учебный год 2023 / de la Mata Munoz, Personal Security

mostly the same as the general rules on joint and several obligations that are established in art. 1137 ff. Spanish CC.

The most common scenario is for there to be the agreement of joint and several liability of all parties, including the principal debtor and the coguarantors. These contracts include a clause of waiver to "all benefits"35. Sometimes, the guarantors are joint and severally liable with regard to the inner relationship, but secondarily with respect to the principal. A mixture of several, and joint and several co-guarantees for the same debt is also possible.

(ii) Construction ofunclear contractual terms

The co-guarantors are free to make agreements regarding their internal relationship within the guarantee. If an agreement is not clearly formulated the real will of the parties must be construed with regard to the facts and circumstances of each individual case. However, the same terminological formulas with identical imprecise terms are recurrently used in practice. Therefore it is useful to suggest a construction that will be generally applicable to the same recurrent cases36. Firstly, the assumption of a guarantee together by a plurality of persons should be considered to be a coguarantee. If the co-guarantors have agreed that there should be a joint and several liability between them, this does not make them joint and severally liable in relation to the principal debt37· Furthermore, a co-guarantor may constitute a guarantee for the risk of not-being repaid by the debtor if the guarantee is performed. The person who guarantees this right of one coguarantor against the debtor is not thereby the sub-guarantor of the creditor38.

In some instances of joint and several co-guarantee it is the case that one co-guarantor promises to indemnify another co-guarantor if he is called on to perform. If the promisee has performed, he is able to recover the total amount from the promisor. If it is the promisor the one who is performing, then the promisor does not enjoy a right of recourse against the other co-guarantor. Moreover, the promisor is not to be considered to be a sub-guarantor for the promisee's liability vis-a-vis the creditor.

Furthermore, in neighbouring countries it is common for there to be an agreement to provide a guarantee for a maximum percentage of the debt. If this is agreed by a plurality of guarantors (for example A ensures a 100 % of the debt, while B and C guarantee only a 30 o/o each) it is difficult to

35 " •••con renuncia a los beneficios de excusi6n, orden y division"

36See Carrasco, Cordero and Marin, 289.

37STS 3 June 1968 [RA 1968 no. 3064].

38See SAP Barcelona 28 May 1997 [AC 1997 no. 1164].

know what level of liability must be performed by each of the guarantors39 • However this situation does not seem to be common in practice. There is no case law regarding this matter and there is no theoretical discussion of this possibility. The only reference to this issue has stated that such a contract is to be construed as a joint and several co-guarantee40•

The partners of a firm may act together to guarantee a debt of their firm. In this situation it is taken to be the case that each one of them is liable not per capita but proportionally, according to their respective shares of the firm .

b) In the case ofplurality ofsecurity rights (personal and real)

In the case of a plurality of security rights that are assumed independently from each other, every surety is liable for the totality of his obligation against the creditor. This is the case provided that the security is already enforceable and the principal obligation has not been extinguished.

3. Defences

a) In the co-guarantee

The regulation of the guarantee on this matter is applicable to each one of the co-guarantors.

Every co-guarantor can set up all his personal defences. This includes those arising from the principal debt and also the defences of the other coguarantors if the liability has been agreed to be joint and several.

If the creditor discharges one of the co-guarantors, the other coguarantors may set up a defence41 in order to reduce their own liability with regard to the part of the guarantee which has been discharged42•

This situation must be distinguished from the instance in which creditor and guarantor have set-off mutual claims. A release of the latter with regard to having to perform payment does not mean that there has been a discharge. The party who has been released has not received a benefit. Therefore, the other co-guarantors should not receive any advantage on this basis.

39 For Gemany see Gl6ckner, 821.

4°Carrasco, Cordero and Marin, 288.

41The personal defence of the discharged guarantor.

42This is regulated in art. 1850 Spanish CC, although a specific provision would not be necessary.

b) In the case ofplurality ofsecurity rights

If there is a plurality of security rights the sureties can only set up personal defences and defences arising from the principal debt. A discharge of one of the guarantors does not affect the rest.

