Dueling banjos might get more attention ‘round most parts, but dueling promissory notes can be just as exciting. Take the promissory notes that were at issue in the Ontario Superior Court of Justice case Lacasse v. Middleton, 2018 ONSC 3461 (CanLII). In that case, the Court was called upon to determine a winner between two dueling promissory notes and, consequently, whether or not a loan by a mother to her daughter was indeed forgiven.
Eva Middleton (the ”Deceased”) died on June 5, 2015. She was 87 years old.
In October 2014, the Deceased visited her lawyer’s office and provided two documents to him for safekeeping: her will (the “Will”) and a promissory note dated July 16, 2014 (“Note 1”). Note 1 had been given to the Deceased by her daughter, Linda Middleton (“Ms. Middleton”), after the Deceased had lent Ms. Middleton $142,000.
Soon after the Deceased’s passing, Ms. Middleton approached the Deceased’s estate trustee, Julia Gurr Lacasse (“Ms. Lacasse”), and presented her with a second promissory note, this one dated July 22, 2014 (“Note 2”). Notably, and as Justice Hurley observed, “[t]his note differed from the earlier one in a very important respect. It stated that the loan was forgiven upon death”. According to Ms. Middleton, the Deceased had changed her mind after drafting Note 1 and decided that the Deceased’s loan to Ms. Middleton would be forgiven upon the Deceased’s passing.
Ms. Lacasse, and quite understandably, was having none of it. Ms. Lacasse believed that Note 1 accurately reflected the agreement between the Deceased and Ms. Middleton. If the Deceased had in fact changed her mind about Note 1, Ms. Lacasse argued, then surely the Deceased would have provided Note 2 to her lawyer or at the very least would have told him about it.
On April 26, 2016, Ms. Lacasse commenced an application which sought the opinion of the Court as to which of Note 1 or Note 2 was valid and enforceable.
Given the circumstances of this case, as like in the one blogged about by my esteemed colleague, section 13 of the Evidence Act, R.S.O. 1990, c. E. 23, was engaged. Section 13 of the Evidence Act provides that:
In any action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgement or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence. [Emphasis added.]
The reasons for such a provision, as Laskin J.A. observed in Burns Estate v. Mellon, 2000 CanLII 5739 (ON CA), is the need to address “the obvious disadvantage faced by the dead: they cannot tell their side of the story or respond to the living’s versions of events.”
Laskin J.A. went on to further observe at paragraph 9 of Burns Estate v. Mellon that:
When a claim of gift is asserted against the deceased’s estate, a trial judge is justified in carefully scrutinizing the cogency of the supporting evidence. A “healthy skepticism” may be appropriate. But it is the civil standard not the criminal standard that should be applied.
Ms. Middleton’s assertion that the Deceased had changed her mind and forgiven the $142,000 lent to Ms. Middleton by the Deceased could not succeed, then, unless such an assertion could be corroborated by some other material evidence.
To that end, and in addition to testifying herself, Ms. Middleton enlisted the help of her friend of several years, Ms. Willard. Ms. Willard testified at trial that she had first met the Deceased in 2014. Ms. Willard went on to tell the Court that she had later been asked by both the Deceased and Ms. Middleton to witness Ms. Middleton’s signature on both Note 1 and Note 2. Ms. Willard testified that on both occasions she did not read what she was witnessing, but that she had been advised by the Deceased prior to witnessing Note 2 that Note 2 was for the purposes of “either getting things out of [the] Will or not putting her wishes in it.”
Ms. Lacasse, for her part, called as part of her evidence two lawyers who had acted for the Deceased in the past to testify – i.e. the lawyer who had drafted the Will and Note 1, and the lawyer who had been keeping the Will and Note 1 in his safe at his office for safekeeping.
With no doubt the aforementioned “healthy skepticism” in tow, Justice Hurley proceeded to carefully scrutinise the cogency of the evidence before him.
His Honour ultimately found in Ms. Lacasse’s favour. His Honour concluded that it was “passing strange” that the Deceased would withhold from her drafting lawyer’s attention the fact that she had changed her mind with regard to the $142,000 lent by her to Ms. Middleton. Moreover, his Honour concluded that the fact the Deceased did not present Note 2 to the lawyer safekeeping her testamentary documents was most compelling. In rejecting Ms. Middleton’s evidence and in closing, his Honour observed that:
[Ms. Middleton’s] objective from the start (revising the promissory note prepared by [the drafting solicitor]) to the finish (professing to find [Note 2] among [the Deceased’s] personal affects shortly after her death) was, I find, to extinguish her obligation to the estate. This plan might very well have worked if [the Deceased] had not given [Note 1] to her lawyer.
His Honour ultimately held that Note 1 is the only promissory note which is valid and enforceable.
When providing your lawyer with testamentary documents for safekeeping, always be certain to include all documents that are relevant or that might have a bearing on any future estates litigation.