Borduas (Estate of) c. Denis				2011 QCCS 2118
JP 1900   SUPERIOR COURT
CANADA
PROVINCE OF QUEBEC
DISTRICT OF			BEDFORD
No:		460-17-001044-080
DATE:	MAY 4, 2011
______________________________________________________________________
PRESIDING:  THE HONOURABLE MR. JUSTICE MARK G. PEACOCK, J.S.C.
______________________________________________________________________
The Estate of ROSE-AMANDE BORDUAS,
Plaintiff in Continuance of Suit
v.
ALICE DENIS, MANON LÉPINE,
Defendants
-And-
The Estate of DENIS LÉPINE, represented by Mr. MARCEL LÉPINE,
Mis En Cause
______________________________________________________________________
JUDGMENT
______________________________________________________________________

Introduction

 

[1]         This case raises the following novel issue. Upon default under the loan, can the hypothecary creditor take the property in payment where:

 

a)           the hypothec is only on the life interest (“usufruct”) in the residential property and

 

b)           the bare owner, a minor, never intervened either herself or by a tutor to sign the loan and hypothec?

 

[2]         This judgment will be rendered under the following headings:

 

            A-         Factual Context

            B-        Did the Liquidator Mr. Marcel Lépine Have the Power Under the Will of Mr. Denis Lépine to Hypothecate the Property?

C-        Since the Bare Owner, Ms. Manon Lépine (Or Her Tutor) Did Not Sign the Hypothec, Then Is the Hypothec Only Enforceable Against the Usufructary Interest of Ms. Alice Denis?

D-        If So, What Remedies Are Available?

 

[3]         Unless otherwise stated, the facts referred to in this judgment are findings of fact by the Court based on its appreciation of the evidence.

 

A-        Factual Context

 

[4]         Mr. Marcel Lépine wears many hats in this case. He is the liquidator for the estates of his late father, Mr. Émilien Lépine; his late mother Ms. Rose-Amande Borduas (the original Plaintiff); and his late brother, Mr. Denis Lépine. The Court notes his sense of responsibility and family duty in that he acted as executor for the Estates of both his late parents as well as his late younger brother. His mother’s estate is the Plaintiff in continuance of suit and his brother’s estate is the Mis En cause. No issue of conflict of interest was raised at trial. The Mise En Cause was not represented at trial.

 

[5]         Mr. Émilien Lépine died in 1994, Ms. Rose-Amande Borduas died in 2009 and their son, Mr. Denis Lépine died at 45 years of age on March 30, 1995.

 

[6]         Mr. Marcel Lépine is a chartered accountant and practiced between 1974 and 2005.

 

[7]         The late Ms. Rose-Amande Borduas named her son Mr. Marcel Lépine as her executor by way of her Will drafted by Notary Ashby and signed by her on December 1, 2003.

 

[8]         On his death, the late Mr. Denis Lépine owed his father’s estate $61,350.00, which loan was secured by two deeds of hypothec on Mr. Denis Lépine's family residence, bearing interest of 10%. These two hypothecs were registered in 1985 and 1989 respectively.

 

[9]         At the time they were registered, the two hypothecs secured a combined amount of $36,973.40 of debt. Both hypothecs were consented to by the Defendant Ms. Alice Denis, as wife of Mr. Denis Lépine. Over the years, further loans were made and by November 8, 1994, Mr. Denis Lépine owed the Estate of his late father a debt of $61,354.21 (Exhibit P-8).

 

[10]        In his Will,[1] Mr. Denis Lépine left his residence (the “property”) to his wife, the Defendant, Ms. Alice Denis (“Ms. Denis”) as usufructuary during her lifetime and the bare ownership to his then 14-year old daughter, Ms. Manon Lépine, upon the death of her mother. Ms. Denis was named as the universal residual legatee.

 

[11]          Following Mr. Denis Lépine's death, his mother loaned the sum of $61,350.00 to his Estate and his wife, the Defendant, Ms. Alice Denis, without charging interest, so that the two loan-hypothecs now due to the Estate of Mr. Émilien Lépine could be paid off and radiated, which was done. In exchange, the mother herself took a new hypothec (the “new hypothec”) for the full value of the loan of $61,350.00 on the property.[2] This was registered on October 5, 1995. This new hypothec, like the first two, was also drafted by Notary Ashby and was signed (a) by the mother as hypothecary creditor, (b) by Mr. Marcel Lépine as liquidator for the Estate of Denis Lépine and (c) by Ms. Alice Denis as usufructuary. No one signed on behalf of the bare owner, Ms. Manon Lépine. The Estate and Ms. Denis were collectively called the “borrower” in the new hypothec.

