Three recent rulings of the Court of Cassation of the first part of 2021 shed light on the interaction between purpose loans ("mutui di scopo") and the effectiveness of the related security interests.
1.According to the Ruling No. 1517 dated January 25th, 2021, the utilisation of the proceeds of a newly extended mortgage loan ("mutuo fondiario") in order to settle the outstanding unsecured exposure of a current account holder, constitutes a mere credit-debit accounting operation, which does not qualify as delivery ("consegna") under Sec. 1813 of the Italian Civil Code, thus preventing the loan from coming into being.
The whole transaction is construed by the Court as an extension of the pre-existing repayment term ("pactum de non petendo ad tempus"). While confirming the lower court's holding on the nullity of the loan and of the mortgage, the Court of Cassation reverses the one concerning admission of the bank's claim as unsecured claim, on the «basis of and in fulfilment of the said loan contract».
The Court of Cassation points out that in order for the claim at hand to be admitted as unsecured claim, the bank should not have based its legal claim on the void loan but on restitution for undue payments (Sec. 2033 of the Italian Civil Code) or repayment under the pre-existing loan agreement.
One or two logical steps seem, however, to be missing in the Court of Cassation' reasoning:
(a)if the loan contract is void for lack of the constitutive element of the delivery, then its requalification as
pactum de no petendo is to be considered as a consequence of the application of Sec. 1424 of the Italian Civil Code on the conversion of a void contract?
(b)if so, why is the mortgage considered void and not simply subject to claw-back pursuant to Sec. 67, Par. 1 of the Italian Insolvency Act, as security created in relation to outstanding or overdue payment obligations under a pre-existing loan agreement?
(c)maybe, because the strong formalities to which mortgages are subject, do not allow them to secure the "extended obligation" (not described in the mortgage deed), instead of the void new one (described in the mortgage deed)?
2.According to the Ruling No. 9193 dated April 4th, 2021, a mortgage created in order to secure a revolving facility ("apertura di credito") aimed at settling the client's past debts, is subject to a (in the case at hand "successful") claw-back action filed by a competing creditor of the mortgage provider. The Court comes to this conclusion by applying the principle set forth in Sec. 2901, Par. 2, of the Italian Civil Code, whereby a security interest is considered as supported by valid consideration for purposes of withstanding a clawback action only when created at the same time as the secured debt.
You may notice that the core legal issue (creation of a mortgage to secure outstanding indebtedness) is similar
de facto in the two Supreme Court decisions discussed so far.
The reason for the different treatment of a mortgage created substantially for the same purposes (outright invalidity in Ruling No. 1517/2021, relative ineffectiveness following a successful clawback action in Ruling No. 9193/2021), lies, in our opinion, in the legal formal requirements of the mortgage deed, which prevent it from securing any obligation other that described in the deed itself.
3.According to the Ruling No. 9838 dated April 14th, 2021, the attempt of a guarantor to be discharged from its obligations, on the allegation that the guaranteed loan is a sham purpose loan and therefore the related guarantee void, is dismissed by the Court of Cassation on the grounds that the mere indication of a purpose in a loan (without an explicit interest of the lender in the pursuit of such purpose, which might be underscored by the lender's right of acceleration in case of breach of the purpose clause) is not sufficient to turn a loan into a purpose loan.
This ruling may be of interests for facility agreements drafted in accordance with LMA standards, in which the pursuit of the purpose is clearly indicated as mandatory (although lenders are discharged from any monitoring duty), but no specific event of default is provided in the case of non- compliance (lenders being however entitled to terminate pursuant to Sec. 1454 of the Italian Civil Code if the debtor does not comply within 15 days of receipt of a notice to comply).
