Lending &Trending (Q3 2026)

Dear Clients and Friends,

We are pleased to present our client update in the fields of banking, finance and insurance for the third quarter of 2026, including a summary of recent case law developments.

Case Law Updates

1. Denial of a Request to Stay the Realization of Autonomous Bank Guarantees Despite a Dispute Regarding Contract Termination

Courts will generally tend to permit the immediate realization of an autonomous bank guarantee, even where there is a substantial commercial dispute concerning contract termination, equipment, performance or good faith. Even concerns of severe financial harm, and a potential claim of insolvency, will generally not suffice to prevent realization, unless exceptional fraud or particularly extreme conduct is established.

LCA 79551-06-26 Sociedad Española de Montajes Industriales S.A. v. Israel Railways Ltd.

(The Supreme Court, before the Honorable Judge Khaled Kabub, was given on June 30, 2026).

Summary of the judgment:

• Sociedad Española de Montajes Industriales S.A. (SEMI) won, in 2015, a tender issued by Israel Railways Ltd. for a large-scale railway network electrification project, with a total value of approximately NIS 11 billion.
•  On May 20, 2026, Israel Railways notified SEMI of the termination of the agreement and, concurrently, of its intention to realize bank guarantees provided in connection with the engagement.
• SEMI subsequently filed a claim and a motion for a temporary injunction to prohibit the realization of ten guarantees, with an aggregate nominal amount of approximately NIS 49.8 million. It also sought declaratory relief that the termination notice was unlawful.
• The District Court denied the motion, and SEMI filed an application for leave to appeal to the Supreme Court – namely, a third-instance appeal of an interlocutory decision concerning temporary relief.
• The Supreme Court held as follows:
  • With respect to the balance of convenience, SEMI had not established irreparable harm. The alleged harm was primarily financial and could therefore be compensated by monetary damages if the claim were accepted. The allegation of a risk of insolvency was also not established to the required standard.
  • The Supreme Court reiterated the rule that appellate intervention in decisions concerning temporary relief is especially exceptional, and even more so where the matter reaches the Court in a third-instance proceeding. No defect justifying a departure from that rule was found.
  • With respect to the prospects of the claim, the Court held that the factual and interpretive disputes between the parties required a full examination in the main proceeding. Therefore, at the preliminary stage, it could not be determined that the prospects of the claim justified staying realization.
  • The Court emphasized the special status of an autonomous bank guarantee: it is an obligation separate from the underlying transaction, intended to create commercial certainty and stability. Accordingly, the starting point is that realization should not be prevented except in the most exceptional cases. 
  • The possible exceptions are serious fraud or special circumstances meeting a high threshold. SEMI did not establish even prima facie evidence of serious fraud, nor extreme bad faith or an illegitimate motive on the part of Israel Railways.
  • The argument that the guarantees were “designated guarantees” relating to specific equipment was not accepted at this stage. The Court held that the wording of the guarantees supported the conclusion that they were autonomous bank guarantees, while the broader interpretive dispute would be resolved in the main proceeding.
  • The argument that appointing a court-appointed expert in a class-action proceeding constitutes an exceptional innovation was also rejected. The Court held that the Rules of Civil Procedure permit the appointment of an expert even before a determination in the action, subject to the Court’s broad discretion.

Link to the judgment

2. Credit Card Companies May Be Required to Warn Customers About Merchants Suspected of Fraud

A credit card company that has accumulated concrete information giving rise to a suspicion that a merchant is misusing its customers’ cards may be required to warn its customers of the risk, even in the absence of an express regulatory instruction. This duty does not necessarily require blocking a transaction, but does require information management and control procedures that enable the company to assess when effective customer notification is warranted.

FHR 52740-03-26 Isracard Ltd. et al. v. Rivka Keshet et al.

(The Supreme Court sitting as a Court of Civil Appeals, before the Honorable Judge David Mintz, was given on July 13, 2026).

