The Auction Procedure and the Debtor's Defence - Law Firm Psarakis & Kefalas

Legal Insight

January 2020

George Kakouriotis, M.D., Lawyer

Konstantina Daskalopoulou, Trainee Lawyer

Summary: Enforcement is the last weapon in the quiver of the creditor who seeks satisfaction of his claim, and aims, it is said, at the literal administration of justice. In the case of pecuniary claims, when the debtor fails to comply with his obligation, the creditor proceeds, following a court decision or payment order, to seize the debtor's assets (movable and/or immovable property) and to liquidate them through a public forced - and now, of necessity, electronic - auction procedure. In the place of the creditor, in the vast majority of cases, it is the credit institutions or bad debt management companies which have not been able (or have not attempted) to find an out-of-court settlement with the debtor. In order to protect the debtor, the legislator gives him the possibility to defend himself at the various stages of the enforcement procedure within a strictly defined timeframe and for specific reasons.

1. Introduction

In a previous article we have examined some indicative cases of enforcement that have been found to be abusive by the case law of our courts. Thus, when the debtor (otherwise known as the "defendant in enforcement") takes legal action in good time against the enforcement proceedings and the instrument under which they are being carried out, identifying the potential defects in them and in the creditor's claim, he can obtain the annulment of the proceedings and the rescue of his property. In those cases, however, where the debtor is inactive and the proceedings continue until the auction takes place, the only possibility remaining is to challenge the validity of the auction (and in particular the auction and award report, which is the final act of execution) and to attempt to prevent its outcome, namely the auctioned property becoming the property of the successful bidder.

2. Electronic auction procedure

Law 4512/2018 made it mandatory to conduct all auctions by electronic means after 21.2.2018. According to the explanatory memorandum of the law, technological development now allows the electronic auction to be conducted and guarantees the unhindered participation of the interested parties, realizing the common goal of the lender and the debtor, which is to achieve the highest possible auction. This new procedure, which, according to case law (see in particular the Rhodes Single Judge Court of First Instance 567/2018), promotes transparency and fully preserves the protection of the debtor, is necessarily differentiated in certain respects from that of the physical auction and is briefly as follows:

The electronic auction is carried out through the electronic auction systems ("EL.SY.PLEIS", https://www.eauction.gr/) by notaries certified for this purpose and based, in principle, in the district of the place where the seizure took place (called auction officials). In addition to the auction officials, visitors, prospective bidders and observers (debtors) have conditional access to the system.
The auction shall be held within 7 months from the date of seizure and in any case not later than 8 months and shall take place on Wednesday, Thursday or Friday, from 10:00 to 14:00 or from 14:00 to 18:00, and in any case shall not take place between 1 and 31 August. The day on which the auction is to be held shall be specified in the seizure report.
After the bailiff has drawn up and posted the extract from the seizure report on the Auction Publications Page of the Judicial Publications Bulletin of the Legal Insurance Section of the Single Fund for the Independently Employed, which (p. (i.e. the posting) must be carried out by the 10th day after the seizure, in the case of movable property, and by the 15th day, in the case of immovable property, the notary shall post on the website of the EL.SY.PLEIS. It is argued that, in the absence of any express legislative provision to that effect, the latest date for such an announcement is the third working day before the auction, so that bidders can validly express their interest in the auction no later than two working days before the auction takes place. Finally, by 17:00 on the day before the electronic auction, the clerk shall post a list of potential bidders who meet the statutory requirements to take part. This completes the so-called preparatory stage of the auction.
The electronic auction is an open bidding type, so candidates submit successive bids, and is concluded by awarding the contract to the highest bidder, i.e. the highest bidder. The result is announced via the EL.SY.PLEIS and the notary draws up the auction and award report. After the payment of the auction price, the auctioned object or the summary of the award report - if it is a real estate - is delivered to the successful bidder and the auction procedure is completed.

