Civil Code of Québec, C.c.Q.
| Citation: | Civil Code of Québec, C.c.Q. | |
| Information about this text: | Consolidation: Updated to 1 May 2004 | |
| Enabled Regulations: | 13 Regulations | |
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CIVIL CODE OF QUÉBEC
S.Q., 1991, c. 64.
updated to May 1, 2004
last amendment: April 22, 2004
BOOK SIX
PRIOR CLAIMS AND HYPOTHECS
TITLE ONE
COMMON PLEDGE OF CREDITORS
2644.
The property of a debtor is charged with the performance of his obligations and is the common pledge of his creditors.1991, c. 64, s. 2644.
2645.
Any person under a personal obligation charges, for its performance, all his property, movable and immovable, present and future, except property which is exempt from seizure or property which is the object of a division of patrimony permitted by law.However, the debtor may agree with his creditor to be bound to fulfil his obligation only from the property they designate.
1991, c. 64, s. 2645.
2646.
Creditors may institute judicial proceedings to cause the property of their debtor to be seized and sold.If the creditors rank equally, the price is distributed proportionately to their claims, unless some of them have a legal cause of preference.
1991, c. 64, s. 2646.
2647.
Prior claims and hypothecs are the legal causes of preference.1991, c. 64, s. 2647.
2648.
The movable property of the debtor which furnishes his main residence, used by and necessary for the life of the household, may be exempted from seizure to the extent fixed by the Code of Civil Procedure, except where such movables are seized for sums owed on the price.The same rule applies to instruments of work needed for the personal exercise of a professional activity, except where such movables are seized by a creditor holding a hypothec thereon.
1991, c. 64, s. 2648.
2649.
A stipulation of unseizability is without effect, unless it is made in an act by gratuitous title and is temporary and justified by a serious and legitimate interest. Nevertheless, the property remains liable to seizure to the extent provided in the Code of Civil Procedure.It may be set up against third persons only if it is published in the appropriate register.
1991, c. 64, s. 2649; 2002, c. 19, s. 15.
TITLE TWO
PRIOR CLAIMS
2650.
A claim to which the law attaches the right of the creditor to be preferred over the other creditors, even the hypothecary creditors, is a prior claim.The priority of a claim is indivisible.
1991, c. 64, s. 2650.
2651.
The following are the prior claims and, notwithstanding any agreement to the contrary, they are in all cases collocated in the order here set out:(1) legal costs and all expenses incurred in the common interest;
(2) the claim of a vendor who has not been paid the price of a movable sold to a natural person who does not operate an enterprise;
(3) the claims of persons having the right to retain movable property, provided that the right subsists;
(4) claims of the State for amounts due under fiscal laws;
(5) claims of municipalities and school boards for property taxes on taxable immovables as well as claims of municipalities, specially provided for by laws applicable to them, for taxes other than property taxes on immovables and movables in respect of which the taxes are due.
1991, c. 64, s. 2651; 1999, c. 90, s. 41.
2652.
Prior claims covering legal costs and expenses incurred in the common interest may be executed on movable or immovable property.1991, c. 64, s. 2652.
2653.
Prior claims of the State for sums due under fiscal laws may be executed on movable property.1991, c. 64, s. 2653.
2654.
A creditor who takes procedures in execution or who, as holder of a movable hypothec, has registered a prior notice of his intention to exercise his hypothecary rights, may apply to the State to declare the amount of its prior claim. The application shall be registered and proof of notification shall be filed in the registry office.Within thirty days following the notification, the State shall declare the amount of its claim and enter it in the register of personal and movable real rights; such a declaration does not have the effect of limiting the priority of the State’s claim to the amount entered.
1991, c. 64, s. 2654.
2654.1.
Prior claims of municipalities and school boards for propertytaxes constitute a real right.They confer on the holder of the claims the right to follow the taxable property into whosever hands it may be.
1999, c. 90, s. 42.
2655.
Prior claims may be set up against other creditors, or against all third persons if they constitute a real right, without being published.1991, c. 64, s. 2655; 1999, c. 90, s. 43.
2656.
In addition to their personal or, as the case may be, real right of action and the provisional measures provided in the Code of Civil Procedure, prior creditors may exercise their remedies under the law for the enforcement and realization of their prior claim.1991, c. 64, s. 2656; 1999, c. 90, s. 44.
2657.
Prior claims rank, according to their order among themselves, and without regard to their date, before movable or immovable hypothecs.Prior claims of the same rank come in proportion to the amount of each claim.
1991, c. 64, s. 2657.
2658.
In a case of distribution or collocation among several prior creditors, the creditor of an indeterminate, unliquidated or conditional claim is collocated according to his rank, but subject to the conditions prescribed in the Code of Civil Procedure.1991, c. 64, s. 2658.
2659.
The priority granted by law to certain claims ceases by operation of law when the obligation which is its cause is extinguished.1991, c. 64, s. 2659.
TITLE THREE
HYPOTHECS
CHAPTER I
GENERAL PROVISIONS
SECTION I
NATURE OF HYPOTHECS
2660.
A hypothec is a real right on a movable or immovable property made liable for the performance of an obligation. It confers on the creditor the right to follow the property into whosever hands it may be, to take possession of it or to take it in payment, or to sell it or cause it to be sold and, in that case, to have a preference upon the proceeds of the sale ranking as determined in this Code.1991, c. 64, s. 2660.
2661.
A hypothec is merely an accessory right, and subsists only as long as the obligation whose performance it secures continues to exist.1991, c. 64, s. 2661.
2662.
A hypothec is indivisible and subsists in its entirety over all the charged properties, over each of them and over every part of them, even where the property or obligation is divisible.1991, c. 64, s. 2662.
2663.
