Gobeil v. Cie H. Fortier et al., [1982] 1 SCR 988

Supreme Court of Canada

Gobeil v. Cie H. Fortier et al., [1982] 1 S.C.R. 988

Date: 1982-06-23

Paul Gobeil Appellant;

and

La Cie H. Fortier, Emilien Porlier and Germain Neurhor Respondents;

and

The Registrar of Saguenay Division Registry Office Mis en cause;

and

Gaston Frenette, Charlotte Bergeron and the Clerk of the Provincial Court for the district of Quebec City Mis en cause ès qualité.

File No.: 16144.

1982: March 18; 1982: June 23.

Present: Laskin C.J. and Dickson, McIntyre, Chouinard and Lamer JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Bankruptcy—Immovable seized prior to bankruptcy—Judicial sale after bankruptcy but before copy of assignment filed—Purchaser in good faith—Procedure to suspend sale or terminate sheriffs proceedings not followed—Whether s. 51 of Bankruptcy Act applicable to judicial sales subsequent to bankruptcy—Bankruptcy Act, R.S.C. 1970, c. B-3, ss. 50, 51, 52, 53—Code of Civil Procedure, art. 569, 673, 688.

At a judicial sale a duly seized immovable was sold to the only bidder present for the sum of ten dollars. However, between the seizure and the sale the debtor had made an assignment of his property. Although he was aware of the assignment, the sheriff proceeded with the sale since he had not seen the notices prescribed by ss. 51(2) and 53 of the Bankruptcy Act, which had not been sent to the correct registry division by the trustee. In his capacity as trustee, appellant asked the Superior Court and the Court of Appeal to vacate the sheriff’s sale. This request was denied.

Held: The appeal should be dismissed.

The sale was neither void nor voidable on the ground that it was not made against the possessor as owner. The procedure of seizure and sale was validly performed, but the trustee did not take the appropriate action required by the Code of Civil Procedure (art. 673) or the Bankruptcy Act (ss. 51, 52, 53) to establish his rights and

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those of the creditors. In the case at bar, the sale could not be suspended: there was neither consent by the parties nor an order by a judge, and no objection. The sheriff was not sent a copy of the assignment and the assignment was not registered. Finally, as there was only one bidder, he had to be declared the purchaser (art. 688 C.C.P.).

Section 53 of the Bankruptcy Act does not apply to the case at bar. It follows from s. 51, which contemplates the possibility of a sheriff’s sale before receipt of a copy of the assignment, that it is not the bankruptcy itself, but the receipt of a copy of the assignment which operates to validate the rights of the trustee on behalf of the creditors and to terminate the sheriff’s proceedings. As the purchaser bought the immovable in good faith he acquired a good title against the trustee.

Héroux v. Banque Royale du Canada; St-Germain v. Nicholson, [1942] S.C.R. 1; Boileau v. Attorney General of Quebec et al., [1957] S.C.R. 463; Patton v. Morin (1865), 16 L.C.R. 267; Dufresne v. Dixon (1889), 16 S.C.R. 596; Brook v. Booker (1909), 41 S.C.R. 331 affirming (1907), 17 Que. K.B. 193; Vézina v. Lafortune (1918), 56 S.C.R. 246; American‑Abell Engine and Thresher Co. v. McMillan (1909), 42 S.C.R. 377; Gathercole v. Smith (1881), 17 Ch. D. 1, distinguished.

APPEAL from a judgment of the Court of Appeal of Quebec which affirmed a judgment of the Superior Court dismissing a motion to vacate the sheriff’s sale. Appeal dismissed.

Louis Huot and Jean Brunet, for the appellant.

Michel St-Hilaire, for the respondents.

English version of the judgment of the Court delivered by

CHOUINARD J.—In his capacity as trustee in bankruptcy of respondent Emilien Porlier, appellant is asking the Court to vacate the judicial sale of an immovable of the bankrupt.

