учебный год 2023 / de la Mata Munoz, Personal Security

upon all the assets of the debtor (art. 1830 Spanish CC). The same is valid for most European countries314• However, in the business practice of all these countries such benefit is generally (almost always) excluded by the parties, opting for a joint and several liability of the guarantor315. This is possible since the provisions on the benefit of discussion are not mandatory. The right of the parties to agree a joint and several guarantee which means excluding the benefit of discussion316 is even expressly contained in the guarantee regulation (art. 1822 par. 2 and 1831 par. 1 Spanish CC317). The former Italian CC shared this conception of guarantee as a secondary obligation. It was an inheritance from art. 2021 French CC and was changed in the CC of 1942 and adapted to the practice.

The advantages of the model based on the secondary nature of the guarantor's liability (benefit of discussion by law) have been frequently pointed out in the Spanish theory318• Their reasons are mainly founded in a traditional conception of the guarantee as a security given for a friend or relative, based in the personal relationship of debtor and guarantor like in old Roman times. In accordance with this model, it is logical to offer the benefactor-guarantor the benefit of discussion since he should only be liable if the debtor is unable to perform. However, the practice has changed the tenor of the law. The guarantor is de facto almost always joint and severally liable. It would make more sense according to the business practice to conceive the guarantee as joint and several and set up protective rules for the weakest guarantors (non-professional or consumer guarantor).

c) The nature ofthe benefit ofdiscussion

The benefit of discussion does not create a duty for the creditor to require payment to the debtor before the guarantor319 but it is a benefit or defence granted to the guarantor. The creditor may require the guarantor for payment, and even sue him, without having demanded the debtor for pay-

314 Art. 2021 French, Belgian, Luxembourgian CC; §§ 771 ff. German CC; art. 638 Portuguese CC; art. 855 Greek CC;§ 21 Finish Guarantee Law.

315For France: Cabrillac and Mouly, no. 322 ff. and Simler, no. 505 ff. Commercial guarantees are even presumed to be joint and several (Cass.com. 28 April 1966, Bull. Civ. 1966, III, no. 209); for Austria, Schwimman/Mader on § 1357 no. 1. For Germany, see Horn/Staudinger, on § 773 no. 2. The waiver to the benefit of discussion may even be agreed by a formular or general terms and conditions.

316STS 5 December 1991[RA 1991no.8917).

317Also in: art. 2021 French, Belgian and Luxembourgian CC; § 773 par. 1 no. 1 German CC; § 1357 Austrian CC; art. 857 lit. a) Greek CC and§ 3 par. 1 Finnish Guarantee Law.

318See extent references in Guilarte, 160.

319As it is in Austria(§ 1355 CC) and the Netherlands (art 7: 855 par. 1 Dutch CC).

ment320• Consequently, the discussion of the debtor's goods is not a constitutive element for a valid requirement for performance, but a benefit that the guarantor may raise in order to avoid payment unless the debtor is de facto unable to perform321 .

The guarantor can first raise the benefit when the debtor has required him for payment (art. 1944 par. 2 Italian CC and 1832 Spanish CC)322.

The benefit grants the guarantor the right to avoid enforcement (realization of his assets) until the discussion of the debtor's assets has been done323 • The benefit of discussion has been defined as the "rank for the

procedural enforcement" (orden de ejecutabilidad procesal) that needs to be raised324. It is only granted by law for the personal guarantee, not for

real security. The advantage of the real securities is precisely the grant of an easy and direct realization of the assets and it would be contradictory to the nature of real securities to permit the raising of a defence that hinders or delays the process to become payment.

d) The benefit ofdiscussion and the co-guarantee

In the case of a co-guarantee, every co-guarantor is entitled to raise the benefit of discussion whenever he has been demanded for performance. If the co-guarantee is mancomunada (the co-guarantors are severally liable) each of the co-guarantors also enjoys the benefit but only for the part of the debt that he secures.