IV. Internal relationship among the different sureties

The performing surety enjoys a right to receive a contribution from the other sureties of the same debt depending on the type of relationship between them. This will be different if it is a case of

a)co-guarantee,

b)a plurality of personal security rights, independent form each other or

c)a plurality of personal and real security rights.

1. Internal relationship among co-guarantors

a) Right ofrecourse

In a joint and several co-guarantee, a co-guarantor who fulfils performance for the entire guarantee, enjoys a right of reimbursement and a right of subrogation in the rights of the creditor against the debtor and the coguarantors (art. 1203 par. 3 Italian CC and 1210 par. 3 Spanish CC)43 . As against the other co-guarantors, the performing party will have a right to be reimbursed for the total amount of the debt, except for his original part.

The internal right of recourse between co-guarantors is regulated in art. 1954 Italian CC44 and based upon the rule of proportionality. The performing co-guarantor enjoys ope legis a right to be refunded by all other coguarantors for their respective shares of the debt. If no agreement has been reached and no other criteria of division can be applied, the respective shares are presumed to be equal with regard to the total debt (division per capita). This result is attained by the application of the rules on co-debt (art. 1298 CC)45 •

43Franzoni, 785 and art. 1210 par. 3 sent. 2 Spanish CC: "Subrogation shall be presumed to exist (...) 3) When payment is made by a person having interest in the performance of the obligation, saving the effects of confusion with respect to the part belonging to him''. See STS 20 July 2007 [RA 2007 no.5301]; SAP Zaragoza 25 June 2007 [AC 2007 no. 299859].

44"If a plurality of persons has provided a guarantee for the same debtor and the same debt, the surety that has performed has a right of refund against the other sureties for their respective part. If one of them is insolvent, art. 1299 must be considered".

45De Maria/Franzoni, 1496.

238 Chapter 4: Plurality ofsecurity rights

co-guarantors. Strictly considered, this payment would be partly the performance of his own debt and partly the performance of the liability owed by other persons. As the case of performance for another person is already regulated in art. 1158 Spanish CC, there would not be any need to enact a special provision to cover the case of co-guarantee. According to the general regulation, a co-guarantor that fulfils the performance of the other coguarantors has a right to be refunded by virtue of being a third party who is performing the debt of another person.

Despite the bad use of legislative language, art. 1844 is not unnecessary as it contains the restrictions that exist in relation to the right of refund. These are included in the third sentence of the provision, according to which, the action of refund will be granted only if: a) payment has been made as a result of a suit or b) after the principal debtor became insolvent or bankrupt. This provision would make sense if it was the case that in Spain the liability of the co-guarantors was joint and several. However, this is simply not the case.

It seems peculiar that by virtue of his status as a co-guarantor, an individual who has completed performance of an obligation that he did not owe (namely the obligations of the other co-guarantors), possesses a right of refund that is inferior to the one that is granted by the general regulation of the Spanish Civil Code. It is submitted that his position should not be distinguished from that of any person who performs the debt of another person52. Therefore, art. 1844 in fine Spanish CC should at least be construed in a non restrictive way. This criterion has been followed by the Spanish Supreme Court, which thus has avoided the strict aRplication of its wording (also in cases of joint and several co-guarantees5 ). In the words of the Supreme Court, "the aim of art. 1844 is to avoid a possible damage to the co-guarantors by reason of a reckless, premature or malicious payment"54155. Therefore, by application of the principles of good faith and equity, a right of refund shall always be present when all the co-guarantors have benefited from the payment56, a judicial suit not being "absolutely necessary".

52For critical views see: Albadalejo, Compendio, 1997, 294; Diez-Picazo,

Fundamentos, 452. Contra: Carrasco, Cordero and Marin, 294.

53STS 9 July 1958 [RA 1958 no. 2718]; STS 20 January 1984 [RA 1984 no. 355] and STS 4 May 1993 [RA 1993 no. 3403].

54STS 19 November 1982 and STS 7 July 1988 cited by Sierra and Gullon, 190.