This immovable was duly seized on September 12, 1975 in execution of a judgment obtained by respondent La Cie H. Fortier. The required notices were published, in particular in the Quebec Official Gazette on September 27, and it was established that the prescribed procedure was followed in the seizure and the sale. The sale was held on November 4, 1975 and the immovable was sold to respondent Neurhor. The sale was registered on

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November 6. Between the seizure and the sale, on September 25, 1975, respondent Porlier made an assignment of his property. The appointment of appellant as trustee, made on the same day, was confirmed by the first meeting of the creditors on October 15.

The following is a summary of the relevant facts, which the parties said they were willing to accept, by L’Heureux-Dubé J.A., rendering the unanimous judgment of the Court of Appeal, which upheld the Superior Court:

[TRANSLATION] Following the assignment of the debtor’s property, the trustee did not submit “the receiving order or assignment, or notice thereof” (ss. 52(1) and 53) but merely sent notices to stay proceedings to the debtor’s various creditors and to certain officers of the Court, including the Clerk of the Court, Courthouse, Quebec City (in case No. 200-02-002449-751, in which respondent La Cie H. Fortier had sued the debtor and obtained judgment), the Bankruptcy Clerk, Courthouse, Sept-Iles (in which the debtor had made an assignment of his property), and the registrar of the Saguenay registry division (judicial district of Mingan, in which the immovable at issue was located).

It appears that the immovable in question is located at Gallix, a municipality situated between Sept-Iles and Port-Cartier and in fact in the judicial district of Mingan, but in the registry division of Baie-Comeau, judicial district of Hauterive. As the prescribed notices were not sent where they legally should have been, that is in the registry division of Baie-Comeau, judicial district of Hauterive, the deputy sheriff, Charlotte Bergeron, was unable to learn of them and in fact did not learn of them before proceeding with the sale.

The bailiff Gaston Frenette, who had made the seizure for and on behalf of the creditor, respondent La Cie H. Fortier, on September 12, 1975, was told by counsel for the latter (by telephone) of the assignment of the property. He then wrote Mr. Legris, requesting written confirmation:

Could you kindly confirm in writing that the sale was stayed on account of the fact that defendant had made an assignment of all his property, so that we can close our file?

This letter was in the record at the time of the sale. For some reason which was not indicated, Mr. Legris took no action regarding it.

The bailiff Frenette was directed by the assistant sheriff to proceed with the sale. He told the latter of the

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assignment of the debtor’s property, but the assistant sheriff proceeded with the judicial sale nonetheless. The immovable (worth $18,000) was sold to the only bidder present, a professional buyer, for the sum of ten dollars ($10.00).

The Superior Court judgment dismissing the motion to vacate the sheriff’s sale is based on the provisions of the Bankruptcy Act, R.S.C. 1970, c. B-3. It further appeared from the decision of the Court of Appeal, affirming the judgment at trial, that appellant made two arguments in the latter Court based on the Code of Civil Procedure and one based on the Bankruptcy Act.

The first argument based on the Code of Civil Procedure, and dealt with in the Court of Appeal, rested on art. 698:

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.

In this Court appellant did not repeat the argument based on this article of the Code of Civil Procedure. He relied on the second argument based on the Code, and on that derived from the Bankruptcy Act (supra).

In the submission of appellant, these two arguments are based on an equal number of errors contained in the judgment of the Court of Appeal. I quote the submission of his counsel:

[TRANSLATION] We will now make a concise summary, the whole respectfully submitted, of what in the opinion of the undersigned counsel constitute errors in the judgment a quo. These are, in turn:

(1) The fact that it did not apply para. 3 of art. 569 of the Code of Civil Procedure, as the immovable property which was sold was not held as owner;

As appellant trustee had become owner under law of the immovable property which was to be sold, defendant bankrupt, the respondent Emilien Porlier, was no longer owner or possessor as owner;

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(2) The fact that it did not apply s. 53 of the Bankruptcy Act to the case at issue, and instead applied s. 51 of that Act;

We respectfully submit that a judicial sale is contemplated by one or more of the words used in s. 53 of the Bankruptcy Act, and in particular by the word “transfer”, and that in the case at bar, there was neither good faith nor, in particular, any adequate valuable consideration in this judicial sale, to such an extent that it is fundamentally void.

