2024 QCCA 148, 2024 QCCA 148

Édifices St-Joseph Gatineau inc. c. Marengère 2024 QCCA 148 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-030357-230 (550-17-011032-198) DATE: February 7, 2024 CORAM: THE HONOURABLE MARK SCHRAGER, J.A. JOCELYN F. RANCOURT, J.A. STEPHEN W. HAMILTON, J.A. ÉDIFICES ST-JOSEPH GATINEAU INC. APPELLANT – Plaintiff v.

MARIO MARENGÈRE RESPONDENT – Defendant JUDGMENT [ 1 ] The Appellant appeals from the judgment of the Superior Court, District of Gatineau (the Honourable Suzanne Tessier) dated December 7, 2022, dismissing its action in passing of title. [ 2 ] For the reasons of Hamilton, J.A., with which Schrager and Rancourt, JJ.A. concur, THE COURT : [ 3 ] DISMISSES the appeal, with judicial costs. MARK SCHRAGER, J.A. JOCELYN F. RANCOURT, J.A. STEPHEN W. HAMILTON, J.A. Mtre Benoît Duclos Mtre Nicolas Vinette DUCLOS For the Appellant Mtre Pierre McMartin BEAUDRY, BERTRAND For the Respondent Date of hearing: January 30, 2024

REASONS OF HAMILTON, J.A. [ 4 ] In this appeal, the Appellant contests the trial judge’s

interpretation of the contract between the parties. The issue was whether the Appellant had the right to choose to purchase only one of the three remaining properties or whether it was required to purchase all three properties en bloc . The judge concluded that the contract did not allow the Appellant to purchase only the property it wanted to purchase, and therefore the action in passing of title of that property failed. [1] CONTEXT [ 5 ] The Respondent was the owner of several properties in Gatineau.

In September 2017, he listed for sale through his broker Pierre Charron the commercial property at 228 St-Joseph and included in the listing the parking lot located at 0 Lois, which was used by some of the tenants of 228 St-Joseph.

He later explained at trial that 0 Lois was also used by the tenants of 200 St-Joseph (another property that he owned) and that he never intended to sell 0 Lois without 200 St-Joseph or without reserving parking spaces for the tenants of 200 St-Joseph. [ 6 ] The Appellant was interested in acquiring 228 St-Joseph and 0 Lois. [ 7 ] The negotiations between the parties expanded to include four other properties (including 200 St-Joseph and 192/194 St-Joseph) and a bowling business.

On March 18, 2018, the parties signed a Promise to Purchase for a sale en bloc of the six properties and the bowling business for a global price of $17,875,000. The price was allocated among the properties (the price for 0 Lois was $600,000), but there was to be a single closing on or before April 30, 2018. [ 8 ] As part of its due diligence, the Appellant was given the environmental reports that the Respondent had in his possession and it mandated Phase I environmental reviews for 228 St-Joseph, 200 St-Joseph and 0 Lois.

The closing was postponed to May 10, 2018, to allow the completion of the due diligence. [ 9 ] On June 27, 2018, [2] the parties signed the first Amendment to the Promise to Purchase, which dealt with several matters: • they added two properties and increased the total price to $18,590,000; • the price was reallocated among the buildings (notably, the price of 0 Lois dropped from $600,000 to $450,000), but the total for the initial properties remained the same; • 200 St-Joseph was excluded from the closing because the Phase I environmental report raised concerns.

The Respondent was to mandate a Phase II report and the closing on 200 St-Joseph was postponed until a satisfactory Phase II report was obtained.

The parties also provided for a lease of parking spaces on 0 Lois by the tenants of 200 St-Joseph in the event that 200 St-Joseph was not sold; • the closing for all of the properties other than 200 St-Joseph was postponed to July 3, 2018é [ 10 ] On July 4, 2018, the parties signed the Second Amendment to the Promise to Purchase: • the Phase I report for 0 Lois raised concerns, so the closing on 0 Lois was postponed awaiting a satisfactory Phase II report; • the closing for 192/194 St-Joseph was also postponed because the Appellant had arranged a single mortgage for 192/194 St-Joseph, 200 St-Joseph and 0 Lois; • articles 3 and 4 deal with the closing for these three properties: 3.

