T-105-88
Katherine Furfaro-Siconolfi (Plaintiff)
v.
Her Majesty the Queen (Defendant)
INDEXED As: FURFARO-SICONOLFI v. M.N.R. (T.D.)
Trial Division, Pinard J.—Montréal, October 17;
Ottawa, November 8, 1989.
Income tax — Gifts — Liability of recipient for transferor's
tax — Under marriage contract, signed September 2, 1977,
husband giving wife $30,000 payable any time during marriage
— Amount paid October 10, 1980 — Minister claiming from
plaintiff amounts owing by deceased husband for taxes for
1977, 1978 and 1979 under Income Tax Act, s. 160 — S. 160
contemplating transfer of ownership without requiring transfer
of possession — Under Civil Code, money transferred upon
signing of contract when right to money arose — S. 160 having
no effect on plaintiff regarding tax debt of husband after
September 2, 1977.
Construction of statutes — Meaning of transfer of property
in Income Tax Act, s. 160 — "Transfer" not defined in Act —
Dictionary definitions of "transfer" applied — Meaning trans
fer without requiring recipient obtain possession of thing
transferred.
Civil Code — Marriage contract signed in Quebec Septem-
ber 2, 1977 between Quebecers who subsequently married in
Quebec providing husband to give wife $30,000 at any time
during marriage husband seeing fit — Money paid October 10,
1980 — Civil Code, art. 777 requirement of actual divestiture
met — By operation of Code, money transferred when contract
signed.
This was an action by way of appeal from the Tax Court's
dismissal of the plaintiffs appeals from notices of assessment.
The plaintiff had entered into a marriage contract by which her
husband agreed to donate to her $30,000 payable at any time
during the marriage as he saw fit. On October 10, 1980 he gave
her $30,000 towards the purchase of real property. The defen
dant claimed from the plaintiff the tax debt owed by the
plaintiffs deceased husband for 1977, 1978 and 1979 pursuant
to section 160 of the Income Tax Act. Section 160 provides
that where a person has transferred property to his spouse, the
transferee and transferor are jointly and severally liable to pay
any amount that the transferor was liable to pay under the Act
on the day of the transfer. The issue was whether the "day of
the transfer" was the date of the marriage contract, September
2, 1977 or October 10, 1980.
Held, the action should be allowed.
As "transfer" is not defined in the Act, it was necessary to
look to dictionary definitions. Accordingly the transfer of prop
erty contemplated by section 160 is a simple transfer of owner
ship, without requiring that the recipient obtain possession. If
Parliament had intended otherwise, it could have said so. The
Act recognizes that "property" includes a right of any kind and
consequently the right of ownership of a thing. Legally, trans
ferring right of ownership of a thing does not necessarily imply
its immediate surrender.
As the marriage contract was concluded in Quebec between
Quebecers who subsequently married in Quebec, the provisions
of the Civil Code of Lower Canada applied. By the operation of
articles 777, 782, 787, 788, 795, 817, 819, 821, 822 and 1085 of
the Civil Code the transfer of ownership of the money to the
plaintiff took place when the contract was signed. This conclu
sion was confirmed by commentators and by judicial decisions.
By the marriage contract, the plaintiffs husband irrevocably
undertook to be a debtor. There was divestiture within the
meaning of article 777 of the Civil Code of Lower Canada.
There was a gift of present property, not future property. There
was a genuine transfer of ownership, and so a transfer of
property within the meaning of section 160 on the date the
marriage contract was signed. Section 160 had no effect against
the plaintiff with respect to any tax debt of her husband after
September 2, 1977. The notice of assessment should be referred
back to the Minister to identify the tax indebtedness of the
plaintiff's husband on September 2, 1977.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Civil Code of Lower Canada, arts. 777, 782, 787, 788,
795, 817, 819, 821, 822, 1085.
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 160, 172(1),
175(3), 248(1) (as am. by S.C. 1974-75-76, c. 26,
s. 125; 1980-81-82-83, c. 140, s. 128).