320STS 25 February 1958 [RA 1958 no. 1043]. Contra: STS 7 April 1975 [RA 1975 no. 1412] and STS 28 September 1977 [RA 1977 no. 3521]. These decisions of the Spanish Supreme Court considered necessary to require for payment firstly the debtor or at least both debtor and guarantor simultaneously. However such a conclusion cannot be inferred from the wording of art. 1832 Spanish CC nor could they be inferred from art. 1944 par. 2 Italian CC.

321The same is valid for Germany: "Es handelt sich um eine echte Einrede: der Glaubiger braucht zur Begriindung der Klage gegen den Burgen nicht zu behaupten, er habe die Vollstreckung gegen den Hauptschuldner erfolglos versucht oder sei dazu nicht verpflichtet. Der Burge muB die Einrede vielmehr im ProzeB selvst geltend machen.",

Horn/Staudinger, on § 771 no. 1

322The guarantor may give notice to the creditor of the debtor's assets before having been required for performance. At this point, he does not raise his benefit of discussion. However, if the creditor ignores this information, it could be considered bad faith and provided that the possibilities to obtain performance by the debtor become worse, the guarantor may raise the defence established in art. 1851 and art.1852 Spanish CC.

323Carrasco, Cordero and Marin, 217; Perez Alvarez, 84.

324STS 14 May 1977 [RA 1977 no. 2074]. See also Carrasco, Cordero and Marin,

216.

e) The benefit ofdiscussion for sub-guarantors

The sub-guarantor (guarantor of a guarantor) enjoys the benefit of discus-

sion both with respect to the guarantor and to the principal debtor (art. 1836 Spanish CC)325 • He has also the right and the duty to point out those

goods of the debtor and of the first guarantor which may entirely or partly perform the principal obligation. The same is valid in Italy. Differently to the guarantor's liability, which is joint and several, the liability of the subguarantor in Italy is secondary regarding the debtor's and the guarantor's liability. The creditor cannot compel the sub-guarantor to pay, unless the debtor and every other guarantor are insolvent or discharged by reason of disability (art. 1948 Italian CC326).

j) Requirements for the application ofthe benefit ofdiscussion

In case the guarantor may raise the benefit of discussion ex lege (in Spain) or by agreement of the parties (in Italy), it operates similarly in both countries.

There are three requirements for the valid application of the benefit of discussion: (i) The discussion has to be raised by the guarantor; (ii) he must point out the goods of the debtor that shall be enough to perform the payment327 and (iii) the guarantor must anticipate the costs of the discussion (art. 1944 par. 2 and 3 Italian CC and 1832 Spanish CC). Once the guarantor has performed these requirements, the creditor must diligently sue the assets pointed out by the guarantor.

aa) The guarantor must raise the benefit ofdiscussion

The benefit of discussion does not operate ipso iure; it is a faculty, a defence (eccezione/excepci6n) of the guarantor that needs to be raised against the creditor (art. 1944 Italian CC ("sia convenuto dal creditore e intenda valersi") 328 and art. 1832 Spanish CC). The creditor is always entitled to require performance from the guarantor and sue a claim against

325 In Germany, the subguarantor may only raise the benefit of discussion against the creditor if the main guarantor may also raise it or if he waived his right to raise the benefit after the subguarantee had been agreed. See Horn/Staudinger, on § 771, no. 4.

326Art. 1948 Italian CC: "11 fideiussore del fideiussore non e obbligato verso il creditore, se non nel caso in cui il debitore principale e tutti i fideiussori di questo siano insolventi, o siano liberati perche incapaci" .

327STS 21 February 2003 [RA 2003 no. 3109]. In this case, the guarantor raised the benefit of discussion on the basis of certain moveable assets of the debtor. However, the guarantor was not able to proof their value, their estate or the relation between those assets and the debtor. He could neither declare where they physically were and whether they could be sold. Hence the Supreme court denies the right to discussion.

328Campogrande, Trattato, 368 .

him. On raising the benefit, the guarantor only stops the creditor's right to enforce his claim against him until the creditor has unsuccessfully tried to obtain payment from the debtor329.

