The Estate of Paul Dontigny, Represented by Georgette Rondeau, Executrix and Residuary Legatee v. Rer Majesty the Queen, [1974] CTC 532, 74 DTC 6437

The Chief Justice (Concurred in by St-Germain, DJ):—This is an appeal from a judgment of the Trial Division dismissing, with costs, an appeal from a decision of the Tax Review Board confirming an assessment under the Estate Tax Act.

The appeal to the Trial Division was determined on an agreed statement of the following facts:

1. Paul Dontigny est décédé le ou vers le 12 mai 1970.

2. Feu Paul Dontigny était domicilié a Lac Cayamant, comté de Pontiac, province de Québec. _,

3. Il était l’époux de Dame Georgette Rondeau.

4. Par testament daté du 13 mars 1953, (Exhibit E-1), passé devant le notaire Cléo Vaillancourt et apparaissant sous le numéro 492 de ses minutes, feu Paul Dontigny a nommé Dame Georgette Rondeau, exécutrice testamentaire.

5. Le testateur, Paul Dontigy, disposa de ses biens ainsi qu’il appert des clauses quatrième et neuvième dudit testament:

a) Article quatrième: Je lègue tous mes biens meubles et immeubles, sans exception, que je délaisserai à mon décès, y compris les assurances que j'aurai sur ma vie à l’heure de ma mort, à mon épouse, Dame GEORGETTE RONDEAU, que j’institue ma légataire universelle; aux conditions mentionnées à l’article neuf;

b) Article neuvième: Si mon épouse et légataire universelle ne garde pas viduité et se remarie, j’entends que tous mes biens immobiliers soient dévolus à mes enfants vivant lors du second mariage de leur mère et à défaut d’enfants vivant, aux enfants de ces derniers.

6. La valeur globale nette des biens laissés par le de cujus est de $83,395.76, dont $57,075.00 de biens immobiliers.

7. Par Avis de Cotisation daté du 17 mai 1971, le Ministre de Revenu National avisait l’Appelante- qu'il avait établi une cotisation d’impôt de $3,036.75 en vertu de la Loi de l’impôt sur les biens transmis par décès.

8. L’Appelante en appela de la cotisation à la Commission de Révision de l’impôt qui rejeta l’appel par jugement daté du 6 novembre 1972.

9. La seule question en litige peut se formuler comme suit: la valeur des biens immobiliers appartenant au de cujus lors de son décès et comprise dans le calcul de la valeur globale nette est-elle déductible de cette dernière en vertu des alinéas 7(1)(a) ou 7(1)(b) de la Loi de l'impôt sur les biens transmis par décès pour établir la valeur globale imposable?

In this Court, the appellant abandoned his claim in so far as it was based on paragraph 7(1 )(b) of the Estate Tax Act.

The following provisions of the Estate Tax Act* [1] should be considered in connection with this appeal:

7. (1) For the purpose of computing the aggregate taxable value of the property passing on the death of a person, there may be deducted from the aggregate net value of that property computed in accordance with Division B such of the following amounts as are applicable:

(a) the value of any property passing on the death of the deceased to which his spouse is the successor that can, within six months after the death of the deceased or such longer period as may be reasonable in the circumstances, be established to be vested indefeasibly in his spouse for the benefit of such spouse, except any such property comprising a gift made by the creation of a settlement or the transfer of property to a trustee in trust;

(2) For the purposes of paragraph (1)(a), any superannuation, pension or death benefit payable or granted

(a) out of or under any fund or plan established for the payment of superannuation, pension or death benefits to receipients, or

(b) out of the revenue of Her Majesty in right of Canada or a province or under or subject to any Act of the Parliament of Canada or of the legislature of a province,

to the spouse of a deceased on or after the death of the deceased in respect of such death, subject to a provision that such benefit ceases to be payable to such spouse if he remarries, shall not, by reason only of such provision, be considered not to be vested indefeasibly i in him.

62. (1) In this Act

“settlement” includes

(a) any trust, whether expressed in writing or otherwise, in favour of any person, and, if contained in a deed or other instrument effecting the settlement, whether or not such deed or other instrument was made for valuable consideration as between the settlor and any other person, and

(b) any deed or other instrument under or by virtue of which a usufruct or substitution is created or any real property or estate or interest therein stands limited to any persons by way of succession:

As I see the matter, there are two hurdles that the appellant must surmount to succeed in this appeal, viz:

(a) it must be established that the “property” the value of which it is wished to deduct under paragraph 7(1)(a) was not “property comprising a gift made by creation of a settlement” (which by definition includes an “instrument under or by virtue of which . . . a substitution is created”) so as to be excluded from paragraph 7(1)(a) by the concluding words thereof, and

(b) it must be established that the “property” the value of which it is wished to deduct under paragraph 7(1)(a) was “vested inde- feasibly” in the widow “for the benefit of” the widow, or, as it is put in the French version, that the property was “dévolus irrévocablement à son conjoint au profit de ce dernier”.

