In practice and theory, the question of the expediency and application of the restrictions on the participation in public sales of certain persons specified in Art. 490, para. 1 of the Civil Code in conjunction with Art. 185 of the Civil Code regarding public sales by state and private bailiffs, as well as respectively in Article 717 of the Criminal Code in conjunction with § 1 of the Code of Criminal Procedure in bankruptcy proceedings, and respectively in Art. 238, para. 7 of the Code of Civil Procedure in the conduct of tenders by public contractors. Practice accepts that the norms establishing an exception to the rule of equality of individual subjects in the acquisition of property through their participation in civil turnover cannot be interpreted expansively and their addressees can only be the persons explicitly mentioned in them[1]. Complaints about the participation of persons who do not have this right, which are blanket, cannot be subject to verification[2], or the contestation of public sales on the stated grounds, incl. as invalid, to be carried out before arbitration[3]. It is important to emphasize that the restrictions on participation in public auctions also cover direct negotiation in bankruptcy proceedings on the basis of Art. 718 of the Criminal Code[4], which may not be held as an auction - public sale. Although independent, the proceedings on public sales have a similar regulation, and the basis of the restrictions on participation is Art. 185 of the ZPA, insofar as they directly refer to it as art. 490, para. 1 of the Civil Code and Art. 717, para. 1 of the Criminal Procedure Code, as well as indirectly § 2 of the DR of the Code of Criminal Procedure, which states that the provisions of the Code of Criminal Procedure and Code of Criminal Procedure apply to cases not regulated by the Code of Criminal Procedure[5]. In this regard, the general consideration of the restrictions is relevant to the individual entities that are limited in their participation in publicly traded companies.
General limitations for participation in the three types of public sales - under the Code of Civil Procedure, the Code of Civil Procedure and the Code of Civil Procedure, cover the debtor and his representative, the persons who, by law or appointment, manage or guard other people's property, regarding these properties (the guards), the officials, regarding the properties they are selling (PSI and DSI, receivers, public contractors, as well as their employees as persons under "appointment" - Art. 185, b. "a" from the ZZD), judges, prosecutors, registrars and lawyers - regarding disputed rights that are subject to the jurisdiction of the court to which they are registered or in the department of which they operate. Additional restrictions under the Civil Code cover as disenfranchised the officials of the office of the district court and the employees of the bailiff. The additional restrictions under ТZ in bankruptcy proceedings cover related to all persons restricted from participating in the tenders (§ 1 of DR of ТZ), a the additional restrictions under DOPC cover, in addition to the persons specified in the Code of Criminal Procedure and the Code of Criminal Procedure pursuant to § 2 of the Code of Criminal Procedure of the Code of Criminal Procedure, and all authorities conducting the auction, as well as the experts who appraised the item, subject to public sale.
Debtor's right to participate
There's no arguing that the debtor may not participate in public sales of property owned by him, when the same is a debtor for the enforceable monetary claim. The right of mortgagors and pledgee creditors to participate in the bidding for property serving as security, when the execution is not directed against them as subjects, has long been contested in practice, and for a long time the same persons were considered on the one hand as third parties to the process and on the other as debtors. S Interpretative decision No. 4 of 11.03.2019 of the Supreme Court of Appeal No. 4/2017, OSGTC this conflicting understanding was overcome by accepting in his reasons under item 2 that mortgagors and pledge debtors may participate in the bidding and are not covered by the restrictive norms for participating in the relevant auctions for the debtor, in this capacity, although critically accepted in the literature[6].
The debtor's representatives and related parties
Practice accepts that representatives of legal entities fall under the restriction of participating in a public sale when the execution is directed against the company they represent, as a debtor[7]. It should be emphasized here that a person can acquire several qualities that fall into several restrictions - so e.g. the manager of a debtor company can also be appointed as a custodian of the property, he can also be a lawyer[8]. In this regard, it is important to investigate what exactly the quality of the person limits him from participation, because e.g. the manager and the sole owner of a limited liability company is not an official and is not subject to official duty within the meaning of Art. 185, b. "a" PPE[9], and on Art. 490, para. 1 of the Civil Code, on Art. 717, para. 1 of the TK and of Art. 238, para. 7 of the Code of Criminal Procedure as a representative of the debtor. In the limitation of Art. 185, b. However, "a" from the PPE is included the guardian of the prohibited person, as managing and guarding someone else's property[10], rendering the sale between the two void. However, the former manager of a company does not fall within the restrictions as a representative of the debtor, nor as related party according to § 1 of the DR of the ТZ[11].
