A-105-73
The Estate of Paul Dontigny represented by
Georgette Rondeau, Executrix and Residuary
Legatee (Appellant)
v.
The Queen (Respondent)
Court of Appeal, Jackett C.J., St.-Germain and
Choquette D.JJ.—Ottawa, May 23, July 11 and
18, 1974.
Estate tax—Devise of immovable to widow with gift to
children on remarriage—Liability to tax—Estate Tax Act, s.
7(lxa).
Appeal from the judgment of the Trial Division ([1973]
F.C. 587) dismissing, with costs, an appeal from a decision
of the Tax Review Board confirming an assessment under
the Estate Tax Act.
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, that the appeal is dismissed and the value of the
immovable property must be included in the aggregate net
value of his estate for estate tax purposes. The immovable
did not "vest indefeasibly" in the wife as required by
section 7(1)(a) of the Estate Tax Act, therefore it is un
necessary to consider whether the will created a "substitu-
tion" in the sense of the Civil Code and a "settlement"
within the meaning of section 7(1)(a) of the Estate Tax Act.
APPEAL.
COUNSEL:
Luc Forget for appellant.
Alban Garon, Q.C., and W. Lefebvre for
respondent.
SOLICITORS:
Martineau and Forget, Hull, for appellant.
Deputy Attorney General of Canada for
respondent.
JACKETT C.J.—This is an appeal from a judg
ment of the Trial Division dismissing, with
costs, an appeal from a decision of the Tax
Review Board confirming an assessment under
the Estate Tax Act.
The appeal to the Trial Division was deter
mined on an agreed statement of the following
facts:
[TRANSLATION] 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 property,
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(lxa) or 7(1)(b) of the Estate Tax Act for
the purpose of establishing the aggregate taxable value?
In this Court, the appellant abandoned his
claim in so far as it was based on section 7(1)(b)
of the Estate Tax Act.
The following provisions of the Estate Tax
Act' should be considered in connection with
this appeal:
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;
(2) For the purposes of paragraph (1)(a), any superannua-
tion, pension or death benefit payable or granted
(a) out of or under any fund or plan established for the
payment of superannuation, pension or death benefits to
recipients, or
(b) out of the revenue of Her Majesty in right of Canada
or a province or under or subject to any Act of the
Parliament of Canada or of the legislature of a province,
to the spouse of a deceased on or after the death of the
deceased in respect of such death, 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.
62. (1) In this Act
"settlement" includes
(a) any trust, whether expressed in writing or otherwise,
in favour of any person, and, if contained in a deed or
other instrument effecting the settlement, whether or not
such deed or other instrument was made for valuable
consideration as between the settlor and any other person,
and
(b) any deed or other instrument under or by virtue of
which a usufruct or substitution is created or any real
property or estate or interest therein stands limited to any
persons by way of succession;
As I see the matter, there are two hurdles that
the appellant must surmount to succeed in this
appeal, viz:
1 While the deceased died before the Revised Statutes of
Canada, 1970, came into force, the parties did not supply us
with copies of the applicable law but assured us that it did
not differ in any material respect from c. E-9 of R.S.C.
1970, which is the text to which I refer.
(a) it must be established that the "property"
the value of which it is wished to deduct
under section 7(1)(a) was not "property com
prising a gift made by creation of a settle
ment" (which by definition includes an
"instrument under or by virtue of which ... a
substitution is created") so as to be excluded
from section 7(lxa) by the concluding words
thereof, and
(b) it must be established that the "property"
the value of which it is wished to deduct
under section 7(1)(a) was "vested indefeas-
ibly" in the widow "for the benefit of" the
widow, or, as it is put in the French version,
that the property was "dévolus irrévocable-
ment à son conjoint au profit de ce dernier".
If the appellant fails to surmount either of these
hurdles, the appeal fails.
As I am of opinion that the appellant has
failed to surmount the second hurdle, it is un
necessary for me to consider whether the first
one has been surmounted.