The hypothecary rights conferred by a hypothec may be set up against third persons only when the hypothec is published in accordance with this Book or the Book on Publication of Rights.1991, c. 64, s. 2663.
SECTION II
KINDS OF HYPOTHEC
2664.
Hypothecation may take place only on the conditions and according to the formalities authorized by law.A hypothec may be conventional or legal.
1991, c. 64, s. 2664.
2665.
A hypothec is movable or immovable depending on whether the object charged is movable or immovable property or a universality of movable or immovable property.A movable hypothec may be created with or without delivery of the movable hypothecated. Where it is created with delivery, it may also be called a pledge.
1991, c. 64, s. 2665.
SECTION III
OBJECT AND EXTENT OF HYPOTHECS
2666.
A hypothec is a charge on one or several specific corporeal or incorporeal properties, or on all the properties included in a universality.1991, c. 64, s. 2666.
2667.
A hypothec secures the capital, the interest accrued thereon and the legitimate costs, other than extra-judicial professional fees, incurred for their recovery or for conserving the charged property.1991, c. 64, s. 2667; 2002, c. 19, s. 11.
2668.
Property exempt from seizure may not be hypothecated.The same rule applies to movable property belonging to a debtor which furnishes his main residence and which is used by and is necessary for the life of the household.
1991, c. 64, s. 2668.
2669.
A hypothec granted on the bare ownership does not extend to the full ownership upon extinction of the dismemberment of the right of ownership.1991, c. 64, s. 2669.
2670.
A hypothec on the property of another or on future property begins to affect it only when the grantor acquires title to the hypothecated right.1991, c. 64, s. 2670.
2671.
A hypothec extends to everything united to the property by accession.1991, c. 64, s. 2671.
2672.
Movables charged with a hypothec which are permanently physically attached or joined to an immovable without losing their individuality and without being incorporated with the immovable are deemed, for the enforcement of the hypothec, to retain their movable character for as long as the hypothec subsists.1991, c. 64, s. 2672.
2673.
A hypothec subsists on the new movable resulting from the transformation of property charged with a hypothec and extends to property resulting from the mixture or combination of several movables of which some are so charged. A person acquiring ownership of the new property, particularly through application of the rules on movable accession, is bound by such hypothecs.1991, c. 64, s. 2673.
2674.
A hypothec on a universality of property subsists but extends to any property of the same nature which replaces property that has been alienated in the ordinary course of business of an enterprise.A hypothec on an individual property alienated in the same way extends to property that replaces it, by the registration of a notice identifying the new property.
If no property replaces the alienated property, the hypothec subsists but extends only to the proceeds of the alienation, provided they may be identified.
1991, c. 64, s. 2674.
2675.
A hypothec on a universality of property subsists notwithstanding the loss of the hypothecated property where the debtor or the grantor replaces it in a reasonable time, having regard to the quantity and nature of the property.1991, c. 64, s. 2675.
2676.
A hypothec on a universality of claims does not extend to the subsequent claims of the person granting the hypothec when such claims result from the sale of his other property by a third person exercising his rights.Nor does it extend to a claim under an insurance contract on the other property of the grantor.
1991, c. 64, s. 2676; 2002, c. 19, s. 15.
2677.
A hypothec on shares of the capital stock of a legal person subsists on the shares or other securities received or issued on the purchase, redemption, conversion or cancellation or any other transformation of the hypothecated shares, provided the registration of the hypothec is renewed against the shares or other securities received or issued.The creditor may not object to the transformation on the ground of his hypothec.
1991, c. 64, s. 2677.
2678.
Where what is owed to the creditor is the object of a tender or deposit in accordance with this Code, the court may, following an application by the debtor making the tender or deposit, authorize the extension of the hypothec on the property tendered or deposited, and it may allow the amount initially registered to be reduced.Once the reduction of the initial amount is entered in the appropriate register, the debtor is no longer entitled to withdraw his tender or the property deposited.
1991, c. 64, s. 2678.
2679.
A hypothec on an undivided share of a property subsists if the grantor or his successor preserves rights over some part of the property by partition or other act declaratory or act of attribution of ownership, subject to the Book on Successions.If the grantor does not preserve any rights over the property, the hypothec nevertheless subsists and extends, according to its rank, to the price of transfer payable to the grantor, to the payment resulting from the exercise of a right of redemption or a first refusal agreement, or to the balance payable to the grantor.
1991, c. 64, s. 2679.
2680.
In the case of distribution or collocation among several hypothecary creditors, the creditor of an indeterminate, unliquidated or conditional claim is collocated according to his rank, but subject to the conditions prescribed in the Code of Civil Procedure.1991, c. 64, s. 2680.
CHAPTER II
CONVENTIONAL HYPOTHECS
SECTION I
THE GRANTOR OF A HYPOTHEC
2681.
A conventional hypothec may be granted only by a person having the capacity to alienate the property hypothecated.It may be granted by the debtor of the obligation secured or by a third person.
1991, c. 64, s. 2681.
2682.
A person whose right in a property is conditional or open to an attack in nullity may only grant a hypothec subject to the same condition or nullity.1991, c. 64, s. 2682.
2683.
Except where he operates an enterprise and the hypothec is charged on the property of that enterprise, a natural person may grant a movable hypothec without delivery only on road vehicles or other movable property determined by regulation and subject to the conditions determined by regulation.Where the act constituting the hypothec is accessory to a consumer contract, it is subject to the rules as to form and contents prescribed by this Book or by regulation.
1991, c. 64, s. 2683; 1998, c. 5, s. 9.
2684.
Only a person or a trustee carrying on an enterprise may grant a hypothec on a universality of property, movable or immovable, present or future, corporeal or incorporeal.The person or trustee may thus hypothecate animals, tools or equipment pertaining to the enterprise, claims and customer accounts, patents and trademarks, or corporeal movables included in the assets of any of his enterprises kept for sale, lease or processing in the manufacture or transformation of property intended for sale, for lease or for use in providing a service.
1991, c. 64, s. 2684.
2685.
Only a person carrying on an enterprise may grant a hypothec on a movable represented by a bill of lading.1991, c. 64, s. 2685.
2686.
Only a person or a trustee carrying on an enterprise may grant a floating hypothec on the property of the enterprise.1991, c. 64, s. 2686.
SECTION II
OBLIGATIONS SECURED BY HYPOTHECS
2687.
A hypothec may be granted to secure any obligation whatever.1991, c. 64, s. 2687.
2688.
A hypothec granted to secure payment of a sum of money is valid even if, when it is granted, the debtor has not received the prestation in consideration of which he has undertaken the obligation or has received only part of it.This rule is applicable in particular to lines of credit and the issue of bonds or other titles of indebtedness.
1991, c. 64, s. 2688.
2689.
An act validly constituting a hypothec indicates the specific sum for which it is granted.The same rule applies even where the hypothec is constituted to secure the performance of an obligation of which the value cannot be determined or is uncertain.
1991, c. 64, s. 2689.
2690.
The sum for which the hypothec is granted is not considered to be indeterminate where the act, rather than stipulating a fixed rate of interest, contains the necessary particulars for determining the actual rate of interest on the obligation.1991, c. 64, s. 2690.
2691.
Where the creditor refuses to hand over the sums of money he has undertaken to lend and for which he holds a hypothec as security, the debtor or the grantor may, at the expense of the creditor, cause the hypothec to be reduced or cancelled, upon payment, in the latter case, of only the amounts that may then be due.1991, c. 64, s. 2691.
2692.
A hypothec securing payment of bonds or other titles of indebtedness issued by a trustee, a limited partnership or a legal person authorized to do so by law shall, on pain of absolute nullity, be granted by notarial act en minute in favour of the person holding the power of attorney of the creditors.1991, c. 64, s. 2692.
SECTION III
IMMOVABLE HYPOTHECS
2693.
An immovable hypothec is, on pain of absolute nullity, granted by notarial act en minute.1991, c. 64, s. 2693.
2694.
An immovable hypothec is valid only so far as the constituting act specifically designates the hypothecated property.1991, c. 64, s. 2694.
2695.
Hypothecs on the present and future rents produced by an immovable and hypothecs on the indemnities paid under the insurance contracts covering the rents are considered to be immovable hypothecs.Such hypothecs are published in the land register.
1991, c. 64, s. 2695.
SECTION IV
MOVABLE HYPOTHECS
§1. — Movable hypothecs without delivery
2696.
A movable hypothec without delivery shall, on pain of absolute nullity, be granted in writing.1991, c. 64, s. 2696.
2697.
A sufficient description of the hypothecated property shall be contained in the act constituting a movable hypothec or, in the case of a universality of movables, an indication of the nature of that universality.1991, c. 64, s. 2697.
2698.
A movable hypothec charging the fruits and products of the soil, and the materials and other things forming an integral part of an immovable, takes effect when they become movables with a separate existence. It ranks from its date of registration in the register of personal and movable real rights.1991, c. 64, s. 2698.
2699.
A movable hypothec on property represented by a bill of lading or other negotiable instrument or on claims may be set up against the creditors of the grantor from the time the creditor gives value, provided it is registered within the following ten days.1991, c. 64, s. 2699.
2700.
A movable hypothec on property that is not alienated in the ordinary course of business of an enterprise and that is not registered in a file opened under the description of the property is preserved by filing a notice of preservation of hypothec in the register of personal and movable real rights.The notice shall be registered within fifteen days after the creditor is informed in writing of the transfer of the property and the name of the purchaser, or after he consents in writing to the transfer. The creditor transmits a copy of the notice to the purchaser within the same time.
The name of the debtor or grantor and of the purchaser and a description of the property shall be indicated in the notice.
1991, c. 64, s. 2700; 1998, c. 5, s. 10.
2701.
A movable hypothec assumed by a purchaser may be published.1991, c. 64, s. 2701.
§2. — Movable hypothecs with delivery
2702.
A movable hypothec with delivery is granted by delivery of the property or title to the creditor or, if the property is already in his hands, by his continuing to hold it, with the grantor’s consent, to secure his claim.1991, c. 64, s. 2702.
2703.
A movable hypothec with delivery is published by the creditor’s holding the property or title, and remains so only as long as he continues to hold it.1991, c. 64, s. 2703.
2704.
Holding is continuous even if its exercise is prevented by the act of a third person without the consent of the creditor or is temporarily interrupted by the handing over of the property or title to the grantor or to a third person for evaluation, repair, transformation or improvement.1991, c. 64, s. 2704.
2705.
The creditor, with the consent of the grantor, may hold the property through a third person, but if so, detention by the third person effects publication only from the time the third person receives evidence in writing of the hypothec.1991, c. 64, s. 2705.
2706.
A creditor prevented from holding the property may revendicate it from the person holding it, unless he is prevented as a result of the exercise of hypothecary rights or a seizure in execution by another creditor.1991, c. 64, s. 2706.
2707.
A movable hypothec granted with delivery may be published by registration at a later date, provided publication is not interrupted.1991, c. 64, s. 2707.
2708.
A movable hypothec on property represented by a bill of lading or other negotiable instrument or on claims may be set up against the creditors of the grantor from the time the creditor gives value, provided the title is remitted to him within ten days from that time.1991, c. 64, s. 2708.
2709.
Where the title is negotiable by endorsement and delivery, or delivery alone, its remittance to the creditor takes place by endorsement and delivery, or by delivery alone.1991, c. 64, s. 2709.
