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

07.08.2018 NL law
Legislative proposal to protect trade secrets: update

Short Reads - On 5 July 2016, the EU Trade Secrets Directive came into effect (Directive 2016/943/EU). The directive intends to harmonise rules regarding the protection of undisclosed know-how and business information (trade secrets) across all EU member states. As the directive is not directly applicable in the member states, each member state must enact national implementing legislation.

Read more

07.08.2018 NL law
Protection of listed companies against unsolicited takeovers, prevention of unwanted influences in the telecoms sector and protection of other vital sectors: latest developments

Short Reads - Following a recent series of (attempted) unsolicited takeovers by foreign bidders of Dutch listed companies, such as PostNL, Unilever and AkzoNobel, the protection of companies against unsolicited takeovers and the protection of vital sectors have received more attention in both the Netherlands and Europe.

Read more

31.07.2018 NL law
Can an SPV be misled before it exists?

Articles - Transactions are regularly structured through special purpose vehicles (SPVs). An SPV is often established at the end of the negotiations, just before signing the agreement. The other party to the agreement provides information and raises certain expectations during the negotiations. The individuals negotiating for the SPV do not necessarily become officers of the SPV once it is established.

Read more

07.08.2018 NL law
Boskalis v. Fugro: scope of a shareholder's right to put items on the agenda

Short Reads - Under Dutch law (section 114a of book 2 of the Dutch Civil Code), shareholders have the right to put items on the agenda of the general meeting. The question arises as to whether shareholders also have the right to force an (informal) vote in the general meeting on subjects which are not within their powers. A judgment of the Dutch Supreme Court of 20 April 2018 between Boskalis and Fugro focused on this question.

Read more

12.07.2018 NL law
Voortgang wetsvoorstel Wet bescherming bedrijfsgeheimen

Short Reads - Op 5 juli 2016 is de Richtlijn bedrijfsgeheimen (2016/943/EU) in werking getreden. De richtlijn heeft tot doel de regels inzake bescherming van niet-openbaar gemaakte knowhow en bedrijfsinformatie (bedrijfsgeheimen) in de EU lidstaten te harmoniseren. De richtlijn moest voor 9 juni 2018 geïmplementeerd zijn in de Nederlandse wet- en regelgeving. Nederland heeft deze termijn niet gehaald.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring