T-3045-76
The Queen (Creditor-applicant)
v.
Couillard Enterprises (Division Construction) Inc.
(Debtor-respondent)
and
Entrepot Colbert Inc. (Objector)
and
Registrar of the registration division of Quebec
City (Mis -en- cause)
Trial Division, Marceau J.—Quebec, March 22;
Ottawa, April 14, 1977.
Procedure — Rule 2400 — Interest required to object to
judgment — Whether or not interests of judgment debtor and
"third party purchaser" be recognized — Jurisdiction —
Court power to charge land — Rule 2400 order imposing
charge on land of debtor-respondent — Objection — Lands
sold to third party — Deed to third party not recognized —
Federal Court Rule 2400 — Federal Court Act, R.S.C. 1970
(2nd Supp.), c. 10, s. 56 — Quebec Civil Code, arts. 2098,
2130, 2166, 2167, 2168, 2176a — Cadastre Act, R.S.Q. 1964,
c. 320, ss. 14 and 15.
When the creditor-applicant obtained an order under Rule
2400 imposing a charge (show cause) on the lands of the
debtor-respondent, the respondent objected arguing the lands
had been sold and the charge could not attach. The respond
ent's deed to the third party purchaser had not been registered
when the applicant filed the Rule 2400 application. Another
order granted the respondent the opportunity to dispute the
application for a final order in writing. The respondent, on
filing its written dispute, impleaded the objector. The applicant
then filed a written dispute seeking the Court's dismissal of the
respondent's dispute.
Held, the application is granted. Rule 2400 gives the Court
the power to charge land until a judgment is paid, and although
the Court cannot refuse to exercise this power because of a
dispute, it must consider the dispute's merits. Since the Federal
Court Rules for executing judgments must be complemented
by the rules of the province where the land lies, a Rule 2400
application must recognize the rights of both the judgment
debtor and the third party purchaser because of the similarity
of Rule 2400 to the operation of certain legal concepts in
Quebec. Under the Quebec Civil Code, the ranking of interests
in land depends on the deed's registration date, without regard
to prior possession; a purchaser-vendor cannot confer a sustain
able title until his own title has been registered. The 1974 deed
for the lots in question, put forward by the respondent and the
objector, could not be registered. The lots, therefore, still
belonged to the respondent on the date of the show cause, and a
charge could attach. The reference to the 1974 unsealed deed in
a subsequently registered deed changes nothing, despite the
constructive notice, because of the absence of fraud.
Adam v. Flanders (1879) 25 L.C.J. 25 (C.A.); Banque de
Montréal v. St. Gelais [1966] Q.B. 365, affirmed [1968]
S.C.R. 183, followed.
APPLICATION.
COUNSEL:
Claude Joyal for creditor-applicant.
Michel Deniers for debtor-respondent and
objector.
SOLICITORS:
Deputy Attorney General of Canada for
creditor-applicant.
Létourneau, Stein, Marseille, Delisle &
LaRue, Quebec, for debtor-respondent and
objector.
The following is the English version of the
reasons for order rendered by
MARCEAU J.: On September 2, 1976 applicant,
the creditor under a judgment of this Court,
obtained an order imposing a charge (order to
show cause) on the land described in her applica
tion as the property of respondent, the debtor
under the said judgment. The disposing portion of
this order, made under the authority of section
2400 of the General Rules and Orders of the
Federal Court, was written in the usual terms, as
follows:
[TRANSLATION] IT IS ORDERED THAT unless sufficient cause
to the contrary be shown before the Federal Court of Canada,
sitting at Quebec City, at 25 rue St-Louis, on the 21st day of
October, 1976, at ten o'clock, the said land shall, and it is
ordered that in the meantime it do, stand charged with the
payment of $61,922.79 due on the said judgment, and with the
payment of interest at the rate of six per cent per annum on the
sum of $55,103.72, from the 21st day of July 1976 until the
date of payment, together with the costs of this application.
