Other Claims and Rights in Property

Enforcement against Other Claims and Rights in Property

1. General questions

A separate chapter of the Code of Civil Procedure, in force, deals with enforcement against other claims and other rights in property.

A claim is generally deemed a subjective right of a creditor to request an allowance from his debtor (this right's counterpart is the debtor's obligation, referred to as the debt).

As the Code deals separately both with enforcement against earnings and against a bank account, therefore, it is assumed that this chapter handles the question of claims other than those arising from an employment contract (or other remuneration equivalent thereto pursuant to the provisions on judicial enforcement) and other than those arising from a bank account. It is also worth mentioning that a few claims are excluded from enforcement by virtue of particular legal provisions.

A general division distinguishes pecuniary and non-pecuniary claims. To introduce enforcement against claims properly, firstly, enforcement against an ordinary pecuniary claim shall be discussed, and then cases of enforcement with particular features, those against claims safeguarded either with an entry in the Land and Mortgage Register, or a pledge or guarantee, related to a document, against a claim for delivery of a thing.

On the other hand, by virtue of the provisions under analysis, other rights in property shall be understood as those which do not include claims. Whereby, only transferable rights may be meant here, as non-transferable rights (e.g. use, personal servitude) cannot be a subject of enforcement, similarly to rights unrelated to property.

The rights identified in the CCP as 'other rights in property' have not been specified in the Code.

In any case, when 'enforcement against other rights in property' is mentioned, this does not refer to the right of property, nor to the other rights for which enforcement provisions provide for separate methods of enforcement, such as enforcement against perpetual usufruct, and against a cooperative property right to residential premises.

This paper shall discuss to a larger extent only enforcement against selected property rights.

The specific nature of individual claims and other rights in property required particular legislation for enforcement whose object they were, whereby these particular legal provisions related primarily to the issue of attachment.

In case, enforcement against claims and other rights in property is completed with a plan of final distribution of the sum gained, the provisions related to a plan of final distribution of the sum gained from attachment of earnings are used (pursuant to art. 1033 and 1034 of the CCP).

The afore-mentioned enforcement is the competence of the judicial enforcement officer proper for the debtor in accordance with the general rules. This means that in case of a physical person, the criterion of debtor's domicile is used (but in case this person has no domicile in Poland, the decisive factor is the person's temporary address in Poland, or possibly the last place of residence in Poland), and in relation to legal persons - the criterion of its registered seat. However, in case the enforcement object is a right related to the possession of a document, the provisions introduce an exception to facilitate its garnishment. The enforcement officer competent to carry out this enforcement is the one of the Court in whose region the document is kept. Furthermore, when speaking of the enforcement officer's competence, the creditor is vested with the right to choose an enforcement officer pursuant to art. 8 of the L.E.O. In his motion to start enforcement, the creditor shall indicate a given claim or right in property against which enforcement is to be carried out.

Art. 895 § 3 of the CCP stipulates an exception from the principle of enforcement to be started by request. A motion for enforcement to be started against movables obliges the enforcement officer also to carry it out against claims and other rights in property related to a document if it turns out that the debtor has such a document.

2. Enforcement against an Ordinary Pecuniary Claim

The enforcement officer starts enforcement by garnishing the claim to which the debtor is entitled. This garnishment is grounded on such elements as attachment in case of enforcement against earnings and against a bank account. It consists of the following operations: firstly, the enforcement officer notifies the debtor that he may not accept due performance or dispose of a given claim, or of the safeguard established therefore. At the same time, he informs the debtor on the enforcement being initiated. Secondly, the enforcement officer summons the debtor of the claim garnished (the garnishee) not to pay the claim due from him but to transfer it to the enforcement officer or into court deposit. The garnishment is implemented the moment the debtor of the claim attached (the garnishee) is served this summons (art. 900 § 1, first sentence of the CCP).

In case, enforcement is addressed to claims which are composed of periodical payments (e.g. rent, land rental etc), the garnishment also refers to future payments (art.900 §2 of the CCP). That is why the creditor need not renew his enforcement motions with regard to subsequent instalments.