§3. — Movable hypothecs on claims
2710.
A movable hypothec on a claim held by the grantor against a third person or on a universality of claims may be granted with or without delivery.However, in either case the creditor may not set up his hypothec against the debtors of hypothecated claims as long as it may not be set up against them in the same way as an assignment of claim.
1991, c. 64, s. 2710.
2711.
A hypothec on a universality of claims, even when granted by the remittance of the title to the creditor, shall be entered in the proper register.1991, c. 64, s. 2711.
2712.
A hypothec on a claim held by the grantor against a third person shall, where the claim is itself secured by a registered hypothec, be published by registration; the creditor shall remit a copy of a certified statement of registration of the hypothecated claim to the debtor.1991, c. 64, s. 2712.
2713.
In all cases, either the creditor or the grantor may institute proceedings in recovery of a hypothecated claim, provided he impleads the other.1991, c. 64, s. 2713.
§4. — Movable hypothecs on ships, cargo or freight
2714.
A movable hypothec on a ship is effective only if at the time of publication the ship is not registered under the Canada Shipping Act or under an equivalent foreign law.A movable hypothec may also be granted on the cargo of a registered ship or on the freight, whether or not the property is on board, but in that case it is subject to any rights over the property which other persons may have under such legislation.
1991, c. 64, s. 2714.
SECTION V
FLOATING HYPOTHECS
2715.
A hypothec is a floating hypothec when some of the effects are suspended until, the debtor or grantor having defaulted, the creditor provokes crystallization of the hypothec by serving a notice of default and crystallization of the hypothec on the debtor or grantor.The floating character of the hypothec shall be expressly stipulated in the act.
1991, c. 64, s. 2715.
2716.
A floating hypothec has effect only if it was published beforehand and, if immovable properties are charged, only if it was registered against each of them.It may not be set up against third persons except by registration of the notice of crystallization.
1991, c. 64, s. 2716.
2717.
Any condition or restriction stipulated in the constituting act in respect of the right of the grantor to alienate, hypothecate or dispose of the charged property has effect between the parties even before crystallization.1991, c. 64, s. 2717.
2718.
A floating hypothec on more than one claim has effect in respect of the debtors of hypothecated claims, upon registration of the notice of crystallization, provided the notice has been published in a newspaper circulated in the locality of the last known address of the grantor of the floating hypothec or, where he carries on an enterprise, in the locality where the enterprise has its principal establishment.The notice need not be published if the hypothec and the notice of crystallization may be set up against the debtors of the hypothecated claims in the same way as an assignment of claim.
1991, c. 64, s. 2718.
2719.
By crystallization, a floating hypothec has all the effects of a movable or immovable hypothec in respect of whatever rights the grantor may have at that time in the charged property; if the property includes a universality, the hypothec also charges properties acquired by the grantor after crystallization.1991, c. 64, s. 2719.
2720.
The sale of an enterprise by the grantor may not be set up against the holder of a floating hypothec. The same applies to a merger or reorganization of an enterprise.1991, c. 64, s. 2720.
2721.
The creditor holding a floating hypothec on a universality of property may, from registration of the notice of crystallization, take possession of the property to administer it in preference to any other creditor having published his hypothec after the date of registration of the floating hypothec.1991, c. 64, s. 2721.
2722.
Where there are several floating hypothecs on the same property, crystallization of one of them enables the creditors holding the others to register their own notice of crystallization at the registry office.1991, c. 64, s. 2722.
2723.
Where the default of the debtor has been remedied, the creditor requires the registrar to cancel the notice of crystallization.The effects of crystallization cease with the cancellation, and the effects of the hypothec are again suspended.
1991, c. 64, s. 2723.
CHAPTER III
LEGAL HYPOTHECS
2724.
Only the following claims may give rise to a legal hypothec:(1) claims of the State for sums due under fiscal laws, and certain other claims of the State or of legal persons established in the public interest, under specific provision of law;
(2) claims of persons having taken part in the construction or renovation of an immovable;
(3) the claim of a syndicate of co-owners for payment of the common expenses and contributions to the contingency fund;
(4) claims under a judgment.
1991, c. 64, s. 2724.
2725.
The legal hypothecs of the State, including those for sums due under fiscal laws, and the hypothecs of legal persons established in the public interest may be charged on movable or immovable property.Such hypothecs take effect only from their registration in the proper register. Application for registration is made by filing a notice indicating the legislation granting the hypothec, the property of the debtor on which the creditor intends to exercise it, and stating the cause and the amount of the claim. The notice shall be served on the debtor.
Registration by the State of a legal movable hypothec for sums due under fiscal laws does not prevent it from exercising its prior claim.
1991, c. 64, s. 2725.
2726.
A legal hypothec in favour of the persons having taken part in the construction or renovation of an immovable may not charge any other immovable. It exists only in favour of the architect, engineer, supplier of materials, workman and contractor or sub-contractor in proportion to the work requested by the owner of the immovable or to the materials or services supplied or prepared by them for the work. It is not necessary to publish a legal hypothec for it to exist.1991, c. 64, s. 2726; 1992, c. 57, s. 716.
2727.
A legal hypothec in favour of persons having taken part in the construction or renovation of an immovable subsists, even if it has not been published, for thirty days after the work has been completed.It subsists if, before the thirty-day period expires, a notice describing the charged immovable and indicating the amount of the claim is registered. The notice shall be served on the owner of the immovable.
It is extinguished six months after the work is completed, unless, to preserve the hypothec, the creditor publishes an action against the owner of the immovable or registers a prior notice of the exercise of a hypothecary right.
1991, c. 64, s. 2727.
2728.
The hypothec secures the increase in value added to the immovable by the work, materials or services supplied or prepared for the work. However, where those in favour of whom it exists did not themselves enter into a contract with the owner, the hypothec is limited to the work, materials or services supplied after written declaration of the contract to the owner. A workman is not bound to declare his contract.1991, c. 64, s. 2728.
2729.
The legal hypothec of a syndicate of co-owners charges the fraction of the co-owner who has defaulted for more than thirty days on payment of his common expenses or his contribution to the contingency fund, and has effect only upon registration of a notice indicating the nature of the claim, the amount exigible on the day the notice is registered, and the expected amount of charges and claims for the current financial year and the next two years.1991, c. 64, s. 2729.
2730.
Every creditor in whose favour a judgment awarding a sum of money has been rendered by a court having jurisdiction in Québec may acquire a legal hypothec on the movable or immovable property of his debtor.He may acquire it by registering a notice describing the property charged with the hypothec and specifying the amount of the obligation, and, in the case of an annuity or support, the amount of the instalments and, where applicable, the annual Pension Index. The notice is filed with a copy of the judgment; it must be served on the debtor.
1991, c. 64, s. 2730; 2000, c. 42, s. 5.
2731.
Except in the case of the legal hypothec of the State or of a legal person established in the public interest, the court, on application of the owner of the property charged with a legal hypothec, may determine which property the hypothec may charge, reduce the number of the properties or give leave to the applicant to substitute other security for the hypothec sufficient to secure payment; it may thereupon order the registration of the legal hypothec to be cancelled.1991, c. 64, s. 2731.
2732.
A creditor who has registered his legal hypothec preserves his right to follow it on movable property which is not alienated in the ordinary course of business of an enterprise, as though he were the holder of a conventional hypothec.1991, c. 64, s. 2732.
CHAPTER IV
CERTAIN EFFECTS OF HYPOTHECS
SECTION I
GENERAL PROVISIONS
2733.
A hypothec does not divest the grantor or the person in possession, who continue to enjoy their rights over the charged property and may dispose of it, subject to the rights of the hypothecary creditor.1991, c. 64, s. 2733.
2734.
Neither the grantor nor his successor may destroy or deteriorate the hypothecated property or materially reduce its value except by normal use or in case of necessity.Where he suffers a loss, the creditor may, in addition to his other remedies, and even though his claim is neither liquid nor exigible, recover damages and interest in compensation up to the amount of his claim and with the same right of hypothec; the amount so collected is imputed upon his claim.
1991, c. 64, s. 2734.
2735.
Hypothecary creditors may institute legal proceedings to have their hypothec recognized and interrupt prescription, even though their claims are neither liquid nor exigible.1991, c. 64, s. 2735.
SECTION II
RIGHTS AND OBLIGATIONS OF CREDITORS IN POSSESSION OF HYPOTHECATED PROPERTY
2736.
Where the creditor of a movable hypothec with delivery holds the property charged, he shall do whatever is necessary to preserve it; he may not use it without the permission of the grantor.1991, c. 64, s. 2736.
2737.
The fruits and revenues of the hypothecated property are collected by the creditor.Unless otherwise stipulated, the creditor hands over the fruits collected to the grantor, and applies the revenues collected, first, to expenses, then to any interest owing to him, and lastly to the capital of the debt.
1991, c. 64, s. 2737.
2738.
Where shares of the capital stock of a legal person are redeemed for cash by the issuer, the creditor collecting the price applies it as if it were revenue.1991, c. 64, s. 2738.
2739.
The creditor is not liable for loss of the hypothecated property by superior force or as a result of its ageing, perishability, or normal and authorized use.1991, c. 64, s. 2739.
2740.
The grantor is bound to repay to the creditor his expenses incurred for the preservation of the property.1991, c. 64, s. 2740.
2741.
The grantor may not recover possession of the hypothecated property until performance of his obligation, unless the creditor abuses the property.The creditor loses his hypothec upon a judgment compelling him to return the property.
1991, c. 64, s. 2741.
2742.
An heir of the debtor who has paid his share of the debt may not demand his share of the hypothecated property until the whole debt is paid.An heir of the creditor may not, on receiving his share of the debt, return the hypothecated property to the prejudice of any unpaid coheir.
1991, c. 64, s. 2742.
SECTION III
RIGHTS AND OBLIGATIONS OF CREDITORS HOLDING HYPOTHECATED CLAIMS
2743.
A creditor holding a hypothec on a claim collects the revenues it produces, together with the capital falling due while the hypothec is in effect; he also gives an acquittance for the sums he collects.Unless otherwise stipulated, he applies the amounts collected to payment of the obligation, even if it is not yet exigible, according to the rules governing payment generally.
1991, c. 64, s. 2743.
2744.
The creditor may, in the act constituting the hypothec, authorize the grantor to collect repayments of capital or the revenues from the hypothecated claims as they fall due.1991, c. 64, s. 2744.
2745.
The creditor may at any time withdraw his authorization to the grantor to collect. To do so he shall notify the grantor and the debtor of the hypothecated rights that he himself will thenceforth collect the sums falling due. The withdrawal of authorization shall be registered.1991, c. 64, s. 2745; 1998, c. 5, s. 11.
2746.
While the hypothec is in effect, the creditor need not sue in order to recover the capital or interest of the hypothecated rights, but he shall inform the grantor within a reasonable time of any irregularity in the payment of any sums exigible on the rights.1991, c. 64, s. 2746.
2747.
The creditor remits to the grantor any sums collected over and above the obligation owed in capital, interest and expenses, notwithstanding any stipulation by which the creditor may keep them on any ground whatever.1991, c. 64, s. 2747.
CHAPTER V
EXERCISE OF HYPOTHECARY RIGHTS
SECTION I
GENERAL PROVISION
2748.
In addition to their personal right of action and the provisional measures provided in the Code of Civil Procedure, creditors have only the hypothecary rights provided in this chapter for the enforcement and realization of their security.Thus, where their debtor is in default and their claim is liquid and exigible, they may exercise the following hypothecary rights: they may take possession of the charged property to administer it, take it in payment of their claim, have it sold by judicial authority or sell it themselves.
1991, c. 64, s. 2748.
SECTION II
GENERAL CONDITIONS FOR THE EXERCISE OF HYPOTHECARY RIGHTS
2749.
Creditors may not exercise their hypothecary rights before the period established in article 2758 for surrender of the property has expired.1991, c. 64, s. 2749.
2750.
Earlier ranking creditors take priority over later creditors when exercising their hypothecary rights.An earlier ranking creditor may, however, be liable for payment of expenses of a later creditor if, after being notified of the exercise of a hypothecary right by the latter, he delays unreasonably before invoking the priority of his rights.
1991, c. 64, s. 2750.
2751.
The creditor may exercise his hypothecary rights in whosever hands the property lies.1991, c. 64, s. 2751.
2752.
Where property charged with a hypothec subsequently comes under usufruct, the hypothecary rights shall be exercised against the bare owner and the usufructuary simultaneously, or notified to whichever of them they are not exercised against first.1991, c. 64, s. 2752.
2753.
A creditor whose hypothec charges more than one property may exercise his hypothecary rights simultaneously or successively against such properties as he sees fit.1991, c. 64, s. 2753.
2754.
Where later ranking creditors are secured by a hypothec on only one of the properties charged in favour of one and the same creditor, his hypothec is spread among them, where two or more of the properties are sold under judicial authority and the proceeds still to be distributed are sufficient to pay his claim, proportionately over what remains to be distributed of their respective prices.1991, c. 64, s. 2754.
2755.
The holder of a floating hypothec may not exercise his hypothecary rights until after registration of notice of crystallization.1991, c. 64, s. 2755.
2756.
The holder of a movable hypothec with delivery on shares of the capital stock of a legal person need not notify the person who issued the shares of his right, but the exercise of his hypothecary rights is, in all cases, subject to the provisions and agreements governing the transfer of the hypothecated shares.1991, c. 64, s. 2756.
SECTION III
PRELIMINARY MEASURES
§1. — Prior notice
2757.
A creditor intending to exercise a hypothecary right shall file a prior notice at the registry office, together with evidence that it has been served on the debtor and, where applicable, on the grantor and on any other person against whom he intends to exercise his right.Registration of such a notice is made in accordance with the Book on Publication of Rights.
1991, c. 64, s. 2757.
2758.
In a prior notice of the exercise of a hypothecary right, any failure by the debtor to fulfil his obligations shall be indicated, together with a reminder, where necessary, that the debtor or a third person has a right to remedy the default. In addition, the amount of the claim in capital and interest, if any, and the nature of the hypothecary right which the creditor intends to exercise shall be included in the notice, together with a description of the charged property and a call on the person against whom the right is to be exercised to surrender the property before the expiry of the period specified in the notice.This period is of twenty days after registration of the notice in the case of a movable property, sixty days in the case of an immovable property, or ten days if the creditor intends to take possession of the property; however, the period is of thirty days in the case of a notice relating to movable property charged with a hypothec constituted by an act accessory to a consumer contract.
1991, c. 64, s. 2758; 1998, c. 5, s. 12.
2759.
A dealer in securities who, as creditor, has a hypothec on the securities he holds for his debtor may, in the ordinary course of his duties and where allowed by the regulations and usages observed where he trades and by his agreement with his debtor, sell the securities or take them in payment without giving prior notice or observing any time limits prescribed in this Title.1991, c. 64, s. 2759.
2760.
The voluntary alienation of property charged with a hypothec, effected after the creditor has registered a prior notice of the exercise of a hypothecary right, may not be set up against the creditor unless the acquirer, with the consent of the creditor, personally assumes the debt, or unless a sum sufficient to cover the amount of the debt, interest and costs due to the creditor is deposited.1991, c. 64, s. 2760.
§2. — Rights of the debtor or person against whom a hypothecary right is exercised
2761.
A debtor or a person against whom a hypothecary right is exercised, or any other interested person, may defeat exercise of the right by paying the creditor the amount due to him or, where that is the case, by remedying the omission or breach set forth in the prior notice and any subsequent omission or breach, and, in either case, by paying the costs incurred.This right may be exercised before the property is taken in payment or sold, or, if the right exercised is taking in possession, at any time.
1991, c. 64, s. 2761.
2762.
A creditor having given prior notice of the exercise of a hypothecary right is not entitled to demand any indemnity from the debtor except interest owing and costs.Notwithstanding any stipulation to the contrary, costs exclude extra-judicial professional fees payable by the creditor for services required by the creditor in order to recover the capital and interest secured by the hypothec or to conserve the charged property.
1991, c. 64, s. 2; 2002, c. 19, s. 12.
§3. — Surrender
2763.
Surrender is voluntary or forced.1991, c. 64, s. 2763.
2764.
Surrender is voluntary where, before the period indicated in the prior notice expires, the person against whom the hypothecary right is exercised abandons the property to the creditor in order that the creditor may take possession of it or consents in writing to turn it over to the creditor at the agreed time.If the hypothecary right exercised is taking in payment, voluntary surrender shall be attested in a deed made by the person surrendering the property and accepted by the creditor.
1991, c. 64, s. 2764; 2000, c. 42, s. 6.
2765.
Surrender is forced where the court orders it after ascertaining the existence of the claim, the debtor’s default, the refusal to surrender voluntarily and the absence of a valid cause for objection.The judgment fixes the period within which surrender shall be effected, determines the manner of effecting it and designates the person in whose favour it is carried out.
