More questions & answers
By Chantal de Lourdes Gomez Ruiz • Photos by Jesús de Avila • March 2010
- Which are the most common contracts used in Mexico to guarantee or assure the fulfillment of an obligation?
The most common contracts are the following:
a) The mortgage
b) The Guarantee Trust
c) The pledge
- What is a Trust Agreement?
It is a contract by virtue of which, the Settler transfers to the trustee one or more properties or rights, with a legally and certain purpose, entrusting the fulfillment of such purpose to the Trustee institution and for the benefit of the Beneficiary, who can be the same Settler or a third party.
- What is it a Guarantee Trust?
It is an agreement by means of which, the debtor, or a third party -acting as the settler in the trust transfer movable, real estate or rights into the Trust’s patrimony to secure and guarantee the obligations of the debtor.
The purpose of this trust is it to guarantee and assure the fulfillment of the debtor’s/ settler’s obligations. These kinds of trusts usually contemplate a mechanism to foreclose on the properties contributed to the trust, in case the obligor does not comply with his obligations.
 Can the same Guarantee Trust be used to guarantee simultaneous or several and successive obligations from the debtor?
It is possible, and those can be obligations with the same creditor/beneficiary or with different ones. In this last scenario each creditor/beneficiary would be obliged to notify the trustee as soon as the obligation into his/her favor is fulfilled, thus ending the rights on the Trust in reference with such obligation on his/her behalf.
- Who has the possession of the properties transferred into a Guarantee Trust and which ones are the obligations of such person regarding these properties?
The parties have the option to choose who will have the possession, if a third party or the debtor/settler. Whoever has the possession will hold the properties transferred into the Trust as a depositor and will have the obligation to preserve them like their own property. The epositor is not entitled to use them for diverse purpose that the one agreed by the parties and will be responsible for any damage caused by the use of the, to any third party.
- What happens in case of breach of the obligations guaranteed by the Guarantee Trust?
The depositor of the properties would be obliged to return them to the trustee and in case he/she refuses to do it, a judicial request shall be presented by means of a special procedure.
It is important to mention that the parties can establish the basis on which the trustee shall proceed to foreclose on the trust’s patrimony, in an extrajudicial procedure. In such a case, the parties shall establish the at least the following:
a. The trustee may start the procedure o f extrajudicial foreclosure of property or rights
in the trust, upon receipt of the creditor’s/beneficiaries’ written notice requesting the sale of the assets and containing a clearly description of the breach of the debtor’s obligations guaranteed by the trust.
b. The trustee shall notify the debtor/settler in writing at the address established to such purposes in the Trust agreement, about the creditor’s/beneficiary’s request.
The debtor/settler may oppose to the sale only in case he/she pays immediately the guaranteed debt, proves that his/her obligations are fulfilled, or proves that the obligation was extended or renewed with the creditor’s/beneficiaries’ compliance.
 Which are the principal advantages for the creditor/beneficiary of using a Guarantee Trust in comparison with the Contracts of Mortgage and Pledge as ways to guarantee the fulfillment of a debtor’s obligations?
The advantages of the Guarantee Trust are the following, among others:
(i) A new patrimony is created, isolating the properties transferred into it, from the parts’ patrimonies.
(ii) It is a way of guaranteeing someone obligation’s fulfillment with a minor cost, since the Guarantee Trust agreement can contain an extrajudicial procedure to be enforced by the creditor and the trustee in case of breach of the debtor’s obligations, thus saving the usual time and costs that would be spent in a judicial procedure.
(iii) In the event of lost or damage of the properties or rights transferred as collateral, even for reasons not attributable to the debtor/settler, the Creditor/Beneficiary may require to provide other properties or rights in the patrimony of the trust or the payment of the debt, even before of the agreed term. Email to a friend
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• Robles, Lazo y Gallardo, S.C. is a Law Firm of specialists in various areas of Law, including Corporate Law, Real Estate, Immigration, Foreign Investment, among others. The Firm is integrated with a group of highly qualified attorneys and has offices in Guadalajara (Privada del Niño No. 676, Fraccionamiento Camino Real, telephone number 33-3121-3010 33-3121-3010 ) and Puerto Vallarta (Carretera a Mismaloya No. 479 interior 107, Edificio Scala. Telephone number 322-223-3218 322-223-3218 ).E-mail: jgallardo@rlg.com.mx
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