La foreclosureThe seizure of movable property, a compulsory execution procedure enabling a creditor to sell his debtor's movable property, is not immune to incidents. Among the most sensitive are disputes over the ownership of seized assets. These can include misidentification, situations where the debtor's assets and liabilities are intermingled, as in the case of the seizure of vehiclesThese incidents often require legal intervention.
Action by the seized debtor
Application to set aside the seizure
The debtor has a specific remedy when the seizure relates to assets that do not belong to him. Under article R. 221-50 of the Code of Civil Enforcement Procedures, the debtor can apply to have the attachment declared null and void. This action differs substantially from the action for diversion reserved for third parties.
"The debtor may request the nullity of a seizure relating to property of which he is not the owner. (Article R. 221-50 of the Code of Civil Enforcement Procedures)
Case law confirms this possibility. In a decision of 4 June 2002, the Commercial Chamber of the Court of Cassation recognised the right of the distrainee debtor to bring an action for nullity to have the assets seized against him declared invalid due to the absence of a title deed (Cass. com., 4 June 2002, no. 98-19.342).
Conditions of eligibility
This action for nullity is only admissible until the seized assets are sold. The debtor must prove that he is not the owner of the assets subject to seizure. If he fails to bring this action when he knows that he is no longer the owner of the seized assets, he may be prosecuted for misappropriation of seized assets.
The Criminal Division of the Court of Cassation has ruled that the failure to present seized objects, which the debtor justifies by their prior sale, without bringing an action for nullity of the current seizure, constitutes misappropriation of seized objects (Cass. crim., 1 Sept. 2004, no. 03-86.497).
This action is not a mere formality. The debtor must provide solid evidence. In a ruling handed down on 23 November 2007, the Aix-en-Provence Court of Appeal ruled that the production of invoices containing a retention of title clause, but dated several months after the seizure and sale report, was insufficient (CA Aix-en-Provence, 23 Nov. 2007, no. 06/15732).
Particularities in tax matters
Tax litigation has some very specific features. Article L. 281 of the French Tax Procedures Code (LPF) limits the debtor's disputes to the formal regularity of the act or the substance of the proceedings (due date, amount of debt).
However, case law has relaxed this rigour. The Court of Cassation considers that the debtor's nullity action constitutes an objection to proceedings falling within the scope of Article L. 281, 1° of the LPF, relating to the formal regularity of the deed (Cass. com., 4 June 2002, no. 98-19.342).
However, this action is still subject to a specific procedure. The taxpayer must first submit a claim to the tax authorities before referring the matter to the enforcement judge, as the Court of Cassation pointed out in an opinion dated 14 May 2001 (Cass., opinion, 14 May 2001, no. 01-00.002).
Action by the third party claimant
The distraction action
Where a third party believes that it is the owner of assets included in the seizure, it has a specific right of action: the distraction action provided for in article R. 221-51 of the Code of Civil Enforcement Procedures.
"When a third party claims to be the owner of a seized asset, he may ask the bailiff to mention this claim on the report.
The purpose of this action is to remove the assets belonging to the third party from the seizure. It does not invalidate the seizure, but merely removes the disputed assets.
An action for segregation is successful even in the event of collective proceedings against the seized debtor. The Commercial Chamber of the Court of Cassation has ruled that the absence of a claim in the context of collective proceedings does not prevent a third party from bringing an action for diversion (Cass. com., 26 Nov. 2002, no. 01-03.980). These situations may also become more complex as a result of theaddition of creditors or opposition mechanisms.
Deadlines and conditions of admissibility
This action is strictly limited in time. It must be brought before the seized property is sold. Once this period has elapsed, only a claim against the purchaser remains possible, with limited chances of success.
The third party must specify the elements on which his right of ownership is based, on pain of inadmissibility. This requirement is designed to prevent fraudulent collusion between the debtor and complaisant third parties.
A seller benefiting from a retention-of-title clause is not entitled to bring an action for distraction against the lessor of a building, whose lien takes precedence over his right of ownership, unless it is established that the lessor knew the origin of the furniture (Cass. 3e civ., 24 June 2009, no. 08-14.357).
Proof of ownership
The burden of proof lies with the third party making the claim. He must overcome the presumption in article 2276 of the Civil Code that "in the event of furniturepossession is equivalent to title".
Judges have full discretion in assessing the evidence produced. Purchase invoices accompanied by bank statements showing the necessary resources may suffice (CA Aix-en-Provence, 16 Nov. 2007, no. 06/14630).
Conversely, a simple letter from the third party setting out his claims is insufficient. The Poitiers Court of Appeal ruled that a letter from an ex-wife indicating her desire to recover the seized assets was not sufficient to establish the origin of the furniture, as the third party could not provide proof for himself (Poitiers Court of Appeal, 21 May 2003, no. 01/02404).
Between spouses separated by property, the rules of evidence in article 1538 of the Civil Code exclude the application of article 2276. The Court of Cassation censured a court of appeal that had applied the presumption that all furniture seized from the home of a spouse separated from property was presumed to belong to him or her (Cass. 1re civ., 27 Nov. 2001, no. 99-10.633).
Claims submitted after the sale
Claim action
Once the property has been sold, the action for diversion becomes inadmissible (article R. 221-52, paragraph 1 of the Code of Civil Enforcement Procedures). The third party can only bring an action for revendication against the purchaser.
However, this action comes up against the protection afforded to purchasers acting in good faith by article 2276 of the Civil Code. The action will only succeed if the purchaser was in bad faith or if the property was lost or stolen, in which case the owner will have to reimburse the purchaser for the price he paid (article 2277 of the Civil Code).
Price distraction
The third party has an intermediary solution until the funds are distributed: he can apply for the sale price to be segregated. Article R. 221-52, paragraph 2 of the Code of Civil Enforcement Procedures allows third parties who are recognised as owners to request that the sale price, less costs, be paid to them until the funds are distributed.
The Court of Cassation applied this solution in a judgment of 8 April 2004 (Cass. 2e civ., 8 Apr. 2004, no. 02-16.842). This possibility constitutes a deferral of the right of ownership over the proceeds of the sale, which partially preserves the interests of the third party after a late claim.
This mechanism illustrates the search for a balance between the interests of the pursuing creditor, the seized debtor and third-party owners. Disputes relating to the ownership of seized assets remain an area where the assistance of a lawyer is invaluableThis applies to the creditor, the debtor and the third party making the claim.
Sources
- Code of civil enforcement procedures, articles R. 221-50 to R. 221-53
- Civil Code, articles 2276 and 2277, article 1538
- French Tax Procedures Code, article L. 281
- Cass. com. 4 June 2002, no. 98-19.342
- Cass. crim., 1st Sept. 2004, no. 03-86.497
- Cass. com., 26 Nov. 2002, no. 01-03.980
- Cass. 3rd civ. 24 June 2009, no. 08-14.357
- Cass. 1st civ., 27 Nov. 2001, no. 99-10.633
- Cass. 2nd civ., 8 Apr. 2004, no. 02-16.842
- CA Aix-en-Provence, 23 Nov. 2007, no. 06/15732
- CA Aix-en-Provence, 16 Nov. 2007, no. 06/14630
- CA Poitiers, 21 May 2003, no. 01/02404
- Cass. opinion, 14 May 2001, no. 01-00.002
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