2015 QCCA 1627, 2015 QCCA 1627

D'Ermo c. D'Ermo 2015 QCCA 1627 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-024222-143 (500-17-053349-091) DATE: October 2, 2015 CORAM: THE HONOURABLE NICHOLAS KASIRER, J.A. DOMINIQUE BÉLANGER, J.A. MARK SCHRAGER, J.A. DORIA D’ERMO APPELLANT – Plaintiff/Cross-Defendant v.

DELIA D’ERMO RESPONDENT – Defendant/Cross-Plaintiff and DINA D’ERMO RESPONDENT – Intervener JUDGMENT [ 1 ] This is an appeal from a judgment of the Superior Court, District of Montreal (the Honourable Justice Gérard Dugré), dismissing Appellant’s action in first instance and declaring it abusive, granting the cross-demand and annulling the instrument appointing Appellant sole testamentary liquidator of her mother’s estate and condemning Appellant to assume personally the legal fees of the estate and to pay the legal fees of Delia D’Ermo (“Respondent”).

FACTS [ 2 ] Maria Carmine Galluccio died on October 22, 2006, leaving as heirs and appointing as testamentary liquidators her three daughters, the parties to this litigation. [ 3 ] Though in virtue of the will signed in 1989, all three daughters were appointed liquidators, the Appellant became sole liquidator in virtue of a document signed in January 2007 by all three sisters.

The effect and the validity of this document is an issue in appeal as it was in first instance. [ 4 ] As sole liquidator, the Appellant instituted the present proceedings claiming payment on behalf of the estate of $375,000 plus interest, from Respondent, in virtue of a demand promissory note signed on October 31, 1990 by Respondent on behalf of 2844-4966 Québec inc. and personally as guarantor. The corporation was the entity used by Respondent and her then companion to purchase certain land in Gatineau, Quebec.

The mother was involved though there is ambiguity as to whether her involvement in the venture was as a lender (in virtue of the above promissory note) or as an investor (as a shareholder of one-third (1/3) of the outstanding shares in 2844- 4966 Québec inc.). [ 5 ] According to Respondent, the amount of the note was a fiction to justify granting a hypothec over the land in such amount in favour of the mother as “creditor proofing”. The real amount advanced was $225,000 according to the evidence given by Respondent at trial. [ 6 ] Shares in 2844-4966 Québec inc. were never issued.

In any event, in June 1999, the land was sold by 2844-4966 Québec inc. to Respondent for $375,001, for $1 cash and $375,000 by assumption of debt. Respondent intervened in the deed of sale to assume liability for the payment of $375,000 to her mother, personally.

The purpose of this transfer as Respondent explained, was to avoid payment of tax on capital because such tax is payable by corporations and not individuals. [ 7 ] In September 1991, the mother bequeathed to Respondent by codicil all of her interest in the shares of 2844-4966 Québec inc. subject to payment of two hypothecary loans on other immovable properties owned solely by the mother.

However, these loans had been entirely repaid by the mother prior to her death. [ 8 ] At trial, Respondent explained that the mother executed this codicil for the convenience of the management of 2844-4966 Québec inc. and the land venture in Gatineau, but that her intention was always that her assets be shared equally by her daughters upon her death as expressed in the 1989 will.

[ 9 ] Shortly following the mother’s death, it became evident to the three sisters that it was cumbersome to seek signatures from Respondent and the third sister, Dina D’Ermo (“Intervener”) because they resided in Barbados and Hamilton, Ontario, respectively. Accordingly, it was suggested that they empower Appellant who resided in the Montreal area to act alone so that she could sign documents to wind up the affairs of the estate.

