The Estate of Paul Dontigny (Appellant)
v.
The Queen (Respondent)
Trial Division, Pratte J.—Ottawa, May 22 and
25, 1973.
Estate tax—Devise of immovable to widow with gift to
children on remarriage—Liability to tax—Estate Tax Act, s.
7(1)(a).
D by his will left the residue of his estate to his wife on
condition that if she remarried the immovable property
should go to his children.
Held, the value of the immovable property must be includ
ed in the aggregate net value of his estate for estate tax
purposes. The will created a "substitution" in the sense of
the Civil Code and a "settlement" within the meaning of
section 7(1)(a) of the Estate Tax Act. The immovables did
not "vest indefeasibly" in the wife as required by section
7(1)(a).
APPEAL from Tax Review Board.
COUNSEL:
Paul Martineau, Q.C., for appellant.
André Gauthier for respondent.
SOLICITORS:
Martineau and Forget, Hull, for appellant.
Deputy Attorney General of Canada for
respondent.
PRATTE J.—This is an appeal from a decision
of the Tax Review Board upholding the decision
of the Minister of National Revenue to claim an
amount of $3,036.75 from the appellant by
virtue of the Estate Tax Act, R.S.C. 1970, c.
E-9.
The facts out of which the litigation arises are
not in dispute. Moreover, at the start of the
hearing, counsel for both parties placed on
record a document entitled "Agreement as to
the facts", which it is pertinent to quote:
1. The death of Paul Dontigny occurred on or about May
12,1970.
2. The late Paul Dontigny was domiciled at Cayamant Lake,
in the county of Pontiac, in the Province of Quebec.
3. He was the spouse of Georgette Rondeau.
4. According to the will dated March 13, 1953, (Exhibit
E-1), sworn before Cléo Vaillancourt, notary, and appearing
in his records as number 492, the late Paul Dontigny named
Georgette Rondeau as his executrix.
5. The testator, Paul Dontigny, disposed of his property as
indicated in clauses four and nine of the said will:
[TRANSLATION] a) Clause four: I bequeath all my prop
erty, movable and immovable, without exception, that I
may leave on my death, including life insurance policies in
force at the time of my death, to my wife, GEORGETTE
RONDEAU, whom I appoint as my residuary legatee; under
the conditions mentioned in clause nine.
b) Clause nine: If my wife and residuary legatee does not
remain a widow and remarries, I wish all my immovable
property to devolve upon my children living at the time of
the second marriage of their mother or, if there are no
children living, upon the children of the latter.
6. The aggregate net value of the property left by the
deceased is $85,395.76, $57,075.00 being immovable
property.
7. By a Notice of Assessment dated May 17, 1971, the
Minister of National Revenue advised the appellant that he
had established a tax assessment of $3,036.75 by virtue of
the Estate Tax Act.
8. The appellant appealed the assessment to the Tax Review
Board, which dismissed the appeal in the judgment dated
November 6, 1972.
9. The only question at issue may be formulated thus: is the
value of the immovable property belonging to the deceased
at the time of his death, and included in the calculation of
the aggregate net value, deductible from the latter by virtue
of paragraphs 7(1)(a) or 7(1)(b) of the Estate Tax Act for
the purpose of establishing the aggregate taxable value?
Section 7(1) of the Estate Tax Act reads as
follows:
7. (1) For the purpose of computing the aggregate taxable
value of the property passing on the death of a person, there
may be deducted from the aggregate net value of that
property computed in accordance with Division B such of
the following amounts as are applicable:
(a) the value of any property passing on the death of the
deceased to which his spouse is the successor that can,
within six months after the death of the deceased or such
longer period as may be reasonable in the circumstances,
be established to be vested indefeasibly in his spouse for
the benefit of such spouse, except any such property
comprising a gift made by the creation of a settlement or
the transfer of property to a trustee in trust;
(b) the value of any gift made by the deceased whether
during his lifetime or by his will that can, within six
months after the death of the deceased or such longer
period as may be reasonable in the circumstances, be
established to be absolute and indefeasible and that was
made by him by the creation of a settlement under which
(i) the spouse of the deceased is entitled to receive
(A) all of the income of the settlement that arises
after the death of the deceased and before the death
of such spouse, or
(B) periodic payments in ascertained amounts or lim
ited to ascertained maximum amounts, to be made at
intervals not greater than twelve months, out of the
income of the settlement that arises after the death of
the deceased and before the death of such spouse, or,
if that income is completely exhausted by those pay
ments, out of the income and capital of the settle
ment, and
(ii) no person except such spouse may receive or other
wise obtain, after the death of the deceased and before
the death of such spouse, any of the capital of the
settlement or any use thereof, or any of the income of
the settlement to which such spouse is entitled or any
use thereof,
Counsel for the appellant claimed that, in
order to compute the aggregate taxable value of
the property passing on the death of Mr. Dontig-
ny, the value of the immovables bequeathed to
his wife under the terms of clauses four and
nine of his will should, according to section
7(1)(a) just quoted, be deducted from the aggre
gate net value of his property. In support of this
claim he advanced certain arguments which
may, as I understood them, be summarized as
follows:
1. Clauses four and nine of the deceased's will
do not create a substitution:
(a) because the will does not impose upon the
legatee of the immovables the obligation of
keeping the immovables so bequeathed;
(b) because the will does not impose upon the
legatee of the immovables the obligation of
giving the immovables to her children, but
merely the option of so doing, since the
legatee is free to remarry or not;
(c) because the will does not impose upon the
legatee of the immovables the obligation to
give them to her children at a specified date,
but rather at the time of her remarriage.
