Real or personal guarantees, words matter

In view of the health situation, the economic setbacks of which are beginning to be felt strongly, a new decision of the Court of Cassation makes it possible to take stock of the securities called upon to intervene financially in the event of default by the main debtor.

By a judgment of December 10, 2020, the Court of Cassation overturned a decision pronounced in the degree of appeal which intended to protect the legal person having given its building as security for the commitments of another company of which it was the minority shareholder.

The facts underlying this decision can be summarized as follows.

The IKARE public limited company was founded in 2001 by Messrs A., C. and M.

In December 2008, Mr. C., together with his wife, Mrs. B. and the IKARE company, set up a second company, called KOLIA, active in the Horeca sector.

In February 2009, KOLIA obtained a loan of 350,000 EUR. As a guarantee for this loan, the bank obtains the joint surety from Mrs B. and Mr C. for 500,000 EUR as well as a mortgage of 350,000 EUR on the building of the IKARE company.

In July 2009, Mrs. B. was released from her surety by the bank insofar as she is no longer manager of KOLIA.

In September 2015, KOLIA’s credit was denounced and the bank decides to implement the mortgage guarantee granted by IKARE. On this occasion, the latter maintains that it should be discharged of any obligation towards the banker under article 2037 of the Civil Code. This provision provides a cause for the termination of the bond when “the subrogation to the rights, mortgages and privileges of the creditor can no longer, by the act of this creditor, operate in favor of the surety“.

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“The Court of Cassation recalls that a surety bond is a commitment by which a person submits to a creditor to meet an obligation if the debtor does not meet it himself.”

Virginie Schoonheyt

Avocat Cairn Legal

In this case, IKARE criticized the banker for having wrongfully released Mrs B. from her personal surety and, in doing so, to definitively prevent her from turning against her to partially recover the sums paid by her.

The Mons Court of Appeal ruled in favor of IKARE, considering that article 2037 of the Civil Code was applicable to “real bond“. From then on, she had discharged IKARE of any commitment towards the bank which had wrongly discharged Mrs B.

The bank lodged an appeal against this decision.

Real surety or personal surety

By its judgment of December 10, 2020, the Court of Cassation recalls that a surety bond is a “undertaking by which a person submits to a creditor to fulfill an obligation if the debtor does not meet it himselfThe Court reiterates, however, that it is necessary to distinguish:

The personal guarantee who is bound by this obligation on the “all of its assets “:

The real deposit (mortgage) which is only required “up to the value of the mortgaged property”.

The Court therefore sanctions the analogy made by the Court of Appeal between the personal surety and the real surety. On this occasion, she recalls that the aim of article 2037 of the Civil Code is to offer special protection to personal deposit which intervenes in counterpoint to the legal and economic comfort brought to the creditor by the addition of a second heritage to that of the principal debtor for the recovery of the sums due. The Court considers that this protection cannot be reconciled with the mechanism of the real surety which does not engage on the totality of its assets.

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“The judgment highlights the difference in treatment between personal and real guarantees called upon to intervene in the event of default by the debtor.”

Virginie Schoonheyt

Avocat Cairn Legal

If this judgment highlights the difference in treatment between personal and real guarantees called upon to intervene in the event of default by the debtor, it should not be deduced from this that the fault of the banker will go unpunished in the event of real security.

Indeed, this decision only recalls that, unlike the personal surety, when the banker wrongfully releases another guarantee, the actual deposit is not automatically discharged, for lack of legal provision in this sense. It will therefore have to demonstrate, in addition to the existence of the bank’s fault, the reality of its damage (here the impossibility of suing Mrs. B. whose solvency must be demonstrated) as well as the causal link between this damage and the fault. from the banker.

This decision has the merit of highlighting the differences between guarantees frequently granted by shareholders and company directors.

Real or personal guarantees, all words are important.

Virginie Schoonheyt
Avocat Cairn Legal

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