The new eviction against housing illegal occupation

Levantamiento del velo in Spain vs piercing of the corporate veil in the US

THE NEW EVICTION AGAINST HOUSING ILLEGAL OCCUPATION

By Antoni Faixó

I. ACT 5/2018

On 12 June 2018, Act 5/2018, amending the Civil Procedure Act, has been published in the State Official Gazette to introduce a new eviction procedure, specifically addressed against housing illegal occupation.

The Preamble of the Act explains that the civil procedural regulations had not provided for an appropriate solution for this phenomenon, since illegal occupation is not illegally a temporary use (“precario”), since there is not a use permitted by the owner and there is not a relationship between the owner and the occupant, and the remaining civil procedures had similar procedural or legal problems.

II. FEATURES OF THE NEW EVICTION

Particularly, Act 5/2018 amends several sections of the Civil Procedure Act, particularly section 250.1.4, regulating the restraining order for recovering possession, being the most important one.

We highlight below the most significant aspects of this new eviction:

(a) The claim may only be brought by individuals, non-profit making entities and public entities. Therefore, the legal standing to sue is limited and this action is not allowed for banks and investment funds. We must say, however, that the Act does not explain the reason for this limitation.

(b) The claim must be accompanied by the title deed or document of possession. It is logical and it is not really new.

(c) The property must be a dwelling. It does not therefore apply to premises.

(d) The claim may be brought against unknown occupants (“ignorados ocupantes”) or squatters. To date, the case law admitted so, but it was a legally discussed issue. Now, with this new express provision, there will be no discussion on the legal standing to be sued.

(e) If the occupants are identified in the site, the judge may inform to the relevant social services, if the applicant may have consented so. Currently, it is natural and logical.

(f) If the claimant has requested the immediate delivery of possession (which shall be obviously always requested), the judge shall require the occupant to submit a document of possession within 5 days. Otherwise, the judge shall order the immediate eviction, with no possibility to appeal this decision. If applicable, the social services shall be informed to adopt safeguards within 7 days. This issue is important and will be analysed in detail below.

(g) In the answer to the claim, the only possible allegation shall be that the occupant has the document of possession or that the claimant does not have it.

(h) The judgment admitting the claim may be enforced immediately, without the 20-day awaiting term regulated in section 478 LEC, being applied.

As we have seen, the new procedure breaks the current procedural standards of oral proceedings and significantly limit the defendant’s options. Firstly, the defendant is limited in his/her defense allegation in the answer: the defendant may only argue that he/she has the title or that the claimant does not have it; just it. Secondly, if the defendant does not submit the title within 5 days, the eviction is enforced without appellation. This term is shorter than the one to answer the claim, which is of 10 days. There would be the possibility that the defendant does not have the title and that therefore the eviction is enforced, but then the defendant could answer that the title submitted by the claimant is not correct, because the law allows so, which would create a complex and difficult situation to be solved. Thirdly, the judgment is immediately enforceable, which we understand is positive.

III. EFFECTIVE DATE

The Act shall become effective on 2 July. Then, this new claim may be submitted.

IV. FINAL ASSESSMENT

The creation of these proceedings solves a legal loophole as regards the type of procedure to be enforced when recovering possession against illegal occupation of property, but partially, because this proceeding only affects dwellings, but not premises and because it limits the legal standing to sue, without justifying this limitation. Therefore, the problem will remain for these other illegal occupations.

LEVANTAMIENTO DEL VELO IN SPAIN VS PIERCING OF THE CORPORATE VEIL IN THE US

By Antoni Faixó

I. DESCRIPTION OF THE PIERCING OF THE CORPORATE VEIL DOCTRINE

The piercing of the corporate veil is a doctrine created by case law, so that there are cases where the legal principle stating that legal persons have limited liability separated from its members, is broken.

These cases are varied, but they generally require a fraudulent attitude by the offender.

It is worth mentioning that this doctrine is recognised on an international level and particularly, the Court of Justice of the European Union has analysed and applied this doctrine on several occasion.

II. THE PIERCING OF THE CORPORATE VEIL IN SPAIN

The Supreme Court has applied the piercing of the corporate veil doctrine on several occasions and in different circumstances.

The essence of this application is the following, pursuant to the Supreme Court:

"a procedure to discover, and, if applicable, repress, the wilful intent or abuse committed, supported on the legal autonomy of a company, penalising those managing the company, in order to put an end to fraud or abuse "

One of the most current cases is the sole-member company, in which the creation and use of the company for fraudulent purposes to avoid a personal obligation and responsibility of the member, is assumed.

However, there is not only one element or situation that clearly identifies a case of piercing of the corporate veil. The Spanish case law analyses case by case and freely assesses if the piercing of the corporate veil can be applied in each case.

Finally, we must say that the application of the piercing of the corporate veil doctrine is an exceptional resource, since, if possible, the channels provided for in the corporate regulations to claim incorrect attitudes, must be applied: appeal of shareholders’ agreements or the liability action against the director. If in any particular case, no legal action may be applied, then the piercing of the corporate veil could be asserted.

III. PIERCING OF THE CORPORATE VEIL IN THE US

In the US, the courts apply the “piercing of the corporate veil” doctrine similarly to the Spanish courts, although the laws and case law may be different in each state, so that in some states this doctrine is interpreted more flexibly than in other states.

In this regard, it is important to take into consideration that American companies must be applied the “local” law of the state of their registered offices, so that when court proceedings are initiated in another state where such company has acted, the court must apply the rule of the company’s state of origin.

In any event, the American case law has identified three possible cases or elements that may consider the application of the “piercing of the corporate veil” doctrine:

(a) Unit of interest and ownership.
(b) Fraudulent conduct.
(c) Probable cause.

It must be said that the American case law has analysed this doctrine for much longer than in Spain, so that therefore there are more judgments and possible forecasts of probability of estimating a claim of this type in the US.

IV. CONCLUSIONS

The piercing of the corporate veil doctrine is similar in both countries, although the case law is more consolidated and the cases are more categorised in the US, with differences among states.

In any event, each case is individually analysed, since there is not a clear and standardised legal standard regulating the piercing of the corporate veil and courts are free to decide either to apply such doctrine or not.