovec, 2020 ONSC 2930, a case heard in the Ontario Superior Court of Justice.
Tomek began as a divorce application brought by the wife, Judith Tomek, against her husband, Joseph Zabukovec. Prior to trial, the parties had resolved all issues related to their marriage and separation, except for one: their interest in a property owned by the late Joseph Zabukovec Sr., the husband’s father.
Joseph Sr. had two sons: Joseph Jr. and Edward. In the late 1980s, Joseph Sr. purchased and became sole owner of a 15-acre wooded parcel of land in the Caledon area. He had hoped to sever the land into lots, build houses, and sell them for a profit. However, shortly after purchasing the land, Joseph Sr. told Joseph Jr. to take a small section of the land for himself and build himself a home for his family. Construction on a home, fully funded by Joseph Jr. and his wife, on the lands owned by Joseph Sr., began in 1988.
In the summer of 1989, Joseph Jr. borrowed $80,000 from his father to finish the construction of the house. Meanwhile, Joseph Sr. brought an application to sever the land, but was denied. According to Joseph Jr., shortly thereafter his father told him not to worry, as the land would be his when Joseph Sr. passed away.
Joseph Jr. and his family moved into their newly constructed home in the fall of 1989, although it was still incomplete. The couple paid off the $80,000 initially borrowed from Joseph Sr. Over the next 30 or so years, the couple continually made improvements to the home at their sole expense, installing the kitchen, bathrooms, flooring, trim, a sauna, and replacing the windows at least once and the roof at least twice.
From the time the house was constructed, the extended family treated the land as two separate parcels: the house with 1-2 acres of land surrounding it, and the remaining acreage. Everyone in the extended family acted as if the house and its surrounding 1-2 acres belonged to Joseph Jr. and his wife, Judith. Joseph Sr. treated the remaining acreage as if he was the owner. At one point, Joseph Sr. encouraged his other son, Edward, to build a home on the land, but Edward declined.
For as long as the couple resided in the house, they paid all property taxes, insurance premiums, and other associated expenses. This arrangement continued even after Joseph Sr. passed away in 2004 and ended only when Judith moved out of the house in 2018.
Husband, Joseph Jr. and wife, Judith claimed that they held a beneficial interest in the land either through: 1) an unjust enrichment claim; or 2) proprietary estoppel. Judith further claimed that their entitlement to the property was the subject of an oral agreement between them and Joseph Sr.
Simply put, unjust enrichment exists when one party is enriched, to the detriment of the other party, for no juristic (i.e. legal) reason. Joseph Jr. and Judith claimed that the Estate of Joseph Sr. had been unjustly enriched by their construction of the house and their continued upkeep of both the house and the 1-2 acres surrounding the house. They further claimed that they were entitled to receive a proprietary interest in the land by way of constructive trust, or alternatively, monetary compensation for their investment in the property.
Proprietary estoppel is established when: 1) there is an implied or express promise or reassurance that the claimant has a right or benefit over property; 2) the claimant does, or refrains from doing, something in reliance on that promise or reassurance; and 3) the claimant suffers a detriment as a result of their reliance on the promise or reassurance, such that it would be unfair for the other party to go back on their word. Joseph Jr. and Judith claimed that they would not have invested significant time, energy, and resources into building the house and continually improving it if Joseph Sr. had not made an express promise that they would one day own the entire property.
Finally, where parties claim that there was an oral agreement, the courts must look objectively at the words and actions of the parties to determine what they intended, and to decipher whether the requisite elements of a contract (offer, acceptance, and consideration) are present. Judith claimed that there was an oral agreement between her and her husband on one hand, and between them and Joseph Sr. on the other hand, that title would be transferred to her and Joseph Jr. sometime in the future.
In the end, the court held that Joseph Sr. and Judith held joint beneficial ownership of 75% of the property through a constructive trust and proprietary estoppel only and that there was insufficient evidence to establish an oral contract. The court put the couple in charge of selling the property. Once sold, they would be able to divide 75% of the net proceeds between them and finalize their divorce. The remaining 25% of the property remained in the estate for distribution according to the intestacy rules under the Succession Law Reform Act, as Joseph Sr. had died without a will.
Interestingly, the court apportioned 75% of the land to the couple on the basis that they were entitled to one-half the value of the land plus the house. The court gave the other one-half to the estate (or 25% of the entire property) on the basis that Joseph Sr. still treated part of the land as his own.
In this case, Justice Fowler Byrne wrote a well-reasoned decision that will no doubt assist litigators in the sometimes tricky areas of trusts and estoppel.
When parents and children make arrangements involving land, they should keep careful records of their agreement(s) and any investments they put towards the land. One never knows when a simple promise or representation may one day lead to a lawsuit.