Short Reads

Priority in cases involving a mortgage that has been preceded by attachment and succeeded by bankruptcy of the debtor: a puzzle for advanced players

Priority in cases involving a mortgage that has been preceded by attachment and succeeded by bankruptcy of the debtor: a puzzle for advanced players

Priority in cases involving a mortgage that has been preceded by attachment and succeeded by bankruptcy of the debtor: a puzzle for advanced players

08.10.2015 NL law

What is the priority of recourse in cases where a mortgage has been preceded by an attachment on the same asset and succeeded by bankruptcy of the debtor? In the matter of FGH Bank N.V. versus Aannemingsbedrijf Fraanje B.V. (ECLI:NL:GHDHA:2015:281), the Court of Appeal of The Hague ruled that the attachor has priority over the mortgagee, thereby following previous case law by the Dutch Supreme Court. Many legal academics do not accept that this is the solution to the priority puzzle. This blog purports to briefly explain why.

If an attachment is succeeded by an act of disposition (beschikkingshandeling), like the encumbrance of an asset with a mortgage, Section 505 (2) Dutch Code of Civil Procedure (“DCCP“) provides that this act of disposition cannot be invoked against the attachor who attached the asset prior thereto. In the case discussed here, this means that the mortgagee cannot enforce its right of mortgage – particularly the associated right of priority  – against the attachor.

In Ontvanger/Amro (ECLI:NL:HR:1985:AC9072, paragraph 3.4) the Dutch Supreme Court held that the mortgagee in cases where the mortgage is both preceded and succeeded by an attachment in fact ranks behind the first attachor. Following Banque de Suez/Bijkerk q.q. (ECLI:NL:HR:1988:AC3064, paragraph 3.1), this also applies in the event of bankruptcy of the debtor, albeit that the amount of the claim for which the asset was previously attached is added to the bankruptcy estate .

In the case at hand, the Court of Appeal ruled that the mortgagee ranks behind the attachor in accordance with Banque de Suez/Bijkerk q.q. This leaves one wondering whether this application of Section 505 (2) DCCP is correct. As pointed out in legal literature, the fact that the mortgagee does not rank ahead of the attachor does not automatically result in the attachor ranking ahead of the mortgagee. In other words: not ranking ahead does not necessarily mean ranking behind. The attachor can ignore the mortgagee’s right of mortgage. The attachor is not, however, in the position to ignore the mortgagee as co-creditor of the debtor. Yet that is basically what the Court of Appeal of The Hague does by following the Dutch Supreme Court in ranking the mortgagee behind attachor.

The preceding attachor may ignore the subsequent right of mortgage, not the mortgagee itself. Consequently, the mortgagee does not rank ahead of the attachor. Nothing more, nothing less. Hence, arguably the better view would be that attachor and the mortgagee are treated on an equal footing as to the amount of the claim the asset was attached for prior to the encumbrance of the asset with the mortgage. In the event of bankruptcy of the debtor, the mortgagee would rank pari passu with all ordinary creditors as to that amount. We may now only hope for a mortgagee brave enough to challenge the Dutch Supreme Court regarding its long standing case law on this point.

The post Priority in cases involving a mortgage thas has been preceded by attachment and succeeded by bankruptcy of the debtor: a puzzle for advanced players is a post of Stibbeblog.nl

Related news

04.07.2019 NL law
Audit firms and accountant's duty of care towards third parties

Short Reads - The Dutch Supreme Court recently decided (ECLI:NL:HR:2019:744) that the standard for audit firms' and accountants' duty of care towards third parties is in essence no different than the general duty of care under Dutch tort law, and ultimately depends on the circumstances of the case. However, the role of accountants in society, their responsibility to serve the general interest, and rules of professional conduct and practice play an important role.

Read more

27.06.2019 NL law
Stibbe launches website about Digital Economy

Inside Stibbe - Stibbe's Digital Economy group published a new website this week: Stibbedigital.com With this new website we aim to view technological developments including artificial intelligence (AI), blockchain, the Internet of Things, smart mobility and the rise of digital platforms from a legal perspective.

Read more

01.07.2019 BE law
HvJ: nationale rechter dient toe te zien op de naleving van de verplichtingen inzake luchtkwaliteit

Articles - Bij arrest van 25 juni 2019 (C-723/17) deed het Hof van Justitie uitspraak over enkele prejudiciële vragen, voorgelegd door de Nederlandstalige rechtbank van eerste aanleg Brussel, over de toepassing van de Europese Luchtkwaliteitsrichtlijn (2008/50/EG). Het Hof kent in zijn arrest de nationale rechter een belangrijke taak toe bij de correcte implementatie en afdwinging van de Luchtkwaliteitsrichtlijn. 

Read more

20.06.2019 NL law
Stibbe advises Westermeerwind

Inside Stibbe - The District Court Midden-Nederland ruled in favour of Westermeerwind B.V. on 19 June, in a case brought by organisations acting for the 'Westermeerwind Group'. The group had claimed that the 32 members of that group had the right to participate in the Windpark Westermeerwind at a much lower price than other participants, and with a different corporate structure.

Read more

04.06.2019 NL law
Dutch Supreme Court clarifies evidentiary rules concerning signatures and signed documents

Short Reads - In two recent decisions, the Dutch Supreme Court has clarified the evidentiary power of signed documents. If the signatory unambiguously denies that the signature on the document is his or hers or claims that another party has tampered with the signature (for instance, through forgery or copying a signature from one document and pasting it in another), it is up to the party invoking the signed document to prove the signature's authenticity (ECLI:NL:HR:2019:572).

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring