Gingras et al. v. Gagnon, [1977] 1 SCR 217

Supreme Court of Canada

Gingras et al. v. Gagnon, [1977] 1 S.C.R. 217

Date: 1975-03-26

Paul Gingras, in his capacity of trustee in bankruptcy of the Quebec Investment Corporation Appellant;

and

Les Immeubles Adams Inc. (Intervenor) Appellant;

and

Jean-Marc Gagnon Respondent.

1974: March 22; 1975: March 26.

Present: Martland, Pigeon, Dickson, Beetz and deGrandpré JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Hypothecs—Vendor’s privilege—Giving in payment clause—Creditor standing security in favour of debtor in a later deed involving the hypothecated immovable—Vendor’s security not mentioned in second deed—Is intervention equivalent to waiver?—Interpretation of a deed in authentic form is a question of law—Civil Code, art. 1592 and 2081—Code of Civil Procedure, art. 805.

Respondent Gagnon sold an immovable which he had acquired from one Albert Bouchard and which was burdened with a debt in Saul Garneau’s favour at the time of the purchase, to A.B. Motel Inc., a company created by Gagnon and in which he held 9,997 of the 10,000 shares. Payment of the balance on the purchase price was guaranteed by hypothec and vendor’s privilege in favour of respondent. A.B. Motel Inc. subsequently borrowed $7,000 from the Quebec Investment Corporation by a deed of obligation which mentioned the charges of Bouchard and Garneau but not Gagnon’s security, and which also contained a giving in payment clause. Gagnon appeared with the deed and stood surety to the creditor. A.B. Motel Inc. later made an assignment of its property. The creditor availed itself of the giving in payment clause, and a judgment of the Superior Court declared it to be the owner of the immovable and declared the immovable to be “free and clear from all rights and privileges other than those” of Bouchard and Garneau. The Quebec Investment Corporation itself made an assignment of its property and appellant was appointed trustee in this bankruptcy. In this capacity he sold the immovable to appellant, Les Immeubles Adams Inc. He then submitted a motion to have Gagnon’s privilege cancelled pursuant to art. 805 of the Code of Civil Procedure, alleging that the hypothec had become

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extinct because “the succession of events related” in the action “constitutes an express as well as a tacit remission”, which makes para. 4 of art. 2081 of the Civil Code applicable. This motion was dismissed. On appeal, Les Immeubles Adams Inc. intervened in support of the trustee’s contentions, which were dismissed. Hence the appeals to this Court.

Held (Dickson and de Grandpré JJ. dissenting): The appeals should be allowed.

Per Martland, Pigeon and Beetz JJ.: Tacit renunciation results from unequivocal facts which necessarily imply an intention by the creditor to cancel claims on the immovable. Further, the renunciation is strictly interpreted if there is any doubt as to its scope. The fact to be considered is the text of a deed in authentic form. Respondent is not only a witness to the deed. He intervened to stand surety for A.B. Motel Inc. for the performance of all clauses and conditions contained in the deed. In the deed the immovable is declared “free from any hypothec or incumbrance whatever”, except for the three debts which do not include that of respondent. Secondly, a giving in payment clause is included in the deed. Article 1592 of the Civil Code provides that the giving of a thing in payment is equivalent to a sale of it. If giving in payment is equivalent to a sale, the giving in payment clause can be likened to a conditional promise of sale. By his intervention respondent, in addition to standing surety for the principal debt, also approved the conditional promise of sale, and even guaranteed its performance, that is to say that in the event of default by the borrower, the immovable would be transferred to the lender free from any hypothec or incumbrance whatever except for the debts described in the deed, which did not include his own. He also gave the borrower a guarantee against eviction, including eviction which might result from enforcement of his own security. By implication, respondent’s intervention entailed at least a conditional undertaking to waive the security held on the immovable. When the condition was fulfilled, that is, by the default of the borrower and the election of the lender to avail itself of the giving in payment clause, the waiver took effect.

Per Dickson and de Grandpré JJ., dissenting: An express waiver of a hypothec must be contained in a document which in and of itself indicates the decision of the hypothecary creditor to waive the special protection he enjoys. The mere fact that the lower courts did not see in the deed in question a clear waiver of this hypothecary protection by the creditor establishes beyond any doubt that this cannot be an express waiver. If it exists, therefore, the waiver alleged by appellants may only be tacit. As such (a) it is primarily a question

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of fact; (b) it must be clearly apparent from the proven facts; (c) it places a very heavy onus on the party making the allegation. The deed relied on by appellants must not be given a rigid construction divorced from reality. If respondent had intended to make the remission of hypothec but retain his debt as an ordinary debt, he would have included the amount of the hypothec in his proofs of claims to the trustee. However, he did not do this, as his proofs of claims related to other expenses and advances made by him on behalf of A.B. Motel Inc.

