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Order of priority in the pledge

Jan. 15, 2018, midnight

Order of priority in the pledge

 

The Deposit is considered to be one of the most reliable ways to ensure the fulfillment by the debtor of the principal obligation, since it gives the creditor a preferential right, as the mortgagee over other creditors to receive satisfaction at the expense of the collateral. Some individuals believe that the availability of collateral is a 100 percent guarantee of protection of interests of the creditor. However, this statement may not agree, in particular because of the fastening in the civil legislation of the Russian Federation the possibility of repeated registration of pledge of property already in pledge (subsequent pledge). So, the subsequent mortgagee actually bears the risk of failing to meet their requirements at the expense of the collateral, since, in the case of treatment of punishment prior mortgagee, the requirements for more "late" pledge are repaid simultaneously or proportionally with the previous one, and on the "leftovers" after the damages in full prior mortgagee (clause 1 of article 342 of the civil code).

Given that in practice the mechanism of "pledging" is used quite often, try to understand its intricacies, which can affect the sequence of satisfying the claims of mortgagees.

Initially I would like to note that until 01 July 2014 in the Civil code contained a rule that allows members of the previous pledge to impose a ban on the registration of subsequent pledge (clause 2, article 342 of the civil code as amended by Federal law dated 05.05.2014 № 99 – FZ). Since that date, the provisions of the Deposit have undergone significant changes (the Federal law from 21.12.2013 № 367 – FZ "On amendments to the Civil code of the Russian Federation and the annulment of certain legislative acts (provisions of legislative acts) of the Russian Federation" (hereinafter – "law on amendments")). The legislator has established the possibility of a subsequent pledge with the caveat "unless otherwise provided by law." Innovation has deprived the prior mortgagee and mortgagor the right to prohibit subsequent pledge, but have given the authority as defined in the prior pledge agreement terms subsequent Deposit. Therefore, dealing with a "later" Deposit, you must correlate the date of the conclusion of the previous pledge agreement, the terms relating to all "secondary" liens of the property, and applicable to the data relations.

As a General rule, the priority of claims of secured creditors depends on the date of occurrence of each Deposit. Its correct determination is crucial. Prior to the entry into force of the Federal law on amendments, there was a provision by which it was recognized that the right of pledge arose from the moment of concluding the pledge contract, and concerning pledge of property which is for the transfer to the pledgee from the moment of transfer of the property. A different procedure could be envisaged directly in the pledge agreement. However, in disputes on the priority of satisfaction of creditors ' claims under the contracts of pledge of goods in circulation concluded before 01 July 2014, the courts adhered and still adhere to the position that the right of pledge under the pledge agreement of goods in circulation does not occur at the time of conclusion of the pledge agreement, and after execution by the mortgagee (lender) of the obligation to transfer to the pledger (the debtor) in cash, the obligation to return which is provided by this pledge (decree of the Presidium of the Russian Federation from 25.12.2012 № 10292/12; The decision of Arbitration court of the Ural district from 18.10.2016, № F09-9156/16; the Decision of Arbitration court of the Moscow district from 14.12.2016 year the case № A40-6347/2015).

The current rules on pledge provide for several conditions to determine the date of occurrence of the collateral and, as a consequence, the order of satisfaction of requirements of creditors on the Deposit of one property. Thus, "the right of the mortgagee to the mortgagor relations arise from the moment of concluding the contract of pledge, unless otherwise provided by contract, this Code and other laws" (paragraph 1, article 341 of the civil code). The rights under the pledge agreement can not "emerge" from the mortgagee is informed of the occurrence of the primary obligation. Accordingly, it was logical to conclude that, if the primary obligation is a real agreement, for example, a loan, the time of the Deposit of the performance security it is the time of the execution creditor's obligations under such contract, that is the point of giving money to the debtor, regardless of when they signed such a contract.

However, if the collateral is property, not related to real estate, and his bail is taken into account by the registration of notices about him, in case of dispute with third parties, including in terms of determining the rights of the previous and subsequent mortgagee in respect of the collateral, the pledgee is entitled to invoke its right of pledge only after the commit record of the account collateral (the Decision of Arbitration court of far East district from 31.01.2017 year F03 - 6427/2016). The exception to this rule is the case where it is proved that at the time of conclusion of the contract or at the time of emergence of circumstances with which the law links the emergence of mortgage, the subsequent mortgagee knew or should have known of the presence of the previous pledgee. In such a situation the requirements of the prior pledgee shall be satisfied preferentially, regardless of the date of Deposit (the Decision of Arbitration court of the Ural district from 07.06.2017, № F09-3044/17).

It should be noted that the legislator in a special way established priority of claims of the pledgees arising under committed prior to 01 July 2014 contracts of pledge of property not related to real things, and the information about which is entered in the register of notifications on pledge of movable property in the period 1 July 2014 to 1 February 2015 inclusive. The priority of the security Deposit in such cases is determined not by the date of recording the pledge, and the date of the execution of loan contracts (section 6 of article 3 of the Federal law on amendments).

In addition to the above, the judicial practice actually formed, another rule that must be considered when establishing the rights of the previous and subsequent pledgee. In particular, the Supreme Court explained that the rights and obligations of the mortgagee in respect of property, which place restrictions on the disposal (article 174.1 of the civil code), has a person in whose favor was made a judicial act, and the court or court bailiffs to ensure the execution of the act imposed a lien on the debtor's property or prohibit the disposal of such property. In this case, the date of Deposit is the date of seizure by the court bailiff or executor, and in respect of property to which the rights are subject to state registration, — date of entry into the state register of record about the arrest (clause 94 of the Resolution of Plenum of the Supreme Court of 23.06.2015 year № 25 "On application by courts of certain provisions of section I of the Civil code of the Russian Federation"; the Definition of the Supreme Court of 26.09.2017 year in the case of No. 37-КГ17-10).

Considering the question about the order of satisfaction of claims of mortgagees of the same property, I would like to note that, in our opinion, unlike other cases of satisfaction of claims of mortgagees at the expense of the mortgaged property the interest of subsequent mortgagees of the most vulnerable in bankruptcy of the mortgagor. This is due to the fact that:

1) from the proceeds from the sale of the property only 70 % (80 % if the secured execution of the loan agreement) to be applied towards repayment of requirements of creditors on liabilities secured by pledge; the rest is used to meet the claims of creditors of the first and second queues and for the implementation of payments current account;

2) initially used only in the principal amount of the outstanding principal obligation and interest for the use of funds;

3) funds for the repayment of the claims of the subsequent pledgee are sent from the remaining part of the funds designated in paragraph 1, only after full satisfaction of the original pledgee (article 138 of the Federal law from 26.10.2002 № 127 – FZ "On insolvency (bankruptcy)"; paragraph 15 and paragraph 22.1 of resolution of the Plenum of the Russian Federation from 23.07.2009, № 58 "On certain issues related to satisfaction of the pledgee in case of bankruptcy of the mortgagor").

Taking into account the above, we recommend you "not to deceive ourselves" at the conclusion of subsequent loan contracts, but rather to try to assess possible risks of such a step: to take into account the conditions of the previous liens against the property, to correlate the size of the obligation secured by the prior pledge, the market value and condition of collateral, analyze the information on financial and economic activities of the future mortgagor, etc. In the evaluation of collateral is necessary to remember that the collateral may not be transferred to property that is not permitted foreclosure, claims, inextricably linked with the identity of the creditor, in particular requirements about the alimony, about compensation of the harm caused to life or health, and other rights which concession to other person is prohibited by law. The apartment which is the only shelter of the pledger, where the registered minor children, under this prohibition does not fall. It can be decorated collateral and may be foreclosed by the direct instructions of the law (clause 1, article 78 of the Federal law as of 16.07.1998 № 102 – FZ "On mortgage (pledge of real estate)". However, cases of repossession of the apartment is limited. Such an action is possible under the condition that the apartment was pledged under the mortgage contract or mortgage by virtue of the law to ensure repayment of the loan or the target loan provided by a Bank or other credit organization or other legal entity for the acquisition or construction of such apartment or other residential building or apartment, their overhaul or other inseparable improvements, as well as the repayment of previously granted credit or a loan for acquisition or construction of a house or apartment. Foreclosure on an apartment is grounds for termination of the right to use it as the mortgagor and any other persons residing in it, including minors. Upon failure of those persons to leave and/or leave voluntarily, the mortgagee must apply to the court for recognition of their terminated right of use of apartment, eviction and removal from the register (Definition of the Supreme Court of 10.11.2015 No. 4-КГ15-41; Appeal ruling the Saint – Petersburg city court 14.04.2015 No. 33-5484/2015).

In establishing priority order for satisfaction of claims of pledgees to thoroughly study the conditions and grounds of prior liens, as often unscrupulous pledgers use the named legal mechanism for the deprivation of the subsequent mortgagees of the ability to repay requirements at the expense of such property. The presence of "defects" of the transaction on pledge of property as well as its performance in some cases, there may be grounds to challenge the previous authority of the pledgee, which in turn may affect the sequence of repayment of requirements of the mortgagees.