Guaranty (Fianza)

 

The guaranty -fianza- is a personal surety under which a person (guarantor) responds with his own assets of the obligation of payment of a debtor (in the sale, the buyer), in the case of not paying the latter. The bond must be expressly granted, cannot be presumed.

The guarantor must have the capacity to be bound, and sufficient assets to respond to the guaranteed obligation. If the guarantor becomes insolvent, the creditor may ask for another guarantor to replace him who is solvent, unless, when establishing a bond, the creditor has demanded and agreed on a certain guarantor.

The guarantor may be liable for all or part of the debt, but he cannot be bound by more than the principal debtor himself, both in quantity and in conditions.

 

 

A.1.- Persons involved in the payment guarantee

 

The creditor of the principal debtor, who demands to guarantee in his favour the fulfilment of the debt using the bond.

The principal debtor, person duty-bound to fulfil the payment obligation.

The guarantor, person who undertakes to fulfil a payment obligation of another person, if that person does not pay. The guarantor must have the capacity to be bound and sufficient assets to respond to the obligation he guarantees with all his present and future assets.

The guarantor is subsidiary to the obligation of the principal debtor since its enforceability requires the enforceability and maturity of the principal obligation, and the guarantor always pays instead of the principal debtor.

The guarantor has no effect on the guarantor’s real rights. The creditor does not have any real right over the assets of the guarantor, only the guarantee of payment of the obligation, even with the assets of the guarantor.
It is an ancillary obligation, which requires a valid principal obligation and a breach of that obligation to raise the guarantor’s obligation.

 

 

A.2.- Essential features of the payment guaranty

 

The Guaranty is unilateral since only one of the parties is obliged to pay.  It is consensual, as just the mere expression of the  guarantor and the acceptance of the creditor makes the contract become perfected.

Depending on the nature of the obligation assumed by the guarantor, the guaranty may be subsidiary –  guarantor of collectibility- or joint-guarantor of payment-. It is a subsidiary guarantee when the guarantor agrees to pay if the debtor does not do so; In application of the “excusion” benefit, the creditor must first address the debtor and, if he does not pay, he has the right to demand, afterwards, to demand from the guarantor the payment of the debt.

The guaranty is joint when the guarantor undertakes to pay jointly with the debtor; The creditor can claim the payment of the debt indistinctly to any of them, or both at the same time. The joint bond is the most used since it is the one that offers greater guarantees of recovery to the creditor.

If the guarantors are jointly liable and have expressly waived the benefits of “excusion” and “division”, the action against the joint guarantor can be filed in court directly, without need to try to seize first the assets of the principal debtor; The guarantor then, is considered as the principal debtor, and as such assumes directly the obligations of the person whose responsibility for payment guarantees.

 

 

A.3.- Relations between guarantor and creditor

 

The means of defence available to the guarantor against the claim of the creditor are the benefit of “excusión” and the benefit of “division”.

 

A.3.1.- “Excusion” Benefit
If the secured obligation is not fulfilled, the creditor requests payment to the guarantor. First, the guarantor has the power to oppose the “excusion” benefit, which is to oblige the creditor, previously, to seize all the property of the debtor.
For this, the guarantor must designate the assets of the debtor within the Spanish territory that cover, in whole or in part, the debt . If the creditor fails to follow up on said assets, the guarantor’s liability is reduced by the value of those assets.

 

A.3.2.- “Division” Benefit
The “division” benefit requires that the debt is divided equally among the guarantors so that the creditor cannot claim each of the guarantors more than the proportional part that corresponds to pay.
This benefit implies several guarantors of the same obligation and debtor. It is required that the guarantors have not renounced the benefit of division, and that among the guarantors no joint liabilities has been agreed.

 

A.4.-Effects between guarantor and debtor

If the guarantor pays on behalf of the debtor, the guarantor becomes the principal creditor of the latter, and two legal actions against the debtor arise for him: the Refund Action and the Subrogation Action.

 

 

A.4.1.- Refund Action (Acción de Reembolso)

The Refund Action is a personal action that has the guarantor, to “repeat” against the debtor to reimburse him, as compensation, the following concepts:

a. The total debt;
b. The legal interest of the debt since the guarantor notifies the debtor to have made the payment to the creditor;
c. The expenses incurred by the guarantor since the creditor notified the request for payment;
d. The damages.

With the Refund Action, the guarantor can only claim the principal amount that the creditor was entitled to claim from the debtor. Therefore, if the guarantor pays more than it was owed, he can repeat against the debtor only for the initial debt, not for the overpayment. Besides, the guarantor may only demand repayment when the term of payment of the debt is due.

The debtor may plead some procedural exception to the guarantor’s claim:

a. If the guarantor pays without informing him beforehand, the debtor may use against him the procedural exceptions that could have been opposed against the creditor at the time of payment;
b. If the guarantor pays without informing the debtor in advance, and the debtor, ignoring the payment made by the guarantor, repays the creditor, the guarantor may claim restitution to the creditor for unjust enrichment, but will not have legal action against the debtor;
c. If the guarantor paid it before the expiration of the term, he could not demand repayment to the debtor until the term expires.

A.4.2.- Subrogation Action (Acción de Subrogación)

With the Subrogation Action, the guarantor who complies with the payment obligation becomes subrogated in all the rights that the creditor had against the debtor, and acquires the same legal actions that the creditor had against the debtor.

 

 

A.4.3.- Refund Action vs Subrogation Action

Essentially, the right of refund in favour of the guarantor who has paid confers him an own right to be compensated for the damages that the forced payment caused. As a result, the right of credit of the guarantor who exercises the Refund Action appears at the moment in which he makes the payment, which is what motivates his right to be compensated.
The right of subrogation, on the other hand, results in the full transfer for the guarantor of the right that the original creditor had vis-à-vis the debtor, with all the accessory rights such as guarantees, preferences and privileges (except personal privileges).

 

 

A.4.4.- Termination of the Guaranty

 

The Guaranty becomes extinguished:

a. By extinction of the principal obligation. If the main obligation secured is extinguished, also the extinction of the bond contract (accessory principle) occurs.

b. By releasing one of the guarantors. The release of the obligation made by the creditor to one of the guarantors, without the consent of the others, benefits everyone to the extent of the part of the guarantor released.
c. By extended payment term granted to the debtor by the creditor, without the consent of the guarantor. It will not apply when in the guaranteed obligation it was agreed that it could be extended to maturity. The mere fact that the creditor does not claim compliance with the obligation when it expires does not mean that such an extension has been granted.
d. Other causes of termination of the bond: The bond is extinguished, and the guarantor is released, when the creditor voluntarily accepts a property or other securities in payment of the debt, even if later he loses them as a result of the eviction. The bond is also extinguished when, for any action taken by the creditor, the guarantor cannot substitute him in the rights, mortgages and privileges.