BC Supreme Court allows sale of property despite specific bequest in testator's will

Heir gifted with property also owed substantial debt to the estate

BC Supreme Court allows sale of property despite specific bequest in testator's will

An heir who owed a substantial debt to the estate is not entitled to receive a property bequeathed specifically to her in the testator’s will, the BC Supreme Court has ruled.

In Kolic Estate (Re) 2022 BCSC 1527, Violet Kolic executed a will before her death, specifically bequeathing property in Victoria, BC, valued at $391,9000 to her three children. Mary Kolic, one of the children named in Violet’s will, was appointed executor, but the court later removed her. Sitka Law Corporation was appointed administrator of the estate instead.

Mary Kolic had occupied the Victoria property since her mother’s death in 2013. The other heirs requested the administrator to sell the property, but Mary opposed the sale. The administrator warned Mary that the estate would expect her to pay “occupation rent” from her share of the estate once the litigation was complete. In 2019, Mary started paying the administrator $1,000 per month as rent payment. These were not requested by the administrator but were deposited to the credit of the estate. There was no tenancy agreement, security deposit, or agreement regarding the appropriate rent to be paid by Mary for her occupation of the property.

Mary Kolic owed a significant amount to the estate, and the administrator contended that the property must be sold to realize Mary Kolic’s share of the funds she owed. The administrator further said that the property would be difficult to sell as is and would sell at a significant discount unless it was cleared out of Mary’s belongings.

Mary argued that the specific bequest transferring the property to the siblings must be complied with. She said the administrator was effectively seeking permission from the court to disregard the express bequest made by her mother in the will.

The administrator argued that the will’s administration provisions authorized it to sell the property despite the specific bequest. In the alternative, the court may exercise its inherent jurisdiction if that is not the case.

Equitable principle

The court noted that Mary Kolic is seeking registration of her interest in the property in her name despite her substantial indebtedness to the estate. The court turned to the equitable principle in jurisprudence, stating that where a legatee of a share of the residue is a debtor of the estate, they are not entitled to receive their legacy without bringing their debt into account.

The court emphasized that the equitable principle is designed to ensure fairness and to prevent a beneficiary who owed money to an estate from receiving more than their fair share of the estate. In light of this principle, the court said that the right to set off must be applied.

The administrator’s claim is to the equitable set-off of the judgment debt owed by Mary Kolic to Violet’s estate against her interest in the property. The judgment debt goes to the very root of Mary’s demand that the property be bequeathed to her and her siblings. Further, the court noted that the administrator’s claim against Mary was so connected to her interest in the property that it would be unjust to allow her to receive the bequest without considering the estate’s claim.

The court said, “To transfer the property into the siblings’ names in specie will further the ongoing conflict, serve no useful purpose, further deplete the estate with legal costs, and delay administration of an estate that has already spent nearly a decade in the legal system.”

The court then concluded that it would be unjust to allow Mary to receive the bequest without taking into account the judgment debt she owed the estate. The court ordered the administrator to sell the property, despite the specific bequest, and for Mary to vacate the house and remove all her belongings.

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