Joint Tenancies, Spouses and Estates

Can a person sever a joint tenancy and thereby disentitle a spouse from receiving half of the matrimonial home by right of survivorship?  The answer is maybe. The starting point for our discussion is Part II of the Family Law Act (“FLA”)¹.

Section 19 of the FLA states that both spouses have an equal right to possession of a matrimonial home.²  However, if only one of the spouses has an ownership interest in a matrimonial home then, subject to any separation agreement or court order, the other spouse’s right of possession is personal as against the first spouse and ends when they stop being spouses.³  It is important to remember that a right to possession is not an ownership interest.

Now that we have some basic understanding of legal rights relating to a matrimonial home we can consider what happens when the matrimonial home is owned by the spouses jointly.

The increasing prevalence of blended families also increases the situations in which one spouse may prefer to bequeath that spouse’s interest in the matrimonial home to someone other than the other spouse.  For example, one spouse may prefer that a child from a prior relationship receive an interest in the matrimonial home.  However, if the matrimonial home is held by the spouses in joint tenancy—as many matrimonial homes are held—then the surviving spouse will receive the deceased spouse’s interest in the matrimonial home by operation of law and the deceased spouse’s interest in the matrimonial home never falls into the estate of the deceased spouse.

Before a spouse can bequeath his or her interest in a matrimonial home held in joint tenancy, it is necessary that one of the spouses sever the joint tenancy by conveying their interest in the joint tenancy to his- or her-self, thereby converting the joint tenancy into a tenancy in common.  However, at first blush, section 21(1) of the FLA⁴ restricts a spouse’s ability to dispose of or encumber an interest in a matrimonial home unless (a) the other spouse joins in the instrument or consents to the transaction, (b) the other spouse has released all rights to the matrimonial home by a separation agreement, (c) a court order authorizes the transaction, or (d) neither spouse has designated the property as a matrimonial home and both spouses registered, and not cancelled, another property as a designated matrimonial home.

Pursuant to section 21(2) of the FLA,⁵ a transaction disposing of or encumbering an interest in a matrimonial home may be set aside unless the person who acquired the interest in or encumbrance of the real property was a good faith purchaser for value without notice.  Thus, it may appear that it is not possible for one spouse to bequest their interest in the matrimonial home without the permission of the other spouse or an order of the court.  However, a review of the treatment of section 21(1) of the FLA discloses that it is possible to do so.

The predecessor of section 21(1) of the FLA is section 42(1) of the Family Law Reform Act, R.S.O.1980, c. 152, and, for all intents and purposes, the provisions are functionally identical.  The earliest reported judicial consideration of this provision occurred in Re Sammon, 1979 CanLII 1821 (ON CA),⁶ which was decided after the enactment of the FLRA but involved facts arising before that statute’s enactment.  In Re Sammon, one spouse attempted to sever the joint tenancy in the matrimonial home by way of a deed conveying his interest in the matrimonial home to himself, which deed was signed by him but held by his solicitor and only registered in the Land Registry Office after the deceased’s passing.  The same day that Mr. Sammon made out the aforesaid deed, he also made out a will bequeathing his property, subject to a legacy to his sister and some charitable bequests, to his niece and leaving nothing for his spouse.

After Mr. Sammon’s death, his niece, who was also named as executrix in Mr. Sammon’s last will, brought an application for a determination of whether one-half of the net proceeds from the sale of the matrimonial home should be paid (a) to Mr. Sammon’s estate (i.e. because Mr. Sammon severed the joint tenancy in the matrimonial home) or (b) to his spouse (i.e. because the joint tenancy in the matrimonial home was not severed and, therefore, the matrimonial home was entirely owned by the surviving joint tenant).

Morden J.A., writing for the Court, held that there was insufficient evidence that “…the grantor made it clear from his words and conduct that he considered himself to be immediately and unconditionally bound by the deed.”  Specifically, Morden J.A. noted as follows:

In my view, it is not clearly apparent from the material filed that the conduct of the deceased amounted to an acknowledgement that he was, by merely executing the deed and leaving it with his solicitor, thereupon immediately and unconditionally depriving himself of his right of survivorship in the event, as unlikely as it may have been, of his wife dying first. In other words, the evidence does not satisfy me that he considered the deed to be any less ambulatory than the will.

On that basis, the Court of Appeal held that Mr. Sammon’s conveyance of his interest in the matrimonial home was not “delivered” and, therefore, the joint tenancy had not been severed.  Consequently, the deceased’s spouse received all the net proceeds from the sale of the matrimonial home;however, the Court of Appeal expressly refrained from considering what effect s. 42 of the FLRA (now s. 21 of the FLA)  would have on the transaction.

The issue next arose in Van Dorp v. Van Dorp et al., 1980 CanLII 1609 (ON SC)⁷.  In Van Dorp, the surviving spouse brought an application to set aside her husband’s conveyance of his one-half interest in, approximately, 89 acres of land on which the applicant and her deceased spouse resided together in a two-story farmhouse with the remainder of the land being farmed by the family.  The applicant’s husband executed a deed conveying his one-half interest as a joint tenant to himself as tenant in common with the intention of severing the joint tenancy.  The applicant’s husband’s last will and testament directed that his half-interest in the matrimonial home be divided amongst his three sons.