A notary was instructed by Appellant, who prepared a document under private signature entitled Deed of Designation of liquidator (“the designation document”), which was signed by all three sisters. The notary only had contact with Appellant. The brief document refers to the mother’s death and the will in virtue of which the three sisters are liquidators, sole heirs and universal legatees. The document concludes: 5. That in accordance with

Article 785 of the Civil Code of Quebec , the Appearers, representing the majority of the heirs, agree to designate Doria D’ERMO as the only liquidator. IN CONSEQUENCE THEREOF , the Appearers hereby designate Doria D’ERMO, one of the above appearers, who immediately accepts the office, as liquidator of the Succession of Maria Carmine (also known as Mariette) GALLUCCIO (GALLUCCI). The said Doria D’ERMO shall be charged with the full administration of the property of the Succession of Maria Carmine (also known as Mariette) GALLUCCIO (GALLUCCI).

Signed at Montreal, Province of Quebec (…) [ 10 ] Following execution of the designation document, Appellant took steps to liquidate the estate and signed, alone, all required documentation. The record indicates that the sisters were apprised of the progress of the liquidation. Appellant sent periodic accountings. Indeed, neither of the two other sisters raised any grounds to question the work of Appellant as testamentary liquidator other than dissatisfaction with the price obtained for the mother’s house voiced by Respondent, but which was not disputed in any legal forum.

By the time of the hearing, the liquidation had been completed, but for the issue involved in this litigation and the distribution of Respondent’s share of the estate, which Appellant held back pending resolution of the present issue. [ 11 ] In January 2007, Appellant discovered the aforementioned promissory note amongst the mother’s papers. Whilst the other aspects of the estate were being liquidated and finalized, there ensued periodic exchanges through conversations and emails between the sisters as Appellant sought explanations and ultimately payment to the estate of $375,000 from the Respondent.

Given the vagueness and contradictions in Respondent’s explanations, Appellant eventually instituted the present litigation in October 2009. Appellant also sought judgment declaring that Respondent was deemed to have renounced to the succession because the Respondent had attempted to conceal the mother’s interest in the Gatineau venture. THE TRIAL JUDGMENT [ 12 ] The trial judge considered that the mother was a lender in virtue of the aforementioned promissory note, but dismissed the claim as prescribed because three years had passed since the date of the note.

As well, the judge considered that the assumption of the debt by Respondent in the deed transferring ownership of the land from 2844-4966 Québec inc. to Respondent was equally prescribed three years after its date. The judge concluded his treatment of this issue as follows: [31] De plus, le Tribunal est d’avis que la mère des parties a clairement dit comment régler les transactions quant aux immeubles de Gatineau. On le sait, la capacité de la mère des parties de contracter et de gérer ses biens n’est aucunement contestée pour la période de 1990 jusqu’à son décès.

Or, la mère des parties a clairement énoncé à l’article premier de son codicille (P-2) comment sa fille Delia, la défenderesse en l’instance, devait régler l’investissement de sa mère dans les immeubles de Gatineau. C’est donc par l’application de l’article premier du codicille signé par la mère des parties que les liquidatrices doivent régler ce que la défenderesse peut devoir à la succession de sa mère quant aux immeubles de Gatineau. Quel est le sens et la portée de cet

article du codicille? Le Tribunal n’est malheureusement pas saisi de cette question et il recommande aux liquidatrices de s’entendre et de régler la succession de leur mère en conséquence. [ 13 ] The judge then continued in the judgment to address the other issues raised in the case. He dismissed the Appellant’s claim under

article 651 C.C.Q. that her sister be deemed to have renounced to the estate given her concealment of the mother’s interest in the Gatineau venture. The judge held that in fact, no concealment had been shown; the codicil clearly demonstrated an interest in 2844-4966 Québec inc. and, given the legal presumption of good faith (article 2805 C.C.Q. ), the allegation of concealment was considered unfounded by the judge.

This conclusion is purely factual and since no palpable error has been demonstrated to us with respect to these allegations of concealment, there is no ground for this Court to intervene. [ 14 ] Adjudicating on the cross-demand, the judge declared that the signature of the designation document was induced by Appellant’s false representations to her two sisters. Accordingly and applying articles 1401 and 1422 C.C.Q ., the judge declared the designation document a nullity and thereby deemed never to have existed.

