Swaps and expiry: How to interpret the doctrine of the Supreme?
Although the doctrine of forfeiture in cases of placement is virtually unanimous swaps, financial institutions continue alegándola in his writings defense.
In this post we review the most recent jurisprudence.
First we indicate our comments and then extractaremos some of the statements that we consider most relevant.
Of recent Supreme Court rulings that address (12 January 2015, 7 July 2015 and 16 September 2015) We can distinguish two different interpretations:
For financial institutions
Las entidades financieras toman literalmente el criterio de que el plazo de caducidad empezará a contar a partir del conocimiento del error. Often, it is intended that the expiry date of the action begins to run from the first negative liquidation of swap, “dinamitando” the wording of Article 1.301 the C.Civil and shortening the term to the detriment of customers. As far as I know, That interpretation is concerned and omits what we would call the "preamble" of the doctrine that in its judgment of 12 January 2015. And this, based on the arguments that we provide below.
For the clients
The interpretation of the defenses of financial institutions that the period begins to run from the notice of the error has had the following weaknesses:
1.- Frontally violates the wording of Article 1301:
"The action of nullity only last four years. This time starts to run:
(….) In error, or willful misconduct, or falsity of the cause, from the consummation of the contract".
The term consummation of the contract, fortunately no doubt as to the jurisprudence in that It occurs when you have made all benefits relating thereto. (First Chamber -STS 569/2003, of 11 June, STS, 1st room, of 27 March 1989 inter).
Interpret that in cases where the error is (allegedly) known before the consummation of the contract, the limitation period can be reduced, it goes against the wording of this article.
2.- Interprets a tortious form, the sense that the Supreme Court gives the expiry:
Let's not forget, which to place the doctrine on the expiry complex financial products, in its Judgment of Plenary 12 January 2015, makes an introduction indicating that the rules should be interpreted according to the social reality that must be implemented and that economic reality has become much more complex in relation to the time the article was forged 1.301 the C.C. Namely, in complex banking contracts, if the contract were already accomplished, and knowledge of error was following the consummation, the four-year period would not begin to count only from the time (always following the consummation) in which the client had been aware of the error. All, to adapt to the economic reality of the present moment and the complexity involved some financial contracts.
So it literally says the Supreme Court (underlined and bold our) in its Judgment of Plenary 12 January 2015:
"In interpreting the art today. 1301 the Civil Code in relation to actions that pursue the annulment of a banking contract or investment by concurrence of vice of consent, one can not ignore the interpretive criterion on "the social reality of the time that [the rules] They must be applied primarily serving the spirit and purpose of those ", as provided for in art. 3 Civil Code. "The original wording of Article 1301 Civil Code, dating from 1881[more, 1889], only it was amended in 1975 to delete the reference to 'contracts made by married woman, Unlicensed or competent authority ', leaving unchanged the rest of the precept, and, specifically, the consummation of the contract as the starting time of the exercise period of the action. "The difference in complexity between the contractual relationships in which the late nineteenth century could occur more easily mistake on consent, bank contracts, financial and current investment, It is considerable. Thus, in cases such as that at issue in the appeal can not be interpreted “consummation of the contract” like a simple legal business is involved. On the date the art. 1301 the Civil Code was drafted, the low complexity, as usual, characterized contracts allowed the contracting suffering of vice of consent, with a minimum of care, I could meet the error suffered at one point early development of the contractual relationship. But in the spirit and purpose of the standard compliance with the traditional requirement was the “action is born”, under which the calculation of the period of exercise of the action, unless expressly provided to the contrary, You can not begin to run at least until it has or can be full and complete knowledge of the cause that justifies the exercise of the action. This principle is enshrined now in the principles of European contract law (art. 4:113).
"Definitely, no puede privarse de la acción a quien no ha podido ejercitarla por causa que no le es imputable, as is the lack of decisive evidence of the existence of error in consent. "Therefore, in complex contractual relationships are often as those arising from banking contracts, financial or investment, the consummation of the contract, for the purposes of determining the starting time of the exercise period of the action for annulment of the contract by error or fraud, It can not be fixed before the customer may have become aware of the existence of such error or fraud. The initial date for exercise of the action is, therefore, the suspension of the settlement of benefits or interest accrual, the application of management measures agreed by the hybrid instruments FROB, the, and general, another similar event that allows real understanding of the characteristics and risks of the complex product acquired by a consent vitiated by error ".
Namely, you try to favor that has suffered the error, causing the computer will not start until there is an event that allows you to be aware of the error. Or in a nutshell, if the current reality is more complex, does not have any logic “shorten” the deadline for claiming, quite the contrary.