At such time as Phase Il reports are provided by the Seller to the Buyer and its lender which is satisfactory to the lender, the closing for 200 St-Joseph, 192/194 St-Joseph and 0 Lois will take place for the amounts set forth in

article 8 of the Revised Letter of Amendment dated June 19, 2018 and set forth in articles 1 and 2 herein and will be paid by the Buyer to the Seller. However, the closing for 200 St-Joseph, 192/194 St-Joseph and 0 Lois shall take place by no later than December 31st, 2018.

Should the Buyer not have elected to close for these three properties by December 31st, 2018, the Seller, at his own discretion, may allow a further extension for the closing of the three properties, or may elect to cancel the sale of 200 St-Joseph, 192/194 St-Joseph and 0 Lois, in which case the Promise to Purchase dated March 16, 2018 and all Amendments and Revised Letters of Amendments shall be considered null and void only insofar as they concern 200 St-Joseph, 192/194 St-Joseph and 0 Lois, without any legal recourses from either party. 4.

At any time either prior to or following the presentation of the Phase II report(

s) for 200 St-Joseph and 0 Lois, whether or not satisfactory to the Buyer's lender, the Buyer at his sole discretion and sole risk may proceed with the closing of any or all of the properties set forth in

article 3 above at the same prices set forth in the Revised Letter of Amendment and in the present Second Amendment. • provision was made for parking by the tenants of 228 St-Joseph at 0 Lois and 192/194 St-Joseph, in the event that the closing did not occur on those properties; • the closing for the other properties was to take place no later than July 23, 2018. [ 11 ] The closing for the other properties occurred on July 24, 2018. [ 12 ] On August 20, 2018, the Respondent provided the Phase II environmental report for 200 St-Joseph, which concluded that the property respected the standards for commercial purposes. [3] He also mentioned that there was a fire debris issue on 0 Lois.

The Phase II

report for 0 Lois dated August 28, 2018, confirmed the presence of fire debris. [ 13 ] The Appellant advised the Respondent on August 28, 2018, that it was exercising its right under

article 4 of the Second Amendment to close on 0 Lois and that it “continue[d] to review the possibility of adding the other 2 properties on St-Joseph at a later point”. [ 14 ] The Respondent answered by formally requesting that the Appellant close on 200 St-Joseph and 192/194 St-Joseph under

article 3 of the Second Amendment. [ 15 ] There were subsequent discussions between the parties and they came close to agreeing to a sale of 200 St-Joseph and 0 Lois, but nothing came of it. [ 16 ] On May 6, 2019, the Appellant brought proceedings to force the passing of title for 0 Lois at a price of $450,000. It also claimed $250,000 in damages. JUDGMENT UNDER APPEAL [ 17 ] The judge viewed the issue as a matter of

interpretation of contract. She considered the contract as a whole and the evidence as to the parties’ divergent intentions, and concluded that there was an ambiguity. [4] She looked for the common intention of the parties, [5] but concluded that they had different intentions. [6] She then looked at the contract as a whole and the reasons for the amendments and she concluded that the “

interpretation la plus raisonnable, plausible et credible ” [7] was that the parties had always intended a sale en bloc and that

article 4 did not allow the Appellant to choose to close on only 0 Lois. [8] [ 18 ] She therefore dismissed the Appellant’s action in passing of title. QUESTIONS ON APPEAL [ 19 ] The Appellant raises three issues on appeal: 1. that the judge failed to rule on its objections to the testimony of the Respondent and the real estate agent as to their intention and

interpretation of articles 3 and 4 of the Second Amendment and that she should have excluded that evidence; 2. that

article 4 was clear and did not require

interpretation; 3. that if it was necessary to interpret articles 3 and 4, the judge committed an error in her

interpretation. ANALYSIS [ 20 ] In principle, the

interpretation of a contract is a question of mixed law and fact and the Court should not intervene unless the Appellant demonstrates a palpable and overriding error. [9] The Court must also be satisfied that the judge did not make an error of law with respect to the framework of her analysis and any objections. 1. The objections [ 21 ] At trial, Appellant objected to the testimony of the Respondent and Charron as to their intention and their understanding of the two provisions in the Second Amendment. The objections were taken under reserve.

