Cancellation of the Seizure due to Abuse

Legal Insight

November 2019

George Kefalas, LL.M. (mult.), Μ.Sc.

Summary: During the economic crisis, many debtors are unable to meet their financial obligations, resulting in creditors initiating enforcement proceedings against them. The institutionalisation of electronic auctions and the strict supervision of banking institutions, as well as the increase in overdue debts to the State and the Social Security Funds, have led to mass auctions against borrowers and other debtors. The article presents only one of the ways in which debtors can defend themselves against a possible accelerated auction, namely the abusive acceleration of the auction. 

1. Introduction

The period of credit expansion in our country during the 2000s was followed by the period of economic crisis, when creditors, especially banks, started procedures to enforce their claims. In this context, after going to court and obtaining a court judgment or a payment order, they often proceed to seize the debtors' real or personal property or even to seize accounts held by their debtors with banks. In such cases, the debtor must react immediately and within the short time limits laid down in the Code of Civil Procedure, either by bringing before the competent court defects in the instrument (i.e. the judgment or payment order), by contesting the creditor's claim or, finally, by alleging errors in the enforcement procedure initiated by the creditor. This article examines only one of the grounds which the debtor against whom enforcement proceedings are brought (the 'defendant in enforcement' in the legal terminology) may raise, namely the issue of the improper acceleration of the enforcement proceedings or the improper issue of the instrument on the basis of which they are brought, with case studies of judgments of the Greek courts. 

2. Cases of improper performance

Many times, cases of enforcement have been brought before our courts, where the debtor claims that they are being carried out in an abusive manner. Below are various cases that have been found to be abusive and from which some indications are drawn that an enforcement procedure is abusive and, therefore, should be annulled. 

2.1 Seizure of a high value asset of the debtor to satisfy a disproportionately small claim of the creditor. 

The acceleration of an auction of assets of a high value in relation to the creditor's claim has been found to be invalid on several occasions as being abusive, as such an action violates the principle of proportionality, in simple terms it is considered to be an excessively burdensome measure compared to the purpose pursued. Thus, the decision No. 759/2013 of the Single Judge of the Court of First Instance of Corinth ruled that the seizure of a property worth 12,303,000.00 euros for the satisfaction of a claim of 1,087,365.00 euros was abusive. Similarly, the decision No. 402/2014 of the Athens Court of First Instance regarding the seizure of property worth EUR 1,200,000.00 for the satisfaction of a claim worth EUR 56,842.00, as well as the decision No. 4242/2014 of the same court regarding the seizure of property worth EUR 92,868.00 for the satisfaction of a claim worth EUR 2,320.48. 

2.2 Seizure of the debtor's assets (especially movable property) of disproportionately low value in relation to the creditor's claim.

A seizure imposed on the debtor's assets of insignificant value in relation to the claim whose satisfaction is sought is also invalid on the grounds of abuse, especially when it results in the debtor's debilitation as a natural person or company. The decision of the Piraeus Court of First Instance No. 220/2014 annulled, as abusive, the seizure imposed on movable property of the debtor company with a total value of EUR 3,870.00 for the satisfaction of a claim of EUR 750,000.00, as it held that, on the one hand, the lender did not expect any substantial benefit from the execution, and on the other hand, the debtor company would suffer significant damage to its operation from the seizure of its equipment. 

2.3. Imposition of a seizure on an asset, the auction of which will not satisfy the creditor imposing the seizure because other creditors have priority. 

This case concerns debtors who have debts to several creditors, usually credit institutions. In such cases, a creditor's seizure of the debtor's property may be considered abusive when it does not expect to satisfy its claim, either because the seized asset is already secured (usually by a mortgage lien) in favour of another creditor or because the debtor has high debts to creditors who have priority over the auctioneer (e.g. the State or insurance funds). 

Thus, the already mentioned decision 759/2013 of the Single Court of First Instance of Corinth ruled that the seizure of a property worth 12.303.000,00 euros for the satisfaction of a claim of 1.087. 365,28 euros was abusive, because - apart from the disproportion between the lender's claim and the value of the property - there were claims of IKA and the Greek State with a total value of 31,000,000 euros, so the seizure enforcer would not receive anything from the auction - the price that would be achieved in the auction. Similarly, the seizure of a property, which was auctioned at a price of EUR 150,000 and on which there was a mortgage of another lender worth EUR 1,200,000.00, was found to be abusive. In the same vein, the decision No. 37354/2005 of the Thessaloniki Court of First Instance, where the seizure of a property for the satisfaction of a claim of 3.465,29 euros was considered abusive, because the property had been registered with a total value of more than 35.000 euros and at the same time the debtor had debts to the State and the IKA of 170.000 euros. In these cases, the courts have held that 'due to the amount of the debts against the debtor covered by security in rem, even if the auction were to take place, the auctioneer would not receive any money'.

