Anjou (Town of) v. C.A.C. Realty Ltd. et al.

Anjou (Town of) v. C.A.C. Realty Ltd. et al.
Collection
Supreme Court Judgments
Date
1977-04-29
Report
[1978] 1 SCR 819
Judges
Laskin, Bora; Judson, Wilfred; Pigeon, Louis-Philippe; Beetz, Jean; de Grandpré, Louis-Philippe
On appeal from
Quebec
Subjects
Civil procedure
Decision Content
Supreme Court of Canada
Anjou (Town of) v. C.A.C. Realty Ltd. et al., [1978] 1 S.C.R. 819
Date: 1977-04-29
Town of Anjou (Applicant) Appellant;
and
C.A.C. Realty Limited (Plaintiff)
and
Azet Realties Ltd. et al. (Defendants)
and
Montreal Trust Company (Purchaser) Respondents.
1976: March 3 and 4; 1977: April 29.
Present: Laskin C.J. and Judson, Pigeon, Beetz and de Grandpré JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Civil procedure—Judicial sale of immovable—Sale subject to a hypothec—Legality of judicial sale subject to a hypothec—Civil Code, art. 2161l—Code of Civil Procedure, arts. 665, 670, 677, 698 and 704.
In December 1971 plaintiff C.A.C. Realty Limited had an immovable belonging to Azet Realties Ltd. seized in execution of a judgment for an amount in excess of $96,000 due on a second hypothec. The writ of execution, the minutes of seizure and the notices published in the Official Gazette and the newspapers indicated that the immovable was to be sold by auction subject to a first hypothec of approximately $80,000 in favour of The Western Savings and Loan Association, repayable in monthly instalments of $1,171.81. The insertion of this charge as one of the conditions of the sale was requested by the seizing plaintiff. On the day of the sale, the representative of appellant Town, to which over $9,000 in municipal and school tax arrears was owed, went to bid in order to protect the City’s claim. On being informed that the purchaser was to assume the hypothec mentioned in the conditions of sale, the representative was instructed by his superiors not to bid in case the Town should be personally bound to pay the hypothecary debt. Respondent Montreal Trust Company purchased the immovable for one dollar. The privilege of the Town of Anjou was therefore discharged by the sale. In its motion to vacate the sheriffs sale, based on art. 698 C.C.P., appellant maintained that the charge of the hypothec had unlawfully been included as a condition of the sale. The Court of Appeal affirmed the judgment of the Superior Court and dismissed the motion, since no fraud was employed to keep persons from bidding, the essential conditions and formalities prescribed for the sale were observed, and appellant had remedies it could have exercised before the sale. Hence the appeal to this Court.
Held (Beetz and de Grandpré JJ. dissenting): The appeal should be dismissed.
Per Laskin C.J. and Judson and Pigeon JJ.: There is no provision in the Code of Civil Procedure which makes the sale of an immovable subject to a hypothec unlawful. It is under art. 670(c) that the seizing creditor requested that the “charge” of the hypothec be inserted in the notice of sale as a condition of sale. The hypothec is a “charge” within the meaning of this paragraph, as within the meaning of this whole section of the Code. The only remedy that was available to appellant was therefore opposition to charges under art. 677. The Code has authorized the seizing creditor to specify the charges subject to which the judicial sale is to be made. The sheriff is bound to follow these instructions. Although the decision of the seizing party can be contested, it stands until set aside by the Court.
The decision of the courts of Quebec is in accordance with well-established precedent. The seizing creditor was in good faith and there was no fraud to keep persons from bidding.
Per Beetz and de Grandpré JJ., dissenting: The forced sale of an immovable subject to a hypothec is unlawful and appellant may plead its nullity as a result.
Illegality of the sale: the hypothec and privilege are not “charges” withing the meaning of arts. 670, 676, 677 and 684 or “real rights” that can be included in the conditions of sale within the meaning of arts. 684, 690 and 696 of the Code of Civil Procedure. These provisions refer to rights carved out of ownership such as usufruct, use and habitation. These rights cannot be given effect without the immovable to which they are attached. The hypothec and immovable can on the other hand be satisfied without the immovable by money, by the proceeds of a judicial sale of the immovable which is subject to them, with their beneficiary being paid from the proceeds in accordance with the priority of his security.