Consequently, the judge considered that all three sisters were and had always been the liquidators of the succession and were bound to act together as indicated in the mother’s will. Therefore, he concluded that Appellant had no right to have her legal fees paid by the estate since she did not validly have its authority to institute the proceedings. Moreover, he concluded that the proceedings were abusive and instituted in bad faith, so he condemned Appellant to pay Respondent’s legal fees in addition to assuming her own.

DISCUSSION [ 15 ] In our view, there are errors in the judgment, which require the intervention of this Court. [ 16 ] The judge’s conclusion that the claim to the $375,000 in virtue of the promissory note is prescribed is not wrong. Whether the claim be based on the demand promissory note signed in 1990 or on the assumption of the debt in the deed signed by Respondent in 1999, given the passage of three years, without interruption, the prescription of three years indicated by

article 2925 C.C.Q. applies. [1] The judge was correct in this regard. He was equally correct in that the hypothecary security did not modify the prescription applicable to the debt. [2] [ 17 ] However, the series of emails containing declarations by Respondent as confirmed during her trial testimony constitute, in our

opinion, an acknowledgment or admission of indebtedness and thus, a renunciation of the prescription: 1 - March 7, 2007, Exhibit P-15 , Respondent proposes to pay one third of the appraised value of the land in Gatineau to each sister or alternatively, $200,000 to the estate (or $66,666 to each of her sisters) payable through the “settling” of the mother’s assets.

She added on the issue of concealment of the asset that had she wished to conceal the Gatineau transaction: “I would not have admitted to it being my debt upon the discovery of it”. 2 - April 24, 2007, Exhibit D-13 , Respondent reiterates the sisters’ interest in the Gatineau project: “So if I don’t end up buying your share of mom’s 1/3 of the property, then you’ll each become 1/9 owner of the whole property with me and Richard.” 3 - June 4, 2007, Exhibit D-6 , Respondent writes to her sisters: “As far as I know, you are 1/9 owner of a piece of land in Gatineau”. 4 - April 29, 2009, Exhibit P-16 , “I will pay what I owe – no more, no less”.

The context of this statement is not a debate with Appellant as to whether Respondent owes money to the estate, but rather how much she owes. [ 18 ] These emails cannot constitute interruptions of prescription because they were written after the expiration of the three-year prescriptive period. They may however constitute renunciations of the prescription since they are acknowledgments of the indebtedness. 2883. Prescription may not be renounced in advance, but prescription acquired or the benefit of the time elapsed in the case of prescription that has begun to run may be renounced. 2883.

On ne peut pas renoncer d'avance à la prescription, mais on peut renoncer à la prescription acquise et au bénéfice du temps écoulé pour celle commencée. 2885. Renunciation of prescription is either express or tacit; tacit renunciation results from an act which implies the abandonment of the acquired right. 2885.

La renonciation à la prescription est soit expresse, soit tacite; elle est tacite lorsqu'elle résulte d'un fait qui suppose l'abandon du droit acquis. [ 19 ] The foregoing emails filed in evidence without objection taken together and read in light of Respondent’s testimony at trial constitute admissions of liability to reimburse her sisters or the estate for the mother’s interest in the Gatineau land.

Irrespective of whether the mother’s interest in the Gatineau venture was a loan or an investment and irrespective of the effect of the codicil, there is an admission of liability by Respondent. [ 20 ] Since the only basis for the liability is the admission and because the admission cannot be divided, [3] the quantum of the liability must be $200,000 as Respondent stated. Accordingly, this will be the amount of the condemnation of Respondent in favour of the estate. [ 21 ] The foregoing emails are nowhere referred to in the judgment. They constitute crucial evidence.

We are of the opinion that the omission by the judge to consider this evidence constitutes an error of mixed law and fact.

