Lender's Notice of Auction

Legal Insight

November 2022

Danae Stamarga, LL.M

Summary: This article sets out the way in which creditors other than the creditor of the debtor in enforcement may participate in the distribution of the auction proceeds and be satisfied therefrom.

Introduction

 When someone owes you money for whatever reason, the only way to get that money, when they refuse to give it to you, is to go into execution. In order for this to happen, however, you must have an enforceable title against your debtor (such as a final court decision, a decision that has been declared provisionally enforceable, a payment order, a notarial deed, etc., see Art. 904 CCC). But what happens when you yourself do not have an enforceable title in your hands against your debtor and another creditor, equipped with an enforceable title, has already initiated enforcement proceedings against the same debtor by seizing some of his assets? Can you take part in the enforcement proceedings that have already started? 

The answer is: Yes. And the way to do that is through the institution of the announcement of lenders. Although now (after Law 4335/2015) the legislator allows multiple seizures of the same asset, at the same time he chose to maintain the institution of notice which aims to avoid not only unnecessary costs but also confusion from the simultaneous conduct of several enforcement proceedings on the same property. At the same time, as already mentioned, this institution also enables creditors who do not have an enforceable title to take part in the enforcement procedure and thus satisfy their claim, thus ensuring a place in the distribution of the auction proceeds.

1. What is the announcement?

An announcement is an extrajudicial procedural act, in the form of a request, by a certain creditor (not the obligee) of the defendant of the enforcement, addressed to the auction clerk (notary) and claiming the participation of the former in the distribution of the auction proceeds. In fact, by means of the notice, another creditor of the defendant declares the existence of a claim against the debtor and requests that it be placed on the ranking list. A prerequisite for the declaration is therefore that enforcement has already been accelerated by the seizure of the debtor's movable or immovable property.

2. What claims can be reported?

Another advantage of this institution is that it allows you to declare any kind of claim. Thus, all creditors of the enforcement defendant have the right to give notice, whether or not they have an enforceable title, whether or not they have issued a cheque for payment, whether or not they are privileged, whether or not their claim is evidenced by a document. Even creditors whose claim is still subject to a condition or time limit may be notified. Contingent creditors are classified randomly, which means that they are classified for the event that the contingency is paid. In practice, the part of the award attributable to them is only deposited and paid after the condition has been met.

It is also worth noting that as long as the claim has not been extinguished, one can be declared for the same claim in more than one auction against the same debtor or co-debtor. This is because classification alone does not extinguish the claim {see in this respect the judgment no.  590/2008 AP: "It follows from the combination of the provisions of Articles 972, 979 and 980 of the CCP that any prior seizure or announcement and, in general, the participation of the declarant in other classification or execution proceedings against the same debtor or another co-debtor, does not deprive the creditor of the possibility to be announced for the same claim in another auction, since classification alone does not result in the extinction of his claim. If, however, the creditor was subsequently ranked in a certain list and his ranking was finally unaffected (in the sense of the enforceability of that list), then, in view of the fact that the auction proceeds have already been publicly deposited for the benefit of the creditors, the relevant claim is written off in accordance with Article 432 of the Code of Civil Procedure"} It is irrelevant whether or not the defendant has other assets or whether the creditor could satisfy his claim in another way.

3. Which lenders can be notified and how are they notified?

As mentioned above, they can be notified:

(a) the pledging or mortgaging or hypothecating creditor,

(b)  the assignee if he is a creditor of the defendant in enforcement,

(c) the person who is enforcing the enforcement in respect of a claim other than that for which he is enforcing the enforcement.

They may not be announced:

(a) a third party claiming the same right to the seized property,

(b) the creditors of the creditor enforcing the attachment,

(c) the bailiff who is entitled to the costs of enforcement,

(d) the enforcing creditor in respect of the claim in respect of which enforcement is sought.

In the event that a third party takes the place of the creditor enforcing the execution, he is not obliged to declare his claim, since he will be the final enforcer. In this case, however, the original creditor will have to be notified, as he is now considered a third party creditor. Thus, in CP 1726/2008 it was held that '... the attaching creditor, if he himself is the one who is enforcing the execution, is not obliged to give notice of the claim for which the attachment was made, nor is he obliged to deposit his securities [...]. An exception to this rule occurs in the case where enforcement is continued, after substitution, by another creditor, in which case the original enforcer, who is now outside the enforcement procedure, may participate in the classification only by lodging a statement of his claim, which must be accompanied by the corresponding deposit of his supporting documents'.

Moreover, a lateral exercise of the right of notice is not excluded, i.e. notice not by the creditor of the defendant, but by his creditor (i.e. the creditor of the defendant), who neglects to exercise this right (see in this respect Court of Appeal of Patras 341/2007).

Since it is not possible to invite all creditors to give notice of any claims, the invitation of creditors is not a condition of notice. Thus, creditors give notice on their own initiative, having been informed of the accelerated enforcement by the publications that take place under the relevant provisions. In particular, the legislator in Art. 955 par. 2, para. b) of the CCP stipulates that "An extract of the seizure report, which includes the names of the party in favour of and the defendant of the execution, as well as their tax identification number and, in the case of legal entities, their name and tax identification number, a description of the seized securities, the price of the first bid, the amount for which the seizure is made, the terms of the auction, the name and address of the auction official, as well as the place, day and time of the auction, shall be issued by the bailiff and published by the bailiff and published by the bailiff by the tenth day after the seizure on the auction publications page of the Judicial Publications Bulletin of the Legal Insurance Sector of the Unified Fund for the Independently Employed" (respectively defined in Art. 995 par. 4 for the case where the seizure concerns real estate). In this way, interested creditors can obtain information about the execution being levied against their debtor by clicking on the website deltio.tnomik.gr and entering the full name of their debtor. By way of exception, the extract of the attachment report is served on the pledgers, mortgagees and mortgagees (see Articles 955(2)(d), 995(4)(d) of the CCP and Article 41 of the Introductory Act to the CCP).

