Moss (Bankrupt), Re, (2010) 251 Man.R.(2d) 286 (CA)

• Judge: Monnin, Chartier and Beard, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: March 03, 2010
• Jurisdiction: Manitoba
• Citations: (2010), 251 Man.R.(2d) 286 (CA);2010 MBCA 39

Moss (Bankrupt), Re (2010), 251 Man.R.(2d) 286 (CA);

      478 W.A.C. 286

MLB headnote and full text

Temp. Cite: [2010] Man.R.(2d) TBEd. MY.001

Keith G. Collins Ltd., as Trustee of the Estate of Danny Moss, a Bankrupt (plaintiff/appellant) v. Danny Moss and Carrie Moss (defendants/respondents)

(AI 09-30-07200)

Carrie Moss (plaintiff/respondent) v. BMO Nesbitt Burns Inc. (defendant/appellant)

(AI 09-30-07202; 2010 MBCA 39)

Indexed As: Moss (Bankrupt), Re

Manitoba Court of Appeal

Monnin, Chartier and Beard, JJ.A.

April 29, 2010.

Summary:

Moss, an insurance broker, sold six life insurance policies to his mother (Eliza) valued at $700,000, naming Moss as beneficiary. A few months before Moss made an assignment in bankruptcy, change of beneficiary forms in favour of his daughter (i.e., Eliza's granddaughter, Carrie) were executed by or on behalf of his mother and delivered to each of the insurers. When Eliza died, Carrie received the insurance proceeds. Carrie gave Moss complete control over her investments. Moss opened a margin account for Carrie with BMO Nesbitt Burns Inc. and losses of $320,000 occurred. Carrie sued BMO for negligence. BMO sought a declaration that claimed that Carrie had no legal or equitable interest in the funds invested in BMO because the change in beneficiary forms were invalid (i.e., not executed by Eliza), such that the policy proceeds became property of Moss's bankruptcy trustee on Eliza's death. The bankruptcy trustee commenced a separate action against Moss and Carrie, seeking, inter alia, a declaration that all insurance proceeds were property of the bankrupt (Moss) under the Bankruptcy and Insolvency Act. A trial was directed on certain issues.

The Manitoba Court of Queen's Bench, in a decision reported at (2009), 235 Man.R.(2d) 286, dismissed the claims of the bankruptcy trustee and BMO for declaratory relief, rejecting their arguments that the change of beneficiary forms were invalid. The court found that Moss signed Eliza's name on the forms. However, he had authority to do so impliedly, if not expressly, by virtue of a general power of attorney that he held from her at that time. Notwithstanding the power of attorney, the court was also satisfied that in applying for the insurance and in subsequently executing and delivering the change of beneficiary forms to the insurers, Moss was acting as Eliza's agent. It was not a mandatory requirement of the Insurance Act that the named insured in a policy of life insurance sign the change of beneficiary form personally. Moss therefore had no interest in the policies of insurance subsequent to the delivery of the change of beneficiary forms to the insurers, and in particular, at any time subsequent to his assignment in bankruptcy. Accordingly, the proceeds in question could not be considered property of the bankrupt within the meaning of the Bankruptcy and Insolvency Act. Before judgment was entered, the bankruptcy trustee and BMO requested a reconsideration. They asserted that the decision was based on a clear mistake and/or fundamental misapprehension because the decision relied on alternate defences (that Eliza had expressly or implicitly authorized Moss to sign the forms for her) that had been abandoned before trial.

The Manitoba Court of Queen's Bench, in a decision reported at (2009), 243 Man.R.(2d) 88, denied the motion. The bankruptcy trustee and BMO appealed.

The Manitoba Court of Appeal allowed the appeal, granting the declaratory relief sought by the bankruptcy trustee and BMO.

Agency - Topic 1065

Authority of agent - Express authority - Power of attorney - Scope of authority - [See Bankruptcy - Topic 7208.2 ].

Bankruptcy - Topic 7208.2

Setting aside transactions prior to bankruptcy - General - Change of beneficiary in life insurance policy - The trustee in bankruptcy of Danny Moss's estate and BMO Nesbitt Burns Inc. (the applicants) sought declaratory relief, including an accounting (and payment) of approximately $700,000 of life insurance proceeds received by Carrie Moss from six policies on the life of her grandmother, Eliza - The applicants asserted that forms changing the beneficiary of the policies from Danny Moss (Eliza's son) to Carrie had not been executed by Eliza and that, as such, they were invalid and that the insurance proceeds were property of Danny - The court dismissed the claims, finding that the forms were validly executed by Danny alone - The applicants requested a reconsideration, asserting that the decision was based on a clear mistake and/or fundamental misapprehension because the decision relied on alternate defences (that Eliza had expressly or implicitly authorized Danny to sign the forms for her) that had been withdrawn before trial - The motion was denied - The Manitoba Court of Appeal allowed the applicants' appeal - The trial judge failed to recognize that specific and key aspects of the defence had been withdrawn - This material misapprehension was a palpable and overriding error - By arriving at findings that relied on a defence that had been abandoned, the trial judge placed the applicants in the untenable position of having to disprove a theory that had been withdrawn - Further, the trial judge's finding that Danny had Eliza's authority to sign the forms was flawed not only due to the withdrawn defence, but also because Danny's general power of attorney for Eliza did not vest the requisite authority in Danny - The power to designate or alter beneficiaries in a life insurance policy had to be a specific one - As there was no evidence accepted by the trial judge that Eliza had signed the forms with Danny's assistance, the applicants had proven their case - The forms were not validly executed - Accordingly, the court granted the declaratory relief sought by the applicants - See paragraphs 24 to 30.

Insurance - Topic 7151

Life insurance - Beneficiaries - Designation of - Alteration or revocation - [See Bankruptcy - Topic 7208.2 ].

Practice - Topic 9422

Appeals - Grounds of appeal - Error of law - [See Bankruptcy - Topic 7208.2 ].

Cases Noticed:

Prudential Insurance Co. of America v. Johnson et al. (1937), 176 So. 625 (La. C.A.), refd to. [para. 17].

Desharnais v. Toronto-Dominion Bank et al., [2001] B.C.T.C. 1695; 42 E.T.R.(2d) 192; 2001 BCSC 1695, refd to. [para. 27].

Counsel:

R.W. Schwartz and A. Thiessen, for the appellant, Keith G. Collins Ltd.;

D.J. Kroft and A.P. Loewen, for the appellant, BMO Nesbitt Burns Inc.;

J.E. Crane, for the respondents, Danny and Carrie Moss.

These appeals were heard on March 3, 2010, by Monnin, Chartier and Beard, JJ.A., of the Manitoba Court of Appeal. On April 29, 2010, Monnin, J.A., delivered the following judgment for the court.