The error is palpable and determinant because consideration of the emails and the testimony of Respondent in relation to them give rise to a completely different conclusion. [4] Moreover, the judge’s reference to the codicil is somewhat of a non sequitur given that the immovable properties referred to in the codicil are not the properties subject to the Gatineau venture, but rather other properties which were owned by the mother and which were hypothecated to raise the $225,000 advanced by the mother for the purchase of the Gatineau land. [ 22 ] As stated above, a condemnation of Respondent in favour of the estate in the amount of $200,000 should be substituted and in such regard, the judgment in first instance should be reversed.

We understand that Appellant has held back Respondent’s share of the estate pending resolution of this litigation, so that there will be no condemnation for interest or special indemnity. [ 23 ] Given this finding on the indebtedness of Respondent, it is not necessary to address Appellant’s subsidiary argument that the judge should have fixed a term applicable to the debt pursuant to

article 1512 C.C.Q. [ 24 ] Concerning the designation document, the parties used the term “power of attorney” during their testimony. On analysis of the facts, the intention of all parties was to allow Appellant to do the necessary in order to liquidate the estate including signing required documentation alone. In order to avoid sending documents for signature to her two co-liquidators in Barbados and Hamilton, Ontario, she required their authority to do these things by herself, which the parties characterized as their understanding of a “power of attorney”.

The only practical consequence appearing from the record and arising from the appointment of Appellant as sole liquidator rather than mandatary of the two other liquidators was that she had power to cause the estate to sue Respondent without the consent of the other two liquidators. Nothing else was raised by Respondent or Intervener as a consequence of Appellant’s appointment as sole liquidator.

The administration of the estate by Appellant was not otherwise put in issue by the other parties. [ 25 ] Appellant, according to her uncontradicted testimony, on the suggestion of Intervener, gave instructions to the notary to prepare a document “that would allow her to sign for the three of us” and explained what the sisters wanted to achieve: “… the idea was that I would close the accounts and be able to do anything and that is exactly what I did”. There was no fraud or misrepresentation on the part of Appellant. Her thinking was on a par with her sisters.

The legal effect of the document which the notary prepared may have been

technically different than a power of attorney. Nevertheless, Appellant did not misrepresent the document in question to her sisters. It is not evident from the facts that she misrepresented the document even if she referred to it as a power of attorney. Whatever words she may have used to describe it reflected her honest understanding equal to that of her sisters i.e. that upon signature of the document, she would have power to do alone, that which was required to wind up the estate. More significantly, the document is clear on its face.

It states that all the heirs designate Appellant as the “only liquidator (…) charged with full administration” of the estate. There is no mention of the term “power of attorney”. That the sisters may not have understood the full legal implication of what they had signed does not mean that their sister induced them to sign a document by false representation such that their consent to the document was vitiated by fraud. Articles 1400 and 1401 C.C.Q. provide as follows: 1400.

Error vitiates the consent of the parties or of one of them where the error relates to the nature of the contract, to the object of the prestation or to any essential element that determined the consent. An inexcusable error does not constitute a defect of consent. 1400. L'erreur vicie le consentement des parties ou de l'une d'elles lorsqu'elle porte sur la nature du contrat, sur l'objet de la prestation ou, encore, sur tout élément essentiel qui a déterminé le consentement. L'erreur inexcusable ne constitue pas un vice de consentement. 1401.

Error on the part of one party induced by fraud committed by the other party or with his knowledge vitiates consent whenever, but for that error, the party would not have contracted, or would have contracted on different terms. Fraud may result from silence or concealment. 1401. L'erreur d'une partie, provoquée par le dol de l'autre

partie ou à la connaissance de celle-ci, vicie le consentement dans tous les cas où, sans cela, la

partie n'aurait pas contracté ou aurait contracté à des conditions différentes. Le dol peut résulter du silence ou d'une réticence. As stated above, Appellant did not fraudulently induce her sisters to sign the designation document. If they did sign in error thinking the document a power of attorney, such error resulted from the fact that they did not read the document. [ 26 ] Intervener testified that she did not read the document at all and Respondent said that she “glossed it over” and even though the wording appeared somewhat “general”, she signed nevertheless.

