1. Specificity of the action for liability due to insufficient assets and starting point of the limitation period
2. Pending proceedings deprive the supervising judge of the power to rule on the admissibility of a claim
3. Continued performance of the contract requires compliance with the stipulated arbitration clause
4. Failure of subrogation of the guarantor: burden of proof
5. Abusive termination of credit facilities does not release the guarantor from their obligation to pay
6. Third-party objection of the guarantor to the arbitration award
7. Mortgage guarantees: methods of distributing the debtor's available balance
8. Sanction for the imbalance resulting from a jurisdiction clause
9. Loss of partner status is conditional upon reimbursement of the value of the shares
10. Real estate civil partnership: Loss of partner status is conditional upon reimbursement of the value of the shares
1. Liability for insufficient assets
Com. April 8, 2015 (No. 13-28.512) F-PB:
In this case, the action for liability due to insufficient assets against the director of a company in judicial liquidation was declared admissible. The director contested the admissibility of this action. According to him, the action for liability due to insufficient assets was combined, on the one hand, with actions for extra-contractual liability. Furthermore, the rules governing the action for liability due to insufficient assets were combined with those governing actions for liability against directors of public limited companies; consequently, the action was subject to a three-year statute of limitations and could only be based on management errors not barred by the statute of limitations under Article L.225-254 of the French Commercial Code.
The Court of Cassation dismissed the appeal and reiterated that an action for liability due to insufficient assets is independent of the special liability action available under Article L. 225-254 of the French Commercial Code against the directors of a public limited company and of the general action for extra-contractual civil liability. The Court further clarified that, pursuant to Article L. 651-2, paragraph 3, of the French Commercial Code, the action is subject to a three-year statute of limitations from the date of the judgment ordering the judicial liquidation, regardless of when the alleged mismanagement by the director was committed.
2. Admission of Claim and Pending Proceedings
Com. April 8, 2015 (No. 14-10.172) F-PBI:
In this case, a debtor in liquidation contested the declaration of one of its creditors due to the existence of an appeal concerning the debtor's liability to pay a certain sum to the said creditor. This last case was struck from the docket, and the Court of Appeal ruled that the claim was admissible.
With reference to Articles 383 of the Code of Civil Procedure, L.624-2 and L.641-14 of the Commercial Code in its version prior to the Ordinance of March 12, 2014, the Court of Cassation quashed the judgment insofar as an appeal pending on the date of the judgment opening the insolvency proceedings, suspended only by a striking-off order, deprives the supervising judge of the power to rule on the admissibility or rejection of the claim, regardless of whether the appealed judgment is enforceable.
3. The continued performance of the contract requires compliance with the arbitration clause stipulated in
the 1st Civil Chamber. 1 , 2015 (No. 14-14.552) F-PB:
A liquidator who had continued to perform the contracts brought an action before the Commercial Court to obtain payment of sums owed by a contracting party despite specific stipulations containing an arbitration clause. The liquidator's claim was declared inadmissible for failure to comply with the arbitration procedure. The liquidator then appealed to the Court of Cassation. In support of his claim, the liquidator argued, in particular, that the arbitration clause is only enforceable against the insolvency proceedings bodies when they are acting on behalf of the debtor and not when they are acting on behalf of the creditors.
The Court of Cassation upheld the Court of Appeal's decision, which held that " the liquidator had exercised the right to continue performing the contracts with all the associated rights and obligations, which implied compliance with the arbitration clause stipulated therein ."
4. Failure to Subrogate the Guarantor: Burden of Proof.
Com. 8 April 2015 (No. 13-22.969) F-PB:
In this case, a bank that filed its claim after the deadline was not included in the distribution of dividends provided for in its debtor's continuation plan. The bank therefore sued the debtor's guarantor to enforce its guarantee. The Court of Appeal ordered the guarantor to pay a certain sum because it had neither demonstrated that it could have derived an actual benefit from being included in the distributions and dividends, nor demonstrated the existence of a loss of opportunity.
The Court of Cassation quashed the judgment on the grounds that the Court of Appeal reversed the burden of proof. It is incumbent upon the creditor, and not the guarantor, to prove that the loss of the preferential right caused no harm.
5. Abusive Termination of Credit Lines Does Not Release the Guarantor from its Obligation to Pay.
Com. March 24, 2015 (No. 13-16.076) FS-PB:
In this case, the manager of a single-member limited liability company (EURL) had acted as joint and several guarantor for the repayment of loans and the outstanding balance of a current account held with a bank. The bank subsequently demanded the return of the payment instruments from the company shortly before the company went into liquidation and then sued the guarantor. The guarantor, for her part, sought to hold the bank liable for wrongful termination of the credit facilities.
The Court of Appeal rejected the bank's claims for reimbursement and ordered it to pay damages to the guarantor.
