Mortgage Surety: The Guarantor Company Cannot Rely on the Debtor’s Court-Supervised Reorganisation (CA Bordeaux, 9 July 2026, No. RG 26/02118)

Bordeaux Court of Appeal (cour d’appel), Second Civil Chamber, 9 July 2026, No. RG 26/02118

What happened in this case?

The facts are economically very commonplace, and that is precisely what makes the ruling interesting for many guarantors. In 2018, an individual granted three loans, for a total principal amount of €370,000, to a trading company. Two years later, by notarial deed of 6 November 2020, a general partnership (société en nom collectif, SNC), managed by the same person as the borrowing company, undertook to act as a “mortgage surety” (caution hypothécaire): it charged a building belonging to it as security for the debt, up to €400,000 plus 5% for costs and ancillary sums, that is a guarantee capped at €420,000.

The arrangement is a classic one in corporate groups: one group entity, owner of a real estate asset, guarantees the debts of another. Matters became complicated when the borrowing company was placed in compulsory liquidation (liquidation judiciaire) by the Bordeaux Commercial Court on 23 October 2024, a procedure eventually converted into court-supervised reorganisation by a judgment of the Bordeaux Court of Appeal of 5 May 2025.

Two weeks after that conversion, on 19 May 2025, the lender had the guarantor SNC served with a payment order constituting a seizure of real property (commandement de payer valant saisie immobilière) for the sum of €420,000, and then summoned it before the enforcement judge (juge de l’exécution) of the Bordeaux Court of First Instance (tribunal judiciaire) in order to have its claim fixed and the forced sale of the charged building ordered.

By a guidance judgment (jugement d’orientation) of 22 January 2026, the enforcement judge found for the guarantor: he annulled the payment order, considering that the debt was not due because of the collective proceedings opened against the principal debtor, and ordered the payment order to be struck off. The lender appealed on 25 February 2026 and obtained leave to summon on a fixed date. It was in this context that the Bordeaux Court of Appeal delivered, on 9 July 2026, a judgment overturning the decision in full: the debt is due, the payment order is valid, the debt is fixed at €420,000 and the forced sale of the building is ordered, with an auction hearing set for 22 October 2026.

What is a “mortgage surety” or real security for another?

The expression “mortgage surety” (caution hypothécaire), used in the 2020 notarial deed, is misleading, and this terminological trap is at the heart of the dispute. Despite the word “surety”, a person who charges a specific asset as security for another’s debt, without personally undertaking to pay, does not enter into a suretyship: they create real security for another (sûreté réelle pour autrui).

How does it differ from a classic suretyship?

The distinction was established by a landmark judgment of the mixed chamber (chambre mixte) of the French Supreme Court (Cour de cassation) of 2 December 2005 (No. 03-18.210): real security granted to guarantee a third party’s debt involves no personal undertaking to satisfy another’s obligation and is therefore not a suretyship. The practical consequence is twofold, and it cuts both ways.

On the one hand, the grantor is better protected than a surety on one point: their exposure is limited to the charged asset. If the building is worth less than the debt, the creditor cannot pursue the grantor against their other assets. On the other hand, and this is what the SNC learned to its cost, for guarantees predating 2022 the grantor does not benefit from the statutory protections attached to suretyship, nor, above all, from the ability to rely on the defences belonging to the principal debtor.

Ordinance No. 2021-1192 of 15 September 2021, which reformed security law, specifically sought to correct this hybrid situation. The new Article 2325 of the Civil Code (code civil) now provides that where real security is created by a third party, the creditor has a claim only against the asset charged as security, and makes several protections borrowed from suretyship applicable to the grantor, including the benefit of discussion under Article 2305 of the Civil Code.

Does the debtor’s court-supervised reorganisation block foreclosure on the guarantor’s building?

That was the whole question put to the Bordeaux court, and the enforcement judge had answered it in the affirmative at first instance. The guarantor put forward three successive arguments, which the court dismisses one after the other.

Can the guarantor rely on the stay of proceedings and the prohibition on payments?

The SNC argued that the debt was not due: under Article L. 622-7 of the Commercial Code, the judgment opening collective proceedings automatically prohibits payment of any debt arising before it, so the creditor could no longer demand payment from the debtor company. Yet, it contended, since it was not personally a debtor, it was indeed the claim against the company in reorganisation that had to be certain, liquidated and due within the meaning of Article L. 311-2 of the Code of Civil Enforcement Procedures (code des procédures civiles d’exécution).

