In theory, when liquidating a succession, publication formalities must be observed so that the various creditors can present themselves and claim their due. This formality also gives the successors an overall view of the assets and liabilities of the succession before deciding whether or not to accept it.
But these formalities often go unobserved, especially when a succession has few assets and is of little value. In the matter of Caouette v. Boutin Jacques (Succession de),1 the court had to rule on what impact the absence of formalities had on an action for hidden defect that was brought after the succession liquidation was completed.
I– THE FACTS
The court congratulated the lawyers and parties for agreeing on the facts and filing a joint motion for the adjudication of an issue of law based on the parties’ affidavits. The court also commended their efforts to frame the debate and avoid additional costs.2
In this particular case, it was only 17 months after the heirs had accepted the succession that the plaintiff presented a claim against that succession for hidden defects in a house that he had bought from the decedent.
The chronological sequence of events can be summarized as follows:
- November 10, 2003: Ms. Boutin sold her home to the plaintiff for $50,000;
- October 24, 2009: Ms. Boutin passed away, and her will provided that the residue of her property be partitioned equally between her four (4) children;
- December 29, 2009: the four heirs of Ms. Boutin partitioned the sum of $4,500 ($1,125 each); the heirs neither made an inventory nor published a notice of closure;
- May 25, 2011: “[TRANSLATION] The plaintiff sent a formal notice to Ms. Boutin’s heirs, claiming $38,000 for hidden defect.”3
The parties agreed that the defendants were in good faith and were unaware of any hidden defect in the abovementioned residence.
II– THE DECISION
Both parties admitted that some of the succession liquidation rules had not been observed, including publication of the inventory and notice of closure. The parties submitted different positions to the court as to the impact of this absence of liquidation formalities.
The plaintiff argued that under article 799 C.C.Q., the heirs were responsible for all of the succession’s debts resulting from that breach, including the action for hidden defect, even if the debt exceeded the value of the property they took:
If they give their consent, the heirs, and the successors having by that fact become heirs, are liable for the debts of the succession beyond the value of the property they take.
In response, the heirs claimed that even if the formalities had been observed, the plaintiff would only have been able to collect the $4,500 of the succession, since his claim for hidden defect would have been listed in the inventory. What is more, the defendants add that since the heirs were in good faith, their liability in respect of the succession should be reduced to the value of the property that they took in accordance with article 835 C.C.Q.:
835. An heir having assumed payment of the debts of the succession or being liable for them under the rules of this title may, if he was in good faith, move that the court reduce his liability or limit it to the value of the property he has taken if new circumstances substantially change the extent of his liability, including, but not limited to, his discovery of new facts, or the coming forward of a creditor of whose existence he could not have been aware when he assumed the liability.
The court first stated the principles that apply to this case:
- The obligation of warranty upon the sale of the immoveable was passed to the heirs pursuant to article 1441 C.C.Q.
- The debt arising from this obligation of warranty constitutes a debt of the succession.
- The heirs are not, at least in theory, bound by the debt obligations of the deceased to an extent greater than the value of the property they received pursuant to article 125 C.C.Q.
- Some exceptions apply to this last principle; for instance, where there is no inventory, the liability of the heirs will be incurred even beyond the value of the property that they take pursuant to articles 640 and 800 of the C.C.Q.
- As for heirs who fall under that last category, article 135 C.C.Q. provides for the criteria under which it might be possible to reduce liability where the heirs are acting in good faith.
The court insisted on two key elements: that the heirs were in good faith and the hidden defect on which the debt hinged was absolutely unknown to the heirs at the time the succession was liquidated. In fact, it was only one year later that the plaintiff learned the house had hidden defects. What arises from all this is that even if the formalities had been observed, the plaintiff would not have even known that he had a debt against the succession at the time the inventory was drawn up and published. The court reminds us of the three conditions that must be met for article 835 C.C.Q. to apply:
a) the good faith of the heir liable to the debts;
b) the discovery of new facts or the coming forward of a creditor whose existence could not have been known;
c) a substantial change in the extent of the heir’s liability.
The court found that these criteria had been met. But more specifically, as regards the last criterion, the court ruled that going from receiving $1,125 net to having to pay $10,000 for hidden defects qualifies as a substantial change in the conditions under which one might be willing to accept a succession.
Consequently, the court found that article 835 C.C.Q. applies perfectly in this case, and agreed to limit the heirs’ liability to the amount that they received, namely a total of $4,500.
III– AUTHOR’S COMMENTS
This is a good case study for the application of article 835 C.C.Q. The court had to choose between either compliance with the formalities that allow creditors and debtors to be called and assert their rights over the succession or the liability of heirs, which can be neither absolute nor infinite.
The court’s recognition of the heirs’ good faith is important and results from its analysis of the finality of the provision requiring compliance with formalities; the court questions whether such compliance would have made a difference, a very interesting approach in terms of implementing article 835 C.C.Q.
The liquidation formalities of successions are regularly disregarded, especially in situations where there is no dispute and the amount at stake is negligible. In fact, the formalities in a succession for $4,500 would entail costs representing a significant portion of the succession, which certainly discourages people from following these rules. While the courts should definitely not encourage such practices, the impacts must be limited and the notions of reasonableness and proportionality honoured, keeping in mind that these standards are not of public interest.
This decision should not be seen as an encouragement to flout the formalities prescribed by law. Compliance remains the best protection against any eventuality or claim that might crop up after a succession is liquidated. Still, liability can be limited when rights are exercised in good faith. And there is also the principle of minimis non curat lex, which holds that the courts cannot reproach the parties for failing to observe details the effects of which are too small to be of any real consequence.
From a technical perspective, this is a wonderful lesson on use of procedure; in the space of a single day, the parties held a trial that determined their rights, and they achieved this by agreeing on the admissions and being concise.
In those succession cases where the means used exceed the end goal of the dispute, emulating the parties in Caouette v. Boutin-Jacques would be beneficial. This would make determining the parties’ respective rights easier, a task that could be completed within a timeframe and at a cost that are both reasonable and proportionate.
1 2012 QCCS 6283, EYB 2012-215548 (S.C.).
2 Id., par. 28.
3 Id., par. 6.