On October 21, 1976, respondent was granted by
another order of the Court the right to dispute in
writing the application for a final order, setting out
[TRANSLATION] "the reasons for which the prop
erty described ... should not be affected by a
privilege". Several days later, it filed a written
dispute in which it joined another corporation
which it impleaded as objector. Its claim was, in
effect, that the property involved was no longer its
property, but had become that of the objector.
Applicant, in turn, then filed a written reply seek
ing a dismissal of the dispute, and the incidental
issue thus defined was submitted to this Court for
decision.
I have mentioned these details on the status of
the record to better clarify the unusual problems
which it raises and to facilitate discussion of them.
First, on the procedural level, the respective
situations of the parties is not very clear. It may be
asked, on the one hand, whether respondent has
the required interest to dispute, its claim being
simply that it is not the owner of the lots subject to
charge, and it makes no further claim; it may, on
the other hand, be asked whether the objector can,
for its part, have the required status, after simply
being joined in the pleadings as though it were a
party to them.
In fact, the ambiguity of the situation comes
from the completely exceptional nature especial
ly from the point of view of Quebec law—of the
provisions of rule of practice 2400, on which the
application relies. This is not a case of a seizure of
immovable property, but the charging order
sought will have a wider scope than the registra
tion of a judicial hypothec provided for by the
Civil Code of Quebec (article 2034 et seq. and
article 2121). Paragraph (9) of rule of practice
2400 states, "A charge imposed by an order under
paragraph (1) made absolute under this rule shall
have the same effect, and the judgment creditor in
whose favour it is made shall have the same reme
dies for enforcing it, as if it were a valid charge
effectively made by the judgment debtor." An
application under rule of practice 2400, in my
opinion, has some of the characteristics of both a
judicial hypothec and a hypothecary action limited
to conclusions of a declaration of hypothec, and
this is why I believe that in a case such as the one
submitted here the interest required to object to
the judgment must be recognized for the debtor
under the judgment as well as the third party who
claims to be the purchaser.
Moreover, the rules of practice of this Court, in
the matter of execution of judgments, must be
complemented by those in force in the province in
which the property involved is located (section 56
of the Federal Court Act); therefore, in my opin
ion, on the basis of certain provisions of the Civil
Code of Quebec, it is necessary to validate the
intervention of the objector, informal as it is, and
allow it to participate as such in respondent's
dispute. That disposes of the question of
procedure.
A second more important initial problem
immediately arises: that of jurisdiction. As with
the first, the parties did not raise it themselves, but
the Court cannot avoid asking whether it may
decide on a question of the nature of the one
submitted here. However, I have concluded that
this jurisdictional question must receive a positive
reply. Rule of practice 2400, adopted under the
authority of the Federal Court Act, gives the
Court the power to impose absolutely a charge on
land, affecting certain land, until the amount due
as the result of a judgment made by the Court is
paid; the latter clearly cannot then refuse to exer
cise such a power merely because a dispute exists,
and in the face of a dispute, it could not agree to
exercise it without first considering the merits of
such a dispute. It could not be denied jurisdiction
to decide the merits of a dispute without rendering
its power under Rule 2400 completely illusory. In
the case at bar, the Court cannot allow the
application and make the absolute order if it is
satisfied that the debtor under the judgment to be
executed is—or is considered to be—the owner of
the property involved, which requires that it be
able to decide on the claim of the third party-inter-
venor who claims to be the holder of a sustainable
interest in that property.
It is therefore necessary to examine the basis of
the dispute by respondent and the objector, and in
order to do this it is now necessary to set out as
clearly as possible the salient points.