FIRST ARGUMENT: THIRD PARAGRAPH OF ART. 569 C.C.P.

Article 569 reads:

569. A creditor may seize and sell the moveable property of his debtor which is in the possession of the latter, that in his own possession and that in the possession of third parties who consent thereto.

He may, in all cases, seize by garnishment in the hands of a third party sums and effects due or belonging to the debtor.

He may also seize in execution the immoveable property of which the debtor is or is reputed to be in possession as owner.

Appellant did not dispute that at the time of the seizure the debtor held the immovable as owner. That was no longer the case when the sale took place, because the ownership had passed into his hands as trustee. [TRANSLATION] “Does the rule stated in para. 3 of art. 569 C.C.P. apply only to the time of seizure”, he asked, “or at the time of the sale as well?”

Appellant answered this question as follows:

[TRANSLATION] The words used in French are “saisir-exécuter”. This phrase is also found in paras. 1 and 3 of art. 569. It is true that in para. 3 of the said article, the English version states “He may also seize in execution”, but the text is even clearer in the translation of the words “saisir-exécuter” in para. 1 of the article: “seize and sell”.

We accordingly conclude that the para. 3 rule applies both to the seizure and the sale.

In support of this proposition appellant cited several cases in which a sale that could not be challenged on the grounds listed in arts. 698 et seq. C.C.P. (or the corresponding provisions of the earlier Code) was vacated in accordance with art.

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569 C.C.P., because ownership of either the movable or immovable property sold did not rest with the debtor: Héroux v. Banque Royale du Canada; St-Germain v. Nicholson, [1942] S.C.R. 1; Boileau v. Attorney general of Quebec et al., [1957] S.C.R. 463; Patton v. Morin (1865), 16 L.C. R. 267; Dufresne v. Dixon (1889), 16 S.C.R. 596; Brook v. Booker (1909), 41 S.C.R. 331 affirming the Court of Appeal for Quebec (1907), 17 Que. K.B. 193; Vézina v. Lafortune (1918), 56 S.C.R. 246.

However, in none of these cases are the facts similar to those in the case at bar, in which ownership allegedly changed hands between the seizure and the sale. In each case, at the time of the seizure the debtor was already not in possession as owner.

In Héroux (supra) which was chiefly relied on by appellant, Rinfret J., as he then was, rendering judgment for the Court, appeared to suggest by the language he used, in the submission of appellant, a distinction between the time of the seizure and the time of the sale, and so made possible the interpretation put forward by appellant. The latter cited, in particular, the following passages at p. 9:

But we can find nowhere, either in the doctrine or the jurisprudence, that judicial seizure and sale of moveable property not in the possession of a judgment debtor will deprive the true owner of his title and will confer on the adjudicataire a title which cannot be defeated and which he may oppose to the revendication of the true owner.

…

There was no lawful execution and adjudication of that moveable property within the meaning of arts. 665 and 668 C.C.P., because the property was not seized in the judgment debtor’s possession; but, on the contrary, it was in the physical possession of the North Western Timber Company Limited and, in fact, in the legal possession of the respondents themselves. There was no sale “under the authority of law” such as to give effect to art. 668 C.C.P. and to art. 2268 C.C., and the appellant adjudicataires cannot, for those reasons, prevent the revendication of the true owners, the respondents.

Aside from the fact that in that case, as counsel for respondent Neurhor pointed out, a seizure and

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a sale of movable property was involved, I see nothing in the passages cited to support appellant’s argument, or to suggest as he does that this is what Rinfret J. had in mind. Stating the question to be answered at the outset of his opinion, he wrote at p. 2:

The question is whether the owner of moveable property may revendicate it against the adjudicataire at a bailiff’s sale, when the seizure has taken place super non domino et non possidente.