The costs of the declaration shall be borne by the declarant.

4. Method and time limit for filing the notification

The application shall be made by means of a document, which shall be called an application. This document must contain all the particulars of the pleadings, the appointment of a counterparty in the district of the Court of First Instance of the place of enforcement - if no counterparty is appointed, then the counterparty is the lawyer who signs it -, a description of the claim and a request for the claim to be classified in the auction and, if there is a privilege (e.g. a pledge, mortgage or lien), the request must relate to the privileged classification. Since the preparation of the notice requires, as mentioned above, specialised legal knowledge, it has now been expressly stipulated in the law that the notice must be signed by a lawyer.

The deadline for filing the notice is no later than 15 days (not working days) after the auction. According to Article 940A, it cannot be carried out during the period from 1 to 31 August, when it is prohibited to carry out any enforcement action. That period is therefore not to be counted in the abovementioned period. A notice in violation of this provision is invalid without prejudice. This was held by the Supreme Court in its judgment no. 1868/1999, according to which "...the acts of execution prohibited to be performed in August, in accordance with the requirement of Article 940 A of the CCP, include the making of a notice of execution, as well as the filing with the notary of the auction of the documents proving the announced claim, pursuant to Article 972 par. 1 of the CCP, because the announcement is an act of the enforcement procedure, since it constitutes the first act and the starting point of the classification, which is part of the compulsory enforcement procedure. Furthermore, the breach of that provision by the execution of the act of enforcement during the month of August renders the act null and void, without the element of damage, which does not need to be pleaded and proved. Although this is not expressly stated, it is clear from the strongly prohibitive wording of the provision ("... it is not permitted."), which is tantamount to a penalty of nullity, irrespective of any damage.

This document must be served within the time limit mentioned above on the auctioneer, the auctioneer and the debtor to be enforced. The prevailing view is that for the notice to be valid it is sufficient for it to be served on the notary within the time limit. Failure to serve the other two notices (i.e. on the creditor and the debtor) or late service of the notice will only invalidate it if one of those persons stops the notice and, in the course of the opposition, pleads and proves his procedural prejudice. In order to be valid, the above notifications, and in particular the notification to the notary, must be effected exclusively by the competent bailiff by going to the notary's place of residence or to the place where he has his office. Any other method of communicating the notice shall render it invalid. This means that the notice cannot be filed by the creditor himself or his lawyer with the auction clerk or sent to him by post.

The documents proving the existence of the claim must be submitted to the auction clerk by the creditor being notified or by his/her attorney within the same time limit in order to draw up the ranking list. In practice, a notarial power of attorney is required in the event that they are filed by the attorney-in-fact. In all cases, the auctioneer shall draw up a deed of deposit. It is understood that if these supporting documents are formed at a later date, they may be filed at a later date. Thus the failure to file such documents or their late filing does not entail a disqualification from the right to rank, but only from the right to prove the announced claim before the auction clerk. In this case, the claim of the creditor who has lodged a statement of claim shall be considered doubtful and shall be classified by chance, that is to say, subject to the condition that the documents proving it are produced within a certain period of time or in the proceedings for an objection to the classification list. This consideration is set out in the judgment of the Court of First Instance No 119/2003: 'Because, from the provision of Article 972(2)(a) of the Law of the European Union, the Court of First Instance has no jurisdiction to rule on the application of Article 972(2)(a) of the Law of the European Union. 1 of the CCP clearly follows that within the period of fifteen days from the day of the auction, on which the notice of classification must be served, the notice creditor must file with the auction clerk both the documents proving his claim and any privilege securing it. This obligation shall also be incumbent on the obligee where, in addition to the executory title already lodged with the auctioneer, the obligee has other documents proving the privilege on his claim or other claims he has announced. Failure to comply with that time-limit results in the creditor's disqualification, under Article 151 of the CCP, from the procedural right to lodge the documents proving his claim and any privilege securing it with the auctioneer, but not in disqualification from the right to produce those documents before the court during the hearing of the opposition to the classification list, which is obliged, in accordance with the provisions of Articles 335 and 338 to 341 of the Civil Code, to take into account all the evidence relied on and adduced before it by the parties in support of their claims which have a material bearing on the outcome of the proceedings'. 

5. Consequences of notification

It is important to know that with the service of the notice on the debtor, and provided that it has been served on the auction clerk before, so that it can be signed, the limitation period of the claim is interrupted and the debtor becomes in default.

6. The notice as a seizure

The law expressly states that a notice, when based on an enforceable title, has the effects of a seizure. Moreover, the validity of the notice is not affected by the suspension or cancellation of the auction. Thus, if for any reason the original attachment is annulled or extinguished, the notice of foreclosure replaces that attachment. It is only necessary that the original attachment was substituted. For this reason, the auction may not be cancelled or suspended by agreement between the enforcing creditor and the debtor in default without the consent of the creditors who were notified having filed an enforceable title (see in this respect the judgment no. 385/2010 of the Court of Appeal, according to which the auction may be cancelled only if the creditor in default, the notified creditors and the costs have been paid).

In the case of a property seizure, in order for the notice to have the effects of a seizure, it must also be served on the mortgage officer of the district of the place of seizure and recorded in the margin of the seizure record, so that third parties can be informed of its existence and the consequent prohibition of disposal based on it (and) which will be in force if the original seizure expires.

If the notice has not been served or has been served in time on the debtor in default, as already mentioned, yes, the notice is not invalid, but the consequence of the independent attachment that the notice brings about will be invalid. Therefore, special attention should be paid and all the performances provided for in Art. 972 par. 4.