NOVE partner Urmas Volens, attorney-at-law Paul Varul and attorney-at-law Anto Kasak represented their clients in the Supreme Court in a court case (RKTKo 2-15-8579) in which the Supreme Court clarified and developed further its case law in order to define more clearly the liability of the person who owns immovable property encumbered with a mortgage but is not the debtor.
The court case concerned a dispute which arose when a buyer acquired from a seller a registered immovable which had previously been encumbered with a mortgage for the benefit of a third person. At the time of the transaction it was agreed that the part of the purchase price which covered the amount of the mortgage would be deposited at a notary and that this would be used to satisfy the claims of the third party which were secured by the mortgage. It was also agreed that once the claims had been satisfied the mortgage would be deleted. The third party mortgagee requested, however, that the buyer of the property should also pay the part of the seller’s debt in excess of the mortgage amount and he refused to give his consent to the deletion of the mortgage for the benefit of the buyer.
The positions expressed in the Supreme Court’s decision are of fundamental importance in the following points.
- When acquiring a registered immovable which is encumbered with a mortgage, the buyer has to take into account that the mortgage will not be extinguished through its acquisition by the buyer but it will be preserved and used for securing the same claims which existed prior to the acquisition.
- The owner of the registered immovable encumbered with the mortgage is liable for securing the debt of another person only to the extent of the amount of the mortgage. The fulfilment of any obligation in excess of the mortgage amount can be requested only from the debtor.
- The owner of the registered immovable can prevent the compulsory enforcement and sale of the immovable by paying the debtor’s obligations to the creditor.
- The owner of the registered immovable can fulfil the obligations by either paying the claimed amount to the mortgagee or by depositing it for the benefit of the creditor at a notary. The obligation will be deemed to be fulfilled if the depositor (the owner of the registered immovable) has deposited the amount at a notary without the right of reclamation.
- If the owner of the registered immovable is not the debtor of the secured claim, he or she may present the same objections to the claim secured by the mortgage as the debtor. The owner of the registered immovable may also refuse compulsory enforcement if the secured claim has been satisfied or it has been extinguished in another way (e.g. by reaching a compromise or by waiver of the claim).
Urmas Volens joined the team who worked on settling this dispute at the phase of cassation proceedings.