55However, in case of arbitrary payment of the whole debt by one of the conguarantors, the others can always set up their defences against the performing one.

56According to STS 24 May 1994 [RA 1994 no. 3741] the performing guarantor must not have been sued for payment in order to ask the co-guarantors for reimbursement if all of them have benefited from the payment. This benefit might simply be the avoidance of an increase of the debt because of procedural costs (STS 7 July 1988 [RA 1988 no.

Furthermore, with regard to the second restriction of art. 1844 par. 3, a factual insolvency or bankruptcy of the debtor is enough to render the guarantor entitled to request reimbursement57.

b) The case ofinsolvency ofone ofthe co-guarantors

According to art. 1954 par. 2 juncto art. 1299 Italian CC, if one of the coguarantors is bankrupt, his part of the debt will be assumed by the other co-guarantors. They will thus assume their share proportionally in relation to the performing guarantor. The latter must prove that at the moment of reimbursement, the relevant co-guarantor was insolvent58 • The same rule is to be found in art. 1844 par. 2 Spanish CC.

A logical application of this provision only takes place within coguarantees that have been agreed as being joint and several, or if the "benefit of division" has been lost (cases listed in art. 1831 par. 1). Otherwise, i.e. in the normal case of several liability, the guarantors are not legally compelled to reimburse the performing party. If full performance is freely given, then he thereby assumes the risk of insolvency.

c) The right ofthe co-guarantors to set up defences against other co-guarantors

If one co-guarantor has performed on behalf of his fellow co-guarantors (joint and several ex lege in Italy or if the benefit of division has been lost according to the law in Spain59), the co-guarantors can set up any defences against the performing guarantor (solvens) that they could have raised vis- a-vis the creditor. Moreover, every co-guarantor can set up his own personal defences against the solvens.

2. Internal relationship between a plurality ofsureties that are independent from each other

a) Plurality ofguarantees, independent from each other

As previously observed, the rules on co-guarantee are not applicable to the case in which a plurality of personal securities are independent from each

9287]; STS 7 June 1991 [RA 1991 no. 4428] and STS 16 July 1999 [RA 1999 no. 6770]); but also the cases of special interest of the co-guarantors in the principal debt (STS 2 December 1988 [RA 1988 no. 9287] commented by Guilarte, CCJC, 1988, 18 § 483; STS 24 May 1994 [RA 1994 no. 3741], commented by Tur, CCJC, 1994, 36 § 970 and STS 29 November 1997 [RA 1997 no. 8437]).

57STS 18 September 1997 cited by Sierra and Gull6n, 190.

58See Petti, 193.

59See supra Chapter 2, D., 2. Benefit of division. Special benefit for co-guarantors,

103.

other60• Hence, there is no right of recourse between the different sureties. However, the general rules on guarantees are applicable. In this respect, according to arts. 1949 Italian CC and art. 1839 Spanish CC61 , the performing guarantor is subrogated in all of the rights of the creditor, including the security rights for the debt 62 • Therefore, it is also a matter of hazard as to which one of the guarantors shall be requested to perform in first place and which one will finally perform.

b) Plurality ofpersonal and real securities independent from each other

The same results are present in the situation of there being a plurality of personal and proprietary sureties63 . By virtue of art. 1203 par. 3 Italian CC and art. 1210 par. 364 Spanish CC, the surety (personal and/or real) that performs the obligation is subrogated into all the rights of the creditor. The rights that are annexed to the credit are also the object of subrogation65• Therefore, the surety who fulfils the payment is subrogated into all the rights of the creditor. This subrogation therefore includes any other security that ensures the principal debt.

As the creditor is free to act against any of the sureties that are guaranteeing the same principal debt it is a matter of hazard as to which surety will be required to provide payment. The one who has been chosen has to furnish payment, but he thus obtains the possibility to sue the other sureties. However, this right is of little use if the other sureties are insolvent. It is thus an unpredictable matter as to which of the sureties will finally suffer the patrimonial damage. This appears to be particularly unfair as the ultimate loss is thus dependent on the will of the creditor, which may be whimsical or based on mere personal preferences.