The Court of Cassation held that, in so ruling, when the guarantor is obligated, by virtue of the accessory nature of their commitment, to pay the bank the amount of sums remaining due from the principal debtor, and the claim for damages held by the former against the latter can only give rise to set-off, the Court of Appeal violated Article 1147 of the Civil Code.
6. Third-party objection by the guarantor to an arbitral award.
Com. May 5, 2015 (No. 14-16.644) FS-PBRI:
In this case, a debtor assigned to their creditor all the shares they held in the capital of a company. On this occasion, the parties entered into a liability guarantee agreement and a litigation management agreement, each agreement containing an arbitration clause under which the arbitrators were granted the power to act as amiable compositeurs in the final instance. By a deed of the same day, which did not contain an arbitration clause, a third-party company became jointly and severally liable for the debtor's obligations to the creditor.
The company whose shares had been transferred was ordered to pay a certain sum, and the creditor called upon the liability guarantee. An arbitral award ordered the debtor to pay the creditor said sum. Summoned by the creditor, the guarantor filed a third-party objection to the arbitral award, which was declared inadmissible by the Court of Appeal.
Citing Article 6(1) of the European Convention on Human Rights, the Court of Cassation quashed the Court of Appeal's judgment, holding that "the effective right to a court implies that a joint and several guarantor, who was not a party to the arbitration proceedings, is entitled to file a third-party objection to the arbitral award determining the amount of the principal debtor's debt to the creditor."
7. Allocation of the Debtor's Available Balance
(Com. 5 May 2015 (No. 14-17.941) F-PB):
In this case, a company took out two loans of the same amount from two banks, secured by two mortgages registered on the same day. The company having been placed in judicial liquidation, the banks filed their claims. After the liquidator sold the property, the allocation of the remaining proceeds between the banks arose.
The Court of Appeal held that the available balance should be allocated between the two banks in proportion to their respective mortgage claims as admitted to the liabilities of the judicial liquidation.
The Court of Cassation upheld the ruling, specifying that in cases where two mortgage registrations, taken out on the same day on the same property, compete with each other and where the debtor's assets are insufficient to satisfy their holders' rights, the debtor's funds are allocated proportionally.
8. Sanction for Imbalance Resulting from a Jurisdiction Clause
1st Chamber , March 25, 2015 (No. 13-27.264) F-PB:
To finance work in France, a company entered into two framework credit agreements with a bank established in Switzerland. These agreements contained a jurisdiction clause stating that " the borrower acknowledges that the exclusive place of jurisdiction for any proceedings is Zurich or the location of the bank branch where the relationship is established" and that " the bank is nevertheless entitled to bring an action against the borrower before any other competent court ."
Challenging the financial arrangement within which this transaction took place, carried out through the representative of a company domiciled in the United Kingdom and involving a bank established in France, a company, as successor to the borrower's rights, sued both the bank and the Swiss bank in a French court, seeking compensation for its losses.
The Court of Appeal upheld the bank's objection to jurisdiction on the grounds that the imbalance resulting from the alternative dispute resolution (ADR), inherent in an ADR agreed upon between two contracting parties from different countries, was not sufficient to render it irregular under the Lugano Convention.
The Court of Cassation overturned the Court of Appeal's decision. According to the Court, by failing to examine whether the alleged imbalance—in that the disputed clause reserved to the bank the right to take action against the borrower before " any other competent court " and did not specify the objective elements on which this alternative jurisdiction was based—was contrary to the objective of predictability and legal certainty pursued by the Lugano Convention, the Court of Appeal deprived its decision of a legal basis.
9. The loss of shareholder status is contingent upon the reimbursement of the value of the shares
. May 5, 2015 (No. 14-10.913) F-PB:
Following the judicial liquidation of a partner and co-manager of a French real estate company (SCI), the liquidator summoned the managers to appoint a provisional administrator for the SCI. One of the managers and the SCI challenged the Court of Appeal's decision to grant this request, arguing that, according to the SCI's articles of association, in the event of the judicial liquidation of one of the partners, that partner ceased to be a member of the company.
The Court of Cassation dismissed the appeal against the Court of Appeal's decision, because it follows from Article 1860 of the Civil Code that the loss of partner status cannot precede the reimbursement of the value of one's shares.
10. Partners' liability for company debts
3rd Civil Chamber. May 6, 2015 (No. 14-15.222) FS-PBI:
Due to a lack of sound insulation, a real estate company (SCI) and its insurer were sued by the condominium association to obtain compensation for this damage.
The insurer was subsequently ordered to pay the liquidator of the SCI an amount corresponding to the cost of repairs actually incurred by the SCI. This amount did not correspond to the amount of the claim, since the Court of Appeal had deducted from the total amount payments made by partners on the grounds that they had paid their personal debts to third parties.
The Court of Cassation, on the contrary, affirms that " a partner in a civil law company who satisfies a company creditor pursuant to Article 1857 of the Civil Code pays the company's debt and not a personal debt ."
