Foreclosure on property in connection with non-fulfillment of contractual obligations
Thus, in accordance with art. 292 of the Civil Code of the Republic of Kazakhstan, the fulfillment of an obligation may be secured by a pledge.
According to Article 299 of the Civil Code of the Republic of Kazakhstan, a pledge is a method of securing the fulfillment of an obligation, by virtue of which the creditor (pledgee) has the right, in case of non-fulfillment by the debtor of the obligation secured by the pledge, to obtain satisfaction from the value of the pledged property primarily before other creditors of the person to whom this property belongs (the pledgor) with the exceptions established by this Code.
According to Clause 2 of Article 299 of the Civil Code, the pledge of enterprises, buildings, structures, apartments, rights to land and other immovable property (mortgage) is regulated by the Law of the Republic of Kazakhstan "On Mortgage of Immovable Property". The general rules on pledge contained in the Civil Code apply to mortgages in cases where the Mortgage Law does not establish other rules.
Most often in judicial practice, there are disputes on the recovery of overdue loan debt with foreclosure on collateral, which are handled mainly by Banks, micro-credit organizations, credit partnerships, pawnshops.
This category of cases is considered by the courts using the norms of the Civil Code, the Law "On Mortgage of Real Estate" and banking legislation.
It should be noted that the Law of the Republic of Kazakhstan No. 333-V SAM dated July 17, 2015 introduced significant changes to the norms of the Civil Code and the Law "On Mortgage of Real Estate" on the norms governing foreclosure on mortgaged property.
Generalization has established that in most cases, decisions are made to satisfy claims.
The courts reasonably apply the norms of Articles 272.722 of the Civil Code, which establishes the borrower's obligation to repay the loan item in accordance with the procedure and terms stipulated in the contract.
The Law of the Republic of Kazakhstan dated July 17, 2015 amended paragraphs 3 and 4 of art.722 of the Civil Code, providing for the right of the mortgagee to satisfy his claims by foreclosing on the pledged property (subparagraph 4 of paragraph 2 of art.321 of the Civil Code
So, by the decision of the Kokshetau city Court of the Akmola region dated May 20, 2015 on the claim of the Micro-credit Organization GID Credit SK LLP to Kazbekova AA for debt collection, by foreclosing on the mortgaged property, the claim was partially satisfied. The amount of debt in the amount of 3,290,166 tenge, the cost of paying the state duty 98,705 tenge, was recovered from the defendant in favor of LLP by foreclosing on an apartment located at the address: Kokshetau, m-n Central, 50 sq. 25, setting the initial sale price of the mortgaged real estate at its sale 5,664,457 tenge. The rest of the claim was denied.
The court found that within the framework of the General Loan Agreement concluded between the parties on May 04, 2014, on May 05, 2014 and on May 06, 2014, the plaintiff and the defendant concluded loan agreements no.KDGKS00384Ki no.KDGKS00384*1K in the amount of 1,500,000 tenge and 1,000,000 tenge, respectively, for a period of 48 months, with the condition of payment remuneration is 20% per annum.
Thus, the deadline for the execution of the contract has not yet arrived, the mortgagee has applied to the court for early recovery of the entire amount of debt and foreclosure on the mortgaged property.
The court, referring to Articles 272, 722 of the Civil Code, satisfied the claim for early recovery of the entire amount of debt, reducing the penalty from 500,000 tenge to 350,000 tenge, and foreclosed on the mortgaged property.
Article 20 of the Law of the Republic of Kazakhstan "On Mortgage of Real Estate", which regulates the basis and methods of mortgage realization, as amended by the Law of the Republic of Kazakhstan No. 333-V SAM dated July 17, 2015, is set out in a new edition
Foreclosure on the mortgaged property in order to satisfy the claims of the mortgagee may be levied in the event of non-fulfillment by the debtor of the obligation secured by the mortgage for which he is responsible.
The pledgee has the right to satisfy his claims by:
1) the sale of mortgages in court;
2) the sale of mortgages out of court, if this is provided for by the laws of the Republic of Kazakhstan or in the mortgage agreement or subsequent agreement of the parties;
3) taking possession of the pledged property in case of declaring the auction invalid in accordance with Article 32 of this Law.".
By virtue of Article 317, paragraph 1 of the Civil Code, foreclosure on mortgaged property in order to satisfy the claims of the pledgee (creditor) may be levied in the event of non-fulfillment or improper fulfillment by the debtor of the obligation secured by the pledge for which he is responsible.
