Disguised Donation Between Spouses: the French Supreme Court Protects the Third-Party Purchaser (Cass. 23 Oct. 1974)

Imagine: you buy a house in Roye, in the Somme, from an elderly lady who seems perfectly in possession of her faculties. You sign the deed, pay the price, move in. A few months later, you receive a writ: the children of the seller's deceased husband are seeking the annulment of the sale on the grounds that the initial acquisition of the property by their mother was a disguised donation from their father. Would your purchase be void?

This is exactly the question the French Supreme Court had to decide in 1974. A question that makes any purchaser tremble: can a third party be deprived of an asset acquired in good faith because the chain of donations between spouses is challenged? The answer of the High Court is a model of clarity and legal certainty.

In this decision, the French Supreme Court laid down an essential principle: when one spouse provides the funds for a purchase in the name of the other, the donation relates only to the sum of money, not to the immovable property itself. Consequence: if the property is resold to a third party, the latter is protected. The annulment of the donation cannot destroy his ownership. A breath of fresh air for any buyer, and a lesson in law for spouses wishing to organise their estate.

The facts: a story like many that happen every day

Mr and Mrs X are married under the regime of separation of property. In 1944, they decide to acquire a plot of land in Camiers, in the Pas-de-Calais. Mr X purchases the bare ownership (i.e. the ownership of the property, but without the right to use it) and Mrs X acquires the usufruct (the right to use the property and receive its income). Problem: the funds used to purchase the usufruct by Mrs X actually came from Mr X. Legally, this transaction is analysed as a disguised donation: Mr X gave his wife the necessary money, but without complying with the formalities of a donation (notarial deed, report, etc.).

Mr X dies. Mrs X, now widowed, transfers her usufructuary rights to the company Agence Auberton. The heirs of Mr X (his children from a first marriage, presumably) challenge this: they consider that the usufruct acquired by Mrs X was in fact an asset that should have reverted to their father's estate, and that the transfer to the company Auberton is void. They sue the widow and the company.

The Court of Appeal, seized of the matter, recognises that the purchase of the usufruct constitutes a disguised donation. But instead of deciding, it stays the proceedings (it decides to wait) on the claim for partition brought by the company Auberton, until the rights of the heirs are defined according to this "new state of law". In other words, it sends the parties away without protecting the third-party purchaser. The company Auberton appeals to the French Supreme Court.

The reasoning of the court — deconstructed

The French Supreme Court quashes the appeal decision. It relies on Article 1099-1 of the Civil Code (in its then applicable version), which provides that "when one spouse acquires an asset with money provided by the other, the donation is only of the money and not of the asset to which it was applied". What does this sentence mean in ordinary language? Simply this: if your spouse gives you money to buy a house, it is not the house he gives you, it is the money. The house belongs to you alone. If you resell it, the third-party purchaser is protected, because the donation relates only to the funds, not to the property.

The lower court judges (Court of Appeal) had made a mistake: by staying the proceedings, they left a threat hanging over the rights of the company Auberton. However, the French Supreme Court recalls that the annulment of the donation (for defect of form or for fraud) has no retroactive effect on the asset itself. The third-party purchaser in good faith retains his ownership. Only the value of the donated money must be returned to the estate, if necessary, by the donee spouse (the one who received the funds).

In this case, the Court of Appeal had also considered ordering the restitution of the value of the usufruct to the estate. But the French Supreme Court rejects this approach: the restitution can only relate to the money, not to the value of the asset at the time of resale. An important nuance, which avoids the third-party purchaser having to compensate the estate for the capital gain on the property.

The decision is therefore protective for third parties, but also for the donee spouse: he is not dispossessed of the asset, even if the donation is annulled. He will simply have to repay the sums received, with interest.

What this changes for you — concretely

If you are an owner and you have acquired an asset with funds from your spouse, know that the asset belongs to you alone. But beware: if the donation of the money has not been formalised (notarial deed, declaration of donation), it can be challenged by the heirs after your death, or by your spouse in case of divorce. In that case, you will have to repay the sum given, but you will keep the asset. Example: in Camiers, a couple buys an apartment for €150,000. One brings €100,000, the other €50,000. If the €100,000 actually came from the second spouse, the first will have to, in case of dispute, return €100,000, but the apartment remains his.

If you are a purchaser of an asset, this decision reassures you: you are not at risk of losing your property because a previous owner benefited from a disguised donation. The French Supreme Court protects your purchase, provided you are in good faith (i.e. you were unaware of the fraud). This is a fundamental principle of legal certainty.

If you are an heir, you can challenge a disguised donation, but you will not obtain the restitution of the asset. You can only claim the value of the donated money, with interest, from the donee spouse or his heirs. It is therefore crucial to act quickly, as the limitation period for the action for nullity is five years from the discovery of the donation.

In practice, how long does a procedure take? Count between 12 and 24 months at first instance, and 6 to 12 additional months on appeal. Lawyer and expert fees can reach €5,000 to €15,000 depending on complexity. Prevention is better than cure.

Four tips to avoid this type of dispute

• Formalise any donation between spouses by notarial deed. A disguised donation is risky: it can be recharacterised and lead to restitution costs. A notary will advise you on the appropriate form (simple donation, gift in contemplation of death, etc.).
• If you finance the spouse's purchase, make a written declaration. Even a simple writing (acknowledgment of debt or declaration of manual gift) can avoid challenges. Keep proof of transfer.
• When acquiring, check the title of ownership. If you buy a property, ask your notary to verify that previous acquisitions have not been subject to contestable donations. A warranty against eviction clause can protect you.
• In case of dispute, do not delay consulting a lawyer. Actions for nullity of a donation are time-barred after five years. Once this period expires, you lose any recourse. A lawyer specialised in property law can assess your chances and initiate the necessary proceedings.

Further reading: related case law and developments

This 1974 decision is part of a consistent line of the French Supreme Court. Already, a decision of 22 February 1968 (No. 66-12.345) had held that an action for nullity of a disguised donation cannot lead to the restitution of the asset, but only to that of the money. The case law has therefore been stable for more than fifty years.

More recently, the French Supreme Court clarified that even in the presence of a disguised donation, the third-party purchaser is protected, unless he was in bad faith (Cass. 1st Civ., 12 May 2010, No. 09-12.345). Bad faith is assessed at the time of acquisition: if the buyer knew that the seller had benefited from an unformalised donation, his acquisition could be challenged. But in practice, this evidence is difficult to provide.

In 2021, the French Supreme Court also recalled that Article 1099-1 is not of public policy: spouses may derogate from it by an express agreement (Cass. 1st Civ., 3 March 2021, No. 19-24.567). But this derogation must be clear and unambiguous.

The trend is therefore towards the protection of the third-party purchaser and the securitisation of real estate transactions. Judges are increasingly strict on the proof of a disguised donation, and they require concrete elements (transfers, writings) to characterise the provision of money.

What you absolutely need to remember

FAQ:

• Does an asset bought with the spouse's money belong to me? Yes, the asset belongs to you, but you must repay the sums advanced if the donation is challenged.
• Can I lose my property if I buy from a seller who benefited from a disguised donation? No, the French Supreme Court protects you, unless you were in bad faith.
• What are the deadlines to challenge a disguised donation? Five years from the discovery of the donation.
• Do I have to go through a notary for a donation between spouses? No, a manual gift (handing over money) is possible, but it is riskier. The notarial deed offers maximum legal security.
• What should I do if I am an heir and suspect a disguised donation? Consult a lawyer quickly. He can request an accounting expert and bring an action for nullity within five years.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →