Philippe H. Bélanger

The appellant bank held a first-ranking hypothec on an immovable, which was subsequently acquired by the respondents through a taking in payment under their second hypothec.

When the original debtor later defaulted on the bank's loan, the bank exercised its hypothecary remedy by filing a motion for forced surrender and taking in payment against the respondents as the new owners of the immovable.

The Superior Court granted the motion, but the Court of Appeal set it aside on the basis that prescription of the personal obligation had been acquired during the proceeding and extinguished the hypothec.

The majority of the Supreme Court dismissed the appeal on the basis that it agreed entirely with the Court of Appeal's reasoning.

The dissent would have allowed the appeal, holding that a hypothecary creditor exercising its remedy against a hypothecary debtor who is not the personal debtor interrupts prescription at the time of filing, and the conditions of the Civil Code were all met at that date.

The appellant bank appealed from the Quebec Court of Appeal's decision (2018 QCCA 810).

The Supreme Court of Canada heard the appeal on November 7, 2019, and delivered oral judgment on the same day dismissing the appeal with costs.

Written reasons were to follow.

A majority of the Court found against the appellant.

The respondent bank sued the appellant on a hypothecary suretyship.

The parties reached a settlement agreement, but the bank subsequently withdrew its counter-offer and denied the existence of the transaction.

The trial judge and Court of Appeal both confirmed the validity of the transaction.

However, the Court of Appeal ordered the appellant to pay interest and an additional indemnity because she failed to deposit the settlement funds.

The Supreme Court of Canada allowed the appeal, holding that the appellant was never put in default by the bank, which had steadfastly refused to recognize the transaction.

Therefore, interest never began to run, and the bank could not claim interest on an obligation it had rendered impossible to perform.