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Case:
BGH V ZR 13/04 V. Civil Senate
Date:
25 November 2004
Translated by:
Tony Weir
Copyright:
Sir Basil Markesinis

§§ 107, 873, 1909 BGB
If the actual transfer of property to a minor, in and of itself, is purely advantageous in legal terms, his declaration of agreement to the transfer does not need the approval of his statutory representative or other body entrusted with his care, and this is true even if the underlying agreement contains some onerous obligations. In such a case the transactions giving rise to the obligation to transfer and the actual transfer agreement should be appraised quite separately.

§§ 107, 1030, 1191 BGB
The transfer of land to a minor is purely advantageous in legal terms even if the land is burdened by a real charge. The same is true where there is a usufruct, provided that the usufructuary is to bear any exceptional repairs or improvements and any unusual burdens on the land.

§ 107 BGB
The fact that the transferee of land is subject to the normal public land charges does not constitute a legal disadvantage in the sense of §107 BGB.

The first applicant is the mother of the second and third applicants, born in 1988 and 1990 respectively. She is registered in the Land Register as owner of a dwelling burdened with a real charge.

On 4 August 2003 the three applicants entered into a so-called ¿berlassungsvertrag in front of a notary whereby the first applicant reserved to herself a lifelong gratuitous usufruct in the property, on the terms that as usufructuary she would bear all unusual burdens and meet the cost of unusual improvements and renewals as well as any interest or capital repayments on the land charge. A formal transfer of the property was simultaneously agreed whereby the second and third applicants were each to receive a half undivided share in the property by way of anticipation on their inheritance. The first applicant, however, reserved the right to withdraw from her obligations if "without the prior agreement of the transferor either of the transferees disposes or burdens the whole or any part of the property or if either of them predeceases the transferor". In order to secure the transfer subject to this right of withdrawal the parties agreed that a caution in favour of the first applicant be entered in the land register.

The land registry refused the application for the registration of the document on the ground that the second and third applicants were minors and that in view of the obligations connected with the first applicant¿s possible exercise of her right of withdrawal the transfer contract was not in law purely beneficial to them. ... [It was held that it was wrong of the land registry to refuse to register the document].

Reasons: .....
III.
1. The transfer effected by the parties on 4 August 2003 pursuant to the prior contract is valid since the transfer to them was in law purely beneficial (107 BGB). The land registry was therefore not entitled under §20 of the Land Registry Ordinance to make the requested change of ownership dependent on the prior endorsement by their curator or the court of wards of the underlying contract.

a) The transfer itself cannot be said to entail legal disadvantages for the minor parties on the mere ground that their mother reserved the right to withdraw from the obligations arising from the prior agreement. It is true that this reservation of the right of withdrawal could adversely affect the minors since if it were exercised after the property had been transferred they would not only have to retransfer their part of the joint ownership (§346(1) BGB) but might also face claims for damage to the property or diminution of its value in the interim (§346(2) to (4) BGB). But although this is a disadvantage in law, it is the result of the obligations assumed by the parties under the prior agreement: the actual execution of the gift does not involve the minors in any liability under §346 (2) to (4) BGB even if the agreement to make it is terminable (schwebend unwirksam §§107, 108(1) BGB).

The court below held the actual transfer invalid because it viewed the transactions as a unit and made no distinction between the legal consequences of the obligation and the conveyance. This is the wrong approach. Certainly this court did say in the case of a transfer of a dwelling that the question whether a gift to a minor by his statutory representative was purely advantageous in a legal sense was to be resolved by looking at the obligation and the conveyance together (BGHZ 78, 28, 35), but the sole aim in that case was to confirm the protection of the minor envisaged by §107 BGB and to make it impossible, in a case where the basic transaction was profitable but legal disadvantages were involved in the conveyance, for the statutory representative, on the basis of the last phrase of §181 BGB, to represent the minor in the conveyance itself and endorse the minor¿s declaration of acceptance. Even so, the global view promoted by the court in that case was criticised by writers as breaching the Trennungsprinzip embedded in the law [that is, the principle that the contract to convey and the actual conveyance be treated as quite separate]. The result was agreed to be correct but it was said that should be reached by a purposeful interpretation of the last phrase of §181 BGB so as to reduce the scope of its application. We need not decide now whether this is the preferable solution, for the reasoning of the court in that case does not justify taking a global view when, as in our case, the underlying transaction, regarded in isolation, certainly entails legal disadvantages, thereby rendering it terminable under §§107, 108(1) BGB and there is no obligation which the statutory representative could validate by acting as both representative and principal under §181 (last phrase) BGB in a manner constituting an evasion of the protection designed by §107 BGB. We are therefore left with the principle, which §107 BGB does not displace, that conveyances are abstract and must be treated as independent of the underlying contract to effect them.

