The rescission was declared of a mortgage the insolvent company granted over a warehouse it owned in guarantee of the loan a credit institution had granted to a company of its group. The Supreme Court declared (i) that the contextual guarantee was for consideration and (ii) the need for proof of the profit (even indirect) of the guarantor company without merely belonging to the group sufficing, and confirmed that the rescission only affected the guarantee and not the loan.
The insolvency administration brought a rescission action over a mortgage the insolvent company granted over an industrial warehouse it owns in guarantee of the loan granted by a credit institution to a company of its group1.
The commercial court’s judgment, confirmed under appeal, upheld the rescission action over the mortgage. The provincial court understood that granting the mortgage was an act for consideration harmful to the insolvency estate, as the mortgage was over the insolvent company’s main asset to secure the debt of a company that was in a dreadful financial state without receiving any consideration whatsoever.
The Supreme Court confirmed that the granting of a mortgage by the insolvent company over the industrial warehouse, within the two years before the declaration of insolvency, without receiving any consideration whatsoever, either directly or indirectly, constituted an act of disposal for consideration damaging the estate of the debtor under insolvency proceedings, which was, therefore, subject to rescission.
In short, the Supreme Court concluded as follows:
- The fact that granting the contextual guarantee was for consideration. The insolvent company’s granting of the contextual guarantee to a company of its group is an act for consideration. The Supreme Court stated that “unless proven otherwise, granting the simultaneous or contextual guarantee with the creation of the secured credit will be understood to correspond to the granting of the latter, and therefore for consideration, as the creditor grants the credit based on the existence of the guarantee, i.e., it receives jointly correspondent to its credit the debtor’s promise of payment and the guarantee of the third party.”
- Analysis of damage in intragroup contextual guarantees. The fact that the guarantee in favour of a third party should be for consideration does not exclude the existence of damage. Moreover, if it is an act of disposal by way of consideration carried out in favour of a person particularly related to the guarantor subsequently declared insolvent, the damage is presumed, although it may be proven otherwise.
In intragroup contextual guarantees, the existence of damage to assets may be considered excluded if any asset attribution exists, even if only indirect, in favour of the guarantor company, of an amount sufficient to justify the provision of the guarantee. The mere existence of the group does not justify such asset attribution or profit. An abstract appeal to “group interest” is not enough; it is necessary to specify and justify the financial benefit obtained by the guarantor.
- Effects of insolvency rescission action. In the case of an in rem guarantee (the mortgage), granted to a third party, the effect of the rescinding judgment is the extinction of the guarantee and cancellation of the registration of such mortgage, without this affecting the validity and efficacy of the loan in relation to which the guarantee was provided. The Supreme Court did not accept the appellant financial institution’s allegation that the guarantee and secured legal transaction (the loan) were indivisible, because the creditor would not have granted the loan without the guarantee. For the Supreme Court, the loan, in respect of which the in rem guarantee had been granted by the party later declared insolvent, was a legal transaction between a third party and the creditor benefiting from the guarantee, which was not affected by the guarantor’s declaration of insolvency. The creditor whose guarantee was rescinded would have to satisfy its interest outside the insolvency. When the non-debtor mortgaging party becomes insolvent, its insolvency emphasizes the lack of justification of the granting of a guarantee over a third-party debt, meaning that, to restore the estate, the rescission of the mortgage does not affect the secured credit’s validity.
Two senior judges of Chamber One of the Supreme Court cast dissenting votes:
- Senior judge Antonio Salas Carceller agreed with the operative part of the judgment, but partially disagreed with the grounds, particularly with the classification of the contextual guarantee as an act for consideration. In his opinion, the granting of the mortgage in favour of a debt of another group company is an act free of charge. He believes two concepts should be differentiated: (i) the cause of the transaction granting a mortgage to secure a third-party obligation, with no effective consideration, which should be considered free of charge for the effects of article 71.2 of the Insolvency Act 2 ; and (ii) the grounds that could be put forward for encumbering the actual asset of the specific case, which would not come under the concept of cause and could not be put forward to the detriment of the insolvent company’s creditors.
- Senior judge Sebastián Sastre Papiol disagreed with the fact that the contextual guarantee should be subject to rescission alone, allowing the main transaction (in this case, the loan) to subsist. In his opinion, a total presumption of burden exists when the guarantee is provided simultaneous to the creation of the credit. The creditor’s sacrifice in granting the credit represents the corresponding element, not only of the debtor’s (borrower) obligation, but also of the guarantee provided by the third party. Therefore, the rescission of a contextual guarantee, leaving the loan subsist, harms the basic elements of the transaction, its cause and the consent provided in executing the transaction. He therefore declared that, with the damage of the grant of the guarantee having been proven, the transaction should be terminated in full with recognition for the creditor of the restituting credit charged to the insolvency estate.
Other recent decisions by provincial courts of appeal deal with similar cases of insolvency rescission actions against acts granting guarantees over third-party debt of other group companies. The judgments of the courts of appeal of Asturias 3 and Badajoz 4 turned to the theory of compensatory advantage and, in contrast to the conclusion of the case judged by the Supreme Court, concluded that the acts were not subject to rescission. The judgment of the Segovia Provincial Court 5, in a case of a contextual guarantee granted by a parent company to its affiliate, also considered that the group interest justified it and that there was no reason for rescission.