Under art. 2081(6) C.C, privileges and hypothecs become extinct, inter alia, by the sheriffs sale. To extend the preferential right and the right of pursuit beyond the sheriff’s sale is to alter the nature of the hypothec and frustrate the sheriff’s sale. It is therefore illegal to sell an immovable judicially subject to a hypothec.
Nullity of the sale: the sale is void and the Town can plead its nullity for the following reasons: (1) the condition placed on the sale is likely to keep persons from bidding, and certainly discouraged the Town of Anjou; the prohibition of a sale being made subject to conditions likely to keep even a few people from bidding is a prohibition of public order based on the integrity of the judicial process and the protection to which third parties are entitled; (2) the condition results in an inversion of the privileges and hypothecs, without the consent of the creditors involved, by the unilateral action of the seizing creditor; in arts. 713 to 731 C.C.P., the legislator tried to protect the order of privileges and hypothecs; a judicial sale not in keeping with these provisions is contrary to the mandatory requirements of the law; (3) the sale can be vacated under art. 698 C.C.P. if it was made subject to conditions that kept persons from bidding, regardless of any fraud (art. 698(2) C.C.P); if the conditions are contrary to the aim pursued by the law and to the nature of the sheriffs sale, they make the latter a nullity; (4) the Town’s failure to object within the time prescribed does not mean that it has lost its remedy, since the facts show that this failure cannot be interpreted as a tacit acquiescence in the sale. Without making the first hypothecary creditor lose its hypothec, the vacating of the sheriffs sale will preserve the Town of Anjou’s privilege.
[Perrault v. Mousseau (1896), 6 Que. Q.B. 474, applied; Legault v. Desève (1920), 61 S.C.R. 65; Lymburner v. Courtois (1922), 34 Que. K.B. 341; Boileau v. Attorney General of Quebec, [1957] S.C.R. 463; Breton v. Jacques and Seabord Securities Canadian Ltd., [1972] R.P. 35, referred to.]
APPEAL from a decision of the Court of Appeal of Quebec[1], affirming the judgment of the Superior Court[2] dismissing a motion to vacate a sheriff’s sale. Appeal dismissed, Beetz and de Grandpré JJ. dissenting.
Emilien Brais, Q.C., for the appellant.
Kenneth Oberland, for the respondent, C.A.C. Realty Limited.
Jean Savard, for the respondent, Montreal Trust Company. The judgment of Laskin C.J. and Judson and Pigeon JJ. was delivered by
PIGEON J.—This is an appeal from a unanimous decision of the Court of Appeal of Quebec, affirming the dismissal of a motion to vacate a sheriff’s sale. The facts are set forth by Turgeon J., with whom Montgomery and Mayrand JJ. concurred, as follows.
[TRANSLATION] In December 1971 plaintiff C.A.C. Realty Limited had an immovable belonging to Azet Realties Ltd. seized in execution of a judgment for an amount in excess of $96,000 due on a second hypothec. It was stated in the writ of execution, the minutes of seizure and the notices published in the Official Gazette and the newspapers that the immovable was to be sold by auction subject to a first hypothec of approximately $80,000 in favour of The Western Savings and Loan Association, repayable in monthly instalments of $ 1,171.81 in capital and interest.
No opposition was filed and the immovable was sold to Montreal Trust Company on April 7, 1972 for $1. The sheriff’s report prepared following the sale states that the purchaser assumed the hypothec in favour of The Western Savings and Loan Association.
At the time of the seizure there was almost $9,000 owing to appellant in municipal property and school taxes (it was responsible for collecting the latter). The Town of Anjou authorities learned through the Official Gazette that the immovable had been seized and that it would be sold on April 7, 1972, at 11 a.m., at the Montreal courthouse, subject to the first hypothec, which the purchaser was to assume. On March 9, 1972 the head of appellant’s revenue department sent to the sheriff of Montreal its claim for the taxes owing at that time.
