Paré, J:—This case, stated under Article 448 of the Code of Civil Procedure with the consent of all interested parties, raises for the decision of this Court the correctness or otherwise of the assessment made by the Quebec Succession Duties Department under section 38 of the Succession Duties Act, RSQ 1964, c 70, in respect of the death of the late Edmund Howard Smith who died on January 5, 1970.
The facts that gave rise to the present litigation are these:
On June 8, 1962 the deceased was the only shareholder and creditor in a company called Clarke Place Investments Limited. On that date, another company called Clarke Place Investments Inc was incorporated.
On July 20, 1962, by deed: of donation executed before H B McLean, Notary, the deceased gave the sum of $1,000 to the Montreal Trust Company, in trust for the plaintiff’s grandchildren named in paragraph 2 of the joint factum made under Article 448 of the Code of Civil Procedure.
On September 4, 1962 the deceased sold to Clarke Place Investments Inc all of his shares in the capital stock and all of his claims against Clarke Place Investments Limited, of which he was the only shareholder and creditor, the net worth of this latter company being as of that date the sum of $4,014,329.24.
In consideration of said sale, the newly formed company, Clarke Place Investments Inc, issued to the deceased 25,000 5% non-cumula- tive redeemable preferred shares of the par value of $100 each and 1,000 being all of the authorized common shares of the par value of $1 each, in its capital stock. This company also delivered to the deceased its promissory note payable on demand in the amount of $1,513,329.94 With interest at the rate of 5% per annum until payment.
On this same date of September 4, 1962 the deceased offered to sell for $1,000 to the Montreal Trust Company, in its capacity of trustee, under the deed of donation herein above referred to, the 1,000 common shares issued to him that very day by Clarke Placements Investments Inc. Acceptance of this offer by the Montreal Trust Company in its said capacity was also of the same date of September 4, 1962. When Mr Edmund Howard Smith died on January 5, 1970, the trustee still held these one thousand common shares and they were worth $1,716,276.
It was on that last amount that the Quebec Succession Duties Department levied duties and this on the ground that the object of the donation made by the deceased in 1962 was not a sum of $1,000 but the 1,000 common shares in the capital stock of Clarke Place Investments Inc.
The first question of law upon which this Court is called upon to decide is the following:
1. Under the Quebec Succession Duties Act (RSQ 1964, c 70, and amendments) and in the circumstances described in paragraphs 3 to 7 inclusive above, are Quebec Succession Duties leviable on or in respect of (a) the said sum of $1,000, being the sum given by the Deceased to Montreal Trust Company, or (b) the said common shares of Clarke Place Investments Inc?
The creation of a trust fund for a mere sum of $1,000 to be shared between six grandchildren which provided for a payment to each of them of one-third of his share upon attaining the age of 25, one-half of the remainder upon his attaining the age of 30, and the remainder thereof upon his attaining the age of 35, already suggests the conclusion that the intention of the donor was not to give his grandchildren a mere fraction of that $1,000 but the shares that were to be soon after substituted for that sum of $1,000.
This is further evidenced by the following facts: (a) the incorporation of the new company; (b) the creation of the $1,000 trust fund; (c) the sale by the donor of his shares to the newly formed company; (d) the sale to the trustee of all of his common shares therein; and (e) all this having been done within a very short period of time and with no apparent reason other than that of ultimately causing the donor’s 1,000 shares in Clarke Place Investments Inc to pass into the hands of the donees.
The presumptions arising from these facts constitute, in the absence of any explanation or rebuttal by the plaintiffs, prima facie evidence that the payment of the sum of $1,000 by the donor to the trustee was solely made with a view to providing it with sufficient funds to enable the purchase of the donor’s 1,000 common shares in that company formed for that very purpose.
The principle in law to be applied is that whatever name be given to a contract or a transaction by the parties, it does not change its true nature which remains characterized by their intention and the purpose sought for by them. This is also true where the parties have achieved their purpose under the disguise of a series of transactions which must then be considered as a mere machinery to cover their true intention.
In this particular instance, the whole or the main purpose the donor must be taken to have had in mind, while proceeding as he did, was to cause the 1,000 common shares held by him in Clarke Place Investments Inc to pass into the hands of the trustee as a gift for his grandchildren.
I unhesitatingly come therefore to the conclusion that the property which has been disposed of by gratuitous title and is deemed to have been transmitted owing to death, under section 27 of the Act, is not the $1,000 donation made on July 20, 1962 but the 1,000 common shares of Clarke Place Investments Inc which were acquired by the trustee on September 4, 1962.
The second question concerns the rates of duty which shall be applied on property transmitted to Philip Howard Smith, one of the heirs of the late Edmund Howard Smith. The said Philip Howard Smith is the adopted child of Gardner Howard Smith, one of the sons of the deceased.
The defendant has applied to this grandchild of the deceased the rates set forth in subsection (3) of section 9 of the Succession Duty Act, which rates are those applicable to strangers in blood to the deceased.
The question which is to be decided by this Court is:
Under the Quebec Succession Duties Act, are the duties on or in respect of the property transmitted or deemed to be transmitted to the said Philip Howard Smith to be at the rates provided by subsection (3) of Section 9 of the Act or at the rates provided by Subsection 1 of said Section 9?
The plaintiffs argue that the Quebec Succession Duties Department have erred in treating Philip Howard Smith, the legally adopted son of a son of the deceased, as a stranger in blood to the deceased and not as a direct descendant of the deceased, as they should have in accordance of subsection (1) of section 9 of the Act. They aver that Philip Howard Smith, while in fact no blood relative of the deceased, was, in law, his direct descendant because of his legal adoption by the son of the deceased and this pursuant the disposition of paragraph 38(a) of the 1969 Adoption Act, which reads as follows:
DIVISION VI — EFFECTS OF ADOPTION
38. From the date of the judgment granting the adoption:
(a) the adopted child shall become, in all respects and with respect to all persons, the legitimate child of the adopter and that of his consort if the latter joined in the motion for adoption;
With this I agree. Legitimacy is an attribute of birth whereby a child, in accordance with the provisions of Article 218 of the Civil Code is deemed to have been conceived during marriage and is therefore held to be a child of the husband. If a child is deemed to have been con- ceived by the husband, he must also be deemed to be a child in blood. In law, a legitimate child is therefore a child in blood and a descendant.
Furthermore, it is significant that the Legislature, in July of this year, in repealing section 10 of the Succession Duties Act, did not amend section 9 thereof.
For these reasons, this court doth declare:
A. It is on or in respect of the said common shares of Clarke Place Investments Inc still held by the Montreal Trust Company at the time of the death and having the value at that time of $1,716.276 that the Quebec succession duties are leviable;
B. It is the rates of duty provided for by subsection (1) of section 9 of the Succession Duties Act, not the rates provided by subsection (3) of section 9, that are applicable to the property, the ownership, usufruct or enjoyment whereof was transmitted or is deemed to have been transmitted owing to the death of the deceased to the plaintiff Philip Howard Smith;
The whole with costs against defendant.