Bankruptcy Law

The Commercial Code is silent on the fate of the undivided assets of a debtor subject to a court-supervised liquidation procedure. However, under the ordinary law provisions of Article 815-17 of the Civil Code, joint creditors can have the property sold by auction and retain the price resulting from this transfer, up to the amount of their claim. Consequently, the rights of mortgage creditors are  …

Undivided property

The Commercial Code is silent on the fate of the undivided assets of a debtor subject to a court-supervised liquidation procedure. However, under the ordinary law provisions of Article 815-17 of the Civil Code, joint creditors can have the property sold by auction and retain the price resulting from this transfer, up to the amount of their claim. Consequently, the rights of mortgage creditors are in no way paralyzed by the commencement of the insolvency procedure against one of the co-owners, provided that the security was granted by all the co-owners on property that was undivided prior to the commencement of the insolvency procedure. These creditors must be paid out of the sale price of the property, with only the balance being paid in equal shares by the non-debtor co-owner and the liquidator . Similarly, the authorization given by the bankruptcy judge to sell the property and to divide the sale price equally between the two co-owners does not deprive the creditor of the undivided co-ownership, which existed prior to the opening of the insolvency procedure, of its right to seize the property . The ordinance of the bankruptcy judge ordering the auction of an undivided property at the request of a mortgagee even prevents, when it has the force of res judicata, has replaced the order for seizure of the property and has been published in the mortgage office, the action of the liquidator seeking the division of the undivided property and the prior auction of the undivided property .

In the absence of an application by a creditor for partition of the undivided interests, the liquidator, who represents the interests of the personal creditors of an undivided co-owner in an insolvency procedure, is entitled to seek the auction and partition of an immovable placed in undivided ownership prior to the opening judgment , without having to seek the prior authorization of the bankruptcy judge . This is because the bankruptcy judge does not have the power to authorize the sale by mutual agreement of the debtor's property and property rights, since the property in question does not form part of the assets of the judicial liquidation of the undivided co-owner, who had only undivided rights in the property prior to the opening of the procedure  : the liquidator must first apply for the division of the undivided property. Under this procedure, the liquidator is not required to specify the steps taken to reach an amicable partition, as this obligation is only imposed when the undivided co-owner himself is at the origin of the request for partition . Nor is the liquidator required to prove the existence of a claim, provided that he is acting as the representative of the divested undivided co-owner and is exercising the latter's right to apply for partition . In the event of the debtor's death during the judicial liquidation, the liquidator, who represents the creditors and could have acted on the property before the joint ownership of the estate was created, is entitled to pursue the forced sale of the undivided house . On the other hand, the liquidator does not have standing to bring an action for partition of the debtor's joint estate where the property in question has been the subject of a declaration of unseizability duly published before the judgment opening the judicial liquidation .

Paragraph 3 of Article 815-7 reserves the option for co-owners to halt the course of the partition action by paying the debtor's obligation. In such a case, the liquidator may not pursue his application for liquidation and partition without first examining the co-undividend's applications to remain in joint ownership and for preferential allocation of the property, since the auction of undivided property is not subject to the rules applicable to the realization of the assets of the insolvency procedure . An offer by a co-owner who wishes to pay the outstanding liabilities must indicate the extent to which it can be paid, otherwise it will not be accepted . Such an offer cannot be rejected on the basis of the amount of a single claim, supposedly greater than that of their offer, if there is no updated statement with certainty enabling them to know the amount of the debt they would have to pay . In fact, partition, requested by the liquidator with a view to the sale by auction of an undivided property, should not be ordered if the co-owner is not in a position, due to the absence of a final decision admitting the claims to the liabilities of the judicial liquidation of the co-owner, to know the amount of the debt that he must pay in order to stop the course of the action .

In addition, the liquidator may realise a property belonging to the community under the conditions set out in Article L. 642-18 of the Commercial Code if it was included in the joint pledge of the creditors of the procedure before the divorce decree was registered, which had the effect of rendering it undivided . When, in the course of the proceedings, the dissolution of the community becomes effective against third parties, the spouse is heard or duly summoned before any decision ordering or authorizing the sale of the undivided property .

On the other hand, the liquidator does not have standing to bring an action for auction and partition of the principal residence of an undivided co-owner in judicial liquidation, when only some of the claims declared predate the Law of 6 August 2015 . Nor may he, when acting in place of the spouse in a court-supervised liquidation, apply for the partition and licitation in a single lot of the undivided property that constitutes the family home, since Article 215(3) of the Civil Code, which requires the consent of both spouses for such property, is applicable in such a situation . Where the bankruptcy judge has, by an ordinance that has become res judicata, ordered the transfer of the debtor's undivided rights in a property shared with his divorced wife, his decision puts an end to the indivision subsisting between them, with the result that the liquidator is no longer entitled to apply for the auction of the same property . Nor may the liquidator apply for the sale by auction of a joint asset that was part of the debtor's assets before his death, on the basis of Article 815 of the Civil Code, since the debtor was unable to become a co-owner and the liquidator cannot act as the creditors' representative under Article 815-17 of the Civil Code .

Lastly, the liquidator may not, without the debtor's agreement, realize assets or rights acquired under a succession opened after the opening or pronouncement of the judicial liquidation, or bring about the division of any joint ownership that may result .

Cass. com., 11 December 2001, LawLex202300005258JBJ (LJ).

Cass. com., 20 September 2005, LawLex202300005655JBJ (LJ) and LawLex202300005321JBJ (LJ).

Cass. com., 20 September 2017, LawLex202100001475JBJ (LJ).

Cass. 1re civ., 26 September 2007, LawLex202300005497JBJ (LJ).

Cass. com., 22 February 2017, LawLex202300005262JBJ (LJ).

Cass. 1re civ., 20 December 1993, LawLex202300005260JBJ (LJ) ; 27 May 2010, LawLex202300005261JBJ (LJ) ; 9 July 2003, LawLex202300005498JBJ (LJ).

Cass. com. 27 September 2016, LawLex202100001485JBJ (LJ). See already Cass. 1re civ., 21 May 1997, LawLex202100001489JBJ (LJ), holding that the liquidator is entitled to pursue the forced sale of the property of the divorced debtor which is part of a post-community joint ownership, where the court-supervised liquidation took place prior to the transcription of the divorce ruling.

Law 2015-990 of 6 August 2015 for growth, activity and equal economic opportunities; Cass. com. 13 April 2022, LawLex202200002439JBJ (LJ).

Cass. 1re civ., 3 April 2019, LawLex202300005326JBJ (LJ).

Cass. com., 12 July 2016, LawLex202100002676JBJ (LJ).

Cass. com., 19 February 2013, LawLex202300005263JBJ (LJ).

Cass. 1re civ., 30 June 2004, LawLex202300005319JBJ (LJ).

Cass. com., 3 October 2006, LawLex202100001641JBJ (LJ) ; Cass. 1re civ., 12 November 2008, LawLex202300005322JBJ (LJ).

CA Paris, 13 November 2007, LawLex202300005295JBJ (LJ).

Cass. 1re civ., 13 January 2016, LawLex202100001482JBJ (LJ).

Cass. com., 20 April 2017, LawLex202300005327JBJ (LJ).

Cass. com., 18 February 2003, LawLex202300005499JBJ (LJ).

Cass. com., 10 July 2019, LawLex202100001644JBJ (LJ).

Bankruptcy Law

918. Undivided property

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918. Undivided property

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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