Hall v. Quebec (Deputy Minister of Revenue), [1998] 1 S.C.R. 220

Mary Margaret Hall Appellant

v.

The Deputy Minister of Revenue of Quebec Respondent

Indexed as: Hall v. Quebec (Deputy Minister of Revenue)

File No.: 25369.

Hearing and judgment: December 3, 1997.

Reasons delivered: February 12, 1998.

Present: Lamer C.J. and L’Heureux‑Dubé, Gonthier, Iacobucci and Bastarache JJ.

on appeal from the court of appeal for quebec

Estates ‑‑ Seizin ‑‑ Testamentary executor and universal legatee ‑‑ Nature and effect of seizin of testamentary executor and seizin of legatee ‑‑ Coexistence of two seizins ‑‑ Whether executor’s seizin prevails over that of legatee ‑‑ Whether testamentary executor’s seizin extends to fruits and income generated after testator’s death ‑‑ Civil Code of Lower Canada, arts. 409, 891, 918.

Taxation ‑‑ Estate ‑‑ Universal legatee ‑‑ Taxation Act providing that income of estate must be included in computing taxable income of person entitled to demand payment thereof during taxation year ‑‑ Time when person entitled to demand payment thereof ‑‑ Taxation Act, R.S.Q., c. I‑3, ss. 652, 663 ‑‑ Civil Code of Lower Canada, arts. 891, 918.

The appellant’s husband died in 1985. In his will, he named her the residuary legatee of all the property of the estate, which included an investment portfolio. During its first fiscal year, the estate received $38,329 in interest and dividend income from the investment portfolio. In that fiscal year, the estate reported approximately $27,580 in investment income, while the appellant reported the $10,910 that had been distributed to her by the estate. In 1987, the testamentary executor ended his administration, paid the residue of the estate to the appellant and transferred the securities to her name. The following year, the Ministère du Revenu issued a new notice of assessment to the appellant in respect of the 1986 taxation year that added $30,329 to her income. It claimed that this amount, which represented interest and dividends not paid to the appellant, was “payable” to her by the estate under s. 652 of the Taxation Act (“T.A.”) and was therefore taxable in her hands. The appellant filed a notice of appeal in the Court of Québec against this new notice of assessment. The appeal was dismissed, and the Court of Appeal affirmed the decision of the Court of Québec.

Held: The appeal should be allowed. The new notice of assessment in respect of the 1986 taxation year should be quashed.

While the testator referred in his will to his “trustees and executors”, which might be taken as expressing an intention to create a trust, the absence of a transfer or conveyance of the property to a trustee precludes such a conclusion. The will simply created a testamentary succession. Furthermore, s. 646 T.A. does not have the effect of equating a simple testamentary succession with a trust. The legislature employed a specific drafting technique and used the word “trust” to cover several concepts in order to simplify the text of the Act.

Pursuant to ss. 652 and 663 T.A., the income of an estate must be included in computing the taxable income of a person who was entitled to demand payment of it during the taxation year, whether or not the income was paid to the person. However, it is necessary to refer to the principles of civil law, and more specifically to the concept of seizin, in order to determine as of when such a person is entitled to demand payment thereof. A joint reading of arts. 891 and 918 C.C.L.C. leads to the conclusion that a legatee is entitled to demand payment of what the testamentary executor owes him or her, regardless of whether or not he or she has been paid any amount, only once the executor’s seizin has terminated. The seizin devolved upon the legatee by operation of art. 891 C.C.L.C. confers on the legatee the rights relating to possession of the property bequeathed to him or her. Although the legatee is also the owner of that property as of the testator’s death, the executor’s seizin prevails over that of the legatee. Even though executors have only de facto possession, art. 918 C.C.L.C. authorizes them to claim the moveable property of the estate, even in the legatee’s hands, during the period of their seizin. It is by means of their seizin that executors control the estate patrimony and execute the will. Once this execution is terminated, the seizin comes to an end even if the testator extended it beyond that time. The executor is thus a mandatary responsible for executing the will. Until the executor’s seizin has terminated, the legatee’s rights are therefore secondary to those of the executor and the legatee cannot exercise his or her rights in the bequeathed property. Since in this case the right to bring an action in revendication against the executor had not yet arisen in 1986 ‑‑ because the administration of the estate had not yet been completed and the executor’s seizin was still in effect ‑‑ the appellant could not demand payment of the income from the moveable property in the first year of the succession.

