THE COURT

Concerning the only ground, taken in its first limb;

In view of the last paragraph of Article 93 of the Commercial Code;

Given that it is forbidden for a secured creditor, at the time his security is created, to cause the debtor to recognise that property in the charged assets has passed to him;

Given that (i) according to the findings of the judgement under attack, Augier, an industrialist, brought an action for a declaration that the contract dated 14 June 1958 pursuant to which he agreed to transfer to Manufacture Générale de Munitions (“MGM”), a corporation, as security for the reimbursement of a loan of 28,000,000 old francs made to him that day by the latter, title to 1850 nominative shares which he held in Production d’Equipment de Locomotion par Licence (“SPELL”), a corporation, was in fact a prohibited contract of forfeiture (“pacte commissoire”) and should therefore be nullified and (ii) the Court of Appeal declared null and void the penultimate paragraph of the contract which provided that, in case of failure to repay the whole of the loan within a period of six years, MGM would remain owner of the shares, but held that the remainder of the contract was valid on the grounds that its only function was to grant “a kind of life interest in the shares” to MGM during the period of the loan;

But given that the said contract, of which an uncontested copy has been produced, provides “In order to guarantee the repayment of the loan made to him by Manufacture Générale de Munitions and the payment of interest on this loan, M. Auger has hereby transferred to Manufacture Générale de Munitions the 1850 shares of ten francs each which he owns in SPELL…..M. Augier has transferred these 1850 nominative shares by share transfer form signed by himself. M. Augier declares that he agrees that Manufacture Générale de Munitions be the owner of these shares and he further undertakes to transfer to it all the files of SPELL in order that this share transfer be duly completed, in particular by entries in the share transfer register of that company”;

Given that the Court of Appeal, which considers that such a transfer of title, stipulated without any condition in the document creating the charge, did not fall under the prohibition set out by the text cited above, has breached such text by refusing to apply it;

FOR THESE REASONS…….

QUASHES AND ANNULS…..

Back to top

This page last updated Thursday, 15-Dec-2005 09:05:51 CST. Copyright 2007. All rights reserved.