SABADELL SOLBANK must return almost 500,000 Euros to buyers at the Cala Romántica development in Mallorca for a failed off plan property development.
This was ordered on 19th December 2017 by the First Instance Court Number 8 of Marbella, Malaga, Spain.
The responsibility derives from the issuance by BANCO CAM (now SABADELL SOLBANK) of a General Line of Guarantees for the refund of advanced payments according to Law 57/1968. This is a new example of the effectiveness of Law 57/1968 when the developer has abandoned the off-plan project or is in a situation of bankruptcy.
It is one of 44 separate cases won by the CostaLuz-DeCastro teams for more than 80 individual clients during 2017 using the Keith Rule strategy against the off-plan property developer’s bank.
In this case the claimants requested the return of their advanced payments on account (amounting to almost 500,000 Euros) plus legal interest from date of payment. The reason for the claim was the lack of construction of the Cala Romántica off-plan housing development in Mallorca that, according to the purchase contracts, should have been completed in 2008.
The contracts were cancelled in 2011 during the bankruptcy procedure of the developer, however the buyers were unable to recover the amounts from the developer.
In its defence the Bank stated that it had no legal relationship with the claimants as it was not involved in any of the purchase contracts, that the time limit for this type of action was 1 year, that the bank is not mentioned in any of the purchase contracts and that none of the off-plan payments claimed in the Lawsuit were paid to the developer’s accounts opened at the Bank.
However, the Judge did not agree with any of the Banks arguments and stated in the Sentence that:
“The upholding of the Lawsuit is applicable according to the Jurisprudence of the Supreme Court. In this case it has been proved that the defendant bank signed with the developer a Line of Guarantees on 17 July 2006 and also issued individual guarantees to some buyers. Based on these proven facts and according to its responsibility under LEY 57/1968 the Bank is responsible for the return of the money.
The fact that the claimants did not demand the delivery of the individual guarantees does not exempt the banking entity of its responsibility since, as the Supreme Court sentences state, the buyer who has paid amounts on account must not be harmed by the seriously negligent or wilful misconduct of the developer who did not require the individual guarantees”
So the existence of the General Line of Guarantees signed between the developer and the Bank according to Law 57/1968 made the claim against SABADELL SOLBANK possible as the guarantor entity, despite the fact that the buyers did not have individual guarantees. The case represents a new example of the importance of Law 57/1968 over the Insolvency Act due to the special protective nature of the law for off-plan property buyers.
Thanks to the existence of this 1968 law, the claimants have been able to satisfy their legitimate claims independently of the insolvency procedure of the developer. There are hundreds of examples like this throughout Spain as a result of the bursting of the financial and real estate bubble.
The Sentence makes reference to two Sentences of the Supreme Court dated 23/09/2015 and 22/04/2016, although there are many more occasions in which the Supreme Court has ruled on this type of responsibility.
It is also already consolidated jurisprudence that the time limit for these types of actions is 15 years and not the 1 year that SABADELL SOLBANK stated in its defence.
Regarding interest, the Judgment also follows the jurisprudence of the Supreme Court, which establishes the time from when the calculation of interest applies as the date of delivery of the deposits in the accounts of the developer, which in this case results in almost 200,000 Euros of interest at the legal rate in addition to the principal amount of almost 500,000 Euros.
The Judge has also imposed costs of the legal action on the Bank.
Although case law is already well established, the Bank does have the right to submit an appeal to the Provincial Appeal Court.
Keith Rule – Costaluz Lawyers <email@example.com>