The question of when a third-party payment on another’s debt is considered gratuitous, which is not always easy to determine in practice, was once again addressed by the BGH (Federal Court of Justice) in a decision dated February 23, 2023 — IX ZR 136/22.
The plaintiff is the insolvency administrator of the debtor’s estate. The insolvency proceedings were opened on March 2, 2020, following an application made on December 18, 2019. The defendant leased premises to a GbR (partnership). After rent payments were not made, the defendant terminated the lease with a notice dated September 20, 2019. Between October 7, 2019, and January 17, 2020, the debtor made a total payment of €82,681.07 to the defendant to settle the rent arrears of the GbR.
The plaintiff filed a claim against the defendant seeking the repayment of this amount, initially relying on § 131 para. 1 sentence 1 of the German Insolvency Code (InsO). After the defendant argued that this provision did not apply since she was not an insolvency debtor, the plaintiff alternatively presented the factual basis for a donation avoidance claim under § 134 para. 1 of the InsO. He argued that the GbR was not able to settle the rent arrears.
The document containing this statement was not made available to the defendant by the Regional Court. The defendant was subsequently sentenced as requested, with the Regional Court stating in the factual findings of the judgment that it was undisputed that the GbR was unable to settle the rent arrears at the time of the contested actions. After an unsuccessful application for rectification of the factual findings by the defendant, she filed an appeal and argued in the second instance that the GbR was not insolvent at the time of the payments and was still economically active. Furthermore, the defendant argued that her claim was not worthless, providing more detailed explanations. The appellate court did not admit the defendant’s argument and dismissed the appeal by resolution. The defendant is now challenging this decision with a petition for non-admittance to the Federal Court of Justice (Nichtzulassungsbeschwerde).
Decision: Examination of Worthlessness is Required
The Federal Court of Justice (Bundesgerichtshof) allowed the revision because the appellate court’s decision to dismiss the appeal violated the defendant’s right to be heard. The Federal Court of Justice then set aside the contested decision and referred the case back to the appellate court for a new hearing and decision.
The defendant’s submissions should have been admitted in the second instance according to § 531 para. 2 No. 2 of the German Civil Procedure Code (ZPO). The Regional Court violated the defendant’s right to be heard by using the plaintiff’s submissions in its decision, which the defendant was unaware of. This was causally linked to the defendant not presenting arguments, especially regarding the issue of the worthlessness of the claims against the tenant. While the fact that the plaintiff initially based his claim only on avoidance under § 131 of the Insolvency Code (InsO) does not preclude the consideration of the circumstances under different legal aspects, from the defendant’s perspective, the lack of the plaintiff’s submissions on the factual conditions of § 134 of the InsO in the document dated June 4, 2021 meant that she had no knowledge of any such arguments. The defendant also asserted the tenant’s insolvency sufficiently substantiated. A party meets its obligation to substantiate when making factual claims related to a legal provision that is suitable for making the opposing party’s claimed right appear non-existent. The likelihood of the presentation is irrelevant.
The BGH further explains that in assessing the gratuitousness of a third-party’s performance in a three-party relationship, it is not crucial whether the disposer received compensation. What matters is whether the recipient of the performance has to provide consideration in return. This consideration can also entail the recipient losing a claim against their debtor when receiving the performance. However, this only applies if the recipient’s claim was valuable. If the claim was worthless, the recipient hasn’t lost anything that can be considered as consideration for the performance. In such cases, the performance on another’s debt is voidable as a gratuitous act.
Due to the violation of the defendant’s right to be heard, the decision of the appellate court must be set aside, and the case must be reconsidered there, taking into account the defendant’s submissions and any proposed evidence. The burden of proof and substantiation for the factual conditions of the avoidance circumstance of gratuitous acts rests with the insolvency administrator. If the debtor has settled a claim against a third party, the insolvency administrator must also prove that the claim was worthless.
In this decision, the BGH reaffirmed its previous jurisprudence on Section 134 of the German Insolvency Code (InsO). The decision is also convincing in terms of content. A worthless claim cannot serve as consideration for a received performance. The explanations regarding the right to be heard are in line with previous jurisprudence, emphasizing the need for lower instance courts to proceed carefully and not overstretch the requirements for substantiation.