Décision

[1]                The Appellant obtained a judgment for $52,929.89 with interest against the Respondent Honey on May 27, 2010 (the 2010 judgment), and then registered a legal hypothec against her house. He exercised the hypothecary recourse of taking in payment nine years later in 2019 and obtained judgment ordering the surrender of the property and declaring him owner on December 7, 2020 (the 2020 judgment).[1] The 2020 judgment was not registered against the property.[2]

[2]                The Respondent Honey appealed the 2020 judgment in Court record 500‑09‑029288-214 and the Appellant made a motion to dismiss the appeal. On March 13, 2021, two days before the presentation of the motion to dismiss, the Respondent Honey filed a notice of intention to make a proposal in bankruptcy. The Respondent Trustee, as trustee to her notice of intention, issued a notice of stay of proceedings and the Court took cognizance of the notice and stayed the appeal.[3] That appeal remains stayed and is not presently before the Court.

[3]                The Appellant made a motion in Superior Court to lift the stay on March 22, 2021. He only proceeded with the motion on February 11, 2022. The Respondent Webber’s predecessor, as liquidator of the estate of the Respondent Honey’s father and creditor of the Respondent Honey,[4] intervened in the proceedings.

[4]                The judge allowed the intervention and dismissed the motion to lift the stay.[5] The Appellant filed a notice of appeal on both issues.

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[5]                The appeal will be dismissed.

[6]                The issue of the intervention is moot and need not be decided. Even assuming that the judge was wrong in allowing the intervention by the estate of the Respondent Honey’s father, the Court would not allow the appeal on that basis if the judge was correct on the issue of lifting the stay. Moreover, even if the Appellant is right that the question of the intervention by a creditor on an application to lift the stay is of sufficient importance that it should be decided by the Court despite the fact that it has no impact on the outcome of the appeal, it would not be appropriate to do so in the present case where the intervenor did not participate in the appeal.

[7]                On the second issue, the Appellant pleads that he was the owner of the property as a result of the 2020 judgment.

[8]                But for the appeal from that judgment, the Appellant would be correct.

[9]                Article 2781 C.C.Q. provides that, when the creditor takes the property in payment, the judgment of surrender constitutes the creditor’s title:

[10]           The Court has interpreted this provision as meaning that title is transferred when the judgment of surrender is rendered: “il y a coïncidence juridique entre le jugement en délaissement forcé et la prise en paiement qui éteint l’obligation et consacre le droit de propriété du créancier”.[6] Further, the Court has held that the failure of the creditor to register the judgment against the property has no effect on the transfer of title.[7]

[11]           As a result, if there had been no appeal, the Appellant would have been the owner of the property when the Respondent Honey filed her notice of intention to make a proposal. The stay of proceedings under Section 69 of the Bankruptcy and Insolvency Act (B.I.A.)[8] would not apply because there would have been no further proceedings to stay and in any event the property at issue would not belong to the insolvent person. Further, Sub-section 70(1) B.I.A., which is set out below, would have no application because the 2010 judgment in favour of the Appellant would have been “completely executed by payment to the creditor”.

[12]           However, there was an appeal of the 2020 judgment, and the issue then becomes whether that appeal had the effect of suspending the transfer of title pursuant to the judgment. That issue has never been clearly decided by the Court, although there are decisions by judges in chambers which are on point.

[13]           In Pelletier c. Caisse populaire Desjardins du Piémont Laurentien,[9] a judge of the Court was seized with a motion to suspend the provisional execution of a judgment of forced surrender of an immoveable for a taking in payment. He decided that the appeal suspended the conclusion transferring ownership of the property, because that conclusion was not mentioned in Article 660 C.C.P.

[14]           That is the proper analysis. The general rule set out in Article 355 C.C.P. is that a properly initiated appeal stays the execution of the judgment, unless provisional execution is provided for by law or is ordered by the court of first instance. Although Article 355 C.C.P. refers to the “execution of the judgment”, it also applies to declaratory conclusions.[10] In the present matter, the judge did not order provisional execution and the Appellant does not argue that any of the exceptions in Article 660 C.C.P. apply. 