The guarantor can only raise the benefit of discussion for the debt he has secured. Accordingly, if the secured obligation is a co-debt and the guarantor only secures one of the co-debtors, he can only require the discussion of the assets of the debtors he guarantees330.

bb) The guarantor must point out the goods of the debtor subject to discussion

The guarantor has the duty to point out the goods owned by the debtor that may contribute to the payment of the debt (art. 1944 Italian CC and art. 1832 Spanish CC331 ). The guarantor must contribute with the creditor to

recover the money lent to the debtor and avoid an unnecessary delay of payment332.

(i) Excessive difficulty to enforce. Explicit exclusion from the discussion ofcertain assets

A very long, intense or difficult discussion is not to be expected. Spanish Courts are strict in the interpretation of the guarantor's duty, so that the assets indicated must be concrete, enforceable and sufficient333 . There is no need to consider those goods or assets pointed out by the guarantor if the circumstances of the case or the nature of the assets make it difficult to tum them into cash or would prolong the course of action334• It is the task of the judge to evaluate such circumstances. However in Spain the discussion is first limited by the law to those assets that "can be sold within Spanish territory and are sufficient to cover the amount of the debt" (art.

329 Ravazzoni, La fideiussione, 189.

33°Carrasco, Cordero and Marin, 21 7.

331 Also art. 2023 and 2024 French, Belgian and Luxembourgian CC. German and Portuguese CC keep silent regarding the duty of the guarantor to point out the debtor' s assets. However, if the debt was also secured with real security interests, the guarantor may raise those rights constituted before or simultaneously to the guarantee (§ 772 par. 2 juncto § 773 par. 2 German CC and art. 639 Portuguese CC). § 772 par. 2 German CC: "If the creditor has a right of pledge or lien on a moveable of the pmcipal debtor, he must also seek satisfaction out of such moveable. If such a right in the thing belongs to the creditor also for another claim, this applies only if both claims are covered by the value of the thing."

332Aru, on art. 1955, 405; Ravazzoni, La fideiussione, 186; Giusti, 185.

333STS 31 January 1986 [RA 1986 no. 344]; STS 3 October 1985 [RA 1985 no.

4570] ; STS 7 April 1975 [RA 1975 no. 1412] and STS 29 October 1991 [RA 1991 no. 7488].

334 Giusti, 186; Carrasco, Cordero and Marin, 221.

1832 CC). A similar but even more extensive rule was also contained in art. 1909 par. 2 Italian former CC which excluded following assets from discussion: a) the property outside the jurisdiction of the court of appeal in which territory the payment must be performed ("situati fuori della giurisdizione della corte d'appello in cui si deve fare il pagamento [... ]"), b) those assets which are subject to judicial procedure ("di beni litigiosi [... ]") and c) the assets which have been mortgaged to secure the debt and are no longer possessed by the debtor ("o di beni gia hipotecati per cautela del debito, i cuali non siano piu in potere del debitore"). This provision was considered superfluous or obvious and therefore not included in the new Civil Code335• However, art. 1944 Italian CC is still constructed in the same or even more extensive terms: if the search for the debtor's assets

would take too long, is difficult or will probably be non-fructuous, it does not need to be done by the guarantor336• The valuation of these facts is the task of the judge3371338•

(ii) Need to point out sufficient assets to satisfy the creditor

In Italy it is not necessary that the guarantor points out enough of the debtor's assets to cover the whole debt. It is generally considered that the guarantor can successively give notice of the debtor's property if he was not aware of its existence without negligence or if they successively enter the debtor's patrimony339•

The only problem in this case is the possible abuse of this right by the guarantor in order to delay the moment of performance. The judge must value in each case whether there has been an abuse or whether an extension of the procedure is justified. He must thereby also evaluate whether the guarantor's risk is so relevant that a delay of payment is justified340.

In contrast, in Spain the guarantor needs to point out enough of the debtor's assets to satisfy the creditor (art. 1832 CC). The aim of this requirement is to avoid losing time and costs by preventing the creditor from starting new procedures. Some scholars construe the wording of this provision extensively (not literally) considering that the guarantor may raise the benefit even if he does not find enough assets owned by the debtor to cover the debt341 • The protection of the guarantor is estimated to be more impor-

335Distaso, 117.

336Cass. 22 December 1969 no. 4032, FI, 1970, I, 421.