CASES JUDICIALLY CONSIDERED
APPLIED:
Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R.
536; (1984), 84 DTC 6305; Fasken, David v. Minister of
National Revenue, [1948] Ex.C.R. 580; [1948] C.T.C.
265; (1948), 49 DTC 491; Murphy (GA) v. The Queen,
[1980] CTC 386; (1980), 80 DTC 6314 (F.C.T.D.);
Goyette v. Dionne et Messier (1927), 44 B.R. 15 (Que.);
Labrie (Dame) c. Gilbert, [1973] C.S. 134 (Que.).
CONSIDERED:
Perron, A. v. M.N.R. (1960), 25 Tax A.B.C. 172.
AUTHORS CITED
Brière, Germain. Donations, substitutions et fiducie.
Montréal: Wilson & Lafleur Ltée, 1988.
Larousse trois volumes en couleur, tome 3. Montréal:
Editions françaises Inc., 1966, "transfert".
Oxford English Dictionary, vol. XVIII, 2nd ed. Oxford:
Clarendon Press, 1989, "transfer".
Robert, P. Dictionnaire alphabétique et analogique de la
langue française, tome 6. Paris: Le petit Robert, 1976,
"transfert".
COUNSEL:
Robert Marchand for plaintiff.
Daniel Marecki for defendant.
SOLICITORS:
Spiegel Sohmer, Montréal, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following is the English version of the
reasons for judgment rendered by
PINARD J.: In this action, pursuant to subsec
tions 172(1) and 175(3) of the Income Tax Act,
S.C. 1970-71-72, c. 63 as amended, the plaintiff is
appealing from a decision of the Tax Court of
Canada which dismissed her two appeals against
two notices of assessment issued by the defendant.
By these notices of assessment, dated June 18,
1982 and January 9, 1986, the defendant in reli
ance on section 160 of the Act claimed from the
plaintiff amounts of $18,349.47 and $4,005.22
respectively, in respect of a tax debt owed by the
plaintiffs husband, the late Eligio Siconolfi, for
his 1977, 1978 and 1979 taxation years; the
defendant gave the reason that Mr. Siconolfi had
transferred property to the plaintiff for a consider
ation below its fair market value, when he owed a
tax debt.
The provisions of section 160 of the Act in effect
at the relevant time, as admitted by the parties,
were as follows:
160. (1) Where a person has, on or after the 1st day of May,
1951, transferred property, either directly or indirectly, by
means of a trust or by any other means whatever,
(a) to his spouse or to a person who has since become his
spouse, or
(b) to a person who was under 18 years of age,
the following rules are applicable:
(c) the transferee and transferor are jointly and severally
liable to pay a part of the transferor's tax under this Part for
each taxation year equal to the amount by which the tax for
the year is greater than it would have been if it were not for
the operation of section 74 or section 75, as the case may be,
in respect of income from the property so transferred or from
property substituted therefor; and
(d) the transferee and transferor are jointly and severally
liable to pay the lesser of
(i) any amount that the transferor was liable to pay under
this Act on the day of the transfer, and
(ii) a part of any amount that the transferor was so liable
to pay equal to the value of the property so transferred;
but nothing in this subsection shall be deemed to limit the
liability of the transferor under any other provision of this Act.
The plaintiff accordingly filed two notices of
objection against these two notices of assessment,
and the defendant subsequently sent the plaintiff,
on September 28, 1983 and March 18, 1986, two
notifications in which she upheld the assessments
without change.
On November 17, 1983 and May 29, 1986 the
plaintiff filed appeals with the Tax Court of
Canada from these two decisions. The Tax Court
of Canada dismissed these two appeals in a deci
sion dated September 29, 1987 and varied on
October 27, 1987.