[Belle-Isle Lumber v. Craft Finance Corp., [1966] Que. Q.B. 135, aff. [1966] S.C.R. 661, distinguished; London Life Insurance Co. v. Benoit (1939), 66 Que. Q.B. 483; Plouffe et Cie Ltée v. Aubin (1931), 50 Que. Q.B. 280, referred to.]

APPEALS from a decision of the Court of Appeal of the Province of Quebec[1], affirming a judgment of the Superior Court. Appeals allowed, Dickson and de Grandpré JJ. dissenting.

P. Jolin, for the appellant Gingras.

R. Truchon, for the appellant Les Immeubles Adams Inc.

J.R. Laffoley, for the respondent.

The judgment of Martland, Pigeon and Beetz was delivered by

BEETZ J.—The Court has to decide whether respondent Gagnon waived a vendor’s privilege in his favour on an immovable purchased by Les Immeubles Adams Inc. from appellant Gingras, the trustee in bankruptcy of Quebec Investment Corporation. The trustee is seeking to have the registration of this privilege cancelled pursuant to art. 805 C.C.P. The Superior Court of Quebec dismissed the motion by the trustee, who appealed. After the appeal was entered Les Immeubles Adams Inc. intervened in support of the trustee’s contentions. By a majority decision the Court of Appeal upheld the judgment of the Superior Court. Appellants now appeal against the decision of the Court of Appeal.

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On June 22, 1961 respondent Gagnon sold an immovable to A.B. Motel Inc.; payment of a sum of $30,000, the balance on the purchase price, was guaranteed as follows:

[TRANSLATION] TO guarantee payment of the aforesaid balance on the purchase price, and interest, the aforementioned immovable sold hereby shall remain specially hypothecated in favour of the vendor by a vendor’s privilege.

—This clause speaks of both a hypothec and a privilege; I am inclined to think that the intention was merely to emphasize the existence of a vendor’s privilege, rather than to create a special hypothec, but this does not affect the outcome of the litigation.—

On June 18, 1963 A.B. Motel Inc. borrowed $7,000 from Quebec Investment Corporation, and to guarantee repayment it hypothecated the immovable previously purchased from Gagnon. The following statement by the borrower was included in the deed of obligation:

Statement of debtor

The debtor makes the following statement, which is essential to this loan, to wit:

That it has good and valid title to the property, free from any hypothec or incumbrance whatever;

Apart from the debts stated:

There then follows a description of three charges on the property in favour of Saul Garneau, Albert Bouchard and Quebec Investment Corporation respectively. The deed makes no mention of Gag-non’s security. The deed further contains a giving in payment clause:

[TRANSLATION] In the event of failure by the debtor to perform any of its obligations under this deed, for a period of ninety days, or if the said property is seized in execution of a judgment, the creditor shall, on giving notice to the debtor or to the registered owner or owners that, in accordance with then provisions of this clause, the creditor exercises the privilege of becoming owner of the property, then become absolute owner ipso facto of the said property, free and clear from all rights, hypothecs, privileges and incumbrances made subject to hypothecs in favour of the creditor, with retroactive effect to the date of these presents, the whole in full settlement of all amounts owed under this deed, and

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with no entitlement to indemnity or compensation on any grounds whatever.

Finally, the deed mentions a twofold intervention:

The following have also appeared herewith:

[TRANSLATION] Messrs. Jean Joseph Fortin of Quebec City, industrialist, and Jean-Marc Gagnon, of St-Félicien, Lac St-Jean, industrialist; The aforesaid persons, to whom these presents have been read, do hereby jointly and severally stand surety to the creditor for the repayment of the aforesaid amount of seven thousand dollars ($7,000), and interest on the same, and for the performance of all clauses and conditions contained in this deed.

The intervenors further state that they renounce the benefit of division and discussion.

On October 26, 1966 A.B. Motel Inc. made an assignment of its property. Appellant Gingras was appointed trustee in bankruptcy. As A.B. Motel Inc. had defaulted on its debts the creditor, Quebec Investment Corporation availed itself of the giving in payment clause cited above; a judgment of the Superior Court dated March 17, 1967 declared it to be owner of the immovable, and declared the immovable to be “free and clear from all rights and privileges other than those” of Saul Garneau and Albert Bouchard.

On July 19, 1967 Quebec Investment Corporation itself made an assignment of its property and appellant Gingras was also appointed trustee in bankruptcy. On September 7, 1967, Gingras, in his capacity of trustee in bankruptcy of Quebec Investment Corporation, sold the immovable to appellant Les Immeubles Adams Inc. He then submitted the motion to cancel which is the subject of this appeal.