The interest and dividends generated by the securities bequeathed to the appellant were subject to the testamentary executor’s seizin. The effect of the right of accession provided for in art. 409 C.C.L.C. is to make the fruits and income subject to the same rules as the principal property. Thus, universal legatees become ipso jure the owners of the fruits and income produced by the property to which they are entitled. However, this right of ownership is subject to the same conditions as the principal, that is, the fruits and income from the property covered by the executor’s seizin are also included in that seizin and are not “payable” to the universal legatee until the estate has been administered. In this case, by granting the executor a seizin in terms as broad as those provided for in the will, the testator expected the executor to have the power to administer the fruits and income generated by the bequeathed property. The testator was under no obligation to specify that these fruits and income were included in the executor’s seizin, since they were included in it by operation of the law alone. It is only when a testator wishes to exclude the fruits and income from the property included in the executors’ seizin that he or she must do so expressly. Furthermore, the rule that the income produced by the immoveables is not included cannot be applied to the income produced by the moveables, since the former are excluded from the seizin. However, where, as here, the testator states that the immoveables are included in the estate, the income they produce is also included in the executors’ seizin by virtue of the principle of accession.

Cases Cited

Referred to: Royal Trust v. Québec (Sous‑ministre du Revenu), [1990] R.D.F.Q. 36; Blanchet v. Blanchet (1861), 11 L.C.R. 204; D’Aoust-Rudenko v. Bédard, Sup. Ct. Hull, No. 550‑05‑000073‑893, February 16, 1989; Saint‑Aubin v. Crevier (1905), 28 C.S. 392.

Statutes and Regulations Cited

Act respecting the Ministère du Revenu, R.S.Q., c. M‑31, s. 14.

Civil Code of Lower Canada, arts. 409, 596, 863 et seq., 871, 891, 918, 921, 981a et seq.

Civil Code of Québec, S.Q. 1991, c. 64, art. 777.

Taxation Act, R.S.Q., c. I‑3, ss. 646, 647, 652, 663 [repl. 1984, c. 15, s. 143].

Authors Cited

Brière, Germain. Précis du droit des successions, 3^e éd. Montréal: Wilson & Lafleur, 1993.

Comtois, Roger. “L’exécuteur testamentaire” (1967), 2 R.J.T. 533.

Jolin, Marc. Les impôts sur le revenu et le décès. Montréal: Association québécoise de planification successorale, 1978 (feuilles mobiles mises à jour en décembre 1994, envoi n^o 19).

Mayrand, Albert. Les successions ab intestat. Montréal: Presses de l’Université de Montréal, 1971.

Mignault, Pierre Basile. Le droit civil canadien, t. 3 et 4. Montréal: Théoret, 1897‑1899.

Planiol, Marcel, et Georges Ripert. Traité pratique de droit civil français, t. 5, 2^e éd. par André Trasbot et Yvon Loussouarn. Paris: L.G.D.J., 1957.

Smyth, Jerome C. “Seizin in the Quebec Law of Successions” (1956‑57), 3 McGill L.J. 171.

Toullier, Charles Bonaventure Marie. Le droit civil français, t. 4, 5^e éd. Paris: J. Renouard, 1830.

Traité de droit civil du Québec, t. 5, par Hervé Roch. Montréal: Wilson & Lafleur, 1953.

APPEAL from a judgment of the Quebec Court of Appeal, [1996] R.D.F.Q. 41, 96 D.T.C. 6538, [1996] Q.J. No. 942 (QL), affirming a decision of the Court of Québec, [1991] R.D.F.Q. 194. Appeal allowed.

J. L. Marc Boivin, for the appellant.

Pierre Séguin and Martine Bergeron, for the respondent.

English version of the judgment of the Court delivered by

//Gonthier J.//

I. Facts

[1] Gonthier J. -- Following the hearing of this case, the appeal was allowed from the bench with reasons to follow. These are those reasons. This appeal raises two fundamental issues relating to the Quebec law of successions. The first concerns the nature and effects of the testamentary executor’s seizin. The second is whether the fruits and income generated by property after the testator’s death are subject to the executor’s administration or whether they pass unconditionally to the heirs and legatees.

[2] George W. Hall, the appellant’s husband, died on May 3, 1985. In his will, he named her the residuary legatee of all the property of the estate.

[3] The estate included an investment portfolio. The will appointed the appellant and her son James Douglas Hall as testamentary executors. In view of the appellant’s advanced age and lack of business experience, it was Mr. Hall who settled the estate. The will listed and specified the powers of the testamentary executors, extending them beyond the year and a day provided for in art. 918 of the Civil Code of Lower Canada. More specifically, clause 8 of the will read in part as follows:

My Executors and Trustees shall have seizin and possession of all my property, moveable and immoveable, real and personal, and with powers beyond the year and a day limited by law and until the complete execution of this my will and the final division and distribution of the capital of my estate.

In addition to all other powers they have by law, my Executors and Trustees shall, without judicial authorization or the consent of any beneficiary, have the following powers which they may exercise in their uncontrolled discretion:

(a) to sell, hypothecate and alienate from time to time all or any part of the property of my estate, moveable as well as immoveable, to receive the proceeds and consideration and grant discharge and main‑levee therefor and also to abandon or give away any property, moveable or immoveable that they may consider worthless;

(b) to invest and re‑invest all moneys of my estate. . . .

