Civil law property final exam notes (robert godin) april 2007



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partition (dividing the property up amongst the co-owners)


  • This partition had a restrictive effect

  • The partition would be déclaratif and not attributif

    • Even the owners are part of an indivision and they can dispose of their share, their right to an object is precarious

      • I.e. their right of ownership is subject to that partition

  • Since all the undivided owners shared the same right, the nature and quality of their right is identical, even though their proportions may be different (the one that has 75% does not have a better right of ownership than another)

    • They must thus always act in unanimity, so the person with less proportions would still have the same right, which led to awkward situations

    • A consequence of this is that the fruits and revenue would automatically flow to the co-owners, which does not easily allow for the accumulation of revenue for reserves

  • Indivision was seen historically as a difficult situation

    • Would often lead to conflict and litigation

    • Against human nature and the public interest

    • There was then just one article that dealt with indivision

      • This article, a rule of public order, was in the section in successions

      • This article, however, was given a general application beyond indivision that arose though succession

      • The second paragraph, however, was never given a broad interpretation

  • Under the new code the process of partition was changed significantly

    • The old code had a concept called licitation (or forced sale)

    • It could result from an involuntary or forced

      • This could follow an action in partition in which the partners don’t agree on the value or the shares, or whether property should be sold or not


      • It could also follow the provisions of a forced sale under the code of civil procedure

    • When this action takes places the property is said to have been inherited directly by the person who obtain the property as if he had inherited from day one

    • This created a great deal of insecurity within the situations in which people did want to be in an indivision for specific reasons

      • For example a developer would team up with a lender or a tenant and formed an indivision, which was very efficient from a tax point of view, as each individual could retain specificity

      • This became a very popular and important way to do this, so indivision agreements had to be developed to deal with these situations

        • While it was not a partnership, it closely resembled one in law

    • There were many legal challenges though in general it worked out well

    • Practitioners were able to include a section in the book of property that would deal with indivision and would not be against public order

    The section of co-ownership is in the book of property, designed to deal with this arrangement in a much broader and elaborate way that would not deal with succession exclusively



    • Arts. 1012 to 1037

    • This is an entirely new regime

    • There are still special rules under the book of succession that apply exclusively to indivision that arise from successions
    • The French Code, in 1976, has already been amended to deal with this kind of successions

    Establishment of indivision



    Art. 1012

    Indivision arises from a contract, succession or judgment or by operation of law.

    • Already introduces other forms in which indivision may arise

    Art. 1013 allows for the postponement of partition



    Art. 1013

    The undivided co-owners may agree, in writing, to postpone partition of a property on expiry of the provided period of indivision.

    Such an agreement may not exceed thirty years, but is renewable. An agreement exceeding thirty years is reduced to that term.



    • Co-owners may agree in writing to postpone partition for 30 years

      • Why 30 years?

        • It is the normal amortization period for mortgage financing

    • One aspect of licitation was that any financing of the property became due in full at this time




    Art. 1030

    No one is bound to remain in indivision; partition may be demanded at any time unless it has been postponed by agreement, a testamentary disposition, a judgment, or operation of law, or unless it has become impossible because the property has been appropriated to a durable purpose.

    The dispositions that didn’t exists under the old code



    • Agreement

    • Testamentary disposition; art.1037

    • Judgment art.1032 and art.943 for succession

    • Operation of law; if the liquidation has not been terminated

    • Appropriation for durable purpose




    Art. 1037

    Indivision ends by the partition or alienation of the property.

    In the case of partition, the provisions relating to the partition of successions apply, adapted as required.

    However, the act of partition which terminates indivision, other than indivision by succession, is an act of attribution of the right of ownership.






    Art. 943

    The State or a municipality may, in the manner of the holder of a found thing, sell movable property in its hands by auction, without further delay than that required for publication, in the following cases:

    (1)   the owner of the property claims it but neglects or refuses to reimburse the holder for the cost of administration of the property within sixty days of claiming it;

    (2)   several persons claim the property as owner, but none of them establishes a clear title or takes legal action to establish it within the sixty days or more allotted to him;

    (3)   a movable deposited in the office of a court is not claimed by its owner within sixty days from notice given him to fetch it or, if it has not been possible to give him any notice, within six months from the final judgment or from the discontinuance of the proceedings.




    Art. 1032

    On a motion by an undivided co-owner, the court, to avoid a loss, may postpone the partition of the whole or part of the property and continue the indivision for not over two years.

    A decision under the first paragraph may be revised if the causes shown for continuing the indivision have ceased to exist or if the indivision has become intolerable or too high a risk for the undivided co-owners.