At the hearing in this Court, counsel for the
plaintiff indicated that he was withdrawing his
allegation that the notices of assessment issued
against Eligio Siconolfi were incorrect in fact and
in law. Counsel pleaded simply that the plaintiff
did not receive any transfer of property from her
husband Eligio Siconolfi which could make her
liable under section 160 of the Income Tax Act for
the period subsequent to September 2, 1977.
Counsel for the defendant, for his part, submit
ted that as the plaintiff on October 10, 1980,
whether in good or bad faith, received the sum of
$30,000 from her husband when the latter owed a
tax debt for taxation years prior to 1980, she must
as a consequence of this "transfer of property" be
held jointly and severally liable with her husband
to pay the latter's tax debt on the day of the said
transfer, namely October 10, 1980.
The following relevant facts were duly estab
lished by the evidence:
(a) on October 10, 1980 the plaintiff was the sole
purchaser of real property located at 7445, rue
Elisée, Ville St -Léonard, for $160,000, $65,693.23
of which was paid in cash partly as a result of the
fact that her husband Eligio Siconolfi gave her the
sum of $30,000 which he had undertaken to pay
her in their marriage contract;
(b) at the time this sum of $30,000 was paid, the
plaintiffs husband owed the defendant tax, inter
est and penalties for his 1977, 1978 and 1979
taxation years;
(c) on October 10, 1980, the late Eligio Siconolfi
owed the defendant a total of $18,349.47 for his
1977 and 1978 taxation years;
(d) on January 9, 1986 Mr. Siconolfi owed the
defendant $4,005.21, namely $3,720 in tax and
$285.21 in interest, for the 1979 taxation year;
(e) the clause of the marriage contract under
which the plaintiff received the sum of $30,000
from her husband is the following, Eligio Siconolfi
being "The First Party":
THE First Party shall ... and furthermore donates unto his said
future wife hereto present and accepting:—
a) The sum of THIRTY THOUSAND DOLLARS ($30,000.00) to
be paid at any time during the said marriage as he sees fit, the
First Party hereby constituting himself debtor of the Second
Party to the extent of the said sum. The donor, however,
reserves the right at any time, to pay the whole or any part of
the said sum either in cash or by the transfer of property,
moveable or immoveable. Should the said sum not have been
paid during the existence of the marriage, and he predeceases
her, she shall have the right to demand payment of this sum or
the part thereof then unpaid or unsatisfied from his succession.
Essentially the question is to determine, in the
circumstances, at what time there was a transfer
of property within the meaning of section 160 of
the Act. On the one hand, the plaintiff maintained
that this transfer occurred on the date of the gift
stipulated in the - marriage contract, namely Sep-
tember 2, 1977, when she acquired the right to
$30,000 or its equivalent in movable or immovable
securities; on the other hand, the defendant con
sidered that the transfer occurred on October 10,
1980, when the sum was paid to the plaintiff.
As it is critical to determine "the day of the
transfer" as provided in section 160 of the Act, the
Court must examine the meaning to be given to a
transfer of property in the said provision.
In this regard I consider that I should follow the
modern rule of legislative interpretation as defined
by the writer E. A. Driedger and stated by the
Supreme Court of Canada as follows, when it had
to interpret provisions of the Income Tax Act in
Stubart Investments Ltd. v. The Queen, [ 1984] 1
S.C.R. 536; (1984), 84 DTC 6305, at page 578
S.C.R.:
While not directing his observations exclusively to taxing
statutes, the learned author of Construction of Statutes (2nd
ed. 1983), at p. 87, E.A. Driedger, put the modern rule
succinctly:
Today there is only one principle or approach, namely, the
words of an Act are to be read in their entire context and in
their grammatical and ordinary sense harmoniously with the
scheme of the Act, the object of the Act, and the intention of
Parliament.