The enforcement officer sends to the debtor together with the above-mentioned summons a request to make within a week a declaration answering the following questions: is the debtor actually vested with the right to the claim? What is its amount? In case, there are no grounds to comply with the summons, what are the reasons therefore? Are there other people who assert their right to the claim? Has there been litigation with reference to this claim? Has enforcement of other creditors been addressed to this claim and what was its object (art. 896 § 2 of the C.C.P.)?

The garnishment has similar effects as attachment against earnings. Pursuant to art. 902 CCP, relevant provisions with reference to this type of enforcement are applied thereto. Thus, if the debtor/garnishee disposes of the claim after its attachment, these dispositions shall be invalid in relation to the enforcing creditor (art. 885 in conjunction with art. 902 of the C.C.P.). In turn, the enforcing creditor may enjoy all rights and claims of the debtor towards the claim attached by force of the garnishment itself (art. 887 in conjunction with art. 902 of the CCP). In particular, he may demand the debtor/garnishee of the attached claim grant him information on the amount of the claim attached, and even initiate litigation against him.

If the debtor of the garnished claim (garnishee) infringes the ban on payment of the due amount to the debtor or infringes the duties arising from garnishment, this gives rise to his civil liability towards the creditor if the latter incurred damage arising therefrom.

3. Enforcement against Claims Safeguarded by an Entry in the Land and Mortgage Register, a Pledge or Guarantee

A claim which is vested in the debtor may be safeguarded. This may take a material form (mortgage, pledge) or a personal form (guarantee).

A mortgage is one of the limited rights in property and it is set up the moment the right is entered into a Land and Mortgage Register (or in case, there is no such register at the moment the document is entered in the Register of Documents). The essence of a mortgage consists in the fact that the real estate (and also rights mentioned in the legal provisions, such as e.g. perpetual usufruct and cooperative property right to residential premises) is burdened in such a way that claims may be satisfied from the real estate, notwithstanding the fact whose property it became and with priority before personal creditors of the real estate owner (art.65 subparagraph 1 of the 6th July 1982 Law on Land and Mortgage Registers and Mortgages unified text Journal of Laws No 124, item 1361 of 2001, as amended).

Initiating garnishment of a claim safeguarded by mortgage, the enforcement officer sends out notifications and summonses of the same type as those in case of enforcement against an ordinary pecuniary claim. Additionally, he sends to the competent court which conducts the Land and Mortgage Register for a given real estate, a motion for entering the garnishment in this register or enclosing this motion to the Documents' Register (art. 897 § 1 of the CCP). Garnishment becomes effective the moment this entry is made (whereby, in accordance with art. 29 of the above-mentioned Law, this entry has a retroactive force starting from the date the motion was submitted) or the moment the motion requesting this document is filed into the Documents' Register. However, the garnishment is effective starting from the moment when the summons were served on the garnishee if this service was earlier.

In case, the Court which conducts the Land and Mortgage Register or the Documents' Register ascertains an obstacle for garnishment to be entered, it notifies the creditor and the enforcement officer thereon and sets up for them a deadline to remove it. To remove the obstacle, the creditor may enjoy any rights which are vested in the garnishee. If documents being in the garnishee's possession are necessary therefor, the creditor may demand the enforcement officer seize them from the garnishee. If the creditor does not remove the obstacle in time, the Court shall dismiss the enforcement officer's request, and the latter will have to cancel enforcement proceedings. The removal of the obstacle may demand initiation of a court action for the adjustment of the entry in the Land and Mortgage Register in line with its actual legal state (art. 10 of the above-mentioned Law). In such a case if the Creditor files an action in the deadline appointed by the Court, the enforcement officer's request for an entry may be dismissed only if the action is validly dismissed by the Court.

If, by force of garnishment, the enforcing creditor replaces the debtor in his rights, this means that the former replaces the debtor as a mortgage creditor. Thus, he may obtain the Court judgement with a writ of enforcement against the debtor of the garnished claim (or exclusively against mortgage debtor), and then conduct priority enforcement arising from art. 1025 § 1 p. 5 of the CCP.

Another form of material safeguard i.e. a pledge, is, similarly to a mortgage, one of limited rights in things. It is established on movables and transferable rights (art. 306 to 335 of the Civil Code). By virtue of this right, creditors may try to satisfy their claims against a thing regardless whose property it has become (or in whom the right is vested), and their claim has priority before the owners' personal creditors.

In turn, a claim safeguard by way of guarantee consists in the guarantor's contractual obligation to perform the debtor's duty if the latter is not able to do it.