He opposes the doctrine of the Supreme Court used the time that could be aware of the error, to harm the client, shortening the term, below four years after the consummation, literally established by Article 1.301 the C.Civil.
3.- As some have pointed sentences, You can not associate the time negative liquidations occur with the knowledge of the error.
The existence of negative settlements does not show that there was a thorough knowledge of the error by the customer. And as we have indicated before, for Supreme Court (STS 12 January 2015) required "Full and complete knowledge of the cause that justifies the exercise of the action" (see extract SAP Corunna section 3 of 7 March 2016 SAP Guadalajara and section 1 of 2 March 2016-04-28).
4.- Last, in demands performed by this type of products, se solicita de manera subsidiaria la indemnización por daños y perjuicios, based on breaches of the obligations of financial institutions, especially concerning the duty of disclosure.
In this action, the term does not apply 1.301 CC but the general 15 years of the civil code (reduced 5 by Law 42/2015 of 5 October 2015, and must have the regime of the Fifth Transitory account). Therefore, if well structured beg, by one way or another our customer satisfaction will be achieved.
Ultimately, from my point of view, the doctrine issued by the Plenum of the Supreme Court Judgment of 12 January 2015, on the date of expiration count on swaps and whose purpose is to amend Article 1301 CC to the current reality and the complexity of financial contracts, It provides that the calculation of the limitation period begins on the date of the error if it is after the consummation. If the error is prior to the consummation, the limitation period shall commence from the date of consummation, in literal application of Article 1301 C.C. We will have to wait for a judgment of the High Court to definitively clarify the issue.
Then collect some quotes of statements that we consider particularly relevant.
STS 16 September 2015:
"FOURTH.- El cómputo del plazo para ejercitar la acción de anulación de contratos financieros o de inversión complejos por error en el consentimiento.
1.- The judgment of the Provincial Court correctly addresses the question of what is the nature of the invalidity derivative of the error invalidating the consent, which it is not a radical nullity, in which the action to enforce its declaration is not subject to any exercise period, but of relative nullity or cancellation. This was stated by this Court on numerous occasions (sentencias núm. 603/2013, of 4 October , and No.. 119/2015, of 5 March , among the most recent). Consent is not nonexistent. There, but it is vitiated by error. The contract is subject to confirmation, express or implied, and also, if the action for annulment is not exercised on time, the contract becomes unassailable by reason of lack of consent.
In this kind of nullity, the exercise of the stock is subject to the time limit under Article. 1301 Civil Code , according to which ' [the]a nullity action only last four years. This time starts to run:
[…] In the [cases] Error, or willful misconduct, or falsity of the cause, from the consummation of the contract […]».
2.- Now, the applicant is right when, in its appeal, It argues that the starting point for the calculation of this exercise period of the action is not declared by the judgment of the Provincial Court, whereby the starting date would be the conclusion of the contract, which would determine the action for annulment error invalidating the consent was expired.”.
SAP Valencia section Novena 30 September 2015:
"Third .. The next issue to be addressed (second plea) is the expiration action and the Board must ratify their rejection, such as the resolution is motivated appealed quoting judgments of this Section Nine, whose interpretation criteria of Article 1301 Civil Code , It is ratified in the relevant decision of the Supreme Court's plenary session 12/1/2015 , whose doctrine on expiration It has been reiterated in the recent judgment of 7/7/2015 and is that, to the case, within four years it should be started on your computer, be given a contract of successive tract, since the extraordinary measure of mandatory exchange was adopted (buyback), when the holder of the preferred shares and subordinated debentures is aware of the risk of such products and it happening in May-June 2013 It is clearly not the time elapses at presentation demand 01.14.2014 ".
Seventh section SAP Valencia 18 September 2015:
"It also argues the expiration Action , which also indicated rejection by referring to the contested judgment, and the case-law on this matter although respect to transactions of buying other complex financial products, distinguishing between the time of conclusion of the contract and its consummation.
