On May 20, 1980, Aron granted a mortgage right to his house to the bank. After a few years Aron defaulted with respect to the payment of his debt to the bank. Pursuant to the Bank’s right of mortgage, the bank sold Aron’s house by public auction.
In first instance the house was auctioned by ascending bid on 5 September and by descending bid on September 19, 1990 and subsequently allotted to Celvin.
After the bank had served a notice of default to Celvin by December 1, 1990, Celvin paid the purchase price on 2 December, whereupon the deed of auction by descending bid and the deed of acquittance were entered in the public registers. Meanwhile Aron paid all his debts to the Bank on 22 November 1990. On that day the bank caused his mortgage to be cancelled.
On 28 November 1990 Aron served writs upon Celvin and the bank, declaring, among other things, that he is declaring the agreement of auction purchase to be cancelled. Aron assumed the position that he had cancelled the agreement and had remained owner of the lot. In cassation the question at issue is whether Aron was entitled to cancel the auction purchase and whether he has remained owner of the lot.
Article 3:269 Civil Code: This article provides that a public sale can be presented until the time of allotment at the auction, by payment of the debt secured by the mortgage and also of the costs already incurred for the execution. Articles 527-529 of the Code of Civil Procedure: these articles lay down provisions for the consequences of defaulting by the buyer at an auction.
Adjudication by the Dutch Supreme Court
A default on the part of an auction purchaser only creates a right of cancellation for the execution creditor, who has sold the property by virtue of his own legal right.. The viewpoint that the execution debtor is entitled, in case of default of the buyer in the event of a forced sale by a mortgage holder, to cancel the purchase, is contrary to the system of the law. It is not justified, neither by the application conditions of sale, nor by the demands of reasonableness and fairness, to assume that Aron still has the authority in this case, even if he has meanwhile paid his debts to the Bank.
On account of the sale carried out by virtue of its own right, the bank is obliged to effect delivery to Celvin. Only the bank was party to the agreement of auction with Celvin and the fact that Aron has paid off his debts to the bank after the allotment to Celvin, does not entail that Aron acquired the right to cancel the purchase agreement with Celvin. This is no different in case Celvin defaults in paying the purchase price. Only the bank, being the execution creditor, has the right to cancel the agreement with Celvin, since he has caused the mortgaged property to be sold by virtue of his own right.