60STS 4 May 1993 [RA 1997 no. 3741]; Diez-Picazo, Fundamentos, 445 ff; Petti,

192.

61"By virtue of payment the surety is subrogated in all the rights that the creditor had against the debtor. (...)"

62Cass. 7 April 1998 no. 3575 cited by Petti, 192.

63Garcia Medina, La doctrina jurisprudencial del art. 1852 del C6digo Civil (LEG 1889, 27), y la extinci6n de la fianza, Boletin Aranzadi Civil-Mercantil num. 47/2002, 2003.

64Subrogation shall be presumed to exist: (...) 3° When payment is made by a person having an interest in the performance of the obligation, saving the effects of confusion with respect to the part belonging to him" .

65Cass. 27 December 1963, no. 3221 , FI, Rep. 1963, voce Fideiussione e mandato di credito, 24; Tafuro/Franzonni, 785 and art. 1212 Spanish CC: "A subrogation transfers to the party surrogated the credit along with the rights annexed thereto, whether they run against the debtor or third parties, whether guarantor or holders of the mortgages" ("La subrogaci6n transfiere al subrogado el credito con los derechos a el anexos, ya contra el deudor, ya contra los terceros, sean fiadores o poseedores de las hipotecas").

c) Possible solutions to the unfairness ofthe lack ofright ofrecourse among sureties

aa) In general

As we have observed, the absence of regulation on the plurality of independent sureties has given origin to inequitable situations regarding the internal right of recourse among the sureties. Scholars in Italy and Spain have chosen to ignore the study of this matter66. However, the case law in Italy and in other countries such as Germany, has applied general legal principles in order to provide a satisfactory and fair solution to these situations.

bb) Solution based on the principle of bona fides

(i) Application in neighbouring countries

The logic of fairness suggests that if several persons are prepared to risk their own patrimony or certain assets in order to secure the obligation of another person, all of them should be deemed to be co-debtors for a part of the liability that arises upon the non-performance of the principal debtor67 . The courts and scholars of certain neighbouring countries with no specific regulation of this issue have already accepted such a solution on the basis of general legal principles such as equity or bona fides68 .

The Italian Supreme Court has reached the same solution to this issue. This court held69 that the performing guarantor is subrogated into all the

66The only reference to this case has been first recently made in Carrasco, Cordero and Marin, 290291.

67Reinicke and Tiedtke, 183 und 187 f.

68In Germany on the basis of§ 242 BOB (bona fides), BGH 29 June 1989, BGHZ 108, 179, 183, 186. In Common Law a right of contribution between co-sureties has been recognised to all co-sureties on the basis of the principle of equity. So, "The right of a surety to contribution is not limited to those who have jointly or jointly and severally bound themselves by the same instrument or even by different instruments expressly connected with each other... The rights of a surety and the effect of the conduct of the creditor upon them rest, broadly speaking, upon two principles which are quite distinct from each other: One is merely a principle of the law of contract. (...) But sureties have other rights not based upon contract at all, but resulting from the equitable right to contribution in all cases where there are sureties for the same debt, even though bound by different instruments, for different amounts an in different terms. In all such cases the extent of each surety's rights must depend not only upon the rerms of the instrument by which the other sureties are bound, and the extent of this relief may be measured by the extent to which the conduct of the creditor has affected the surety's right to contribution" (Molson Bank v. Konvinsky [1924] 4 D.L.R. 330 at 335-36 (Ont. C.A.); Mc Guiness, 226.

69Cass. 7 April 1998 no. 3575 in Petti, 192; See also Franzoni, 1497.

rights of the creditor (art. 1203 Italian CC). This guarantor therefore has a right to receive reimbursement from each of the other guarantors. This reimbursement is to be proportional to the percentage that each guarantor provided with regard to the total provision of security. Therefore the performing guarantor should receive a sum that is equivalent to the entire sum of the guarantee, with the exception of an amount that represents the proportion of the total security that was provided by himself70. Altogether it can be observed that the Italian Supreme Court has overcome dogmatic problems in order to provide a sensible solution.

