Dation en Paiement or Datio Pro Solutio
“Dation En Paiement” (comes from French) means giving in (1)lieu of payment. It is an act by which a debtor gives a movable or immovable asset or property to the creditor, instead of paying a debt he or she owes in money. The creditor is generally willing to receive it, in payment of a sum which is due. It is similar to cession of assets, as well known as “datio pro solvendo”, established in section 1175 Civil Code, but it is important not to confuse them. Under the dation in payment the credit is paid and discharged fully by giving the property or asset to the creditor, who becomes the new owner of the property, but on the other hand, the cession of assets does not discharge the debt until the creditor sells and gets the full amount of debt, this means the creditor does not become the owner of the property and only gets profit through a sale, then the debt will be considered cancelled (STS 28th June 1997).
This legal issue is not regulated on the Spanish Civil Code, but it has been ruled by some Resolutions issued by the Spanish Supreme Court, specially the STS 13th February 1989. In this Resolution, the Supreme Court used the Latin Term “Datio Pro Solutio” to explain the meaning of this item and established the requirements to fulfill in order to pay the debt. The Spanish Jurisprudence states that although Dation in payment is not expressly regulated under civil law, rules of purchase and sale must be applied.
Last 17th December 2010 and 4th February 2011, the Court of Appeal in Navarra issued two different and opposite Orders, in which the BBVA bank was obliged to accept this solution of Dation in payment to extinguish and cancel the debt (December) and the last one in February stated just the contrary, I mean, the debt attached to the mortgage was not cancelled by acquiring the house through an auction, considering that the value of the property was lower than the debt. The Court of Appeal’s first Resolution considered that by giving the house to the bank with its value was enough to cover the debt, so (2)discharged it, moreover, if the bank granted the loan was because the house had a higher value than the credit. On the other hand, the latest Resolution is totally different and stated that the value of the property is now 70.000€ lower than when it was firstly valuated, this Judge challenged what the previous Judge issued and stated by applying a principle of Spanish Civil Code which considers that debtor will have to pay all the debts with current or future assets and that Judges should be independent and fulfill the law accordingly.
A couple of weeks ago, Spanish Prime Minister, Rodriguez Zapatero, considered that specially now that Spain is under recession, Dation in Payment does not have to be mandatory and (3)compulsory to be accepted by banks, so he replied with a NO to the request made by opposition parties which claimed for it, in order to help debtors to deal with their mortgages. He stated that if Dation in Payment had to be accepted in all cases this could make the financial system collapse in Spain. He finally concluded that is not the right time to discuss and debate this issue at the Spanish Parliament, at least by now.
I have just had a client’s Dation in Payment experience last week with CAM bank and it just ended in a positive way for my client, who ought 82.000€ of a mortgage, the property was valued at 92.000€, but bank made us sign an extension of the loans by negotiating and refinancing other loans that my client had outstanding, providing a (4)guarantor, otherwise the operation should have not been approved and signed.
1.- Lieu: Término que proviene del Normando-francés, significa lugar. En inglés jurídico se usa más la acepción “in lieu”, que significa en lugar de, así, por ejemplo en la Dación en Pago, quiere decir que se entrega un bien en lugar de pagar la deuda. En Derecho Tributario inglés se usa el término Lieu Tax como impuesto sustitutivo. Es importante no confundirlo con el término “Lien”, que significa derecho de preferencia, carga, gravamen o embargo preventivo.
2.- Discharged: Se usa principalmente en Derecho Civil y Mercantil relativo a las deudas, en el contexto de la Dación en Pago significa que la deuda ha sido satisfecha o extinguida en su totalidad. También significa que un contrato ha sido resuelto. En Laboral significa dar de baja o dar el finiquito y en Derecho Penal la acepción más común es la de absuelto o exonerado de un delito.
3.- Compulsory: obligatorio, forzoso, de obligado cumplimiento. En Derecho Procesal o Tributario “Compulsory Procedure” significa Procedimiento de Apremio o Ejecutivo.
4.- Guarantor: avalista, fiador solidario, garante de una fianza judicial. Proviene de warranty, en el habla más coloquial se usa más guarantee, que significa garantía, aval, fianza o caución. Así que son palabras parcialmente sinónimas.