Initially, appellant Gingras alleged that Gagnon had given a general release to A.B. Motel Inc. by accepting 9,000 ordinary shares of that company in payment; the trial judge, basing himself on the preponderance of evidence, correctly dismissed that argument, to which no reference is made in the reasons of the judges of the Court of Appeal. Appellants have not pressed the point in this Court; they have emphasized that Gagnon was a shareholder of A.B. Motel Inc. at the time of his

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intervention in the deed of June 18, 1963, but the evidence is not clear on this point.

Appellant Gingras further contends that Gagnon renounced his privilege by his intervention in the deed on June 18, 1963. He argues that the renunciation was re-affirmed by the fact that Gagnon, having been appointed inspector in the bankruptcy of A.B. Motel Inc., and being present at meetings where the hypothecs of Saul Garneau and Albert Bouchard were discussed, never mentioned his own privilege and submitted no claim to the trustee.

The Superior Court found there had been no renunciation, explaining the actions of Gagnon by his lack of business know-how, rather than his intention to renounce his security. In the Court of Appeal the majority upheld the Superior Court, and saw Gagnon’s intervention as indicating only an intention to stand surety for A.B. Motel Inc. at the lender’s request, but not on intention to renounce his security; the Chief Justice of Quebec, dissenting, based himself on art. 2048 C.C. and concluded that by intervening in the deed Gagnon must be deemed to have ceded his preference to Quebec Investment Corporation, and further that the wording of the surety demonstrated the intention of Gagnon to renounce his security.

Paragraph 4 of art. 2081 C.C. provides that “Privileges and hypothecs become extinct:… By the express or tacit remission of the privilege or hypothec”. This provision is taken from Pothier, who writes [TRANSLATION] “A hypothec becomes extinct by the express or tacit remission of his hypothec right by the creditor”: Traité de l’hypothèque, No. 192. The Civil Code of Quebec is more explicit on this point than the Code Napoleon—art. 2180—which makes no mention of tacit remission, although the latter is accepted in French law. Tacit renunciation results from unequivocal facts which necessarily imply an intention by the creditor to cancel claims on the immovable. Further, the renunciation is strictly interpreted if there is any doubt as to its scope. Learned writers indicate, inter alia, that the renunciation must be limited to the right to claim the surrender of the property from third parties, when it is not clearly apparent from the terms of

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the deed that the creditor intended to renounce all attributes of the hypothec (Laurent, v. XXXI, No. 375; Martou, Des privilèges et hypothèques, IV, No. 1340; Baudry-Lacantinerie and de Loynes, v. 26, No. 2262). They generally agree in stating that there is a tacit renunciation of the security where the creditor intervenes in or consents to the sale of the immovable hypothecated to him, provided there is no other explanation of his presence or consent to the deed. (J. CI. Civil, art. 2180, “Hypothèques”: Sec. Z, pp. 60-61; Aubry and Rau, v. III, 292, p. 663; Troplong, Privilèges et hypothèques, v. IV, No. 871; Baudry-Lacantinerie and de Loynes, v. 26, No. 2262; Planiol and Ripert, v. XIII, no 1323.)

Pothier also considers there is tacit remission

[TRANSLATION] where the creditor has allowed the debtor to subject the thing hypothecated to a further hypothec: since, as the debtor had no need of the consent of the first creditor to create in favour of a second creditor a hypothec which would in any case be subordinated to the first hypothec, the consent of the first creditor can hardly be regarded as given and required for any other purpose than to remit his hypothec.

In the latter case, however, the intent of the parties may be considered and the circumstances weighed to determine whether the earlier creditor, in consenting to have the thing which was hypothecated to him subjected to a further hypothec, intended absolutely to remit his hypothec right, or merely to give up his rank to the new creditor, without however remitting his hypothec.

Ordinarily, however, the presumption is that a creditor who has consented to a further hypothec has remitted his own:…

In order that the consent which the creditor gives to alienation or to a further hypothecation of the thing hypothecated, entail a tacit remission of his hypothec right, that consent must be formally given.

Op. cit. Nos. 195 and 196.

Troplong maintains that a creditor who signs a deed whereby a debtor hypothecates the immovable to another party, and declares that it is free and clear, is deemed to renounce his hypothec (Privilèges et hypothèques, v. IV, No. 871).