In her judgment, the judge failed to deal with the objections expressly and she considered the evidence that was subject to the objections. [ 22 ] Having taken the objections under reserve during the trial, the judge should have dealt with them expressly in her judgment.

However, this error is not fatal because the objections were unfounded. [ 23 ] First, the Appellant waived the right to make these objections because (1) it did not object to questions on this issue when its representative was examined out of court; (2) it put questions to the Respondent on this issue in his examination out of court and then produced the transcript of that examination in the court record, and (3) it examined its representative at trial on this same issue.

By presenting evidence to the court as to the parties’ intention and their understanding of the two provisions in the Second Amendment, the Appellant opened the door to the Respondent testifying and putting questions to the broker on the same issue. [10] [ 24 ] The judge appears to have been aware of the waiver issue. When the Appellant first objected to the broker’s testimony, the judge’s immediate reaction was to say: J’ai entendu la version de bien du monde. Et j’ai également entendu une version de l’employé de votre client.

Donc, j’aimerais juste savoir le courtier, lui, comment il a perçu ça. [11] [ 25 ] In any event, even if the objections had not been waived, they were unfounded.

Article 2863 CCQ prohibits testimony that contradicts or varies the terms of a juridical act set forth in a writing, unless there is a commencement of proof. The production by the Appellant of the Respondent’s testimony constitutes such a commencement of proof. [12] Moreover,

Article 2864 CCQ permits testimony to interpret a writing. In my view, once the judge concludes that the contract is ambiguous, this testimony cannot be said to contradict or vary the Second Amendment, but is admissible to assist in interpreting it. 2. Whether

article 4 was clear or ambiguous

[26] On the issue of

interpretation, the judge accurately summarized the two-step test in Uniprix. [27] In the first step, the judge must ascertain whether the contract is clear or ambiguous: [34] The first step in interpreting a contract is to determine whether its words are clear or ambiguous (Droit de la famille — 171197,2017 QCCA 861, at para. 62 ; Samen Investments Inc. v. Monit Management Ltd., 2014 QCCA 826, at para. 46 ).

Thepurpose of this step, which some authors refer to as the clear act rule (règle de l’acte clair) (Gendron, at p. 27), is to prevent judges fromdeparting, deliberately or unexpectedly, from a clearly expressed intention of the parties. In short, a judge must defer to a clear contract.This step thus [translation] “‘serves as a bulwark’ against the risk of an

interpretation that deviates from the true intention of the partiesand subverts the scheme of their agreement” (Baudouin and Jobin, at No. 413 (citation omitted); see also Lluelles and Moore, atNo. 1570). [35] Although this step is based first and foremost on a reading of the words themselves, it is not necessarily limited to that in everycase, as there may be situations in which a contract’s language is not faithful to the parties’ common intention (Lluelles and Moore, atNo. 1574; Droit de la famille — 171197, at para. 62).

Indeed, [translation] “[w]hen considered in the context of the agreement’s otherclauses or of the circumstances in which it was concluded, the seemingly clear words of a clause may [sometimes] prove to beambiguous and to be inconsistent with the scheme of the contract, the true intention of the parties” (Baudouin and Jobin, at No. 413; seealso Lluelles and Moore, at Nos. 1572-74; Tancelin, at No. 316; Gendron, at pp. 27, 31 and 34; Éolectric inc. v. Kruger, groupe Énergie,2015 QCCA 365, at paras. 18-19 ; Rouge Resto-bar inc. v.

Zoom Média inc., 2013 QCCA 443, at paras. 78-79 ).Likewise, a clause that might be perceived to be ambiguous may be perfectly clear when considered in its context. [36] If the words of the contract are clear, the court’s role is limited to applying them to the facts before it. If, on the other hand, thecourt identifies an ambiguity, it must resolve the ambiguity by proceeding to the second step of contractual

interpretation (Baudouin andJobin, at No. 413; Lluelles and Moore, at Nos. 1584-86; Samen Investments, at paras. 46-47). The distinction between these two stepscan be difficult to see, but it is fundamental. At the first step, the judge might, for example, consider the context of the conclusion andperformance of the contract in order to confirm that its language is clear (see e.g. Habitations Gilles Stébenne inc. v. 9166-9929 Québecinc., 2016 QCCS 2953, at paras. 34 and 41-47 ).

