The Malaga Mercantile Court 1 Bis, with datePalacioJusticia of the 7th of May 2014, has formally accepted a lawsuit filed by 15 pensioners against Rothschild, its jurisdiction on the subject matter and service of process on the Spanish addresses provided for N.M. Rothschild & Sons (Madrid and Barcelona).

According to the Unfair Competition and Protection Against Consumer Advertising, as ammended, (law 29/2009, of December 30, 2009), any service provider that advertises in Spain is obligated to run decent, legal, honest and truthful advertising.

According to Lawbird Legal Services Rothschild offered a product, the Credit Select Series Mortgage Loan, that was sold to pensioners as a legal means to reduce the value of their otherwise unencumbered homes, for Inheritance Tax mitigation purposes.

The Tax Office, on the contrary, has ruled that such scheme constitutes fraud.

Acting pensioners have demanded from Rothschild that their mortgages, with a combined value of over €4 million, are cancelled (action for removal of effects). But also, lawyers have filed, in conjunction with the most pressing ‘removal of effects action’, a main and principal declaratory action, an action for cessation, future prohibition and for rectification of misleading, inaccurate or false information.

With the new law it is also possible, if the court deems appropriate, to order that the judgment be published in whole or in part (this remedy is no longer dependent on an action for damages), or that a corrective statement be made.

Finally, it is worth mentioning that this case, alongside another one dealt with by the Criminal Courts in Denia, was a matter of Parliamentary discussion by MP Huw Irranca-Davies and Conservative Treasury Minister Sajid Javid. 

How Palatinum would look likeA Court in Madrid has ordered that “Caja de Ahorros de Murcia” is liable to return over €400,000 in deposits paid by British investors in the failed Urbanizadora Costa Palatinum/Proyectos Antele resort.

In a post written almost 4 years ago, we dubbed this developer “civil swindler” for taking deposits to finance an off-plan development that were never used for its intended purpose, in our opinion, fraudulently.

Consequently Lawbird Legal Services, represented by Roberto Leiro, sued the developer in a Criminal Court in Murcia hoping that the Judge took notice of the fact that whilst the construction of this development was being aborted –with no mention of returning deposits- a newer project was being proposed in…Venezuela.

As was the case, the Judge took no notice and the case was dismissed. However, the ruse had worked for us as the developer made full disclosure and submitted revealing documents that were otherwise out of our reach: a general bank guarantee issued by Caja Murcia to guarantee the Costa Antele Aparthotel and several bank account statements.

With this document in hand, we filed a case in Madrid (avoiding where possible Murcia) against Caja Murcia demanding the return of off-plan deposits, based on the 57/1968 Act on Off-Plan Property Down Payments, as it was our understanding that:

  • A recent Supreme Court ruling had concluded that for the 57/1968 Act to apply, the off-plan property should be used for family living accommodation purposes, whether temporary, accidental or circumstantial.
  • The developer had voluntarily submitted to the 57/1968 Act by producing a general bank guarantee that specifically referred to the Act.

The Court, on hearing the parties, upheld our allegations and ruled in favour of our customers, ordering Caja Murcia to make a full refund of the capital, plus interest. What are the conclusions to be drawn from this ruling? A few, and not just legal:

  • Most Courts are rejecting 2 defense arguments used by financial institutions who refuse responsibility on grounds that deposits were not paid into the “special bank account”, or that claimants did not have an individual policy.
  • Buyers in this development now have an opportunity to seek relief by filing against Caja Murcia, on the basis of documentation we hold and the conclusions of this rulings. We are unsure however whether claimants who already sued the bank and lost their cases would be able to “revisit” the matter and sue again, by submitting new fresh allegations.
  • It is recommendable to avoid suing in Murcia, or its neighbouring province, Alicante. Both jurisdictions have, in our opinion, a large density of bank/developer-friendly Judges who are becoming known for their bank-liability-exoneration-rulings, and also developers.

Roberto Leiro will now issue enforcement proceedings for recovery of the deposits, a faily uncomplicated process considering that technically banks are mostly a “liquid asset” and tend to pay up promptly.

Have you been caught out in the Urbanizadora Costa Palatinum/Proyectos Antele fiasco? If so, contact us.

