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Case:
Com. 400 Case SCI 5 rue Ampère/SDR du Sud-Est Bull. Civ., n° 89, 61 JCP E n° 24 14.06.01 p. 997
Date:
02 March 1993
Translated by:
Mr. Trevor Brown and Miss Ann Yazikov
Copyright:
Professor B. S. Markesinis

FACTS AND POINTS DECIDED

A loan contract has traditionally been considered as a “contrat réel”, i.e. a contract which is complete as far as one of the parties at least is concerned by the delivery of the asset which is its object. Thus, the lender completes his contractual obligation by delivering the sum lent to the borrower. This case shows the tension between this doctrine and the rule of bankruptcy law that contracts being performed at the time of a bankruptcy order must be affirmed by the administrator in order validly to continue. It also brings out the potential difficulties of proving in an administration in respect of interest current at the time of the bankruptcy order. The facts are clearly set out in the first paragraph of the judgement.

One might wonder what would be the position in the case of the complex loan documents currently in use in the syndicated loan markets where the lender has many ongoing obligations which are basic to the deal, such as the periodic fixing of floating interest rates; or changing currency in multicurrency operations.

Held:

Since the funds had apparently been paid to the lender before the start of the administration, the loan contract was not a contract in course of performance under bankruptcy law.

At the public hearing of 13 January 1993, the COURT:

Whereas, according to the judgement brought before this Court (Lyons, 28 September 1990) the Société de développement régional du Sud-Est (SDR) granted two loans in 1982 to the Société civile immobilière (SCI) of 5, rue Ampère, Lyons, each to be repaid in 11 annuities; SCI having gone into administration, the SDR filed its proof;

As regards the first argument:

Whereas the SCI challenges the judgement for accepting as the SDR’s proof the amount of interest to fall due from the day of the judgement commencing the administration up to the due date fixed for several annuities, whilst, according to the Appeal, article 67 of the decree of 27 December 1985 provides that, in addition to the provisions of article 51 of the law of 25 January 1985, the declaration of the claim must include in particular the methods to be used for calculating interest, the running of which has not stopped, the latter being deemed to be a claim for the amount calculated later; in this case, the judges of the lower court held as valid a proof simply specifying the total interest due without indicating the method used to calculate this interest; the Court of Appeal has thus violated article 67 of the aforementioned decree.

But whereas (1) article 67 of the decree of 27 December 1985 only requires that the methods used for calculating interest, the running of which has not stopped, be specified in those cases when the total interest cannot be calculated on the day of the proof; (2) the argument is not founded;

As regards the second and third arguments taken jointly:

Whereas the judgement is further challenged for ruling the way it did, whilst, according to the Appeal: 1) on one hand, the Court of Appeal has not responded to the argument included in the SCI’s pleading, according to which the continuation of the the existing loan contracts after the judgement validating the recovery plan could not be based on the provisions of article 37 of the law of 25 January 1985, as such provisions are applicable only during the (statutory) observation period, so that these contracts were cancelled; the Court of Appeal’s decision thus lacks grounds and has violated article 455 of the new Code of Civil Procedure; 2) on the other hand, because the judgement validating the company’s recovery plan did not so state, the loan contracts being litigated cannot have been continued; by ruling the way it did, the Court of Appeal has violated articles 61,62 and 64 of the law of 25 January 1985;

But whereas, (1)since it was not claimed that the funds had not fully been handed over to the borrower before the start of the administration, the loan contracts being litigated were not contracts in the course of performance in the sense of article 37 of the law of 25 January 1985; (2) thus, the Court of Appeal, which was under no obligation to respond to the invalid argument based on the application of this text, escapes the criticism set out by the third argument; it follows that none of the arguments are founded;

ON THESE GROUNDS,
DISMISSES the Appeal.

Based on the report of Mr. Tricot, Councillor, the comments of SCP Defrenois et Levis, advocate for SCI of 5,rue Ampère, of Me. Thomas-Raquin, advocate for the company SDR, the arguments of Mrs. Piniot, Advocate-General. Mr. HATOUX, Conseiller doyen, acting as President.

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