The court sweeps the argument aside on a point of principle: the SNC, “which created real security on behalf of another, is not a surety of the company [debtor] and cannot usefully rely on defences personal to the principal debtor such as the prohibition on payments or the stay of proceedings in the context of court-supervised reorganisation proceedings”. In other words, the characterisation adopted in 2005 by the mixed chamber turns against the guarantor: since it is not a surety, it cannot borrow the debtor’s means of defence. The borrower’s collective proceedings are, as far as it is concerned, res inter alios acta: a matter between other parties, which confers no right on it.

Does the benefit of discussion apply to guarantees created before 2022?

The guarantor then relied on the new Article 2325 of the Civil Code: since the reform, the grantor of real security for another can invoke the benefit of discussion and compel the creditor to pursue the principal debtor first. Combined with the stay of individual proceedings affecting the debtor in reorganisation, this benefit would have paralysed any action by the creditor: it is impossible to “discuss” a debtor protected by the collective proceedings, and therefore impossible to seize the guarantor’s building.

The court expressly acknowledges the logic of this reasoning: the Ordinance of 15 September 2021 “extended to real security for another the benefit of discussion provided for in Article 2305 of the Civil Code, which has the effect, in the event of court-supervised reorganisation of the debtor and a stay of individual proceedings, of preventing the creditor from acting against both the principal debtor and the third party who created the security”. The admission deserves emphasis: for guarantees created after 1 January 2022, the outcome would probably have been the opposite.

But the disputed guarantee was created on 6 November 2020. The Ordinance entered into force only on 1 January 2022 and, by virtue of the principle of non-retroactivity of legislation laid down in Article 2 of the Civil Code, the new Articles 2323, 2325 and 2305 of the Civil Code did not apply to this security. The court adds that the transitional regime of Article 37 II of the Ordinance, which keeps suretyships entered into before 1 January 2022 under the former law, has been extended by case law to real security for another created before that date where it takes the form of a “mortgage suretyship” (cautionnement hypothécaire). The SNC therefore could not rely on the benefit of discussion, which did not exist for it under the former law.

Does Article L. 622-28 of the Commercial Code protect a guarantor company?

One last hope remained: Article L. 622-28 of the Commercial Code, which suspends, until the judgment adopting the plan or ordering liquidation, any action against the guarantors of the debtor in collective proceedings. The text expressly covers persons “who have charged or assigned an asset as security”, which corresponds exactly to the SNC’s situation.

But the text contains a decisive restriction: it protects only natural persons. The legislature wished to protect the manager or close relation who guarantees the company’s debts, so as to encourage them to request the opening of a preventive procedure without fearing immediate pursuit. Guarantors that are legal entities are excluded. As the SNC is a company, the court holds that it “cannot rely on the suspension of proceedings”. The debt is therefore perfectly due, and the guidance judgment is overturned.

Why did the lack of a statement of account not save the guarantor?

In the alternative, the SNC sought annulment of the payment order for a formal defect: Article R. 321-3 of the Code of Civil Enforcement Procedures requires, on pain of nullity, that the payment order include a statement of the sums claimed in principal, costs and accrued interest, indicating the rate of default interest. Yet no detailed statement, loan by loan, had been provided, although partial payments had been made and the running of interest had been stopped on the day collective proceedings were opened. The guarantor added that it was unable to verify whether or not the debt exceeded its maximum commitment of €420,000.

The argument carried weight, but it still had to be presented in the proper form. The court declares it inadmissible for a purely procedural reason: an objection that a procedural document is void for a formal defect must be raised before any defence on the merits. Yet the SNC had first developed, in its submissions, the argument that the debt was not due, which is a defence on the merits, before raising the objection of nullity. The order of the arguments in the submissions thus doomed the objection.

The guarantor tried to respond by relying on Article R. 311-5 of the Code of Civil Enforcement Procedures, under which no challenge or incidental application may be made after the guidance hearing: the creditor, which had not raised the inadmissibility of the objection before the enforcement judge, could no longer do so on appeal. The court rejects the objection: that provision concerns only challenges and incidental applications, not pleas of inadmissibility, which may be raised at any stage of the proceedings. The inadmissibility of the objection of nullity could therefore be raised for the first time before the Court of Appeal.

Does the third-party guarantor benefit from a one-month period before the descriptive report?

The guarantor’s last argument: that the payment order had lapsed. Article R. 321-3 of the Code of Civil Enforcement Procedures provides that where the payment order constituting a seizure is served on the person who granted a mortgage over one of their assets to secure a third party’s debt, the period for the demand to pay, normally eight days, is extended to one month. The SNC inferred that the court commissioner (commissaire de justice) could not draw up the descriptive report of the building before the expiry of that one-month period. Yet the payment order had been published on 26 May 2025 and the descriptive statement drawn up on 17 June 2025, less than a month later.

