Judge Sentences Spanish Bank to Refund a Purchaser Without Bank Guarantee
It’s not been quite like the search for Bin Laden, but we have been scouring all case law databases for the last couple of years trying to find any ruling that would point to the direction of the banks’ liability to refund property buyers, in the event of developers falling foul of their obligations to refund deposits, where the latter had accounts opened with the former and were using them to trade in property, irrespective of whether bank guarantees were available or special accounts opened at all, these being the 2 main obligations developer’s had, in accordance to the 57/1968 Act on Off-Plan Property Down Payments (Ley 57/1968, de 27 de julio, reguladora de las percepciones de cantidades anticipadas en la construcción y venta de viviendas).
One very web-active colleague that was initially admitting to having the evasive case law but was reluctant to disclose it (we still don’t know if they really have any of it), is instead now hinting that there was something to that effect, always in a vague but nonetheless “mercantile” manner, so as to no doubt monopolize the information and release it with a big bang when the time was right (all very strange, really). A website with a pretended interest in helping thousands who have lost thousands to rogue developers also claimed this case law existed but my insistent requests to have a copy of such ruling were left unresponded.
And then, just by chance, we have come across a ruling, written up by the Judge in charge of Court of First Instance number 54 in Madrid, that finds a bank responsible of being irresponsible and forces it to repay a buyer who bought into a development that was never completed. We have asked for a copy of the ruling from our Madrid colleague who, as we expected, has kindly and promptly acceded to forward us one, after the long-weekend, that is. Once we have received it, we will discuss it, as it has the potential to set a precedent that can make banks responsible in any event, where they consented developers to use their accounts to trade in property, without securing the deposits that were being paid into those accounts by customers. In the ruling, the Judge determined that the bank manager, who knew the buyer personally, had lent him the deposit that was to be invested with the developer, who was also his client. The Judge found the developer’s bank (and buyer’s lender) morally responsible because it knew that the loan was to be used to buy a property, and consented that the loan was paid directly into the developer’s account, which, known to the bank, did not comply with the 57/1968 Act. Indeed, all very incestuous!
It is soon to draw conclusions but I can say that:
- The ruling has not been appealed, presumably to avoid the inevitable publicity it would attract if it went to a higher judicial instance, in this case, the Provincial Audience (quoting my colleague).
- The case is specific, in that the bank assisting the developer was also the lender for the buyer, perfectly knew that the funds were going to be used as a deposit for offplan property, and allowed these funds to be lodged in one of their accounts.
- According to our Madrid colleague, barring error or omission, there is no known case law on the matter (note that a ruling of a Court of First Instance is not deemed as case law).
Another consequence of this rulling is that a developer may force banks to advance funds to complete unfinished developments as, if unprotected buyers can find solace in this doctrine, so should the developer (although that’s another story altogether).
This ruling can be the beginning of the end of the nightmares many bona fide buyers have and are going through. My advice is, in any event, to apply caution and prudence, until we can get hold of it (ruling) and have it read, dissected, interpreted and, ultimately, draw reasoned and balanced conclusions on how to proceed.
It should be stressed that this is a very specific case, with a very particular set of circumstances that render it unique, and cannot be considered of general application against all banks and developers (at least with what we have so far). Each case we come across needs to be analised thoroughly and clients advised that losing it will almost invariably attract subtantial legal costs (and certainly where a claim is deemed to be “reckless”).
Documents
Having now received this extraordinary ruling, the following assertions made by the parties are worth noting, as they may indicate a trend to be followed by Courts in future:
It a nutshell, the Plaintiff claimed:
– That the contract between the developer and the buyer mentioned that the sums paid on account of the price were to be guaranteed, by means of bank guarantee to be issued by La Caixa.
– That La Caixa gave a loan facility to the buyer to, precisely, invest in this development, and therefore knew that the funds were to be utilized to this effect.
The Defendant (La Caixa) claimed, on the contrary:
– That they have no involvement, direct or indirectly, with the developement in question, nor with the contract signed for it.
