When Mortgage Encumbrances Fail to Shield Against the Actio Pauliana
In March 2025, a seven-judge panel of the Polish Supreme Court resolved a question that had divided Polish courts and legal scholars for nearly two decades. The central issue was deceptively straightforward: May a debtor successfully defend against an actio pauliana—the venerable creditor’s remedy against fraudulent conveyances—by demonstrating that the transferred immovable property was so encumbered by mortgages that the creditor could not have obtained satisfaction from it in any event? Resolution III CZP 9/24 definitively settled one of the most significant controversies in Polish obligations law of recent decades, fundamentally reorienting the doctrinal framework governing creditor protection.
I. The Underlying Dispute: A Family Transaction with Strategic Implications
The litigation that precipitated this landmark ruling arose from circumstances that, while prosaic in their origins, exemplified the sophisticated asset-protection strategies that had long frustrated creditors under the prevailing jurisprudential regime. B.M., a physician practicing in Wrocław, found herself in severe financial distress. Her indebtedness to a banking institution had reached approximately 840,000 Polish zlotys, and all of her immovable properties were encumbered by mortgages. In October 2013, anticipating imminent financial catastrophe, she conveyed one of her properties to her son, J.M., by way of donatio.
The donee, upon acquiring the property, undertook to service the maternal mortgage obligations—at least initially. When he ceased making payments in 2018, the mortgagee bank initiated enforcement proceedings. Separately, two of the mother’s personal creditors, A.S. and K.S., who had previously obtained a judgment against her exceeding half a million zlotys, sought to invoke the actio pauliana. They contended that the gratuitous transfer had been effected to their detriment as creditors.
J.M. interposed what had become a familiar defense: the property was encumbered by mortgages whose aggregate amount exceeded its market value. Even had his mother retained title, these unsecured creditors could never have obtained satisfaction from the asset. What purpose, then, would be served by declaring the donatio ineffective as against them?
II. The Jurisprudential Instability: Two Decades of Doctrinal Oscillation
The defendant’s argument found substantial support in established Supreme Court precedent. For nearly two decades, the dominant view had been articulated in the judgment of January 31, 2007, which held that a debtor cannot be deemed to have become insolvent “to a greater degree” where the creditor could not have obtained satisfaction from the subject matter of the impugned transaction regardless of whether the transfer occurred. The Supreme Court maintained this position as recently as 2017.
The first significant departure from this orthodoxy appeared in September 2021, when the Court observed that mere mortgage encumbrance does not automatically preclude a finding of creditor prejudice; rather, the tribunal must ascertain what secured obligation actually remained outstanding. The decisive doctrinal shift, however, occurred in June 2024, when the Supreme Court fundamentally altered course, holding that in assessing the prerequisite of creditor prejudice, courts should not inquire whether the particular creditor could realistically have obtained satisfaction from the subject matter of the challenged transaction.
This reorientation was not fortuitous. The judiciary had come to recognize that the prior interpretive framework facilitated systematic abuse.
III. The Interpretive Revolution: Resolution III CZP 9/24
The March 2025 resolution definitively resolved the controversy, effecting a fundamental transformation in the conceptualization of the actio pauliana. The seven-judge panel pronounced unequivocally: where a debtor alienates mortgaged immovable property, creditor prejudice obtains whenever the transaction resulted in the creation or enlargement of an excess of liabilities over assets in the debtor’s estate.
The critical doctrinal innovation lay in abandoning the individualized assessment of particular creditors’ prospects in favor of a systemic approach to the protection of creditors in globo. As the Court astutely observed, Article 527 § 2 of the Civil Code speaks of “prejudice to creditors” in the plural—and this grammatical choice is not without significance. The legislature focuses on the objective insolvency of the debtor, not on the manner in which such insolvency affects the satisfaction prospects of any specific creditor.
IV. The Termination of “Mortgage Gaming”
The reformed doctrine put an end to what the Supreme Court denominated the practice of “mortgage gaming” (gra hipotekami). Under the antecedent regime, debtors could effectively argue that alienation of over-encumbered property caused no cognizable harm to creditors, only to procure—after dismissal of the actio pauliana—the discharge or cancellation of the very mortgages that had grounded the defense. Equally problematic was the retention of mortgage registrations securing obligations that had already been satisfied.
The Court emphasized that proving such manipulations in actio pauliana proceedings was, at minimum, exceedingly difficult, whereas creditors typically possess superior instruments for assessing their realistic prospects of satisfaction than do courts adjudicating fraudulent conveyance claims.
V. Practical Ramifications of the Supreme Court’s Resolution
The interpretive reformation carries far-reaching implications for legal practice. First, it substantially strengthens the position of creditors in disputes with debtors who attempt to conceal assets from enforcement. The argument premised on excessive mortgage encumbrance ceases to function as a universal defensive shield.
Second, the resolution introduces enhanced legal certainty. Previously, courts were compelled to engage in complex prognostications concerning hypothetical future enforcement proceedings, evaluating whether the creditor could realistically have obtained satisfaction from a particular property. Henceforth, the inquiry is confined to whether the alienation of an asset resulted in a deterioration of the debtor’s financial position in balance-sheet terms.
Of considerable significance is the temporal rule established by the resolution: the existence of creditor prejudice is to be assessed as of the moment of the close of oral argument, not the date of the impugned transaction. This principle, grounded in Article 316 § 1 of the Code of Civil Procedure, may prove material in circumstances where the debtor’s financial situation has evolved during the pendency of litigation.
VI. Interpretive Challenges Under the New Framework
The reformed approach, while more systemically coherent, engenders certain practical difficulties. Adjudicators will now be required to analyze debtor balance sheets with greater precision, potentially necessitating expert testimony and sophisticated valuations. There also arises the question of threshold effects: will any deterioration in the debtor’s financial position, however marginal, suffice to sustain the actio pauliana?
Moreover, the resolution does not address all issues pertaining to mortgage encumbrances. Open questions remain regarding scenarios in which a portion of the secured obligations has been discharged while the mortgage registration persists in the land register, or cases involving joint mortgages (hipoteka łączna), where the secured creditor may elect from which of several properties to seek satisfaction.
VII. Prospective Considerations
The March resolution of the Supreme Court concludes nearly two decades of interpretive uncertainty regarding a significant institution of obligations law. It establishes an approach that is more systemically coherent and more resistant to abuse, albeit at the cost of somewhat increased evidentiary complexity.
The genuine test of the new framework, however, will come in the months and years ahead, as lower courts undertake to apply these principles to concrete fact patterns. The history of Polish jurisprudence demonstrates that even the most apparently pellucid Supreme Court resolutions may generate novel interpretive questions when confronted with the heterogeneity of real-world circumstances.
One conclusion, nevertheless, appears secure: the era in which mortgage encumbrance could serve as a universal shield against the actio pauliana has definitively concluded. This development represents salutary news for honest creditors—and unwelcome tidings for those who would exploit legal intricacies to evade the satisfaction of their obligations.
This analysis is based on Resolution III CZP 9/24 of the Polish Supreme Court, rendered by a seven-judge panel on March 19, 2025.
Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.
There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.
One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).
Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.
He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.
