Marcotte, Hogue, Moore

Appeal from a judgment of the Superior Court dismissing an application for a declaratory judgment and damages. Granted ($287,459).

In 2001, an agreement was reached between the respondent city and real estate developer Les Promotions MG Larochelle inc. concerning the land transferred in excess by the developer as park fees. A bank equivalent to the excess surface area of the transferred land was set up. This bank was to enable Larochelle to meet its obligation to transfer 10% of the area of the next lots it would develop, by offsetting the area it would have to transfer against the excess area accumulated in the bank. In 2015, having been unable to use the bank, Larochelle asked the city to make a cash offer, which was refused. The trial judge concluded that the appellant, who holds all the rights, titles, and interests previously held by its sister company Larochelle, could not demand financial compensation.

The judge erred in law in finding that the transaction binding the parties entailed novation and extinguished any obligation the city might have had towards Larochelle to return what it had over-collected. A transaction does not necessarily entail novation of the parties' prior obligations. That must have been their intention. In this case, the parties intended to defer the exigibility of the city’s obligation to return the over-collected surface area to a time when Larochelle would again be obliged to transfer land to the city for park purposes, thus allowing the parties to proceed by way of compensation rather than forcing the city to borrow the money needed to perform its obligation by equivalence. The parties were convinced at the time that Larochelle would carry out new residential developments and, not perceiving this event as uncertain, they wanted to subject the city's obligation to an indeterminate term rather than a condition. It is common ground that the objective uncertainty of an event is not sufficient to make it a condition, and that the parties themselves must not have considered it certain.

The judge committed another error when she determined that, if it was a term obligation and not a conditional obligation, the action was prescribed.  She could not conclude that the city’s obligation became due as soon as the Commission de protection du territoire agricole du Québec had refused the requested permission to withdraw the land Larochelle wished to develop from the agricultural zone, since in doing so she simply ignored the other two scenarios that could lead to the use of the land bank, which were still likely to occur. Not knowing at what point the city’s obligation could be considered to have become exigible in these circumstances, it was necessary to apply to the court for a term to be set so that the obligation, which had been suspended up until then, would become exigible and extinctive prescription would begin to run. As the term could not be set before the claim was lodged, the claim was not prescribed.

Finally, as performance in kind is impossible in this case, we must place ourselves at the time Larochelle transferred the land to determine the value of what the city received in excess and, consequently, the amount it must pay to the appellant to now perform its obligation to return this overpayment by equivalence (art. 1700 of the Civil Code of Québec (S.Q. 1991, c. 64)).

Text of the decision: http://citoyens.soquij.qc.ca