(f) to determine whether any moneys received or disbursed shall be on account of capital or of income or of both and in what proportions, and all other questions of like character which may arise in the course of their administration;

(j) to postpone the sale, realization, calling in and conversion of the whole or any part of the assets of my estate without being responsible for any loss resulting from such postponement, particularly as to any shares of The Royal Trust Company which I may own at the time of my death, it being my desire that my Executors and Trustees may retain them as long as they deem it advisable to do so;

(n) and generally to perform all acts of administration and also other acts or [sic] ownership in the same manner and with the same effect as if they were the absolute owners of my estate and to decide all questions which may arise in the course of their administration, realization, partition or winding up of my estate and their decision, whether made in writing or implied by their acts, shall be conclusive and binding on all beneficiaries. [Emphasis added.]

[4] During its first fiscal year ending May 3, 1986, the estate received $38,329 in interest and dividend income from the investment portfolio. This sum was deposited in the name of the estate in a bank account opened for that purpose. During that first fiscal year, the estate paid off the testator’s debts, paid a portion of the individual legacies and distributed $10,910 to the appellant. In its income tax return for that fiscal year, the estate reported approximately $27,580 in investment income, while the appellant reported the $10,910 that had been distributed to her.

[5] On December 14, 1987, the Quebec Ministère du Revenu issued a certificate of distribution pursuant to s. 14 of the Act respecting the Ministère du Revenu, R.S.Q., c. M‑31. Shortly thereafter, the estate ended its administration, paid the residue to the appellant and transferred the securities to her name.

[6] On April 15, 1988, the Ministère du Revenu issued a new notice of assessment to the appellant in respect of the 1986 taxation year that added $30,329.76 to her income. The respondent claimed that this amount, which represented interest and dividends not paid to the appellant, was “payable” to the appellant by the estate within the meaning of s. 652 of the Taxation Act, R.S.Q., c. I‑3 (“T.A.”), and was therefore taxable in her hands. On December 16, 1988, the appellant filed a notice of appeal in the Court of Québec against this new notice of assessment. On July 19, 1991, the appeal was dismissed by Judge Louis Robichaud of the Court of Québec (Civil Division). The Court of Appeal unanimously affirmed that decision on April 17, 1996.

II. Relevant Statutory Provisions

[7] Sections 646, 652 and 663 T.A. read as follows at the relevant time:

646. In this Part, a trust, wherever it is created, or an estate, referred to in this title as a “trust”, shall also include the trustee, testamentary executor, administrator, heir or other legal representative having ownership or control of the property of the trust or estate.

Likewise, a beneficiary shall include every person having a right in a trust.

652. For the purposes of paragraph a of section 657 and sections 663, 667 and 672 to 676, an amount shall not be considered payable in a taxation year unless it has actually been paid in the year to the person to whom it was payable or unless that person was entitled to demand payment of it in that year.

653. The income of a trust for a taxation year, before any deduction under section 130.1, paragraphs a and b of section 657 or the regulations made under paragraph a of section 130, must also, in the case of a trust other than a trust governed by an employee benefit plan, be included in computing the income of a beneficiary for the year to the extent that it has become payable to him in the year, whether or not it is paid to him, and must not be included for any subsequent year in which payment is made and, in the case of a trust governed by such a plan, of a person who has contributed to the plan as an employer to the extent that it was paid in the year to that person. [Emphasis added.]

[8] Articles 409, 871, 891, 918 and 921 C.C.L.C. provide as follows:

409. The natural and industrial fruits of the earth, civil fruits, and the increase of animals, belong to the proprietor by right of accession.

410. Fruits and interest arising from the thing bequeathed accrue to the benefit of the legatee from the time of the death of the testator, when the latter has expressly declared in the will his intention to that effect.

Life‑rents or pensions, bequeathed by way of maintenance, also begin from the date of the testator’s death.

In all other cases, fruits and interest do not accrue until they are judicially demanded, or until the debtor of the legacy is put in default.

891. Legatees by whatever title, are, by the death of the testator, or by the event which gives effect to the legacy, seized of the right to the thing bequeathed, in the condition in which it then is, together with all its necessary dependencies, and with the right to obtain payment, and to prosecute all claims resulting from the legacy, without being obliged to obtain legal delivery.

892. Testamentary executors, for the purposes of the execution of the will, are seized as legal depositaries of the moveable property of the succession, and may claim possession of it even against the heir or legatee.

This seizin lasts for a year and a day reckoning from the death of the testator, or from the time when the executor was no longer prevented from taking possession.

When his duties are at an end, the testamentary executor must render an account to the heir or legatee who receives the succession, and pay him over the balance remaining in his hands.

If, under the will, his duties are extended beyond the year and a day, he shall, upon the request of the heir or legatee or of one of the heirs or legatees, produce from time to time a summary account of his management and of the administration of the properties of the succession if he is charged therewith, such account to be furnished without any judicial formality or costs.

921. The testator may modify, restrict or extend the powers, the obligations and the seizin of the testamentary executor, and the duration of his functions. He may constitute the testamentary executor an administrator of his property, in whole or in part, and may even give him the power to alienate it with or without the intervention of the heir or legatee, in the manner and for the purposes determined by himself.

