Mortgages in Québec: Foreclosure

Toronto-Dominion Bank v. Young2020 SCC 15 (38242)

Chief Justice Wagner (and 7 colleagues) wrote as follows (at paras. 1-2):
“We have carefully read the reasons of our colleague Côté J. In our view, the Court of Appeal’s reasons are complete having regard to the issues, and we are entirely in agreement with them.
We would dismiss the appeal with costs.”Justice Côté (in dissent) wrote as follows (at paras. 3-4, 58-62):

“Does a motion for forced surrender and taking in payment — a purely hypothecary remedy — brought against a debtor who is not the original debtor constitute a separate and independent remedy or a remedy that depends on the continued existence during the proceeding of a claim against the original debtor? That is the question before the Court in this case.
In order to answer the question, it is necessary to consider two areas of the law which bear certain quite technical aspects, namely hypothecary remedies and prescription. The solution to the problem raised by the facts of this case turns on a rigorous interpretation of the relevant provisions of the Civil Code of Québec (“C.C.Q.” or “Civil Code”), an interpretation that must be firmly rooted in civil law principles and informed by the practical realities faced by the parties.

I think it important to point out here that the judicial application that will constitute a civil interruption of prescription must be served “on the person to be prevented from prescribing”: art. 2892 para. 1 C.C.Q. In this case, the respondents were the persons TD Bank sought to prevent from prescribing, namely because they were the only persons against whom it sought hypothecary conclusions. The conclusions sought in a motion for forced surrender and taking in payment are purely hypothecary in nature; no conclusion was sought against Ms. Macht on a personal basis. What interest would Ms. Macht have had in contesting the hypothecary action when she no longer had any interest in the property that was the sole object of that action? To ask the question is to answer it. By serving its motion on the respondents, TD Bank met the requirements of art. 2892 para. 1 C.C.Q. Moreover, there is no denying that the hypothecary loan agreement between TD Bank and Ms. Macht is the source of all the rights in this case: Barakett, at para. 48. The filing of the motion for forced surrender and taking in payment therefore interrupted prescription for the purposes of exercising the hypothecary remedy, which was exercised against the only persons who had an interest as parties to the dispute: art. 2896 C.C.Q.

To summarize, Ms. Macht remained under a personal obligation to TD Bank, while the respondents had a real obligation, that is, a hypothecary obligation, from the time they took the hypothecated property in payment and became the owners of the immovable subject to TD Bank’s first hypothec. The respondents were bound propter rem, as hypothecary debtors, because the hypothecated property was in their hands. At the time TD Bank filed its hypothecary action, all of the applicable conditions were met: the 60‑day period following the registration of its prior notice had expired, its claim was liquid and due, and the debtor, Ms. Macht, was in default. The appellant therefore exercised its hypothecary remedy in a timely manner. It opted to exercise a hypothecary remedy and was not required to bring a personal action as well in order to interrupt prescription: Pratte (2012), at No. 487. By filing and serving its hypothecary action, the appellant interrupted prescription in relation to its hypothecary debtors, the respondents.

In my view, and with respect, the Court of Appeal erred in concluding that the filing of the appellant’s action did not interrupt prescription. As I explained above, a court must look to the time when a creditor exercised his or her hypothecary remedy — not the time of the judgment — to determine whether prescription has been acquired and whether the applicable conditions are met: arts. 2748 and 2749 C.C.Q. In this case, the appellant exercised its hypothecary remedy in a timely manner, while the personal claim against Ms. Macht was not prescribed.

Given my conclusion on the first issue, I need not consider the appellant’s arguments on the impact of the delay caused by the judicial system on its rights. I therefore do not propose to do so.

 

I would accordingly allow the appeal with costs throughout. I would order the respondents to surrender the immovable, and I would declare the appellant the owner of the immovable.”

 

Full Decision