Related Parties, as restricted from participating in public sales, are indicated only in bankruptcy sales - in Art. 717, para. 1 of the TK in conjunction with § 1 of the DR of the TK[12]. This limitation of the application of § 1 of the DR of TK is criticized in the literature[13], but practice adheres to the understanding that there is no such restriction on the participation of related parties in public sales under the Code of Criminal Procedure and Code of Criminal Procedure[14]. So, for example, the debtor's son can participate in a public sale in accordance with the Code of Civil Procedure by a bailiff[15], as can the daughter[16], and generally all direct relatives[17]. There is no obstacle for the debtor's employees or workers to participate in the public sale under the Code of Criminal Procedure or Code of Criminal Procedure[18], including his legal counsel[19].
Custodians of the property being sold
Art. 185, b. "a" of the PPE dictates that persons who, by law or appointment, manage or guard other people's property do not have the right to acquire the property they guard or manage, even at a public sale. This refers to the persons who are appointed as guards[20] by the bailiff of the base Art. 470 of the Code of Civil Procedure, by the public executor of the basic. Art. 234 of the Code of Civil Procedure, or by the syndic of the foundation. 654 of the Civil Code, but also, as stated, the trustees, in addition to the debtor's representatives, to whom attention was drawn. The persons close to the guard, however, if they have no other capacity (e.g. related parties in bankruptcy sales) do not fall within the statutory limitation[21].
One part of the practice assumes that the ban on the participation of the watchman in the public sale according to the Code of Civil Procedure is not violated and when a natural person who is a representative of a legal entity is appointed as a custodian, and when the legal entity participates in the bidding[22]. The main argument that is supported in this direction is that the specified imperative provisions of Art. 185 of the Civil Code cannot be interpreted broadly and by analogy.
The opposite is advocated in a significant part of the practice[23], which accepts that when the manager of the buyer company is the person to whom the management of the property subject to the public sale was entrusted, this would mean allowing an easy circumvention of the law and achieving a goal undesirable by law, namely that the persons who participate as buyers in the public sale are not related in any way to the property being sold, in order to avoid any doubts about the impartiality of the PSI in carrying out the sale, as well as not to allow no doubts about the correct conduct of the public sale and the bona fide execution of the bidding.
The first view should be supported here, namely that the representative of a company and the company itself are not the same entity, although they are obviously related persons. The current editions of Art. 490, para. 1 of the Civil Code and of Art. 238, para. 7 of the Code of Criminal Procedure do not provide for restrictions on persons related to the guard, therefore, from their strict interpretation, it follows that the company represented by the natural person - custodian can participate in the tenders under the Code of Civil Procedure and the Code of Civil Procedure, but not in those under the Civil Procedure Code in bankruptcy proceedings. If the persons related to the custodian in the sold under the Code of Civil Procedure and Code of Criminal Procedure should be restricted from participation, this should be expressly legislated.
They are not accepted as persons who by law or appointment manage or guard other people's property, the liquidators[24], but only in that capacity. They could fall under the law's limitations as representatives of the debtor. It's not a keeper and the person it is property owner, in which the item is located[25]. There is no harm in participating creditor in the auction, when the latter has paid a fee to the guard[26]. The mayor's relatives of the settlement in which the property is located are also not within the scope of art. 185 of the ZZD[27], as well as persons married to employees of the Ministry of the Interior – policemen[28]. It is interesting to note that the police officers present at the auction were restricted from participating in it, according to Art. 931 of the repealed Civil Procedure Act, and in the current legal framework the same could be referred to the officials of the court office, according to Art. 490, para. 1 of the Code of Civil Procedure. The participation of a security guard in the vendor, in addition to discrediting the same, can also be a disciplinary offense under the Civil Servant Act[29].
Court and public executors and receivers
Art. 185 of the ZZD introduces two restrictive criteria for the participation of judicial and public executors and receivers in the sold - as officials, regarding the properties they sell, and in their professional capacity as persons with public powers, regarding disputed rights that are subject to the jurisdiction of the court to which they are registered or in the department in which they act. Although not explicitly stated in b. "b" of Art. 185 of the Civil Code, receivers and public contractors fall under b. "a" of the same according to the first criterion, and also on the basis of the special laws in which the limitation of their participation is expressly regulated - art. 717, para. 1 of the TK and Art. 238, para. 7 of the Code of Criminal Procedure. In this regard, it is indisputable that judicial and public executors and liquidators cannot participate in the auctions that they themselves conduct, as well as in the auctions of other colleagues from the same area of operation.