In principle, however, the judge should not have recourse to the principles ofinterpretation set out in arts. 1425 to 1432 of the Code (Baudouin and Jobin, at No. 413; Lluelles and Moore, at No. 1571). In this sense,the

interpretation of the contract is more superficial at the first step than at the second (Lluelles and Moore, at No. 1572). [28] In principle, at the first step, the judge should “first and foremost”[13] consider the words of the contract. The judge may alsoconsider the circumstances in which the contract was concluded. The testimony of the parties may also be relied on at this juncture to establish those circumstances.[14] It would however be improper at this first step to engage in a lengthy

interpretation of the parties’common intention. [29] In this light, I would nuance the trial judge’s comments on the use the parties’ testimony in the first step of her analysis: [57] Une lecture du contrat dans son intégralité révèle une ambiguïté en raison de leur [articles 3 and 4] formulation, mais égalementparce que les parties ont des intentions divergentes lorsqu’elles les adoptent. [Emphasis added] [30] The testimony as to the parties’ intentions was not the deciding factor in the judge’s analysis of the first step (“mais égalementparce que”). In any event, I agree with her conclusion at the first step that articles 3 and 4 of the Second Amendment were ambiguous.While it is true that

article 4 on its own seems very clear, there is an apparent contradiction between articles 3 and 4:

article 3 providesthat the Appellant has the obligation to close for all three properties “[a]t such time as Phase Il reports are provided by the Seller to theBuyer and its lender which is satisfactory to the lender”, while

article 4 allows the Appellant to pick and choose which of the threeproperties it wants to buy “[a]t any time either prior to or following the presentation of the Phase II report(

s) for 200 St-Joseph and 0Lois, whether or not satisfactory to the Buyer's lender, […] at his sole discretion and sole risk”. [31] The ambiguity is even more evident when

article 4 of the Second Amendment is examined in the context of the initial Promise toPurchase and the first Amendment. The deal between the parties had always been a purchase en bloc. 200 St-Joseph and 0 Lois wereheld back from the main closing because of environmental concerns, and 192/194 St-Joseph was held back because it was beingfinanced with the other two properties.

In that context, a clause that would allow the Appellant to pick and choose among the threeproperties without regard to whether there were any environmental issues represents a sudden and very significant change in the deal.The parties are, of course, free to make such a change. However, in the absence of any explanation as to why the parties did so, the judgewas entitled to have doubts as to whether the clause was really intended to make such a change. In those circumstances, she was right toproceed to the second step of interpreting the contract. 3.

Interpretation of articles 3 and 4 [32] Once the judge concluded that there was an ambiguity, she was required to go to the second step in Uniprix and interpret thecontract. For that step she could look at all of the evidence, including the testimony. [33] The judge found that the parties’ intentions were divergent. The Appellant’s representative testified that

article 4 was anexception to

article 3 and was intended to give the Appellant the right to pick and choose any of the three properties. The Respondentand the broker testified that the sale was always intended to be en bloc and that

article 4 merely allowed the Appellant to pick and choosewhether it would buy any contaminated properties. [34] Once the judge found that there were divergent intentions, she should have abandoned her search for a common intention and instead looked for the most reasonable

interpretation.[15] Although she said that she was looking for a common intention, she concluded

by finding an

interpretation that was “ l’interprétation la plus raisonnable, plausible et credible ”. [16] [ 35 ] In arriving at this conclusion, she looked at the contract as a whole, including the Promise to Purchase, the first Amendment and the Second Amendment. [17] She found that the parties’ clear intention at the outset was a sale en bloc of all of the properties. [18] The contract was modified because of environmental concerns and to accommodate the Appellant’s financing. [19] The respondent recognized that the Appellant could withdraw any contaminated property from the sale [20] and had arranged its financing on the basis of purchasing all of the properties. [21] [ 36 ] In that context, the judge qualified the purpose of

