New judgment about guarantee trusts and credit filings in the insolvency proceeding of the settlor-debtor

On July 14, 2010  in the “Feroanco S.A. s/concurso preventivo s/ incidente de verificación (por Sinsbur S.A.)” case Tribunal E of the Commercial Court of Appeals affirmed the ruling of the Lower Court which accepted the credit filed by Sinsbur S.A. (“Sinsbur” or the “Beneficiary”), as a potential unsecured creditor.

Sinsbur and Feroanco S.A. (“Feroanco” or the “Insolvent”) were parties to a copper supply contract in which Sinsbur supplied Feroanco.  In order to secure Feroanco’s obligations the parties created a guarantee trust over the future receivables to be collected by Feroanco.  FNB S.A. acted as the trustee (the “Trustee”).

The Trustee was the one that initially requested the credit acceptance on behalf of the Beneficiary.  The Lower Court declared that the Trustee could not claim on behalf of the Beneficiary.  Such resolution caused a claim preclusion.  Consequently, the Beneficiary filed the evidence of its credit at a later stage.

Tribunal E considered that the rejection of the filing by the Trustee did not preclude Beneficiary’s possibilities to make such filing.

Therefore, Tribunal E established that, in connection with guarantee trusts, beneficiaries must file the evidences of their credits because: (a) the creation of a trust does not mean the novation (“novación”) of the main obligation which lasts until its total repayment; and (b) the secured credit can be partially satisfied if the trust assets are not enough to repay the credit in full.  That is why the nature of this type of credits is “potential”.  Whether the credit is unsecured or preferred, Panel E understood that it is an unsecured credit because the guarantee that the trust creates does not affect an asset of the insolvent party as trusts create a separate asset, different from the trustee’s and of the settlor’s.  Nevertheless, this does not negate the preference that Sinsbur has over the trust assets.

This judgment clears a very controversial issue among legal authors[1].  Case law seems to consolidate in the way mentioned above.

 

 

 

 

 

[1] This opinion has been held by Mario A. Carregal, counsel of Marval, O'Farrell & Mairal, in his book Fideicomiso.  Teoría y Aplicación a los Negocios.