The court rejects the reasoning by carefully distinguishing two periods that the guarantor was conflating. The one-month period in Article R. 321-3 is a payment period: it fixes the time left to the third-party guarantor to pay before the sale procedure continues. The eight-day period in Article R. 322-1 is a technical waiting period: it fixes the point from which the court commissioner may enter the premises to draw up the descriptive report. No provision extends this second period for the benefit of the third-party guarantor. The report could therefore validly be drawn up more than eight days after the payment order was issued, even before the expiry of the one-month payment period. No lapse was incurred.

What is the scope of this ruling and what should one make of it?

The ruling is unfavourable to guarantors, and its exact scope must be gauged before its logic is discussed.

In practical terms, the solution validates a formidable creditor strategy: when the principal debtor enters collective proceedings, a creditor holding real security granted before 2022 by a legal entity can immediately seize the charged asset, without waiting for the outcome of the collective proceedings and without the guarantor being able to set up anything from the debtor’s proceedings against it. For corporate groups where a property holding company (SCI) or an asset-holding SNC guarantees the operating debts of a sister company, an extremely common configuration, the risk is at its maximum.

As regards the reasoning, however, the grounds call for two critical observations.

The first concerns a paradox of characterisation that the ruling accepts without resolving. To dismiss the defences drawn from the collective proceedings, the court holds that the guarantor “is not a surety”, an orthodox application of the 2005 case law. But to justify applying the transitional regime of Article 37 II of the Ordinance, which by its terms is reserved for “suretyships” entered into before 1 January 2022, it relies on the guarantor’s status as a “mortgage surety” and on a judicial extension of that regime to real security for another. The guarantor is thus not enough of a surety to benefit from the protections of suretyship, but sufficiently one to have applied to it the transitional regime that deprives it of the new protections. Each proposition can be defended in isolation; placed side by side, they give the impression that the characterisation varies according to the result sought.

The second observation is more strategic than critical: the detour through the transitional regime was probably not indispensable. It would have been enough to note that the security, created in 2020, was governed by the law in force on the day of its creation, a law under which, since 2005, the grantor of real security for another has had no benefit of discussion. By invoking Article 37 II, the court needlessly weakens its reasoning, since the judicial extension of that text to real security remains debated. For guarantors and their advisers, this point could provide an angle of challenge before the French Supreme Court, with no guarantee of success, the substantive solution appearing consistent with the position of the highest court on the application of law over time.

What remains is the essential point, which the ruling has the merit of stating clearly: the date of 1 January 2022 now divides real security for another into two worlds. Before, the grantor is a guarantor without a shield. After, they have the benefit of discussion, which the court itself acknowledges can paralyse the creditor’s action throughout the debtor’s collective proceedings. Creditors know this; guarantors must know it too.

What to remember if you have guaranteed a third party’s debt

First reflex: date your guarantee and characterise it. If you have charged an asset as security for another’s debt, the date on which the security was created is decisive. If created before 1 January 2022, it falls under the former law: no benefit of discussion, and no borrowing of the debtor’s defences. If created since that date, it opens up the protections of Articles 2325 and 2305 of the Civil Code, the effect of which can be decisive in the event of collective proceedings against the debtor.

Second reflex: identify who the grantor is. A natural person who has charged an asset as security benefits from the stay of proceedings under Article L. 622-28 of the Commercial Code during the debtor’s observation period, whatever the date of the guarantee. A legal entity never does. In asset structuring arrangements, the choice to interpose an owning company is therefore not neutral: it deprives the guarantee of that protection.

Third reflex: in the event of a payment order constituting a seizure of real property, have the formal regularity of the document checked without delay, and raise objections of nullity at the head of your submissions, before any debate on the merits. This case shows that a serious argument (the lack of a detailed statement of the sums claimed) can be definitively lost over a mere question of the order in which arguments are presented. Foreclosure litigation is full of traps: the windows for challenge are narrow and close quickly, the guidance hearing acting as a guillotine beyond which no new challenge is admissible.

Finally, if you are a manager and are asked to guarantee your company’s debts, weigh the difference between guaranteeing personally and having a company of your group provide the guarantee: the first option exposes your entire estate but benefits from the protections of Book VI of the Commercial Code; the second limits the base to the charged asset but leaves the creditor free to act from the first default in payment, even in the midst of collective proceedings.

FAQ: Your Questions on Real Security for Another and Foreclosure on Real Property