Subsection 248(1) [as am. by S.C. 1974-75-76,
c. 26, s. 125; 1980-81-82-83, c. 140, s. 128] of the
Act defines "property" as follows:
"property" means property of any kind whatever whether real
or personal or corporeal or incorporeal and, without restrict
ing the generality of the foregoing, includes
(a) a right of any kind whatever, a share or a chose in
action,
(b) unless a contrary intention is evident, money,
(c) a timber resource property, and
(d) the work in progress of a business that is a profession;
[My emphasis.]
As however, the Act gives no definition of the
word "transfer", I feel it is necessary to refer to
the various definitions given by recognized dictio
naries of the word "transfert" in French and
"transfer" in English.
1. Petit Robert, Dictionnaire alphabétique et
analogique de la langue française, 1976 ed., tome
6, defines the word "transfert" as a term in legal
language: [TRANSLATION] "Act by which a
person passes a right to another. Transfer of
ownership."
2. Larousse trois volumes en couleur, 1966 ed.,
tome 3, defines "transfert", again in the legal
context: [TRANSLATION] "legal synonym of CON
VEYANCE: The contract itself suffices to transfer
ownership of the real property sold ... Transfer of
ownership, operation by which property changes
owner."
3. The Oxford English Dictionary, 2nd ed., vol.
XVIII, 1989, defines "transfer": "Law. Convey
ance from one person to another of property, spec.
of shares or stock."
In light of the foregoing definitions, I consider
that the transfer of property contemplated by sec
tions 160 of the Act is a simple transfer of owner
ship, without it being necessary for the recipient to
have possession of the thing or object the owner
ship of which is thus transferred. In a precise
definition, the Income Tax Act recognizes that
"property" includes a right of any kind whatever,
and consequently the right of ownership of a thing.
In legal terms, it is established that transferring
the right of ownership of a thing, as for example in
a sale or gift, does not necessarily imply immediate
surrender of that thing.
As I see it, if the legislature had really intended
to suspend the effect of section 160 until the
debtor of a tax debt who transferred ownership of
a thing to his spouse or to a person under 18 years
of age had actually given the recipient possession
of that thing, it could have said so. Section 160 is
designed to counter tax evasion, and I do not think
in view of the language used that the legislature
intended to limit itself in this way, even though in
the circumstances it results in a taxpayer's debt
being borne by a third party.
Such an interpretation also seems to me to be in
complete agreement with the following opinion
expressed by Thorson J. of the Exchequer Court of
Canada in Fasken, David v. Minister of National
Revenue, [1948] Ex.C.R. 580; [1948] C.T.C. 265;
(1948), 49 DTC 491, when he had to interpret
certain provisions of the Income War Tax Act
[R.S.C. 1927, c. 97] in respect of the meaning to
be given to a transfer of property; at page 592 Ex.
C.R., he said:
The word "transfer" is not a term of art and has not a technical
meaning. It is not necessary to a transfer of property from a
husband to his wife that it should be made in any particular
form or that it should be made directly. All that is required is
that the husband should so deal with the property as to divest
himself of it and vest it in his wife, that is to say, pass the
property from himself to her. The means by which he accom
plishes this result, whether direct or circuitous, may properly be
called a transfer. [My emphasis.]
To the same effect, Cattanach J. of the Federal
Court of Canada said the following in Murphy
(GA) v. The Queen, [1980] CTC 386; (1980), 80
DTC 6314, at page 392 CTC, in dealing with
provisions of the Income Tax Act [R.S.C. 1952,
c. 148]:
Also common to both subsection 56(2) and 74(1) is the
concept of a "transfer".
I accept the contention of counsel for the plaintiff that the
word "transfer" as used in subsection 56(2) and the word
"transferred" as used in subsection 74(I) are not used in a
technical sense and in its ordinary dictionary meaning it is to
give or hand over property from one person to another. [My
emphasis.]