There are a few differences between enforcement against a pledge safeguard and a guarantee safeguard and ordinary enforcement. They arise from the fact that we deal here with the owner of a thing subject to the pledge or guarantee. Thus, garnishing a safeguarded claim, the enforcement officer notifies such a person that he must not pay any amounts from this claim to the debtor. The notification is sent together with a summons to make within one week a declaration on possible obstacles rendering satisfaction from the object of the pledge or payment of money difficult or impossible.

The fact that the enforcing creditor replaces the rights of the debtor by virtue of garnishment leads in particular to his right to satisfy his claim from the object of the pledge, and for this purpose he may initiate a court action against the owner of this object. Similarly, he may initiate an action against the guarantor for the payment of the amount which the latter guaranteed.

4. Enforcement against a claim related to a document

A claim related to a document means such a claim which may not be a subject of decisions without a document. Enforcement against claims related to a document relates therefore to such documents like promissory notes, cheques, bonds, and savings' books. This enforcement, when compared to enforcement of other claims, is simpler as to the principle involved. As the claim is related to a document, it is necessary to deprive the debtor of this document to conduct enforcement. Thus, firstly, the enforcement officer collects the document from the debtor, seizing in this way the claim. To collect the document, the enforcement officer has the flat, and other premises or hide-outs of the debtor opened, and carries out other investigation acts pursuant to art. 814 of the C.C.P. A document which is held by a third party may be taken away from this person only when this person agrees to deliver the document or admits that this document belongs to the debtor, or else in other cases as defined in the law (art. 901 1 and art. 845 § 2 in conjunction with art. 901 § 1 of the C.C.P.). The enforcement officer draws up a protocol on the collection of the document, and in case there are other seizures, he makes mentions of this in the protocol. The enforcement officer notifies about the seizure the debtor (at the same time notifying him of enforcement initiation pursuant to art. 805 of the C.C.P.), the enforcing creditor and the debtor of the claim seized, and in case of subsequent seizures also previous creditors.

The second stage of this enforcement consists in the enforcement officer collecting from the debtor the seized claim of the due amount. However, depending upon the nature of the claim, it may be necessary also to fulfil other actions to implement the claim, such as prior termination of a contract or conservative acts in the form of, for instance, warning, protesting, promissory note notification, but the enforcement officer may carry out these acts only at the request of the creditor or debtor. If the execution of the claim requires still more complicated acts, they may be fulfilled by a special administrator appointed for this purpose pursuant to art. 908 § 1 of the C.C.P.

5. Enforcement against a claim for the delivery of a thing

A separate manner of enforcement is used when it is not possible to seize debtor's movables (documents included) because they are held by a third person who refuses to deliver them or to admit that they are the debtor's property. In such a situation, in the first sequence, it is necessary to deprive this third person of the movables in his possession. Thus, the enforcement officer firstly seizes the claim for the delivery of a thing, which is vested in the debtor against this person. This may be exclusively such a claim which gives the right to deliver the movables to the debtor as his property. The seizure is carried out in accordance with the general principle i.e. similarly to enforcement from an ordinary, pecuniary claim (pursuant to art. 896 of the C.C.P.). However, the seizure of a claim for the delivery of a movable is equal to seizure of the movables themselves (art. 905 § 1, second sentence of the C.C.P.). By virtue of the seizure the enforcing creditor is authorized, in particular, to initiate an action for return of a thing.

After taking over of movables, they are subject to sale by way of enforcement against movables (art. 905 § 2 of the C.C.P.) to satisfy the creditor. The described manner of enforcement (from article 905 § 1 of the C.C.P.) may be used also when there is enforcement of non-pecuniary claims which consists of delivering a movable to the creditor if the movable is held by a third party who refuses to deliver it.

Similarly as in the case of movables, the debtor may be the owner of the real estate but not be its actual holder, for instance, because after the sales contract of immovable, it has not been handed over to him, yet. The purpose of enforcement becomes firstly garnishing this real estate from the person who has it in his possession. Thus, the enforcement officer seizes the claim for the delivery of a real estate in accordance with general principles, however, on condition that the object is the claim for the delivery of a real estate to the debtor acting as its owner. The real estate delivered is transferred by the enforcement officer to the debtor to be administered by the latter (art. 906 § 1 of the C.C.P.). This, in turn, will facilitate conducting of enforcement against this real estate at the request of the creditor.