Pothier is more explicit: regarding a deed of purchase or obligation containing a clause that the

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land is free of hypothec, subscribed to by a creditor as a witness only, he considers that the creditor must be held to have absolutely waived his hypothec; and he adds:

[TRANSLATION] If there is any doubt that the creditor must be assumed to have absolutely waived his hypothec by subscribing to the deed containing this clause, there is at any rate no question that he cannot rely on it as against the buyer to whom the land has been sold, or against the other creditor to whom it was hypothecated by this deed; since, while he may not have intended to waive his hypothec, he cannot avoid the consquences of having, by his dissimulation, acted together with the debtor to mislead the aforesaid purchaser or the other creditor; for this reason they may raise against him the exception of fraud.

The signature of a creditor on a deed which states that a certain land of his debtor is not subject to any hypothec may, however, have no prejudicial effect on his hypothec right; that is, where there are grounds for presuming that he appended his signature without the deed having been read; as e.g. where he has signed a contract of marriage honoris causa, solely in the capacity of a relative or friend.

Op. cit., No. 197. (Emphasis is mine.)

Of course, it must be kept in mind that registration did not exist in Pothier’s days, but on the other hand, in principle, the law of registration does not have the effect of making a particular type of waiver valid under the earlier law invalid at the present day.

As a general rule the question of whether the actions of a creditor demonstrate his intention to waive his security is a question of fact which is best decided by the judges of fact (Planiol and Ripert, v. 13, No. 1323). And this is precisely one of the principal arguments relied on by respondent Gagnon. He contends that this Court should not intervene because, he says, it is a question of fact on which the Superior Court and Court of Appeal were in agreement, holding that there had been no waiver on his part.

However, the “fact” to be considered in the case at bar is actually the text of a deed in authentic form. This text must be interpreted, its meaning and effects determined, and this is a question of law. Where an individual intervenes in a deed in order to assume obligations, his intent must not be

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judged from his own subjective point of view—except in cases where he can plead mistake, fraud or violence—but first and foremost in accordance with the objective meaning which the text subscribed by him may have for those who are called upon to read it. If the text is clear, expressly or by implication, it is conclusive and there is nothing to be considered by the judges of fact. What is at stake is the security of contract.

To resolve the issue it is necessary, and in my view sufficient, to consider the effect of the intervention by Gagnon in the deed of June 18, 1963, and the nature of the obligations the performance of which he guaranteed. Gagnon was not, as in the example given by Pothier, merely a witness to the deed. The majority on the Court of Appeal held that he intervened in order to stand surety for A.B. Motel Inc. This obvious conclusion emerges not from consideration of the facts, but from a reading of the deed. One must, however, read further, and see what obligations Gagnon was undertaking by the terms of the deed, and what he was standing surety for. He was standing surety for “the performance of all clauses and conditions contained in this deed”. In the deed, as indicated above, the borrower, in the first place, makes a statement “essential to this loan”, to the effect that the immovable is “free from any hypothec or incumbrance whatever”, except for the three debts therein described. No reference is made to Gag-non’s security. Secondly, a giving in payment clause provides that in the event of default by the borrower and of a decision by the creditor to exercise the option, the latter “shall… then become absolute owner ipso facto of the said property, free and clear from all rights, hypothecs, privileges and charges made subject to hypothecs in favour of the creditor, with retroactive effect.”

Article 1592 C.C. provides that the giving of a thing in payment is equivalent to a sale of it; and sale entails a warranty against eviction. If giving in payment is equivalent to a sale, the giving in payment clause can be likened to a conditional promise of sale. In the case at bar the borrower, A.B. Motel Inc., promised for all practical purposes to sell the immovable in the event that a

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condition was fulfilled, namely failure by it to perform any of its obligations. By his intervention Gagnon, in addition to standing surety for the principal debt, also approved the conditional promise of sale, and even guaranteed its performance as surety, which is equivalent to saying that he guaranteed that in the event of default by the borrower the immovable would be transferred to the lender free from any hypothec or incumbrance whatever, apart from the three debts described in the deed, which did not include his own. He also gave the borrower a guarantee against eviction, including eviction which might result from enforcement of his own security. How then can he retain the latter once borrower has become owner of the immovable? In the circumstances, I have choice but to conclude that, by implication, this intervention entailed at least a conditional undertaking to waive the security held on the immovable. When the condition was fulfilled-first, by the default of the borrower, and second, by the election of the lender to avail itself of the giving in payment clause—the waiver took effect.

The question raised by this appeal is somewhat analogous to that decided in London Life Insurance Co. v. Benoit[2]; a wife who held a hypothec on the immovable of her husband had approved an express assignment of priority on the hypothec in favour of the plaintiff, and had further stated that she approved all stipulations in the deed in which she intervened; as the deed contained a giving in payment clause in the event of default by the husband, it was held that the wife intended to abide by this, and hence to have approved the possible loss of her hypothec right if her husband did not pay. It was held that such an undertaking was absolutely void in view of the former art. 1301 C.C.