In view of this interpretation of section 160 the
Court must now consider whether, if the sum of
$30,000 was not paid to the plaintiff until October
10, 1980, she in fact received a transfer of owner
ship of that money, as she maintained, on the date
of her marriage contract with Eligio Siconolfi on
September 2, 1977. In this regard, as it was a
marriage contract concluded in Quebec between
Quebecers who subsequently married in Quebec,
the provisions of the Civil Code of Lower Canada
must be considered. As Mr. Maurice Boisvert' so
aptly expressed it, "If income tax is a creation of
the Act which imposes it, that Act must apply
within the framework of the civil laws governing
legal relationships between individuals. The tax is
grafted, as it were, on the legal tree which covers
with its shadow the rights and obligations arising
from the contracts."
It is by the operation of articles 777, 782, 787,
788, 795, 817, 819, 821, 822 and 1085 of the Civil
Code of Lower Canada that the gift of $30,000
stipulated in the marriage contract here had the
effect of transferring ownership of the money to
the plaintiff when the contract was signed on
September 2, 1977, a contract in fact followed by
a marriage of the parties. The relevant provisions
of these articles are:
Art. 777. It is essential to gifts intented [sic] to take effect
inter vivos that the donor should actually divest himself of his
ownership in the thing given.
[The consent of the parties is sufficient, as in sale, without
the necessity of delivery.]
' Perron A. v. M.N.R. (1960), 25 Tax A.B.C. 172, at p. 176.
Art. 782. It may be stipulated that a gift inter vivos shall be
suspended, revoked, or reduced, under conditions which do not
depend solely upon the will of the donor.
If the donor reserve to himself the right to dispose of or to
take back at pleasure some object included in the gift, or a sum
of money out of the property given, the gift holds good for the
remainder, but is void as to the part reserved, which continues
to belong to the donor, except in gifts by contract of marriage.
Art. 787. Gifts inter vivos do not bind the donor nor produce
any effect until after they are accepted. If the donor be not
present at the acceptance, they take effect only from the day on
which he acknowledges or is notified of it.
Art. 788. [The acceptance of a gift need not be in express
terms. It may be inferred from the deed or from circumstances,
among which may be counted the presence of the donee to the
deed, and his signature.]
This acceptance is presumed in a contract of marriage, as
well with regard to the consorts as to the future children. In
gifts of moveable property this presumption also results from
the delivery.
Art. 795. [Gifts inter vivos of present property when they are
accepted, divest the donor of and vest the donee with the
ownership of the thing given, as in sale, without any delivery
being necessary.]
Art. 817. The rules concerning gifts inter vivos apply to those
which are made by contract of marriage, with such modifica
tions as result from special provisions.
Art. 819. Subject to the same rules, when particular excep
tions do not apply, future consorts may likewise, by their
contract of marriage, give to each other, or one to the other, or
to the children to be born of their marriage, property either
present or future.
Art. 821. Gifts of present property by contracts of marriage
are, like all others, subject to acceptance inter vivos. The
acceptance is presumed in the cases mentioned in the second
section of this chapter. Third parties not present to the deed
may accept separately, either before or after the marriage, gifts
made in their favor.
Art. 822. Gifts by contract of marriage of present or future
property are valid, even as regards third parties, only in the
event of the marriage taking place. If the donor or the third
party who has accepted the gift die before the marriage, the
gift is not void, but remains suspended by the condition that the
marriage will take place.
Art. 1085. The fulfilment of the condition has a retroactive
effect from the day on which the obligation has been contract
ed. If the creditor be dead before the fulfilment of the condi
tion, his rights pass to his heirs or legal representatives.
The fact that a gift of the type at issue here in
the marriage contract filed in this proceeding has
the effect of transferring ownership of the money
given on the date that the contract is signed is
further confirmed by commentators and by judi
cial decisions.
In his text titled Donations, substitutions et
fiducie, Germain Brière writes, in the various fol
lowing numbered paragraphs:
[TRANSLATION] 258.—Ordinary law of gifts and exceptions-
.—Mention should at once be made of a very important provi
sion, that of article 817 C.C.L.C., under which gifts in a
marriage contract are subject to the rules concerning gifts inter
vivos, with such modifications resulting from special provisions
as will now be considered.
259.—Mitigations of rule.—The rule that a gift must be accepted
is well known (art. 787 C.C.L.C.). As we know, this acceptance
may be tacit or presumed (art. 788 C.C.L.C.) in gifts in
general, but there are other mitigations which are specific to
gifts by marriage contract.
260.—The law presumes acceptance.—This is the effect of article
821 C.C.L.C. for gifts of present property and of article 788(2)
C.C.L.C. for gifts in general, when they are made in a marriage
contract. It would not appear to be the case for born children.
This rule is explained by the fact that, by signing the deed, the
future spouses tacitly accept the gifts for themselves and, as a
corollary, their acceptance applies to their unborn children.
Acceptance remains necessary in itself, but is not subject to any
particular formality: the simple signature of the marriage
contract will suffice.
265.—Suspensive condition.—A gift by marriage contract is sub
ject to the marriage taking place, and the law accordingly
attaches to it a suspensive condition: it is said to be made under
the condition si nuptiae sequantur. The right to the thing given,
though the donee acquires it on signature of the contract or on
acceptance, will exist or not depending on whether the marriage
takes place (art. 822 C.C.L.C.). The legislature assumes that
the donor acted in consideration of the marriage, that he would
not otherwise have made the gift.
266.—The marriage takes place.—Once the marriage has taken
place, the right to the thing given is deemed to have existed
from the time of the gift: this is an application of article 1085
C.C.L.C.
274.—Review of concept of present property.—As we saw in
considering consequences of the irrevocability of gifts, the
concept of "present property" could not be limited to property
the donor has in his patrimony at the time of the gift; based on
the last paragraph of article 777 C.C.L.C., it could be said that
the gift of a sum of money or thing which is undetermined but
determinable can be regarded as a gift of present property
although the donor is not yet entitled to it. What matters is that
the donor undertakes the obligation, makes himself a debtor of
the donee.
In Goyette v. Dionne et Messier (1927), 44 B.R.
15 (Que.), the Court said the following at pages 16
et seq.:
[TRANSLATION) Whereas the only question presented by the
case is as to whether this gift is a gift inter vivos and of present
property or a gift of future property, resulting from death, and
any other question raised by the parties is by common agree
ment eliminated as having no relevance to the case;
Whereas the fact of providing that the money given will be
payable within three months of the donor's death does not, as
the learned Superior Court judge recognized, imply that the
gift is a gift mortis causa, as this clause is only a term which
delays execution of the gift; and whereas the fact of providing
that the money given to each donee will be paid from and out of
the most clear and apparent property in the estate of the donor
does not necessarily imply that the gift in the instant case is a
gift of future property, even if this stipulation is taken as
similar to the clause discussed by writers and the courts regard
ing things given to be taken from the property of the donor's
estate.
Whereas as a matter of sound logic and legal interpretation,
to determine the nature of an act undue importance should not
be attached to any particular phrase: rather, all parts of the
document should be considered and it should be taken as a
whole;
Whereas under article 777 C.C. the criterion for a gift inter
vivos, and its essential component, are "that the donor should
actually divest himself of his ownership in the thing given", and
whereas in the instant case such divestiture unquestionably
occurred, since it states in the said deed of gift that the donor
now gives each of the donees the sum of $10,000, reserves a
usufruct to himself and undertakes to pay the amounts given to
each donee, and that the donor further formally states that he
"absolutely divests himself of the bare ownership of the three
sums of $10,000 each so given, and recognizes that he is a
debtor therefor to the donees" so that as of this moment his
estate has become subject to an obligation to pay the said three
sums of $10,000;
In view of the last paragraph of article 777 C.C., which
provides that a gift "of a sum of money or other indeterminate
thing which the donor promises to pay or to deliver divests the
donor in the sense that he becomes the debtor of the donee";
Whereas, for these reasons, the gift in the instant case is a
gift inter vivos of present property, and the Superior Court
judgment finding the said gift to be void as being a gift mortis
causa of future property is in error;
and at page 23:
When a donor states that he undertakes to pay each of the
said donees the amounts mentioned above, it cannot be said
that an obligation has not immediately been created requiring
the donor as of that moment to pay the sum and acting as a
charge on his estate, even though the due date for payment is
delayed until his death.
