Professional fees awarded in a lawsuit cannot be executed against all of the assets in trust in case of a restructuring of a financial institution in accordance with Section 35 bis of the Financial Institutions Law.

In re "Recurso de hecho deducido por la actora en la causa Comafi Fiduciario Financiero S.A. c/ Muravchik, Abraham Jaime" the Argentine Supreme Court (the "Supreme Court") ruled on March 15, 2011 that professional fees awarded to the counsel of the plaintiff in a lawsuit that corresponds to a litigious credit (crédito litigioso) that was transferred to a trust cannot be executed against all of the assets in trust when such trust was set up due to the restructuring of a financial institution in accordance with Section 35 bis of the Financial Institution Law No. 21,526, as amended (the "FIL").

Banco Patricios S.A. ("Banco Patricios") brought a lawsuit pursuing collection of a note issued by the defendant. The judgment recognized the right of Banco Patricios and stated that the defendant should bear all legal expenses.

Before starting with the execution of such judgment Banco Patricios was restructured in accordance with Section 35 bis of the FIL. Within such legal framework Banco Mayo S.A. undertook a number of Banco Patricios' liabilities with preferences and some of its excluded assets. Banco Mayo S.A. then set up a financial trust appointing Comafi Fiduciario Financiero S.A. as trustee (the "Trustee") and transferring such assets to it (the "Trust"). The litigious credit (crédito litigioso) mentioned above was included in those assets.

The counsel to Banco Patricios in such lawsuit considered her task finished and asked the court to award her professional fees. Then she intended to collect such fees from all of the assets of the Trust because she considered that the fees were an ancillary to the litigious credit (crédito litigioso) so transferred.

The First Instance Judge and the Court of Appeals accepted the lawyer's argument. Finally, the Supreme Court rejected the judgment of the Commercial Court of Appeals, Panel C, stating that the collection right of the lawyer was limited to the proceeds of such lawsuit but not to all of the assets in trust.

The Supreme Court highlighted (a) the public character of the regulations that rule the banking and financing activities, (b) that those who acquire assets and liabilities of a restructured financial institution are not successors of such entity and (c) that such acquirers do not undertake any liability with respect to the creditors of the restructured financial institution that have not been excluded. The professional fees of lawyers acting in lawsuits are not liabilities with preferences that must be honored with all of the excluded assets.

It also states that a different solution would alter the effectiveness of the banking public law regulations that rule the exclusion of assets and liabilities process. The collection actions, consequently, are only acceptable against the proceeds of the recovery of the credit in which lawsuit the lawyer work.

In re "Banco Caseros s/ quiebra s/ incidente por Guerrero de Villamea, Cristina y otros" (April 30, 2002) the Supreme Court said that the restructuring proceeding stated in Section 35 bis of the FIL is outside the scope of ordinary law.

This ruling is significant because it accurately defines the scope of the restructuring of financial institutions in crisis vis-à-vis their various creditors.

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