However, the restrictions do not apply to auctions and properties located outside their area of operation, such as a private bailiff may participate in public auctions outside its area of operation, coinciding with the District Court and the district in which it is located[30]. The restriction does not apply to former receiver of the company in bankruptcy, if at the time of the sale he was dismissed from his position[31]. The employees of the bailiff, the officials of the office of the district court, the employees and the persons connected with the receivership, as well as the authorities of the public execution may not participate in the said public sales in the same area of operation, but this restriction does not apply to direct relatives of those same employees[32], and with regard to the relatives of the persons related to the syndic - according to the restrictions of § 1 of the DR of the Labor Code.
Lawyers
Perhaps the most controversial text, subject to criticism as in literature[33], as well as in practice, is about the restriction of lawyers to participate in public sales.
A piece of jurisprudence[34] accepts that the leading criterion in restricting lawyers from participating in public sales is not the territorial one, regarding the area of action of the bar association, and is the professional "on disputed rights that are subject to the jurisdiction of the court to which they belong", i.e. a lawyer may not participate in a public sale only when his conduct affects legally significant interests for which he has exercised legal representation or protection in a broad sense. The main argument against the territorial criterion is the freedom of lawyers to practice without restriction throughout the country, and not only in the region of the relevant bar association.
The other part of the case law[35] assumes that the norm of b. "b" from Art. 185 of the ZZD restricts all expressly named persons to participate in public sale not only in relation to executive cases in which they administered justice or represented the parties, but in all executive cases, formed in the area of activity of the respective private or state bailiff, coinciding with the territory of the bar association in which they are registered.
At the other extreme is the case law which accepts that it is it is permissible for a lawyer of a creditor party in bankruptcy proceedings to participate in a public sale, i.e. the professional criterion is also rejected[36], as long as the lawyer does not enter into transactions with his client regarding the subject matter of the case.
One of the arguments of the first view, rejecting the territorial criterion and giving priority to the professional one, is that in the past lawyers were appointed to the corresponding court coinciding with the area of the bar association, which made them also court officials, therefore any participation in public sold would cast doubt on the impartiality of the procedure. Historically, however, this is not entirely correct, inasmuch as lawyers in the modern history of Bulgaria have never been territorially restricted in exercising their profession - such restrictions are not contained in all successive normative acts regulating the legal profession - Decree No. 1842 on the Bar, Pron. State Gazette no. 96 of 03.12.1976, Lawyers Act, Promulgation, SG No. 140 of 24.12.1888, Lawyers Act, Promulgation, SG No. 78 of 07/08/1925, Decree on the Bar, Pron. SG No. 49 dated 10.06.1952, Law on Advocacy, Promulgation, SG No. 80 of 27.09.1991, as well as in the current one Law on Advocacy, Promulgation, SG No. 55 of 25.06.2004 The slightest such restriction would be illogical from the point of view of the jurisdiction of the judicial proceedings, always leading to the supreme court having territorial jurisdiction throughout the country.
On the other hand, an express prohibition, apart from the general one, including the territorial and professional criterion laid down in Art. 185, b. "b" of the ZZD, is located in the now active ZAdv. in art. 46 – “the lawyer or the European Union lawyer may not personally, through a proxy or with a hidden proxy, enter into any transactions with his client regarding the subject matter of the case". An identical text is contained in Art. 23, para. 2 of the previous ZAdv., Promulgation, SG No. 80 of 27.09.1991. Moreover, such an express prohibition was provided for in Art. 230, para. 3 of the previous PPE (Official Gazette, No. 268 of 05.12.1892, repealed on 01.01.1951), in the following form:In addition, attorneys cannot, either directly or through substitutes, make with their attorneys any condition or contract for sale, donation, exchange, or the like on the things that are included in the cases entrusted to them, under the fear of invalidity and damages and expenses.".