More recently, the Athens Court of Appeal, in its decision No. 2134/2019, ruled that the seizure imposed by a bank against the debtor's property worth 50,000 euros for the satisfaction of a claim of approximately 300,000.00 euros was abusive, because the property was already subject to a mortgage lien of another bank up to the amount of 70. 000 - and the debt to the second bank amounted to EUR 42 300,00 at the time of the opposition proceedings - while the enforcement agent had not previously proceeded with an auction against the property of the co-debtor, on which there was a first-class mortgage for EUR 190 000. It was therefore considered that the bank which had imposed the attachment and conducted the auction would not benefit from the auction because the price obtained from the auction would be received by the other bank which had registered the lien. 

2.4. Abuse of enforcement taking place in view of the debtor's attempt to collectively settle his debts. 

Another situation of particular interest to borrowers, individuals or companies, is where the debtor has initiated the necessary procedures for the settlement of his debt - for example, out-of-court mechanism, reorganisation, negotiations under the Code of Conduct for Banks, the law on over-indebted individuals - and the credit institution imposes a seizure of his assets. Thus, the Athens Court of Appeal, in its decision No. 2604/2019, presumed that the seizure imposed by a bank, which had already declared its intention to participate in the procedure of the out-of-court debt settlement mechanism, to which the debtor company had appealed, is invalid as improper. A similar case is the case of decision 5352/2011 of the Athens Single Judge Court of First Instance, where the bank's enforcement was found to be abusive, even though the debtor had already expressed its intention to join the law on over-indebted individuals (Katseli Law), which was in force at the time. 

2.5. Abusive enforcement by the bank when the debtor has already initiated legal proceedings to contest the debt.

The recent decision No. 290/2019 of the Ioannina Single Judge Court of First Instance was a recent decision of the Court of First Instance of Ioannina. The court ruled that the enforcement action brought by a bank against borrowers who had taken out a loan in Swiss francs was abusive, because the borrowers had challenged both the validity of the loan agreement and the amount of the bank's alleged claim against them in a previous lawsuit. The bank's conduct, which did not wait for the decision on the borrowers' claim to be delivered, but initiated proceedings to enforce the recovery of its claim, was therefore considered abusive. 

The reasoning of this judgment may be of great importance in the context of enforcement against borrowers and guarantors who have already had time to contest the banks' claims against them in court. 

2.6. Issuance of a title and initiation of enforcement proceedings in the course of negotiations between the creditor and the debtor

The behaviour of a creditor who, while negotiating with the debtor to settle his debt, proceeds to issue an enforcement order against the debtor has been found by the courts to be abusive. This results in the invalidity of the instrument and, as a consequence, of the further enforcement proceedings. By way of example, the decision of the Athens Single Judge Court of First Instance No. 5095/2019 presumed the invalidity of the payment order issued by a bank against a debtor company, because it had appealed to the courts for the issuance of the payment order during the negotiations between the company and the bank for the settlement of the debt. The court held that the bank's conduct was abusive because, by issuing the order, the bank had acquired a position of strength in the negotiations, since it could at any time proceed to enforce the recovery of its claims. 

2.7. Other cases to be taken into account

Other factors also play a role in the judicial assessment of whether or not the accelerated enforcement is abusive. For example, the debtor's attempt to settle his debt will be assessed positively, as will any payments he may have made against his debt. Also, the fact that the attachment was imposed on a property which is the debtor's main residence may also, in combination with the above, lead to the invalidity of the attachment. Even the fact that the debtor is unable to find employment has been positively taken into account by the courts. Ultimately, therefore, the judgment on the abusive or non-abusive nature of the enforcement is based on a combination of several factors to be taken into account. 

3. Conclusion

At a time when creditors, in particular banks, are undertaking enforcement proceedings to enforce their claims, it is important that the debtor reacts promptly to enforcement actions in order to avoid the auctioning of his property. This is often done in order to put pressure on the debtor to accept a burdensome arrangement more easily. Such behaviour has often been found by the case law of our courts to be abusive and leads in the majority of cases to the invalidity of the enforcement procedure. What must be pointed out is the short time limits provided for in the law of enforcement, which require the immediate mobilisation of the debtor in order to prevent the effects of enforcement. 

(in relation to the auction procedure and the debtor's defence read here and in relation to the most common grounds for cancelling the attachment read here)