Finally, in Labrie (Dame) c. Gilbert, [1973]
C.S. 134 (Que.), Tôth J. also had occasion to refer
to academic opinion and case law in connection
with an action for execution of a marriage contract
by the wife following a decree of separation as to
bed and board. The clause in question is set out as
follows in this judgment, at page 134:
[TRANSLATION] In consideration of the said future mar
riage the future spouse makes an inter vivos and irrevocable
gift in full and absolute ownership, from the date the mar
riage is celebrated and subject to the express condition that it
may not be distrained on the future wife, who accepts ... of
the sum of $5,000, for which he undertakes to be a debtor to
the future wife and which will be payable to her without
interest.
At pages 134 et seq., Tôth J. writes:
[TRANSLATION] Prof. Albert Bohémier Jr., in his article
"Des donations consenties par contrat de mariage et la maxime
donner et retenir ne vaut", writes ((1964-65) 67 R. du N. 229,
at p. 242):
In a gift inter vivos it is necessary, but it will suffice to
preserve the rule "giving and retaining has no effect", or still
better, to ensure that the donor's obligation is final and
irrevocable. Under the first pararaph of art. 777 C.C., it is of
the essence of a gift that it must have effect inter vivos, that
the donor must actually divest himself of his ownership or
that the donor must actually undertake to be a debtor of the
thing he promises to deliver or to give (art. 777(6) C.C.).
From the time that the donor finally and irrevocably divests
himself of ownership, the gift inter vivos of present property
has been made, regardless of the nature of the property
which is the subject of the gift. Accordingly, there is a gift of
present property inter vivos when the existence of the donor's
obligation is no longer dependent on his will, directly or
indirectly.
In the case of a gift, what is meant by present property when
a sum of money is involved?
Article 777 C.C. contains the following rule:
The gift of an annuity created by the deed of such gift, or
of a sum of money or other indeterminate thing which the
donor promises to pay or to deliver, divests the donor in the
sense that he becomes the debtor of the donee.
It is the divestiture which makes present property of a sum of
money that is the subject of a gift. Sir Alexandre Lacoste C.J.
said in Dorval v. Préfontaine (1905), 14 Q.B. 80, at p. 87):
The special nature of the gift of present property is that it
takes effect immediately at the time of the deed, so that the
donor of the thing given is at once divested of it, and hence it
follows that the thing given must be in the donor's estate at
that time, or at least, he then becomes the donee's debtor
(arts. 755 and 777 C.C.).
If therefore the donor becomes the donee's debtor, the gift is
of present property. The criterion in this matter is whether the
donor has actually and irrevocably become a debtor, not wheth
er he had the amount available at the time of the gift.
Professor Bohémier writes (op. cit., p. 297):
... A gift of present property is one which concerns
property the donor has or does not have, but which is
irrevocable because the donor is no longer free not to perform
the obligation he has undertaken.
The solvency of the donor at the time of the gift, whether he
has the amount given in his estate, is of no importance in
analysing the question of whether the gift is of present or future
property. The gift is valid between the parties if there is a
divestiture within the meaning of art. 777 C.C., even if the
creditors can make use of the Paulian action. This in fact is
what the Superior Court held in Bisson v. Labrie, ([1946] C.S.
462):
A gift by a marriage contract worded as follows: On the
occasion of his marriage the future husband makes a gift to
the future wife of the sum of $5,000 which the future wife
shall be entitled to claim in the lifetime or on the death of the
future husband from property most clearly owned by him.