If the debtor fails to fulfill the main obligation, the mortgagee has the right to satisfy his claims by selling the pledged property, including the mortgage, in court or out of court, if this is provided for by the contract or legislative acts.
Thus, the mortgagee can apply to the court with a claim for the recovery of amounts with foreclosure on the debtor's property.
If the deadline for the performance of the contract has already arrived, and the debtor has not fulfilled it properly, then the courts, considering such cases, should take into account the provisions of Part 2 of Article 317 of the Civil Code, which regulates that foreclosure on mortgaged property may be refused if the debtor's violation of the obligation secured by the pledge is extremely insignificant and the amount of the pledgee's claims is clearly disproportionate as a result. the value of the mortgaged property.
The Law of the Republic of Kazakhstan dated July 17, 2015 amended paragraph 2 of Article 317 of the Civil Code and supplemented Part two with the following content: Violation of the obligation secured by the pledge is extremely insignificant and the amount of the pledgee's claims is clearly disproportionate to the value of the pledged property, while the following conditions are met:
1) The amount of the unfulfilled obligation (excluding penalties (fines, penalties) is less than 10% of the value of the pledged property determined by the parties in the pledge agreement 2) the period of delay in fulfilling the obligation secured by the pledge is less than 3 months. If the deadline for the performance of the contract has not arrived, but the pledgee has applied to the court for early recovery of the entire amount owed, then the courts should take into account the requirements of paragraph 1 of Article 321 of the Civil Code, according to which the pledgee has the right to demand early fulfillment of the obligation secured by the pledge in cases 1) if the pledged object has left the possession of the pledgor, in which it was left, not in accordance with in accordance with the terms of the pledge agreement;
2) violations by the pledgor of the rules on the replacement of the pledged object (Article 314 of this Code);
3) loss of the pledged object due to circumstances for which the pledgee is not responsible (paragraph 2 of Article 313 of this Code), if the pledgor has not exercised the right provided for in paragraph 2 of Article 314 of this Code.
4) foreclosure on the subject of the pledge in order to fulfill the obligations of the pledgor under enforcement documents to third parties who do not have an advantage over the claim of the pledgee, in the absence of the pledgor's other property.
The pledgee has the right to demand the early fulfillment of the obligation secured by the pledge, and if his claim is not satisfied, to foreclose on the subject of the pledge in the case of:
1) violations by the pledgor of the rules on subsequent pledge;
2) failure by the pledgor to fulfill the obligations stipulated in subitems 1 and 2 of paragraph 1 and paragraph 2 of Article 312 of this Code;
3) violations by the pledgor of the rules on the disposal of pledged property (paragraph 2 of Article 315 of this Code).
4) violation by the pledgor of the obligation secured by the pledge (Articles 317, 720 and 722 of this Code, Article 20 of the Law of the Republic of Kazakhstan "On mortgage of immovable property)
By the decision of the Kokshetau City Court of the Akmola region dated May 20, 2015, the claim of Micro-credit Organization GID Credit IC LLP to Frick N.V., Frick T.V. for debt collection of KZT 6,073,486 and foreclosure on mortgaged property was partially satisfied.
The debt in the amount of 5,873,486 tenge, the cost of paying the state fee of 176,205 tenge was recovered from the defendant Frick N. V. in favor of LLP, the rest of the claim was denied.
The court found that within the framework of the general loan agreement No.GKS00365K dated 02/06/2014, the plaintiff and the defendant Frik NV concluded a loan agreement no.KDGKS00365K dated 02/14/2014, in accordance with which the defendant Frik NV was granted a loan in the amount of 5,000,000 tenge, for a period of 60 months.
Thus, the deadline for the execution of the contract has not yet arrived, i.e. the mortgagee has applied to the court for early recovery of the entire amount of debt and foreclosure on the mortgaged property.
The court concluded that the amount of 5,873,486 tenge had been partially recovered.
In rejecting the claim regarding foreclosure on property, the court applied art. 21 para. 2 of the Law of the Republic of Kazakhstan "On mortgage of immovable property, arguing that the amount owed by the defendant, N.V. Frick, is disproportionate to the value of the pledged property in the amount of 11,520,799 tenge (As estimated on January 14, 2014) and the collateral is the only housing of the defendants.
Whereas in this case, it was necessary to check whether there are grounds for foreclosure on the pledged property provided for in art. 321 of the Civil Code.