1991, c. 64, s. 2765.
2766.
If the good faith of the creditor or his capacity to administer or ability to sell the property to which his motion of surrender applies is challenged, the court may order the creditor to furnish a surety to guarantee performance of his obligations.1991, c. 64, s. 2766.
2767.
Surrender is also forced where the court, on a motion of the creditor, orders surrender of the property before the period indicated in the prior notice expires, where there is reason to fear that otherwise recovery of his claim may be endangered, or where the property may perish or deteriorate rapidly. In the latter cases, the creditor is authorized to exercise his hypothecary rights immediately.The motion need not be served on the person against whom the hypothecary right is exercised, but the order shall be served on him. If the order is subsequently rescinded, the creditor is bound to return the property or pay back the price of alienation.
1991, c. 64, s. 2767.
2768.
A creditor who has obtained surrender of the property has simple administration thereof until the hypothecary right he intends to exercise has in fact been exercised.1991, c. 64, s. 2768.
2769.
The person against whom the hypothecary right is exercised and who is not responsible for the debt becomes personally liable therefor if he fails to surrender the property within the time allotted by the judgment.1991, c. 64, s. 2769.
2770.
Where the person against whom the hypothecary right is exercised has a prior claim by reason of his right to hold the movable property, he is bound to surrender it, subject to his priority.1991, c. 64, s. 2770.
2771.
The person against whom the hypothecary right is exercised may, where he has received the property in payment of his prior or hypothecary claim, which is anterior to the claim contemplated in the prior notice, or where he has paid the prior or hypothecary claims anterior to his own, require that the creditor himself sell the property or cause it to be sold by court order; he is then bound to surrender the property only subject to the creditor’s giving him security that the property will be sold at a sufficient price to ensure full payment of his anterior prior or hypothecary claim.1991, c. 64, s. 2771.
2772.
Real rights which the person against whom the hypothecary right is exercised had in the property when he acquired it, or that he extinguished while it was in his possession, revive after surrender unless they have been cancelled.1991, c. 64, s. 2772.
SECTION IV
TAKING POSSESSION FOR PURPOSES OF ADMINISTRATION
2773.
A creditor who holds a hypothec on the property of an enterprise may temporarily take possession of the hypothecated property and administer it or generally delegate its administration to a third person. The creditor or the person to whom he has delegated the administration acts in such a case as administrator of the property of others entrusted with full administration.1991, c. 64, s. 2773.
2774.
The taking of possession of a property does not affect the rights of the lessee.1991, c. 64, s. 2774.
2775.
Taking of possession terminates under the same circumstances as administration of the property of others, and also where the creditor is satisfied with his claim in capital, interest and costs, or where he fails in the attempt to exercise his right, or where the creditor has published a prior notice of the exercise of another hypothecary right. The bankruptcy of the person against whom the hypothecary right is exercised does not terminate taking of possession.1991, c. 64, s. 2775.
2776.
When possession ends, the creditor shall render account of his administration and, unless he has published a prior notice of the exercise of another hypothecary right, return the property in possession to the person against whom the hypothecary right was exercised, or to his successors, at the previously agreed place or, failing that, at the place where it is.He registers a notice of return of property in the proper register.
1991, c. 64, s. 2776.
2777.
A creditor who has, through his administration, obtained payment of the debt, is bound to return to the person against whom the hypothecary right was exercised, in addition to the property, any surplus remaining in his hands after payment of the debt, the expenses of administration and the costs incurred for the exercise of possession of the property.1991, c. 64, s. 2777.
SECTION V
TAKING IN PAYMENT
2778.
Where, at the time of registration of the creditor’s prior notice, the debtor has already discharged one-half or more of the obligation secured by the hypothec, the creditor shall obtain authorization from the court before taking property in payment, except where the person against whom the right is exercised has voluntarily surrendered the property.1991, c. 64, s. 2778.
2779.
Subsequent hypothecary creditors or the debtor may, within the time allotted for surrender, require the creditor to abandon the taking in payment and sell the property himself or have it sold by judicial authority; they shall have registered a notice beforehand to that effect, reimbursed the creditor for the costs he has incurred and advanced the amounts needed for the sale of the property.The notice shall be served on the creditor, the grantor or the debtor and the person against whom the hypothecary right is exercised, and registration thereof is made in accordance with the Book on Publication of Rights.
Subsequent creditors who require the creditor to proceed with the sale shall also furnish him with a security guaranteeing that the property will be sold at a sufficiently high price to enable his claim to be paid in full.
1991, c. 64, s. 2779; 1992, c. 57, s. 716; 2002, c. 19, s. 15.
2780.
A creditor required to sell shall proceed to do so unless he prefers to pay the subsequent creditors who registered the notice, or, if the notice was registered by the debtor, unless the court authorizes the creditor to take the property in payment on such conditions as it determines.If the creditor does not act, the court may allow the person who registered the notice requiring the sale, or any other person designated by him, to proceed with it.
1991, c. 64, s. 2780.
2781.
Where the default has not been remedied or the payment has not been made in the time allotted for surrender, the creditor takes the property in payment by the effect of the judgment of surrender, or of a deed voluntarily made by the person against whom the hypothecary right is exercised, and accepted by the creditor, if neither the subsequent creditors nor the debtor have required him to proceed with the sale.The judgment of surrender or the deed voluntarily made and accepted constitutes the creditor’s title of ownership.
1991, c. 64, s. 2781; 2000, c. 42, s. 7.
2782.
Taking in payment extinguishes the obligation.A creditor who has taken property in payment may not claim what he pays to a prior or hypothecary creditor whose claim is preferred to his. In such a case, he is not entitled to subrogation against his former debtor.
1991, c. 64, s. 2782.
2783.