Raymond Boivin, head of the Town of Anjou’s revenue department, went to the Montreal courthouse to attend the sale with authority to bid in order to protect the city’s preferred claim. However, before the auction he learned from the prothonotary that the purchaser was to assume The Western Savings and Loan Association’s hypothec. Apparently appellant’s staff had not noticed this condition when they read the notices of sale in the Official Gazette and the newspapers. Raymond Boivin immediately telephoned his immediate superior and was instructed not to bid in case the Town should be personally bound to pay hypothecary debt. In its motion to vacate the sheriff’s sale, appellant maintains that a condition was unlawfully imposed on the sale. This condition was expressed as follows:
Subject to a first hypothec in favour of The Western Savings and Loan Association which the purchaser must assume, the details of which mortgage are summarized as follows and registered at the Registry Office for the Registration Division of Montreal, under No. 1977182, maturing April 1st, 1985 subject to repayment at the rate of $1,171.81 monthly in capital and interest. The balance of the hypothec at October 1st, 1971 was approximately $80,000. The agent for the hypothecary creditor is the Montreal Trust Company.
Having rejected, on the basis of the decision of this Court in Legault v. Desève[3], appellant’s submission that the condition above quoted obliged the purchaser to assume the hypothecary debt personally, Turgeon J. said:
[TRANSLATION] The trial judge held that it was unlawful to have an immovable that has been seized sold subject to the hypothec encumbering it, but that this resulted in a relative and not an absolute nullity. He faulted the Town of Anjou for not having filed an opposition within the prescribed time, and dismissed its motion. He rightly followed the decision of our colleague Bernier J.A., who, while a Superior Court judge, held in Breton v. Jacques et al., [1972] R.P. 35, that a hypothec cannot be included in the conditions of a judicial sale since such a sale results ipso facto in its extinction as a real right. I refer to this judgment, which contains a complete study of the question before this Court.
It should be noted that there is no provision in the Code of Civil Procedure expressly prohibiting the judicial sale of an immovable subject to a hypothec encumbering it. On the contrary, certain articles in the Code of Civil Procedure, such as arts. 670 (c), 684, 690 and 696, seem at first sight to allow it.
In the case at bar appellant’s motion to vacate is based on art. 698 C.C.P., which reads as follows:
698. A sheriffs sale may, at the instance of any interested person, be vacated:
1. If, with the knowledge of the purchaser, fraud was employed to keep persons from bidding;
2. If the essential conditions and formalities prescribed for the sale have not been observed; but the seizing creditor cannot vacate the sale for any irregularity attributable to himself or his attorney.
I am of the opinion that no fraud was employed to keep persons from bidding. On the contrary, plaintiff-respondent and its solicitors acted in good faith and sincerely believed that by insisting that the immovable be sold subject to the first hypothec, they were encouraging bidding. Western Loan and Savings Association and its agent Montreal Trust Company, which became the purchaser, were also in good faith.
Moreover, the essential conditions and formalities prescribed for the sale were observed.
…
Appellant had remedies it could have exercised before the sale. Thus it could have made an opposition to secure charges, on the basis of art. 676 C.C.P. and a certain series of precedents prevailing at the time, or, if it preferred, it could have relied on art. 677 C.C.P. and made an opposition to charges if it felt aggrieved. The senior officers of the Town of Anjou learned from the Official Gazette of the seizure and sale before March 9, 1972, but apparently neglected to read the conditions. On the day of the sale appellant’s representative, who had gone to the Montreal courthouse, was told of the conditions of sale by the prothonotary. He reported to his superior, who, owing to a misunderstanding of the condition, gave him instructions not to bid.
A sheriff’s sale is a procedure which confers more absolute rights on the purchaser than a voluntary sale. It is preceded by strict formalities aimed at protecting the judgment debtor and the purchaser. It should be remembered that under art. 577 C.C.P. the adjudication of property under execution transfers the ownership thereof to the purchaser from its date, and that this principle is in the public interest.
In the circumstances I am of the opinion that the judgment of the Superior Court is well founded.
In my opinion this decision is well founded. As Dorion J. pointed out in Lymburner v. Courtois[4], at p. 346, the Legislature of Quebec was so anxious to protect the validity of judicial sales that, in the Act passed in 1880 (43-44 Vict., c. 25), for the protection of hypothecary creditors by a system of notification by registered mail to their address as recorded in a special register, there was added a concluding provision that now reads as follows in the Civil Code:
Art. 2161/. The omission to comply with any of the provisions of articles 2161a to 2161k does not invalidate any proceeding in any cause or matter in which such omission may occur; but the officer or other person in default is responsible for all damages which may result therefrom.