The court stated that the violation of the obligation committed by the debtor in the amount of KZT 5,873,486 was extremely insignificant and clearly disproportionate to the value of the pledged property of KZT 11,520,799. Although the legislation in force at that time did not provide criteria for determining the insignificance of the violation of the obligation and the proportionality of its value to the collateral, the established amount of debt cannot be considered insignificant, since it amounts to more than 50% of the value of the collateral.
Whereas in this case, it was necessary to check whether there are grounds for foreclosure on the pledged property provided for in art. 321 of the Civil Code.
The court stated that the violation of the obligation committed by the debtor in the amount of KZT 5,873,486 was extremely insignificant and clearly disproportionate to the value of the pledged property of KZT 11,520,799. Although the legislation in force at that time did not provide criteria for determining the insignificance of a breach of an obligation and the proportionality of its collateral value, the established amount of debt cannot be considered insignificant, since it amounts to more than 50% of the value of the pledged property.
The court should have taken into account that, in accordance with Article 80 of the Law "On Enforcement Proceedings and the Status of Bailiffs", in the case of the sale of property at an electronic auction, the initial price of the property being sold is reduced in a specified step until one of the participants agrees to buy the property at the advertised price, which should not be less than fifty percent of the initial valuation of the property, put up for electronic auction. Therefore, in case of sale, the property can be sold within 50% of the original price, which is proportional to the amount owed.
With the introduction of amendments to art.317 of the Civil Code and the legislative regulation of the criteria for determining the insignificance of a violation of an obligation and proportionality, this problem has disappeared in law enforcement practice. By the decision of the district court no.On August 2, Urjar district, East Kazakhstan region, dated August 06, 2015, the claim of JSC Fund for Financial Support of Agriculture against the Tutkabai farm for foreclosure on collateral was satisfied.
The court levied foreclosure on the pledged property:- a land plot on the right of temporary paid land use (lease) for a period of 49 years with a total area of 117 hectares, located at the address: East Kazakhstan region, Urdzhar district, Akshaki village. It follows from the case file that the collateral value of the property was determined by the plaintiff at 719,000 tenge, based on the pledge agreement dated August 03, 2005. The debt was recovered from the defendant by the decision of the district court No.2 Urdzhar district dated 04.12.2009 in the amount of 151907 tenge.
In this case, the court did not take into account the provisions of Part 2 of Article 317 of the Civil Code, and the proportionality of the mortgagee's claims to the value of the pledged property was not clarified.
According to Article 21, paragraph 3, paragraph 3 of the Law "On Mortgage of Immovable Property - When making decisions on foreclosure on immovable property mortgaged under a mortgage agreement, the court must determine and indicate in the decision: the initial sale price of the mortgaged immovable property upon its sale.
In violation of this rule, the operative part of the court's decision does not specify the initial sale price of the mortgaged property.
The summary also found that in cases of this category, the courts issued reasoned rulings to dismiss the claim on the following grounds: in the event of a repeated failure by the plaintiff, who did not request a hearing in his absence (art. 249 p. 7 of the CPC) and at the request of the plaintiff himself to return the statement of claim (art. 249 p. 9 GPC).
At the same time, there is a court ruling on leaving the claim without consideration due to the plaintiff's failure to comply with the mandatory pre-trial dispute resolution procedure established by law for this category of cases, on the basis of paragraph 1 of Article 249 of the CPC.
So, by the definition of the district court no.2 of the Yenbekshikazakh district of the Almaty region dated July 17, 2015, the statement of claim of Kaskelen Credit Partnership LLP against Zholumbekov, the third person of the Zholseit peasant farm for foreclosure on mortgaged property was left without consideration on the basis of paragraph 1 of Article 249 of the CPC, due to non-compliance with the pre-trial dispute resolution.
The court found that in order to ensure the fulfillment of the borrower's obligations under the Loan Agreement, the Pledge Agreement for No. 52-3-b dated April 18, 2006 provided a house with a land plot of 0.1423 hectares, located at the address: Enbekshikazakh district village of Ashchybulak, Abaya St., house No. 14, owned by private ownership by T. Zholumbekov by Decision of the specialized interdistrict economic The amount of debt in the amount of 5,064,537 tenge was recovered from the farm "Zholseit" by the court of the Almaty region on May 02, 2012. Since the court's decision has not been executed, 4,528,537 tenge remained in arrears, the creditor filed a claim for foreclosure on the mortgaged property.
