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Expropriation—Reconveyance—Second and third expropriations—Commercial development after first expropriation ensured—Failure to adjust on a corresponding basis—Civil Code, arts. 1478, 2098—Code of Civil Procedure, art. 797 (old version).

In January 1962, the appellant Community concluded a promise of sale of nearly three million square feet of land for $2,000,000 to Place Versailles Inc. (then known as Lanabar Realty Inc.).

A few months later, the Minister of Roads deposited in the registry office a plan of expropriation which made him the owner of an area of 513,115 square feet included in what the Community had sold to Place Versailles, by accepting the promise of sale with an initial payment of $100,000.

On August 6 of the same year, appellants signed a notarial deed of sale (registered on August 9, 1962) in which it was stipulated that an expropriated strip would be excluded from the sale; it was also agreed therein that the indemnity to be paid by the expropriating party would be given and paid by the vendor Community to the purchaser company as a reduction of the sale price, the latter reserving the right to dispute the indemnity offered by the Government.

During the same month, Place Versailles began construction of a shopping centre on the land purchased from the Community. In April 1963, the land was annexed by the City of Montreal on conditions which ensured the development of the shopping centre then under construction.

On July 11, 1963, the Minister of Roads reconveyed to the Community part of the land expropriated but, on the other hand, expropriated part of Place Versailles’

[Page 1119]

land. Finally, on May 26, 1965, the Minister again expropriated part of what he had reconveyed to the Community in 1963.

On February 25, 1966, a Superior Court judgment granted a motion in which Place Versailles requested that the record be referred to the Public Service Board for the amount of the indemnity to be determined. In this motion, Place Versailles described itself as the expropriated party. Following a preliminary exception filed by the expropriating party, the Board made an order ruling that Place Versailles had an interest only in the indemnity for the expropriation of July 11, 1963. Following this decision, the Community filed a motion to the Board that the indemnity due as a result of the expropriations be fixed. By means of an intervention made in the name of Lanabar Realty Inc., the appellant company requested from the Board that the indemnity to the Community be determined by taking into account “the fact that the commercial potential of these properties was materialized by the development of a shopping centre.”

Following the hearing, the Board held that the properties of the Community should be valued as undeveloped land at $0.95 per square foot and those of Place Versailles as commercial land at $3 per square foot. To this the Board added an increase in value of ten per cent a year, thus fixing the indemnity awarded to the Community at $432,727 and to Place Versailles at $235,917.

The Community and Place Versailles appealed and requested that all the expropriated properties in question be valued as commercial land. While agreeing with the Board’s decision concerning the first expropriation, the Court of Appeal disagreed concerning the third expropriation and the total indemnity awarded to the Community was increased to $627,200.

Appellants appeal to this Court to have the indemnity for the first expropriation of May 30, 1962 also fixed on the basis of $3 a square foot.

Held: The appeal should be dismissed.

The Court of Appeal was correct in holding that to fix the value for purposes of the third expropriation, it mattered little whether the expropriated party was the Community or Place Versailles. Even if the Community was the owner, that would in no way change the value, which in this case was the market value. There is no question here of special value for the owner.

To fix the indemnity for the first expropriation, the Board seems to have made an inquiry only into the price the Community could have obtained on the market on

[Page 1120]

the day when this first expropriation was made, and excluded any consideration of the unregistered deed. The whole of the land was valued as being located in a residential zone, except for a commercial frontage 150 feet deep. However, there was in fact an opportunity for commercial development.

Regarding the first expropriation, an important consideration is the fact that Place Versailles had agreed to pay $0.70 per square foot a few months earlier. Between the purchase by Place Versailles and the first expropriation, nothing occurred which could be considered as likely to cause a dramatic change in the value. Even if the difference of $0.25 per square foot between the price paid by Place Versailles and the value assigned by the Board were regarded as insufficient, it should be considered that the Board was far too generous to the expropriated party in setting the value of the land reconveyed to the Community on July 11, 1963 at $1,045 per square foot, while it valued the land expropriated from Place Versailles on the same day at $3.30 per square foot.

