01.A home for the grandfather and a loan shared by three
At the end of 2016, a family decided to buy a home in Barcelona, with a parking space and a storage room, for the grandfather to live in. Four people bought it. Two sisters, the husband of one of them and a nephew of both, the son of a brother who had already died. Ownership was split into thirds among the three branches of the family. One of the sisters acquired two sixths, the nephew another two, and the other sister and her husband one sixth each.
The price was two hundred and fifty thousand euros and it was financed in full. That same day they signed a mortgage loan with a bank for the same amount, secured by a mortgage over the three properties purchased. The borrowers were the two sisters and the nephew. As the loan covered one hundred per cent of the price, the bank required a second security, and the married couple also mortgaged their own principal residence, even though the husband was not a debtor under the loan. The three borrowers were jointly and severally liable to the bank, and the instalments were paid from a joint account into which they all paid.
02.A life insurance policy on a single person
Also on that same day, the nephew took out a life insurance policy linked to the loan, with a sum insured of one hundred and seventy-five thousand euros and with the bank as beneficiary. The policy did not cover his third of the debt, some eighty-three thousand euros, but seventy per cent of the loan, more than double what corresponded to him in the internal relationship between the debtors.
The reason the insurance was taken out on him was proved at second instance, at the appeal hearing, through the testimony of the bank employee who handled the transaction. The policy was taken out to obtain a discount on the interest rate, which applied to the whole loan instalment. To obtain it, it was enough for one of the borrowers to take out the policy, and the family decided it would be the nephew. Moreover, the premium was not paid by him alone, because it was charged by direct debit to the loan account, the same joint account from which the instalments were paid.
The nephew died in 2017, less than a year after signing. His mother was his sole heir. The insurer paid the bank the one hundred and seventy-five thousand euros, the bank applied them to repaying the loan, the outstanding principal fell to just over seventy thousand euros and the monthly instalment was reduced for all the debtors.
03.The heir's claim
In 2021, the heir sued the other three co-owners. She brought the action for division of jointly owned property, to bring the co-ownership to an end, and raised with it the settlement of accounts between the co-owners. Her argument on the insurance was simple. As against the bank, the debtors are jointly and severally liable, but between themselves the debt is divided in equal shares, and the insurance is a contract of the nephew from which third parties unconnected with him cannot benefit. Therefore, the one hundred and seventy-five thousand euros had to be allocated in full to her son's third, which was thereby paid off, and the other debtors had to compensate her for what the insurer had paid over and above that share.
In practical terms, the claim meant that the other two debtors, our clients, who had not received a single euro from the insurance, would each have to repay her a third of what the insurer had paid, more than fifty-eight thousand euros each and more than one hundred and sixteen thousand in total, to be deducted when the value of the properties was shared out, as if the repayment had been a payment made by her son for the benefit of the others.
Our clients opposed the claim. They argued that there was an agreement between the co-owners not to divide the property while the grandfather was alive, which was the very reason for the purchase, and that the life insurance, taken out to secure the joint loan, had to benefit all the debtors equally.
04.A first instance that left the main issue unresolved
The grandfather died in 2023, while the proceedings were under way and a few days before the trial date. The court of first instance adjourned the trial, asked the parties for written closing submissions and delivered judgment in June 2023 without hearing the witnesses. It ordered the division of the co-ownership, declared that the properties were indivisible for the purposes of Article 552-11.5 of the “Código Civil de Cataluña”, the Catalan Civil Code, and ordered our clients to pay the costs. On the “pacto de indivisión”, the agreement not to divide, it said that, the grandfather having died, it was irrelevant whether it had existed. And on the life insurance it said nothing, because it considered that the settlement of accounts between the co-owners was a matter for the enforcement stage.
Both parties asked, without success, for the judgment to be supplemented with a ruling on the insurance, and both appealed on the ground of “incongruencia omisiva”, the failure to rule on an issue raised.
05.Our argument
On appeal, we, the firm's lawyers, argued that the insurance issue had to be decided by looking at what was actually contracted for and why. We started from two provisions. Article 1145 of the “Código Civil”, the Spanish Civil Code, provides that “Payment made by one of the joint and several debtors extinguishes the obligation” and that “The one who made the payment may only claim from his co-debtors the share corresponding to each, with interest on the advance”. And Article 88 of the “Ley de Contrato de Seguro”, Spain's Insurance Contract Act, provides that “The insurer's benefit must be delivered to the beneficiary, in performance of the contract, even against the claims of the lawful heirs and creditors of any kind of the policyholder”.
From this we drew the first idea. The right of recourse between joint and several debtors presupposes a payment made by one of them. Here no debtor paid. The insurer paid, in performance of its own obligation to the bank, which was the designated beneficiary. The insurance money never entered the nephew's assets or formed part of his estate, so his heir had paid nothing that she could claim from the others.
The second idea was the intention of the parties, which emerged from the documents themselves. The sum insured did not correspond to the nephew's third, but to seventy per cent of the loan, which was moreover the minimum the bank required to grant the discount on the loan, an advantage that applied to everyone's instalment. Had the purpose of the insurance been to cover only his share, it would have been taken out for eighty-three thousand euros and with a much lower premium. The premium was paid by all of them from the joint account. And the policy designated the bank as beneficiary for the amount of the loan outstanding, and only what remained after it was repaid would go to the insured's heirs, so its purpose was to reduce the single debt, not one share of it.
We added an argument of consistency. After the death, the heir stated in writing, through her lawyer, that she would continue to meet the loan instalment as heir, and she went on paying her third of the instalments, already reduced by the repayment. That conduct was incompatible with the argument that her son's debt had been settled by the insurance.