The court concluded that the plaintiff had not complied with the mandatory pre-trial dispute resolution procedure established by law for this category of cases, the possibility of an out-of-court procedure for the sale of the pledged property of the defendants had not been lost, and there were no conditions provided for the judicial sale of the pledged property in the present case.
The court also points out that the grounds and procedure for foreclosure on immovable property are provided for by the provisions of the Law of the Republic of Kazakhstan "On Enforcement Proceedings and the status of Bailiffs", according to which the bailiff is allowed to foreclose on the debtor's pledged property through auctions, in the absence of the debtor's funds and other property. This position of the court seems to be erroneous.
The right of out-of-court enforcement is a pre-trial stage of dispute settlement and, in accordance with Clause 3 of Article 9 of the Civil Code, is one of the ways to protect the violated rights of the creditor. The extrajudicial sale of property is the right of the creditor – mortgagee and does not exclude the possibility of judicial sale by virtue of Article 20, paragraph 1 of the Law of the Republic of Kazakhstan "On Mortgage of Immovable Property.
Thus, there is no mandatory procedure for preliminary pre-trial dispute resolution in this category of cases.
Therefore, the case was to be considered on its merits, and the court should have found out whether there were grounds provided by law for the judicial sale of the pledged property. In accordance with paragraph 3 of Article 319 of the Civil Code, at the request of the pledgor, the court has the right to postpone its sale from public auctions for up to one year in a decision on foreclosure on the pledged property. In accordance with paragraph 4 of Article 21 of the Law "On Mortgage of Immovable Property", at the request of the mortgagor, the court, if there are valid reasons, has the right to postpone its sale for up to one year in a decision on foreclosure on mortgaged immovable property in cases where:
1) the mortgagor is a citizen, regardless of which immovable property is mortgaged by him under a mortgage agreement, provided that the pledge is not related to the implementation of entrepreneurial activity by this citizen.;
2) the subject of the mortgage is a land plot consisting of agricultural land.
The postponement of the sale of mortgaged immovable property does not affect the rights and obligations of the parties under the main obligation and does not release the debtor from compensation for the creditor's increased losses during the postponement, remuneration and penalties due to him. If the pledgor satisfies the claims of the pledgee within the time period provided to him by the postponement, the court, upon the application of the pledgor, cancels this decision.
Postponement of mortgage sale is not allowed in the following cases::
1) if it may lead to a significant deterioration in the financial situation of the pledgee;
2) if proceedings have been initiated against the pledgor or the pledgee to declare him bankrupt. According to the judicial acts studied, it follows that the courts rarely apply this rule of law, and no deferrals were granted.
By virtue of Article 305 of the Civil Code, the pledgor may be either the debtor himself or a third party.
By virtue of Article 288 of the Civil Code, Legislative acts or the terms of an obligation between a creditor and debtors may provide that if the main debtor does not satisfy the creditor's claim to fulfill the obligation, this claim may be submitted in the unfulfilled part to another debtor (subsidiary debtor).
In accordance with Article 357 of the Civil Code, before making claims against a person who, in accordance with the law or the terms of the obligation, is responsible in addition to the responsibility of another person who is the principal debtor (subsidiary liability), the creditor must make a claim against the principal debtor.
If the principal debtor has refused to satisfy or has not fully fulfilled the creditor's claim, or the creditor has not received from him a response to the claim within a reasonable time, this claim in the unfulfilled part may be presented to the person bearing subsidiary responsibility.
Thus, in the case of the provision of collateral by a third party to ensure the fulfillment of the debtor's obligations, the legal relationship that has arisen is a real guarantee. In the case of a real surety, the real surety is responsible within the limits of the property provided by him as collateral for the main debtor.
Therefore, in the case of a real guarantee, the creditor has the right to make demands for the fulfillment of the obligation first to the debtor, and only then, in the unfulfilled part, to the guarantor.
There are also questions about the payment of state duty. The pledge (mortgage) agreement, by virtue of the requirements of Articles 292, 299 of the Civil Code, is an additional obligation that ensures the possibility of fulfilling the main monetary obligation.
In case of improper fulfillment by the debtor of its obligations, the creditor, when applying to the court with a claim for recovery of the debt amount, is obliged to pay state duty based on the price of the claim, determined according to the rules established by art.102 of the CPC from the amount of the recovered amount, while the claim for foreclosure on the pledged property is not subject to additional state duty.
In the case of an independent claim for foreclosure on the pledged property, the amount of the state duty must be paid based on the value of the pledged property.
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