III. Judgments Below

A. Court of Québec, Civil Division, [1991] R.D.F.Q. 194

[9] In his judgment, Judge Robichaud discussed the concept of “seizin”. He noted that this concept is of paramount importance, since in light of the law, academic opinion and the will, a distinction must be made between two types of seizin: that devolved upon the legatee by operation of art. 891 C.C.L.C., and that of the testamentary executor set out in art. 918 C.C.L.C.

[10] In Judge Robichaud’s view, the seizin of a universal legatee has priority over that of the testamentary executor (at p. 196):

[translation] The Court is of the view, based on the writings of Mignault, that the seizin of the universal legatee has priority over that of the testamentary executors, who are regarded merely as depositaries, as their possession confers no attributes incidental to the right of ownership recognized in our law, including in particular that of enjoyment of the fruits generated by the capital.

[11] He rejected the appellant’s argument that s. 646 T.A. equates an estate with a trust and held, accordingly, that [translation] “it should be concluded that it is the estate that became the owner -- albeit temporarily -- of the assets of the estate” (p. 196). According to the judge, s. 646 must be read in light of the other provisions of the Taxation Act, including s. 663, which provides that the income of a trust, or an estate, must be included in computing the income of a beneficiary if it has become “payable” to the beneficiary, as it had in the case at bar.

[12] Finally, Judge Robichaud found that the fruits and interest produced by the property bequeathed to the appellant were not included in the testamentary executor’s legal seizin, since they were generated after the testator’s death and therefore did not form part of the estate patrimony. He added that the will conferred no power of management on the executors in respect of the fruits and income produced by the bequeathed property.

B. Quebec Court of Appeal, [1996] R.D.F.Q. 41

[13] Forget J. (ad hoc) (LeBel and Tourigny JJ.A. concurring) began by noting that the will of the de cujus established a simple testamentary succession, governed by arts. 863 et seq. C.C.L.C., not a trust within the meaning of arts. 981a et seq. C.C.L.C. Forget J. also rejected the appellant’s contention that s. 646 T.A. equates a simple testamentary succession with a trust.

[14] Although under s. 647 T.A., an estate can be a separate taxpayer and constitute a taxable entity as of the testator’s death, s. 663 T.A. creates an exception in providing that [translation] “the income of a trust -- and consequently that of an estate -- must be included in computing the income of a beneficiary -- the residuary universal legatee in this case -- to the extent that it ‘has become payable’ to him in the year, whether or not it is paid to him” (p. 44). Section 652 T.A. for its part provides that an amount becomes “payable” in the year if it has actually been paid to the person to whom it was payable, or if that person was entitled to demand payment of it.

[15] It therefore had to be determined whether the appellant could demand payment of the income during the first fiscal year of the estate. The respondent answered in the affirmative, while the appellant maintained that it was up to the testamentary executors to choose the time when the amount would be paid, upon termination of the administration of the estate. Forget J. stated that since the Taxation Act does not expressly derogate from the general law, the principles of the civil law relating to successions and the rights of legatees must be applied to answer this question.

[16] The Court of Appeal pursued its reasoning by noting that the will creates a residuary universal legacy of the testator’s moveable and immoveable property in favour of the appellant. Thus, the appellant became the owner of the bequeathed property on the day of the testator’s death, without any formalities. Pursuant to art. 891 C.C.L.C., concerning the seizin of legatees, and the right of accession provided for in art. 409 C.C.L.C., the appellant also acquired ownership of the fruits of the bequeathed property, and the right to obtain payment thereof and to prosecute all claims arising therefrom, upon her husband’s death. As for art. 871 C.C.L.C., which could limit the appellant’s right to the fruits and interest arising from the bequeathed property, Forget J. concluded that it does not apply to a universal legatee, since the testator, having bequeathed his or her entire patrimony to the universal legatee, does not need to expressly grant the interest arising from the bequeathed property to him or her.

[17] As for the testamentary executors, Forget J. reiterated that they have only de facto possession of the estate, as opposed to the legatees’ de jure possession. Furthermore, according to the judge, the executors’ de facto seizin does not cover the fruits and income from the bequeathed property, since they are subsequent to the testator’s death and have never formed part of the estate patrimony. Finally, since the will of the late George Hall did not refer to the income from the estate’s moveable property, it must be concluded that it “devolved” upon the appellant at the same time as the bequeathed property. Accordingly, Forget J. concluded that the appellant was entitled to control the income of the estate as of her husband’s death and was therefore entitled to demand payment thereof. He added that the appellant’s position could lead to all sorts of abuse, such as income splitting.

IV. Issues

[18] 1. What is the legal nature of the seizin of legatees and that of testamentary executors, and how do they coexist?

2. Does a testamentary executor’s seizin extend to investment income generated after the testator’s death?

V. Analysis

[19] Before discussing the main issues, it must first be determined whether the will of the late George W. Hall created a true trust, or simply a testamentary succession. This distinction is important because the two legal institutions are not governed by the same provisions of the Civil Code of Lower Canada and have different legal consequences.

