Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement Order (EEO) for uncontested claims designed a way to speed up the enforcement of civil cases in Member States. However, it is still necessary for the claimant to go before the courts in the defendant’s residence country and get a judgment against the debtor. Once a judgment is obtained, the claimant must apply to have it certified as a EEO. What is the applicable legislation in Spain, specifically in relation to loans guaranteed by mortgages?
HOW DOES SPANISH LEGISLATION DEAL WITH UNPAID LOANS AND THE ENFORCEMENT OF A MORTGAGE?
In accordance with the contents of Article 1911 of the Spanish Civil Code (SCC), the debtor is responsible for the performance of his obligations with all his present and future property. In the event of a loan guaranteed by a mortgage, this principle remains paramount and it is not altered. This is, the principal obligation born out of the contract loan is guaranteed by a right in rem, which is an accessory obligation that originates once the mortgage deed is registered at the Land Registry. The debtor is not only liable with the mortgaged assets, but with all his assets.
The mortgage identifies a specific property within the assets own by the debtor as fixed to the payment of the debt, giving publicity to this fact so it may be valid against third parties. This is the reason why the mortgages under Spanish law are only truly incorporated once they are registered at the Land Registry, so that they may be enforceable against third parties.
Article 105 of the Mortgage Act sets up the principle that mortgages do not alter the unlimited personal liability of debtors as established in the above mentioned Article 1911 SCC.
Once the mortgage is incorporated, in the event of non-fulfilment of the principal obligation the mortgage creditor should consider which procedure is to follow to satisfy his credit. The alternatives available under Spanish law would be to commence:-
- Ordinary proceedings;
- Enforcement proceedings;
- Mortgage proceedings;
- Out of court proceedings.
The fact that the creditor cannot only attempt to recover from the debtor through the enforcement of the mortgage, but that he is also entitled to proceed against any other assets he may have, is clear not only from the contents of Articles 1911 SCC and 105 of the Mortgage Act, but also from Article 140 of the Mortgage Act. The latter clearly sets forth that it would be valid the pact whereby the creditor and the debtor agree in the mortgage deed that the guaranteed debt can only be released on the mortgaged assets. This is, for the mortgage deed to prevent legal action against any other assets, an express agreement recorded in the mortgage deed shall be required.
In support of the fact that the creditor can proceed with legal action against any other asset of the debtor rather than proceed with the enforcement of the mortgage, this is also made obvious in the procedural applicable law, and in particular under Article 555 of the Civil Procedure Act, which allows the joinder of actions in this respect.
After the reform of the Spanish Procedural Act, it can be said that there is one single enforcement procedure and that within this, there is a special procedure for the enforcement of mortgage. It is therefore clear from the above articles that when the creditor attends to recover the monies the Spanish procedural system allows him two alternatives: to proceed with the standard enforcement or to proceed with the enforcement of the mortgage, and that is possible to joint both procedures by virtue of the contents of the above mentioned articles.
HOW ARE ENFORCEMENT TITLES CERTIFIED AS EUROPEAN ENFORCEMENT ORDERS?
In accordance with the Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement Order for uncontested claims, these can be authentic instruments on uncontested claims. Article 4.3.(a) defines authentic instruments as “A document which has been formally drawn up or registered as an authentic instrument, and the authenticity of which: 1. Relates to the signature and the content of the instrument; and 2. Has been established by a public authority or other authority empowered for that purpose by the Member State in which it originates.”
Article 25 of the Regulation establishes that an authentic instrument, if enforceable in one Member State, could be enforced in other Member State.
Under Spanish Law, Public Instruments are those authorised by a Notary Public or a competent public employee with the solemnities required by law (Article 1216 SCC). Documents signed by a Notary Public are governed by Notarial Legislation (Article 1217 SCC).
The only authentic instruments that can be enforced under Spanish law are listed in Article 517 of the Civil Procedure Act. In accordance with this article, public instruments are enforceable as long as they are first copies, or if these are second copies, are produced by judicial order and the debtor was notified, or if they were produced with the agreement of all the parties involved.
This matter is also regulated by Article 17 of the Law of 28 May 1862 on the Profession of Notary, modified by Law 36/2006 of 29 November on measures for the prevention of tax evasion which came into force on 1 December 2006 and by Article 233 of the Notarial Regulation enacted by Decree of 2 June 1944.
The above mentioned Article 17 sets forth that, for the purposes of Article 517.2.4 of Law 1/2000 of 7 January on Civil Procedure, it shall only be considered an enforceable title those copies that the interested party requests from the Notary Public with such purpose. When producing such copy, the Notary Public shall insert at the margin of the original deed kept in his protocol the date in which the copy was issued and the name of the interested party who requested the copy. Article 233 of the Notarial Regulation requires that all deeds which contain an enforceable obligation whose compliance may be demanded at court shall expressly mention whether or not they have been issued as an enforceable document. Once an enforceable copy has been issued, it would only be possible to obtain a new enforceable copy by the same interested party subject to the provisions of Article 517.2.4 of Civil Procedure Act.
In litigation, it is for the judge to decide as a matter of fact whether or not the document relied upon in the action meets the criteria of Article 4 of EC Regulation 805/2004 for the purpose of enforcement by a European Enforcement order but, on the balance of possibilities, if the requirements contained under Spanish Law for a tittle to be considered as an enforceable authentic instrument have not been complied with, the European Enforcement Order Certificated may fail to meet the criteria of Article 4 of the EC Regulation 805/2004 for the purpose of enforcement by a European Enforcement order. It is therefore essential to ensure that the proceedings in the country of origin comply with the national legislation in force.