Executory proceeding: fixed debit deed

Regulations

Article 573.1 of the LEC requires the creditor to provide the fixed debit deed stating its balance. (LEC is the acronym for Ley de Enjuiciamiento Civil, Civil Procedure Act). And all calculations must be expressed in the lawsuit, in those cases in which variable interest has been agreed (574.1 LEC):

“Article 573. Documents to be attached when applying for executory proceeding as accounts balance.

In the cases referred to in the second paragraph of the preceding Article, the following must be attached to the enforceable application, in addition to the enforceable deed and the documents referred to in Article 550

1st. The document or documents expressing the balance resulting from the settlement made by the creditor, as well as the statement of debit and credit items and those corresponding to the application of interest which determine the specific balance for which enforcement is requested. (…)

Article 574. Enforcement in cases of variable interest.

The executor shall state in the enforcement application the calculation operations resulting in the balance of the amount determined by which he requests the release of the enforcement in the following cases:

1st. When the amount he claims comes from a loan or credit in which variable interest has been agreed. (…)”

However, in trials practice, there are numerous lawsuits attaching debit deeds that do not comply LEC’s requirements. And that taking into account that many loans are granted with variable interest rates.

This situation places the debtor in a situation of defenselessness preventing him from knowing the calculation of the amount claimed. We will now see the debtor’s alternatives when contesting these situations and how Courts resolve them.

Fixed Debit Deed without the Legal Requirements

As is known, the Fixed Debit deeds are issued by Public Notaries.  The duty of the Notary Public comprises three fundamental factors:

√ Balance liquidation carried out as agreed.

√ Compliance of the balance liquidation with the conditions expressed in the loan.

√ Detail of the calculations resulting as final debit balance.

Therefore, what the law requires is an accreditation of the claimed amounts. And the creditor’s calculation of the rates applied in each period is not sufficient. This requirement is included in article 218 of the Public Notaries Rules and Regulations which states that:

“If the interest rates or fees have not been explicitly stated in the contract, the requesting institution must prove to the notary what those have been, all of which must be recorded in the debit deed”

Otherwise, the debtor can contest asking for the nullity of the executory proceeding. Arguing the breach of the duty established in arts. 574 and 573 LEC about the documentation requirements when filing for an executory proceeding.

As we have previously explained, Courts are very strict in terms of compliance with these requirements. As an example of this we have October 5, 2017 Malaga’s Second Instance’s Writ, reaching the following conclusions:

“Regarding to the latter requirement, this Chamber has repeatedly ruled that a proper interpretation of the legal provisions set out in Article 574.1.1 LEC, in relation to paragraphs 1.2 and 3, and paragraphs 2 and 3 of Article 573 LEC, leads us to understand that the legal requirement of liquidity of the amount for which the execution is requested, in the case that said amount comes from a loan or credit in which a variable interest has been agreed, is translated into a documentary requirement referring to the presentation, together with the executive procedure, of the authentic document that expresses the calculation operations expressed in the deed of debt determining the amount by which the execution is requested; a requirement that increases those already established in art. 573 LEC. (…)”

“It is true, however, that the balance sheet does not express the calculation operations that gives the determined amount for which the execution has been requested and dispatched in the present case, since the accounting statement of the account opened for the debtors has not been incorporated in it as an annex, a document that is stated by the Notary to have been sent by the requesting company and incorporated in the notarial matrix, which shall contain a detailed statement of the data relating to the determination of the amount of each instalment due, including the capital, the rate of interest and the period of delay applied to each instalment and the time to which the calculation of interest relates, together with the credit and debit movements on the debtors’ account.

In view of the above, this Chamber considers that the aforementioned notarial deed does not satisfy the documentary requirement set out in Article 574.1.1 or LEC, in relation to § 1.2 and 3, and § 2 and 3 of Article 573 LEC, since it is a reliable document that not only does not fully prove that the settlement has been carried out in the manner agreed by the parties in the execution deed, but also does not express the calculation operations that result in the balance of the determined amount for which the execution has been requested and dispatched in this case. (…)”

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Impossible enforcement of a court decision

The execution of sentences is part of the right to effective judicial protection. However, it may happen that its execution becomes impossible to determine whatever the characteristics of the procedure and the content of the Judgment.

Therefore, not considering the documents provided as sufficient, the Court considered that the execution should have been dismissed. Consequently, Court supported defendant’s argument.

Despite the existing case law, there are still lawsuits that do not comply with legal requirements. And these requirements have been held by old caselaw. For example, because of not enforceable title/privilege, Burgos’ Second Instance Court is ruling nullity of the execution since 1995:

“It is also necessary to provide the relevant documentation with clear and sufficient information to enable both the court and the debtor to know and verify the acts that led to the accounting operations of this settlement, whether they were credit or debit operations, and with regard to both ordinary and default interests,  what was their percentage and the capital to which they were applied, especially regarding the default interests, due to the complexity that, as they are variable and have to be adapted to banking regulations, their implementation in the case in question is required in accordance with the provisions of the aforementioned clause 4. In the case of the policy in question, the aforementioned requirements were not met by the executing entity. If this is not done this way, the purpose of the reform in Art. 1435 LECiv by Law 34/1984 ( RCL 1984\2040; RCL 1985\39 and ApNDL 4257) to reinforce the position of the debtor, avoiding the possible harmful effects derived from a purely unilateral fixing of the liquid amount, would be defrauded if, as already indicated, the elements of fact and calculation essential for its determination were not required, which implies the estimation of the exception of nullity of the executive judgment as the executive title is not enforceable. (…)”

Conclusions

• LEC is very strict with the fulfillment of the requirements for the executory proceeding, especially regarding variable interest rates’ loans.
• The requirements for the documents accompany the executory lawsuit are established in Articles 573 and 547 of the LEC.
• The Fixed Debit Deed is documented by public notary and must comply with the provisions of article 218 RN. It is insufficient the debtor’s presentation of a list with the rates applying in each interest period.
• These requirements avoid putting the debtor in a position of defenselessness. If the requirements are not fulfilled debtors may contest nullity of the debit deed and consequently of the executory procedure.
• Despite the long-standing caselaw about the obligation to comply with LEC’s requirements, nowadays suitcases not fulfilling them are still filed in Courts.

If this article has been of interest, we also suggest you to read the following article published on our website: Foreclosure Opposition