Respondent and the objector allege that on July
4, 1974 a deed of sale under private signature was
made between them, by which the former ceded to
the latter all the lots involved in the application for
a charge made by applicant, these lots being part
of a large expanse of land which the vendor in the
deed had acquired from a single owner two years
previously. Respondent and the objector admitted
that this deed of sale between them did not contain
a correct and precise description of the said lots,
this being the reason why it could not be entered in
the property index at the registry office; however,
they maintained that the land in question was
nonetheless included in the sale, and that applicant
was certainly informed of this before filing her
application for a charge, since the certificate of
search from the registrar which she had requested
and obtained mentioned a hypothecary deed grant
ed by the objector not long before, which had in
fact been made and registered in due form.
These facts, put forward by respondent and the
objector in their dispute, were not contradicted by
applicant. She claimed, however, that they could
not form a legal basis for the conclusions sought in
opposition to her application for an absolute order
imposing a charge, and I believe that she is
correct.
Respondent acquired the land described as num
bers P-105, P-106 and P-106-A of the cadastral
plan of Ste. Foy, in the Quebec City registration
division, in 1972. In 1973, respondent filed in the
cadastral office a plan to subdivide part of this
land, which created new lots numbered 105-38,
105-39, 106-26 and 106-A-27, and these became
the only lots to be legally recognized under the
unequivocal provisions of articles 2166-2167 and
2168 of the Civil Code of Quebec. As was men
tioned above, the 1974 deed made between
respondent and the objector did not designate the
lots which it dealt with according to their new, but
their only legal designation, and this was why it
could not be registered in due form. The result was
that at the time when applicant filed her applica
tion for a charge to be imposed and thus registered
her right to obtain payment of her claim from the
lots, the only registered owner of them was her
debtor, respondent. It is true that the certificate
from the registrar mentioned the registration of a
hypothecary deed executed by the objector, but the
deed had no effect at that time because it related
to no registered interest.
In fact, the whole system of acquisition and
transfer of interests in land in Quebec law is in
question here. It would be tedious to quote all the
texts involved. What is important is that under the
Quebec Civil Code, the ranking of hypothecs and
other interests in land located in the Province
depends on the date of registration of the deeds
from which they result, without regard to prior
possession (if it occurred) of the interested parties
(article 2130 Civil Code). A purchaser may confer
no sustainable interest in the land of which he has
become the owner until he has registered his title,
because previously he himself held no interest
which he could plead against third parties, that is,
those who acquired against his vendor some inter
est in the land and registered their titles (article
2098 Civil Code). In the case at bar it is clear, I
repeat, that articles 2168 and 2176a of the Civil
Code and sections 14 and 15 of the Cadastre Act
(R.S.Q. 1964, c. 320) prevented the 1974 deed put
forward by respondent and the objector being reg
istered in due form for the lots involved in the
motion, and according to the entries at the registry
office, those lots still belonged to respondent on
September 2, 1976, the date of the order to show
cause and the registration of the privilege'. The
conclusion is certain and inevitable: this unsealed
deed of 1974, on which the dispute is based, could
confer no title sustainable against applicant on
anyone, and the fact that it was mentioned in
another subsequent registered deed changes noth
ing, even though applicant may have thus indirect
ly become aware of it, since there is no question of
fraud here.
It may be noted that applicant requested at the hearing and
obtained the right to amend its reply, to allege that on Novem-
ber 10, 1976 respondent and the objector had signed a notice of
correction before a notary and registered it. However, the fact
is not important, because on the one hand an admission by
respondent and the objector about their legal situation could
not be drawn from it, and on the other hand it is clear that a
retroactive effect could not be attributed to such a registration.
This strictness of the laws of registration in the
Quebec legal system with respect to interests in
land may seem extreme. However, it has always
been considered necessary for security of transac
tions involving immovables, and the courts have
never hesitated to apply the laws strictly (in par
ticular, see Adam v. Flanders (1879) 25 L.G.J. 25
(C.A.); Banque de Montréal v. St. Gelais [ 1966]
Q.B. 365, affirmed [1968] S.C.R. 183).
The dispute of respondent and the objector,
therefore, cannot succeed. The application will be
granted, and as a result an absolute order imposing
a charge on the lots described in the order to show
cause of September 2, 1976 will issue.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.