The granting of immediate enforcement based on a document under Article 417 of the Civil Procedure Code may be used for compelling a debtor to endure unlawful enforcement against their assets, particularly when such enforcement is based on monetary claims arising from unfair contract terms. This enforcement can lead to irreversible consequences if it is directed against real estate.
For instance, there are numerous cases where a property, mortgaged to secure claims under a credit agreement, is sold at a public auction, only for the agreement itself to be found null and void at a later date. Despite the established nullity of the contract, however, the sold property cannot be reclaimed. Their sole remaining option is to claim compensation for damages from the creditor who has been unjustly enriched at their expense.
Therefore, the timely stay of execution, which in this case we achieved for our client, can practically save the property from an unlawful sale.
Background
In 2023, our clients – a mother and daughter – concluded two loan agreements with the company NOVO FINANCE LTD. The disbursed credits were secured by a mortgage on a real estate. Under the terms of the loan agreements, NOVO FINANCE transferred approximately 25% of the principal to the borrower, whi in turn the borrower was obliged to provide the creditor (NOVO FINANCE) with nearly the same amount as a so called ‘guarantee instalment’ within a short period. This instalment was intended solely for the payment of interest during the first year of the loan.
In practice, this guarantee instalment also serves as a condition precedent for the transfer of the remaining principle, resulting in the artificial inflation of the this principal and leading to an escalation of the interest payable.
Following the execution of the agreements, the borrower failed to make the agreed instalments on a regular basis. Consequently, NOVO FINANCE initiated two legal proceedings against her and her mother. Within these proceedings, the claims were for a relatively small amounts in comparison to the total loan facility, which exceeds 160,000 BGN. However, on the basis of the issued orders for immediate enforcement and writs of execution, the creditor immediately commenced enforcement proceedings before a private bailiff, simultaneously imposing preservation on their bank accounts and initiating measures for preparation of the public auction.
Court case and result
To protect the interests of out clients following the receipt of the notices for voluntary payment, we drafted and necessary claims and appeals, explaining our arguments as to why the concluded agreements shall be announced null and void. Whether due to an excessive caseload or a lack of thorough judicial scrutiny, the court of first instance dismissed our submissions and rejected the application for a stay of execution. This caused significant distress to our clients, as the enforcement proceedings against them were progressing toward the imminent sale of the mortgaged property.
Despite the initial setback, upon the appeal filed by our law firm, the Sofia City Court issued a reasoned order invalidating the writ of execution issued in favour of the creditor, fully endorsing the arguments we presented. By virtue of this judicial act, which is final and not subject to further appeal, the expedited public auction of the property has, for the time being, been successfully averted.
However, this outcome would not have been possible had our clients not reached us and requested our assistance in a timely manner, enabling us to organise their defence effectively. Therefore, do not hesitate to contact us should you find yourself a debtor under a similar loan agreement and your property or income is at risk!