    Art. 1014 talk about publication



    • This was also very complicated under the previous law

      • It couldn’t have been predicted that indivision agreements would come into place and become popularized

      • The agreements were somehow based on the good will of the parties

      • But these agreement often were made by institutions in the financial sector which new each other




    Art. 1014

    Indivision by agreement in respect of an immovable shall be published if it is to be set up against third persons. In particular, publication mentions the expected length of indivision, the identification of the shares of the co-owners and, where applicable, the pre-emptive rights granted or the awarding of a right of exclusive use or enjoyment of a portion of the undivided property.
    • Art. 1014 allows for publication


    • The indivision agreement will be opposable, but is everything in it opposable?

      • Since most issues in indivision are not real rights is opposability the case?

    • There are some restrictions: under art.1015, there is a presumption of equality

    • The court also seems to protect preemptive rights by publication

    • Presumably, this provision authorizes the publication of these agreements and all these rules will probably be enforceable and opposable to third parties

    • The list herein in not exhaustive

    • It is interesting that in this case a personal right is allowed to be published

      • There is also enough in Art.2938 which supports that these rights are publishable and thus binding to successive owners

      • This is sort of an open question, nonetheless, and there are no cases about this



    Art. 2938

    The acquisition, creation, recognition, modification, transmission or extinction of an immovable real right requires publication.

    Renunciation of a succession, legacy, community of property, partition of the value of acquests or of the family patrimony, and the judgment annulling renunciation, also require publication.



    Other personal rights and movable real rights require publication to the extent prescribed or expressly authorized by law. Modification or extinction of a published right shall also be published.

    Art. 1015


    The shares of undivided co-owners are presumed equal.

    Each undivided co-owner has the rights and obligations of an exclusive owner as regards his share. Thus, each may alienate or hypothecate his share and his creditors may seize it.



    • The principle of equality is referred to often

    • Even if co-owners find themselves sharing the same right, each is considered to be considered an absolute owner

    • Even a person with 99% of the share she cannot force decisions on the other

      • The share will affect issues like how much of the income belongs to each owner, etc

      • A 99% owner of a building can sell his share of the building but cannot force the other owner to sell his 1%




    Art. 1016

    Each undivided co-owner may make use of the undivided property provided he does not affect its destination or the rights of the other co-owners.

    If one of the co-owners has exclusive use and enjoyment of the property, he is liable for compensation.



    • The balance again between individual and collective rights

    • You can exercise your rights as long as it doesn’t affect others

    • The issues of destination is also important: what was the destination of the property?




    Art. 1017

    The right of accession operates to the benefit of all the undivided co-owners proportionately to their shares in the indivision. Nevertheless, where a co-owner holds a right of exclusive use or enjoyment of a portion of the undivided property, he also has exclusive use or enjoyment of property joined or incorporated with that portion.


    • The first part seems obvious and self-evident

    • The second sentence makes reference to a provision that have been created to get around the moratorium of conversion

      • Some limitations on condominium were created, so indivision were used to get around this

      • This refers to situations in which people are in indivision but has agreed to have exclusive portions of the buildings




    Art. 1018

    The fruits and revenues of the undivided property accrue to the indivision, where there is no provisional partition and where no other agreement exists with respect to their periodic distribution. They also accrue to the indivision if they are not claimed within three years from their due date.

    • Awkward writing in the first sentence, seems it portrays the idea that an indivision has a juridical personality, but this is not the case

    • What it means is that in principle the income will be capitalized and added to the value of the total asset if not distributed


    Art. 1021


    Partition which takes place before the time fixed by the indivision agreement may not be set up against a creditor holding a hypothec on an undivided portion of the property unless he has consented to the partition or unless his debtor preserves a right of ownership over some part of the property.

    • First of all, partition makes the hypothec executable and the forced sale that will result will extinguish the hypothec

    • What this article is referring to is Art. 2679 (see article)

      • Usually following a partition, a hypothec is extinguished if the person who took the hypothec no longer holds rights over the asset

    • A premature partition, will not take away hypothecary interests (consent is needed)

      • A partition will not cancel the hypothec as stipulated in art.2679



    Art. 2679

    A hypothec on an undivided share of a property subsists if the grantor or his successor preserves rights over some part of the property by partition or other act declaratory or act of attribution of ownership, subject to the Book on Successions.

    If the grantor does not preserve any rights over the property, the hypothec nevertheless subsists and extends, according to its rank, to the price of transfer payable to the grantor, to the payment resulting from the exercise of a right of redemption or a first refusal agreement, or to the balance payable to the grantor.


    • If a person hypothecates his property, this hypothec will not survive partition, unless the person who has the hypothec still maintain an interest on the property following the partition


      • If following partition, you will no longer own any part of a property, it is not right for your hypothec to still remain with the property

        • This would make your other people liable for your hypothec




    Art. 1022

    Any undivided co-owner, within sixty days of learning that a third person has, by onerous title, acquired the share of an undivided co-owner, may exclude him from the indivision by reimbursing him for the transfer price and the expenses he has paid. This right may be exercised only within one year from the acquisition of the share.