If the appellant fails to surmount either of these hurdles, the appeal fails.

As I am of opinion that the appellant has failed to surmount the second hurdle, it is unnecessary for me to consider whether the first one has been surmounted.

Regardless of whether the will created a “substitution”, within the meaning of that word in the Civil Code of Quebec, when it gave to the widow the testator’s real property subject to the requirement that, if she remarried, the real property would pass to the children or the grandchildren at the time of the remarriage, a question concerning which there seems to be room for possible difference of opinion, there is agreement that the widow received the property under the will, not absolutely, but subject to title passing to the children or grandchildren if she remarried. In my view, such a will does not vest the property in the widow “indefeasibly”. A gift that is subject to being defeated or terminated on an event such as remarriage is defeasible and does not, therefore, fall within the principal part of paragraph 7(1){a). This is, as I understand it, the view expressed by the learned trial judge in the penultimate paragraph of his reasons for judgment, with which I agree.

In my view, the appeal should be dismissed with costs.

Choquette, DJ:—The essential facts and documents in this case are reported by the Chief Justice.

While not questioning the existence of a conditional substitution (Article 929 CC), I agree with the Chief Justice that for the purposes of this appeal, it is sufficient to invoke the last reason given by the judge of the division of first instance, namely that the immovables of the deceased were not “vested indefeasibly” in his spouse as required by paragraph 7(1)(a) of the Estate Tax Act, RSC 1970, c E-9.

To counter this argument, the appellant cites Article 892 of the Civil Code, and maintains that only the deceased could revoke the legacy of his property to his spouse, and since he did not do so during his lifetime, the legacy is now irrevocable. She concludes that if she remarries, it is she the widow, and not the deceased, who will cause the property to pass to her children.

I cannot accept this reasoning. lt was the testator himself who specified in clause 9 of his will that its provisions would be revoked should his widow remarry. If she does remarry, it will doubtless be of her own volition, but it will be by the wish of the testator that the property in question devolves upon his children or grandchildren.

The legacy in question amounts to a legacy subject to a resolutory condition: if the condition is fulfilled, action can be taken to revoke it (Article 893 CC).

The condition is valid, inasmuch as it requires—in addition to the will of the legatee—the performance of a certain act, namely a second marriage (Article 1081 CC).

In my view, the condition does not constitute an impairment of the basic right to marry or not to marry, as maintained by the appellant. The widow retains complete freedom in this respect. The testator for his part was merely exercising his right to dispose of his property as he saw fit, the condition being laid down in the interests of his children.

As fong as the condition remains possible and effective, the legacy remains revocable.

The appellant further maintains that if her right of ownership is subject to resolution or revocation, then she has only a simple interest in, or right of temporary enjoyment of, the property bequeathed. She requests that her assessment be revised accordingly.

In response it must be pointed out that it is the aggregate net value of all property passing on the death of a person that must be calculated for estate tax purposes, subject to the deductions allowed under the Act (c E-9).

The property in question forms part of the estate bequeathed by the testator at his death. The fact that the property is not “vested Indefeasibly” in his widow does not release his estate from the responsibility of paying an assessment based on the value of the property itself. It is as executrix and universal legatee, moreover, that the appellant is required to pay this assessment.

I would add one final reason relating to revocability. For the purposes of paragraph 7(1)(a), only superannuation, pension or death benefits payable to the spouse of a deceased subject to a provision that such benefit ceases to be payable to him if he remarries are to be considered not to be vested indefeasibly in him (subsection 7(2)). This means that in other cases—particularly that of a bequest of immovables—devolution is to be deemed revocable where there is such a provision.

The appellant’s other arguments relate to substitution. Since we adhere to the revocability argument, they need not be discussed.

The appellant is at liberty to complain of the harshness of the Act in her particular case—and her submission contains everything that could be said in her favour—but she cannot complain of a judgment that merely applies the Act.

Having said this, I will subscribe to the arguments of the Chief Justice, and in accordance with his conclusions I would dismiss the appeal with costs.