337Ravazzoni, Nov. Dig. It., 284.

338For Germany see § 773 par. 1 nos. 2, 3, 4 and § 773 par. 2.

339Bo, voce Fideiussione, 376.

340Distaso, 118; Giusti, 187.

341Guilarte, 182 ff; Alventosa de! Rio, La fianza, 178.

tant in this point than the risk of increasing the costs of procedure342• Such interpretation is based on the principle of favor fideiussoris. However, in this case the legal provision is absolutely clear and does not leave any room for interpretations. The guarantor can only raise the benefit if he can identify enough assets of the debtor.

cc) The guarantor must anticipate the costs ofthe discussion

The discussion of the debtor's property benefits the guarantor in the first place. If it is successfully performed, he is thereby discharged of his guarantee obligation vis-a-vis the creditor. Moreover, the discussion of the debtor's assets delays the performance of payment to the creditor. It would be unfair to make him also cover the cost of such discussion which takes place only for the benefit of the guarantor.

g) Duty ofthe creditor to diligently discuss the debtor's assets

Once the guarantor has raised the benefit, pointed out the assets of the debtor and anticipated the costs of the discussion, the creditor must proceed diligently to make the discussion. If he does not or does not sufficiently prove his diligence on discussing, he remains liable "to the extent of the value of said property, for the insolvency of the debtor resulting from such negligence" (art. 1833 Spanish CC)343. Also in Italy there used to be a parallel provision in art. 1910 former CC of 1865344; but it was deleted in the current CC. However, the same consequence derives specifically from art. 1957 par. 1 Italian CC according to which the creditor must sue the debtor and continue diligently the actions in order to make the guarantor remain liable until six months after the obligation becomes due and payable. The general duty to perform obligations according to the principle of good faith would also be enough to expect diligent behaviour from the creditor345. There is no lack of diligence from the creditor when the assets are difficult to realize346. Such level of difficulty needs to be assessed by the judges.

If the goods of the debtor are not enough to perform the whole debt, the guarantor remains liable for the difference347.

342Contra: Carrasco, Cordero and Marin, 221.

343Also in art. 2024 French, Belgian and Luxembourgian CC.

344Art. 1910 former Italian CC: "Qualora il fideiussore abbia fatto l'indicazione dei beni ed abbia somministrato le spese occorrenti per l'escussione, il creditore e responsabile verso il fideiussore fino alla concorrenza dei beni indicati, a cagione della non solvenza del debitore principale, sopragiunta per essersi da Jui differito il procedimento giudiziale".

345Giusti, 189; De Maria/Franzonni, 1490.

346Carrasco, Cordero and Marin , 223.

347Giusti, 187; Lacruz, 502 f.; Carrasco, Cordero and Marin, 223.

h) Exceptions ofthe benefit ofdiscussion

The Spanish CC establishes some exceptions to the secondary nature of the guarantee in art. 1831. A discussion of the debtor's assets is not required: 1° when the guarantor has expressly waived it; 2° when he has bound himself in solido with the debtor; 3° in case of bankruptcy or insolvency of the debtor and 4° when the debtor cannot be sued within the Kingdom.

Consequently, the benefit of discussion is not an essential element of the guarantee in Spain since it is excluded ex lege for certain cases and may also be excluded by agreement of the parties348.

aa) Benefit ofdiscussion excluded by the parties

The benefit of discussion can be excluded by agreement of the parties. If they have agreed a joint and several guarantee, the guarantor may not raise the benefit of discussion. Moreover, the guarantor may at any moment renounce his right. This waiver must be express; i.e. the intention of the guarantor must be undoubtedly, but no special form is required349• It may be included in the general terms and conditions of the contract.

bb) Cases oflegal exclusion ofthe benefit ofdiscussion

Spanish law establishes three cases in which, even if the guarantor has not renounced the benefit of discussion, it is excluded ex lege because the discussion is obviously too difficult or almost impossible. These three cases are: a) the case of debtor's bankruptcy350 (art. 1831 par. 3 Spanish CC); b)

348 In Germany § 773 CC also sets certain exceptions to the benefit of discussion: "The benefit of discussion is barred: 1. If the guarantor has waived the benefit, especially if he has assumed the guarantee in such manner that he is himself a principal debtor. 2. If the difficulty of bringin an action against the principal debtor is materially increased in consequence of a change of domicile, industrial location, or place of residence of the principal debtor, occurring after the assumption of the guarantee: 3. If bankruptcy proceedings have been instituted agains the property of the principal debtor. 4. If it may be presumed that compulsory execution on the property of the principal debtor will not lead to the sarisfaction of the creditor.

