Litigious withdrawal: when the assignment of a debt allows the termination of a property dispute

You sell a plot of land in Reims. The purchaser does not pay. You sue for rescission of the sale (cancellation for non-payment). But on the same day, you assign your debt (the right to claim the price) to a third-party company. Your purchaser, learning of the assignment, notifies you of a "litigious withdrawal" (Article 1699 of the Civil Code): he reimburses you the price you claim from him, and substitutes himself for the assignee to terminate the proceedings.

Is this legal? Does the litigious withdrawal allow a dishonest buyer to escape his debts by buying his own debt? The Court of Cassation answers: yes, but only if the debt is disputed and the assignor has been paid. Explanation.

The facts: a story like many others

In 1985, the X family (sellers) sold a plot of land in Tinqueux to SCI Campo di Fiori. The price was not paid. The sellers sued for rescission of the sale before the Tribunal de Grande Instance of Reims. On the same day, they assigned their price debt (the right to obtain payment) to SCI César Matignon.

SCI Campo di Fiori learned of the assignment. It then invoked litigious withdrawal: it appeared before SCI César Matignon and reimbursed the amount of the assigned debt, thus substituting itself for it in the rescission proceedings. The goal? To extinguish the sellers' action, since the debt was now extinguished by payment to the assignee.

The sellers contested: they argued that litigious withdrawal was not possible because the debt was not "litigious" (disputed) at the time of the assignment, and that one of the assignors had not been fully paid. The Court of Appeal of Reims ruled in favour of the purchaser. Appeal to the Court of Cassation.

The reasoning of the court — dissected

The Court of Cassation upheld the judgment of the Court of Appeal. It recalled that litigious withdrawal, provided for in Article 1699 of the Civil Code (which allows the person against whom a litigious right is assigned to free himself by reimbursing the assignment price), is admissible as long as the debt is disputed at the time of the withdrawal. Here, the action for rescission of the sale demonstrates that payment is disputed. The debt is therefore litigious.

The Court also noted that one of the assignors had been fully paid (he received his share), and that the nature of the debt of another had been modified (it became a debt of restitution). It concluded that the rescission of the sale is disputed, which makes the withdrawal regular.

In other words, litigious withdrawal is not an abuse: it is a mechanism that allows the purchaser to end the proceedings by paying the debt to the assignee, provided that the assignor had not been fully paid before the assignment. Here, one of the sellers had already been paid, which made the debt partially extinguished, but that did not prevent the withdrawal for the remaining part.

What this means for you — concretely

If you are a seller of a plot of land or real estate: you must be extremely careful if you assign your price debt to a third party. Before assigning, ensure that the purchaser has not already disputed the sale. Otherwise, he will be able to exercise litigious withdrawal and extinguish your action for rescission, often at a lower cost for him. Example: you sell a plot of land in Tinqueux for €200,000, the purchaser does not pay. You assign your debt to a collection agency for €150,000. The purchaser can then reimburse you these €150,000 and put an end to your proceedings. You lose €50,000.

If you are a purchaser: litigious withdrawal is a powerful defensive weapon. If a seller sues you for rescission and assigns his debt, you can substitute yourself for the assignee by reimbursing the assignment price. This allows you to end the proceedings and keep the property, provided you have the funds. Caution: this only works if the debt was disputed before the assignment.

If you are an assignee (SCI or investor): always check whether the purchaser has already initiated a dispute. Otherwise, your acquisition risks being annulled by litigious withdrawal. You will lose your investment and must reimburse the assignment price to the purchaser.

Four tips to avoid this type of dispute

• Before assigning a litigious debt, have it certified by a notarial deed that the purchaser has not yet disputed the sale. Thus, litigious withdrawal cannot be exercised.
• If you are a purchaser and receive a summons for rescission, react quickly. Monitor any assignments of debt in the legal publicity registers. You have a short period to exercise the withdrawal.
• For sellers: only assign a debt after having obtained partial payment or a guarantee. It is better to negotiate a payment plan with the purchaser than to assign at a loss.
• Consult a lawyer specialised in real estate before any assignment of debt. A 30-minute consultation can save you from a costly dispute.

Further reading: related case law and developments

The Court of Cassation had already admitted litigious withdrawal in matters of real estate debt (Civ. 1re, 12 May 1987, No. 85-14.123). But the originality of the 1993 decision is to specify that the withdrawal is possible even if the assignor was partially paid before the assignment. This solution was subsequently confirmed (Civ. 3e, 20 January 2010, No. 08-20.670).

The trend is therefore favourable to the debtor (the purchaser): litigious withdrawal is a potestative right (a right that the debtor can exercise unilaterally) that allows the assigned debt to be extinguished. However, the courts ensure that the assignor is not prejudiced: he must have received the assignment price, or at least part of it. In the future, the mechanism could be extended to assignments of future or conditional debts.

What you absolutely must remember

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