Discharge of Mortgage Debt (Germany) Case

CourtCourt of Appeal of Frankfurt (Germany)
Docket NumberCase No. 6
Date27 a 1952
German Federal Republic, Court of Appeal of Frankfurt.
Case No. 6
Discharge of Mortgage Debt (Germany) Case.

Recognition of Acts of Foreign States — Confiscatory Legislation — Extra-territorial Effect of — Foreign Bank as Mortgage Creditor — Nationalization of Foreign Bank — Discharge of Mortgage Debt by Payment to State Enterprise Substituted for Expropriated Creditor Bank — Whether Valid Discharge of Debt — Relevance of Debtor's Good Faith.

The Facts.—The appellants were owners of real property situate in Western Germany on which they had raised a mortgage some time before the conclusion of hostilities in the Second World War, the mortgagees being a bank carrying on business in what subsequently became known as Eastern Germany. In 1946 the Bank was expropriated by order of the Soviet military authorities (and a law subsequently enacted) who were in occupation of Eastern Germany, and the property of the Bank was vested in a State enterprise. The latter continued to demand from the appellants payment of interest on the mortgage debt, and ultimately also repayment of the capital sum. In 1947 the appellants discharged the mortgage debt by paying the capital sum to the State enterprise, which purported to grant them a discharge. In accordance with German law the appellants thereupon applied to the Land Registry for the cancellation of the mortgage to which they would have been entitled if the discharge of the debt had been a discharge valid in law. The trustee of the expropriated creditor Bank in Western Germany, however, lodged a complaint against the cancellation of the mortgage, on the ground that the expropriation of the creditor Bank had no extraterritorial effect and was therefore invalid in Western Germany. He accordingly contended that the expropriated Bank was still the true mortgagee and that the payment of the mortgage debt to the State enterprise did not constitute a valid discharge of the appellants' liability under the mortgage. The trustee's complaint, in accordance with the relevant provisions of German law, was duly registered as a land charge, and the appellants appealed against such registration.

Held: that the trustee's complaint against the cancellation of the mortgage was justified, irrespective of whether or not the appellants had made the...

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