The Court of Appeal fixed the indemnity for the third expropriation at the actual value, but it thereby granted an important advantage to appellants by omitting to adjust the deduction for the reconveyed land on a corresponding basis. For the 142,216 square feet reconveyed, this makes a difference of over $320,000. If it is considered that the land reconveyed on July 11, 1963 had the same value as the land expropriated on that day, this means that for the area which was the subject of the first expropriation, the indemnity in effect represents about $1.57 per square foot. This appears to take sufficiently into account the possibility of commercial development at the time of the first expropriation, and there is no reason to intervene.

APPEAL from a decision of the Court of Appeal of Quebec,[1] varying a judgment of the Superior Court homologating an order of the Public Service Board. Appeal dismissed.

Pierre Pinard, for the appellants.

Emile Colas, Q.C., for the respondent.

The Judgment of the Court was delivered by

PIGEON J.—The purpose of this appeal is a further increase of the expropriation indemnity awarded by the Public Service Board and increased by the Court of Appeal.

[Page 1121]

The case began in very special circumstances and the proceedings developed in an unusual way, as we shall see.

La Communauté des Sœurs de la Charité de la Providence (“the Community”) for a long time owned a large institution in the east of Montreal Island, which with the extensive adjacent property formed a distinct municipality known as St-Jean-de-Dieu, west of the so-called Montée St-Léonard highway. In 1961, the provincial government began construction of the Louis-Hippolyte Lafontaine tunnel across the river from that highway. These works were part of the Trans-Canada Highway, and involved the widening of Montée St-Léonard and its transformation into an expressway, with the necessary construction as far as Metropolitan Boulevard.

In February 1961 Place Versailles Inc., then known as Lanabar Realty Inc., approached the Community with a view to purchasing nearly three million square feet of land north of Sherbrooke Street and west of Montée St-Léonard. It had in view the construction of a shopping centre at this important intersection. The Community proposed a price of $2,500,000. On January 22, 1962, Place Versailles made a written offer of $2,000,000, which was accepted the next day. It stipulated that the promise of sale would not be registered, and that if it was it would thereby become void.

On May 30, 1962, the Minister of Roads deposited in the registry office a plan of expropriation which made him the owner of an area of 513,115 square feet included in what the Community had sold to Place Versailles, by accepting the promise of sale on January 23 with an initial payment of $100,000.

On August 6, 1962, Place Versailles signed a notarial deed of sale with the Community (registered on August 9, 1962) in which the following clauses appear:

[TRANSLATION] However, a strip expropriated by the Government of Quebec for repairing or constructing the Trans-Canada Highway, as described in a plan

[Page 1122]

deposited and registered in the Montreal registry office May 30 last (1962), under No 1603054, shall be excluded from the property above described;

It is agreed by the parties that the purchaser company shall take possession immediately of that part of the land sold which was not expropriated, in its present state and condition, declaring that it has seen and examined it and is content and satisfied therewith.

However, it is also agreed that the indemnity to be paid by the Government for the expropriated part shall be given and paid by the vendor Community to the purchaser company as a reduction of the sale price hereinafter stipulated, and that the purchaser company shall have the right to dispute the indemnity offered by the Government if it considers such indemnity insufficient, the vendor Community promising to support such dispute as required, but without incurring any expense. It is agreed by the parties that the right of ownership in the immovables hereby sold dates from January 23 last (1962), the date when the offer to purchase the said immovables was accepted by the vendor, and the purchaser has since that date (January 23, 1962) had effective possession and control of the said immovables.

In August 1962, Place Versailles began construction of a shopping centre on the land purchased from the Community.

On July 11, 1963, the Minister of Roads reconveyed to the Community part of the land expropriated the year before. This reconveyance concerned an area of 142,216 square feet fronting on Sherbrooke Street. On the same day, on the other hand, the Minister expropriated part of Place Versailles’ land, an area of 73,241 square feet forming a long triangular piece along the strip expropriated to widen Montée St-Léonard.

Finally, on May 26, 1965, the Minister again expropriated part of what he had reconveyed to the Community in 1963 and so took back an area of 69,226 square feet.

