Semaine Juridique 1986 II Jurisprudence

20630 CONFLICT OF LAWS. -- Succession. A) Fraud à la loi. Unitary and complex rule of conflicts. Inapplicable [indifferent] situation. Artificial change of elements of attachment. Immovable property converted to movable property. Evasion of rules concerning reserve portion [of inheritance]. Fraud (yes). B) Law of July 14, 1819, art. 2. French heir. Right of attachment. Given assets located in France. Assets susceptible to being the object of an "action in reduction".

Cassation civil, 1st Chamber, March 20, 1985; Caron (siblings) v. Odell (spouses) and others.

It is of little importance whether the rules of conflict of laws are unitary or complex in finding faude à la loi. It is sufficient that this rule of conflict of laws is voluntarily applied, in changing an element of attachment, with the sole aim of evading the application of an [otherwise] applicable rule. In this case, the Court of Appeal which found the manipulation of a rule of conflict of laws including two elements of attachment, constituting manipulation, by a series of harmonized operations, to change the element of attachment consisting at the beginning in the nature of immovable of a property located in France, becoming subsequently movable property, in order to avoid the application of French law on succession envisaging a reserve, thus found the existence of fraud, which limits the principle of voluntary autonomy.

Article 2 of the Law of July 14, 1819 allows the French heir to attach, out of inheritable assets located in France, a portion equal to the value of assets situated abroad from which he has been excluded, on whatever basis, by virtue of the local [foreign] laws and customs; this right of attachment can be exercised on given assets located in France which, according to French law, could have been the object of an "action in reduction" for violation of the [principle of the] reserve, if the whole of the succession had been subject to French law.

It follows that it is within the powers of the Court of Appeal hearing the case of a demand of attachment upon an immovable property located in France, representing the only asset of a corporation established under American law by the deceased and his associates, to see whether the latter had genuinely contributed assets equal to the value represented as being from them, or if, on the contrary, they benefited from a hidden gift.

Annotation: Juris-Classeur Droit international, Fasc. 535; Juris-Classeur Civil, Art. 3, Fasc. L — Juris-Classeur Droit international, Fasc. 557-A; Juris-Classeur Civil, App. Art. 718 to 892; Juris-Classeur Notverdana Répertoire V, Successions (Droit international privé).

THE COURT: —  Given that Jean-Claude Caron emigrated to the United States of America, where he fixed his domicile in Saint-Thomas in the Virgin Islands; that in the month of November 1971, he acquired, at Villeneuve-Loubet (Alpes-Maritimes), an apartment and its appurtenances in the building "The Commodore" of the Marina Baie des Anges; that, December 27, 1973, Jean-Claude Caron incorporated with the Odell spouses — Mrs. Odell being his former secretary -- a corporation under American law, the "Commodore Corporation" (designated by the abbreviation C.C.) of which he possessed 10,000 shares and the Odell spouses 5,000; that on March 22, 1974, the C.C. corporation acquired the apartment of the "Commodore", which constituted its sole asset, for the price of 570,000 French francs; that meanwhile, by an act of January 23, 1974, a trust — administered by First Pennsylvania Banking and Trust Company (F.P.B.T.C.) 00 to which was transferred the title to the 10,000 shares belonging to Jean-Claude Caron, was created by him with the stipulation that at his death those shares would be given to the Odell spouses; that, by will dated March 14, 1975, executed in conformity with the law of his American domicile, Jean-Claude Caron left one-half of his estate to Mrs. Odell and the other half to First Pennsylvania Bank (F.B.B.), with instruction that it administer the assets for the benefit of an institute of preventive medicine; that Jean-Claude Caron died on July 17, 1977 at Villeneuve-Loubet, where he was temporarily visiting, leving his two children: Leslie, of French nationality, and Aimery, of American nationality; that, on April 11, 1978, Mrs. Leslie Caron and Mr. Aimery Caron brought an action against the Odell spouses, the Commodore Corporation and the two trustees to: judge that Jean-Claude Caron was sole owner of the apartment of Villeneuve-Loubet, to declare ineffective against the plaintiffs the sale of the apartment to the C.C. corporation, find that the inheritance of this building is controlled by French law, that Mrs. Leslie and Mr. Aimery Caron have each the right to one reserved share of a third, and that, on the third share, Mrs. Leslie Caron, of French nationality, can claim, by virtue of article 2 of the law of July 14, 1819, the equivalent of rights from which she was deprived of assets located in the United States; that the judgment appealed from said that only the provisions of French law relating to the reserve of children of the decedent were fraudulent and that the sale by Jean-Claude Caron to the C.C. company is invalid against Leslie and Aimery Caron only to the extent of 2/3 undivided share of the immovable, said that the immovable asset shall be deemed remaining to the extent of an undivided 2/3 share in the patrimony [i.e., "estate"] of Jean-Claude Caron up until his death, and that it is the undivided property of Mrs. Leslie Caron for 1/3, Mr. Aimery Caron for 1/3, and the Odell spouses for the last third, rejected the other demands of the plaintiffs, notably that of Mrs. Leslie Caron relating to the exercise of her right of attachment, and that put forth by the brother and sister to claim payment of a right of occupancy; — on the first claim of incidental attachment, previously set forth:— Given that the Odell spouses and the Trustees complain that the Court of Appeal wrongly found that in realizing the transaction under litigation, Jean-Claude Caron had wanted to compromise the inheritance right of reservation of his children Leslie and Aimery, then, first, that there has not been addressed that in additional findings it was determined that, given lifetime gifts by Jean-Claude Caron to his children, these latter were not deprived of their reserve [entitlement]; then, secondly, that in failing to address this issue the appeal court violated article 922 of the Civil Code, according to which the quality of asset freely disposable by inheritance is determined by notionally adding all the assets given during life by the deceased; — But given that the conclusions invoked were filed on January 22, 1982, after the announcement of the decision of cloture of January 4, 1982, which has not been revoked; and that they are therefore inadmissible; — From which it follows that the claim can not be accepted in either of its two branches; — On the second claim of incidental appeal, taken in its eight branches: -- Given that the Odell spouses and the trustees object to the Court of Appeal having found the existence of a fraude à la loi on the inheritance law of France while first, in holding as material element of fraude à la loi the use not of a rule of conflict of laws but of "the whole system of conflicts solutions", the assets under litigation having been transferred from the domaine of rei sitae to the rule which submits the succession of movables to the law of the last domicile of the deceased, the judgment appealed from violates "the spirit and the aims of the mechanism of fraude à la loi in France in resolving conflict of laws [questions]; while, secondly, it should not have responded to the conclusions by which the Odell spouses and the C.C. corporation  argued that the artificial quality of this corporation could not have been invoked as element of fraude à la loi unless the plaintiffs had proven the artificiality according to the law of the Virgin Islands under which the corporation was constituted; then, thirdly, that in finding the artificiality of the C.C. corporation according to French law, the judgment appealed from would have violated article 3, paragraph 1 of the Law of July 24, 1966 and article 14-5 of the France-U.S. Convention of Establishment of November 25, 1959; while, fourthly, that it should not have responded to the additional conclusions of the F.P.B. and the F.P.B.T.C. under which they stated that they had been given, before the filing of the case, with title to the shares of the C.C. company and, besides, of the building constituting the property of that firm; while, fifthly, that in making application of the concept of fraude à la loi in relation to abusing the rights of third parties, the judgment appealed from violates the spirit and the aims of that concept; while, sixthly, in declaring invalid against the Caron siblings, as tainted with fraud on the French law of succession, the sale consented to by their father to the C.C. corporation, the judgment appealed from misconstrued the principle of voluntary autonomy and violated article 1134 of the Civil Code; while, seventhly, that it should not have responded to the additional conclusions of the F.P.B. and the F.P.B.T.C. by which they stated that the law on succession claimed to be defrauded was not applicable at the time of the sale since it depended on the domicile of the seller at the time of his death; while, finally, that in finding the existence of a fraude à la loi, although the law claimed to be defrauded was not definitively known at the time of the sale, the judgment appealed from violated the notion of French fraude à la loi as well as the rule of conflicts determining the law on succession; -- But given, firstly, that it is unimportant that the rule of conflict is unitary or complex in order for there to be fraude à la loi; that it suffices that this rule of conflicts be voluntarily used, in modifying an element of attachment, with the sole end of evading the application of a law [otherwise] competent; that in the case at bar, the appeals court, which found manipulation of a rule of conflicts including two elements of attachment, manipulation consisting, though a series of transactions, harmonized, in