This provision was considered so important that it was repeated in the Code of Civil Procedure, where it is now art. 665:
665. The registrar, when served with the minutes of seizure, must note the seizure in the index of immoveables and notify the interested parties in the manner prescribed by the Civil Code. The non-compliance with this provision does not invalidate the seizure but renders the registrar responsible for all damages which may result therefrom.
With respect to the statement made by Taschereau J. in Boileau v. Attorney General of Quebec[5], that [TRANSLATION] “there are cases where sheriffs sales have been vacated even for reasons not specifically mentioned in art. 784 C.C.P. (now art. 698 C.C.P.)”, one must look at what was involved. The case dealt with a sale made in execution of a judgment which was nothing less than void because it was based on a false document. This is why Rand J. said (at p. 474):
What, then, was the act for the annulment of which these proceedings were brought? It was obviously the original document which was entered under the authority of s. 1115 of the former Criminal Code. That was done ex parte, and in the absence of both of the parties to the bond and of any person representing either of them. The application made in January to set aside that judgment is a subordinate proceeding, the validity of which, by the challenge now made, rests entirely upon the validity of the former; if that is set aside, everything depending on it automatically falls.
There is nothing of this kind in the case at bar. There is no provision in the Code of Civil Procedure which makes the sale of an immovable subject to a hypothec unlawful. Appellant certainly had the right to oppose the sale, since the taxes owing to it should rank before hypothecs. However, this is not the question to be decided on a motion to vacate a sheriff’s sale. The question is whether it is unlawful to make a judicial sale subject to a hypothec. In the section of the Code of Civil Procedure dealing with the seizure of immovables in execution, one reads in art. 670:
670. The sheriff must insert in the Quebec Official Gazette, in French and English, at least thirty days before the date fixed for the sale, a notice stating:
…
c. the designation of the immoveable or of the rents, as the case may be, as inserted in the minutes, with the charges there mentioned and those which the seizing creditor or the debtor has requested in writing to have inserted;
The above sets out one of the principal formal requirements for the judicial sale of immovables. I have underlined the provision under which the seizing creditor did request in writing that the charge of the hypothec in question be mentioned. I do not see how it can be said that a hypothec is not a “charge” within the meaning of this section of the Code of Civil Procedure. Not only is this right included in the ordinary meaning of the expression, but this is also clear from art. 704, which opens as follows:
704. The certificate must contain all privileges, hypothecs or other charges registered against the property…
The word “charge” recurs several times thereafter, as a general term to designate all the real rights that must be mentioned in the certificate.
This being the case, I do not see how there can be any doubt that the remedy that was available to appellant to prevent the sale subject to the hypothec was the opposition to charges under art. 677.
677. Any person, aggrieved by reason of an immoveable being advertised as subject to a charge which prejudices his claim, may make an opposition to the sale of the property subject to such charge, unless good and sufficient security be given him that it will be sold at a sufficient price to ensure payment of his claim.
…
Appellant objects that a sale subject to a hypothec is contrary to the spirit of the Quebec system of judicial sales of immovables, and relies heavily on a judgment of the Superior Court which dismissed an opposition to secure charges, made by a hypothecary creditor: Breton v. Jacques and Seabord Securities Canadian Limited[6]. Like the trial judge and the judges in the Court of Appeal, who examined this decision and do not dispute its soundness, I do not see how this can imply that sales subject to a hypothec are unlawful. It cannot be said, as appellant maintains, that a hypothec is not a charge: the Code establishes the contrary. The most that may be said is that appellant would have been entitled to request not only what is provided in art. 677, but also the outright removal of the charge of the hypothec from the conditions of sale, or perhaps to bid while refusing the charge. The Code has authorized the seizing creditor to specify the charges subject to which the judicial sale is to be made. The sheriff is bound to follow these instructions. This does not mean that the decision of the seizing party cannot be contested, but it stands until set aside by the Court.