 

[12]        Mr. Marcel Lépine testified and the Court accepts his testimony that the Defendants never paid any amount towards the loan. The evidence is clear that the loan of $61,350.00 is past due and still owing. Mr. Marcel Lépine kept a meticulous record of the amounts owed by his brother, Mr. Denis Lépine up to November 8, 1994, which totalled $61,354.21.[3]

 

[13]        On behalf of the Plaintiff, a notice was given to both Defendants[4] requiring that the demand loan be repaid within 60 days. Thereafter, the necessary notice for the exercising of hypothecary right (taking in payment) was prepared and served on both Defendants and the succession of Mr. Denis Lépine and was ultimately published on September 17, 2008.[5] No payments have ever been made although Mr. Marcel Lépine, on behalf of the Plaintiff, had tried to make arrangements with the Defendants. Mr. Marcel Lépine had suggested to the Defendants that the house be sold to pay the loan, but they refused. It was as a result of this refusal that the present legal procedures were taken.

 

[14]        Since the action in forced eviction and taking in payment (art. 795 of the Civil Code of Procedure (“C.C.P.”)) was instituted within time on November 24, 2008, the defence of prescription is rejected.

 

[15]        The 2008 municipal tax roll for Granby shows the property was evaluated at $130,380.00, slightly more than twice the debt owing to the Plaintiff.[6]

 

[16]        What are the parties’ positions in this litigation? On behalf of the Plaintiff, it is alleged that at the time that he signed the new hypothec on behalf of the Estate of Denis Lépine, Mr. Marcel Lépine as liquidator had the seisin ("saisine") and had "… le pouvoir de vendre ou autrement aliéner tous mes biens meubles et immeubles …".[7] The Plaintiff asks the Court to confirm the taking in possession of the property so that that it becomes the sole owner.

 

[17]        The Defendants argue that the "power to alienate" does not include the power to hypothecate. Furthermore, they argue that since Ms. Manon Lépine was the bare owner, it was necessary - for the new hypothec to be valid - that her mother signed on her behalf as tutor (which had not been done). Finally, the Defendants argue that to the extent that the new hypothec was valid, it could only encumber the usufructary interest of Ms. Denis and therefore the only remedy for default was judicial sale of that interest and not taking in possession. These arguments will be dealt with shortly.

 

B-        Did the Liquidator Mr. Marcel Lépine Have the Power Under the Will of Mr. Denis Lépine to Hypothecate the Property?

 

[18]        The Will of the late Denis Lépine was signed before and was notarized by Me. Ashby on June 14, 1985.

 

[19]        Article 5 of the Will of the late Mr. Denis Lépine noted:

 

"Je lègue à Alice Denis l'usufruit de ma propriété. Elle jouira de cet usufruit sa vie durant, sans être tenue de donner caution, ni de faire inventaire. Je lègue la nue propriété de ma propriété de Granby, 319 Reynolds à ma fille, Manon, dès l'instant de mon décès, pour qu'elle y réunisse la jouissance à la cessation de l'usufruit d'Alice Denis."

 

[20]        Under article 8 of that Will, the liquidator had the following powers:

 

"… Il aura la saisine de tous mes biens meubles et immeubles, à titre de dépositaire et restera en fonction au-delà de l'an et jour prévus par la loi jusqu'à l'entière exécution de mes dernières volontés. … Il aura le pouvoir de vendre ou autrement aliéner tous mes biens meubles et immeubles, de gré à gré, sans formalité de justice et sans la participation de mes légataires aux prix, termes et conditions qu'il jugera équitables, de recevoir le produit de ces aliénations et d'en donner quittance.

 

… Je veux et entends que mon exécuteur-testamentaire prenne à même la part de Manon, toute somme nécessaire à son instruction, à son établissement dans la vie ou pour toute autre raison jugée nécessaire ou utile par mon exécuteur.

 

Ma légataire aura droit de recevoir sa part à l'âge de vingt et un ans."

 

[21]        At the time of the death of Mr. Denis Lépine, he owed his father’s estate $61,350.00 which was secured, in part, by the two mortgages on his residence. Failure to pay these debts could have lead to the execution on the mortgages and the sale of Mr. Denis Lépine’s residence.

 

[22]        The members of the family collaborated to effect a consolidation and refinancing of this debt.

 

[23]        Effectively, Ms. Alice Denis’ mother-in-law - Ms. Rose-Amande Borduas - loaned the money to pay the debt owed to the estate of Mr. Émilien Lépine. While the security taken on the residence was increased to the full value of the outstanding loan ($61,350.00) instead of the principal amount secured by the previous two hypothecs ($36,973.40), no interest was to be charged.

