Case information

Publication of rights — Contracts — Legal hypothec — Paulian action — Whether Court of Appeal erred in finding that creditor suffers no injury in context where their debtor becomes owner of immovables again and subsequently transfers them without valuable consideration, to detriment of their creditor — Civil Code of Québec, art. 2943.1.

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Mr. Filion granted multiple loans to Michel Bélanger over a long period of time. These amounts were intended to, in particular, enable him to renovate and keep his immovables. Michel Bélanger experienced financial difficulties; he did not succeed in completely repaying Mr. Filion. In 2011, a transaction homologated by the court was entered into; it provided that Michel Bélanger would pay Mr. Filion $172,000 to settle their dispute. That amount was secured by a hypothec on Michel Bélanger’s immovables. In 2012, Gestion Marton inc. (“Marton”), a hypothecary creditor ranking first on those same immovables, was authorized to take them in payment. It consequently retroactively became their owner, free of Mr. Filion’s hypothecs. In 2014, Michel Bélanger repurchased the immovables from Marton to sell them, the same day, to his son, Cédrick Bélanger. In 2014, an agreement was reached, and Cédrick Bélanger and Michel Bélanger solidarily undertook to pay $100,000 in final settlement of the debt to Mr. Filion. Later that same year, Mr. Filion was informed that he would never be repaid. He checked the land register and received confirmation that the immovable was now the property of Cédrick Bélanger. In 2015, Mr. Filion made a demand to Michel Bélanger to pay the amounts and instituted a Paulian action against the sale by Michel Bélanger to his son, Cédrick Bélanger.
The trial judge examined the five criteria set out in the jurisprudence and established that: (1) the claim existed prior to the act whose validity was attacked, (2) the claim was certain, liquid and exigible, (3) the action was brought within the year after the creditor learned of the injury resulting from the act which was attacked, (4) there existed an impoverishment of the creditor by the transaction that removed from the debtor’s patrimony an asset that could have been seized and (5) there existed fraudulent intent on the part of the debtor. The Court of Appeal was of the opinion that the trial judge had committed an error in law in its assessment of the fourth criterion. Following the taking in payment of the immovables, Marton had become owner of the immovables. They were therefore no longer included in Michel Bélanger’s assets at the time of the sales to Michel Bélanger and Cédrick Bélanger. Because the sale to Cédrick Bélanger did not truly impoverish Michel Bélanger, the sale could not have caused injury to Mr. Filion. As a result, the Court of Appeal allowed the appeal, set aside the trial judgment and dismissed the Paulian action.