In my opinion the decision of the courts of Quebec in the case at bar is in accordance with well-established precedent. In Perrault v. Mousseau[7], one reads at p. 481:
It is obvious that the setting aside of a sheriffs sale, when once completed, should only be allowed under conditions still more strict than those which control the filing of an opposition afin de distraire prior to the sale. The spirit of that distinction appears in the first condition imposed in regard to the vacating of sheriffs sales, viz.: “If fraud or artifice was employed, with the knowledge of the purchaser to keep persons from bidding.” It is true that the article adds:—“If the essential conditions and formalities prescribed have not been observed,” but this must evidently be taken to refer to such an extreme and flagrant case of the violation of precedent formalities as would operate a denial of justice if not corrected; the case either of the inobservance of essential formalities of which the petitioners had previously been ignorant, or of collusive acts between the creditor and the adjudicataire, at the time of the sale, or at least within that precedent delay when the filing of oppositions is prohibited.
It is obviously highly regrettable for appellant to lose the amount of the taxes that were owing to it at the time of the sale, and in the case at bar it would certainly be fairer for the purchaser of the immovable not to be relieved of them by the failure of the municipal authorities to follow the appropriate procedure within the time prescribed. If it were possible to arrive at this result without impairing the principle of the inviolability of judicial sales, I would be in favour of doing so. However, it must be borne in mind that any judicial sale of an immovable necessarily jeopardizes the recovery of municipal taxes. If the legislature did not give these public authorities the benefit of the provisions established to protect hypothecary creditors, it is obviously because all municipalities are presumed to have officers responsible for collecting taxes whose duty it is to keep an eye on notices of judicial sales. In the case at bar, the municipal officers in question did so, but in considering what had to be done to protect the interests of the municipality at the time of the sale, they unfortunately failed to take into account that the sale would be made “subject to” the first hypothec. This clause in the notice was not concealed: it formed a separate paragraph which mentioned the monthly instalments and the balance owing, appearing immediately before the indication of the date, time and place of the sale.
In my opinion the courts of Quebec were justified in holding that the seizing creditor was in good faith and that there was no fraud to keep persons from bidding. Appellant is in the situation of any municipality which fails to see to the protection of its tax claim at a judicial sale of an immovable.
I would dismiss the appeal with costs.
The judgment of Beetz and de Grandpré JJ. was delivered by
BEETZ J. (dissenting)— I—THE FACTS
This is a motion to vacate a sheriff’s sale (art. 698 C.C.P.): the immovable in question was sold subject to a hypothec.
This immovable, assessed for municipal purposes as having a value of $156,000, belonged to Azet Realties. It was encumbered in favour of The Western Savings and Loan Association by a first hypothec guaranteeing a debt of approximately $80,000, the balance of a loan of $92,000. It was also encumbered in favour of C.A.C. Realty by a second hypothec guaranteeing a debt balance of $92,602.75.
C.A.C. Realty obtained judgment and caused the immovable to be seized. In accordance with the instructions of C.A.C. Realty’s solicitors, the writ of execution contains the following condition after the description of the immovable:
Subject to a first hypothec in favour of The Western Savings and Loan Association, which the purchaser must assume …
The same condition is found in the notices of seizure and sale published in French and English in the Official Gazette and the newspapers.
On the immovable seized there is owing to the Town of Anjou arrears of municipal and school property taxes totalling more than $9,000 at the time. The Town sent the sheriff a statement of its claim pursuant to art. 708 C.C.P. The municipal authorities also sent to the sale an officer authorized to bid in order to protect the Town’s claim. On the day of the sale, officers of the court drew the attention of this municipal officer to the condition placed on the sale, a condition the latter admitted he had not noticed previously when reading the notices. The sale was adjourned for a few minutes to enable the officer to get in touch with his superiors. He contacted the Town’s treasurer, who, after consulting the Town’s managing director and a representative of the Municipal Commission, instructed him not to bid, in view of the condition. The immovable was sold to the first and only bidder, Montreal Trust, acting for The Western Savings and Loan Association, the first hypothecary creditor. The purchase price is recorded as follows in the minutes of the auction: “$1.00 + the charge of $80,000”. The sheriff’s report indicates that the sale price is $1.00. Since the proceeds from the auction were less than the costs of seizure, the formality of a scheme of collocation was dispensed with and the dollar from the sale was given to the prothonotary in payment of the court costs.