And we supported our argument with judgments of provincial appeal courts that had decided similar cases, among them two from Barcelona's own “Audiencia Provincial”, the provincial appeal court. The judgment of Section Eleven of 15 December 2016 held that the life insurance payout belongs to the designated beneficiary and partially extinguishes the debt as regards all the joint and several debtors, not just one. And that of Section One, judgment 218/2018, of 23 April, in a case in which each of the two borrowers had taken out his or her own policy for a sum exceeding his or her half of the loan, inferred from this that they wished to cover the whole loan and concluded that repayment by the insurer is repayment of a single principal and gives rise to no right of recourse, because it is not the joint and several debtor who pays but a third party under the insurance contract.
06.What the appeal court decided
Section Seventeen of the Barcelona “Audiencia Provincial” decided both appeals in its judgment of 13 October 2026.
On the insurance, the Chamber begins by acknowledging that there is no uniform body of case law. It sets out the heir's argument, which finds support in a 2008 judgment of the Valencia provincial appeal court holding that, the insurance being individual and the internal relationship between the co-debtors being one of pro rata liability (“mancomunidad”), the sum paid by the insurer must be allocated to the deceased debtor's share. It then sets out the opposing argument through a 2023 judgment of the Alicante provincial appeal court, which denies the right of recourse because the claimant never paid anything, since the sum was paid by the insurer to the bank, which was the beneficiary. That judgment relies in turn on a 2012 judgment of the Cantabria provincial appeal court, according to which the insurer did not merely promise payment of a sum but the repayment of the loan, which was objectively reduced for all the joint and several debtors, and on the 2018 judgment of the Barcelona appeal court that we too had relied on.
The Chamber considers the latter solution to be more in accordance with the law, “atendidas las circunstancias concurrentes en el caso enjuiciado” (in view of the circumstances of the case being tried), and explains what they are. First, the purpose of the purchase, to serve as the grandfather's principal residence, to which the whole family contributed, to the point that the married couple also mortgaged their own home. Second, the terms of the loan. The insurance was taken out to obtain a discount on the interest, it was enough for a single borrower to take it out and it was the borrowers who decided it would be the nephew, so there was no particular interest of his own in taking it out, but rather the convenience of a discount that applied to the whole instalment. And third, the premium was paid from the loan account, which was funded by everyone's income, and therefore everyone paid it.
The conclusion is that the repayment of principal resulting from the life insurance must benefit all the debtors, and not only the heir of the insured. On this point the Chamber dismissed the relief sought in the claim and the heir's appeal.
That is why the appeal court set aside the first-instance costs order that had been made against our clients and ordered each party to pay its own costs and half of the common costs. It made no order for the costs of the appeal against either party, because both had been forced to appeal by the first-instance judgment's failure to rule.
Our defence of the agreement not to divide did not succeed, on the other hand. We argued that the court had to decide in accordance with the situation existing when the claim was filed, when the grandfather was alive, and rule on whether the agreement existed. The Chamber took the view that applying that rule mechanically would lead to an artificial result, because it would not reflect the reality of the facts, and a dilatory one, because it would force the heir to file the same claim again, and that the grandfather's death brought the agreement relied on to an end. The judgment is not final. This firm is going to lodge a cassation appeal on the agreement not to divide and its consequences, and the matter is pending a cassation appeal. As long as the judgment is not final, the ruling on the insurance could also be reviewed if the other party appeals against it.
07.Why this judgment matters
The issue is a common one and far from settled. Several people, often from one family, buy a home together with a joint and several loan, and the bank links to it a life insurance policy that not all of them always take out, nor for the same sum. When the insured dies, a question arises that the contract rarely answers. Is the repayment made by the insurance a payment made on behalf of the deceased, which his heirs can recover from the others, or is it the reduction of a common debt that benefits everyone?
The provincial appeal courts have given different answers, and the judgment itself acknowledges as much. That is why it is significant that the Barcelona “Audiencia Provincial”, with this judgment of its Section Seventeen, joins those of Section Eleven of 2016 and Section One of 2018 to the same effect. Three different sections of the same appeal court have reached the same result in similar cases, which gives a clear, though not binding, indication of how the issue is being decided in Barcelona.
The judgment also adds a nuance which, in our view, is its main lesson. The Chamber does not state that the insurance of one of the borrowers always benefits all of them. It decides by looking at the circumstances of the case, and those it highlights are three facts that can be proved, namely what the property was bought for, what the insurance was taken out for and who paid the premium. That there is only one insured person is not decisive. What is decisive is whether the insurance served the common interest of the debtors or the particular interest of the insured.
Read in this way, the judgment allows a distinction to be drawn. If the insurance is taken out by a single borrower for his share of the debt, he pays for it out of his own pocket and it reflects his own provision for the future, the argument for allocation to his share has more basis. That is the ground on which the Valencia judgment moved, which started from an individual policy of which the deceased was both policyholder and the insured. If, as in this case, the sum insured far exceeds his share, the insurance is taken out to obtain an advantage enjoyed by all and the premium comes out of the joint account, the repayment is a reduction of the single debt, and the heir cannot claim from the others a payment that the deceased never made.
08.What to provide for when signing
The practical lesson for anyone buying with others is that the answer depends on the evidence, and the evidence can be prepared on the day of signing. If several borrowers take out a loan and only one is insured, it is advisable to set down in writing, in a document signed by all of them, what the insurance is taken out for, how the premium will be paid and what effect the repayment will have between the debtors. That document can save years of litigation.
And for anyone inheriting from an insured borrower, the judgment warns that claiming from the co-debtors the part repaid by the insurance requires more than invoking the presumption that the debt is divided under Article 1138 of the Civil Code. In our view, the heir will have to prove that the insurance served the exclusive interest of the deceased. Where the sum insured exceeds his share, the premium was paid by all and the insurance brought a common advantage, that proof is very difficult.
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