The remaining credit after the cancelation of its guarantee through an assignment in lieu of payment (dación en pago) in favor of a creditor with a lower-ranking guarantee is an ordinary credit and cannot be subject to a new classification

After the assignment in lieu of payment (dación en pago) of several properties owned by the insolvent company was agreed in favor of the banking entities whose credit was secured with a first-ranking mortgage, the Spanish tax authorities (“AEAT”), holder of a second-ranking mortgage over the same properties in guarantee of a payment deferral, requested amendments to the definitive texts and that the unpaid tax credit charged to the mortgage security should become classified 50% as credit with general privilege and 50%  as  ordinary  credit.  With  the  adjudication,  the  cancelation  of  the  charges  and encumbrances was ordered (including the second-ranking mortgage), and the remaining unpaid tax credit was classified as ordinary credit (100%).

The court admitted this was an arguable matter, with no legal precedents dealing with it directly and with disagreeing doctrinal opinions: some consider that the credit should be classified according to its ranking (with general privilege and ordinary), while others believe that the credit is ordinary. The judgment opted for the latter view, stating that when article 155.4 of the Insolvency Act10 states that the remaining credit will  be classified correspondingly, this does not mean a new classification, as this already took place and was exhausted in the insolvency administration report. Thus, if the tax credit was classified throughout the report as a credit with special privilege, and the AEAT did not oppose it or request any subsidiary classification of the remainder, it cannot now seek its reclassification as a credit with general privilege. Privileges should be interpreted restrictively and a tax credit cannot be doubly privileged. As a result, it dismissed the AEAT’s complaint and classified the remaining tax credit not covered by the in rem guarantee as 100% ordinary.