[20] In his will, the testator referred to his “trustees and executors”, which might be taken as expressing an intention to create a trust. However, the absence of a transfer or conveyance of the property to a trustee precludes such a conclusion. In the fourth clause of his will, the testator transmitted his property to the appellant in the following terms:

All the rest and residue of my property, moveable and immoveable, real and personal, of which my succession may be composed at the time of my death, I give and bequeath in absolute ownership to my said wife.

It is thus clear that the testator did not intend to create a trust; this was quite simply a testamentary succession.

[21] Furthermore, the Court of Appeal was correct in concluding that s. 646 T.A. does not have the effect of equating a simple testamentary succession with a trust. As it stated, the legislature simply wished to employ a specific drafting technique by using the word “trust” to cover several concepts in order to simplify the text of the Act.

A. Coexistence of the Seizin of Legatees with that of Testamentary Executors

[22] Pursuant to ss. 652 and 663 T.A., the income of an estate must be included in computing the taxable income of a person who was entitled to demand payment of it during the taxation year, whether or not the income was paid to the person. However, the Taxation Act says nothing about a legatee’s right to demand payment of the bequeathed property; it is therefore necessary to refer to the principles of civil law, and more specifically to the concept of seizin, in order to determine as of when a person is entitled to demand payment thereof: Royal Trust v. Québec (Sous-ministre du Revenu), [1990] R.D.F.Q. 36 (C.A.). It follows that it is first necessary to consider the very nature of the legatee’s seizin and of that of the testamentary executor and, second, to determine whether one takes precedence over the other.

(1) Seizin of the Legatee

[23] The source of the legatee’s seizin is art. 891 C.C.L.C., which provides that legatees “are, by the death of the testator, or by the event which gives effect to the legacy, seized of the right to the thing bequeathed”. This is a vague, and often misunderstood, concept. The term “seizin” has its origin in the German expression for “possession” (G. Brière, Précis du droit des successions (3rd ed. 1993), at p. 64). Without going into the history of this ancient concept, it can be noted that under the Custom of Paris, seizin distinguished a legitimate heir from a universal legatee, who was not [translation] “seized as of right” and had to apply to the heir to obtain delivery of his or her legacy in order to be placed in possession (Traité de droit civil du Québec, t. 5, by H. Roch, 1953, at p. 441).

[24] In Lower Canada, since the decision of the Court of Appeal in Blanchet v. Blanchet (1861), 11 L.C.R. 204, and its codification in 1866, every legatee, even a particular legatee or an incompetent person, has been seized of the property of the deceased to which he or she is entitled as a result of the event that gives effect to the legacy. In the case of a legacy of an indeterminate thing, such as a sum of money, the legatee is seized of the right to obtain payment. Thus, since 1866, Quebec law has expressly recognized the seizin of heirs and legatees. A legatee is therefore in the same position as a testamentary heir, who, like a legal heir, is seized of the legacy as of the opening of the succession (J. C. Smyth, “Seizin in the Quebec Law of Successions” (1956‑57), 3 McGill L.J. 171, at p. 182).

[25] According to some authors, seizin is the transmission of ownership of property from the deceased to his or her legatees. In this regard, Mignault stated that seizin is [translation] “a mechanism of the law by virtue of which the rights and debts of deceased persons pass, at the time of their death, from their person to that of their heirs. . . . In other words, it is an instantaneous legal vesting of the assets and liabilities of the deceased” (P. B. Mignault, Le droit civil canadien, t. 3, 1897, at pp. 269‑70 (emphasis in original)). According to majority opinion, however, seizin does not in any way refer to the transmission of ownership, since that transmission takes place automatically by law and by the will (art. 596 C.C.L.C.). Nor does seizin mean the transmission of possession, since possession is a question of fact. Rather, seizin is [translation] “legal authorization to act de plano as the possessor of the inheritance or, better yet, legal empowerment to exercise the rights and actions of the deceased without first having to carry out any formalities” (Brière, supra, at pp. 65‑66). This opinion is shared by Albert Mayrand, who described seizin as [translation] “the right ‘to lay claim to the possessory situation of the deceased’” (Les successions ab intestat (1971), at p. 42). Thus, the seizin of legatees refers more to the authority under which they possess property of which they are also the owners. As Toullier stated (Le droit civil français (5th ed. 1830), t. 4, No. 80, at p. 93):

[translation] The seizin referred to in the maxim the dead seize the living is the right of possession of the deceased, which continues in the person of the heir. At the very instant of death, and by operation of the law alone, this right passes to the person the law calls to the succession; it passes immediately and without interruption together with the right to possess, irrespective of the fact of possession, even before the heir knows that the succession has opened.

