1. Registration Protection of the Assignee of a Mortgage Loan in Cases of Prohibited Financial Assistance.
In Judgment No. 1469/2026 of 22 September 2026, the First Chamber of the Supreme Court examined whether the assignee of a mortgage-secured loan may benefit from the protection afforded by Article 34 of the Mortgage Act (“LH”) where the creation of the security interest infringed the prohibition on financial assistance.
The prohibition on financial assistance, currently set out in Article 150 of Royal Legislative Decree 1/2010 of 2 July, approving the consolidated text of the Companies Act (“LSC”), consists of the prohibition on public limited companies advancing funds, granting loans, providing guarantees or facilitating any other form of financial assistance intended for the acquisition by a third party of their own shares, or of shares or interests in their parent company, thereby preventing the company’s assets from being used to finance or secure the acquisition of its own share capital.
In the case at issue, a company granted a mortgage over a property it owned as security for a credit facility extended to other companies that had indirectly acquired its entire share capital. Years later, the secured loan was assigned, together with its ancillary rights and security interests, to another entity by means of a notarial deed and for valuable consideration. Subsequently, proceedings were brought seeking a declaration of nullity of the mortgage and its amendments and corresponding Land Registry entries, on the grounds that the security had been created to secure financing linked to the acquisition of shares in the mortgagor company itself and therefore constituted prohibited financial assistance. In response to that claim, the assignee relied on its status as a bona fide third-party mortgage holder and on the protection afforded by Article 34 LH.
The Provincial Court held that the mortgage constituted a case of prohibited financial assistance, but upheld its effectiveness against the entity that later acquired the loan and mortgage security for valuable consideration. The Supreme Court confirmed the reasoning of the Provincial Court and recalled that, pursuant to Articles 1112 and 1528 of the Civil Code and Article 149 LH, the assignment of a mortgage loan also entails the transfer of the mortgage as an ancillary right. The Court further clarified the relationship between Articles 33 and 34 LH, namely that registration does not validate an acquisition transaction if it is void, but the principle of public reliance on the Land Registry protects a third party who acquires validly, for value and in good faith, from a party appearing in the Registry as having authority to transfer, against the nullity of the transferor’s prior title. Consequently, as neither bad faith on the part of the assignee nor any ground for invalidity affecting its own acquisition had been established, the Court upheld the registration protection of the mortgage security.
2. Supreme Court Confirms that the Mortgage Auction Value May Be Fixed at 75% of the Appraised Value Where Only Judicial Enforcement Is Agreed.
In its recent Judgment No. 1449/2026 of 17 September, the First Chamber of the Supreme Court addressed an issue of particular importance for the creation and registration of mortgages: whether the auction value specified in the mortgage deed for direct judicial enforcement must necessarily correspond to 100% of the property’s appraised value, or whether a lower amount may be established, provided that it complies with the minimum threshold of 75% set out in Article 682.2.1 of the Civil Procedure Act.
The dispute arose following the negative qualification issued by the Land Registrar of Villacarrillo (Jaén) in relation to two mortgage deeds. For the purposes of judicial auction, values of €109,650 and €90,300 respectively had been assigned, it being expressly stated that such amounts were equal to or greater than 75% of the values contained in the corresponding appraisal certificates. The registrar suspended registration on the grounds that the auction value had to be set at 100% of the appraised value.
The controversy centred on the combined interpretation of two statutory provisions. On the one hand, Article 682.2.1 of the Civil Procedure Act, applicable to direct judicial enforcement proceedings concerning mortgaged assets, permits an auction value of not less than 75% of the appraised value. On the other hand, Article 129.2(a) of the Mortgage Act provides that, where an out-of-court sale before a notary is agreed, the auction value may neither be lower than the appraised value nor differ from that established, where applicable, for direct judicial enforcement.
The Supreme Court dismissed the appeal lodged by the registrar and confirmed the decisions ordering registration of the mortgage deeds. The Court highlighted that Act 5/2019 of 15 March expressly amended Article 129.2(a) of the Mortgage Act but left Article 682.2.1 of the Civil Procedure Act unchanged, despite introducing other amendments to procedural legislation. Subsequent reforms likewise retained the reference to the minimum threshold of 75%. Accordingly, the requirement of 100% of the appraised value applicable to out-of-court sales cannot automatically be extended to all judicial mortgage enforcement proceedings.
The judgment therefore distinguishes between two scenarios. Where the mortgage deed provides solely for direct judicial enforcement, the parties may set the auction value at an amount lower than the full appraised value, provided that it is not less than 75% of that value. By contrast, where an out-of-court sale before a notary is also agreed, the auction value may not be lower than 100% of the appraised value and must coincide with the value established for judicial enforcement, in accordance with Article 129.2(a) of the Mortgage Act.
Through this ruling, the Supreme Court departs from the position adopted by the Directorate-General for Legal Certainty and Public Faith in its Resolution of 23 December 2020, which considered that, as a general rule, an auction value equivalent to 100% of the appraised value was required, even where the deed contemplated only judicial enforcement. In the Court’s view, Articles 682.2.1 of the Civil Procedure Act and 129.2(a) of the Mortgage Act govern different situations, and their application depends on the enforcement mechanisms specifically agreed in the deed.