The sale, if it is valid, discharges the Town of Anjou’s privilege. The latter submitted a motion to vacate the sheriff’s sale, the subject of the appeal. The motion was contested by the two respondents, Montreal Trust, the purchaser, and C.A.C. Realty, the seizing creditor, whose hypothec was also discharged by the sale.
In its motion the Town alleged, inter alia, that the condition placed on the sale was likely to keep persons from bidding and constituted an irregularity equivalent to fraud. I see no reason not to accept the concurrent and unanimous findings of the Superior Court and the Court of Appeal regarding fraud: there was no evidence of fraud.
However, it seems to me that the condition placed on the sale was, any fraudulent intent apart, likely to keep persons from bidding. I shall come back to this.
II—THE SUBMISSIONS MADE BY THE TOWN OF ANJOU
The first submission is that, as worded, the condition attached to the sale makes the purchaser liable for the debt not only by hypothec but also personally. If the first submission is not accepted, the Town has made a second one: the law prohibits on pain of absolute nullity the judicial sale of an immovable subject to a hypothec.
III―THE JUDGMENT OF THE SUPERIOR COURT
Trépanier J. of the Superior Court did not rule on the first submission. He admitted the irregularity of a judicial sale of an immovable made subject to a hypothec, but in his view the Town cannot have the sale set aside when it could have objected to it earlier by the appropriate procedure. Its failure to do so is fatal: and he cites authorities according to which the failure to act within the time prescribed is equivalent to acquiescence capable of covering a merely relative nullity.
IV―THE DECISION OF THE COURT OF APPEAL
This decision is reported at [1974] C.A. 197. The Court of Appeal rejected the first submission, relying on the decision of this Court in Legault v. Desève[8]. With respect to the second submission, it agreed essentially with the Superior Court: the condition imposed on the purchaser of assuming a hypothec constitutes an irregularity, but one which does not result in a nullity of which the Town can take advantage; if the Town had been more alert, it could have made an opposition.
On the second submission I arrive at conclusions which differ from those of the Court of Appeal, and which suffice to dispose of this case. It is therefore not necessary for me to express my opinion on the first submission.
The second submission comprises two questions: (1) does the law allow the forced sale of an immovable subject to a hypothec? (2) If the law prohibits such a sale but it takes place nevertheless, does this result in a nullity appellant can rely on?
The first issue has been raised in the Quebec courts several times, before the sale had taken place, in the following procedural form: is the opposition to secure charges (art. 676 C.C.P.) available to hypothecary or preferred creditors? To the best of my knowledge, the second question is being raised for the first time.
V—ILLEGALITY OF THE SALE
Respondents maintain that the sale is permitted by law, and they are accordingly asking this Court to part company with the Court of Appeal and the Superior Court on this point. They rely on a line of legal opinion and precedent holding that a hypothecary or preferred creditor has the right to require that the encumbered building be sold by the Court subject to his hypothec or privilege. If the sale were advertised without this condition, the hypothecary or preferred creditor could make an opposition to secure charges and ask that his security be registered against the immovable, which would be sold subject to this security (Ferland, P., Traité de procédure civile, Montreal, 1969, Vol. II, at pp. 371 and 372). They maintain that the seizing creditor is even obliged to enter beforehand, after the designation of the immovable to be seized and sold, any hypothecs and privileges that might be encumbering it, otherwise an opposition to secure charges would lie against him: Newman v. Archambault et al.[9] Moreover, counsel for C.A.C. Realty state in their brief, it is precisely in order to comply with the latter judgment of the Superior Court that they inserted the condition in the application for a writ of execution, and in the notices of sale. Counsel for the purchaser Montreal Trust maintain that even if the inclusion of the hypothecs and privileges does not constitute a prior obligation of the seizing creditor, it is nevertheless not illegal; it could also be done at the request of a hypothecary or preferred creditor who prefers to retain his hypothec rather than be collocated and paid directly from the sale proceeds. In the case at bar the condition was inserted by the seizing creditor without their knowledge; they learned of it through the notices, but in view of the judgment and legal opinion mentioned above, they did not see anything irregular in it. Both respondents add that far from discouraging people from bidding, the judicial sale of an immovable subject to a hypothec such as the one in question is likely to attract them: if the condition had not been inserted, Montreal Trust would have bid up to $80,000 to protect its principal’s claim; the other bidders would have been obliged to bid higher and to pay a sum in excess of $80,000 in cash; whereas with the condition inserted, the bidders had an opportunity to purchase the immovable for much less, subject to a hypothec with a favourable rate of interest (seven and a half per cent). If the judgment and legal opinion relied on by respondents are well founded, appellant’s second submission must be rejected. With all due respect, however, in my view this legal opinion and the judgment in Newman v. Archambault constitute a legal heresy; they are incompatible with the old law, with the general scheme of the Civil Code and the Code of Civil Procedure and with the decisions of the Quebec courts. The Court of Appeal and the Superior Court are justified in not following it.
