Dismissal of the Surety's Appeal Against Payment of the Bank Debt

Facts

Company [Z.], headquartered in France, opened an account with a French bank (Bank X.) with an overdraft facility of 750,000 FF. [M.], domiciled in Geneva, acted as joint and several surety without limitation of duration to guarantee Z.'s commitments. The bank terminated the contract with [Z.] in September 1992 and filed a payment claim against [Z.] before the Commercial Court of Grenoble. Judicial reorganization proceedings were then opened for Z. In 1997, the bank filed a payment claim against the surety [M.] before the Court of First Instance of Geneva. [M.] raised the defense of set-off, invoking an alleged claim for damages of [Z.] against the bank. The Geneva courts rejected this argument, considering that [Z.] had waived this claim in the judicial reorganization proceedings and that [M.], as commercial director of [Z.], could not have been unaware of this.

Considerations

The Federal Tribunal dismisses M.'s appeal and upholds the cantonal judgment. It considers that the law applicable to the set-off is French law, the law governing the contract concluded between [Z.] and the bank. Under French law, [Z.] was no longer entitled to invoke the set-off claim, as it had been abandoned in the judicial reorganization proceedings. The Federal Tribunal finds that [M.], as surety and commercial director of [Z.], could not have been unaware of this situation and could have…