This passage only contains the word “seizure”. I would add that the provision commented on by Rinfret J. throughout his opinion is the English version of art. 613 C.C.P. (now art. 569). It contains only the verb “seize”. The article read:

613. A creditor may seize in execution the moveable or the immoveable property of his debtor, in such debtor’s possession, as well as any corporeal moveables in the possession of the creditors or of third parties who consent thereto.

Further, art. 1587 C.C., which preserves for the evicted buyer his remedy against the prosecuting creditor “by reason of informalities in the proceedings, or of the seizure of property not ostensibly belonging to the debtor”, refers only to seizure. It does not deal with the title of the debtor at the time of the sale.

I do not mean by this that ownership does not pass to the trustee at the time of the assignment, and solely by operation of law. I will return to this point below. However, I would say that this does not have the effect, without more, of making a judicial sale void or voidable. The Code of Civil Procedure and the Civil Code do not operate in this way, and their provisions are not contradicted by the Bankruptcy Act (supra). In order to assert the rights vested in him, a trustee must take certain action which will be discussed below.

When the seizure has been validly made against the person possessing as owner, the procedure leading to sale becomes applicable. Article 673 C.C.P. provides that:

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673. The sale cannot be suspended except by the consent of the parties, by a judge’s order, or if there is an opposition.

In the case at bar the sheriff had no choice. There was no consent by the parties, order of a judge or opposition. The sale could not be suspended.

Then, art. 688 C.C.P. provides that: “The immoveable must be adjudged to the last bidder; when there is only one bidder, he must be declared the purchaser.” That is what happened.

However, appellant cited, finally, subs. 5 of s. 50 of the Bankruptcy Act (supra):

50. …

(5) On a receiving order being made or an assignment being filed with an official receiver, a bankrupt ceases to have any capacity to dispose of or otherwise deal with his property, which shall, subject to this Act and subject to the rights of secured creditors, forthwith pass to and vest in the trustee named in the receiving order or assignment, and in any case of change of trustee the property shall pass from trustee to trustee without any conveyance, assignment or transfer.

This subsection cannot be viewed in isolation. Moreover, it provides that the property of the bankrupt shall pass to and vest in the trustee forthwith “subject to this Act”. Subsections (6) and (7) of s. 50 provide:

(6) The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights that are not in conflict with this Act, and the trustee is entitled to avail himself of all rights and remedies provided by such law or statute as supplementary to and in addition to the rights and remedies provided by this Act.

(7) No receiving order or assignment or other document made or executed under authority of this Act shall, except as in this Act otherwise provided, be within the operation of any legislative enactment now or at any time in force in any province of Canada relating to deeds, mortgages, judgments, bills of sale, chattel mortgages, property or registration of documents affecting title to or liens or charges upon property, real or personal, immovable or movable.

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Subsection (2) of s. 51 provides that a sheriff who has seized the property of a bankrupt shall “upon receiving a copy of the assignment or of the receiving order certified by the trustee as a true copy thereof”, forthwith deliver to the trustee all the property of the bankrupt in his hands. The sheriff must therefore deliver the property only on receiving a copy of the assignment. In the case at bar, he received none. If, however, the sheriff, as in the case at bar, has sold the property, he must under s. 51(3) deliver to the trustee the money so realized, and this is what the Superior Court judgment ordered him to do.

Subsection (1)

of s. 52 provides that the trustee may cause a copy of the assignment to be registered on the immovables of the bankrupt in the appropriate registry office. Under subs. (2) of s. 52, the trustee is at the same time entitled to be registered as owner of the immovable. None of this was done in the case at bar.

Section 53 provides, finally, that the property of a bankrupt may even be disposed of to a bona fide purchaser for adequate valuable consideration “unless the receiving order or assignment, or notice thereof, or caution, has been registered against the property in the proper office prior to the registration …”

On registration in particular, Duncan and Honsberger, Bankruptcy in Canada, 3rd ed., 1961, wrote at p. 412:

A trustee is now in the same position as to registration for the purpose of giving notice as any other person claiming an interest in land which he desires to protect and the duty is now imposed on a trustee to protect any interest he may have, by registering promptly a copy of the assignment or receiving order pursuant to section 43(1), or a caveat as provided for by section 43(3).

In the case at bar, the procedure of seizure and sale was validly performed, there was neither consent by the parties nor an order by a judge, no opposition was served on the sheriff, he was not sent a copy of the assignment and the assignment was not registered. The sale could not be suspended (art. 673 C.C.P.) and as there was only one bidder he had to be declared the purchaser (art.

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688 C.C.P.). This sale was neither void nor voidable on the ground that it was not made against the possessor as owner.

SECOND ARGUMENT: S. 53 OF THE BANKRUPTCY ACT

It is necessary to cite in their entirety ss. 51, 52 and 53 of the Bankruptcy Act, which as counsel for respondent Neurhor submitted, must be read as a whole:

51. (1) An execution levied by seizure and sale of the property of a bankrupt is not invalid by reason only of its being an act of bankruptcy, and a person who purchases the property in good faith under a sale by the sheriff acquires a good title thereto against the trustee.

(2) Where an assignment or a receiving order has been made, the sheriff or other officer of any court or any other person having seized property of the bankrupt under execution or attachment or any other process shall, upon receiving a copy of the assignment or of the receiving order certified by the trustee as a true copy thereof, forthwith deliver to the trustee all the property of the bankrupt in his hands.

(3) Where the sheriff has sold the property of the bankrupt or any part thereof, he shall deliver to the trustee the money so realized by him less his fees and the costs referred to in subsection 50(2).

(4) Any property of a bankrupt under seizure for rent or taxes shall on production of a copy of the receiving order or the assignment certified by the trustee as a true copy thereof be delivered forthwith to the trustee, but the costs of distress are a first charge thereon, and, if such property or any part thereof has been sold, the money realized therefrom less the costs of distress and sale shall be paid to the trustee.

52. (1) Every receiving order, or a true copy thereof certified by the registrar or other officer of the court that made it, and every assignment, or a true copy thereof certified by the official receiver, may be registered by or on behalf of the trustee in respect of the whole or any part of any real or immovable property that the bankrupt owns or in which he has any interest or estate in the proper office in every district, county and territory wherein, according to the law of the province in which such real or immovable property is situated, deeds or transfers of title and other documents relating to lands or immovables or any interest therein may be registered.

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(2) Where a bankrupt is the registered owner of any land or charge, the trustee, on registration of the documents referred to in subsection (1), is entitled to be registered as owner of the land or charge free of all encumbrances or charges mentioned in subsection 50(1).

(3) Where a bankrupt owns any land or charge registered under a Land Titles Act or has or is believed to have any interest or estate therein, and for any reason a copy of the receiving order or assignment has not been registered as provided in subsection (1), a caveat or caution may be lodged with the proper master or registrar by the trustee, and any registration thereafter made in respect of such land or charge is subject to such caveat or caution unless it has been removed or cancelled under the provisions of the Land Titles Act under which such land or charge or interest is registered.

(4) Every registrar to whom a trustee tenders or causes to be tendered for registration any receiving order or assignment or other document shall register it according to the ordinary procedure for registering within such office documents relating to real or immovable property.

53. Notwithstanding anything in this Act, a deed, conveyance, transfer, agreement for sale, mortgage, charge or hypothec made to or in favour of a bona fide purchaser or mortgagee for adequate valuable consideration and covering any real or immovable property affected by a receiving order or an assignment under this Act, is valid and effectual according to the tenor thereof and according to the laws of the province in which the said property is situated as fully and effectually and to all intents and purposes as if no receiving order or assignment had been made under this Act, unless the receiving order or assignment, or notice thereof, or caution, has been registered against the property in the proper office prior to the registration of the deed, conveyance, transfer, agreement for sale, mortgage, charge or hypothec in accordance with the laws of the province in which the property is situated.