However, the future husband shall be responsible for admin
istering the said money and the income will be used to assist
in raising the children to be born of the said marriage, and in
the event that the future wife dies first this gift shall be void,
is a valid gift with the donor being divested of ownership, in
that he becomes a debtor of the donee, a divestiture which
does not imply that the donor is owner of the property given
at the time of the gift. As in sale, consent of the parties will
suffice without the necessity for delivery.
As set forth in this judgment, the evidence shows that the
husband did not have the amount given by the marriage
contract in his estate at the time of the gift, and his marriage
contract indeed rendered him insolvent.
Professor Comtois writes (Essai sur les donations par con-
trat de mariage, (1967-68), 70 R. du N. 221, at pp. 418 and
419):
The distinction between present and future property is
much more difficult to apply when money is the subject-
matter of the gift. As an example, I give X the sum of $5,000
payable in two years. At the time of the gift I do not have
this sum of money in my possession. That does not prevent
the gift being a gift inter vivos from the time the donor
undertakes the obligation to pay it. When the gift is of an
annuity or sum of money (last paragraph of art. 777 C.C.),
the obligation undertaken by the donor to pay or deliver
divests the donor and makes him a debtor of the donee. This
may be seen as a matter of wording, but it does not alter the
fact that once the gift is made the amount promised is
included in the liabilities of the donor's estate. This means
that there was a genuine obligation and complete divestiture.
The donor is no longer free to acquire or not acquire the
property. Once he has acquired the property, in any way
whatever, the donee may require him to perform his obliga
tion when the deadline arrives. In any case, the donor cannot
be said to be free...
I will conclude this analysis by another quotation from
Mignault (Le droit civil canadien, t. 4 (1899), p. 90) on gifts
payable at a future date (when the donor dies), which also
applies to gifts payable without a fixed date:
The starting-point is the question of the validity of a gift of
a sum of money payable on the donor's death. According to
most French writers and court decisions, such a gift is valid.
All types of property can be given, they say, incorporeal as
well as corporeal. Thus, a debt may be given and from the
moment of the gift the donor becomes the donee's debtor.
Does it matter whether the debt is payable at a fixed date
and that date is the donor's death? The donor's divestiture is
present and irrevocable: present, because the debt immedi
ately enters the estate of the donee, who may dispose of it or
pass it on to his heirs; irrevocable, because the donor may no
longer cease to be the donee's debtor, he cannot abolish or
limit the right he has given to the donee. Of what importance
then is it that the donor, by wasting his property, may make
the donee's debt meaningless? The right should not be
confused with the fact. The effectiveness of a personal term
creditor's right is undoubtedly subject to the future solvency
of his debtor, but it is subject in fact, for payment, for
execution, and not in law so far as the actual existence of the
debt is concerned, which the debtor can never alter.
In the contract under consideration there is no doubt that the
defendant undertook to be a debtor in an irrevocable manner.
There was divestiture within the meaning of art. 777 C.C. This
is accordingly a gift of present property, not a gift of future
property.
In the same way, in the contract at issue here
there is no doubt that Eligio Siconolfi irrevocably
undertook to be a debtor. There was divestiture
within the meaning of article 777 of the Civil Code
of Lower Canada. Accordingly, there was a gift of
present property, not a gift of future property.
There was a genuine transfer of ownership, and so
a transfer of property within the meaning of sec
tion 160 of the Income Tax Act on the date the
marriage contract was signed, namely September
2, 1977.
Section 160 of the Act accordingly cannot have
any effect against the plaintiff with respect to any
tax debt of the late Eligio Siconolfi subsequent to
September 2, 1977.
At the hearing in this Court counsel for the
parties agreed that in the event of such a finding,
the notice of assessment of June 18, 1982 would be
referred back to the Minister of National Revenue
for him to attempt to identify factually, or if that
is not feasible, on a pro rata basis, the tax debt of
the late Eligio Siconolfi on September 2, 1977.
The plaintiff's action is accordingly allowed with
costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.