[26] Seizin thus has the effect of avoiding a gap in possession. It confers the rights relating to possession on the legatee, without it being necessary for the legatee to be in actual possession of the bequeathed property. It may be that the legatee does not even have the requisite intention for possession such as where, for example, he or she is not even aware of the testator’s death. Consequently, seizin is [translation] “the right one has to take effective possession of the patrimony of the de cujus and undertake, both passively and actively, the actions available to him or her” (Mayrand, supra, at p. 42). In addition to having a seizin that confers the rights relating to possession, it is indisputable that the legatee is the owner of the bequeathed property as of the testator’s death.

(2) Seizin of the Executor

[27] Article 918 C.C.L.C. provides that testamentary executors, “for the purposes of the execution of the will, are seized as legal depositaries of the moveable property of the succession, and may claim possession of it even against the heir or legatee”. Thus, the executor’s seizin differs from that of the legatees in that it is granted so that the executor may execute the will. Article 921 C.C.L.C. provides that this seizin may be expanded by the will. It is therefore necessary to refer to the will in order to determine the scope of the seizin. Once the execution of the will is terminated, the seizin comes to an end even if the testator extended it beyond that time.

[28] The effect of the seizin therefore appears to be that the executor is in a sense given a mandate to carry out and give effect to the testator’s wishes. As Mignault stated, the executor’s seizin is [translation] “the means to carry out this mandate and the purpose of the execution is to give effect to the clauses of the will” (Mignault, supra, t. 4, 1899, at p. 464).

[29] Article 918 suggests that the executor’s seizin is consistent with the concept of a depositary. However, the comparison between the execution of a will and a deposit is not entirely appropriate, since the executor does not necessarily have custody of the property, whereas a depositary must keep it until the end of the deposit (R. Comtois, “L’exécuteur testamentaire” (1967), 2 R.J.T. 533, at p. 538). The executor is thus a mandatary whose mandate is to execute the will; seizin is the means by which this execution can take place.

(3) Coexistence of the Two Seizins

[30] According to the very wording of art. 918 C.C.L.C., a testamentary executor may, during the term of his or her seizin, claim possession of the moveable property even against the heir and the legatee. The codifiers’ intention in drafting this article was clearly to confer on the testamentary executor more powers than mere de facto possession. Thus, the testamentary executor’s seizin appears to have a certain priority over that of the heir during the administration of the estate. Notary Comtois, supra, at p. 538, stated the following on this subject:

[translation] The executor’s seizin does not exclude that of the successors. There is a sort of juxtaposition of seizins owing to the purpose of each of them. Although the successors are seized of the property, they cannot reap the benefits of their seizin as long as the executor is discharging his or her duties, that is, as long as the executor him- or herself has the seizin. [Emphasis added.]

[31] This reasoning is based on a joint reading of arts. 891 and 918 C.C.L.C. For the duration of their seizin, testamentary executors are entitled to claim the moveable property of the estate, even in the legatee’s hands, because they must ensure that the will is properly executed. The testamentary executor’s seizin must thus be given a certain priority over that of the legatee for purposes of administration. Even though the universal legatee is the real owner of the bequeathed property, art. 918 C.C.L.C. provides that the executor’s seizin prevails over that of the legatee. The legatee therefore cannot exercise his or her rights in the bequeathed property until the executor’s seizin has terminated. Smyth, supra, at p. 184, stated the following in this respect:

[I]n one aspect, the executor’s seizin takes precedence for he is empowered, in virtue of it, to claim possession of the moveable property even against the heir or legatee.

[32] Thus, a more accurate reading of the relevant provisions of the Taxation Act and the Civil Code of Lower Canada, and in particular a joint reading of arts. 891 and 918 C.C.L.C., leads to the conclusion that a legatee is entitled to demand payment of what the testamentary executor owes him or her, regardless of whether or not he or she has been paid any amount, only once the testamentary executor’s seizin has terminated. The appellant cited the following passage from Les impôts sur le revenu et le décès (1978 (loose-leaf)), part II, at p. 1-4-7, by Marc Jolin, with which I agree:

[translation] The Civil Code and Quebec commentators are far more specific as to the time when legatees become entitled to the fruits and income than as to the time from which they may demand payment thereof. In the absence of a specific provision on the subject, legatees appear to be entitled to demand payment of the fruits and income arising from property bequeathed to them only from the time when the administrative formalities of settlement of the estate are terminated. This time generally corresponds to the time from which a legatee has a right to bring an action in revendication against an heir or executor who refuses to deliver the bequeathed property. [Emphasis added.]

In the case at bar, the right to bring an action in revendication against the executor had not yet arisen, since the testator had extended the duration of the executor’s seizin beyond the year and a day provided for in the law and since the administration of the estate had not yet been completed in 1986.

[33] In its judgment, the Court of Appeal appears to have failed to take into account, first, this aspect of the juxtaposition of the testamentary executor’s seizin and that of the heir over a certain period of time and, second, the fact that the seizin of the former had priority over that of the latter. With respect, I am therefore of the view that the Court of Appeal erred in concluding that the legatee could demand payment of the income from the moveable property in the first year of the succession.