Respondent Neurhor submitted that it is s. 51 which applies in the case at bar, and under subs. (1), as he purchased the immovable in good faith at a sale made by the sheriff, he acquired a good title against the trustee.

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Appellant submitted that s. 51 only applies in the case of a judicial sale made before the bankruptcy. He argued that it is s. 53 which applies in the case of a judicial sale made after the bankruptcy. In his view, the judicial sale constitutes a “transfer” within the meaning of s. 53, and in order for this transfer made before registration of the assignment in the proper registry office to be valid, it must have been made in favour of a bona fide purchaser and for adequate valuable consideration. Appellant further submitted that in the case at bar there was neither good faith nor adequate valuable consideration, with the result that the transfer is void.

I will dispose at once of the question of good faith, with application both to s. 51, where good faith is the only condition required, and to s. 53.

In this regard the Superior Court judge wrote:

[TRANSLATION] Germain Neurohr [sic] bought these immovables at auction: he complied with the procedure prescribed for such a sale; he therefore cannot be accused of bad faith. There is further no evidence that he acted in bad faith.

For the Court of Appeal, L’Heureux-Dubé J.A. wrote:

[TRANSLATION] The evidence here shows clearly that the purchaser was in good faith and that he was sold the immovable because he was the only, and thus the highest, bidder.

This twofold ruling by the Superior Court and the Court of Appeal disposes of the question of respondent Neurhor’s good faith, and there is no need to discuss the matter further.

As mentioned above, appellant contended that s. 51 applied only in the case of a judicial sale prior to bankruptcy. He based this conclusion on the presence of the following wording at the beginning of subs. (1) of that section: “An execution levied by seizure and sale of the property of a bankrupt is not invalid by reason only of its being an act of bankruptcy”, and on his analysis of the other subsections of s. 51, to which I will return.

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As to s. 53, appellant first noted these words at the beginning: “Notwithstanding anything in this Act”, so that in his opinion this section, if it can be applied to a judicial sale, must take precedence over s. 51. In his submission it is the word “transfer” which makes the section extend to a judicial sale. He argued that this word has a very wide meaning which goes beyond some dictionary definitions, and he cited a decision of this Court, American‑Abell Engine and Thresher Co. v. McMillan (1909), 42 S.C.R. 377, in which Duff J., as he then was, at p. 394 cites the following passages from James L.J. and Lush L.J. in Gathercole v. Smith (1881), 17 Ch. D. 1:

Now “transfer” is one of the widest terms that can be used. It appears to me that very word was used by the legislature not only to prevent the incumbent from assigning himself, but for preventing any transfer by operation of law in invitum—not only to prevent a voluntary dealing by an incumbent with an annuity, but to prevent the annuity vesting in a trustee in bankruptcy, or being seized or attached under a garnishee order, by an execution creditor, or otherwise transferred. [James L.J., at p. 7]

…

Clearly the words “shall not be transferable at law or in equity” do say that he shall not be at liberty to encumber it either directly by assignment or indirectly by suffering a judgment. [Lush L.J., at p. 10].

The latter case concerned a pension of a retired minister of religion, and the applicable statute provided that such a pension “shall not be transferable at law or in equity”. The debtor of the pension, who was the pensioner’s creditor, sought to withhold the pension to set off against his claim. It was held that the pensioner could not himself transfer his pension, that the pension was not subject to attachment and that the debtor of the pension could not keep it to set off against his claim against the pensioner.

In American-Abell (supra) the question was whether the contract by which McMillan gave his property as security for a debt constituted a transfer within the meaning of s. 142 of the Dominion Lands Act, R.S.C. 1906, c. 55.

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Both cases concerned something quite different from a judicial sale. Additionally, no decision has been cited relating to a judicial sale and holding that it is s. 53 which applies to a judicial sale subsequent to bankruptcy.

I consider that it is in fact s. 51 which applies.