Cajasol has been ordered to pay €180,000, plus costs and legal interest, to 2 claimants who had bought 2 properties in Jardines de Manilva (Gardens of Manilva) some years back, through Ocean View Properties.

In spite of the properties being finished, it was established by the Courts that the unattained licenses of occupancy on the completed projected were a fundamental breach of contract that hampered the legitimate aspirations of property purchasers, following undisputed case law on the matter.

With regards to Cajasol, who was found jointly liable to repay the deposits as they had offered a collective bank guarantee to protect advance deposits (no individual bank guarantees had been issued) the Judge dismissed the allegation that the collective bank guarantee was capped at €2,500,000 and that it had already been fully used up to repay other claimants.

Quoting the Judge in charge of Court number 3 in Estepona, article 1 of the 57/1968 Act on Guarantees on Off-Plan Property Deposits states that the bank is responsible of ensuring, under its own responsibility, compliance with the conditions of the guarantee as well as the above cited Act for which reason, it is not acceptable that the bank now tries to excuse its obligation by invoking a quantum limitation established on the collective bank guarantee to now pay. 

Cajasol should be paying out the sums ordered by the Court within the next 3 weeks.

As usual with cases dealt with by Lawbird Legal Services, a copy of the ruling is available for review.

Within a space of time of less than 2 weeks, Huma Mediterraneo S.L. and Promociones Inroal S.L. have filed for voluntary insolvency (CVA) due to the adverse current economic climate.

Huma Mediterraneo’s flagship development, “Cuevas de Almanzora”, was never built in spite of which approximately 400 buyers paid their deposits.

Promociones Inroal S.L. has taken money from a large group of investors and equally, has left them stranded, “Azahar Villas” and “Los Olivos” being some of the unfinished developments.

Customers who had bought off-plan property from them and have not received their properties, or money, are now requested by the Courts to register their rights with administrators.

Experience tells us that whilst registering the credit (paid deposit) is convenient, adhering to a future creditors proposal would be counterproductive to the investor’s interests for legal technicality: banks will use this to stop payment under a “Bank Guarantee Action”  arguing that they are bound by the investor’s adhesion to the agreement in respect of delayed and reduced debt repayment terms.

The advice we can provide is that investors study the options offered by different firms against bank(s) that should have guaranteed the deposits, in the first, or the lawyers whom, in spite of their statutory obligations, failed to obtain a bank guarantee to secure the investment.

 

Justice Mr. Jose Emilio Coronado Ruz, in charge of investigating the criminal claim against Ricardo Miranda Miret and Ocean View Properties former directors -all indicted for missapropriation and swindle- has been himself removed from the post following a recusal petition filed by firm Lawbird.

The reason why Justice Coronado Ruz was forced to leave the investigation by the Madrid Appeal Court was the implication of his brother, Ignacio Miranda Miret, in the sale of the land on which Punta Perla was to be built (via sale of shares of the company Paraiso Tropical).

Lawbird exposed the Judge after noticing that at least €100,000 worth of deposits paid by bona fide customers ended up in the pockets of the brother. The payment had seemingly gone unnoticed to the Judge as was, shockingly, the younger brother’s involvement in a high-profile case that could have not gone past him without knowledge of some degree of participation, a claim that The Honourable responded to by stating that for “reasons that he will not disclose, he has not been in touch with his brother since 1998 and hence, could have not known”.

What are the odds of a case lodged with the Madrid Courts of First Instance- 101 in operation- ending up in one whose boss happens to be the brother of a party implicated in receiving money? Well, 1 in 101. But then, what are the odds of that Judge not knowing that his brother could have been implicated in such case, and furthermore, the odds of both brothers not talking to each other for the best part of 15 years? 

 

Zurich España Insurance Company, the company that insured deposits for off-plan property buyers, is to return these to 6 victorious owners.

Since it was undisputed that Zurich had agreed to cover the risk of contractual default, when the Appeal Court in Malaga found that Pinares de Mijas had not delivered the properties on time -contrary to the earlier ruling passed by the Courts of First Instance in Fuengirola-, the return of the deposits was ordered with inmediate effect.