The rejection of the expiration already it resulted in the judgment of the section of the part, SAP, Civil section 7 the 09 April 2015 (ROJ: SAP V 1414/2015 – CLI:ES:APV:2015:1414), Sentence: 92/2015 | Resource: 105/2015 | Speaker: MARIA FILOMENA IBAÑEZ SOLAZ, following the criteria established by the Provincial Court in other resolutions as: SAP, Civil section 9 the 20 May 2014 (ROJ: SAP V 2388/2014 -ECLI:ES:APV:2014:2388), Sentence: 149/2014, Resource: 1093/2013 , Speaker: GONZALO MARIA DE MORA FONT CARUANA. SAP, Civil section 9 the 17 April 2014 (ROJ: SAP V 2048/2014 – ECLI:ES:APV:2014:2048), Sentence: 113/2014, Resource: 886/2013 , Speaker: MARTORELL PURIFICACIÓN Zulueta has been ratified by the SAP, Civil section 9 the 22 September 2014 (ROJ: SAP V 4492/2014 – ECLI:ES:APV:2014:4492), Sentence: 254/2014, Resource: 168/2014 , Speaker: MARIA ANTONIA GAITÓN REDONDO.
Thus, in the judgment of 20 May 2014 (ROJ: SAP V 2388/2014 indicated: <expiration the action is a significant matter of trade, should be examined by this Court even it is having not deducted in the instance, but in any case it must be rejected as in numerous resolutions and this room is equal to basing class action, such an investment product with the same product distributor. The appellant errs in the interpretation and application of Article 1301 Civil Code , in computing as an initial day from the contractual dates of perfection, when as it has tired of saying this room and reason, It is from the consummation following the judgment of the High Court. As shown in statement 30/12/2013 (Rollo 658/2013 ) we said:
“… it should be noted that the judgment of 11 June 2003 (toll 276.114) states that: “To art. 1301 the Civil Code in cases Error, or willful misconduct, or falsity of the cause, within four years, shall run, from the consummation of the contract, rule which has to sit in accordance with art. 1969 of the Code . In order to when the consummation of the contract occurs, says Case 11 July 1984 that “It is of note that although certainly the computation for the possible exercise of the action for annulment of the sales contract, more precisely by annullability, intended by intimidation, fraud or error occurs after the completion of the contract, o sea, until the completion of all obligations ( sentences, inter, of 24 June 1897 and 20 February 1928 ), and Case 27 March 1989 You need that “Article. 1301 the Civil Code states that in cases of error or fraud action for annulment of the contract shall run ” from the consummation of the contract ” . This time of “consummation” not be confused with the perfection of the contract, but that only takes place, as rightly they understood both judgments instance, when benefits both parties are fully met.”>>
It also alludes to this issue in the AUTO TS, Civil section 1 the 20 May 2015 (ROJ:ATS 3830/2015 – ECLI:ES: TS:2015:3830A), Resource: 1269/2014 , Speaker: FRANCISCO MARIN CASTAN)
And in the judgment of the Supreme Court, the section 1 the 12 January 2015 (ROJ: STS 254/2015 – ECLI:ES: TS:2015:254), Sentence: 769/2014, Resource: 2290/2012 , Speaker: RAFAEL saraza JIMENA, on life insurance, indicates: <And regarding contracts referred tract, declares that judgment No.. 569/2003 :
"Thus, in particular cases of successive contracts has manifested the jurisprudence of this Court; Case 24 June 1897 said that “the deadline for challenging the consent given by mistake in partial settlement of a loan does not begin to run until it has been fully satisfied”, and Case 20 February 1928 said “action seeking invalidation by fraud of a partnership agreement does not begin to count until the end of the contract, ie until expiry of the period during which concluded” ».>>”
SAP Corunna section 3 of 7 March 2016:
"In the case submitted to the consideration of this appeal, unknown even dates the applicant / appellant had full knowledge of the wrongfulness of product contracted, because of course It can not be considered as such one or more negative settlements, para comprender sin más la complejidad del producto contratado, expiration may not be appreciated. Any doubts that might exist, as indicated by the classical jurisprudence of T. S., It can not be widely interpreted, being at an institution not based on material parameters justice, who alleges must prove.
The sentence of section IV of this Provincial Court 16 July 2.015 he understood that a swap contract would only place consummation when carrying out its early termination or upon its final maturity having accrued and paid all settlements planned. Ultimately, whatever analysis perspective expiration would not have occurred”.
SAP Guadalajara section 1 of 2 March 2016-04-28:
“SEGUNDO.-De la caducidad de la acción. According to the appellant, appointment of Supreme Court judgment dated 12 January 2015 , day start serving to compute the expiry date is the date on which the error was known. Based on this, it is said that the party knew the error in year 2009, because on that date is not the first coupon payment, and from intone he must know the risks of the product. Well that statement is not shared. Following the argument of the appellant, one thing is a possible breach, nonpayment of coupons in the year 2009, quite another, know what has hired, which is what determines the defect in the consent. "