The manner of enforcement stemming from art. 906 § 1 of the C.C.P. may be used to facilitate the conduct of enforcement related to the delivery of the real estate to the creditor.

The legal provisions which refer to enforcement against a claim for the delivery of the real estate are applied in cases when the object of the claim is a sea-going ship entered into the ship register (art. 907 of the C.C.P.).

6. Other cases of enforcement against claims

Amongst liabilities, there are alternative obligations distinguished. Such a liability is characterised by the fact that its execution consists in the fulfilment of one of a few defined performances (art. 365 § 1 of the C.C.). In the C.C.P. a separate situation is dealt with in which the enforcement was directed against a claim whose object was an alternative performance, and such in which the right to choose the type of performance is reserved to the debtor against whom the enforcement proceedings are conducted. The enforcement is conducted in accordance with the principles which refer to a given type of claim. Its separate nature consists in the fact that the enforcement officer having seized the claim, summons the debtor against whom the proceedings are conducted to make the choice, this time acting as the creditor with regard to the claim seized. If he does not comply with this summons within one week, the right of choice of performance passes to the enforcing creditor (art. 903 of the C.C.P.).

There is still another way of proceedings provided for when enforcement relates to a particular case of claims arising from reciprocal obligations. The obligation of the debtor of the claim seized is dependent upon the reciprocal debtor's claim against whom the enforcement proceedings are conducted, and the performance consists in the delivery of the thing, whereby the duty to deliver has been already ascertained by the enforcement title. In this case, the enforcement officer is obliged to garnish the enforcement title at the debtor of the seized claim, and having obtained the writ of enforcement, take the thing from the debtor against whom the enforcement proceedings are conducted and, if necessary, obtain performance from the debtor of the claim seized (art. 904 of the C.C.P.).

7. Enforcement against other rights in property

As indicated at the beginning of these considerations, the rights identified in the C.C.P. as other rights in property have not been specified in the Code. Similarly, the description of enforcement against these rights is very laconic. Pursuant to art. 909 of the C.C.P., legal provisions on enforcement against claims shall be applied correspondingly. This means that amongst the provisions those which relate to the manner of seizure (in particular art. 896, 901 of the C.C.P.), effects of seizure (art. 902 of the C.C.P.) and possible establishing of a guardian or an administrator and sale of rights (art. 908 of the C.C.P.) shall be applied to enforcement against other rights in property.

Trying to ascertain the features of enforcement against rights in property, particular attention must be paid to enforcement against rights in property when no person burdened with the duty is identified, or to enforcement against stocks and shares in a limited liability company.

Property rights which have such a nature that there is no identified person burdened with a duty are absolute, subjective rights, such as the right to a patent, the right to fish, the right to shoot game, and furthermore, rights by virtue of which one may demand property being partitioned.

When such a right which is vested in the debtor is to be seized, the moment of its seizure shall be determined in a specific way. As there is no identified obliged person, the seizure is performed the moment the debtor has been served notification (art. 910 of the C.C.P.).

Analyzing rights by virtue of which a person obtains an entitlement to a part during a property division (art. 912 of the C.C.P.), the following shall be distinguished in particular:

- the right of a co-owner to demand partition of a thing which is included in co-ownership,

- the right of the inheritor to demand the inheritance be divided,

- the right of a spouse to demand marital property be divided after marital co-ownership has ceased,

- the right of a partner to demand property be divided after the dissolution of a civil partnership, of a registered civil partnership, and of a general partnership.

In his request for the initiation of enforcement proceedings, the creditor shall indicate the persons against whom the debtor has the right to demand the property be divided. The enforcement officer notifies these persons of the seizure of their rights. Owing to this, they learn that the person who has the right to request the property be divided is the creditor and not the debtor, and which part of the partition will fall to the debtor, and which part is seized. The distribution of the property is carried out by the court in non-litigious proceedings. If, as a result of these proceedings, the court granted the real estate or its fractional part to the debtor, it is obliged to notify the court proper to conduct the Land and Mortgage Register about the seizure. The purpose of this notification is to reveal the seizure by an entry in the Land and Mortgage Register or by submitting a notification to the Documents' Register. After the division is completed, within one month, the creditor may request the enforcement officer to conduct enforcement against the property appropriated to the debtor, indicating the objects (for instance movables, immovable property) to which the enforcement is to be addressed. After this deadline, the elements of the property from which the creditor did not request enforcement are free from seizure.

