Decision of the Constitutional Court regarding mortgage

 

On February 11, 2022, the Constitutional Court of the Republic of Azerbaijan made a decision on the mortgage, which is a method of securing the execution of the obligation.

 

Based on the facts of the case, on May 14, 2013, G. Arkishiyev took credit of 11,000 manats from Texnikabank OJSC, in return, he mortgaged his house on the basis of a mortgage agreement. In the next period, G. Arkishiyev did not pay his debts. Therefore, the Deposit Insurance Fund which was the liquidator of Texnikabank OJSC filed a lawsuit to return the debt in the amount of AZN 15,998.84 and to direct the charge to the mortgaged house. In return, the defendant requested a decision to dismiss the claim and release the house from the mortgage due to the expiration of the limitation period

 

Currently, there are two different approaches among courts on this subject:

 

1) Mortgage is a way to ensure the execution of obligations. For this reason, the mortgage must be terminated and the subject of the mortgage must be released from the burden. Because if the claim on the main obligation is not secured due to the expiration of the claim period, the claim on the mortgage should not be secured.

 

2) Mortgage is an additional obligation related to the main obligation. The property can be released from the mortgage and the mortgage can be terminated only if the debt obligation is eliminated. The expiration of the term of the claim under the loan agreement does not terminate the mortgage obligation.

 

The Constitutional Court notes that Article 48 of the “Law on Mortgage” sets out the grounds for termination of a mortgage agreement. However, the expiration of the statute of limitations is not reflected in that part. Article 10.1 of the law states that the mortgage agreement is not of an independent nature and aims to ensure the execution of the main obligation.

 

It is then stated that the claim period itself contains 2 elements:

1. the right to demand protection of the violated rights from the court – the expiration of the statute of limitations does not restrict the right to appeal to the court.
2. the right to enforce the claim by the court

Taking into account the above, the Constitutional Court ruled that:

- When the statute of limitations on the main claim expires, the claim on additional claims is also considered expired;

- Since the mortgagee has a limited right to thing over the property, the expiration of the statute of limitations on the main claim does not lead to the termination of the mortgage and the release of the subject of the mortgage from encumbrances.

Thus, Texnikabank OSJC is not able to direct the charging against the house of Q. Arkishiyev because of the expiration of the limitation period. But, until G. Arkishiyev pays off his debt, his house will remain under mortgage in favor of Texnikabank OJSC.