Summary of the judgment:

• Customers filed a motion to certify a class action against three credit card companies, alleging that direct-marketing companies persuaded elderly individuals to provide their credit card details and fraudulently charged them.
• It was alleged that the credit card companies had accumulated information from complaints, requests to cancel transactions and charge denials, but did not warn their customers or take sufficient action.
• The District Court dismissed the certification motion, primarily due to the need for individualized inquiries.
• On appeal, the Supreme Court remanded the proceeding to the District Court.
• By majority opinion, the class action was certified on the ground of breach of the duty of disclosure, and further examination of the claim under the Charge Cards Law was remanded to the certification stage.
• The credit card companies petitioned a further hearing.
• The Supreme Court held as follows:
  • A further hearing is an exceptional procedure intended for a new, express rule of law of particular importance or a contradiction with an earlier precedent. Appellate arguments or disagreement with the application of the law are insufficient.
  • Credit card companies, in their capacity as issuers,  provide an essential service and operate vis-a-vis customers who experience gaps in information, expertise and resources.  Accordingly, heightened duties of fairness, care and disclosure applicable in bank-customer relations may apply to them, with the necessary modifications.
  • Where a credit card company receives substantive information giving rise to suspicion that a merchant is misusing credit cards, a duty to alert customers to the risk of transacting with that merchant may be recognized. This is a more moderate duty than a duty to stop or refuse to honor the transaction.
  • At this stage, the Court did not determine precisely when the duty to warn arises, what scope of information is required, how customers should be warned, or whether the technology available during the relevant period made such a warning possible. These issues will be addressed by the District Court. 
  • The argument that appointing a court-appointed expert in a class-action proceeding constitutes an exceptional innovation was also rejected. The Court held that the Rules of Civil Procedure permit the appointment of an expert even before a determination in the action, subject to the Court’s broad discretion.

Link to the judgment

3. Joint Realization of Pledged Assets in a Single Project, Even Where creditor priorities have yet to be determined

A secured creditor holding a registered mortgage with temporal priority is not required to await a final determination of complex third-party claims before commencing the enhancement and realization of the security. Where several pledged assets economically constitute a single project, the Court may appoint the secured creditor and the trustees jointly in order to maximize proceeds, protect the rights of all creditors and avoid a fragmented realization that impairs the assets’ value.

Insolvency Case 89262-01-26 Regev v. Karmi Montefiore – Limited Partnership et al. (Application No. 35); Insolvency Case 47579-02-26 Extra Real Estate Finance (A.M.N.) Ltd. et al. v. S. Priante Investments and Holdings Ltd. et al.

(The Tel Aviv-Jaffa District Court, before the Honorable Senior Judge Hagai Brenner, was given on July 2, 2026).

Summary of the judgment:

• Extra Real Estate Finance and Extra Credit and Factoring provided financing in the amount of NIS 33.5 million for the acquisition of six land parcels in the Israel Bak complex in Tel Aviv.
• To secure the financing, mortgages were registered over all parcels in  September  2024. The alleged outstanding debt amounted to approximately NIS 26.5 million.
• The parcels form part of a single 11-parcel land complex intended for a joint project.
• All parties agreed that the economically appropriate way to maximize their value was through joint enhancement and realization of the complex, rather than separate sales of individual parcels.

Purchasers, limited partners and the trustees of the Hacham Group opposed the realization applications. They raised claims regarding the source of the acquisition funds, the validity of the mortgages, purchasers’ rights and the scope of the secured debt. Some purchasers held exclusion letters, while others claimed entitlement to exclusion letters that had not yet been provided.

• The District Court held as follows:
  • Extra’s mortgages were registered before the other annotations on the parcels. Therefore, any party claiming that its status as a secured creditor should be denied was required to present a substantial evidentiary basis; general allegations or suspicions were insufficient.
  • There was no basis to await full examination of the parties’ claims regarding the validity of the mortgages, priorities and allocation of proceeds. Such examination was expected to be complex and lengthy, while the enhancement of the assets required immediate action to preserve and maximize their value.
  • Under the Insolvency and Economic Rehabilitation Law, where the value of a pledged asset is substantially higher than the secured debt, the preferred course is realization by the trustee for the benefit of all creditors. Where the value of the security is not substantially higher than the debt, the secured creditor is entitled to realize the asset.
  • Had the two parcels been realized separately, the secured debt attributed to them would ostensibly have exceeded their value, and Extra would therefore have been entitled to realize them through its counsel. Had the four parcels been realized separately, their value would have substantially exceeded the secured debt, and realization would therefore have been entrusted to the trustees.
  • A division between different office holders would have impaired the ability to enhance and realize the complex as one economic unit. The trustees and Extra’s counsel were therefore jointly appointed, subject to a detailed enhancement and realization plan to be submitted in advance for the Court’s approval.
  • The appointment does not apply to the rights of purchasers holding exclusion letters or entitled to receive them. All parties’ arguments regarding the validity of the mortgages, allocation of proceeds and Extra’s liability were reserved for further proceedings.