The aforementioned wording at the beginning of subs. (1) of s. 51 is only there, in the submission of appellant, because that section is based on a corresponding section of the British statute, where its addition became necessary, and he explains:

[TRANSLATION] This section is in fact designed to preserve the validity of a sale at auction before bankruptcy to a bona fide purchaser, although this sale constitutes an act of bankruptcy. By their very nature, the acts of bankruptcy listed in s. 24 clearly and exclusively apply to circumstances arising not only before the bankruptcy but in fact before the petition in bankruptcy. It may be asked why the need was felt to validate a judicial sale taking place before the bankruptcy, since under s. 50 the principle is to make them impossible from the date of bankruptcy onwards. The explanation for this provision is purely historical.

It is copied from an analogous provision in the British statute, which made the effect of total avoidance produced by the bankruptcy retroactive not only to the date of the petition or the receiving order, but to the date of the act of bankruptcy, which had occurred long before. However, as the consequence of a judicial decision noting that this solution was sometimes unfair, an attempt was made to correct it. In Canada, where bankruptcy takes effect either on the date of the petition or on the date of the receiving order (s. 50(4)), this provision is not applicable.

These words may not have been necessary and may not have the same application as in the British statute, but it does not follow that they have the effect of making s. 51(1) applicable only to judicial sales made before bankruptcy.

The subsection may quite easily be read as laying down two rules, first that a person who buys the property of a bankrupt in good faith at a sheriffs sale acquires a good title to that property as against the trustee, and second, that such a sale is not invalid solely on the ground that it is an act of bankruptcy.

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Houlden and Morawetz, Bankruptcy Law of Canada, 1960, write regarding this subsection at p. 128:

A bona fide purchaser at a sheriffs sale acquires good title to the goods purchased as against the trustee in the bankruptcy of the former owner: Sec. 42(1).

Subsection (1) itself makes no distinction between sales before and after bankruptcy.

In my opinion, the fact that no mention is made of “adequate valuable consideration” as in s. 53 tends to confirm this interpretation. It is consistent with the Code of Civil Procedure, which at the time required no minimum amount for a judicial sale and which provided in art. 688 that “when there is only one bidder, he must be declared the purchaser”.

Subsection (2) provides that the sheriff shall “upon receiving a copy of the assignment” deliver the property of the bankrupt in his hands to the trustee. This suggests that until he receives a copy of the assignment, he is to continue with his proceedings.

The subsection immediately following provides that where the sheriff has sold the property or any part thereof, not, in my opinion, before the bankruptcy as appellant argued, but before what is provided for in s. 51 itself occurs, namely receipt of a copy of the assignment by the sheriff, the latter shall deliver the money so realized to the trustee.

Similarly, subs. (4) provides that on production of a copy of the assignment “Any property of a bankrupt under seizure for rent or taxes shall […] be delivered forthwith to the trustee”, and if such property or any part thereof has been sold, the money realized therefrom shall be paid to the trustee. Here again, it is the production of a copy of the assignment which is conclusive, and since we are dealing with property sold before that time, this does not exclude a sale of property made after the bankruptcy but before a copy of the assignment is produced.

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It follows from this analysis that the possibility of a sheriff’s sale before receipt of a copy of the assignment was contemplated. It is not the bankruptcy itself, but the receipt of a copy of the assignment which operates to validate the rights of the trustee on behalf of the creditors and to terminate the sheriff’s proceedings.

The price of $10 is unquestionably astonishing in the circumstances. It is no less surprising that when the sale took place none of the hypothecary creditors were present: initially, their claims had a nominal value exceeding $60,000. It was of course through error that appellant failed to perform the acts required to enforce the rights of the creditors, but the fact remains that respondent Neurhor bought this immovable in good faith at a sale held by the sheriff and that he acquired a good title against the trustee.

For these reasons I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Létourneau & Stein, Quebec.

Solicitor for the respondent Germain Neurhor: Gaston Hébert, Hauterive.