Furthermore, the facts of the case at bar differ from those in Belle-Isle Lumber v. Craft Finance Corp.[3]: the beneficiary of a giving in payment clause was assigned priority of rank by suppliers of materials, but neglected to secure from the latter a

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waiver of their privilege in the event that it exercised its rights under the giving in payment clause; having elected to rely on the giving in payment clause it could not then benefit from priority on the hypothec, which it could have done had it proceeded by an action on the hypothec alone.

As my opinion on this point suffices to dispose of the suit, it does not appear necessary for me to decide whether there was, first, an implied assignment of priority of rank, as a result of Gagnon’s consent to the immovable being hypothecated to a third party, and subsequently, extinction of Gagnon’s security when the creditor benefiting from the assignment of rank decided to enforce the giving in payment clause: Plouffe et Cie Liée v. Aubin[4]. Finally, it is not necessary to decide whether Gagnon, by standing surety on the deed by which the debtor hypothecated the immovable—which was stated to be free of any incumbrance or hypothec, except for the three debts specifically described—not only implicitly assigned his rank but unconditionally waived his security.

It was noted by the Superior Court and Court of Appeal that a simple title search would have disclosed the existence of Gagnon’s security. That is so. However, this in no way alters the only interpretation that can be placed on Gagnon’s intervention: had there been a title search and discovery of Gagnon’s security, the same language could still have been used to obtain waiver of his security, at least conditionally.

It was also noted by the Court of Appeal that the notary who recorded the deed had stated he did not know whether Gagnon read it before signing it. Nonetheless, the deed contains a statement that “the aforesaid persons, to whom these presents have been read, do hereby jointly and severally stand surety to the creditor”, and respondent did not demand improbation.

I would allow the appeals; set aside the judgments of the Court of Appeal and of the Superior Court; grant the motion of appellant Paul Gingras; allow the intervention of appellant Les

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Immeubles Adams Inc. in the Court of Appeal; declare to be extinguished the hypothec created in favour of respondent on June 22, 1961, on the immovable described in the motion of appellant Paul Gingras, by a deed bearing No. 10824 of the minutes of Claude Taschereau, notary, and registered at Quebec City on June 29, 1961 as No. 491-721; and order the Registrar of the Quebec City Registry Office to register the present judgment, the whole with costs throughout against respondent.

The judgment of Dickson and de Grandpré JJ. was delivered by

DE GRANDPRÉ J. (dissenting)—In his capacity of trustee in bankruptcy of the Quebec Investment Corporation appellant Gingras, by a motion in accordance with art. 805 C.C.P., is asking that a hypothec for $30,000, made in favour of respondent on June 22, 1961 and duly registered on the immovable described in the motion, be cancelled. The motion alleges that the hypothec became extinct because “the succession of events related” in the action “constitutes an express as well as a tacit remission”, which makes para. 4 of art. 2081 C.C. applicable. In the Court of Appeal appellant Adams, the purchaser of the immovable, intervened in support of this contention, and I shall refer to the appellants collectively (unless the context requires otherwise).

The Superior Court refused to view the matter as involving anything but a possible implied waiver:

[TRANSLATION] It remains for the Court to consider whether it is true that, as applicant maintains, Jean-Marc Gagnon implicitly waived his hypothecary claim. If that is so, he made his company a present of some $30,000.

The majority on the Court of Appeal adopted the same approach; and Turgeon J.A., speaking for the majority had this to say:

[TRANSLATION] It is well established that tacit remission or waiver is inferred from certain actions taken by the creditor: those actions must be such as to necessarily imply an intention to waive the hypothec. They must be of an unequivocal nature, so that it is impossible to interpret them as meaning anything but a waiver. It

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should be observed that waiver is not presumed, and that it must be given a narrow interpretation.

The Court accordingly has before it concurrent findings of the Quebec courts that the remission, if there was one, was tacit and not express. If that really is the case, the question is primarily one of fact. These concurrent findings carry great weight.

In their factum appellants appear to recognize the obstacle presented by the concurrent findings of the Superior Court and the Court of Appeal, as they state:

[TRANSLATION] In the case at bar we feel the remission was express, by reason of the deed signed by respondent, and this deed was confirmed by a situation of fact in which respondent reaffirmed his intention to waive his hypothecary right.

