Competence to deal with claims for the resolution or early maturity of mortgage loans, claims for payments and the realization of mortgage rights

On 25 May 2017, making use of article 98.2 of the Organic Law of the Judiciary, the Permanent Commission of the General Council of the Judiciary agreed to grant certain courts, with the territorial jurisdiction indicated for each case, exclusive and inclusive faculty to hear the matters relating to the general conditions included in financing contracts with real estate guarantees whose borrower is a natural person.

This measure has been in effect since 1 June 2017 and, as it was foreseeable, has already given rise to the first controversies on the extent of this alteration of the territorial jurisdiction rules in relation to the topic to which it refers.

As it is well known, following the court’s assessment of the unfairness of certain clauses of early termination included in many mortgage financing contracts, which entails the nullity of such clauses, several banking institutions have been forced – in order to avoid unfavorable resolutions or the suspension of their enforcement proceedings pending the resolution by the ECJ of the questions referred for preliminary rulings by the Spanish Supreme Court regarding the extend of said nullity (Supreme Court’s decision 271/2017 of 8/2/2017) – to initiate ordinary actions by filing lawsuits for the resolution or early maturity of mortgage loans (under the provisions of Articles  1124 and 1129 of the Spanish Civil Code, i. e. on a legal and non-contractual basis), claim for amount and realization of the mortgage right.

And it is within the scope of this type of lawsuits, where in practice the controversy has arisen as to which Court is competent to hear this class of actions, since they have been presented indiscriminately before the Courts referred to in the agreement of the Permanent Commission of the General Council of the Judiciary of May 25, 2017, as well as before the Courts of First Instance of the place where the property is located in accordance with procedural regulations 50 and 51 of the Spanish Code of Civil Procedure.

The issue has been analyzed at a meeting of the Presidents of the Civil Sections of the Provincial Court of Barcelona on 29 September 2017, and the following decision was unanimously adopted to unify criteria:

“The jurisdiction to hear claims in which declaratory actions are exercised for early maturity or resolution of mortgage loan contracts claiming for the amount and realization of the mortgage right is vested in the Court of First Instance that is competent and not in the Court of First Instance 50 of Barcelona. The jurisdiction extends to claims for nullity which may be brought by the defendant, by way of an exception or a counterclaim, on account of the unfairness of a clause.”

In order to justify its decision, which we agree with, the Provincial Court expressly states that «the actions in which declaratory actions are brought for the early termination or resolution of mortgage loan contracts, claims for payments and for the realization of the mortgage right, are not in themselves individual actions relating to the general conditions included in financing contracts with real estate collateral whose exclusive competence falls within the jurisdiction of the Court of First Instance 50 of Barcelona, and therefore their knowledge must be attributed to the territorially competent First Instance Court.”

The Provincial Court does not go any further into what are the norms or rules of territorial jurisdiction that are affected by the agreement of the Permanent Commission of the General Council of the Judiciary, limiting itself, therefore, to stating that the claims to which we have been referring constantly do not fit within the subject matter for which an alteration of the rules of territorial jurisdiction is agreed.

Going a little further into the matter, in our opinion the only two territorial jurisdiction rules that are temporarily altered are those contained in article 52.14º of the Law of Civil Procedure, for individual actions in the matter of general conditions clauses; and in article 86 ter 2.d of the Organic Law of the Judiciary for collective actions on the same matter. Therefore, solely and exclusively, the claims in which actions are brought whose competence in this matter has been determined by the rules set forth in the aforementioned articles would be affected by the agreement of the Permanent Commission of the General Council of the Judiciary.

In claims in which declaratory actions are brought for early maturity or termination of mortgage loan contracts, for claims for payments and for the realization of the mortgage right, what is sought is the resolution or early maturity of the obligation, pursuant to a legal provision (arts. 1124 and 1129 of the Civil Code) and not to a contractual clause, as well as the sentencing to payment of the amounts due. The fact that the contract to be terminated early or resolved contains general conditions can in no case lead to the conclusion that actions are being brought in the lawsuit relating to them, since, as we have already indicated, in these cases, the action is a claim for breach of contract with a legal basis.

Therefore, considering that the agreement of the Permanent Commission of the General Council of the Judiciary does not in any case alter the mandatory rules of objective jurisdiction contained in article 45.1 of the Code of Civil Procedure («It is incumbent upon the courts of first instance to hear, in the first instance, all civil matters that by express legal provision are not attributed to other courts») and article 85 of the Organic Law of the Judiciary («The courts of first instance shall hear in civil order: 1. In the first instance, judgments not attributed by this Law to other courts or tribunals «) nor those of territorial jurisdiction regulated in the articles 50 and 51 of the Code of Civil Procedure, relating to the general jurisdiction of natural and legal persons; and bearing in mind that the rules applicable to special cases contained in the articles 52 LEC and 86 ter 2. d of the Organic Law of the Judiciary do not apply due to the topic, we cannot reach any other conclusion than that – sharing as we have already said the criteria adopted by the Provincial Court of Barcelona for the unification of criteria – the competence to hear claims in which declaratory actions of early expiration or resolution of mortgage loan contracts to claim for payments and realization of the mortgage right are exercised falls to the Court of First Instance that is territorially competent in accordance with articles 50 and 51 of the Code of Civil Procedure.

Written by José Manuel Rodríguez, COO Adarve Corporacion