Berlin Court of Appeal, 01/08/2012, Ref. 21 U 169/10
If married couples who own a property together separate, or if a community of heirs inherits a property, the question arises as to how this community property is to be cancelled. This becomes particularly relevant if the couple or the community of heirs are at odds with each other.
If the parties involved are then unable to agree on the sale of the property, the only remaining option is a partition auction in accordance with Section 180 of the Compulsory Auction Act.
In a partition auction, an auction is ordered at the request of one of the co-owners. The value of the property is determined and then set by the local court and an auction date is set.
For the bidder, it should be noted that there are some special features of a partition auction in contrast to an execution auction. For example, the new owner has no special right of cancellation vis-à-vis a tenant in the property.
The actual transfer of ownership from the joint owners to the bidder takes place by means of the award decision of the judicial officer.
However, the community property is still not cancelled with the change of ownership, as the community continues to share in the proceeds. This in turn means that the community must then at least agree on the division of the money.
Even after the proceedings have been concluded, there are a variety of claims between the legal owners entered in the land register (banks as mortgagees), the previous owners and the new owners.
The heir can also exclude the partition auction for a certain period of time. This is often agreed in wills if it is foreseeable to the testator that the heirs he or she has provided for will be in dispute and that a partition auction will take place.
However, if there is an important reason, a division can take place even if the heir has excluded the division. Whether such good cause existed was reviewed by the Berlin Court of Appeal in the case presented here.
Facts of the Case:
Member of a disputed community of heirs pursues the partition auction of a property
The plaintiffs and their intervener as well as the defendants were descendants of the testator, who died on 16 March 2005, and heirs in equal shares in accordance with his will dated 24 April 2004.
The will excluded the distribution of the estate for 10 years after the testator's death. Nevertheless, the defendants proceeded with the forced sale of a property belonging to the estate. At the request of the defendants, the Charlottenburg Local Court ordered the forced sale by order dated 18 September 2009. The plaintiffs and their intervener filed a third-party action against this.
In the judgement handed down on 23 September 2012, the district court subsequently declared the enforcement of the order of the Charlottenburg district court dated 18 September 2009, case no. 70 K 94/09, against the property recorded in the land register to be inadmissible.
Further heirs stop the division of the estate by the district court due to a prohibition of division agreed in the will
The defendants lodged an appeal against this judgement on 3 November 2010 and, after requesting an extension of the deadline for submitting the grounds of appeal on 8 December 2010 and being granted until 12 January 2011, lodged their grounds of appeal on 12 January 2011.
In support of their appeal, the defendants argued that the Regional Court's decision failed to properly interpret and analyse the will in order to ascertain the testator's intentions.
The intolerable situation of the community of heirs as well as the loss in value of the estate make it necessary to reassess the prohibition of division and not merely to rely on the wording of the will.
The Regional Court incorrectly assumed that the testator generally imposed the prohibition of settlement because he anticipated disputes between the heirs when considering the question of whether there was good cause pursuant to Section 749 (2) sentence 1 BGB. The testator was primarily concerned with preserving the substance of the estate.
If the testator had recognised that the loss in value of the estate would be brought about precisely against the background of the prohibition, he would have already considered this in his will and would certainly not have wanted the settlement even if the estate assets were destroyed by some of the heirs.
The Regional Court would also be wrong to focus on the question of the defendant's participation in the administrative measures of the estate. The considerable losses were precisely due to majority management measures of the other heirs, whereby participation in the sense of co-decision was not possible.
The losses shown were so high that good cause could be assumed. The Regional Court would be wrong to assume that the testator had deliberately appointed the plaintiffs 2) and 3) as his authorised representatives and managing directors.