A creditor who has taken property in payment becomes the owner of it from the time of registration of prior notice. He takes it as it then stood, but free of all hypothecs published after his.Real rights created after registration of the notice may not be set up against the creditor if he did not consent to them.
1991, c. 64, s. 2783; 1992, c. 57, s. 716.
SECTION VI
SALE BY THE CREDITOR
2784.
A creditor who holds a hypothec on the property of an enterprise and who has filed a prior notice at the registry office indicating his intention to sell the charged property himself may, after obtaining surrender of the property, proceed with the sale by agreement, by a call for tenders or by public auction.1991, c. 64, s. 2784.
2785.
The creditor shall sell the property without unnecessary delay, at a commercially reasonable price, and in the best interest of the person against whom the hypothecary right is exercised.If there is more than one property, he may sell them together or separately.
1991, c. 64, s. 2785.
2786.
A creditor who sells the property himself acts in the name of the owner and is bound to declare his quality to the purchaser at the time of the sale.1991, c. 64, s. 2786.
2787.
A creditor who proceeds by a call for tenders may do so through the newspapers or by invitation.Sufficient information shall be included in the call for tenders to enable any interested person to make an offer at the proper time and place.
The creditor is bound to accept the highest offer unless the conditions attached to it render it less advantageous than another lower offer, or unless the price offered is not commercially reasonable.
1991, c. 64, s. 2787.
2788.
A creditor who proceeds with a sale by public auction shall hold it at the date, time and place fixed in the notice of sale served on the person against whom the hypothecary right is exercised and the grantor and notified to the other creditors who have published their right in respect of the property.He shall also inform any interested person who requests such information of what he is doing.
1991, c. 64, s. 2788.
2789.
The creditor imputes the proceeds of the sale to payment of the costs of exercising the right, payment of the claims prior to his rights, and, finally, payment of his claim.If other creditors have rights to be claimed, the creditor who sold the property renders account of the proceeds of the sale to the clerk of the competent court and remits what remains of the price after imputation; where no such creditors exist, he shall, within ten days, render account of the proceeds of the sale to the owner of the property and remit any surplus to him; the rendering of account may be opposed in the manner established in the Code of Civil Procedure.
Where the proceeds of the sale are insufficient to pay his claim and costs, the creditor retains a claim against his debtor for the balance due to him.
1991, c. 64, s. 2789.
2790.
The purchaser takes the property subject to the real rights charging it at the time of registration of the prior notice, except the hypothec of the creditor who sold the property and the claims which ranked ahead of his rights.Real rights created after registration of the prior notice may not be set up against the purchaser if he did not consent to them.
1991, c. 64, s. 2790.
SECTION VII
SALE BY JUDICIAL AUTHORITY
2791.
A sale takes place by judicial authority where the court designates the person who will proceed with it, fixes the conditions and charges of the sale, indicates whether it may be made by agreement, a call for tenders or public auction and, if it considers it expedient, after enquiring as to the value of the property, fixes the upset price.1991, c. 64, s. 2791.
2792.
No creditor may require that the sale be subject to his hypothec.1991, c. 64, s. 2792.
2793.
The person entrusted with the sale of the property is bound to observe the rules prescribed in the Code of Civil Procedure for the sale of the property of another and, in addition to inform the interested parties of the steps he is taking if they require him to do so.The person acts in the name of the owner and is bound to declare his quality to the purchaser.
1991, c. 64, s. 2793.
2794.
Sale by judicial authority purges the real rights to the extent provided by the Code of Civil Procedure in respect of the effect of the order to sell.1991, c. 64, s. 2794.
CHAPTER VI
EXTINCTION OF HYPOTHECS
2795.
Hypothecs are extinguished by the loss, change of nature, exclusion from being an object of commerce or expropriation of the charged property, where such events affect the property as a whole.1991, c. 64, s. 2795.
2796.
Where a movable property is incorporated in an immovable, the movable hypothec may subsist as an immovable hypothec, notwithstanding the change of nature of the property, provided it is registered in the land register; it is ranked according to the rules set out in the Book on Publication of Rights.1991, c. 64, s. 2796.
2797.
A hypothec is extinguished by the extinction of the obligation whose performance it secures. In the case of a line of credit or in any other case where the debtor obligates himself again under a provision of the deed of hypothec, the hypothec, unless cancelled, subsists notwithstanding the extinction of the obligation.1991, c. 64, s. 2797.
2798.
A movable hypothec is extinguished not later than ten years after the date of its registration or registration of a notice giving it effect or renewing it.Pledge is extinguished upon termination of detention.
1991, c. 64, s. 2798.
2799.
An immovable hypothec is extinguished not later than thirty years after the date of its registration or registration of a notice giving it effect or renewing it.This rule does not apply in the case of hypothecs securing the price of emphyteusis, a rent constituted for the price of an immovable, a life annuity or a usufruct for life, hypothecs given in favour of La Financière agricole du Québec or the Société d’habitation du Québec, or hypothecs in favour of a person holding a power of attorney from the creditors to secure payment of bonds or other evidences of indebtedness.
1991, c. 64, s. 2799; 2000, c. 42, s. 8; 2000, c. 53, a. 67.
2800.
The legal hypothec of a syndicate of co-owners on the fraction of a co-owner is extinguished three years after it is registered, unless the syndicate publishes an action in default against the owner to preserve it or registers a prior notice of the exercise of a hypothecary right.1991, c. 64, s. 2800.
2801.
Where a hypothecary creditor takes the hypothecated property in payment, the hypothec of the creditors ranking behind him is not extinguished except by registration of the deed voluntarily made and accepted or of the judgment of surrender.1991, c. 64, s. 2801; 2000, c. 42, s. 9.
2802.
Other causes of extinction of hypothecs are provided by law.1991, c. 64, s. 2802.