article 4 as follows: [69] L'objet de la clause 4 visait à permettre l'acquisition de certains immeubles par la demanderesse vu le contexte de contamination possible affectant certains immeubles. Elle lui permettait de relever la condition d'évaluation environnementale (Phase 2) même avant que le rapport ne soit produit ( at any time prior to ) afin de se porter acquéreur, à ses risques et périls, du ou des lots contaminés et/ou d'acquérir à ses risques et périls le ou les lots contaminés, et ce, malgré l'insatisfaction de son prêteur ( whether or not satisfactory to the buyer's lender ). [ 37 ] She then concluded that

article 4, properly interpreted in the context of the contract as a whole, did not allow the Appellant to pick and choose only one property: [72] La promesse d'achat initiale du 16 mars 2018 (P-2) et par la suite de tous ses amendements (pièces P3, P4 et P5) mène à interpréter la commune intention des parties. Le Tribunal est d'avis que l'intention commune des parties a toujours été de conclure la vente d'un ensemble immobilier et non de faire des ventes individualisées.

La clause 4 de l'amendement du contrat ne permettait pas à la demanderesse de n'acquérir qu'un immeuble, et ce à son choix, avec la possibilité de mettre fin à l'acquisition des deux autres immeubles. [73] Toute la transaction portait sur un ensemble et les clauses doivent être prises dans le sens le plus rapproché de l'intention des parties.

Le défendeur et son représentant ont été très clairs et francs quant à leur intention du début jusqu'à la fin des négociations. [74] Le Tribunal est d'avis que la clause 4 de l'amendement du 4 juillet 2018 doit être interprétée en lui donnant le sens véritable de l'ensemble du contrat et dans le contexte de l'étude environnementale.

Prétendre que la clause 4 stipule une vente individualisée va à contresens des négociations des parties pour la vente d'un ensemble d'immeubles. [75] La demande de procéder seulement sur l'immeuble 0 rue Lois par ailleurs déclaré contaminé est contraire à la preuve soumise, à l'interprétation et la portée que les parties se sont entendues lorsqu'elles ont signé l'acte. C'est l'interprétation la plus raisonnable, plausible et crédible. [ 38 ] I am in agreement with the outcome, but in my view, the reasoning is incomplete. [ 39 ] The judge concluded that

article 4 did not allow the Appellant to choose to purchase only one property. But she did not interpret

article 4. She did not explain what it means, or what is left of

article 4 after she decided what it did not mean. [ 40 ] In my view, both

article 3 and

article 4 should be given some meaning that allows them to operate in harmony. [ 41 ]

Article 3 provides that the Appellant has the obligation to close for all three properties “[a]t such time as Phase Il reports are provided by the Seller to the Buyer and its lender which is satisfactory to the lender”. This is consistent with the fact that the three properties were withdrawn from the initial closing because of environmental concerns on 200 St-Joseph and 0 Lois. Once the Appellant receives satisfactory Phase II reports, it is required to close. [ 42 ]

Article 4 allows the Appellant to pick and choose which of the three properties it wants to buy “[a]t any time either prior to or following the presentation of the Phase II report(

s) for 200 St-Joseph and 0 Lois, whether or not satisfactory to the Buyer's lender, […] at his sole discretion and sole risk”. It allows the Appellant to pick and choose any property if it has not received the Phase II reports or if they are unsatisfactory. However, it does not relieve the Appellant of its obligation under

article 3. [ 43 ] In the circumstances of the present case, there was no environmental concern with respect to 192/194 St-Joseph and the Appellant received a satisfactory Phase II report on 200 St-Joseph on August 20, 2018. As a result, as of that date, it had the obligation to close on 192/194 St-Joseph and 200 St-Joseph under

article 3. It also had the option to close on 0 Lois under

article 4. [ 44 ] The Appellant sent a notice on August 28, 2018, that it was exercising its right to close on 0 Lois under

article 4 and was “continu[ing] to review the possibility of adding the other 2 properties on St-Joseph at a later point”. It did not have the right to do that. It could not exercise its right under

article 4 while refusing to honour its obligation under

article 3. [22] [ 45 ] For these reasons, the judge did not err in dismissing the action in passing of title for 0 Lois alone. [ 46 ] I propose that the Court dismiss the appeal, with costs. STEPHEN W. HAMILTON, J.A.