modifying the element of attachment consisting at origin in the immovable quality of the asset located in France, becoming thereafter movable, with the aim of avoiding the application of the French succession law providing for a reserved share, thus characterized the existence of a fraud, which excludes the principle of voluntary autonomy; -- Given, secondly, that in finding that "without in any way ordering the nullity of an American corporation or declaring it to be nonexistent, nothing prevents the French judge from finding, in fact, its artificial quality [i.e., quality as artifice or contrivance] and drawing the consequences of its artificial character for the needs and within the limits of the legal action", the Court of Appeal replied to the conclusions invoked; -- Given, thirdly, that in limiting itself to that simple finding of fact, without ordering the nullity or the nonexistence, in law, of the foreign corporation, the judgment appealed from did not violate article 2, paragraph 1 of the Law of July 24, 1966 or article 14-5 of the French-American Convention of Establishment  of November 25, 1959; -- Given, fourthly, that the additional conclusions invoked were filed on January 22, 1982, after the order of cloture of January 4, 1982, which has not been revoked; that these conclusions are inadmissible, neither the complaint of the fourth branch nor that of the seventh branch can be considered and the argument brought by the fifth branch on the misinterpretation of the rights of third parties, which was not validly invoked before the judges at first instance, is new, mixing facts and law, and, therefore, inadmissible; -- Given, finally, that the court of Appeal, which ruled at the sight of the elements of which it was seized in finding the existence of fraude à la loi on the French law of succession, did not have to pronounce upon a hypothesis that was not in fact realized and which could have consisted in the modification of a new element of attachment knowingly sought by the author of the fraud; -- That the second argument must therefore be set aside; -- On the third argument, taken in its two branches, of the incident appeal: -- Given that the Odell spouses and the trustees complain again that the Court of Appeal rejected the argument taken concerning the guarantee of quiet title [garantie du fait personnel] as against the two heirs, Lesle and Aimery Caron, while, according to the argument, firstly the obligation of guarantee, to which the heirs succeed pure and simple, "resists" any personal right which they have over the article sold and thus article 1628 of the Civil Code has been violated; while on the other hand, the seller and his heirs can not exercise an action to nullify the sale -- except for failure of consent -- that if this action is founded on a basis of public policy then any interested party can claim, while the protection of the reserve share can not be invoked by any interested party, but only by the reserve heirs, which excludes the possibility that they can avoid the guarantee exception; that the judgment appealed from has thus violated articles 913, 920 and 1628 of the Civil Code; -- But given that the appeal court, which found that the acquiring corporation had for its sole owners the author and the conspirators to the fraud, and which did not decree the nullity of the sale but its ineffectiveness as against the reserve heirs, correctly found that those latter could not "have placed against them" the obligations of their father tied to a contract of which the end was to constitute a fraud against their rights; -- From which it follows that the argument can not be accepted in any of its two branches; -- On the fourth argument of the incident appeal: -- Given that the Odell spouses, the C.C. corporation and the trustees finally complain that the Court of Appeal rejected the counterclaim of the C.C. corporation seeking reimbursement of the price they paid to Jean-Claude Caron at the time of the sale, while restitution of the price was, according to the argument, the ineluctable consequence of the invalidity or the annulment of the sale and that thus article 1630 of the Civil Code was violated; -- But given that it results from the cited article that restitution of the price is only the consequence of an obligation of guarantee; that when the latter has been set aside, the appeal court correctly rejected the demand for restitution of the price; that it follows that the argument can no more be accepted than the preceding ones; -- Rejects the incident appeal; -- On the second argument of the main appeal: -- Given that Mrs. Leslie Caron and Mr. Aimery Caron criticize the Court of Appeal for having refused to pronounce on their demand for indemnity of occupancy, on the grounds that it is a matter for the co-proprietors to solve the matter of the indivisibility and to discharge the accounts, which is not the object of the present litigation, and that it is sufficient to send the parties back to the competent court and to dismiss, in the matter, the Caron siblings' claim, while the subject of the litigation is fixed by the respective claims of the parties the judge must pronounce on everything that has been claimed; that in refusing, according to the argument to rule on the demand for indemnity of occupancy, of which it was properly seized by the conclusions, without raising any clause of incompetence [lack of jurisdiction] or inadmissibility, the appeal court violated articles 4 and 5 of the new Code of Civil Procedure; -- but given that it follows from the terms of the judgment appealed from, that if the Court of Appeal rejected the demand "this being the case", even if, as a result of a material mistake, it failed to include this specific element in its opinion; that the argument must thus be rejected; -- Rejects the second argument; -- But on the fifth branch of the first argument of the principal appeal : Given article 2 of the law of July 14, 1819; -- Given that this text permits the French heir to claim against assets of the inheritance located in France, a portion equal to the value of assets located abroad from which he was excluded, on whatever basis, by virtue of local laws and customs; that this right of claim can be exercised on the given assets, located in France and which, according to French law, could be the object of an action en réduction for having compromised the [damaged the right of] reserve if the whole of the succession had been controlled by French law; -- Given that the Court of Appeal which, to set aside the right of attachment claimed by Mrs. Leslie Caron on the last third of the immovable, did not investigate, as it was asked to, if the Odell spouses had genuinely contributed to the assets of the Commodore Corporation, representing the value of their share, or if, on the contrary, they had benefited from a disguised gift, did not supply a legal basis for its decision;

For these reasons, and without finding it necessary to rule on the four first branches of the argument: reverse and nullify, but only insofar as it has said that the sale by Jean-Claude Caron to the Commodore Corporation, following the act of March 22, 1974, is only voidable as against Leslie and Aimery Caron to a limit of 2/3 undivided share of the building, the judgment rendered March 9, 1982, between the parties, by the Court of Appeal of Aix en Provence, and, for correction, sends them back before the Court of Appeal of Paris.

MM. Joubrel, president, Camille Bernard, reporter, Sadon, first advocate general; S.C.P. Labbé and Delaporte, S.C.P. Desaché and Gatineau, advocates.