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Tuesday, February 13, 2018

Neighbour denied $100,000 after deceased's cheque bounced

Have you ever wondered what would happen if a person wrote you a cheque but then that person died before the cheque went through? Would the cheque be valid? Would the deceased person's estate have to pay? Would the court uphold your right to receive the funds? Read on to see what the court decided when this happened in Ontario recently.

A woman named Maria Markgraf had received care and assistance from her neighbour, Arlindo Teixeira, for years. Mr. Teixeira had driven Ms Markgraf to appointments, picked up groceries, and fixed things around her house. In recognition of this care and attention, Ms. Markgraf changed her will to include a bequest for $100,000 to Mr. Teixeira.

In addition, Ms. Markgraf wrote a cheque to Mr. Teixeira for $100,000 and told him to take it to the bank right away. The next day Mr. Teixeira took the cheque to Ms. Markgraf's bank. The bank said they had to investigate before cashing it and returned it to him. They didn't reveal to Mr. Teixeira that the account had only $82,000 but Ms. Markgraf also had $200,000 in other investments.

Six days later, Ms Markgraf died. The bank froze her accounts. Mr Teixeira deposited the cheque into his own bank but it was returned because the accounts were frozen. After that. Mr Teixeira tried to deal with Ms Markgraf's estate to recover the $100,000 cheque. He lost the case at trial. He appealed it and lost at that level of court too.

So why would the court say that the cheque for $100,000 could not be honoured? There were a couple of important points. One is that Mr Teixeira helped Ms. Markgraf out of kindness, expecting no reward for it. In other words, there was no contract in place for him to provide care or assistance. Mr Teixeira could not claim the cheque as payment for his time and effort. This means that the cheque had to be classified as a gift.

The second point arose when the court looked at the legal definition of a gift. In order to be a legal gift, the transaction had to meet all 3 criteria for a gift, namely the essential elements of a gift as being: (a) the donor’s intention to make a gift; (b) acceptance of the gift by the donee; and (c) delivery of the gift to the donee.

In this case, the court determined that the first two elements were met, but the third was not. The gift was not delivered and could not be delivered. Although Mr Teixeira received a cheque, the court said that was simply a pledge to pay, and not the gift itself. The gift couldn't be given because there wasn't enough money in the account. The court said that she couldn't give what she didn't have. There was sufficient money in other investments but the bank had no way of transferring money between accounts without direct instructions from Ms Markgraf.

So Mr Teixeira ended up without his $100,000. To add insult to injury, he was ordered to pay $15,000 towards the legal costs incurred by the opposing party.

The judgment doesn't say whether the will stood up as being valid and whether Mr Teixeira still received his bequest under the will.

If you'd like to read the case of Teixeira v. Markgraf Estate in full, click here


  1. Ms. Markgraf changed her will to include a bequest for $100,000 to Mr. Teixeira.[...]
    It's in the 'will'. Does the Judge mention that? The Estate has assets that can be converted into cash. Generally speaking, if one has ie. stocks then they are deemed to have been sold the moment the person dies. This then becomes a cash asset and is part of the estate. I believe that this is what Mr. Teixeira and his lawyer were going for. I wonder if undue influence and the size of the bequest was of concern to the Judge and Ms. Markgraf's family.
    Unrelated. I wonder what would have happened if a lawyer was owned a large sum of money?

    1. The cheque amount was a gift, separate from and in addition to the bequest. The bequest was mentioned in the judge's overview (A2).

      Ms. Markgraf did not have adequate funds within her her account to cover the cheque amount. As in any similar circumstance, the cheque couldn't be honoured by the bank.

      The cheque is considered more an IOU, not itself the gift. If adequate funds were not available in the appropriate account, the gift then failed.

      Unlike a contract or outstanding debt from a lawyer or other service or product provider, the cheque was to provide a gift which the neighbor had no expectation to receive and therefore, had no valid claim as an outstanding contract or debt.

      The neighbor will likely receive his $100K gift from the estate but unfortunately, will not receive the cheque amount as it was not a bequest within the will and is not considered an outstanding debt to the estate.

      To make matters worse, instead of receiving $200K for himself as Ms. Markgraf intended, he will keep substantially less than $100K after the $15K in costs are paid to the respondent, with his own legal costs likely further reducing the remaining bequest.

    2. I agree. The $100K left in the will is a separate $100K from the cheque.


    3. Webeye, the outcome would have been the same regardless of who was to be the recipient of the cheque.


  2. It's amazing how simple can become complicated. Thanks for your input.


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