After noting that the term “dispose of any interest in” is not defined in the FLRA, the Registry Act, or the Conveyancing and Law of Property Act, the judge found that the husband’s conveyance of his half-interest in the joint tenancy to himself amounted to a disposition of his half-interest in the property, which contravened s. 42 of the FLRA (now s. 21 of the FLA).  The judge then set aside the conveyance with the result being that the surviving spouse became the absolute owner of the matrimonial home, but she received only an undivided interest as tenant in common in the remaining land.

Although the decisions in Re Sammon and Van Dorp appeared to settle the matter of whether a spouse could sever a joint tenancy in the matrimonial home by conveying his or her interest to himself or herself as tenant in common without the consent of the other spouse or a court order, the decision in Lamanna v. Lamanna et al., 1983 CanLII 4493 (ON SC),⁸ held differently.  In Lamanna, one spouse conveyed her half-interest in the matrimonial home to herself and contemporaneously executed a last will and testament leaving her one-half interest in the matrimonial home to her five children equally.  Her husband did not join in the instrument severing the joint tenancy, did not consent to the conveyance, and was presumed to have no knowledge of the instrument or of his spouse’s last will and testament until after his spouse’s death.  Following his spouse’s death, the husband brought an application for a determination that his spouse’s conveyance should be set aside because the conveyance contravened 42 of the FLRA (now s. 21 of the FLA).

Decided a few years after Van Dorp, one might expect that the decision in Lamanna would be consistent with Van Dorp.  That did not occur.  Instead, the judge deciding Lamanna, Walsh J., criticized the decision in Van Dorp and explained that he did not agree that a deed from a person to himself or herself to sever the joint tenancy results in any disposition of the property.  In reaching this conclusion, Walsh J. focused on the use of the words “dispose of or encumber” in s. 42 of the FLRA (now s. 21 of the FLA); and expressly rejected the conclusion that a joint tenant conveying her interest in the matrimonial property to herself “disposed” of her interest in the matrimonial home.

Instead, Walsh J. found that although such a conveyance destroys the joint tenancy—because the unity of title is destroyed—that does not amount to a disposition of the conveyor’s interest in the property because each spouse still held an undivided one-half interest in the property after the conveyance severing the joint tenancy even if the nature of title changed from being joint tenants to tenants-in-common.  Walsh J. also held that a spouse’s interest provided for in the FLRA is possessory and not proprietary.  Accordingly, Walsh J. held that the spouse’s conveyance of her half-interest in the matrimonial home did not contravene s. 42 of the FLRA (now s. 21 of the FLA) and that the conveyance of the spouse’s half-interest severing the joint tenancy was valid.

The issue next arose in Re Kozub and Timko, 1984 CanLII 2139 (ON CA),⁹ where the Court of Appeal had an opportunity to weigh in on the matter.  In Re Kozub, the spouses purchased the matrimonial property as joint tenants.  Although the spouses had separated, they each continued to reside in the matrimonial home, albeit in separate apartments.  Following the wife’s diagnosis with cancer, she directed her son to arrange a transfer of her interest in the matrimonial home to her son and prepare a will naming him as executor and sole beneficiary of her estate, all of which was done prior to the wife’s passing.

Following the death of his wife, the surviving spouse brought an application to set aside the deed whereby the son received his mother’s half-interest in the matrimonial home.  In deciding Re Kozub and Timko, Arnup J.A., writing for the Court, noted the differing outcomes in Van Dorp and Lamanna and stated that although the Court agreed with the judge in Lamanna not to follow Van Dorp, it did not agree with the judge’s rationale in Lamanna.  Nevertheless, the Court decided to leave the correctness of the result in Lamanna to a case having the same fact pattern, although it did expressly reject the assertion in Lamanna (later repeated in Re Bank of and Norton (1983), 1983 CanLII 1768 (ON SC)¹⁰) that s. 42 of the FLRA (now s. 21 of the FLA) protects only a possessory right and not a proprietary right.  The Court then held that because the conveyance in Re Kozub and Timko was a conveyance to a third party it clearly contravened s. 42 of the FLRA (now s. 21 of the FLA), declared the conveyance void, and revested the deceased wife’s interest in the matrimonial home with the surviving spouse.

A result consistent with Re Kozub occurred in Re Bank of Montreal and Norton, where the matrimonial home was purchased as joint tenants but the husband subsequently charged the matrimonial home with a mortgage to secure a business loan.  Significantly, the husband had not severed the joint tenancy prior to granting the mortgage and the lender knew that the owners of the property were married.

After the husband died, the lender sought to seize the matrimonial home and the surviving spouse brought an application to set aside the mortgage.  In setting aside the mortgage, the court distinguished the case before it from Lamanna on the grounds that Re Bank of Montreal and Norton involved an encumbrance of the matrimonial home whereas Lamanna involved the disposition of a spouse’s interest in the matrimonial home to herself; and commented that although the former raises the spectre of being dispossessed of the matrimonial home, the latter does not.  Nevertheless, the judge held that the surviving spouse had to bring an application under the FLRA to have the survivorship rights reinstated because the provision under which the application was brought did not allow the court to grant such relief.