[34] Were this Court to accept the Court of Appeal’s decision, every legatee would be entitled to demand the bequeathed property during the actual liquidation of the succession. That would have the effect of depriving the executor of any power of administration over the estate patrimony, which is surely not what the legislature intended. The testamentary executor’s seizin gives him or her control over the estate patrimony, and legatees can demand their shares only once that seizin has terminated. The legatee’s rights are secondary to those of the testamentary executor, who controls the property of the estate in accordance with the instructions set out in the will.

[35] Furthermore, the provisions of the new Civil Code of Québec, S.Q. 1991, c. 64, seem to have clarified Quebec law regarding the operation of seizin. The new art. 777 C.C.Q., which replaces art. 918 C.C.L.C., provides that during the administration of the estate, the liquidator has priority over the legatees and heirs:

777. The liquidator has, from the opening of the succession and for the time necessary for liquidation, the seizin of the heirs and the legatees by particular title.

The liquidator may even claim the property against the heirs and the legatees by particular title. [Emphasis added.]

[36] The Court of Appeal also concluded that, at any rate, the income from the bequeathed moveable property was not included in the testamentary executor’s seizin because it [translation] “was subsequent to” the testator’s death. This second question must therefore be analysed.

B. Is Income Generated After the Testator’s Death Included in the Testamentary Executor’s Seizin?

[37] It should first be noted that art. 871 C.C.L.C., which might at first glance suggest that the fruits and interest arising from the bequeathed property do not automatically accrue to the benefit of the legatee unless the testator has expressly declared that to be his or her intention in the will, does not appear to apply here. Since this case concerns a universal legatee to whom the testator thus bequeathed almost his entire patrimony — aside from the other legacies — it follows that the fruits and interest are included therein. (See: Mignault, supra, t. 4, at p. 345; D’Aoust-Rudenko v. Bédard, Sup. Ct. Hull, No. 550‑05‑000073‑893, February 16, 1989.) The question to be addressed is accordingly whether the interest and dividends generated by the securities were subject to the executor’s seizin with the result that the appellant was not entitled to demand payment thereof.

[38] In its judgment, the Court of Appeal concluded that the executors’ seizin did not cover the fruits and income arising from the property bequeathed to the appellant. Applying the principle that the universal legatee becomes the owner of the bequeathed property on the day of death, without any formalities, the Court of Appeal concluded that at that time the appellant, by virtue of the right of accession provided for in art. 409 C.C.L.C., acquired all the rights to the fruits and interest produced by the said property. With respect, I am of the view that the Court of Appeal erred in applying the principle of accession provided for in art. 409 C.C.L.C. More specifically, the Court of Appeal applied art. 409 C.C.L.C. to the heir’s seizin but not to that of the testamentary executor. The Court of Appeal’s argument would appear to be valid only if the effect of the testamentary executor’s seizin were to be totally discounted. According to the principles of the civil law, however, even though executors have only de facto possession, art. 918 C.C.L.C. authorizes them to claim possession of property in the hands of the heirs and legatees during the period of their seizin. In the case at bar, the terms of the will extended the testamentary executor’s seizin to moveable and immoveable property:

My Executors and Trustees shall have seizin and possession of all my property, moveable and immoveable, real and personal, and with powers beyond the year and a day limited by law and until the complete execution of this my will and the final division and distribution of the capital of my estate. [Emphasis added.]

[39] Thus, art. 409 C.C.L.C. should also apply to the testamentary executor’s seizin; the fruits and income (accessories) will therefore follow the principal property (securities in this case) in the testamentary executor’s hands.

[40] One may question whether the respondent’s position is not based on a certain confusion among the commentators as to whether the executor’s seizin applies to income produced by a testator’s immoveables after his or her death. Mignault (supra, t. 4, at p. 461) wrote the following:

[translation] In our law, it will be more prudent to adopt the opinion that has been approved by the majority of the authors with respect to both the old law and the contemporary law, and to decide that testamentary executors are not seized, by virtue of legal seizin, of the income from immoveables that falls due during the year of the seizin; this is based, inter alia, on the peremptory reason that this income is not included in the testator’s estate but is, on the contrary, the property of his or her heirs and legatees. [Emphasis added.]

(See also: Smyth, supra, at p. 185; Brière, supra, at pp. 279-80; Planiol and Ripert, Traité pratique de droit civil français (2nd ed. 1957), t. 5, No. 686.)

[41] It is not surprising that the majority of Quebec and French commentators have concluded that the income generated by immoveables after the testator’s death is not included in the executor’s seizin. This is an application of the principle of accession provided for in art. 409 C.C.L.C. Since executors are not seized of the immoveables (unless the will provides otherwise), it follows that by virtue of the principle of accession, the executor is not seized of the post mortem income derived therefrom. Conversely, since testamentary executors are lawfully seized of the moveable property, the income generated by that property is subject to their seizin.

