Usually, in a sales contract, the transfer of ownership takes place solo consensu, as soon as the parties have consented to the sale. However, pursuant to Article 2367 of the French Civil Code a derogation is possible if parties agree on a clause of retention of ownership, such a clause delays the transfer of ownership until full payment of the price. Thus, ownership will only be transferred once the agreed price has been paid in full.
In this case, a driver is convicted of drunk driving and his vehicle is confiscated following a court decision.
However, the vehicle is subject to a retention of ownership: the property was purchased from a car dealer with an ownership clause in favour of a bank. As long as the price is not fully paid by the driver, the car belongs to the bank.
The Court of Appeal upheld the decision of the Criminal Court in that it ordered the confiscation of the vehicle as an additional penalty.
The driver issued a recourse to the French Court of Cassation, thus challenging the confiscation of the vehicle: the driver claimed that, under the retention of ownership, he is not the owner of the vehicle.
The Court of Cassation dismissed the recourse and held that the retention of ownership did not affect the firm and definitive character of the sale but only postponed the transfer of ownership. In other words, the retention of ownership does not prohibit confiscation.
The Court of Cassation clarifies the confiscation of assets under a retention of ownership. The beneficiary of the retention of ownership (in this case the bank) needs to justify that the price hasn’t been paid in full, and may request the State to return the asset or its liquid value, in order to recover the right to dispose of it. The value of the asset taken over or its liquidated value is then set off against the balance of the secured claim as payment. Where the value of the asset taken over exceeds the amount of the secured claim still due, the creditor owes the State an amount equal to the difference.
In other words, a retention of ownership does not prevent confiscation. However, the holder of the retention clause (the secured creditor) must prove that the sale price is not (in full) paid in order to obtain restitution of the property, and if the value of the property exceeds the amount still owed, the secured creditor needs to pay the excess to the administration.
A. PEDROT and G. APOSTOL
Reference:
Fr. Court of Cassation, Criminal Division, 28 Feb. 2024, Case No. 22-86.392, Released for official publication.
Source: Légifrance