Although the provision of Art. 185, b. "b" of the ZZD is defined as archaic and does not meet the goals that were pursued with its adoption, the territorial criterion should be applied as the leading one, and the professional one as an additional one. The law specifically says that cannot be buyers, even at a public sale, neither directly nor through a proxy (…) lawyers - regarding the disputed rights that are subject to the jurisdiction of the court to which they are registered or in the department in which they act, unless the buyer is a co-owner of the disputed right. It does not follow from the text in any way that the lawyer should have exercised procedural representation in relation to the subject of the case in order to be restricted from participating in a public sale with the same subject. This restriction is contained in ZAdv. and does not in any way override the general rule of the ZZD, i.e. even if lawyers are removed from the wording of art. 185, b. "b" of the PPE, they will again not be able to acquire rights of their clients who were the subject of cases in which the same lawyers were involved, due to the special prohibition in Art. 46 of ZAdv., corresponding to Art. 230, para. 3 of the previous PPE (Promulgation, SG No. 268 of 05.12.1892, repealed on 01.01.1951). Therefore the ban on participating in public sales for lawyers covers first of all the territory of the bar association in which they are registered, and next and all sales that have as their subject cases and assets, in relation to which the lawyers have exercised legal representation or protection in a broad sense, outside the territory of their bar association. However, the law does not prohibit the conclusion of a transaction between a lawyer and a client if the transferred right has not been the subject of legal proceedings[37]. A similar conclusion also follows from law enforcement in relation to the restriction on the participation of bailiffs in public auctions - with identical texts, it cannot be assumed that the rules for lawyers should be applied differently, i.e. lawyers should not be able to participate in public sales in the area of the bar association to which they are registered, coinciding with the judicial district of the district court, according to Art. 78, para. 4 of ZAdv. However, the quality of a lawyer can be absorbed by another, as already stated - so e.g. a lawyer may participate in a sale in a personal capacity as a claimant[38].
Ivan Nikolaev, attorney-at-law
[1] Decision No. 19 of 01/08/2015 of the Supreme Court of Appeals under Case No. 371/2014, Item I, TC, Decision No. 92 of August 18, 2010 of the Supreme Court of Appeals under Case No. 645/ 2009, Item II, TC, Decision No. 135/8.12.2009 pursuant to Item No. 88/2009 of the Supreme Court, TC, Item II, Decision No. 1032/18.11.2008 according to city decree No. 2941/2007, GK, III year o.
[2] Decision No. 262088 of 30.12.2020 of the SGS according to city ordinance No. 13124/2020
[3] Decision No. 5 of 02/07/2018 of the Supreme Court of Appeal No. 2660/2017, Item I, TC.
[4] Decision No. 444 of 17.10.2019 of the Supreme Court of Appeals under Criminal Procedure No. 2274/2019, Item I, TC, Decision No. 1198 of 02.5.2009 of the Supreme Court of Appeals under Criminal Procedure No. 4955/2007, I pt., GK, Resolution No. 796 of 22.11.2013 of the Supreme Court of Appeal under pt. No. 4094/2013, II pt., TC
[5] Likewise, Decision No. 212 of 18.12.2020 of the AdmS - Vidin under adm. d. No. 154/2020
[6] Ivanov, D. The public sold through a private bailiff. Sofia: Siela, 2021, p. 128.
[7] Decision No. 57 of 15.03.2016 of the OS - Sliven pursuant to city ordinance No. 92/2016, Decision No. 1884 of 15.12.2021 of OS - Varna pursuant to city ordinance No. 2242/ 2021
[8] After the amendments to the Law on Advocacy in Art. 5, para. 2, item 1 with SG No. 17 of 2021
[9] Decision No. 65 of 02/04/2009 of the Supreme Court of Appeals pursuant to Administrative Order No. 410/2008, IV year o., GK.
[10] Decision No. 144 of 14.02.2017 of the Administrative Court - Plovdiv pursuant to City Decree No. 2754/2016.
[11] Decision No. 3715 of 13.11.2017 of the SAC under Administrative Procedure No. 3635/2017, Decision No. 1762 of 6.06.2018 of the SAC under Administrative Procedure No. 1828/ 2018, Decision No. 1783 of 1.08.2013 of the SAC under Civil Law No. 2670/2013.
[12] § 1. (1) "Related persons" within the meaning of this law are: 1. spouses, relatives by direct line - without restrictions, by collateral line - up to the fourth degree inclusive, and relatives by matchmaking - up to the third degree inclusive; 2. employer and employee; 3. the persons one of whom participates in the management of the other's company; 4. partners; 5. a company and a person who owns more than 5 percent of the units and shares issued with voting rights in the company; 6. the persons whose activity is controlled directly or indirectly by a third party; 7. the persons who jointly control directly or indirectly a third party; 8. the persons, one of whom is a commercial representative of the other; 9. the persons, one of whom made a donation in favor of the other. (2) "Related persons" are also the persons who participate directly or indirectly in the management, control or capital of another person or persons, which is why conditions different from the usual ones can be agreed between them.
[13] Popova, V. Bulgarian civil procedural law. Sofia: Siela, 2020, p. 1154, Ivanov, D. The public sold through a private bailiff. Sofia: Siela, 2021, p. 130.
[14] Decision No. 850 of 17.05.2021 of the OS - Varna according to City Decree No. 621/2021.
[15] Decision No. 246 of 3.10.2013 of the State Administrative Court of Ukraine pursuant to Administrative Order No. 306/2013.