2. In any case, at the death of Mr. Dontigny his
immovables became "vested indefeasibly in his
spouse", and consequently section 7(1)(a)
authorizes the deduction claimed even if the will
creates a substitution:
(a) section 7(2) stipulates that a superannua-
tion benefit payable to the spouse of a
deceased, in respect of the death of the
deceased, "subject to a provision that such
benefit ceases to be payable to such spouse if
he remarries, shall not, by reason only of such
provision, be considered not to be vested
indefeasibly in him." This section indicates,
according to counsel for the appellant, that in
the eyes of the legislator, a legatee has
indefeasible title to the property bequeathed
even if he is to lose it in the event of his
remarriage;
(b) there is not the slightest doubt, according
to the definition given by section 62(1) for
"property passing on the death" and "succes-
sor", that, in the meaning of the Act in ques
tion, the immovables of the deceased did pass
to his spouse, whose title to them was
indefeasible since she could only lose them in
the event of her remarriage, in other words of
her own volition;
(c) the legacy of immovables made to the
wife on the condition that she not remarry is a
legacy dependent on a condition declared
void by article 1081 of the Civil Code of the
Province of Quebec;
(d) the legacy made to a spouse under charge
of substitution permits the deduction allowed
for in section 7(1)(a) to be claimed in spite of
the fact that this provision specifies that the
value of property "comprising a gift made by
the creation of a settlement" may not be
deducted. In fact, since section 62(1) defines
the term "settlement" as including "any deed
... under or by virtue of which a usufruct or
substitution is created", it follows from sec
tion 3(1)(e) that this phrase refers only to
substitutions created by a deed other than a
will.
From this, counsel concluded that section
7(1)(a) authorizes the deduction claimed.
A brief examination of the claims which I
have just summarized suffices to show that they
are unfounded. It is obvious, for example, that
contrary to the arguments advanced by counsel
for the appellant, the meaning of the word "set-
tlement" in section 7 is in no way modified by
section 3(1)(e). It would merely be a waste of
time to endeavour to prove this.
It is also clear that the fourth and ninth
clauses of the will of the deceased create a
"substitution" in the sense understood by the
Civil Code and constitute a "settlement" as
understood by the Estate Tax Act. Under the
terms of these clauses the testator bequeathed
his immovables to his wife on the condition that
she deliver them over to her children if she
remarried. Contrary to the claim made by coun
sel for the appellant, the wife of the deceased
did have the obligation to keep the immovables
bequeathed to her: if she did not keep them,
how could she deliver them over? She also has
the obligation, not the option, to deliver all these
immovables to her children in the event of her
remarriage. Finally, if the widow remarries, she
is to deliver her property over at the time of her
remarriage; we are therefore dealing with a
legacy in which the beneficiary is charged with
delivering over the inheritance at a specified
time (article 925, Civil Code). The fact that the
remarriage of the spouse may not take place
serves only to make the substitution conditional,
as described in the final paragraph of article 929
of the Civil Code of the Province of Quebec.'
Article 1081 of the Civil Code, far from declar
ing that such a condition is void, expressly
confirms its validity. 2 '
It was therefore under charge of substitution
that the widow of the deceased received the
immovables which he bequeathed to her. She
would only be eligible for the deduction claimed
if the gift of which she was the beneficiary met
the conditions described in section 7(1)(b).
However, under the circumstances it is indispu
table that the widow of the testator does not
have a right to the immovables bequeathed to
her which satisfies these conditions.
Even if one were to say that the gift in
question did not result from the creation of a
substitution, it would still be necessary to con
clude that the appellant has no right to the
deduction claimed. Under such circumstances
the appellant could only have obtained a favour
able decision if the immovables of the deceased
had been "vested indefeasibly in his spouse for
the benefit of such spouse", as required by
section 7(1)(a). As I interpret the law, the prop
erty is not "vested indefeasibly" in a spouse
when it is bequeathed under the condition that
the spouse not remarry. If it were otherwise, the
provision of section 7(2) would be meaningless.
For these reasons the appeal is dismissed with
costs.
' 929. .. .
The disposition which creates the substitution may be
conditional like any other gift or legacy.
2 The appellant has not claimed that the condition under
which the legacy was made to her is void because it limits
her freedom to remarry. In any case I do not believe that it
falls within the competence of this Court to void a condition
for reasons of this nature.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.