On February 11, 1966, Place Versailles (under the name Lanabar Realty, which was no longer its name since October 2, 1963) made a motion in the Superior Court, alleging the three expropriations of May 30, 1962, July 11, 1963, and May 26,

[Page 1123]

1965. In this motion, served on the Minister of Justice and the Minister of Roads, it described itself as the expropriated party and stated that it had not contested the right to expropriate, but that there had been no agreement as to the indemnity. Accordingly, it requested that the record be referred to the Public Service Board for the amount of the indemnity to be determined. This motion was granted by a judgment of the Superior Court on February 25, 1966.

Before the Board, respondent made, on November 7, 1966, a motion entitled “Preliminary exception in the nature of a defence”, in which he argued that [TRANSLATION] “the action may be sustained only as regards the expropriation of July 11, 1963”, and that for the other two, only the Community “had the capacity to dispute at law the amount of the indemnities…”. On October 27, 1967, the Board made an order declaring the preliminary exception valid and ruling that only the second expropriation mentioned in the Superior Court judgment could be the subject of arbitration by the Board.

In the order of the Board fixing the indemnities, handed down on February 22, 1971, it is stated following a reference to that decision:

[TRANSLATION] By its motion in the record as No 20-4924-X, the Communauté des Sœurs de la Charité de la Providence, applicant-expropriated party, requested that the indemnity due as a result of the expropriations be fixed.

This motion is neither in the printed case nor in the original record sent to the Registrar. However, there is a document dated September 20, 1970 entitled “Intervention”, in which the facts related above, including the motion by the Community, are set out. The conclusions of this proceeding, made in the name of Lanabar Realty Inc., are as follows:

[TRANSLATION] TO ALLOW this intervention for all legal purposes, and to take into account, in fixing the indemnity due for the expropriations of May 30, 1962 and May 26, 1965 affecting lots 332, 335, 335A and 336, the fact that the commercial potential of these properties was materialized by the development of a shopping centre.

[Page 1124]

The Board does not appear to have ruled on this proceeding other than to the extent that it may have taken it into account in its order fixing the indemnity. Meanwhile, before the hearing, Place Versailles had given notices designating it by the name which was its proper name since October 2, 1963.

The order of the Board fixing the indemnities deals with the first and third expropriations first. The essential part reads:

[TRANSLATION] … At the time of the first expropriation, May 30, 1962, the land in question belonged to the Communauté des Sœurs de la Charité de la Providence. On January 22, 1962, there was an offer to purchase which included the expropriated land, made by Lanabar Realty Inc., and this was accepted by the Community. However, this offer was not registered, in accordance with one of its clauses which stipulated that it must not be registered, under pain of nullity. As a result, this promise to purchase was a private writing which could not be invoked against third parties (art. 2098 C.C.).

The deed of sale giving effect to this promise was only made on August 6, 1962. On May 30, 1962, therefore, the date the first expropriation was effected, the owner of the expropriated land was the Communauté des Sœurs de la Charité de la Providence. The reconveyance of July 11, 1963 of part of the land was also made to the Community, and the expropriation on May 26, 1965 of part of the land reconveyed also affected property of the Sisters. With respect to the expropriation of July 11, 1963, it affected part of the property of Lanabar Realty Inc., now Place Versailles Inc.

At that time, the property of the Sisters was located in the municipality of St‑Jean‑de‑Dieu. There were none of the municipal services necessary for a development in this municipality, nor was there a zoning plan. The Communauté des Sœurs de la Charité de la Providence, a non-profit corporation, could not speculate or engage in commercial activity such as the promotion and sale of subdivided properties. It had the power to sell property, but the purchaser was responsible for subdividing it itself and for applying for annexation of the area by a neighbouring municipality in order to obtain municipal services.

From the preceding, it appears that the Community could only sell land undeveloped, which is what was done in the deed of sale of August 6, 1962.

Great importance was attached to the fact that the land was not zoned, which gave it a special value since

[Page 1125]

one could use it as one chose. It must, however, be remembered that any eventual purchaser, before being able to use it for commercial purposes, first had to arrange annexation by a neighbouring municipality, which would apply the zoning of its choice to the land. This is what Place Versailles Inc. wanted to avoid when it required that the promise to purchase not be registered. It thus proposed to begin development of its shopping centre in order to present the municipality which consented to the annexation with a fait accompli. This is in fact what happened when the city of Montreal annexed the territory by Bill 100, assented to on April 24, 1963, which recognized the vested rights of the owners of the land in question. Had it not been for these particular circumstances, there is every reason to presume that the city of Montreal would have applied the same zoning as existed all along Sherbrooke Street to the land, that of a commercial strip 150 feet deep fronting on Sherbrooke Street with the balance in a residential zone.

The land expropriated in 1962 as well as that reconveyed in 1963, and the part re‑expropriated in 1965 should therefore be appraised as undeveloped land, because that is the only value it could have to the expropriated party. The expert witness Bodet is the only one who considered the problem from this angle.

After analysing the evidence of the expert witness Bodet, the Board concluded:

A thorough analysis of these transactions suggests a value of about $0.95 per square foot for the undeveloped value of the land, for the part with a 150-foot commercial frontage on Sherbrooke Street and a considerable area behind located in a residential zone. This then is the value which the Board fixes for the land expropriated from the Sisters on May 30, 1962.

As the evidence shows, because of the increased value brought about by the opening of the Trans-Canada Highway in the area, the annual increase in the value of the land, for the period which concerns us, should be fixed at ten per cent. We shall first determine the indemnity due to the Communauté des Sœurs as a result of the 1962 expropriation, the 1963 reconveyance, and the 1965 expropriation.

In accordance with the principles thus laid down, the Board fixed the indemnity due to the Community for the first expropriation less the reconveyance, plus the third expropriation, as follows:

[Page 1126]

Expropriation of May 30, 1962:

 

 

513,115 square feet at $0.95

$ 487,459.25

 

Damage to the residue

$  14,321.25

$ 501,780.50

Less the reconveyance of July 11, 1963

 

 

142,216 square feet at $1.045

$ 148,615.72

 

+ damage to the residue of 1962

$ 14,321.25

 

- damage to the residue of 1963

$   3,762.00

$ 159,174.97

 

 

$ 342,605.53

Plus the expropriation of May 26, 1965

 

 

69,256 square feet at $1.235

$ 85,531.16

 

—damage to the residue of 1963

$   3,762.00

 

+ damage to the residue of 1965

$   8,352.93

$   90,122.09

 

 

$ 432,727.62

But when it then came to fixing the indemnity for the second expropriation, the Board adopted a completely different basis of valuation. I find it necessary to quote this part of the order in its entirety.

[TRANSLATION] With respect to the area of land expropriated on July 11, 1963, the owner at that time was Place Versailles Inc., which had purchased it on August 6, 1962. By bill 100, assented to on April 24, 1963, the territory of which the land is a part had been annexed by the city of Montreal.

The Bill in question, as well as the plan accompanying it, were filed as Exhibits E-4 and E-4A. The Bill specifies that the planning of the annexed territory will be in conformity with plan S-102 (Exhibit E-4A). It appears clearly on this plan that the territory in question is intended, for the most part, for the construction of a shopping centre, except for the north-west extremity, which is zoned for apartment buildings.

The expropriated part is entirely within the area intended for the shopping centre. This area of the shopping centre has exits on Sherbrooke Street and on two proposed streets running into the service roads of Montée St-Léonard, which had become part of the Trans-Canada Highway.

The Board has already decided many times that the land in a shopping centre has the same value whether it is located behind or in front of the centre. The operation of such business requires very large parking lots and their value is the same as that of the land used for the buildings.

The value of the expropriated land belonging to Place Versailles Inc. is therefore that of commercial land on Sherbrooke Street. An analysis of sales of commercial

[Page 1127]

land on that street shows a price of $3.00 per square foot in 1962. The Board has analysed a large number of transactions cited by four expert witnesses to arrive at this conclusion. Moreover, this is the conclusion reached by the expert witnesses Bigras and Sherry.

In 1963, this value became $3.30 per square foot, that is an increase of ten per cent, as previously established. The area expropriated is 73,241 square feet. However 4,851 square feet, representing the area of the two roads appearing on plan S-102, must be deducted. The value of the land expropriated therefore works out to $225,687 (68,390 square feet at $3.30).

The expropriation leaves an irregular line in one part of the residue. The expert witness Sherry calculated the area depreciated in this way as 6,200 square feet. The Board accepts his method of calculating it, which is, moreover, the method which it has used previously. This area is depreciated by fifty per cent of its value because of the expropriation, and an indemnity of $10,230.00 (6,200 square feet at $3.30 x 50%) must accordingly be paid to the expropriated party.

The total compensation due to Place Versailles Inc. is therefore determined to be $235,917.00.

Place Versailles is, understandably enough, completely satisfied with this last part of the decision. However, it argues forcefully that the same principles should have been applied to the first and third expropriations. In the case of the third the Court of Appeal agreed, Crête J.A. saying on this subject, with the concurrence of his colleagues:

[TRANSLATION] I believe that the Board should have taken into account the fact that the extrinsic factors which could affect the development of the Community’s property in 1962 had disappeared, and that, moreover, the completed construction of the shopping centre undeniably conferred an increased value on the whole property.

To me, it is not important whether in 1965 the land was in the name of the Community or of Place Versailles Inc. The potential of the land was realized and the Board should have taken as the base rate the $3.30 per square foot that it had established for the 1963 expropriation, with the annual increase of ten per cent.

Accordingly, I would say that for the expropriation of May 26, 1965 the decision should have been as follows:

69,256 square feet at $3.90 per foot:

$270,098.40

less damage to the residue of 1963:

$   11,880.00

plus damage to the residue of 1965:

$   26,377.00

Total:

$284,595.40

[Page 1128]

As a result of this new ruling, the total indemnity awarded to the Community should be increased by one hundred and ninety-four thousand, four hundred and seventy-three dollars and thirty-one cents ($194,473.31), resulting in a total of six hundred and twenty‑even thousand, two hundred dollars and ninety-three cents ($627,200.93).

In my opinion, the Court of Appeal was not in error in holding that to fix the value for purposes of the third expropriation, it mattered little whether the expropriated party was the Community or Place Versailles. It is not disputed that the Community could freely sell the land in question. Even if it was the owner, that would in no way change the value, which in this case was the market value. There is no question here of a special value for the owner. As a result, the value in the hands of the vendor was the same as the value in the hands of the purchaser. The failure to register the promise of sale, which amounted to a sale since the purchaser had possession (art. 1478 C.C.), could have no effect on the indemnity. There is therefore no necessity to consider the effect of the first two paragraphs of art. 2098. It is sufficient to note that this article does not go so far as to say that an unregistered document may never be invoked against third parties.

Since the Community and Place Versailles brought common appeals, it is not necessary to consider what should be said of an order by which the Board pretented to decide that it would not comply with a judgment of the Superior Court with respect to two of the three expropriations. In fact, it nevertheless proceeded to do so on the motion of the Community with the participation of Place Versailles, and the Superior Court then homologated the decision. It is only necessary to consider the sufficiency of the indemnity awarded by the Board and increased by the Court of Appeal.

It should be noted first that although, for two of the three expropriations, the Board fixed the indemnity taking the Community as the expropriated party, it stopped short of inquiring into the real value to the Community in the circumstances. The latter having sold the property, the value to it

[Page 1129]

could be nothing else than the price on which it had agreed. It is not on this basis that the indemnity was determined. It appears that any consideration of the unregistered deed was completely excluded, and inquiry was made for the purposes of the first expropriation only into the price the Community could have obtained on the market on the day when this first expropriation was made.