[16] Decision No. 1032 of 18.11.2008 of the Supreme Court of Appeals under City Decree No. 2941/2007, III year o.
[17] Decision No. 344 of 07.05.2013 of the District Court - Ruse under City Decree No. 1105/2012.
[18] Decision of 20.02.2020 of the OS - Montana according to city ordinance No. 38/2020.
[19] Decision No. 135 of 8.12.2009 of the Supreme Court of Appeal under Item No. 88/2009, Item II, TC.
[20] Decision No. 5208 of 31.08.2020 of the SGS pursuant to Administrative Order No. 13915/2018, Decision No. 369 of 3.07.2019 of the Supreme Court of Appeals pursuant to Administrative Order No. 1039/2019, II year o ., GK, Decision No. 579 of 06/05/2018 of RS - Veliko Tarnovo according to city decree No. 293/2018.
[21] Decision No. 7684 of 16.11.2017 of the SGS according to the municipal court order No. 14524/2017.
[22] Decision No. 260071 dated 30.12.2020 of the Supreme Court of Appeals pursuant to Administrative Order No. 424/2020, Decision No. 7483 dated 13.11.2012 of the State Administrative Court pursuant to Administrative Order No. 1649/2008, Decision No. 400 of 16.11.2015 of the Administrative Court - Sofia pursuant to Administrative Order No. 88/2015, Decision No. 746 of 27.07.2016 of the Administrative Court - Razgrad pursuant to Administrative Order No. 105/ 2016
[23] Decision No. 5609 of 28.07.2017 of the SGS pursuant to city ordinance No. 8745/2017, Decision No. 300 of August 3, 2015 of the Administrative Court - Sofia pursuant to city ordinance No. 85/2015 ., Decision No. 94 of 12.02.2016 of the General Assembly - Sofia according to the city ordinance No. 74/2015, Decision No. 322 of October 1, 2015 of the General Assembly - Sofia according to the city ordinance no. 75/2015
[24] Decision No. 679 of 11.10.2007 of the Supreme Court of Appeals under No. 335/2007, TC, Decision of 13.10.2006 of the Administrative Court - Veliko Tarnovo under No. 266/2006.
[25] Decision No. 1996 of 10.11.2017 of the AdmS - Varna by adm. e. No. 2356/2017
[26] Decision No. 796 of 22.11.2013 of the Supreme Court of Appeals under Criminal Code No. 4094/2013, Item II, TC.
[27] Decision No. 132 of 3.05.2010 of the Supreme Court of Appeals pursuant to Administrative Procedure No. 1022/2009, III year o., GK, Decision No. 365 of 3.05.2010 of the Supreme Court of Appeals pursuant to Administrative Procedure No. 1022/ 2009, III year o., GK.
[28] Decision No. 260263 of 29.07.2021 of the OS - Sofia under City Decree No. 111/2019.
[29] Decision No. 270 of 11.02.2016 of the AdmS - Varna by adm. e. No. 1699/2015
[30] Decision No. 74 of 27.03.2013 of the State Administrative Court of Ukraine pursuant to Administrative Procedure No. 3/2013, Decision No. 620 of 01.11.2012 of the District Court - Ruse pursuant to Administrative Procedure No. 410/2012.
[31] Resolution No. 37 of 25.01.2017 of the PAS pursuant to Administrative Code No. 13/2017
[32] Decision No. 1489 of 01/07/2009 of the Supreme Court of Appeals pursuant to City Decree No. 421/2008, V year o., GK.
[33] Ivanov, D. The public sold through a private bailiff. Sofia: Siela, 2021, p. 130, Nikolov, D., Ivanov, D. Enforcement proceedings under the Code of Criminal Procedure and Environmental Protection. Sofia: Siela, 2016, p. 388.
[34] Decision No. 3050 of 05/05/2017 of the SGS pursuant to city ordinance No. 5195/2017, Decision No. 3320 of 05/15/2017 of the SGS pursuant to city ordinance No. 5194/2017.
[35] Decision No. 262462 of 12.08.2021 of RS - Varna under City Decree No. 9969/2019, Decision No. 2127 of 7.12.2018 of OS - Varna under City Decree No. 169/2018.
[36] Decision No. 143 of 15.03.2021 of the SAC under Criminal Code No. 140/2021
[37] Decision No. 1679 of 25.10.2012 of the SAC pursuant to Administrative Law No. 2035/2012.
[38] Decision No. 2523 of 3.12.2013 of the OS - Varna according to the City of Varna Decree No. 2961/2013.