[42] However, there is a minority opinion to the effect that testamentary executors are entitled to collect even the income generated by immoveables during the term of the administration. In this regard, Demolombe stated that a practice was introduced in the Châtelet de Paris of leaving to the testamentary executor all the income coming due during the seizin (Mignault, supra, t. 4, at p. 461). However, Mignault pointed out that under contemporary French law, the testamentary executor has seizin only if the testator expressly grants it. In Quebec, notary Comtois favoured the opinion that the income from immoveables could be collected by the executor during the term of the administration (supra, at p. 539). The Superior Court’s judgment in Saint‑Aubin v. Crevier (1905), 28 C.S. 392, is also referred to in this regard.

[43] The headnote of that judgment contains the following statement: “seizin of movable property of successions by testamentary executors, under Art. 918 C.C., carries with it the right to collect, during the year and a day of its duration, the revenues of the immovable property”. However, this statement is not supported in the judgment. After concluding that according to the commentators, the income generated by a testator’s immoveables before his or her death is part of the estate, Davidson J. stated the following (at p. 393):

There is division of opinion as to whether this principle extends to like rents which become due after the opening of the succession. . . . The plaintiff’s claim includes rent, which became due in the lifetime of Dame Hebert. And, important to observe, it also includes a demand for damages. Thus the executor is master with respect to two items of the claim. Some of the allegations join direct issue as to the whole cause of action; all of them need not do so. I consider that the matters contained in the paragraphs complained of are fully relevant. The inscription‑in‑law must be dismissed with costs. [Emphasis added.]

[44] It is clear from this passage that Davidson J. never concluded that the executor is seized of the income generated by the immoveables after the testator’s death. Rather, he seems to have stated that the fruits and income generated during the life of the testator are subject to the seizin.

[45] The effect of the right of accession is to make the fruits and income subject to the same rules as the principal property. Thus, universal legatees become ipso jure the owners of the fruits and income produced by the property to which they are entitled. However, this right of ownership is subject to the same conditions as the principal, that is, the fruits and income from the property covered by the executor’s seizin are also included in that seizin and are not “payable” to the universal legatee until the estate has been administered. The rule that the income produced by the immoveables is not included cannot be applied to the income produced by the moveables, since the former are excluded from the seizin.

[46] The above conclusion is perfectly consistent with the testator’s intention. Quebec law recognizes that testators can do as they please in determining the seizin they wish to confer on their testamentary executors (Mignault, supra, t. 4, at p. 463). In clause 8 of the will, the testator granted a seizin in the broadest of terms. It is hard to imagine how the de cujus could have added to his executors’ seizin. They had, inter alia, the power to “invest and re‑invest all moneys”, “to determine whether any moneys received or disbursed shall be on account of capital or of income or of both and in what proportions, and all other questions of like character which may arise in the course of their administration”, and “to perform all acts of administration and also other acts or [sic] ownership in the same manner and with the same effect as if they were the absolute owners of my estate”. (Emphasis added.) It would be illogical to grant such powers without expecting the executor to have the power to administer the fruits and income generated by the bequeathed property. It therefore appears that the testator fully understood that there was no obligation to specify that the fruits and income were included in the executors’ seizin, since they were included in it by operation of the law alone. It is only when a testator wishes to exclude the fruits and income from the property included in the executors’ seizin that he or she must do so expressly.

[47] Similarly, there is also an obligation to state whether immoveables are included in the estate, since art. 918 C.C.L.C. excludes them unless otherwise indicated. However, once the immoveables have been included, as in the present case, the income they produce is also included in the executors’ seizin by virtue of the principle of accession.

[48] In light of the foregoing, it is clear that the Court of Appeal erred in holding that the executors’ seizin did not extend to the fruits and income from the property they were administering; it was simply an application of the principle of accession. A contrary conclusion would have the unfair effect of making legatees pay tax on income from which they are not benefiting.

[49] As for the fear expressed by the Court of Appeal that the appellant’s position would open the door to all kinds of abuse, such as income splitting, I agree with the appellant that income splitting is integral to the scheme of taxation of estates and is not in any way reprehensible per se. Furthermore, income splitting has always been possible by means of a trust. What could constitute an abuse would be to keep the estate in existence as a taxpayer distinct from the heir for an unreasonable length of time solely in order to reduce taxes. However, it is not s. 652 T.A. that will prevent such abuse. Rather, the best way to prevent tax evasion is to monitor the diligence of executors in discharging their duties.

VI. Conclusion

[50] I accordingly conclude that the legatee was not entitled to demand payment of the fruits and income generated by the bequeathed property until the administration of the estate had terminated. From a fiscal perspective, this means that the amounts covered by the assessment of April 15, 1988 for 1986 were not “payable” to the appellant and were therefore not taxable in her hands. It is for these reasons that the appeal was allowed together with the appellant’s notice of appeal, and the assessment in notice No. 5088‑MU181418C01 of April 15, 1988 is quashed, the whole with costs throughout.

Appeal allowed with costs.

Solicitor for the appellant: Marc Boivin, Montréal.

Solicitors for the respondent: Veillette & Associés, Montréal.