BGH, Ruling of June 29, 2011 – VII ZB 89/10

By decision of the XI. Civil Senate of March 30, 2010, the German Federal Court of Justice (BGH) had made the assignment of the land charge more difficult by changing the prerequisites for amending the enforcement provision. The VII. Senate, which is responsible for compulsory enforcement, has now abolished the requirement of documenting the accession of the new creditor to the security purpose agreement in a public form and (almost) reinstated the “status quo ante”.

HEAD NOTE

  1. In the procedure for the issuance of the enforcement provision, the notary generally has to act in accordance with the wording of the deed. He cannot derive an execution condition in the sense of Section 726 paragraph 1 of the German Civil Procedure Act (ZPO) from a weighing of interests, if it is not provided for in the deed.
  2. The notary has to rewrite the enforcement provision, if the legal succession to the claims is documented in a public form.

FACTS

In connection with the acquisition and loan financing of real property, the debtor established a certificated land charge in 2000 with in-rem submission under immediate enforcement as well as personal liability with submission under immediate enforcement. Already during the same year, the financing bank assigned a first-ranking partial amount of the land charge as well as claims to which it was entitled based on the assumption of the personal liability for a corresponding amount to the applicant. This assignment was registered in the land register on 18 March 2010. The applicant had applied for the preparation of a partial copy of the notarial deed for it and its rewriting to itself as legal successor with the responsible notary. For this purpose, it submitted the land register excerpt, the enforceable copy, a publicly-certified declaration of assignment, and ordinary copy of the loan agreement from 2000. The notary has rejected the application.

CONTENT AND SUBJECT OF THE DECISION

The VII. Civil Senate has decided to issue the requested enforcement provision in an in-rem and in a personal respect against the debtor. In express deviation from the case law of the XI. Civil Senate, the deciding Senate does not see any reason to examine the accession of the new creditor to the security purpose agreement (Sicherungszweckerklärung) in the proceedings for the issuance of the execution clause.

Legal successor of the creditor in the sense of Section 727 ZPO was whoever had acquired the claim to be executed according to the deed instead of the creditor named in the deed, i.e. the assignee of the land charge and of the declaration of personal liability. The declaration of submission itself does not require any transfer (by legal transaction) to the creditor, but passes by action of law. Accordingly, the legal succession in respect to the declaration of subjugation could not be contingent upon the accession to the security purpose agreement.

Even if one considered the accession to the security purpose a condition for execution in the sense of Section 726 paragraph 1 ZPO, it is often not provided for in the deed and cannot be derived by the notary solely from a weighing of interests. It must be noted here that the proceedings for the issuance of the enforcement provision merely deal with the formal ability to execute and do not address questions of substantive law. The debtor (but also the creditor) was not left without protection, because the action pursuant to Section 768 ZPO was available to him for a review of substantive law. There, the entire evidence available under the ZPO and a decision by a judge are open to the participants, while the proceedings for the issuance of the enforcement provision are restricted in respect to evidence and are handled by the notary.

IMPACT ON DAY-TO-DAY BUSINESS

The decision of the XI. Civil Senate of the BGH has been rightly criticized (primarily in respect to its “wide” interpretation for practice, as shown in the circulars to the notaries by the German Notary Institute (Deutsches Notarinstitut); DNotI-Report 11/2010). Various courts have already decided with restraint following the criticism and now the VII. Civil Senate has also issued a clear, rejecting statement. Since the Large Senate was not called upon, as is usually the case when opinions between Senates differ, some uncertainty for the executing creditor remains, whether depending on the structure of the case, his case will be decided by the VII. Senate, which is responsible for compulsory execution, or by the so-called “banking senate” (XI.).

The decision and its substantiations are to be agreed with; the previous decision of the banking senate interfered in further developing the law at the dogmatically and systematically wrong place. There is no room for contradictory question of substantive law in notarial proceedings for the issuance of enforcement provisions.

The new decision will end the notarial practice of, inter alia, having to prove the accession to the security purpose agreement in a public form even in the case of a refinancing desired by the debtor. The assignment of land charges e.g. by setting the loan including the rewriting of the enforcement provision will now be possible again in a much simpler and cost-effective manner. To the extent not already contained in the documentation of the acquisition of the loan receivable, the assignee can have the right to be able to demand the assignor’s cooperation in formal transfer acts etc. granted to him for reasons of precaution, should the case law change again.