 

[24]        Notary Ashby prepared both the Declarations of Transmission for the property and the new mortgage to the Plaintiff.

 

[25]        According to the Index of Immoveables for Granby, the Declarations of Transmission for the usufruct and the bare ownership (not produced into evidence) were registered as number 386569 and the new hypothec was registered right afterwards as number 386570 on October 5, 1995.

 

[26]        Since the Declarations of Transmission was registered before the new hypothec, this establishes the inference that Ms. Denis was already in possession of her usufructary interest before she allowed it to be used as security in the new hypothec.

 

[27]        The Court is satisfied that the intention of all of the parties was to ensure that the widow and her daughter (the two Defendants) were able to remain in the family residence as a result of the consolidation and refinancing facilitated by the Plaintiff.

 

[28]        The Court is satisfied that the Estate of Denis Lépine, and in particular the executor Mr. Marcel Lépine, had the power to charge the property with a hypothec under art. 1305 of the Civil Code of Québec (“C.C.Q.”) since he had the consent of the beneficiary, the usufructuary, Ms. Alice Denis. As for Ms. Denis, she had the power to hypothecate her usufructary right.[8]

 

[29]        The legal reality is that although both the Estate and Ms. Denis had the power to hypothecate, the only valid hypothec was given by Ms. Denis since, at the time of the new hypothec, the Estate had fully transferred to her all her usufructary rights.

 

C-        Since the Bare Owner, Ms. Manon Lépine (Or Her Tutor) Did Not Sign the Hypothec, Then Is the Hypothec Only Enforceable Against the Usufructary Interest of Ms. Alice Denis?

 

[30]        The Civil Code of Québec makes it clear that usufruct is a dismemberment of the right of ownership and is a real right (art. 1119).

 

[31]        It is possible for a person that holds the right of bare ownership to grant a hypothec on this right.[9] However, this would have required that the tutor for Ms. Manon Lépine - who was a minor at the time - sign the new hypothec as well as obtain court authorization (art. 213 C.C.Q.). A clear reading of the hypothec notes that this was not done. At page 1 of that document, it notes that Ms. Alice Denis is signing only in her capacity as usufructuary.

 

[32]        As mentioned earlier, the new hypothec defines the borrower as both Ms. Alice Denis as usufructuary and the Estate of Denis Lépine. Under the heading of "Hypothèque Principale" the new hypothec notes that “... l’emprunteur hypothèque en faveur du traiteur, jusqu’à concurrence de ladite somme de SOIXANTE ET UN MILLE TROIS CENT CINQUANTE DOLLARS ($ 61,350.00), l’immeuble suivant …” thereafter referring to the property. Since this new hypothec is registered after the Declarations of Transmission, the only real right being hypothecated (art. 2660 C.C.Q.) is the usufructary right of Ms. Denis. Thus, only the consent of Ms. Denis was legally required to hypothecate her usufructary rights.

 

[33]        Since there has been no improbation filed in this case, the Defendant is correct that no evidence will be allowed that would seek to contradict the contents of the new hypothec.[10]

 

[34]        The question remains as to the intent of the parties on the exact rights being hypothecated since the new hypothec simply refers to the borrower granting a hypothec on the property.

 

[35]        However, as the Defendants have argued themselves, the Declaration of Transmission is presumed to predate the new hypothec since it was registered first. This Declaration of Transmission, confirming the transmission of both the usufructary right and the right of bare ownership constitute an act of delivery.[11]

 

[36]        At the time of the signing of the new hypothec, the only real right that could be hypothecated was the usufructary right of Ms. Denis.

 

[37]        Notary Ashby who drafted the new hypothec also had previously drafted the will of the late Mr. Denis Lépine and the Declaration(s) of Transmission, as well as the two hypothecs to the late father.

 

[38]        Accordingly, both the instrumenting notary as well as the other two signatories to the new mortgage, Mr. Marcel Lépine and Ms. Denis knew that the only real right that could be hypothecated by their signatures to secure the loan to the Plaintiff was the usufructary right.

 

[39]        The evidence in this regard is clear and precise that the new hypothec intended to hypothecate only the usufructary interest. The Court is empowered to undertake such a “reading down” which in no way contradicts or changes the hypothec but simply provides the interpretation that conforms to the reality known to all interested parties.[12]

 

[40]        Therefore, any execution under the new hypothec for default in payment of the loan may only take place against Ms. Denis’ usufructary rights and must not affect in any way the bare ownership rights in the property of her daughter, the Defendant, Ms. Manon Lépine.