3. Defence against auctioning

As mentioned above, the forced auction, once conducted, can be challenged either if it is vitiated by defects in previous acts, provided of course that they were challenged in good time, or if it is vitiated by defects in the conduct of the auction itself.
Α. In particular, defects in the enforcement procedure may have crept in much earlier than the conduct of the auction, as early as the first acts of the auction (e.g. drafting of the cheque for execution and the seizure report) up to the completion of the so-called "pre-auction procedure". The latter consists of the filing of the critical documents serving the enforcement procedure with the notary who conducts the auction (8 days from the seizure), the aforementioned publication of the excerpt of the seizure report on the Judicial Publications Website of the TAN - EBRD (10 or 15 days, depending on whether it concerns movable or immovable property) and its service, within the same period, on the pledging/mortgage lender and on the competent tax authorities.
If the above-mentioned acts are defective and/or the debtor has objections to the claim which his creditor seeks to satisfy by way of enforcement, in order to stop the auction, these objections must have been raised by means of an objection already before the auction is held and, in particular, within 45 days of the seizure. Failure to comply with the time-limit for challenging the abovementioned acts strengthens them and renders them immune, their defects having no effect on the validity of the forthcoming auction. Examples of such objections are:
the acceleration of enforcement on the basis of a non-existent executory title or a title with formal or material defects (e.g. the amount and nature of the claim is not clear, it does not bear the executory form, etc.),
acceleration of enforcement before the condition has been met or the time limit on which the claim depends has expired and without the document proving it being communicated (CP 1543/2014, CP 909/2006),
more generally, the acceleration of enforcement for a claim that has not been established, has already been extinguished or is defective,
failure to notify, by the universal or special successor of the enforcing creditor, together with the new cheque, the documents proving his succession (e.g. the deed of acceptance of inheritance, the notice of assignment by the assignee of the claim, the decision approving the merger and the notice of entry in the Register of Public Limited Companies on the merger of a public limited company, etc. - CC 345/2006),
the absence of an indication of an order for enforcement on the copy of the instrument of enforcement (SC 1394/1980),
the vagueness or incorrect calculation of the funds mentioned in the cheque for payment (FSA 535/2018),
the seizure of objects that are absolutely necessary for the living of the debtor and his family or for the exercise of his profession when he earns his living through his personal work (MΠrΔram 42/2010),
the incomplete or incorrect description of the seized property in the seizure report or its extract, which creates serious doubts as to its physical or economic identity and does not exclude its replacement (BPC 545/2017). It should be noted that otherwise the relevant deficiencies are corrected through the so-called rectification appeal, which is heard in the procedure for interim measures and does not affect the validity of the seizure.
the lack of reference in the seizure report or in the extract of the encumbrances (mortgages, mortgages, etc.) registered in the seized property until the seizure - CP 1538/2008),
the setting of a date for the auction to take place before the threshold of 7 months from the seizure (MΠрΘεσ 15472/2018),
Irregularities in the otherwise substituted delivery of the cheque for execution and the seizure report to the debtor and to the registrar of the Magistrate's Court (in case of movable property) or to the mortgagee or the head of the land registry (in case of immovable property) and to any third party owner or tenant (in case of seizure of a mortgaged or mortgaged property), such as service at a place other than the place of the defendant's actual residence/registered office (e.g. e.g. in a shop that is not his/her business establishment - Efpatr 298/2007, AP 1403/2005, with postage at the offices of a company lacking legal representation, etc. - AP 701/2012), the failure to mention in the service report that the person refusing service was the debtor's joint tenant (AP 658/2007) or service on a person who was not the legal representative of the debtor limited liability company (Patras Court of Appeal 1017/2007),
defects in the filing of the documents with the auction clerk or in the publication and service of the extract of the seizure report on the pledging creditor (in the case of movable property) or on any third party owner or noteholder and mortgagees (in the case of immovable property)
the appointment of a notary outside the place of enforcement as the auctioneer, without a statement in the body of the seizure report and in the extract therefrom of the reason for the impossibility of appointing a notary within the place of enforcement.
However, if one or more of the acts of execution preceding the auction were not merely defective but were omitted in their entirety or were performed inadvertently or in such a way as to render them procedurally invalid, they shall render the auction null and void by means of an objection lodged within 30 days of the date of the auction (movable property) or within 60 days of the transcription of the abstract of the auction report (immovable property), irrespective of any prejudice to the debtor who has lodged the objection. Typical examples are:
failure of the bailiff and the witness to sign the seizure report,
failure or late filing of the relevant documents with the auction clerk (e.g. late filing of the seizure report - CP 407/2001) or publication of the extract of the seizure report,
the omission, late or invalid service of critical documents (e.g. service at a previous residence despite the fact that the change of residence was notified - OLAP 3/2007, indication in the extract of a date later than the actual date of the auction due to which the defendant is blamelessly unaware that the auction took place - CC 8/2011, service on an unduly appointed representative - CC 160/1985 or on the bankrupt debtor instead of the trustee - CC 670/1989, late service of an extract from the seizure report on the mortgage creditors - CC 119/2011, etc. etc.).

