The debtor has the inherent right to pursue legal remedies
Com. 8 September 2015 (No. 14-14.192) F-PB:
A company and its manager, ordered to pay various sums due to the poor performance of a contract, appealed the judgment ten days before the company was placed into liquidation. The liquidator, summoned to intervene by the respondents, indicated that he would not appear on behalf of the company due to a lack of funds. The plaintiffs then challenged the appellate court's decision for having dismissed their claims against the company and its representative.
The Court of Cassation dismissed the appeal. According to the Court, it follows from Article L. 641-9 I of the French Commercial Code that when proceedings seeking a judgment against the debtor for payment of a sum of money for a cause predating the judgment opening its liquidation are pending on the date of that judgment, the debtor has, in that case, the right to exercise the legal remedies available against the decision ruling on the claim for payment.
Contract void – Impossibility of restitution
3rd , 2015 (No. 14-11.582) FS-PB:
A municipality had granted a real estate company (SCI) a lease-purchase agreement. Claiming non-payment of rent, the municipality obtained a summary judgment declaring the lease terminated due to the SCI's fault and ordering the latter to pay an advance on the outstanding rent and monthly occupancy compensation until the premises were vacated. The SCI then sued the municipality to have the lease-purchase agreement declared null and void and to obtain reimbursement of the rent paid, arguing that the mayor had not been authorized by the municipal council to enter into such an agreement. Finally, the municipality also sought, in the alternative, payment of occupancy compensation for the period prior to the termination.
The Court of Appeal rejected the municipality's claim for occupancy compensation for the period prior to the termination, finding that the municipality had not suffered any financial loss due to the return of the property.
The Court of Cassation quashes the appeal judgment and specifies that in the event that a void contract has been performed, the parties must be restored to the state in which they were before this performance and that, when this restoration proves impossible, the party that has benefited from a service which it cannot return, such as the enjoyment of a rented property, must pay an occupancy indemnity.
Conventional penalty and penalty clause
2nd , 2015 (No. 14-20.431) F-PB:
The sellers of a property, by notarial deed, undertook the obligation to remove a planter erected on public property, subject to a daily penalty payment. However, an enforcement judge dismissed the buyer's request for the enforcement of the contractual penalty payment. The buyer, having initiated, pursuant to the notarial deed, a seizure and sale and two attachment orders to obtain payment of the agreed sum, the sellers appealed to an enforcement judge, who rejected their request to annul the seizure and sale order, to lift the two attachment orders, and to eliminate the penalty payment.
To annul the seizure and sale order and order the release of the two attachment orders, the lower court judges held that no penalty payment could give rise to enforcement proceedings before its enforcement, whether that penalty payment was ordered by a judge or agreed upon by the parties in a deed to ensure the performance of an obligation to do something.
The Court of Cassation first reiterates that the judge must give or restore the correct legal classification to the disputed facts and acts, without being bound by the label given to them by the parties. Consequently, it was incumbent upon the Court of Appeal to classify and assess the disputed clause, which in this case was a penalty clause.
Indivisibility
1st , 2015 (No. 14-13.658 and No. 14-17.772) FS-PBI:
The two judgments presented here concern similar facts. In each case, a bank appealed to the Court of Cassation against the Court of Appeal's decision declaring null and void a contract for the sale and installation of a wind turbine, as well as the loan agreement granted to finance this purchase.
The Court of Cassation dismissed both appeals. In its first judgment, the Court held that the Court of Appeal had found that the loan offer was linked to the main contract and had been completed by the seller, and that the lender had released the borrowed funds to the seller, thus establishing the existence of a contractual indivisibility between the sales and loan contracts within the meaning of Article 1218 of the Civil Code.
In the second ruling, the Court held that the lower court judges had established the indivisibility of the disputed contracts by stating, firstly, that the loan agreement was ancillary to the sales contract to which it was subordinate, and secondly, that the borrower had certified the performance of the principal contract in order to obtain the release of funds from the lender, who had made these funds available to the seller. Consequently, the termination of the principal contract entailed the nullification of the ancillary contract.
Conditions for participation in decisions within a real estate civil company
3rd , 2015 (No. 13-27.248) FS-PB:
The Court of Cassation reiterates that, according to Article 1844 of the Civil Code, only shareholders have the right to participate in the collective decisions of the company.
Thus, the Court upholds the appeal court's ruling that declared null and void a general meeting attended by the heirs of a deceased shareholder, during which they participated in the appointment of the manager, even though they could not claim either approval or shareholder status.
Abuse of majority
3rd , 2015 (No. 13-14.348) FS-PB:
A minority shareholder of a French real estate company (SCI) sued the majority shareholder to have several decisions made by the general meeting declared null and void. This SCI, initially formed to acquire and operate a building, had sold two-thirds of its shares to another company. Following this new share distribution, a capital increase was voted on and fully subscribed by the majority shareholder, the company's purpose was amended, and all profits from two fiscal years were allocated to reserves.
The Court of Appeal concluded that the statutory rules requiring a supermajority vote for amending the articles of association had been violated and therefore declared the amendments null and void.
The Court of Cassation upheld the lower court's decision, ruling that the principle of unanimity, unless otherwise stipulated, for amending the articles of association, as established by Article 1836 of the French Civil Code, falls under the mandatory provisions of the section referred to in Article 1844-10 of the same code.
