Is lien extinguished by depositing a security in the Attorney's Escrow?
The owner had his vintage car renovated by a Repair Shop. When the time came to pay for the service, a dispute arose between owner and the Repair Shop over the price of the renovation. The Repair Shop seized the vintage car (claimed a lien) to secure its claim. The owner wanted the vehicle back, so he deposited the disputed amount with an Attorney. Under the terms of the Escrow, the Attorney was to pay the amount to the Repair Shop once the court awarded the Repair Shop the disputed amount in the undergiong court proceedings. The Escrow Agreement was between the car owner and the Attorney only; the Repair Shop did not accede to it or accept the Agreement. And it refused to return the vintage car.
Questions arose: Can the Right of Retention be extinguished by simply depositing sufficient security in the Attorney's Escrow? And is acceptance of the deposited security by the lender required?
According to Section 1399(d) of the Czech Civil Code, the Right of Retention is extinguished if the debtor provides sufficient security to the creditor. The Civil Code does not speak of acceptance. On the contrary, under the previous legislation (old Civil Code, Act No 40/1964 Coll.), the Right of Retention was extinguished even if the debtor provided another security to the creditor 'with his consent'.
The Supreme Court has acknowledged that Attorney's Escrow may have both a reimbursement and a security function. It can therefore serve for providing Sufficient Security. However, for the Right of Retention to be extinguished, the security must be accepted by the creditor. This is the same as under the previous legislation (section 180(2) of the old Civil Code), although the current legislation does not now explicitly require the acceptation of the creditor.
The mere provision of security by the debtor is only an offer, without acceptance it does not produce legal effects. The Supreme Court argued primarily on the construction of security institutions: security is typically created by agreement (suretyship, pledge, collateral assignment). However, acceptance can also be made orally or by implication, unless the law expressly provides for a written form.
Academics are divided as to the need for creditor acceptance.
(according to the judgment of the Supreme Court of 27 March 2024, Case No. 21 Cdo 2976/2023)
