In Quebec civil law, creditors are contractual actors to whom debtors must fulfill certain obligations[1]. These obligations may consist of “doing or not doing something”[2]. To fulfill these obligations, the debtor will make payment. Payment can take various forms. This can mean any amount of money to be paid to the creditor, but also the performance of the object of the obligation[3].
In order to obtain payment of these obligations, the creditor may, in the event of any problem, turn to the assets forming part of the debtor’s patrimony[4 ], as these constitute the common pledge of his creditors[5]. However, there is a limit to the assets that can be mortgaged. Some assets are considered unseizable. They cannot therefore be mortgaged to secure performance of the debtor’s obligation. These various types of property may be exempt from seizure by operation of law, by the will of the individual or by the nature of the property[6].
Problem situations we can think of include conflicts between the parties to the contract, or financial difficulties experienced by the debtor. When a debtor owes a particular obligation to a creditor, the creditor runs a certain risk, since he assumes that the obligation will be fulfilled by the debtor, but he has no guarantee that it will be.
This is where the concept of the mortgage comes into its own. In fact, a mortgage is of crucial importance to any creditor wishing to protect his or her financial interests. It is a guarantee of performance of an obligation. In other words, in the event of a factual situation in which the debtor fails to perform his obligation, the creditor may exercise his hypothecary rights arising from the hypothec he holds in order to receive indirect payment of said obligation.
In the words of the Civil Code of Québec :
2660. A hypothec is a real right on movable or immovable property made liable for the performance of an obligation. It confers on the creditor the right to follow the property into whatever hands it may come, to take possession of it, to take it in payment, to sell it or to cause it to be sold and thus to have a preference upon the proceeds of the sale, according to the rank as determined in this Code.
In conclusion, the mortgage is an invaluable tool for all bondholders seeking to protect their economic interests.
Samuel Grisé, lawyer
[1 ] Art. 1373, para. 1 C.c.Q.
[2] Art. 1373, para. 1 C.c.Q.
[3] Art. 1553 C.c.Q.
[4] “All of a person’s assets1 and obligations3 of pecuniary value. ”The distinction between real and personal rights forms the edge of patrimonial law […]” Dictionaries of private law online (https://nimbus.mcgill.ca/pld-ddp/dictionary/search).
[5 ] Art. 2644 C.c.Q.
[6] Without prejudice to the foregoing, more specific rules apply to the unseizability of assets.