The issue then came before the court in Re Horne and Evans, 1986 CanLII 2786 (ON SC)¹¹ aff’d 1987 CanLII 4090 (ON CA)¹², where the deceased spouse and the surviving spouse purchased their matrimonial home as joint tenants.  Shortly before his death, the deceased spouse conveyed his interest in the matrimonial home to sever the joint tenancy with the intention of leaving his interest in the matrimonial home to his daughter from a prior marriage.  The deceased’s executrix then conveyed the deceased’s interest in the matrimonial home in accordance with the last will and testament of the deceased (i.e. to the deceased’s daughter from a prior marriage); however, the surviving spouse sought to set aside that conveyance as being contrary to s. 42 of the FLRA (now s. 21 of the FLA).  At first instance, Galligan J. (as he was then), found that the case was indistinguishable from Lamanna and dismissed the surviving spouse’s application to set aside the conveyance.

The issue next arose in Re Wierzbicki and Wierzbicki (1986), 1986 CanLII 2677 (ON SC).  In that case, a spouse conveyed her one-half interest in the matrimonial home to herself to sever the joint tenancy and then charged her one-half interest in the matrimonial home as a tenant in common with two mortgages in favour of her solicitors.  The judge in Re Wierzbicki noted the earlier decisions in Van Dorp, Re Lamanna and Re Bank of Montreal and Norton and concluded that a spouse conveying an interest in the matrimonial home is still a “disposition” and, therefore, falls within s. 42 of the FLRA (now s. 21 of the FLA).  The judge then set aside the mortgages charged on the deceased spouse’s interest in the matrimonial home.

After the decision in Re Wierzbicki, the Court of Appeal heard the appeal of the decision in Re Horne and Evans.  In upholding the decision below, the Court of Appeal held that even though a deed from a joint tenant to himself or herself destroys the unity of title necessary for the continuance of a joint tenancy, such a conveyance cannot affect the other spouse’s right to possession or occupation under the FLRA.  In so deciding, the Court expressly stated:

A severance of a joint tenancy neither interferes with nor affects the existing balance between spouses with respect to ownership or occupation of the matrimonial home during their marriage.  In practical terms, its only consequence is that the spouses’ undivided one-half interests thereafter form part of their individual estates thereby permitting them to devise their respective interests as they wish.  This result gives a spouse no rights beyond those of a spouse in the case of a matrimonial home owned by him or her alone or with a third person or in the case of a spouse who holds his or her interest by way of a tenancy in common; nor does it place the surviving spouse in any different position than that of a surviving spouse when title is held in some form other than joint tenancy and the deceased spouse’s interest in the matrimonial home does not by reason of title pass on death to the survivor.

The Court was also concerned that the FLRA not be construed as restricting the long-recognized common law right to sever a joint tenancy unilaterally.  The Court then expressly stated that it agreed with the decision of Walsh J. in the factual context of Re Horn and Evans.

The issue arose again in Duschl v. Duschl Estate, 2008 CanLII 15899 (ON SC)¹³.  In Duschl, a spouse wanted to bequeath her interest in the matrimonial home to her daughter from a prior marriage (“ME”) in preference to her spouse, who resided in a senior’s residence, the child she had with her spouse, as well as her four stepchildren.  The matrimonial home was on a modest amount of farmland, which the family farmed.  To effect her wishes, the wife signed her will and a power of attorney but nothing was done at that time to sever the joint tenancy.  A few months later, the wife instructed her attorney to proceed with the severance.  ME subsequently executed a deed as executrix of her mother’s estate conveying to herself alone a one-half interest in the matrimonial home.  ME’s half-siblings then brought an application to set aside the conveyance of the deceased spouse’s interest in the matrimonial home to ME.  Taliano J. then applied Re Horn and Evans and held that the severance did not violate s. 21 of the FLA.

Conclusion

Arguably,  it now appears that the courts of Ontario will find that the conveyance of one spouse’s interest in the matrimonial home to himself or herself, thereby severing the joint tenancy does not, in itself, violate s. 21 of the FLA.

The practical effect of these decisions suggests that there is now a clear route that a spouse can follow if that spouse wishes to bequeath his or her interest in the matrimonial home to someone other than the surviving spouse.  This flexibility is especially useful with the increased occurrence of blended families where, for various reasons, a spouse may prefer that their interest in the matrimonial home go to someone other than the surviving spouse.  That said, it has been more than three decades since the Court of Appeal weighed in on the matter, so it remains possible that a different outcome may result if there are compelling facts that require the Court of Appeal to reconsider the effect of s. 21 of the FLA.  Finally, it is worth noting that in all of the instances herein considered feature one spouse unilaterally attempting to sever the joint tenancy by executing a conveyance (even if in some instances the conveyance was not registered).