From a practical perspective, the judgment underscores the need to define the content of the mortgage enforcement clause with precision. Where only judicial enforcement is envisaged, an auction value ranging between 75% and 100% of the appraised value will be registrable. Conversely, if an out-of-court sale before a notary is also included, the same auction value must be established for both enforcement routes and may not be lower than 100% of the appraised value.
In conclusion, the Supreme Court confirms the independent applicability of Article 682.2.1 of the Civil Procedure Act and provides legal certainty for both the drafting and the registration assessment of mortgage deeds. The minimum threshold of 75% remains applicable where only direct judicial enforcement is agreed, whereas the 100% requirement applies where the deed also provides for an out-of-court sale before a notary.
3. The Supreme Court clarifies when the imitation of products constitutes an act of unfair competition.
Supreme Court Judgment (First Chamber) No. 1408/2026 of 10 September addresses the limits on the imitation of business offerings under Article 11 of Law 3/1991 of 10 January on Unfair Competition (“LCD”) and, in particular, when imitation may be considered unfair because it creates a risk of association for consumers, entails the undue exploitation of another party’s efforts, or constitutes systematic imitation aimed at obstructing the activity of a competitor in the market.
The dispute arose from proceedings brought by a company engaged in the sale of gift products against two competing companies operating in the same sector. The claimant argued that the defendants had continuously imitated its distinctive style, characterised by a combination of illustrations, short messages and certain graphic elements, and brought unfair competition claims based on imitation, confusion, exploitation of another party’s reputation, and breach of the requirements of good faith.
At first instance, the Commercial Court dismissed the claim in its entirety, finding that a significant proportion of the similarities between the parties’ designs reflected trends existing in the market. It also rejected the existence of a risk of association or confusion between the products, as well as any systematic imitation.
An appeal was lodged against that decision before the Provincial Court, which upheld the dismissal of the claim. Although the Provincial Court acknowledged the existence of certain similarities in the graphic elements and messages used in the designs, it held that the mere existence of such similarities was insufficient to establish the requirements laid down in Article 11.2 LCD and, consequently, to uphold the claims brought under Article 32 of the same legislation.
The claimant lodged an extraordinary appeal for procedural infringement and an appeal on points of law before the Supreme Court, arguing that the Provincial Court had assessed the risk of association too restrictively and that the differences between the brands and establishments were insufficient to exclude such a risk. It further argued that the defendants’ conduct entailed the undue exploitation of the claimant’s efforts and the systematic imitation of its offerings.
The Supreme Court recalls that Article 11 LCD establishes, as a general rule, the freedom to imitate another party’s business offerings and initiatives, unless they are protected by an exclusive right recognised by law or the imitation is unfair because it is capable of causing consumers to associate it with the original offering or because it entails the undue exploitation of another party’s reputation or efforts.
The Chamber’s case law also explains, in relation to Article 11.2 LCD, that the risk of association arises from the imitation of the offering, insofar as it has competitive distinctiveness, rather than from the use of distinctive signs or the manner in which it is presented. However, the ability of the imitation to create an association in the consumer’s mind may be counteracted by methods of presentation and the use of brands that are sufficiently different to prevent such a risk. The existence of this risk must be assessed as a whole, taking into account the relevant circumstances and the impression created on the average recipient.
Applying this doctrine to the case at hand, the Court considers that the defendants had taken sufficient measures to differentiate their offerings from those of the claimant. In particular, it takes into account the configuration of their establishments, the arrangement of the products and the use of their own distinctive signs. This allowed consumers to distinguish the different commercial origin of the products and, therefore, counteracted any potential risk of association arising from the similarities between certain designs.
The Chamber also examines the undue exploitation of another party’s efforts and recalls that not every advantage derived from imitation is contrary to the LCD. For conduct to be unfair, there must be an undue exploitation of the material or economic efforts made by the competitor, involving a significant and unjustified saving or reduction in the costs incurred in creating the offering. In the case examined, these costs had neither been substantiated nor quantified, beyond generic references to certain activities carried out before the products were launched on the market.
Finally, the Supreme Court also rejects the existence of systematic imitation with a predatory purpose under Article 11.3 LCD. The Chamber considers that neither the systematic nature of the imitations nor the existence of a strategy aimed at preventing or hindering the claimant’s establishment in the market had been established. Nor had it been demonstrated that the conduct went beyond the market’s natural response, particularly given the existence of other companies in the same sector marketing similar products and using comparable graphic elements and messages.
For all these reasons, the Supreme Court dismisses the appeals and upholds the judgment of the Provincial Court.
Ultimately, the judgment reaffirms freedom of imitation as a general principle of unfair competition law and makes clear that the existence of similarities between business offerings, even where the imitated offering has competitive distinctiveness, is not in itself sufficient to establish an act of unfair competition. The additional circumstances laid down in Article 11 LCD must also be present. In particular, the risk of association may be neutralised through the use of sufficiently differentiated brands and forms of presentation, while the undue exploitation of another party’s efforts requires proof of a significant and unjustified saving related to the efforts and costs incurred in creating the original offering.
