Default judgement superior rights – final and conclusive
Default judgement superior rights – final and conclusive
Mortgage deferential property
H.S. owns a property in Nacka and is married to a man named K.S.
As of autumn 2014, H.S. is in prison in Russia to serve a four-year sentence.
She and K.S. divorce at the beginning of their imprisonment.
In 2015, K.S. sold H.S. property to a company by forging her signature.
The company is founded by K.S. himself, ostensibly to get over the property.
A mortgage deed is then taken out for the property in K.S. name and used as collateral when he takes out a loan from private individual N.H.
In June 2016, K.S. was ordered by the Enforcement Authority to repay the debt to N.H.
The claim shall be made with preferential rights in the property.
Superior right property
In the fall of 2016, H.S. filed a lawsuit against the company for better access to the property because K.S. forged her signature on sale.
H.S. wins the case and is re-enrolled as a legal owner.
The judgment is a so-called default judgment, which means that the company did not attend the hearing.
The Court has therefore not carried out a proper examination of the matter but has ruled in H.S.’s favour.
H.S. then files a lawsuit against N.H. because the mortgage he wants to realize on the property is misrepresented.
N.H., for its part, argues that the default judgment does not have legal force and that the pledge is therefore valid.
Legal power of the default judgment – intermediate judgment
The District Court (TR) decides to decide on the possible legal power of the judgment by means of an intermediate judgment.
It therefore ‘raises’ the question and examines it as in its own judgment because it is decisive for the rest of the case (Chapter 17, Section 5 of the Code of Procedure).
Initially, (TR) states that the impact of a judgment is generally limited to the parties to the case but that third parties (in this case N.H.) may meet in certain circumstances.
The right to a pledge in a property depends on the pawnbroker having the right to dispose of the property in question.
If that right is based on a forged document, it constitutes a so-called permanent grounds for invalidity (Chapter 18, Section 3 of the Land Code), which, according to TR, means that the person intending to acquire the pledge cannot do so legally.
This applies even though the acquirer believes that the transferor is the right owner of the pledged property.
Third party
N.H. points out that there is a risk that default judgments will be used by pawnbrokers who want to escape pawn realization.
TR dismisses the argument because the same result is considered to be achieved by other means as well.
In conclusion, the Court sees no reason to treat default judgments differently from ordinary judgments in terms of legal force and therefore sees it as clear that they can affect third parties.
TR will stay the proceedings pending the finality of the intermediate judgment in accordance with Chapter 17.
Section 5 of the Code of Procedure.
Legal disposal of the party
The Court of Appeal (HovR) agrees with TR’s assessment that third parties may be affected by the legal power of a decision.
According to the Court, this can be done in situations such as the present one where a third party is bound by the legal disposal of one party over the legal relationship at issue (in this case, ownership of the property).
Furthermore, HovR states that that assessment depends on when the previous decision has gained legal force.
In this case, the grant of the lien took place before the start of the default judgment process.
This leads the Court to conclude that N.H. is not subject to the final and conclusive nature of the default judgment and can therefore challenge its validity.