Since 2012, after an important Human Rights Constitutional reform on 2011, Mexican Federal Courts have had different interpretations and have issued contradictory judgments regarding the priority and ranking of consumer’s credits in bankruptcy proceedings. This debate was resolved by two jurisprudences of the Civil Plenary of the First Circuit, which were published on August 2018.
The Commercial Bankruptcy Law in Mexico does not indicate an specific classification, priority or ranking for consumers' credits, as it does for credits against the bankrupt estate, labour, tax, and warranty credits, so by strictly applying articles 217 and 222 of the Law, consumers credits would be considered “common credits”. Nonetheless, as consumers may be considered a defenceless party compared to other creditors and to the bankrupt company, their rights within the bankruptcy proceeding have been a matter of discussion, specially regarding Mexicana de Aviación and Casas Geo bankruptcy proceedings.
The Seventh Collegiate Civil Court of the First Circuit, after resolving an amparo claim against the recognition, ranking and priority of credits judgment dictated in a bankruptcy proceeding in 2012, came to the conclusion that the credits of the debtor’s consumers, should not be considered as common credits, but should be ranked just bellow labour credits and before tax credits, so if the bankrupt company were to be liquidated consumers would get paid just after the company’s employees.
The Court considered that by analysing consumers rights recognized by the Mexican Constitution and the Human Rights International Treaties subscribed by México, as well applying the pro persona principle, there was a considerable inequality between consumers and the rest of the creditors, as consumers must be considered a vulnerable group, and only by ranking consumers credits below labour credits and before tax credits would the State really help them to get a compensation as a result of the bankrupt company’s breach.
On 2016, the Thirteen Civil Collegiate Court in the First Circuit, also considered that the ranking and priority of consumer’s credits should be just below the labour credits, as consumers are a vulnerable social sector and can not be considered equal to other creditors, such as large companies and monopolies. According to the Thirteen Civil Collegiate Court in the First Circuit’s judgment, consumer’s credits are just as labour credits, as article 28 of the Mexican Constitution establishes that the State is obliged to protect consumer’s rights, and by applying the pro homine principle consumers must obtain the major possible benefits when any law is being interpreted. Even tough the Bankruptcy Commercial Law does not indicates an specific ranking for consumers credits, the way Courts can protect their rights adequately in a bankruptcy proceeding is by ranking their credits abreast warranty credits (such as the ones derived from mortgages and pledges), as considered them common credits would reduce consumer’s possibilities to be compensated for the Company’s breach to fulfil its obligations.
On the other hand, the Eight Civil Collegiate Court of the First Circuit, on April 2017, argued that consumer’s credits are indeed contemplated by exclusion in article 217 of the Commercial Bankruptcy Law, so they could not be classified in another ranking or priority, even applying the pro homine principle or taking into consideration consumer’s rights established in the Constitution and the Human Rights International Treaties Mexico has subscribed.
The Eight Collegiate Civil Court of the First Circuit stated that, even tough the relationship between the consumer and the bankrupt company has important and relevant issues to consider, as consumer’s right do have a special Constitutional protection contemplated in article 28 of the Mexican Constitution, this is not enough for consumer’s credits to be reclassified when interpreting the Commercial Bankruptcy Law and rank them below labour rights.
The Twelfth Civil Collegiate Court of the First Circuit, concluded in the same way as the Eight Civil Collegiate Court of the First Circuit, suggesting that the special protection recognized to consumers in an individual or collective proceedings is not enough for them to be privileged creditors in a bankruptcy proceeding and for their credits to be ranked just below labour credits.
The Twelfth Civil Collegiate Court of the First Circuit also argued that if consumer’s credits were to be reclassified, their ranking and priority should be determined by the nature of the goods or services that were paid by the consumer, and as such subclassification was not foreseen by the legislator in the Commercial Bankruptcy Law, all consumer’s credits must be considered common credits.
Finally, the Fourteen Civil Collegiate Court of the First Circuit, also sustained that the nature of consumer’s rights was not enough to reclassify them in a bankruptcy proceeding, and give them a privilege ranking or priority different to those established in articles 217 to 225 of the Commercial Bankruptcy Law.
According to the Fourteen Civil Collegiate Court of the First Circuit, article 222 of the Commercial BankruptcyLaw is very clear and not open to interpretation as it literally establishes that all the credits not mentioned on articles 218, 219, 220, 221, 222 Bis and 224 will be considered common credits, so if consumers credits are not contemplated as privileged credits, they must be ranked as common credits.
As a result of the contradictory interpretations between the Civil Collegiate Courts in the First Circuit, the Civil Plenary of the First Circuit issued two jurisprudences, in order to establish if by applying the pro persona principle and interpreting the Constitution and Human Rights Treaties, consumer’s credits in a bankruptcy proceeding should have an special classification, below labour credits and before tax credits, or if they should be classified as common credits, according to article 217 of the Commercial Bankruptcy Law. The Civil Plenary of the First Circuit concluded that consumer’s rights do not justify the creation of a special category for their credits to be ranked in a privileged position in a bankruptcy proceeding.
The Civil Plenary of the First Circuit stated that consumer’s credits must be considered as common credits, because they are not credits against the bankruptcy estate, nor they are tax or labour credits, so the legislator included consumer’s credits, by exclusion, as common credits, when establishing in article 222 of the Commercial Bankruptcy Law that all the creditors not mentioned in articles 218 to 221 and 224 will be considered as common credits.
The Civil Plenary of the First Circuit pointed out that, even tough there is not a specific article that establishes the classification of consumer’s rights in a bankruptcy proceeding, we can not consider the legislator omitted to include them when creating the Commercial Bankruptcy Law, as they can be allocated within the common credits.
The Civil Plenary of the First Circuit said there is no need to interpret the Commercial Bankruptcy Law according to what the Constitution and Human Rights Treaties establish about consumer’s right or to apply the pro persona principle, as the Commercial Bankruptcy Law is not confusing and does not contradicts or opposed any other law.
The Civil Plenary of the First Circuit also argued that by creating a new classification or ranking for consumers in a bankruptcy, which is not foreseen in the Commercial Bankruptcy Law, Courts would actually be legislating, which is not among their faculties.
Even though the article 28 of the Constitution recognises consumer’s rights and orders that Federal legislators must issue a Law to protect consumers, in order to balance the relationship between consumers and merchants, there is no provision that establishes that consumer’s credits must be paid before any other credit in a bankruptcy proceeding.
There is a different relationship between the consumer and the merchant within a bankruptcy proceeding, than in those proceedings where the consumer’s rights are being analysed; as the bankruptcy proceeding purpose is to conserve the bankrupt company and avoid the generalized breach of its obligations, by preventing individual claims that seek a privilege payments and do not grant a business scheme that allows the company to keep operating.
The Civil Plenary of the First Circuit concluded that, while the recognition of consumer’s rights in other laws only contemplates the bilateral relationship between the merchant and the consumer, in the bankruptcy proceeding there are multiple relationships that must be considered, and that is the reason why the legislator, weighting and examining the specific nature of each credit against the bankrupt company, made the classification established in the Commercial Bankruptcy Law and privileged the credits that were considered most important, and this can not be thought as unreasonable or arbitrary.