– That the developer never requested from La Caixa that a “special bank account” was opened with them.
– That the account opened was in fact a “current account”, dating back to November 2004, when the development was only a project that had not left the drawing boards, and therefore no guarantees could have been provided at the time of opening it.
– That the account was being credited with hundreds of transfers and payments, most of which were not related to down payment on off-plan properties, and was therefore not under any special restrictions.
The Judge determined that, given the bank´s involvement in lending the funds, which are the centre of the dispute, they clearly knew that they were to be used to acquire a property in a development that happened to be using also La Caixa, for banking purposes. Additionally, the Judge established that the type of bank account used is only an accessory matter that, in this case, had minor relevence in respect of the buyer, and should a dispute had arisen here, it could not be in the detriment of the buyer. Finally, the Judge indicated that La Caixa should have ensured that the bank account complied with the provisions of the 1968 Act.
Hola Antonio,
Many thanks for this. I think many of us needed some clarification re this ‘Action’ against banks that’s been enthusiastically promoted elsewhere.
???Am I right in thinking:
(a) it would need to be PROVED that the bank was aware at the time that monies placed in a non-escrow account were for an off-plan purchase. For many trying to get their deposits back, this would not be as straightforward as the above specific case, I would think
(b) banks are not obligated to guarantee off-plan deposits placed in non-escrow accounts, when they claim no knowledge of the purpose of the funds & this purpose cannot be PROVED
(c) if a bank has subsequently issued a mortgage to the developer on properties where the depositor has legally refused to complete, would this implicate the banks in said action
(d) how does this leave those of us who have ‘won’ cases against the developer (having no BG) but developer refuses to pay up, as ruled by the courts. Do claimants still have the option to take action against the bank concerned (on lawyer’s advice, of course)
As Ley 57/68 INITIALLY states the requirement of the Escrow Account, when this is not in place how can the rest of this Law be applied in ‘Action’ against banks (as promoted elsewhere!)
Apologies for capitals & the length of this comment. But, so many many queries.
Best regards, Suzanne
Hello Suzanne!
Hope all is well. In response to your queries:
a) It is an obligation for a bank to know if a person, company or otherwise, is dealing in property. In fact, they need to know what their clients are up to, surely. Imagine a bank manager not knowing where millions of Euros are coming from, and not asking? Surely La Reserva de Marbella S.A. activities are known pretty much everywhere, let alone it´s own banker. Generally, bank also lend to these developer´s so they know full well.
b) According to this ruling, banks that know that an account is being used to finance property transactions should have a fiduciary responsibility to ensure that buyer´s monies are safe, by issuing a bank guarantee facility.
c) Again, lending on these properties entails knowledge of the activities of the client. Denying this is like not knowing what Barack Obama´s job is, currently!
d) The ruling has not been appealed, so it will not be know if it would have been upheld by the courts.
b)
Hello Suzanne,
Sorry, the post was submitted before I could finish!
The Court case stipulates, in a nutshell, that banks always have a responsibility towards buyers where these lose deposits to developers that happen to be their clients, particularly where they could or should have known that these clients where in the property developing business.
This is, of course, the opinion of the ruling Judge and may not be shared by others, but it shows that some judges are feeling that banks have a responsibility that goes beyond just opening bank accounts for clients.
Regarding the ‘action’ being promoted elsewhere, such promoters have indicated that case law supports their enterprise when, in reality, it does not exist, according to every lawyer I have spoken to (even the Madrid lawyer that won this case). It is yet another case of ambulance-chasing, unfortunately. In times of crisis, ethics drop dramatically…
Hi Antonio,
Surely this is a good thing. We are all aware that the banks have stolen our money and thieves and criminals should not be allowed to prosper, no matter how tough things may be for them at the moment.
Why don’t the Authorities stop ‘Pussy footing’ around. The Law has been broken and no amount of glib legal argument will get them around the words ‘Thou Shall Not Steal’. We have had our money stolen from us when there is a law that is there to stop this happening.