2 points worth quoting from this run-of-the-mill ruling:

  • Legal interest is awarded from the date of lodging the claim, not since when the deposit was paid to the developer (as many other similar ruling have established).
  • The delay in delivering the promised properties was counted not from the date when the construction of the properties was physically concluded, but from when they could be legally lived in, establishing that the meaning of “completion” has to necessarily coincide with the grant of the license of occupancy by the local authority (Mijas Town Hall in this case).

Claimants can now shrug off fears that Zurich would do what Mary Beth Senkewicz, former senior executive at the National Association of Insurance Commisioners (US), once warned:

 the bottom line is that insurance companies make money when they don’t pay claims…they´ll do anything to avoid paying, because if they wait long enough, the know the policyholders will die.

 

Arrohabitatge and Caixa Galicia, the saving’s bank in charge of providing the bank guarantees, have been jointly and severally found guilty of contractual default and forced to return the deposit of a British claimant.

The developer, in a brazen display of arrogance, rescinded its agreement with the investor due to his unwillingness to close the transaction, on grounds that no license of occupancy had been granted on the development. When sued, the developer’s defense was based around the fact that the works had been halted by the Town Hall due to a dispute with owners of a neighbouring plot, the Spanish Railway Company (RENFE), a dispute totally beyond the control of the developer.

Roberto Leiro, for the claimants, successfully argued that force majeure, or superior force, could not be invoked because the Spanish Supreme Court has established that this ground to oppose fullfilment must be of a decisive, unforeseeable, insuperable and inevitable nature, due to its alienness, characteristics not appertaining to the delay suffered. And it was not because Arrohabitatge  S.L. is a construction company that could have not been unaware of this matter since, within the scope of their activity, a neighbouring dispute is a vicissitude that can be expected to happen and prevented where possible, or at the very least warned of its likely happening, and never transfer the consequences of it to the consumer.

The title is perhaps not entirely correct as the developer was not part of the ruling, but a reseller that answers to the name of Bancales Inversiones S.L., a company that had bought to resell a particular unit at Los Lagos de Santa María.

On a recent Court decision, the Appeal Court reversed (again) an earlier ruling by the Marbella Court of First Instance 5 who had found this company not responsible for delivering a property that was granted occupancy rights by means of a license that ran against local planning ordinances.

Roberto Leiro Bascones, acting for the claimants, convinced the Appeal Court that having a finished property with adequate supplies is not enough to “effectively transfer ownership” where the license of occupancy was not granted, or was granted via that fiction, or loophole, called “administrative silence” when, as is the case here, violated planning regulations.

As a result, the Malaga Appeal Courts ordered Bancales Inversiones to reimburse over 60k Euros to the claimants.

Following the enactment of the Royal Decree 13/2010, almost anyone setting up a new company in Spain has opted for the fast track Spanish “Express” Limited Company. The reason? It takes no more than 24h to have a fully functioning limited company (up to 3 days where the company’s share capital exceeds €3,100 but is less than €30,000).

Interestingly, the number of newly incorporated companies has increased 18% compared to last year, being October 2012 a record month in the last 5 years. This is not only thanks to the economic crisis pushing unemployed individuals to take up the self-employed option after the little chances to find employment but also to the reduction in the timing and registration expenses. Additional benefits include the standard limited liability,  to many the most strong incentive to start a business securely.

Lets revisit what the specific limitations are in respect of this expedited company incorporation format:

  • The share capital is limited to €3,100.
  • Founder members have to be individuals; this leaves out companies, whether national or offshore.
  • The Directorship configuration is limited to one of three: a sole administrator, 2 joint administrators or more than one joint and several administrators.
  • Compliance of the statutes of such company with the new regulations in place.

The listed limitations make sense: the Mercantile Registry will not carry out due diligence on national founding companies nor the authenticity and legitimacy of an overseas company in such a brief period of time, even if the Notary already does this; yes, the drawbacks of a legality control double-filter system imposed in Spain.

One important recommendation for a non-Spanish shareholders and/or director is to have an NIE number, registered at the Tax office if possible, prior to attending the Notary Public meeting (in fact, this is a compulsory requirement nowadays for any public document). That, or else the process will be delayed by10 days approximately.

Have you had any problems when incorporating this type of company? Do you need help in setting up one?

Patricia Martín Benítez