A husband acquires two thirds of a building that is his separate property, through a loan repaid by the marital community. He sells part of it before the community is dissolved. When both spouses have died, an heir asks that the compensation (récompense, the sum owed between a spouse and the community for value moved from one to the other) due to the community be computed on the subsisting profit, that is, on the value of the property, and not on the loan capital alone. The Riom court of appeal refuses: the property is no longer entirely in the estate, the funding was only partial, and in any case a market value “cannot be provided by an expert”. The Cour de cassation (the French supreme court for civil matters), on 14 October 2020, in a reported decision, quashed twice: the subsisting profit “is valued by applying that proportion, respectively, to the sale price of the portion of the property sold and to the value at the date of liquidation of the other portion”; and refusing to rule because an expert report could not supply the market value is a denial of justice. For the valuer, a precise assignment: a proportion, a price, a value.
The facts
Two spouses married in 1947 without a marriage contract die, leaving two daughters and, on the husband’s side, a son from a first marriage. During the liquidation, the son argues that the husband had acquired two thirds of a separate building at Rocles through a loan repaid by the community, and asks that the compensation be set at the subsisting profit, in proportion to the community’s contribution.
The Riom court of appeal, on 3 July 2018, limits the compensation to 6 097.96 €, the loan capital. It holds that the subsisting-profit rule cannot apply where the property was partly sold before liquidation and is no longer entirely in the separate estate, that partial funding rules out a pro rata calculation on the total value, and that, even if the value at dissolution were relevant, it would have to be determined “by reference to the price obtainable through the normal interplay of supply and demand, which the expert report cannot provide”.
The decision
The first civil chamber quashed, under article 1469, paragraphs 1 and 3, of the Civil Code (Cass. 1re civ., 14 October 2020, no. 19-13.702, reported). It recalls the text: the compensation “is, in general, equal to the lower of the two sums represented by the expenditure made and the subsisting profit”; it “cannot be less than the subsisting profit where the value borrowed was used to acquire, preserve or improve an asset which is found, at the date of liquidation of the community, in the borrowing estate”; “if the asset acquired, preserved or improved was sold before liquidation, the profit is valued at the date of the sale”.
It draws the rule for property partly sold: “where the value borrowed from the community was used to acquire a separate asset which is found partly, at the date of liquidation of the community, in the borrowing estate because it was sold in part before liquidation, the subsisting profit, which is determined according to the proportion in which the funds borrowed from the community contributed to financing the acquisition of the separate asset, is valued by applying that proportion, respectively, to the sale price of the portion of the property sold and to the value at the date of liquidation of the other portion”.
It also quashed, under article 4 of the Civil Code, the ground that an expert could not supply the market value: by refusing to rule on that ground, “the court of appeal breached the above provision”. Remittal to the Lyon court of appeal.
What this changes for valuation
The funding proportion comes first. The calculation starts with a fraction: the share of community funds in the acquisition cost of the separate asset, price and costs included. Here two thirds of a building were bought with a loan repaid by the community; the fraction is the community capital over the total cost of those two thirds. The report establishes that proportion from the deed of purchase, the loan schedule and the statements, before any value. The glossary describes the récompense, and the article on the formula for compensation for works on separate property explains the same fraction applied to works.
Two bases, two dates. For the part sold before liquidation, the base is the sale price, at the date of sale. For the part kept, the base is the value at the date of liquidation, in practice the date closest to the partition, according to the condition of the property at the date of purchase. The valuer therefore produces a current value of the fraction kept and retrieves, from the deed, the price of the fraction sold; applies the proportion to each; then adds them up. The result is the subsisting profit, to be compared with the expenditure made: the compensation is the higher of the two where the expenditure served to acquire.
Property partly sold does not escape the rule. The court of appeal’s argument that the subsisting-profit rule requires the asset to be found “entirely” in the estate is rejected: a partial sale does not bring the compensation back to the expenditure made, it only changes the base for the portion sold. The report therefore separates the lots or shares, with the division plan or the deed of partial sale, to assign each its price or its value.
Market value is established by expert appraisal, and the judge must decide. The court of appeal had written that a value “through the normal interplay of supply and demand” could not be supplied by an expert report. The Cour de cassation sees a denial of justice. For the valuer, it is a reminder of the assignment: market value, the price at which the property would change hands between a willing seller and a willing buyer, is established by comparison with recent transactions, with the necessary adjustments, and the report must allow the judge to adopt it. A report content with a wide bracket or an insurance value would leave the judge without a basis. The article on compensation and personal benefit recalls the other conditions of the compensation.
An old liquidation to reconstruct. A marriage of 1947, a building acquired and partly resold decades earlier: the report reconstructs the condition of the property at purchase, the make-up of the portion sold, the price obtained and current evidence for what remains, flagging the uncertainties. The guide on the matrimonial property liquidation and the valuation date describes these cases.
What the valuer takes from it
- Compensation due for the acquisition of separate property with community funds cannot be less than the subsisting profit, even if the property was partly sold before liquidation.
- The subsisting profit is determined according to the proportion in which community funds contributed to the funding.
- That proportion applies to the sale price of the portion sold and to the value at the date of liquidation of the portion kept.
- The value at the date of liquidation is a market value, which the expert appraisal must establish; the judge cannot refuse to rule on the ground that it is impossible to fix.
- The report gives the proportion, the price of the part sold, the current value of the rest and the calculation.
Further reading
The Market value page describes the assignment, its timescale and its fee. The guide Matrimonial property liquidation: setting the valuation date and the glossary entries récompense, date de valeur and comparable complement this article. On the same theme: Divorce: compensation for works on separate property follows a formula and Compensation: personal benefit required, funds presumed common. The decision is available on Légifrance.
What next
A compensation claim to compute on separate property funded by the community and partly sold since?
I establish the value of the property at the date of liquidation, in its condition at purchase, retrieve the price of the part sold and compute the subsisting profit in proportion to the funding, for the notary or the court.
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