Β. On the other hand, defects and deficiencies in the main procedure of the auction, i.e. those relating to the auction itself and its conduct (e.g. defects in the auction or re-auction and award report or in the summary of the award report), may be raised by means of an objection filed exclusively within the aforementioned 30 or 60-day time limits.

The same time limit is claimed to apply to the acts identified in the so-called 'preparatory stage' of the electronic auction, as explained above, the omissions or complete omission of which are considered to affect the auction itself. Such defective acts may include, for example:

the conduct of the auction by a non-certified notary and the participation in the auction of non-certified bidders or bidders who have not paid a deposit (EphAθ 2653/2011),
the untimely posting of the announcement in the electronic auction systems which prevented the participation of more bidders due to the short or non-existent deadline for their certification,
the continuation of an auction procedure that was temporarily interrupted due to technical failure of the electronic auction systems without a new order from the auctioneer or before the expiry of 10 working days from the posting of the notice of continuation, etc.

4. Suspension of the auction procedure

Specifically in the context of enforcement against immovable property for pecuniary claims, the possibility of suspending the auction, once only and for a maximum period of six months, is provided for in order to give the defendant in temporary financial difficulties an additional opportunity to rescue his seized property or to secure a higher auction proceeds after the end of a possible seasonal fall in the value of the property being auctioned. This suspension shall be granted on application by the defendant for enforcement lodged at least 15 working days before the day of the auction and shall be heard in the interim procedure. A condition for granting it is the presumption that there is no risk of harm (procedural or pecuniary) to the creditor who is the enforcing party and the existence of a reasonable expectation that the debtor will satisfy the latter within the period of suspension or that after that period it will be possible to obtain a higher bid. The granting of the suspension shall be subject to the payment of any costs incurred in bringing the auction forward and of at least ¼ of the capital due to the recoverer. This measure is irrelevant to the validity of the auction and is subject to strict conditions aimed at striking the right balance between the interests of the creditor who is being enforced and the debtor who is being enforced, providing the latter with an 'extension' at the last stage of the enforcement procedure without disregarding the interests of the debtor.

It should be noted that, although Law 4335/2015, which set 8 months from the date of seizure as the latest point in time for the auction to take place - providing at the same time that within this period the relevant decision on any opposition to the execution will have been issued - abolished the possibility of suspension, it is nevertheless accepted by part of the case law (see. In addition, the fact that the right to enforce a judgment has been withdrawn from the courts is not yet fully recognized by some of the courts (in particular, MΠrAmal 58/2017, MΠrAθ 7766/2017, MΠrKal 202/2017 and the judgment no. AP 11/2017) that such suspension of an impending auction may ultimately be granted in those cases where it is not pοssible to meet the deadlines for the hearing of the opposition and the decision on it.

5. Suspension of the auction

If, for whatever reason, the auction is not held on the date set (e.g. agreement to pay creditors, annulment of the execution, suspension of the auction, abandonment of the auction, etc.), the auctioneer shall be entitled to cancel the auction. ), it may be accelerated again either by a declaration of continuation by the creditor who has already been accelerated or by a declaration of substitution by another creditor who has similarly initiated enforcement proceedings against the debtor and is continuing the auction procedure. Within 3 days, the auction clerk shall post on the website of the TEN-EFTA's IDD the notification of the declaration and the new date of the auction within 2 to 3 months from the date of the declaration. Against the latter, the execution defendant may lodge an objection within 30 days from the date of posting, raising any objections as to its validity (e.g. due to cancellation or waiver of the attachment, suspension of the execution or the auction, deficiencies in the substitute creditor's legal documents filed with the auction clerk, etc.), further delaying the liquidation of its assets.

6. Conclusion

Although the conversion of the 'physical' auction into an electronic auction has significantly reduced the chances of errors and omissions occurring during the enforcement stages, and with the certification procedure providing additional guarantees for the reliable operation of the electronic systems, it is understood that there is still a risk of shortcomings in the enforcement procedure, which the debtor can demonstrate in court in order to annul the auction of movable and immovable property. In any event, the debtor must be ready and alert from the outset of the proceedings against him in order to defend his legal interests as effectively as possible.

(in relation to the cancellation of an attachment on the grounds of impropriety read here and in relation to the most common grounds for the cancellation of an attachment read here)