[15]           The conclusion that the transfer of title was suspended by the appeal is fatal to the Appellant’s position. First, Sub-section 70(1) B.I.A. provides that a judgment creditor who has not “completely executed” his judgment (i.e., the 2010 judgment) before the bankruptcy[11] is an unsecured creditor:

[16]           Because the Appellant had not obtained title to the property when the notice of intention was filed, he had not “fully executed” the 2010 judgment. As a result, the legal hypothec has no effect and the Appellant is an ordinary creditor subject to the stay of proceedings under Section 69 B.I.A.

[17]           The final issue is whether the judge should have lifted the stay of proceedings and allowed the Appellant to obtain a final judgment and title. According to Section 69.4 B.I.A., a stay can be lifted if the creditor is materially prejudiced or when it is equitable on other grounds:

[18]           The judge concluded that the test was not met. He first concluded that the Appellant was not being treated unfairly or differently from other creditors. Further, he concluded that it would not be equitable to lift the stay:

[19] Dealing now with equitable remedy. The Court agrees with the opposing parties: granting the lift of the stay would actually be unfair to the creditors in the bankruptcy. The Court is informed that the immovable, at its current value, covers 100% of the claims against the bankrupt. Allowing the stay to be lifted would allow the petitioner to move forward and indeed be in a position much more advantageous than the other creditors.

[19]           This is a discretionary decision, and the Court will only intervene if there is an error in principle or it is plainly unreasonable.[12] On the contrary, the decision is clearly correct: lifting the stay would give the Appellant the chance to improve his status from ordinary creditor to owner of the property, thereby (if he is successful on the merits of the appeal from the 2020 judgment) giving a property which the Appellant alleges is worth over $600,000 to an ordinary creditor owed approximately $100,000, and leaving the other creditors with nothing.

[20]           The Appellant argues that this opens the door to abuse by a debtor, who can frustrate a hypothecary creditor by appealing from the judgment ordering forced surrender and then filing a notice of intention to make a proposal. This is not so. First, this judgment only applies to legal hypothecs of judgment creditors. Any other hypothecary creditor is recognized as a secured creditor in insolvency proceedings and its rights are not in principle stayed by the proceedings. Moreover, the result would have been different if the 2020 judgment had been declared executory notwithstanding appeal. Finally, the filing of a notice of intention is a serious matter. The debtor who fails to file a proposal or whose proposal is ultimately rejected by the creditors or not approved by the court is deemed to have made an assignment in bankruptcy. A court can also intervene if the debtor is not acting in good faith.

FOR THESE REASONS, THE COURT:

[21]           DISMISSES the appeal, without judicial costs given that none of the Respondents filed a factum or participated in the appeal.

[1]  O’Brien c. Honey, 2020 QCCS 4999.

[2]  Only a final judgment can be registered (Art. 3002 C.C.Q.). The application for registration of a judgment in forced surrender for taking in payment must be accompanied by a certificate of non-appeal (Yves Papineau, Les charges de copropriété et leur recouvrement, Montréal, Wilson & Lafleur, 2011, p. 243).

[3]  Honey c. O’Brien, 2021 QCCA 435.

[4]  McQuillan (Succession de Honey) c. Honey, 2020 QCCS 4434.

[5]  Proposition de Honey, 2022 QCCS 756.

[6]  Fabrication Al-Will inc. c. KWP inc., 2016 QCCA 22, para. 40, citing Summerside c. Turnberry, syndicat de copropriétaires, [2000] R.J.Q. 693 (C.A.), para. 16.

[7]  Brousseau c. Desjardins Assurances générales, 2011 QCCA 445; motion for leave to appeal to the Supreme Court dismissed (S.C. Can., 2011-11-24) 34254; Les Investissements Pliska inc. c. Banque d’Amérique du Canada, 1996 CanLII 5999 (QC CA).

[8]  R.S.C., 1985, c. B-3.

[9]  2016 QCCA 1341 (j. in chambers).

[10]  Mouvement laïque québécois c. English Montreal School Board, 2021 QCCA 1675, para. 2 (j. in chambers); Fraternité des policiers et policières de Montréal c. Bureau des enquêtes indépendantes, 2022 QCCA 1028, para. 15 to 28 (j. in chambers).

[11]  Sub-section 70(1) also applies to proposals (Sub-sections 66(1) and 66.4(1) B.I.A.).

[12]  Gaastra v. Watts, 2012 ABCA 262, para. 3.