The seizure of property procedure was reformed by order no. 2006-461 of 21 April 2006 and its implementing decree no. 2006-936 of 27 July 2006, amended by decrees no. 2006-805 of 23 December 2006 and no. 2009-160 of 12 February 2009.
Penalties for defaulting bidders under the old text
Under the old text, the first paragraph of article 707 of the Code of Civil Procedure provided that :
"The last bidder must, within three days of the auction, declare himself to be the successful bidder and provide his acceptance or represent his power of attorney, which remains attached to the original of the declaration; failing to do so, the lawyer is deemed to be the successful bidder in his own name.
Lawyers who failed to declare the identity of their principals were thus declared bidders in their own name, and law firms with experience of property seizure procedures are full of anecdotes about colleagues who were declared bidders in their own name because they failed to declare the identity of their principals: mistake in the property, client withdrawing and absence of written power of attorney, etc.
Under the new text, the sanction has not been renewed and there is no provision for cases where the lawyer is unable to declare the identity of his principal. The question naturally arose when the matter was referred to the Marseilles judicial court.
Penalties for defaulting bidders under the new text
The facts are simple: Mr X requested the sale of a flat by public auction and, in the hubbub of the hearing, Mr Y purchased the property under a mandate given to him by a client.
Local practice is for the lawyer to give the court clerk a statement of the successful bidder's identity between sales or at the end of the hearing, unlike in other jurisdictions where the successful bidder's identity is publicly announced.
The business is therefore conducted with a certain amount of discretion.
Mr Y realises that he has the wrong property and does not declare the identity of his principal.
The enforcement judge then applies a combination of the provisions of articles R. 322-46 and 48 of the Code of Civil Enforcement Procedures. Article R. 322-46 states that :
"Before the end of the hearing, the last-bidding lawyer declares the identity of his principal to the court clerk and gives him the certificate referred to in Article R. 322-41-1.
Article R. 322-48 states that :
"The provisions of this section shall be prescribed on pain of nullity of the auction raised ex officio. Any new bid duly made covers the nullity of the previous bids. The invalidity of the last bid automatically entails the invalidity of the auction.
It notes that the provisions of article R. 322-46 require the lawyer to declare the identity of his principal, and that if the identity of the principal is not declared, the auction is automatically null and void and must be raised ex officio.
The provisions of the Code of Civil Enforcement Procedures are then imprecise as to how to proceed.
Article R. 322-48 is inserted under paragraph 3 entitled "Nullity of auctions. The following article R. 322-49 states that :
"Challenges to the validity of the bids are made orally at the hearing, through a lawyer. The judge shall rule immediately and, if necessary, immediately resume the bidding under the conditions set out in article R. 322-43.
In this case, the pursuing creditor's lawyer (Maître X) had left the room, and can it be said that the lawyer who had made a mistake (Maître Y) had verbally challenged the validity of the auction?
This is the most logical analysis.
In such a case, the magistrate would have had to immediately order the property to be put back up for sale... but in front of an empty room and with the result that there were no bids, since the case took place at the end of the hearing and after the public had left.
If no bids are received, the pursuing creditor is automatically declared the successful bidder for the amount of the reserve price, in application of the provisions of the first paragraph of article L. 322-6 of the Code of Civil Enforcement Procedures:
"The amount of the reserve price is set by the pursuing creditor. In the absence of a bid, the creditor is automatically declared the successful bidder at this amount.
Immediately putting the property back up for sale would therefore have been very disadvantageous for the pursuing creditor.
The judge therefore decided to refer the case ex officio to a new auction hearing and, above all, ordered Maître Y to pay the procedural costs that the pursuing creditor would have to incur to organise this new auction hearing.
In fairness, the solution makes a lot of sense: it makes Mr Y bear the financial consequences of his error, while neutralising the negative consequences for the pursuing creditor. In law, however, it is highly debatable:
- It seemed impossible that Maître Y would be ordered to pay an unspecified sum, and above all one that could not be determined at the date of the judgment.
- There was no legal basis for adjourning the case to a new adjudication hearing. Adjudication hearings can only be postponed in a limited number of cases and at the request of the parties, not on the initiative of the judge.
Dissatisfied with the decision, the pursuing creditor decided to appeal.
The opinion of the Aix-en-Provence Court of Appeal
The pursuing creditor asked the Court of Appeal to declare Maître Y the personal purchaser of the property by application of the provisions of the former article 707 of the Code of Civil Procedure.
The Court of Appeal naturally rejected this request, noting that there was no legal basis for it.
It then explains that Maître Y had referred to the enforcement judge a challenge to the regularity of the last auction, but refuses to apply the provisions of article R. 322-49 of the Code of Civil Enforcement Procedures, and more specifically the body of the sentence which states that "The judge shall rule immediately and, if necessary, immediately resume the bidding under the conditions set out in article R. 322-43.
On the contrary, it approved the enforcement judge's decision to adjourn the adjudication hearing, stating very elliptically "that it was therefore up to the execution judge to postpone the sale, which he did not have to justify specifically as he was obliged to do so".. But why did he have to?
On the contrary, the text seems to indicate that he was required to put the property back up for sale immediately. Without being any clearer, the Court approved the enforcement judge's decision to order Maître Y to bear the costs of the second sale, whereas the pursuing creditor requested that he be ordered to bear the costs of the first sale.
This example illustrates just how incomplete the text of the Code of Civil Enforcement Procedures is: over and above the liberties that the enforcement judge and the court of appeal seem to be taking with the letter of the text, it is clear above all from the misadventures of Maîtres X and Y that the legislator has removed a text that met a very concrete practical need, without seeking to replace it.
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