Link to the judgment

4. A Forgery Claim Will Not Prevail Over Unrebutted Professional Opinion and Bills-of-Exchange Presumptions

A cheque drawer who alleges forgery, theft or lack of consideration must present a detailed factual account and objective evidence. A factoring company that documented verification, relied on the instruments’ documentation and presented professional evidence as to the authenticity of the signature may rely on the presumptions of delivery, consideration and holder in due course – even where the cheque was endorsed to another financing entity and returned to it after dishonor.

Small Claims Civil Case 63709-02-23 Axio Capital Envelope Ltd. v. Yassin Abu Amer

(Ramla Magistrate’s Court, Rehovot District, before the Honorable Senior Registrar Naama Peres, was given on June 28, 2026).

Summary of the judgment:

• Axio Capital Envelope Ltd., a company engaged in cheque factoring and non-bank financing, filed a cheque for execution in the amount of NIS 18,000. The cheque was drawn to the order of A.A. Psagot Construction Ltd. and endorsed to H.S. Mamon, which submitted it for factoring.
• After the cheque was dishonored due to the closure of the drawer’s account, it was returned to Axio after Axio repaid its debt to the financing entity to which it had endorsed the cheque.
• The defendant claimed that the cheque had been stolen, that his signature had been forged and that no consideration had been given. He also argued that Axio was not a holder in due course because the cheque had been dishonored and negotiated among several entities.
• The Court held as follows:
  • The forgery claim was rejected. The defendant did not present external factual evidence, a counter-expert opinion or a complaint to the police. In contrast, the claimant’s graphological opinion found a high degree of correspondence between the signature on the cheque and an earlier cheque of the defendant that had been honored.
  • A telephone verification call conducted before the factoring of earlier cheques, in which the defendant confirmed the validity of the cheques and receipt of consideration, strengthened the Court’s conclusion. The Court held that the defendant was estopped from retrospectively denying the signatures, pursuant to the doctrine of estoppel by representation in negotiable instruments.
  • Once the drawer’s signature was established, the claimant was entitled to presumptions of valid delivery and consideration. The defendant did not substantiate any claim of theft, conditional delivery or failure of consideration, and therefore did not rebut those presumptions.
  • The claimant’s status as a holder in due course was assessed as of the date on which it received the cheque for factoring, rather than the date on which the cheque was returned to it after being dishonored by another financing entity. Erasure of the subsequent endorsement enabled it to enforce the instrument and did not detract from its original rights. 
  • The claim was accepted and the enforcement proceedings were reactivated. No costs were awarded to the claimant because it had not timely attached all exhibits to its enforcement application in the court file.

Link to the judgment

5. Rejection of a Failure-of-Consideration Defense in a Factored Cheque and Recognition of an Oral Personal Guarantee

A cheque submitted for factoring may be enforceable even where a failure-of-consideration defense is raised, if that defense is not established by strong evidence. In addition, a controlling shareholder who confirms a cheque by telephone, confirms that consideration was provided and declares that he personally guarantees payment may be exposed to personal liability even without signing a written guarantee.

Civil Case 34982-01-25 S Capital Ltd. v. Lunter L.M. Construction Works Ltd. et al.

(Tel Aviv-Jaffa Magistrate’s Court, before the Honorable Judge Adi Hadar, was given on June 28, 2026).

Summary of the judgment:

