Why is an entanglement necessary

BGH: Elimination of the entanglement of a seized claim in insolvency proceedings

InsO § 89; ZPO § 850k
BGH, judgment of November 19, 2020– IX ZB 14/20 (LG Hannover)

Author's guiding principle
The entanglement of a seized claim can be eliminated during insolvency proceedings by the fact that the insolvency court, as the enforcement court, suspends the execution of the seizure and transfer order until the insolvency proceedings are canceled, without canceling the seizure as a whole (delimitation of BGH, decision of 2.12.2015 - VII ZB 42/14, WM 2016, 133).

II. Facts
When bankruptcy was opened, the bankruptcy debtor's P account was already burdened with a garnishment that had been served outside of the period relevant to contestation of Sections 130, 131 InsO. The insolvency administrator applied for the attachment and transfer order to be canceled, whereupon the insolvency court canceled the attachment and transfer order and declared the attachment based on it to be inadmissible. The attachment creditor filed an immediate appeal against the annulment of the attachment. The appellate court changed the decision of the bankruptcy court so that the attachment and transfer decision is not revoked, but only its execution including the entanglement is suspended until the bankruptcy proceedings are repealed. The insolvency administrator has lodged a legal complaint against this decision of the appellate court and further requested the annulment of the attachment and transfer decision.

III. Legal evaluation
The appellate court had considered it sufficient to eliminate the entanglement of the account balance by suspending the execution of the attachment and transfer decision without lifting the attachment as a whole. Incoming payments since the opening of insolvency proceedings are protected against enforcement by Section 89 I InsO. Complete repeal of the seizure would deprive the creditor of his rank advantage after the proceedings were repealed and would not be necessary. The jurisprudence of the Seventh Civil Senate (BGH decision of 2 December 2015 - VII ZB 42/14) does not contradict this view. It is true that the BGH decided in it that the options for annulment or suspension of foreclosure were finally regulated in the ZPO. However, the decision there only concerned the enforcement creditor's lack of disposition and is therefore not relevant in the present case.

The BGH agreed with this view. He cites two judgments of the Ninth Civil Senate from 2011 and 2017 (BGH IX ZR 40/17 and BGH IX ZB 217/08), according to which the public-law entanglement generally lasts until it is formally repealed, but will be eliminated during the insolvency proceedings by the competent enforcement body suspending the execution of the seizure until the bankruptcy proceedings are lifted, without the need to lift the garnishment. This should ensure that the legal position of the attachment creditor protected by Article 14 I GG is protected as comprehensively as possible by preserving priority.

This case law has been called into question in the literature and the case law of the lower court, since the code of civil procedure does not provide for a suspension of the execution. This view is based on a resolution of the Seventh Civil Senate from 2015 (VII ZB 42/14) according to which it should not be permissible to restrict the legal effect of an attachment and transfer order in such a way that only the rank is preserved, the rest of the attachment effects but not applicable for the time being. The Seventh Civil Senate sees no legal basis for a temporary waiver of the effects of the lien without lifting the seizure and therefore rejects this, pointing out that the options for restricting or suspending enforcement in the strictly formalized enforcement proceedings provided for in the ZPO are considered to be final have to, from.

The Ninth Civil Senate sees no contradiction between the cited decisions of the Ninth Senate and those of the Seventh Senate, because the case decided by the Seventh Civil Senate was only about the implementation of an agreement restricting enforcement. The enforcement creditor and the enforcement debtor had agreed in the course of an installment payment agreement that the enforcement debtor should be able to freely dispose of the attached account balance if the same was observed. Such an agreement should be distinguished from the effects of opening insolvency proceedings.

In its previous case law, the Ninth Civil Senate has disregarded the fact that the Code of Civil Procedure does not provide for an instrument according to which the attachment debtor may dispose of an attached account, but the attachment and enforcement as such remain in place. However, even after a renewed review, this should only be adhered to in relation to the insolvency proceedings.

IV. Practical note
The Ninth Civil Senate of the BGH, despite strong headwinds from the courts of first instance and the specialist literature as well as the Seventh Civil Senate, adheres to its view that during the insolvency proceedings the public legal entanglement of a seized claim can be eliminated by suspending enforcement for the duration of the insolvency proceedings without that the seizure needs to be lifted. The formalistic argument of the opposing view that such an instrument is not provided for in the ZPO and therefore cannot exist is invalidated by the BGH with the argument of creditor protection, according to which the least possible impairment of the attachment creditor is required. For the practice of insolvency proceedings, it is to be hoped that this pragmatic solution that best suits the interests of the parties involved will now prevail. If this is not the case, the insolvency administrator is obliged to get the attachment creditor - if necessary by way of an enforcement counterclaim - to completely cancel the attachment so that priority is not possible. Since this path is not advantageous for any of the parties involved, the Ninth Civil Senate's adherence to its suspension solution is to be welcomed.

Lawyer Dr. Elske Fehl-Weileder, specialist lawyer for insolvency law