In property foreclosure, if the purchaser has conclusively won the auction and complied with all auction requirements, title may be granted to him even after the debtor has been conclusively and officially declared bankrupt, says Supreme Court in a case involving grant of title to auction winner. This is an important precedent that will be relevant for many property foreclosure processes as debtor bankruptcy during such a process is not uncommon.
The case involved our client, who was the highest bidder for an auctioned property subject to foreclosure. After the client won the auction, the court overseeing the process issued a formal order accepting the bid.
Due to enforcement officer’s inactivity, it was not until four months after the auction that the court requested our client to pay the price. Client paid the price as requested, which means it was in compliance with all auction requirements. The court then made a formal grant of title to the client.
But the grant was challenged by debtor’s insolvency administrator. It turned out that, after the bid acceptance order became conclusive and final, the debtor was conclusively declared bankrupt. By law, a bankruptcy order stays any enforcement process pending against the debtor and when the order becomes conclusive and final, all such enforcement is cancelled[1]. The administrator thus claimed that the bankruptcy order caused cancellation of the foreclosure process and this defeated the bid acceptance order as there was no grant of title when the process was still stayed[2].
The court dealing with administrator’s complaint was in doubt about his interpretation and so approached the Supreme Court with a question on a point of law. The Supreme Court (just as our client who won the auction) disagreed with the administrator’s take and issued the following resolution:[3]: “The fact that a bankruptcy order becomes conclusive and final (Article 146(1), sentence two, of the Bankruptcy Law Act of 28 February 2003 (consol., Dz.U. 2020, item 1228, as amended) does not preclude grant of property title to auction winner who has received a conclusive and final bid acceptance order and has complied with auction requirements (Article 998(1) CCP)”.
Case handlers: Anna Wieczorek (attorney-at-law & partner), Anita Woroniecka (attorney-at-law ).
[1] Bankruptcy Law, Article 146.
[2] Bankruptcy Law, Article 146(1), sentence three.
[3] Supreme Court resolution of 18 November 2021 r., case no. CZP 77/20
Author