Appellants see this express waiver as contained in the wording of a deed of obligation concluded on June 18, 1963; in his dissenting opinion the Chief Justice of Quebec outlines the main points of this deed, and the clauses of particular relevance, in the following terms:

[TRANSLATION] By deed of obligation concluded on June 18, 1963 A.B. Motel Inc. acknowledged that it owed the Quebec Investment Corporation the sum of $7,000 on a loan, and to guarantee repayment of this amount it hypothecated the immovable it had purchased from Gagnon. In this deed A.B. Motel Inc. stated that “it had good and valid title to the property, free of any hypothec or incumbrance whatever”, apart from a debt in the amount of $30,000 to Saul Garneau, a sale price balance of $95,000 owed to Albert Bouchard and a debt in the amount of $15,000 to the Quebec Investment Corporation. The deed contained the following clause:

In the event of failure by the debtor to perform any of its obligations under this deed, for a period of ninety days, or if the said property is seized in execution of a judgment, the creditor shall, on giving notice to the debtor or to the registered owner or owners that, in accordance with the provisions of this clause, the creditor exercises the privilege of becoming owner of the property, then become absolute owner ipso facto of the said property, free and clear of all rights, hypothecs, privileges and charges made subject to hypothecs in favour of the creditor, with retroactive effect to the date of these presents, the whole in full

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settlement of all amounts owed under this deed, and with no entitlement to indemnity or compensation on any grounds whatever.

The intervention appearing at the end of the deed is as follows:

[TRANSLATION] THE FOLLOWING HAVE ALSO APPEARED TO THESE PRESENTS:

Messrs. JEAN JOSEPH FORTIN of Quebec City, industrialist, and JEAN‑MARC GAGNON, of St-Félicien, Lac St-Jean, industrialist;

THE AFORESAID persons, to whom these presents have been read, do hereby jointly and severally stand surety to the creditor for the repayment of the aforesaid amount of seven thousand dollars ($7,000), and interest on the same, and for the performance of all clauses and conditions contained in this deed.

The intervenors further state they waive the benefit of division and discussion.

Appellants submit that this intervention by respondent in a deed in which his mortgage of $30,000 is not mentioned, and in which he stands surety for the obligations of A.B. Motel Inc., including the dation en paiement clause, constitutes an express waiver by him of the hypothecary protection afforded him by the deed of June 22, 1961. I cannot agree with that argument. In truth, an express waiver of a hypothec must be contained in a document which in and of itself indicates the decision of the hypothecary creditor to waive the special protection he enjoys. The mere fact that a judge of the Superior Court and two of the three judges of the Court of Appeal did not see in the deed of June 18, 1963, a clear waiver of this hypothecary protection by the creditor establishes beyond any doubt that this cannot be an express waiver.

In support of the foregoing we need only refer to the definition of “exprès” (express) in the Dictionnaire encyclopédique Quillet, (1962):

[TRANSLATION] Stated in such a clear and precise manner that no doubt is possible;

and cite the following paragraph from Mignault, Le droit civil canadien, vol. 9, p. 182:

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[TRANSLATION] Our article provides that the remission can be express or tacit, and in so doing it accords with general principles. There is no difficulty with regard to express remission, as it is only a matter of giving effect to the intent expressed by the creditor. However, it should be noted that a hypothecary creditor may waive his rank, that is yield priority on the hypothec to another hypothecary creditor, without losing his hypothec, the effectiveness of which only is impaired by his waiver. If it is alleged there was a tacit remission the Court will decide this, but it goes without saying that such a remission will not be presumed. Pothier (No. 194) states that consent to alienation of the hypothecary right without reservation, or consent for the immovable to be hypothecated to another creditor, entails a tacit waiver of the hypothec, since the only explanation for such consent, which the owner had no need of in order to alienate or hypothecate his immovable, must be that the hypothecary creditor intended the immovable to be sold or hypothecated free of his hypothec. The question whether there was an absolute waiver, or merely a yielding of priority or consent not to exercise the hypothec with respect to the purchaser, must, no doubt, be considered. Further, the remission of a hypothec, by consent to alienation, cannot be a defence to a claim by the creditor if the alienation has not occurred, or if it has been cancelled. In general, the debtor, in alienating the immovable, must have acted in accordance with the conditions specified by the creditor, but alienation on more advantageous terms, or at a higher price, does not appear to constitute a breach of the permission to sell. Thus, consent to onerous alienation does not appear to authorize a gift inter vivos, but when the creditor permits a gift, it is held that he cannot object to a sale, unless the gift was only permitted with respect to a certain person. It may be concluded that all of the foregoing is merely a question of fact and of assessment to be arbitrated by the Court. (Emphasis added.)

If it exists, therefore, the waiver alleged by appellants may only be tacit. As such

(a) it is primarily a question of fact;

(b) it must be clearly apparent from the proven facts;

(c) it places a very heavy onus on the party making the allegation.

These rules have been accepted and followed by the Quebec courts, and I see no basis for intervention by this Court.