(ii) Application ofthe "Bona Fides" solution in Spain. Difficulties

A similar solution to that used in Germany or Italy could also be applied under Spanish Law. However, there is some difficulty in this matter with regard to the concept of co-debt. According to the wording of art. 1137 Spanish CC, co-debtors are severally liable, unless a different agreement has been reached on this point. If a plurality of sureties that are independent from each other are considered to be co-debtors, they are thus held to be severally liable with regard to the external relationship. The creditor would therefore only be entitled to request that each one of them fulfils his respective obligation. This would therefore mean that each co-debtor would only have to provide a payment in relation to the debt that was proportional to his or her individual share of the total security.

This solution is obviously different to that which is desired by the parties. This can be seen to be the case as their aim was to secure the total debt with different securities that were additional to each other. Moreover, sureties must not receive any notice of the existence of other sureties. This is to prevent them from being unaware of the amount for which they are liable. If they were unaware they might not be able to set up a defence that might arise if an excessive amount should be requested. The result of this construction would be that in order to solve an unfair situation that was present within the internal relationship, a separate unfair or undesired situation is created within the external relationship.

Spanish case law has modified the application of art. 113 7 Spanish CC in order to restrain the exigency of the express constitution of a joint and several co-debt by application of the principle of good faith (art. 7 Spanish CC). According to a number of decisions the joint and several character of

70 Ifno special agreements have taken place, all securities have the same rank. The sureties are considered co-debtors and according to the rules on co-debt they will be liable pro rata (per capita unless otherwise agreed), (art. 1298 Italian CC). The same has been applied by the German Supreme Court in BGH 24 September 1992, NJW 1992 no. 3228 in Reinicke and Tiedtke, 183 (§426,,nach Kopfen").

a co-debt may be deduced from the intention of the parties or from the nature of the agreements71 •

In case there is a plurality of sureties, they might act separately from -or even not have notice of the existence ofeach other. However, all of the securing obligations seek to achieve a common legal result; i.e. to satisfy the same creditor for the same debt. Hence, they are joined by this common aim. Therefore, according to the case law on co-debt72 the sureties might be considered to be joint and several co-debtors. This may even be the case if the parties have ignored the request in art. 1137 Spanish CC and have not expressly agreed to such a position.

A second theoretical difficulty arises from the fact that if there is a plurality of sureties then there are as many obligations as there are securities. These obligations are independent from each other and also from the principal debt. Certain legal writers hold that a joint and several co-debt creates a unique obligation that is owed by different persons. This theory has been contradicted by other academics who consider that a joint and several co-debt always creates a plurality of obligations: "the external unity derives in a real plurality"73• Moreover Spanish case law on co-debt has also held that even if the different obligations of the individual debtors are independent to a certain extent, they are unified by their common purpose of fulfilling the interest of the creditor74.

It can therefore be concluded that in Spain a plurality of sureties of the same rank, that secure the same debt for a common debtor can be considered to be joint and several co-debtors. Hence, arts. 1140-1148 Spanish

CCshould be applied to such instances.

(iii)Consequences ofthe application to this solution

Consequently the provision of compensation for the benefit of a performing co-debtor shall be applicable for the benefit of a performing surety. In general the compensation of the performing co-debtor can be based on two different claims: reimbursement and subrogation.

In Germany, Italy and Spain the performing debtor has claim for reimbursement against his co-debtors with regard to their respective parts of the

71STS 15 March 1982 [RA 1982 no. 3403]; STS 6 March 1999 [RA 1999 no. 2247] and STS 7 April 1983, STS 14 April; STS 20 October 1986, STS 12 May 1987, STS 26 July and STS 11 October 1989, STS 28 May and STS 17 December 1990, STS 19 December 1991 and STS 17 October 1996 cited by Albacar, 709.

72STS 13 March 1987 [RA 1987 no.1479] and STS 26 April 1985 [RA 1985 no.1991].

73For a broad explanation and quotations: Diez-Picazo, Fundamentos, 206.

74STS 19 July 1989 cited by Moreno, 915.