    The right of redemption may not be exercised where the co-owners have stipulated pre-emptive rights in the indivision agreement and where such rights, if they are rights in an immovable, have been published.



    • In indivision, it is important to know the identity of your co-owners, their financial capacity, etc

    • So the law provides a right within 60 days of knowledge to exclude a person from an indivision

    • The second paragraph provides that if an indivision agreement was pre-emptive right, the indivision agreement will take precedence


    STCUM Community v. Bandera investments

    • STM was a co-lender with National Bank and the bank decided to share its portion of the loan to this group called Bandera at a very low price
      • Bandera were “fund vultures” who buy loans at low prices to try and get money out of them


    • The bank wanted to exercise the pre-emptive right, claiming that by being in a syndicated loan, they were in indivision and Art. 1022 would apply

    • The judge came to the conclusion that not because the nature of the case, but the way the documents were drafted, the loan was not in indivision


    Pension Fund for the Employees of STCUM Community v. Bandera investments [1997] C.S. 1906

    • This case deals with syndicated loans (a number of lenders together lend a sum of money). The question that was asked was whether this could qualify as indivision or not. It was held that syndicated loans could be considered as indivision, however, in this particular case it could not.

    • A pension fund made a loan to a numbered company. The company was having problems and the loan was in difficulty. The lenders, were the pension funds and the other was the national bank. At this time the banks experienced financial difficulty and tried to get rid of their bad loans.

    • Guys from Texas came in with a Vulture Fund = bought loans in distress at a significant discount. The banks sold to these funds to get them off their books and write them off. This was fine except that the market was just about to change after the bank sold to Bandera.

    • This particular loan STCUM did not sell their share, only the bank sold it. The STCUM learnt that if they could have bought it at price that Bandera did they would have reduced their risk in the loan.

    • They looked to see if they were in indivision for co-owner, then 1022 would allow them to acquire from the 3rd party at the price paid could operate. The National Bank said indivision does not apply.
    • Godin was part of the case – The court recognized the possibility that indivision could exist in such a situation as co-lenders. BUT in analyzing this current loan they found that indivision did not exist in this scenario. They did not carry on as co-owners. The point was that the articles on indivision should not only relate to tangibles, but should also relate to joint lenders.


    • During the process of Appeal they settled out of court with Bandera.

    • Point – that can apply to intangibles as well.

    • All of this would have been impossible under the old code.

    Also see Alexandre c. Dufour on WebCT




    Art. 1023

    An undivided co-owner having caused his address to be registered at the registry office may, within sixty days of being notified of the intention of a creditor to sell the share of an undivided co-owner or to take it in payment of an obligation, be subrogated to the rights of the creditor by paying him the debt of the undivided co-owner, with costs.

    An undivided co-owner not having caused his address to be registered has no right of redemption against a creditor or the successors of the creditor.



    • Notice of address is established in arts. 3022 and following

    • This mechanism is designed to have the registrar inform the creditors is anything is happening that could affect their right

      • A hypothecary creditor, for instance

    • In the case of Harel c. 2760-1699 Quebec Inc (CS)(one of the co-owners), the share of the other co-owner was ceased and sold by the sheriff

      • Wife and husband co-owners (indivisaires) of their house. Husband goes bankrupt and creditor seizes the right in the indivision of the husband.
      • The husband had never registered his address (see 1023 CCQ) and so wife could not repay the debt of her husband to acquire the share.


      • However, she decided to invoke art. 1023 but since she hadn’t registered her address it was argued that she had lost her rights

      • The judge decided that despite this article not being applicable, she had not lost her rights as per art. 1022

      • The court deemed that arts. 1022 and 1023 are not mutually exclusive


    Cadieux c. Caron (CA) 2004

    Facts:

    • Couple lived together during that time one paid for the apartment (immeuble) in which they both lived while the other paid for the food and disposable items.

    • They separate.

    Issue: are they still owners in equal part of the building?

    Held:

    • The claim for unjust enrichment that the appellant claims is rejected; “rejeté la demande reconventionnelle de l’appelant, fondée sur l’article 1493 CCQ (enrichissement injustifié) pour un partage inégal de la valeur de la même propriété”

    • Confirms: que les parties sont proprétaires à parts égales de l’immeuble

    Reasoning:

    • Both paid for things. Both profited from this.

    • “Bref, l’appelant investissait dans l’immobilier, alors que l’intimée payait les biens périssables”


    On administration

    Art. 1025

    Undivided co-owners of property administer it jointly.




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