Regardless of whether the will created a "sub-
stitution", within the meaning of that word in
the Civil Code of Quebec, when it gave to the
widow the testator's real property subject to the
requirement that, if she re-married, the real
property would pass to the children or the
grandchildren at the time of the re-marriage, a
question concerning which there seems to be
room for possible difference of opinion, there is
agreement that the widow received the property
under the will, not absolutely, but subject to
title passing to the children or grandchildren if
she re-married. In my view, such a will does not
vest the property in the widow "indefeasibly".
A gift that is subject to being defeated or ter
minated on an event such as re-marriage is
defeasible and does not, therefore, fall within
the principal part of section 7(lxa). This is, as I
understand it, the view expressed by the learned
trial judge in the penultimate paragraph of his
Reasons for Judgment, with which I agree.
In my view, the appeal should be dismissed
with costs.
ST. -GERMAIN D.J. concurred.
* * *
CHOQUETTE D.J.—The essential facts and
documents in this case are reported by the Chief
Justice.
While not questioning the existence of a con
ditional substitution (art. 929 C.C.), I agree
with the Chief Justice that for the purposes of
this appeal, it is sufficient to invoke the last
reason given by the judge of the Trial Division,
namely that the immovables of the deceased
were not "vested indefeasibly" in his spouse as
required by section 7(1)(a) of the Estate Tax
Act (R.S.C. 1970, c. E-9).
To counter this argument, the appellant cites
article 892 of the Civil Code, and maintains that
only the deceased could revoke the legacy of his
property to his spouse, and since he did not do
so during his lifetime, the legacy is now irrevo
cable. She concludes that if she remarries, it is
she the widow, and not the deceased, who will
cause the property to pass to her children.
I cannot accept this reasoning. It was the
testator himself who specified in clause 9 of his
will that its provisions would be revoked should
his widow remarry. If she does remarry, it will
doubtless be of her own volition, but it will be
by the wish of the testator that the property in
question devolves upon his children or
grandchildren.
The legacy in question amounts to a legacy
subject to a resolutory condition: if the condi
tion is fulfilled, action can be taken to revoke it
(art. 893 C.C.).
The condition is valid, inasmuch as it
requires—in addition to the will of the legatee—
the performance of a certain act, namely a
second marriage (art. 1081 C.C.).
In my view, the condition does not constitute
an "impairment of the basic right to marry or
not to marry", as maintained by the appellant.
The widow retains complete freedom in this
respect. The testator for his part was merely
exercising his right to dispose of his property as
he saw fit, the condition being laid down in the
interests of his children.
As long as the condition remains possible and
effective, the legacy remains revocable.
The appellant further maintains that if her
right of ownership is subject to resolution or
revocation, then she has only a simple interest
in, or right of temporary enjoyment of, the
property bequeathed. She requests that her
assessment be revised accordingly.
In response it must be pointed out that it is
the aggregate net value of all property passing
on the death of a person that must be calculated
for estate tax purposes, subject to the deduc
tions allowed under the Act (c. E-9).
The property in question forms part of the
estate bequeathed by the testator at his death.
The fact that the property is not "vested
indefeasibly" in his widow does not release his
estate from the responsibility of paying an
assessment based on the value of the property
itself. It is as executrix and universal legatee,
moreover, that the appellant is required to pay
this assessment.
I would add one final reason relating to revoc-
ability. For the purposes of paragraph (1Xa) of
section 7, only superannuation, pension or death
benefits payable to the spouse of a deceased
subject to a provision that such benefit ceases
to be payable to him if he remarries are to be
considered not to be vested indefeasibly in him
(s. 7(2)). This means that in other cases—par-
ticularly that of a bequest of immovables—
devolution is to be deemed revocable where
there is such a provision.
The appellant's other arguments relate to sub
stitution. Since we adhere to the revocability
argument, they need not be discussed.
The appellant is at liberty to complain of the
harshness of the Act in her particular case—and
her submission contains everything that could
be said in her favour—but she cannot complain
of a judgment that merely applies the Act.
Having said this, I will subscribe to the argu
ments of the Chief Justice, and in accordance
with his conclusions I would dismiss the appeal
with costs.
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.