The whole of the land was valued as being located in a residential zone, except for a commercial frontage 150 feet deep on Sherbrooke Street. However, there was in fact an opportunity for commercial development, even if it was not without serious risks, as the Board noted in its order. Place Versailles had good reason for including in its offer to purchase the special clause forbidding registration, on pain of nullity. The indemnity which it now seeks for the partial expropriation implies that the Community agreed to sell it the property for less than a quarter of its value. In fact, it implies that the Community practically gave it the property, since this indemnity, for which the Community is obliged to give it credit, would be almost enough to pay the entire price of the rest of this vast property. Accordingly, Montgomery J. quite properly observed:

Regarding the 1962 expropriation, I agree that an important consideration in the determination of the value of the land then taken is the price that Appellant had agreed to pay only a few months earlier, approximately 70¢ per square foot. To the authorities cited by Mr. Justice Crête in this connection, I would add our decision in Leopold v. Hydro-Electric Commission of Quebec, 1967 [Q.B.] 658. In the light of this price, the value of 95¢ fixed by the Board seems quite fair to Appellant.

I would add to this that in the interval between the purchase by Place Versailles and the first expropriation nothing occurred which could be considered as likely to cause a dramatic change in the value. The following year, annexation by the City of Montreal, on conditions which ensured the development of the shopping centre then under construction, was such as to justify a completely different valuation for the property which was the subject of the second expropriation on July 11,

[Page 1130]

1963. At that point there was a certainty, no longer a possibility.

Even if the difference of $0.25 per square foot between the price paid by Place Versailles and the value assigned by the Board were regarded as insufficient, it should be considered that the Board was far too generous to the expropriated party in calculating the deduction for the reconveyed land. In fixing the indemnity assigned to the Community and that assigned to Place Versailles according to different principles, it valued the land reconveyed to the Community on July 11, 1963, at $1,045 per square foot, while it valued the land expropriated from Place Versailles on the same day at $3.30 per square foot. There may be an understandable desire to avoid an expropriating party being able to say to the party from whom more has been expropriated than was needed: “I am giving you back the surplus, and since it has increased in value in the interim, I owe you nothing for what I am keeping”. But, may this go so far as to justify fixing a value three times lower for the purposes of a reconveyance than for the purposes of an expropriation made the same day, in respect of a property which according to the Board should be valued in its entirety at the same price, because the reconveyance was made to the former owner and the expropriation affects the party to whom the property was sold by a deed registered after the first expropriation?

The Court of Appeal properly fixed the indemnity for the third expropriation at the actual value, but it thereby granted an important advantage to appellants by omitting to adjust the deduction for the reconveyed land on a corresponding basis, although the reconveyance was made at a time when commercial development was assured. The actual value of the land was then $3.30 per square foot, the price determined by the Board for the second expropriation, instead of $1,045, which it assigned to the reconveyance the same day. For the 142,216 square feet reconveyed, this makes a difference of over $320,000. This discrepancy is even less justified in that the land reconveyed was the best, bordering on Sherbrooke Street, while the second expropriation concerned a strip on the east

[Page 1131]

side. Moreover, part of the reconveyed land was the subject of the third expropriation and was valued by the Court of Appeal at $3.90 per square foot.

When there is a reconveyance, the indemnity is fixed accordingly (art. 797 C.C.P.). This is just a factor in the calculation, not a claim to be set off in compensation. The appeal had brought the whole determination of the indemnity in question, and the same is true of the appeal to this Court. If it is considered that the land reconveyed on July 11, 1963 had the same value as the land expropriated on that day, and not the much lower amount fixed by the Board, this means that for the area which was the subject of the first expropriation, that is, 513,115 square feet, the indemnity in effect represents about $1.57 per square foot, instead of $0.95. This appears to me to take sufficiently into account the possibility of commercial development at the time of the first expropriation.

In these circumstances, I find no reason to intervene to further increase the indemnity for the expropriation. There is no cross-appeal.

For these reasons I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Viau, Bélanger, Hébert, Mailloux, Beauregard, Paquet & Pinard, Montreal.

Solicitors for the respondent: de Grandpré, Colas, Amyot, Lesage, Deschênes & Godin, Montreal.

 



[1] [1974] C.A. 175.

 

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