The heiress is again appealing against the decision of the Regional Court to the Berlin Court of Appeal
In this respect, the Regional Court should have asked itself what the relationship was between the powers of attorney granted and the prohibition on the division of the estate. By granting the powers of attorney, the testator himself had softened the prohibition on the division of the estate. This could only be understood to mean that, with the death of the executrix, he had also given up his intention to bind the estate for 10 years and to encumber the execution of the will for 10 years through the condition, or that he saw this binding primarily in connection with the clarification of the questions of the companies' survival options.
Decision of the Berlin Court of Appeal:
The Berlin Court of Appeal also declares the partition auction inadmissible
The Berlin Court of Appeal has now ruled that the defendant's admissible appeal is unfounded
The Regional Court was right to declare the execution inadmissible, as the defendants were not authorised under the provisions of substantive law to put the estate property up for auction. The rights of the plaintiffs as co-heirs were violated by the execution, so that they were entitled to object to the auction by way of legal action in accordance with § 772 BGB.
According to § 2042 BGB, each co-heir can demand the division at any time and, according to §§ 753 BGB, 181 para. 2 sentence 1 ZVG, file an application for the partition auction of a property belonging to the estate for the purpose of the overall division of the community of heirs.
Since a mere partial division of the estate cannot be enforced against the will of a co-heir, the right of a co-heir to pursue the auction of the estate properties on account of division is conditional under substantive law on the fact that the purpose of the auction is the division of the community of heirs in the first place.
An auction of an estate property solely for the purpose of dividing its proceeds or leaving them undivided in the continuing community of heirs could not be demanded against the will of the other heirs.
A partition auction is only admissible if the purpose of the auction is to divide the property as a whole
Based on the circumstances recognisable to the Senate, it cannot be assumed in the present case that the defendants filed the application for a partition auction for the purpose of pursuing an overall settlement. It is irrelevant whether the fact that the defendants only filed an application for a partition auction with regard to one of the properties belonging to the estate speaks against the assumption that this was done for the purpose of an overall settlement.
However, according to the undisputed submissions of the intervening party in the legal dispute pending between the parties before the Berlin Regional Court, 8 O 247/10, in which the plaintiffs here sued the defendants here for consent to the sale of the property, the defendants themselves claimed that a settlement of the estate was ruled out until 2015 and that the property should be retained by the estate as a profitable property.
The mere realisation of a property and subsequent distribution of proceeds is not sufficient
It is also apparent from the defendants' submissions that, according to the defendants' ideas, the proceeds of an auction of the property in dispute were to be placed in a joint account that could only be disposed of jointly, without it being apparent that a further dispute was to be pursued.
In the statement of 12 July 2012, the defendants argue that the plaintiffs had stated in the proceedings for the sale of the property that it was not a matter of a partial estate settlement, but that the estate should continue to share in the undivided purchase price. The defendants argue that the case here is no different. It follows from this, however, that the requested partition auction is not intended to be a total settlement of the entire estate. Rather, the defendants were concerned with a reorganisation of the assets within the existing community of heirs. The defendants expressly stated this in their pleading of 12 July 2012:
"The property is the economically weakest for the community of heirs due to its own use and rental income that is disproportionate to its market value, so that it is urgently advisable - without dividing the estate - to have the equivalent value credited to a joint estate account in favour of the community of heirs by transferring the property."
However, as stated, the defendants could not enforce such a reorganisation of the estate against the will of the other heirs by filing an application for a partition auction. The plaintiffs would therefore have a right of objection pursuant to Section 771 BGB with the consequence that the compulsory enforcement of the order of the Charlottenburg Local Court dated 18 September 2009 was to be declared inadmissible.
It was then no longer relevant whether a partition auction was also to be regarded as inadmissible with regard to the prohibition of division ordered by the testator.
Source: Berlin Higher Regional Court
Important Note: The content of this article has been prepared to the best of our knowledge and belief. However, due to the complexity and constant evolution of the subject matter, we must exclude liability and warranty. Important Notice: The content of this article has been created to the best of our knowledge and understanding. However, due to the complexity and constant changes in the subject matter, we must exclude any liability and warranty.
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