The problem stems from the fact that the provisions of the Code of Civil Procedure that deal with the seizure of immovables in execution are drafted very concisely and in extremely general terms. If their sources and the other rules of judicial and civil law are disregarded, it is possible to deduce from these provisions, by a literal interpretation, effects opposite to those intended. Let us take as an example the following provisions:
670. The sheriff must insert in the Quebec Official Gazette, in French and English, at least thirty days before the date fixed for the sale, a notice stating:
a. …
b. …
c. the designation of the immoveable or of the rents, as the case may be, as inserted in the minutes, with the charges there mentioned and those which the seizing creditor or the debtor has requested in writing to have inserted;
d. …
e. …
676. A third party may make an opposition to secure charges when an immoveable under seizure is advertised to be sold without mention being made of a charge to which it is subject in his favour and from which it might be discharged by a sheriff’s sale.
677. Any person, aggrieved by reason of an immoveable being advertised as subject to a charge which prejudices his claim, may make an opposition to the sale of the property subject to such charge, unless good and sufficient security be given him that it will be sold at a sufficient price to ensure payment of his claim.
An opposition to charges cannot be made by the seizing creditor or the judgment debtor, unless the mention of such charge has been made without his consent. 684. On the day and at the place appointed, the officer conducting the sale first reads the text of the notice, specifies the charges and the conditions of the sale, and then offers the immoveable for sale by auction.
690. On payment by the purchaser of the purchase price or of the amount which he is not entitled to retain, the sheriff is bound to give him a certificate of sale containing:
…
4. the conditions of the sale;
696. A sheriff’s sale discharges the immoveable from all real rights not mentioned in the conditions of sale except:
1. servitudes;
2. hypothecs resulting from the commutation of seigniorial rights, except as to arrears accrued before the sale;
…
(Emphasis added.)
Are the hypothec and the privilege “charges” within the meaning of arts. 670, 676, 677 and 684 C.C.P. or “real rights” that can be included in the “conditions of sale” within the meaning of arts. 684, 690 and 696 C.C.P.? I do not think so. The expressions “charges” and “real rights” are certainly broad enough to include hypothecs and privileges in another context. However, the provisions cited above refer to rights carved out of ownership such as usufruct, use and habitation, which cannot be given effect without the support of the immovable to which they are attached. The old law put in the same category as these rights land charges—several of which were payable in kind—which were owed by the estate rather than by its owner. It would not be fair to the holder of these rights if the sheriff’s sale were necessarily to discharge them. The same does not apply to hypothecs and privileges: the claim they guarantee can be satisfied by money, without the immovable, specifically by the proceeds of a judicial sale of the immovable which is subject to them, with their beneficiary—this is his only right—being paid directly from the proceeds in accordance with the priority of his security. This is what was intended by the old French law, which is the source for the chapter of the present Code of Civil Procedure. In this matter the 1965 Code follows very closely those of 1897 and 1867. The codifiers of the 1867 Code had been instructed to incorporate into the Code only those provisions considered to be truly in force, citing the authorities on which they were relying. They could suggest amendments, but separately and distinctly, with supporting reasons: Act to provide for the Codification of the Laws of Lower Canada relative to Civil matters and Procedure, 1857, 20 Vict., c. 43, s. 6. The codifiers do not suggest any amendments that would alter the principles concerning the execution of immovables. They refer to two principal sources: very partial earlier codifications which only charge the old law on specific points, and the old authors like Pothier, d’Héricourt and Bourjon, whose terminology they use for oppositions.
Loyseau distinguishes between the charge and the hypothec:
[TRANSLATION] Land charges differ from simple hypothecs chiefly in that the hypothec is an accessory or subsidiary obligation of the thing, to confirm and guarantee the promise and obligation of the person who is the debtor; but the land charge is a rent owed strictly and directly by the estate and not by the person; and the person pays it because of the thing, not to be obliged on his own account, because the thing, which is inanimate, cannot pay it except through the agency of the person.
Traité du déguerpissement et du délaissement par hypothèque, Paris, 1701, at p. 8.
Modern authors make a similar distinction; they subdivide real rights into principal real rights and accessory real rights, and argue that the hypothec, an accessory real right, is not a true right carved out of ownership: Planiol and Ripert, Droit civil, Paris, 1953, Vol. 12, at p. 376; Mignault refers to this distinction without either adopting or rejecting it: Droit civil canadien, 1916, Vol. 9, at pp. 83 and 84.
The “charge” of the old authors falls into the class of principal real rights which are carved out of ownership and differ from the hypothec, an accessory real right.
The old law also distinguished between these two classes of real rights on the basis of the remedies their holder could exercise on the occasion of a forced sale. The opposition to secure charges was open to the holder of a principal real right. The holder of a hypothec only had the opposition for payment—which is not necessary today except for such claims as the registrar is not bound to insert in his certificate: art. 708 C.C.P. Thus according to de Ferrière:
[TRANSLATION] The opposition to secure charges is the one made by a person who claims to have a real right over the immovable seized, such as a right of servitude, ground rent or other real rights inherent in the thing.
The opposition for payment is the one made by a creditor of the judgment debtor, either pursuant to a contract, obligation, sentence or judgment, or by an acknowledged promise, so that he can be advantageously collocated for what is owing to him from the day of his hypothec for his principal, arrears and interest, fees and expenses.
The aim of this opposition is thus that the person making it shall be maintained in all his rights, hypothecs and privileges, and be paid all that is owing to him from the proceeds of the sale, in accordance with the order of his hypothec. (Emphasis added.)
Dictionnaire de pratique, Paris, 1755, Vol. 2, at p. 402.
Pothier refers to the hypothecary creditor when he defines the opposition for payment, but he does not mention the hypothec among the examples of charges which can give rise to the opposition to secure charges (M. Bugnet, Oeuvres de Pothier, Paris, 1890, Vol. 10, No. 585, at p. 265 and No. 590, at p. 266).
None of the older authors, to my knowledge, speak of the opposition to secure charges as being open to the hypothecary creditor. Bourjon, on the other hand, expressly denies the hypothecary creditor the right to this opposition:
[TRANSLATION]
LXXI.
The subject or subject-matter of the oppositions to secure charges are the real charges, ground rents, servitudes that must remain on the land …
LXXII.
Now that their function is known, let us examine their purpose. Their purpose is to preserve these rights, notwithstanding the finality of the sheriff’s sale. It was fair to make this recourse available to those who have the same rights, which cannot be extinguished with money …
LXXIII.
If this opposition did not exist, the sale would discharge these rights; otherwise, who would wish to purchase the property? In this connection, therefore, it must be taken as established that the sale can produce exactly the same effect of extinction with regard to these rights as with regard to the simple hypothec, this is a fair discumbrance which was the purchaser’s due.
LXXXVIII.
A seller to a person subject to a forced sale, to whom part of the price was owing with a stipulation that it could only be reimbursed to him within a certain time could not make an opposition to secure charges but only an opposition for payment. This is the only right arising from such a clause, and without it he would lose his hypothec, which would not be the case with a voluntary sale … (Emphasis added)
Droit commun et La Coutume de Paris, 1770, Vol. 2, at pp. 720 ff.
Regarding oppositions to secure charges made contrary to these principles, it is interesting to note what fate the old law had provided for them:
[TRANSLATION] If the creditors mentioned above had made an opposition to secure charges to the sale, this opposition would become an opposition for payment, and this in seizure and attachment of the price; this is the consequence that must be drawn from the preceding oppo