Failure to read a document or to properly inform oneself will generally make an error as to the nature or effect of the document, “inexcusable” within the meaning of

article 1400 C.C.Q. so that it cannot be the basis of a finding of nullity. [5] [ 27 ] Since the document in effect gave Appellant the power to wind up the estate without seeking specific authorization from her sisters, the error does not go to the nature of the contract. The evidence demonstrates that it was the common intention of the parties at the time that Appellant have the power to act alone. The wording was clear as to the ultimate effect of the execution of the document.

The parties are educated and relatively sophisticated; Respondent is a businesswoman and Intervener is an administrator in an educational institution. Both parties were more than capable of reading the document and understanding its plain words and if they could not understand them, they were more than capable of seeking explanations.

The judge’s conclusion that the document was null is a manifest error of mixed fact and law. [ 28 ] As to the legal effect of the designation document, the parties (being all the heirs and liquidators) could agree that two out of three liquidators named in the will would, in effect, resign such that the remaining liquidator would continue to act as the sole liquidator. Liquidators under a will are free to resign as provided by articles 784 and 1357 C.C.Q. The will specifically provided that the remaining liquidator(

s) continues (continue) to act upon refusal to act or renunciation of office by the others. [ 29 ] There is no basis in fact or law to set aside the designation document; it should be given effect. [ 30 ] Given this conclusion, Appellant certainly had the authority, [6] if not the obligation, to seek recovery of the estate interest in the Gatineau venture. Appellant was not hasty in waiting two years and seeking explanation about the involvement of the mother in the Gatineau venture.

Not having received satisfaction, let alone a clear explanation of the nature of the estate’s rights and given the admissions contained in the emails, the institution of legal proceedings can hardly be characterized as abusive. A review of Respondent’s trial testimony reveals an obscure characterization of the mother’s involvement in the Gatineau venture. In these circumstances, the institution of legal proceedings was not abusive.

The judge’s conclusion in such regard is erroneous. [ 31 ] As well, there is nothing in the record to suggest that the proceedings once instituted were conducted in an abusive fashion. [ 32 ] In virtue of the foregoing, the reasonable legal fees incurred by Appellant are properly an expense of the estate as Appellant had the power to sue and the fees were incurred to recover an asset of the estate. [7] Similarly and given the outcome of the claim, there is no basis for the condemnation against Appellant to pay Respondent’s fees. [ 33 ] Respondent as a one third heir, will support indirectly one third of the estate’s legal fees and disbursements related to this case.

In view of this, Respondent will not be condemned for costs in this judgment. Moreover, though it may be late in the day, it is not inappropriate that a gesture of conciliation be demonstrated to the sisters by not awarding costs. [ 34 ] In

summary, we will set aside the judgment and replace it with a judgment granting Appellant’s motion to institute proceedings in part, condemning Respondent to pay to Appellant in her quality of estate liquidator for the benefit of the estate, the sum of $200,000, declaring that Appellant’s reasonable legal fees and disbursements related to the action are for the account of the said estate and

dismissing the cross-demand and the intervention, the whole without costs for the reasons stated above.

FOR ALL OF THESE REASONS, THE COURT : [ 35 ] ALLOWS the appeal; [ 36 ] SETS aside the judgment in first instance and REPLACES it with the following: GRANTS Plaintiff’s motion to institute proceedings in part; CONDEMNS Defendant to pay to Plaintiff in her quality of estate liquidator of Maria Carmine Galluccio, deceased, the sum of $200,000, without interest; DECLARES that the reasonable legal fees and disbursements incurred by Plaintiff regarding the present action are for the account of the said estate; DISMISSES the cross-demand; DISMISSES the intervention. [ 37 ] THE WHOLE without costs in first instance or in appeal.

NICHOLAS KASIRER, J.A. DOMINIQUE BÉLANGER, J.A. MARK SCHRAGER, J.A. Mtre Régis Nivoix DOYON IZZI NIVOIX, Avocats For Appellant Mtre Robert Lalonde For Respondent Delia D’Ermo Date of hearing: September 28, 2015