In the cases provided for by (3) and (4) the benefit of discussion is permissible where the creditor can satisfy himself out of a moveable of the principal debtor over which he has a right of pledge or lien; the provisionof 772, par. 2 sentence 2 applies." See also

Horn/Staudinger, on § 773 no. 1 ff.

349Carrasco, Cordero and Marin, 223. The formal requirements are the same as those necessary for the creation of a valid guarantee. In Germany the waiver needs to given in writing as this is the compulsory form for the guarantee according to § 766 CC. See

Horn/Staudinger, on § 773, nos. 3 and 4.

350See STS 31.1.1958 [RA 1958 no. 561]; STS 7 March 1992 [RA 1992 no. 2007]; STS 14 February 1997 [RA 1997 no. 1419].

when the debtor cannot be sued in Spain (art. 1831 par. 4 Spanish CC)351

and c) for judicial guarantors and for co-guarantors (art. 1856 Spanish

CC)3s2.

(i) Debtor's bankruptcy

The benefit of discussion cannot be raised if the debtor is bankrupt, nor if there are clear signs of his financial crisis353 . The meaning of "financial crisis" must be interpreted for each case.

(a) Declaration ofbankruptcy

It is not reasonable to sue the debtor if it is obvious that his financial situation cannot lead to satisfactory performance of the debt. Therefore, the guarantor may not raise the benefit of discussion when the debtor has been declared bankrupt354• In Spain, the start of the procedure of suspension de pagos under former bankruptcy law355 (legal procedure previous to the declaration of bankruptcy aiming for the agreement of the creditors in order to save the company) has been considered enough reason to prevent the guarantor from raising the benefit of discussion356• It was factually impossible to obtain performance from a debtor in a situation of suspension de pagos since the agreements taken by the creditors on the debtor's patrimony do not leave assets to discuss on.

(/J) Factual bankruptcy

The guarantor may also raise the benefit of discussion upon the debtor's factual bankruptcy; i.e bankruptcy has not been declared but the debtor

351STS 25 February 1958 [RA 1958 no. 1043); STS 3 March 1966 [RA 1966 no.

916].

352See Guilarte, 437 ff.; Carrasco, Cordero and Marin, 224.

353Giusti, 187; Carrasco, Cordero and Marin, 220.

354This is explicitly established in art. 1831 par. 3 Spanish CC. In Italy, this rule is not explicitly contained within the guarantee regulation but the same results from art. 51 legge fallimentare italiana and case law: Cass. 22 December 1969, 4032, FI 1970, I, 421. See Giusti, 187. The same is valid in France, Belgium and Luxembourg (art. 2023 CC);

Germany (§ 773 par. 1 and 3 CC), Greece (art. 857 par. 3 CC), Finland (§ 21 par. 2 Guarantee Law) and also in Austria, in this case however only if the creditor has not been negligent (nachliissig).

355Spanish bankruptcy law was completely amended in the new bankruptcy law of 2003 (Law 22/2003, of 9 of July, Concursal).

356STS 7 April 1975 [RA 1975 no. 1412); STS 6 October 1986 [RA 1986 no. 5241); STS 24 July 1998 [RA 1998 no. 6139]. These cases regard the former bankruptcy law.

suffers an obviously critical financial position357 • However he will not profit from the benefit of discussion358• In the first place, it will be difficult to find the debtor's assets to point out in order to validly raise the benefit

of discussion. Moreover, the creditor cannot be compelled to start actions against the debtor which cannot be fructuous3591360•