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Without entering upon too detailed an analysis of the oral and written evidence, I should like to indicate the major points. Before doing so, it is worth emphasizing that when the motion was submitted on March 25, 1968, appellant Gingras summoned only one witness, namely respondent, to whom he asked only a few questions.

On April 25, 1968 the trial judge made an order for a re-opening of the hearing, in the following terms:

[TRANSLATION] The hearing shall be re-opened, in order if possible to obtain further information on the following points.

1. Who were the directors of the company who provided the company auditor with the information used by him in preparing the financial statements, with respect to the hypothecary debts?

2. Have there ever been entries made on the company books respecting the hypothec at issue?

3. Was there an account in the name of Jean-Marc Gagnon, and if not, how was the auditor able to establish the debts owed Jean-Marc Gagnon by the company?

4. What did Jean Joseph Fortin, Philippe Gagnon and Jacques Gingras know of the hypothec at issue and the debts of the company to Jean-Marc Gagnon?

5. What other facts or documents can serve as a basis for dating the alleged waiver of the hypothec at issue by Jean-Marc Gagnon?

I can see the necessity for this order since, in my opinion, the deed of June 18, 1963 was not of itself a sufficient basis for arriving at a conclusion. It must be seen as part of the sequence of events, and it can only be fully and properly understood in the light of the circumstances as a whole. Though the evidence is not as detailed as it might have been, it is sufficiently clear for the Quebec courts to have been correct in concluding that it did not establish waiver by respondent of the hypothec of $30,000 created in his favour on June 22, 1961.

On May 5, 1961 respondent purchased the immovable from Albert Bouchard under a deed of sale stipulating that a balance of $95,000 was owed on the purchase price. At the time a debt of $30,000 was owed to Saul Garneau. The motel was operated by respondent under a trade name

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for some weeks, and respondent stated in his testimony that his investment in the transaction was about $40,000.

A.B. Motel Inc. was created by letters patent on May 29, 1961, and the evidence shows that of the share capital of $10,000, divided into 10,000 ordinary shares, 9,997 were issued to respondent.

On June 22, 1961 respondent sold the immovable to his company for the total invested by him. The aforementioned $40,000 was accordingly repaid to him in two ways:

(a) $10,000 in cash (the evidence does not indicate whether this was for shares);

(b) a sale price balance of $30,000 guaranteed by a privilege amounting to a hypothec.

On March 8, 1962 the sum of $15,000 was borrowed by A.B. Motel Inc. from Quebec Investment Corporation, and though the record does not include a copy of this deed, it appears to be established that a personal guarantee was not given by respondent.

In the weeks that followed respondent sold his shares to Jean Joseph Fortin for the sum of $50,000, but as a good part of the purchase price was payable in notes spread over a five‑year period, respondent continued to have at least an indirect financial interest in the matter. Accordingly, as may be seen from the claims filed after the bankruptcy of A.B. Motel Inc., during 1962, 1963, 1964 and 1965 respondent spent a total amount of at least $30,000 on account of the Motel.

When on June 18, 1963, it became necessary to obtain the amount of $7,000 to make the payments due on the Garneau and Bouchard hypothecs, Quebec Investment Corporation agreed to pay an additional sum of $7,000. Negotiations were held with the president of this company, Mr. Jacques Légaré, who was not heard as a witness. However, Paul Ledoux, who signed the deed on behalf of Quebec Investment, stated in his testimony:

[TRANSLATION] My recollection is that the surety of Mr. Gagnon was offered. I don’t recall that there was a requirement in order for the loan to be made, but rather

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that it was offered, that Mr. Gagnon would stand surety for the loan of $7,000.

Further, Jean Joseph Fortin, who signed the deed of June 18, 1973 for A.B. Motel Inc., confirmed and repeated that in his opinion respondent had not abandoned his guarantees. The following extract is relevant:

[TRANSLATION] I was certain of one thing, well… I have always heard of Saul Garneau but I know one thing, I knew for certain that Jean-Marc would definitely not abandon his guarantees in this matter, because…

In this context it is difficult to believe that, to help A.B. Motel Inc. obtain the sum of $7,000, respondent would have waived the protection afforded him by his hypothec of $30,000. In my view such a reading of the deed of June 1963 places a rigid construction divorced from reality on an intervention involving a suretyship signed by an individual with no legal training.

Moreover, the evidence showed that at all times respondent treated this hypothec of $30,000 as something quite different from his ordinary claim against A.B. Motel Inc. As was admitted by appellants, even if the construction they suggest is given to the deed of June 18, 1963, respondent did not waive his debt, but only the collateral remedy represented by the hypothec. If respondent had intended to make the remission of hypothec but retain his debt as an ordinary debt, he would have included this amount of $30,000 in his proofs of claims to the trustee. However, he did not do this, as these proofs of claims related to other expenses and advances made by him on behalf of A.B. Motel Inc.