This is good for the Banks and the Legal profession, you are all going to do well on this bean feast. Why is there no central body we can go to or would that be too easy. We all independently go to different lawyers to get back that which is rightfully ours. I have not yet found a lawyer who has said there is a group of you in the same boat so our fees will be less because of this.
My deposits paid into the developers bank clearly state the PLOT or PARCELA number on them. Assuming the banks employ reasonably intelligent, sighted, people it would be blatantly obvious that these deposits were for an off plan property on a development that was never started let alone finished. Claiming that these deposits were in the wrong account is laughable. Who’s fault is that? Ours? Let’s start seeing some honesty in all this for the sake of Spain’s already tarnished reputation.
I’m sorry if my tone is offensive. No, I am not sorry I am Angry. Angry that at 67 years old I Have been ripped off by some smart suited banker who earns more in one year than I earned in my whole lifetime. Angry that I’m having to live in a grotty rented studio for the rest of my life. Angry that my pension, my life savings has bought another Ferrari for some crook. Angry that I cannot afford another Ferrari to fight to get back MY money. Angry that there is no one with the balls to start a revolution, instead of please sir, no sir, yes your Honour.
Hello Anontio
Is there any news of the above ruling you have mentioned
Hello Simon,
As far as we know this ruling was not appealed and therefore it will not reach the category of case law, but a ruling from a Court of First Instance. This means that any claim based on this ruling will not necessarily be more solid, from a legal point of view, although it is certainly shows other judges a possible route to take.
Hello Mike,
I fully understand your predicament and sympathize with your anguish. We are able to act for customers who group and this way be able to reduce the fees substantially. It is also important to know on what grounds a case is based so that claimants are fully aware of their legal position and consequently, their options and expectations. If you wish to summarize your case and email me directly I will happily provide you with an opinion.
Hello Antonio
so where do you feel we stand this new year with regards to BG’s.? If we were not provided with a BG, what should we do? Or do you feel there is no case against banks who did not provide a BG?.
Hello Goodstitch44,
I feel that a case against the banks that did not provide individual BGs and/or did not guarantee the developer in respect of the protection of individual buyers´deposits (a general or master bank guarantee, irrespective of the individual ones issued on the back of it) is a complete uncertainty, as current case law stands.
This means that if you decide to proceed with an action against banks or savings banks you lack specific case law on the particular subject, which means that you are orphan of legal precedent. So long as you are aware of this, and the legal cost of losing the case, then why not file a case? At the end of the day, someone has to push the envelope on this very controversial matter to seek a favourable result.
Estimado compañero:
Me dirijo a ti en relación a esta sentencia dictada por el Juzgado de Primera Instancia nº 54 de Madrid condenando a La Caixa en virtud del art. 1.2 ley 57/68.
Como podrás imaginarte, estoy preparando una demanda en ejercicio de esta misma acción y contra esta misma, por lo que me sería de tremenda utilidad el tener copia de dicha sentencia. He intentado obtenerla a través del Juzgado, pero como carezco de la información relativa al procedimiento, me ha sido imposible. Te estaría muy agradecida si pudieras remitirme copia de la sentencia o, en su caso, indicarme el nombre del compañero que representó al comprador en este asunto, para trasladarle a él la solicitud.
Agradeciéndote de antemano tu colaboración, recibe un cordial saludo,
Guadalupe Sánchez Baena
info@gmlegalexperts.com
Guadalupe, hemos añadido la sentencia al post. Saludos. Rulling has been added to the post. Regards
Our house bought with mortgage arranged from CAM bank, Dolores. €15,000. We were unable to pay the monthly amounts and so got another loan, the total amount owed to the bank when my husband died was €95,000. They said I had to pay two lots of mortgage, interest etc. I was forced to let a company called Maple Properties to take over my payments and so they have the house and I had six months rent free, then rented it for 6 months. They now want me out by the end of June as it is too expensive to run. I am unsure what if any help you can give.