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Law of successions: when an heir, in good faith, fails to draw up an inventory, the court may exercise its discretion and limit that heir's liability to the value of the property inherited, provided that there exists a new circumstance that substantially changes the extent of the heir's liability, such as the coming forward of a creditor of whose existence was unknown

Law of successions, debts of the succession: In a decision rendered in December 2012, the Superior Court exercised its discretion in accordance with ss. 835 of the Civil Code of Québec. The Court decided that even though the heirs in question had failed to draw up an inventory, an inaction that often results in their personal liability for all outstanding debts of the succession, evidence of their good faith and of the existence of a new circumstance that substantially changes the extent of their liability, such as the existence of an unknown creditor, may justify the reduction of their liability by the court system (Caouette c. Boutin-Jacques (Succession de), 2012 QCCS 6283).

THE FACTS

In April 2003, Ms. Alfreda Boutin-Jacques, 85 years of age, sells her residence, with legal warranty, to the plaintiff, Jimmy Caouette. In October 2009, Ms. Boutin-Jacques dies. Her will stipulates that the residue of the succession will be partitioned equally between her four children and in December 2009, the heirs, in conformity with their mother's last wishes, divide the sum of $4 500. The heirs proceed to this partition, however, without first drawing up an inventory and registering a notice of closure.

At the beginning of 2011, the plaintiff, who is in the process of reselling the property initially purchased from Ms. Boutin-Jacques, obtains an expert report, revealing severe contamination of the land that amounts to more than $40 000 in damages. In consequence, the plaintiff, invoking the existence of a latent defect, claims the sum of $38 000 from the heirs of the late Alfreda Boutin-Jacques.

THE ARGUMENTS OF THE PARTIES 

Both parties recognize that the deceased heirs, in this particular case, failed to register an inventory and a notice of closure in accordance with the law.

The plaintiff

The plaintiff argues that this clear violation of the law renders the heirs liable for all of the succession's debts, even those that are beyond the value of the property inherited. According to the plaintiff, this includes his latent defect claim.

The defendant

The defendant argues instead that even if an inventory had been drawn up in conformity with the law, it would not have allowed the plaintiff to recover a sum greater than $4 500, given the fact that his latent defect claim would not have even been considered in the inventory. Invoking his good faith, the defendant therefore asks the court to exercise its discretion in accordance with ss. 835 of the Civil code of Québec and to limit the liability of the heirs to the value of the property inherited.

THE SUPERIOR COURT'S DECISION

To begin, the Superior Court confirms that the contract of sale concluded between the plaintiff and the deceased in 2003 included the legal warranty and consequently, all claims stemming from this warranty constitute debts of the succession. Generally, heirs will not be held liable for the debts of the succession that are beyond the value of the property inherited. By exception, however,  the heirs who fail to draw up an inventory are considered to have accepted their liability for all outstanding debts of the succession. The present case is an exception to the rule.

The Superior Cour then emphasizes its power to strike down this exception, by exercising its discretion in accordance with ss. 835 of the Civil code of Québec. According to this disposition, once the heirs of a succession succeed in demonstrating their good faith, the existence of a new circumstance and the substantial modification of their liability, the court may limit their liability to the value of the property inherited.

Given the evidence at hand, the Superior Court decides to exercise its discretion. At the time of Ms. Boutin-Jacques' death, all existing debts were paid and her heirs were therefore justified when they partitioned the remaining sum of $4 500. This being said, even if the heirs had drawn up the inventory required by law, the defendant's claim, a claim that did not yet exist, would not have been considered.

The heirs, having no way of knowing that the defendant would later become an eventual creditor, were in good faith when they accepted the residue of the succession. Evidently, their liability would be substantially modified if they also needed to pay the amount of $40 000, amount needed to decontaminate the purchased land.

CONCLUSION

The Superior Court thus decides that the liability of the heirs in question should be limited to the value of the property that they collectively received from the succession of their late mother. According to the Court, the present case constitutes the perfect example of a situation where its discretion, provided by ss. 835 of the Civil Code of Québec should be applied. Dubé Légal inc., Montréal succession law lawyers.