The Court of Cassation – with the judgment issued on 16 February 2015, No. 3022 – ruled that partners of a partnership cannot be considered as third parties and therefore the mortgage cannot be considered a guarantee for obligations of a third party: as a consequence, the creditor having  a  mortgage  on  the partner’s (not partnership’s) asset shall be considered a secured creditor in the concordato of the partnership

The case

The partner of a general partnership sued the bank, alleging that the bank had granted a loan to the company (of which he was a partner and was directly liable by law for the partnership’s debts) and that, in order to guarantee such a loan, he had constituted a mortgage on his own personal assets.

The  plaintiff,  on  the  assumption  that  the  concordato of  the  partnership  was  confirmed  and  performed, requested the cancellation of the mortgage arguing that the release of the residual debts of the partnership, as a consequence of the concordato – which, pursuant to Art. 184 IBL, also extends to partners – made the mortgage  unenforceable.

The bank pleaded that the discharge was limited to the personal liability of the partner as such and not also on the mortgage he had granted as a third party.

The Court of First Instance rejected the claim of the partner, and so did the Court of Appeals. In particular, the Court of Appeals found that the discharge arising from the concordato refer only to the partner as he is by law fully liable for the obligations of the partnership, but cannot extend to the mortgage granted on a personal basis on assets which are not part of the concordato.

The partner then appealed to the Court of Cassation.

The issues

Art. 184 IBL states that the concordato is binding on all creditors prior to the publication in the register of companies of the initial petition, but creditors keep their rights against (inter alia) guarantors of the debtor, while on the other hand, unless otherwise agreed, the concordato is also effective against partners who are fully liable for the partnership’s debts.

The Court of Cassation was called on to give guidance as to whether Art. 184, first paragraph, IBL apply to third party mortgages – which are not explicitly mentioned – and if, when the third party is a partner, the mortgage granted by him in the interest of the partnership would survive the discharge.

The decision

The Court of Cassation stated the following principles:

  • the mortgage granted for a debt of the partnership, even if the mortgaged asset is owned by a partner and  not by the partnership, requires that the receivable must be considered in the concordato as a secured claim;
  • the mortgage creditor is thus entitled to the full payment within the concordato (while it is still possible that – within the limits of Art. 160, second paragraph, IBL – a partial payment with a floor equal to the liquidation value of the asset);
  • in case of partial payment in the concordato, the partner remains liable for the unsatisfied part of the claim.

Commentary

The Court of Cassation seems to overcome a principle, according to which Art. 184, second paragraph, IBL, provides (not an  extension of the concordato to the partners but) an extension in favour of them of the discharge: as a result, according to this approach, for the obligations of the partnership even the partners are liable within the limits of the concordato proposal and benefit of the discharge. The Court seems then to depart from this approach.

It does not seem on the other side that the recent ruling would depart from the principle, affirmed by a large part of the commentators, according to which the partnership’s creditors cannot enforce their claim, even within the limits of the share recognized in the concordato proposal, on the personal assets of the partners prior to the execution of the concordato.