In his testimony Gagnon—who it was alleged failed to mention his hypothec at the time of the inspectors’ discussions—said the following, in his examination-in-chief by counsel for appellant Gingras:

[TRANSLATION] Q. SO, at that time you did not even have your hypothec of $30,000 in mind; or did you deliberately conceal it from those who were deciding whether to hand over the immovable?

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A. At that time, I did not have the money—as I told you just a moment ago, I did not have the money to pay the first and second… I let it go, I said, with my shares, I will recover my $30,000, I have my hypothec, a hypothec follows the contract. Then, I said, I cannot… there must be… first of all, you came to me with a list saying, first hypothec, so-and-so, second hypothec, Mr. so-and-so. I looked at it, I said… they owe me money on that.

Responding to an intervention by the presiding judge, respondent expressed the same thought:

[TRANSLATION] Q. SO it was necessary to establish the sum of money, and in order to establish it it was necessary to know the position regarding hypothecary liabilities—did you understand that?

A. I thought that my contract, at the notary’s, I thought that at that time, when we would go to the notary, and we would begin by saying, so many dollars are due to Saul Garneau, so many dollars to Mr. Bouchard, so many dollars to Jean-Marc Gagnon; I said, at that stage, they… they will soon realize they owe me money.

In my view these facts taken as a whole justify the conclusion stated by Turgeon J., speaking for the majority on the Court of Appeal:

[TRANSLATION] It is, rather, a question of fact to determine what acts entail a tacit waiver, and this is a matter for the trial judge to decide based on the circumstances and the evidence. In the case at bar the Superior Court found in respondent’s favour after hearing his explanations and seeing his behaviour as a witness. The trial judge came to the conclusion that his actions were attributable to his ignorance, not to an intention by him to waive his privilege, as appears from the following extract from the judgment:

On June 22, 1961, that is the day the deed creating the hypothec to Jean-Marc Gagnon was concluded, it was Jacques Gingras who represented A.B. Motel Inc. Testifying at the hearing, he stated that subsequently, as secretary of the company, he did not recall the existence of the hypothec, which explains why he did not have the hypothecary debt of $30,000 shown on the accounting records of the company.

It should be noted here that even then Jean-Marc Gagnon did not mention his hypothecary claim to his immediate colleagues. In all probability, he attached no great importance to the company’s accounting. How can his silence at the time be explained? The

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evidence creates a strong presumption that he lacked much knowledge of administration, and did not know exactly how to differentiate ordinary debts and hypothecary debts. He knew that a hypothec represented a guarantee, but he does not appear to have understood all the characteristic features of a hypothec. On June 22, 1961, and before his company borrowed the money, he definitely had no intention to deceive. Moreover, when he borrowed, what reason had he to think that responsible lenders would not investigate the titles? This hypothesis does not stand up.

Jean-Marc Gagnon remained silent at the meetings of the inspectors, when there was discussion of the hypothecary liabilities of A.B. Motel Inc., or more precisely, of the hypothecs encumbering the immovable in question, and he did not file a claim for his secured debt of $30,000. The explanation he gave for his behaviour was that he believed his hypothec was still valid. He stated that he mentioned it for the first time when he realized there was a purchaser willing to pay a price high enough to cover his hypothec.

It is therefore clear that Jean-Marc Gagnon never waived his hypothecary debt.

So far as the intervenor is concerned, its position is certainly no better than that of appellant Gingras. The entries at the Registry Office should have placed them both on notice, as those entries showed that respondent held a hypothec of $30,000 on the immovable.

One final word. In a well researched factum appellants cite the sources of art. 2081 C.C., in addition to certain extracts from French authors. Not only do I not feel it necessary to refer to those authorities here, but, should the occasion arise, I should hesitate to do so:

(a) registration did not exist under the earlier law, and the latter therefore had to place much more emphasis on appearances;

(b) the socio-economic circumstances of the time did not permit the flexibility in real property transactions that now exists, and their use for financing purposes, such transactions forming a whole which our courts are required to take into account;

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(c) the French commentators who have written since the Code Napoléon have had before them a wording different from our own (art. 2180 C.N.), which they must interpret and which they have often sought to extend.

I would affirm the judgment a quo with costs.

Appeals allowed with costs.

Solicitors for the appellant: Dorion, Dorion, Bernier, Jolin & Champoux, Quebec.

Solicitors for the intervenant, appellant: Tremblay, Beauvais & Associates, Quebec.

Solicitors for the respondent: Campbell, Pepper & Associates, Montreal.