• S Capital Ltd., a company engaged in the provision of credit and cheque factoring, filed a claim against Lunter L.M. Construction Works Ltd. and its controlling shareholder, Maor Lunter.
• According to S Capital, it factored a cheque drawn by Lunter that was delivered to it by A.Z.B. Coral Engineering, after receiving, in a telephone call, Maor Lunter’s approval for the factoring of the cheque, confirmation that consideration had been provided for it, and his personal undertaking to pay it.
• The cheque was subsequently cancelled, and a claim in the amount of NIS 175,500 was filed.
• Lunter L.M. Construction Works Ltd. argued that it had not received consideration from Coral Engineering because Coral had not fulfilled its obligations, and that the factoring transaction was unlawful. It was also alleged that S Capital was not a holder in due course. Maor Lunter later also claimed that, in the verification call, he had intended to refer to a different cheque.
• The Court held as follows:
  • The Court held that the claim was a negotiable-instrument claim against the company that drew the cheque, even if not expressly framed as such in the statement of claim, because the claim concerned the amount of the cheque and the defenses raised were clearly negotiable-instrument defenses.
  • The failure-of-consideration defense was rejected. The Court held that negotiable instruments law establishes a presumption that consideration was given, and the defendants did not present the evidence necessary to rebut it – neither relevant witnesses nor sufficient documents.
  • The Court rejected the “other cheque” version. It held that this was a belated version, not raised initially, unsupported by documents and not upheld by presentation of the other cheque that the defendant claimed to have approved during the call.
  • The transcript of the verification call was afforded central weight. During the call, the defendant confirmed the cheque, confirmed that full consideration had been received, and also answered affirmatively when asked whether he personally guaranteed its payment.
  • The arguments regarding usurious interest, an unlawful transaction and violation of the Fair Credit Law were rejected. The Court held that the borrower in the factoring transaction was a company, and therefore the Fair Credit Law did not apply in the ordinary course.
  • The argument that S Capital was not a holder in due course was also rejected. The Court held that the defendants had not established bad faith on the part of the claimant, and that its status under negotiable instruments law was also proven.
  • With respect to Maor Lunter, the Court held that there was no direct liability under negotiable instruments law because he had not signed the cheque as guarantor. However, contractual liability existed by virtue of an oral guarantee proven through the recording and transcript.

Link to the judgment

6. Bank’s Claim Against a Guarantor Dismissed Due to Limitation, Breach of Disclosure Duties and Impairment of Security

A bank seeking to enforce a guarantee must act in a timely manner, provide an individual guarantor with complete information concerning the scope of the guarantee and the credit, and preserve securities and the guarantor’s rights of recourse. Dismissal of an earlier claim does not restart the limitation period, and releasing security or another guarantor without effective protection of the guarantor’s rights may result in a full or partial discharge – particularly where the bank does not reliably establish the debt.

Civil Case 38598-09-24 Israel Discount Bank Ltd. v. Rami Bar Lev

(Kfar Saba Magistrate’s Court, before the Honorable Judge Itay Regev, was given on August 9, 2026).

Summary of the judgment:

• In 2012, Rami Bar Lev signed a continuing guarantee, up to NIS 350,000, for the debts of a restaurant company to Israel Discount Bank.
• The bank argued that the guarantee also applied to later loans, including a loan in the amount of NIS 180,000 granted in 2019.
• The defendant argued that his guarantee was intended solely for a temporary credit facility of NIS 50,000 and that he had not been updated regarding additional credit or arrears.
• The bank filed an earlier claim in 2020, but that claim was dismissed for want of prosecution in January 2022. The new claim was filed in September 2024.
• During that period, the bank cancelled two charges over the company’s assets and entered into a settlement with an additional guarantor, who paid NIS 90,000 and was released from the balance of his guarantee.
• The Court held as follows:
  • The cause of action accrued when the loan was accelerated in September 2013. Although the period during which the earlier proceeding was pending is excluded pursuant to section 15 of the Limitation Law, it does not commence a new limitation period. Following the cumulative calculation, the claim was time-barred.
  • Apart from the limitation issue, the bank delayed for approximately 33 months after the dismissal of the earlier proceeding, during which interest of approximately NIS 48,000 accrued. The Court held that the delay prejudiced the defendant and was contrary to the bank’s heightened duty of fairness.
  • The defendant was not an interested party in the borrowing company and was therefore recognized as an individual guarantor entitled to the mandatory protections under the Guarantee Law. 
  • The bank did not prove that it had provided the defendant with the required information concerning the scope of the guarantee, the company’s financial position and the additional credit. The guarantor information sheet was unsigned, and the Court held that the nondisclosure deprived the guarantee of validity in respect of the later debts.
  • Cancellation of the two charges and release of another guarantor in exchange for partial payment impaired the defendant’s rights of subrogation and contribution. In the circumstances of the case, the Court held that the damage caused to him equaled the full amount of debt claimed, and he was therefore discharged from his guarantee.
  • The bank also failed to establish the amount of the debt. The bank’s witness acknowledged that the claimed amount was inaccurate, and the accounting documents were not proven as admissible institutional records. The claim was dismissed, and the bank was ordered to pay costs and attorneys’ fees in the amount of NIS 20,000.

Link to the judgment

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We would be pleased to assist with any questions and/or clarifications by email or telephone: 03-3075000

Sincerely,
Banking and Finance and Credit Insurance Practice
Shibolet & Co.

The information in this memorandum is provided for general informational purposes only and should not be relied upon in any specific case without further legal advice.