(ii) Impossibility to sue in Spain

The benefit of discussion can neither be raised upon the impossibility to sue the debtor within Spain361 because in such case the discussion is too difficult and complex. The reason for this exception is the supplementary difficulty for the discussion. Therefore a more general provision as § 773 par. I no. 3 German CC362, would be more satisfactory.

cc) Final remark

The reason for the exclusions of the benefit of discussion is the difficulty of execution in certain cases. However there are other cases in which execution is also very difficult or even impossible. In such cases, the benefit of discussion should also be excluded, as it is the case in neighbouring countries363 (for instance, when the debtor's assets are all already mort-

357This case is especifically considered in Germany under § 773 par. 1 no. 4: "If it may be presumed that compulsory execution on the property of the principal debtor will not lead to the satisfaction of the creditor" ("wenn anzusehmen ist, daB die Zwangvollstreckung in <las Vermogen des Hauptschuldners nicht zur Befriedigung des Glaubigers fiihren wird").

358Carrasco, Cordero and Marin, 220.

359See STS 30 July 1999 [RA 1999 no. 5724].

360The parties may limit the possibility to raise the benefit to those cases in which the reimbursement by the debtor is definitely impossible (totally or partially). Cass. 17 July 1985, no. 4218, FI, Rep 1986, voce Fideiussione e mandato di credito no. 33.

361Also in this sense: art. 640 Portuguese CC. Art. 2023 French, Belgian and Luxemburgian CC, base in the same idea but is even more restrictive: exclusion of the benefit of discussion takes place when the debtor's assets are outside the territory of the court of appeal. This limitation is not justified in modern times (Simler, no. 518).

362§ 773 par. 1 no. 2 German CC: "if the difficulty of bringing an action against the principal debtor is materially increased in consequence of a change of domicile, industri-

al location, or place of residence of the principal debtor, occurring after the assumption of the guarantee" ("wenn die Rechtsverfolgung gegen den Hauptschuldner infolge einer nach der Obernahme der Bilrgschaft eingetretenen Anderung des Wohnsitzes, der gewerblichen Niederlassung oder des Aufenthaltsortes des Hauptschuldners wesentlich er-

schwert ist").

363 § 773 par. 1 no. 4 German CC; art. 857 Greek CC. In France: Simler no. 511 , 512 and 518 .

364

gaged ). A general wording including all these cases in which the debtor's performance is extremely difficult would be more practical.

2. Benefit ofdivision. Special benefit for co-guarantors

The co-guarantors; i.e. the guarantors that guarantee together the same debt of the same debtor, may raise the benefit of division uRon demand of the creditor (art. 1846 Italian CC and art. 1837 Spanish CC) 65 •

3. The right to set up defences (eccezioni/excepciones/66

The double condition of the guarantee, as an obligation itself between guarantor and creditor on one hand and as a co-extensive obligation depending on the principal debt on the other, plays also a role regarding the defences that may be set up by the guarantor. The guarantor is liable vis-a-vis the creditor for his own guarantee obligation (different to the secured debt). Consequently, he is entitled as debtor to set up those defences deriving from his own obligation. Moreover, according to the ancillary nature of the guarantee367, the guarantor can also set up some of the debtor's defences for his principal debt.

a) The right ofthe guarantor to set up the defences deriving from the contract ofguarantee

According to the general law of obligations, the guarantor may set up the defences deriving from his own guarantee obligation and entirely or partly avoid the payment of his debt, or perform under more favourable circumstances . Such defences are the nullity or invalidity of the guarantee contract, the causes of extinction of the guarantee or any limit that might have been agreed by the parties for the guarantee368.

364CA Paris, 5 February 1892: DP 1892, 2, 497 cited by Simler no. 511.

365See under Chapter 4, A., III., 2. Extent of liability of each one of the security rights, 231.

366The guarantor may raise defences not only upon demand of payment by the creditor but during the whole guarantee relationship (App. Firenze, 8 January 1965, BBTC, 1965, 622).

367See art. 1945 Italian CC and art. 1853 Spanish CC.

368Cass. 29 March 1996 no. 2909, Fl, 1996, I, 1621; Cass. 20 August 1990, no. 9719, FI, 1993, I, 2171. See Carrasco, Fianza, accesoriedad y contrato de garantia, 229.