Bankruptcy Law

Can the assignee take advantage of guarantees given by third parties on behalf of the debtor?

The Court of Cassation answers this question in the negative. In its view, the personal nature of the guarantee implies that the guarantor, who has undertaken to guarantee certain sums unpaid by the debtor, has not contracted an obligation to cover the buyer, whose solvency he was unaware of. Accordingly, it considers that the guarantor is not obliged to guarantee new claims arising on the part of the transferee since the transfer, even if it remains liable for those arising on the part of the debtor prior to the transfer . The lessor is therefore not entitled to claim from the debtor's guarantor the loss of profit resulting from the reletting of the equipment to the assignee at a lower rent, since this only affects rents subsequent to the assignment, which it does not guarantee .

However, the Court of Cassation adopts a different solution when the sums guaranteed by the guarantor correspond to loan repayments. While the transferee of the business is obliged to pay the loan repayments due after the sale of the property financed, the debtor's guarantor remains obliged, under the same conditions as the debtor, to repay the loan in full, after deduction of the sums paid by the transferee, including the repayments due after the opening of the insolvency procedure . The courts consider that the guarantor of a loan granted before the opening of the procedure and the adoption of the disposal plan is not discharged if the bank has not agreed to discharge the debtor from payment of the loan instalments from the date of the disposal plan . Similarly, the debtor's guarantor is obliged to pay the outstanding instalments on the loan granted to the debtor by the bank, despite the transferee taking possession of the business as soon as the disposal plan is approved, where the transfer has lapsed due to the non-fulfilment of one of its conditions . In addition, the debtor's joint and several guarantor is not discharged from guaranteeing repayment of loan instalments due to the bank after the disposal plan has been implemented, where it has not been established that the bank has agreed to waive part of its claim or to release the principal debtor and its guarantors from the part of the claim remaining due to the debtor .The disposal of equipment financed by a loan and pledged as part of a sale plan does not release the borrower's joint and several guarantor from the obligation to guarantee repayment of subsequent instalments of the loan owed to the creditor .

Guarantors may nevertheless be discharged from their obligation to provide cover, on the basis of Article 2314 of the Civil Code, where the creditor has committed a fault such as to deprive them of the benefit of subrogation. This is the case where the bank, by failing to register the pledge of the business, has prevented a recovery that could certainly have been made without difficulty if it had done so  or has expressly waived it, depriving the guarantor of the benefit of subrogation . On the other hand, the creditor's fault which would prevent the guarantor from being subrogated to the benefit of the pledge securing the loan cannot result from the agreement concluded with the assignee of the debtor company on the amount owed by the latter in respect of future instalments of the loan secured by the security . Nor does the loss of a pledge as part of a sale plan constitute a fault on the part of the creditor such as to relieve the guarantor of his undertaking where the court has approved it without verifying the creditor's agreement . Similarly, the debtor's guarantor cannot claim to be discharged from its commitment to the bank by the fault of the latter in failing to complete an amending registration of its privilege right after the sale of the business pledged under the disposal plan of the borrowing company, since the sale automatically transfers the guarantee, which is not lost . Lastly, since the assignment of contracts and assets subject to security interests does not entail novation of the obligation, guarantors can only take action before payment against the debtor they have guaranteed and not against the assignee, who is the debtor's co-debtor .

Cass. com., 12 October 1993, LawLex202100003332JBJ (RJ); Cass. crim., 21 November 1995, LawLex202100001910JBJ (RJ), holding that when a leasing contract, the performance of which is guaranteed by a surety bond, is assigned, the surety remains guarantor for rents due prior to the assignment, arising from the assigned debtor, but not for subsequent rents due by the assignee, unless the latter gives an additional undertaking.

Cass. com., 13 February 2007, LawLex202300003819JBJ (RJ).

Cass. com., 13 May 2003, LawLex202300002569JBJ (RJ).

Cass. com., 7 July 2009, LawLex202100003080JBJ (RJ).

Cass. com., 27 February 2007, LawLex202300002570JBJ (RJ).

Cass. com., 8 January 2020, LawLex202200000297JBJ (RJ).

Cass. com., 9 February 2016, LawLex202200001183JBJ (RJ) ; Cass. crim., 9 February 2016, LawLex202100002053JBJ (RJ).

Cass. com., 20 April 2017, LawLex202300004452JBJ (RJ).

Cass. com., 29 September 2015, LawLex202100001172JBJ (RJ) ; 13 April 1999, LawLex202100001170JBJ (RJ).

Cass. com., 13 April 1999, LawLex202100001170JBJ (RJ).

Cass. com., 17 May 2011, LawLex202100003092JBJ (RJ).

Cass. com., 20 October 2021, LawLex202200000189JBJ (LJ).

Cass. com., 19 October 2010, LawLex202100003094JBJ (RJ).

619. Guarantors of loans granted to the debtor