 

[41]        While "vis-à-vis" the Plaintiff, Ms. Denis and the Estate are debtors solidarily according to the new hypothec, the ultimate borrower to benefit from the loan is Ms. Denis alone since the liquidator had previously put her in possession (as she asserted at trial) through the Declaration of Transmission.

 

D-                     If So, What Remedies Are Available?

 

[42]        That said, it is possible where dismembered rights are involved, such as emphyteusis, to contractually agree that the hypothecary creditor may take in possession these rights, which would include all the rights and obligations under an emphyteutic lease.[13]

 

[43]        Having determined that the new hypothec is valid and having determined exactly what right is hypothecated, the question now becomes whether the Plaintiff can exercise the remedy it requests. For the reasons that follow, the Court determines it cannot.

 

[44]        In the seventh conclusion of its Introductory Motion, the Plaintiff asks the Court to declare amongst others, that it takes the property in payment and becomes the sole owner retroactively to the inscription of the prior notice of September 17, 2008.

 

[45]        In reality, the Plaintiff is seeking the full benefit of art. 2781 C.C.Q. and following, as if it had the right to take in payment where a standard hypothec was given by the owner of a property.

 

[46]        However, as we have just seen, this is not the case.

 

[47]        Furthermore, as a necessary precondition to the hypothecary creditor exercising its rights, art. 2758 C.C.Q. requires that the nature of the right being exercised must be specified in the prior notice.

 

[48]        In its prior notice, Exhibit P-4, the Plaintiff had specified a taking in possession  but of the entire property - not a remedy available to it. Accordingly the Plaintiff - now knowing its rights pursuant to this judgment - may undertake a new election of its remedy pursuant to art. 2748 C.C.Q., advise the Defendants pursuant to art. 2758 C.C.Q. and thereafter proceed accordingly.

 

[49]        For these reasons, the Court will grant only certain of the declaratory conclusions requested by the Plaintiff. Doing so will decide certain - but not - all outstanding issues.

 

[50]        Since the Plaintiff has been somewhat successful, it will have its costs against the Defendant, Ms. Alice Denis. Ms. Manon Lépine will have her costs against the Plaintiff since she should not have been a defendant in these proceedings.

 

[51]        The present judgment will come as no surprise to the Defendant, Ms. Alice Denis since this outcome is one of the alternative arguments made by her counsel at trial.

 

[52]        A potential consequence of this judgment may be that the Defendants will be required to vacate the property to allow for the sale of the usufructuary interest. The Court, in view of the family implications in this matter and the fact that the Defendant, Ms. Alice Denis is of a certain age and suffers from a disability, can only hope that the parties are able to finally come to terms to arrange to have the outstanding loan paid off and render the sale unnecessary.

 

Conclusions

 

FOR THESE REASONS, THE COURT:

 

[53]        GRANTS the Plaintiff's Introductory Motion in part;

 

[54]        DECLARES the Defendant Ms. Alice Denis and the Estate of Denis Lépine solidarily in default pursuant to the terms of the Deed of Loan and Hypothec (Exhibit P-1) and of the prior notice (Exhibit P-4);

 

[55]        DECLARES that the Defendant Ms. Alice Denis and the Mis En Cause solidarily owe the Plaintiff the loan amount of $61,350.00 plus interest and legal indemnity from the date of March 22, 2008 i.e. 60 days after the notice of January 22, 2008 (Exhibit P-3);

 

[56]        DECLARES that Exhibit P-2 secures the aforementioned loan by way of a hypothec in favour of the Plaintiff against the usufructary rights of Ms. Alice Denis, but under reserve of the bare ownership of Ms. Manon Lépine in the immoveable property described as:

 

"Un immeuble connu et désigné comme étant la subdivision UN MILLION DOUZE MILLE QUATRE CENT QUATRE-VINGT-SEPT (1 012 487) du cadastre du Québec, circonscription foncière de Shefford;

 

[57]        ALL WITH COSTS against the Defendant, Ms. Alice Denis; and the Plaintiff is to pay the costs of the successful Defendant, Ms. Manon Lépine, who should not have been a defendant in these proceedings.

			(S) MARK G. PEACOCK, J.C.S. __________________________________ MARK G. PEACOCK, J.S.C.
Me. Benoît Galipeau GAUDET GALIPEAU PARCEL Attorneys for Plaintiff
Me. Mario Dionne DIONNE - NADEAU Attorneys for Defendants
The Estate of DENIS LÉPINE, represented by Mr. MARCEL LÉPINE, Mis En Cause - NOT REPRESENTED
Date of hearing:		November 4, 2010