Finally §139 BGB does not have the effect that the invalidity of the obligational agreement invalidates the resulting conveyance. It is true that exceptionally the parties may agree that contract and conveyance be treated as a unit for the purposes of that provision, but in the light of §925(2) BGB no such inference every time property is formally conveyed pursuant to an underlying transaction.

b) Seen in isolation and by itself, the formal transfer of the property entails no legal disadvantages for the minor parties such as to call for the endorsement of the statutory representative or guardian.

aa) In principle a transaction involving the acquisition of property by a minor cannot be said to be free of legal disadvantages if it commits him to obligations which do not merely affect the property acquired but could render him liable to pay out of his own pocket. It is true that when the property was transferred to them, the sons in this case were subject to an obligation under the law of unjustified enrichment to give up their joint ownership (§812 (1)(1) BGB) in the event that the gift transaction was terminated owing to lack of endorsement by the legal representative, but such an obligation was limited in extent and could not exceed the current value of the property acquired without a legal cause (§818(3) BGB) so there was no risk of their personal resources being adversely affected in such a way as to constitute a legal disadvantage.bb) Not is there any legal disadvantage in the fact that the property belonging to the first applicant was burdened with a real charge and that at the time of the disposition a usufruct was to be created and a caution entered in the land register.

The only effect of a legal charge on the owner of the property charged is under §§1192(1), 1147 BGB: he has to accept that the creditor may execute on the property. Accordingly the liability of the second and third applicants on acquiring the charged property is limited to the property itself, a liability which certainly diminishes the advantage of the transfer but does not neutralise it. It is true that the owner may be exposed to a personal monetary liability in that he must meet the cost of procuring the title needed for the chargee¿s execution, but we need not decide in this case whether that constitutes a legal disadvantage, since the land register shows that the legal charge created by the mother was automatically enforceable against the current owner of the land, which in itself constitutes a title to execute so that no further costs could fall on the sons. The chargee might have a claim arising from delict (§823(1) BGB) or one under §823(2) in conjunction with §§1192(1), 1133 to 1135 BGB for depreciation of the charged land but these are not consequential on the acquisition of property by itself but rather on culpable conduct on the part of the owner. ...

The entry of the caution in the land register does not neutralise the benefit resulting from the acquisition, for while a caution secures an obligation to convey and the existence of such an obligation is a precondition of the caution (§883 BGB) the caution itself does not create any obligation and leads to no personal liabilities in the owner of the property. The same is true when the property is burdened by a usufruct, at any rate where, as here, the usufructuary, is to bear not only the normal costs (§§1049, 677 ff. BG) but also the cost of exceptional improvements and repairs as well as any exceptional burdens affecting the property, for then the owner is not bound to meet such expenditures and improvements (§§1049, 677 ff. BGB).cc) A minor¿s wealth is just as much affected by a disadvantage which the parties had no intention of creating but which attaches by law to what they did agree, as is the case of the public charges which attach to all land. Such charges, at least recurrent exactions such as land taxes, do not, however, constitute a legal disadvantage in the sense of §107 BGB.

Certainly the impositions of public law result in a personal liability on the owner and not just a charge on the property, but it is not invariably the case that when a minor comes under some personal liability in consequence of a legal transaction the transaction needs the approval of the statutory representative under §107, 108 BGB. This court indicated in its decision about the transfer of a dwelling that when one is considering whether a transaction is purely advantageous one must consider the purpose of §107 BGB and avoid construing it too rigidly. The principal purpose of §107 BGB is to protect the minor from the risk of dissipation of his estate., but since the economic effects of a transaction may in practice be very difficult to ascertain the code, in the interests of legal security, adopts the formal criterion of "legal disadvantage", which in the normal case does indeed indicate an economic risk. The codifiers having so decided, we cannot possibly substitute a test of economic advantage for their test of legal advantage, but we can properly hold that certain legal disadvantages, whose risk to the estate of the minor is typically trivial, should not fall under that provision. This is the case with of personal liabilities which attach to the minor by law and are limited in extent and economically so slight that it would be unjustifiable for the statutory representative or carer to refuse his approval. When the appropriate appraisal is clear in advance it would be pure formalism to make the validity of a transaction depend on such approval. No loss of legal certainty would ensue from a restrictive construction of §107 BGB in line with its purpose if a closed list were drawn up of clearly identified legal disadvantages, abstractly defined, which typically involve no risk to the minor¿s assets. One such legal disadvantage would be the liability of the minor to meet the recurrent impositions on landowners resulting from public law. Since these are limited in amount and can normally be met from the current produce of the land they typically involve no risk for the minor¿s assets. They are not such as would lead any statutory representative or curator with the minor¿s interests at heart to refuse his consent. This is sufficient justification for regarding them as not entailing any legal disadvantage.

We need not decide in this case whether this applies to exceptional burdens on land, such as the obligation to contribute to local roadworks, since there is no reason to suppose that any such obligation will fall on the minor parties here. The mere possibility that in future they might incur a liability to make such contributions does not amount to a legal disadvantage.

2. It follows that the transfer agreed between the parties is valid without the approval of a statutory representative, a curator or the court.

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