The meaning of the notion of a stock is not uniform. This means both a fraction of a company's initial capital as well as a totality of rights and duties of a stockholder towards the company and, furthermore, the stock document itself which is a security. Enforcement against a stock is understood as enforcement directed to property rights of a stockholder towards a joint stock company incorporated in the stock document (for instance a right to the dividend). In the C.C.P. in force, there is not even one separate provision devoted purposefully to a stock. Individual provisions which deal with enforcement against claims are correspondingly applied to this enforcement pursuant to the aforementioned art. 909 of the C.C.P. An important meaning for enforcement proceedings has the division of stocks into so-called materialized stocks (i.e. those existing in the form of a document) and so-called non-materialized stocks, or else those which are admitted to public trading, regulated by 21st August 1997 Law on Public Trading in Securities (Journal of Laws of 2002 no 49, item 447). In case of the first type of stocks, basically, their seizure will take place in such a mode as in case of enforcement against claims related to a document (i.e. pursuant to art 901 in conjunction with art. 909 of the C.C.P.). The enforcement officer notifies the company on the seizure. The creditor may enjoy all rights related to the fact of having stocks as a result of the seizure (art. 887 in conjunction with art. 909 of the C.C.P.). If it is necessary to satisfy the creditor, the stocks may be sold, as this is understood as a sale of all rights incorporated in the stocks. The sale is carried out by the enforcement officer pursuant to a court order issued at the request of the debtor or the creditor, and the corresponding provisions on enforcement sales of movables are applied (art. 908 § 2 in conjunction with art. 909 of the C.C.P.). Regardless of the provisions of the company statutes, the transfer of stocks in enforcement proceedings shall not require any consent of the company (art. 337 § 5 of the C.C.C.). In case of de-materialized stock, we deal with important differences as these stocks do not exist physically but exclusively as a computer entry. Subjects which conduct accounts of securities (i.e. in particular; brokers, banks) issue exclusively so-called nominative deposit certificates which are evidence of stock possessing. Therefore, the enforcement officer cannot take the stock document from the debtor. The seizure takes place according to the general principles (art. 896 in conjunction with art. 909 of the C.C.P.). The enforcement officer shall send a notification on seizure to the subject who conducts the account of debtor's securities.

In the case of a seizure of rights arising from stocks in a company which is entered into the National Court Register, the enforcement officer is obliged to report this fact immediately to the register court (art. 897 § 4 of the C.C.P.).

By share in a limited liability company, the total rights and duties of a shareholder arising from the company relation are understood. Similarly to stocks in a joint stock company, enforcement against such a share is directed to rights in property vested in the debtor (for instance his rights to a dividend). However, it is not addressed to corporate rights (for instance the right to vote at the General Assembly of Shareholders). The share rights in a limited liability company are not incorporated in any documents. The enforcement officer seizes the share pursuant to the general principle in the same way as in case of enforcement against an ordinary, pecuniary claim, i.e. pursuant to art. 896 in conjunction with art. 909 of the C.C.P. The seizure leads, in particular, to such a consequence that the company shall not be able to make any payments to the debtor to which the latter is entitled owing to the share. In turn, the creditor, by virtue of the seizure, may enjoy all rights and claims of the debtor (art. 887 in conjunction with art. 909 of the C.C.P.). If the creditor's satisfaction requires it, then the sale of the share may take place pursuant to a court order and according to the principles which are in force while selling movables (art. 908 in conjunction with art. 909 of the C.C.P.). Sometimes the company's articles provide for the share transfer to be dependent upon the company's consent or to be limited in another manner. In such a type of situation, when the company share is to be sold during enforcement proceedings, the company has the right to delegate a person who will buy the share for the price which is determined by the register court (art. 185 of the Code of Commercial Companies).

Similarly to enforcement against stocks, the seizure of rights arising from shares in a limited liability company entered into the National Court Register is subject to an immediate notification by the enforcement officer to the court register.

Marek Mrówczyński

Exchange rates of 2010-07-29

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