June 2024

Decision of the Single-Member Court of Appeals of Athens Regarding the Suspension of Foreclosure for an Alleged Debt of €2 Million

Recent decision number 148/2024 of the Single-Member Court of Appeals of Athens has been published, suspending a foreclosure that was being initiated on our clients' residence for an alleged debt of nearly €2,000,000. Specifically, the contested decision, accepting a relevant ground of objection from our clients, ruled that the enforcement process initiated against them was defective and null. This was because, in the enforcement order, a prerequisite act for the seizure of property, the initiating creditor requested the payment of the alleged debt to the entitled entity – a special purpose company (SPV), instead of the creditor itself, which is the only authorized manager of the claim.

A key excerpt of the decision states verbatim: "The respondent loan and credit management company has become the manager of the disputed claim of the aforementioned special successor (acquirer), pursuant to the aforementioned business claims management contracts governed in form and content by Law 4354/2015, and consequently, the rights arising from the transferred, due to sale, claims, of which the aforementioned special successor is the beneficiary {...}, can only be exercised through the respondent management company in accordance with Article 1 para. 1 para. c, Article 2 para. 4 of Law 4354/2015. Consequently, the payment order dated 11.10.2023 for the disputed claim to the special successor, who (special successor - acquirer) is not authorized to judicially pursue the transferred claim, is invalid, as is the entire enforcement process initiated based on the said payment order, concerning all applicants." It is also worth noting that the applicants for the suspension were likely to suffer irreparable harm from the conduct of the contested foreclosure, as there was a risk for three of them to lose their primary residence, where other non-litigant family members also reside.

As we have written elsewhere: "A primary issue concerns the rightful claimant for the disputed debt collection. Simply put, when the Servicer seeks judicial collection of any amount, should it be requested to be paid to the Servicer, who merely manages it, or to the fund that purchased the claim? It is generally argued that if the Servicer is recognized as having the authority to conduct the legal battle on behalf of the Fund, it also has the authority to demand payment of the claim to itself. Therefore, if the debtor wishes to stop the foreclosure, for example, they should pay their debt to the Servicer and not to the Fund. Similarly, in the payment order preceding the seizure, the wording at its end should require the debtor to pay the Servicer and not the Fund. This issue is of great practical importance because if payment is requested from an unauthorized person, every act of enforcement can be deemed invalid".