Foreclosures. Decision 119/2011of the Girona Provincial Court discharges a mortgage debt by turning the home over to the bank

26 October 2011

As the Second Chamber of the Navarra Provincial had done before (Decision 111/2010) when they went against the criteria of the Third Chamber of the same Court (Decision 4/2011), the Girona Provincial Court agreed, in the case of a foreclosure proceeding, that the mortgage debt was discharged when the home was turned over to the bank.

The mortgage deed listed the bank home appraisal as €325,000; the bank sold the home in an auction for half of its appraisal value (€162,000).

The Court considered that the bank had added the auctioned home to its net worth, and not the amount of the clearing price, and therefore the financial entity, which had previously appraised the home for an amount which exceeded the outstanding debt at the time of foreclosure (€303,358.10) could not argue that it was insufficient to cover the debt as this would go against the doctrine of estoppels.

The Court went on to justify turning over the property in lieu of payment based on the fact that the bank entity, once its credit had been satisfied, could earn additional amounts by selling the property and thus obtain profits which violation of the principle of good faith. The rule attempts to avoid this, and to that end the Court opted for a less formal interpretation of the law which it deemed to be more in accordance with what it considered material justice in the case at hand.

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