On the expiration of multi-currency mortgages

When does the term to exercise nullity action for error in a multi-currency mortgage loan start??

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In a contract of multicurrency mortgage,  the consummation occurs with the agreement of wills between the lender and the borrower. The delivery of money and payments are acts of execution of the contract that has already been perfected. For the calculation of the term of exercise of the action of nullity due to error (1301 CC), the contract cannot be understood as consummated before the borrowers were able to know the determining facts of the error. But the contract is not consummated when all installments are paid, but when the agreement of wills is produced.

Below we make a comment about the Judgment of the Plenum of the Supreme Court of 10 January 2020, that establishes that the term for voiding the consent of a multi-currency loan agreement does not extend to the entire duration of the loan, it starts when the loan is consumed (and it is understood consummated with the agreement of wills)  or when the client is aware of his error if said awareness is after the consummation.

Interested sources have been quick to indicate that there were “resurfaced” the expiration of multi-currency mortgage loans. However, Case 10 July 2020, despite being from plenary, it will not affect home loan claims at all that are “under judge”, or pending to raise, as at the end of the entry we explain.

The Civil Plenary Chamber of the Supreme Court on 10 July 2020, with No Resolution 417/2020, dismissed the extraordinary appeal for procedural infringement and the appeal filed by the borrowers,  after considering that the four-year term for the annulment action established in article 1301 CCivil, from the moment they became aware of the true content of the mortgage loan contract until they filed the lawsuit.

Fact background,,es,Juan Alberto and Paulina filed suit against FTA,,es,Asset Securitization Fund,,es,requesting the declaration of nullity for abusive of the floor and ceiling clauses contained in the novation contract of the mortgage loan of,,es,with the corresponding refund of amounts unduly collected,,es,The Securitization Fund Management Company,,es,Beech,,es,acting on behalf of FTA, he responded to said claim alleging that he lacked passive legitimacy since the entity had no legal personality and that it constituted only a private and open fund and that therefore the passive legitimization corresponded to BBVA as successor of Catalunya Banc that was the Company fund constituent,,es

D. Gines. Ms.. Agustina and D. Heraclio contracted with BANCO DE VALENCIA, S.A., un contrato de multicurrency mortgage, by public deed the 4 May 2007. This contract was referenced in Japanese yen.

The 28 October 2011 they signed a deed of modifying novation of the mortgage loan. All three appeared as borrowers.

D. Gines. Ms.. Agustina and D. Heraclio filed suit on 19 December 2014, against CAIXABANK, S.A., requesting that it be declared that D. Ginés and Dña. Agustina were not mortgage lenders, as well as the partial nullity of the loan the novation, regarding the content related to their determination in foreign currency, by mistake-vice of consent and it will be declared that the amount owed by D. Heraclio was the outstanding balance of the loan referenced to euros and consisting of the amount initially loaned (400.000 €) and your agreed interest in this case (Euribor plus one percentage point), minus the amounts already paid for this in euros.

And, secondarily, to declare himself the total nullity of the mortgage loan and its novation, by mistake of consent, and CAIXABANK will be sentenced, S.A., y a D. Heraclius to be restored, reciprocally, the benefits received and the cancellation of the mortgage guarantees constituted due to the absence of the guaranteed obligation being declared. ”

For his part, CAIXABANK, S.A., alleged expiration of the action, that all three were borrowers and that there was no error of consent.

Primera Instancia

The Court of First Instance No. 45 Madrid gave judgment on 20 October 2016, refusing the application.

Appreciated the expiration exception because when the lawsuit was filed, more than four years had passed since the complainant became aware, "Well on that date, the bank informs him both that the installments have risen due to the appreciation of the yen against the euro and that the amount pending amortization is greater than the capital loaned. ”

Provincial Court

D. Gines. Ms.. Agustina and D. Heraclio appealed.

The 25th Section of the Madrid Provincial Court ruled on 27 June 2017, partially considering the appeal for omission inconsistency of the resolution issued at first instance, but dismissed that D. Ginés and Dña. Agustina were not borrowers of the mortgage loan. Fully confirmed in the rest of the sentence.

Supreme Court

D. Gines. Ms.. Agustina and D. Heraclio filed an extraordinary appeal for procedural infringement and appeal.

On extraordinary appeal for procedural infringement they alleged violation of the fundamental rights recognized in art. 24 EC. The reason was rejected.

On appeal they alleged the following reasons:

First: violation of art. 1740 CCivil.

Segundo: infraction art. 1301 CCivil and contradictory doctrine of the provincial hearings on the initial day of the calculation of the expiration term in multi-currency loans.

The first reason was dismissed by the Chamber when considering that:

“The bank loan loan agreement is generally perfected by the issuance of consent by the lender and the borrower or borrowers, and the subsequent delivery of money by the lender to the borrower is an act of enforcement., not perfection of the contract. ”

Beginning of the term of exercise of the action for annulment due to a defect in mortgage loans in foreign currency

The Chamber brought up the jurisprudential doctrine established in the STS 769/2014, of 12 January 2015.

“A loan denominated in foreign currency, even if it is not subject to stock market regulations and, specifically, to the MiFID regulation, it is a contract that presents a special complexity, therefore the reference to a currency to fix the amount in euros of the periodic installments and the capital pending amortization, determines not only the fluctuation of the loan installment, which can be very important, but also the possibility that despite paying such fees on time, the equivalent in euros of the capital pending amortization by the client does not decrease or even increases even though a considerable time has passed since the payment of the periodic installments began.

(…) the consummation of the contract, for the sole purpose of determining the initial moment of the term of exercise of the action for cancellation of the contract by mistake or intent, cannot be established before the client has been able to become aware of the determining facts of the existence of said error or fraud. ”

Ultimately, para la Sala, D. Gines. Ms.. Agustina and D. Heraclio became aware of the true content of the loan agreement, when the monthly fee exceeded 2.000 € and, the bank informed them that they owed a capital in euros higher than what was initially delivered to them. The claim was filed after the four years regulated in art. 1301 CCivil, reason why the appeal was dismissed.

Conclusion

In a multi-currency mortgage loan agreement, for the purposes of the beginning of the period for exercising the nullity action, the contract cannot be understood as consummated before the borrowers were able to know the determining facts of the error. It is governed by the term of four years of art. 1301 CCivil. And the term begins to run when there is an agreement of wills between the lender and the borrower, that occurs with the binding offer or the signing of the loan deed.

Why is the Judgment not relevant to the claims of “Multicurrency mortgages”?

However, taking up our initial thesis, this sentence of the plenary, will not be relevant to the procedures for multi-currency mortgage loans that are in court, not even on those that are pending to raise. And this for the following reasons.

 The action they took in the case

If we go down to the detail of the case that resolves the STS of 10 July 2020, the cancellation actions were exclusively exercised by mistake in the consent (although mainly a partial cancellation or subsidiarily a total nullity action of the loan).    They had not exercised the nullity action due to the lack of transparency of the multi-currency clause.

 The courts do not consider the action for annulment in error

From the STS of the Plenary of 15 November 2017, the doctrine of the High Court is that the channel for the claim is the nullity of the multi-currency clause due to lack of transparency, but not the cancellation by mistake in the consent. Claims that exclusively exercise actions due to error in consent are systematically dismissed by the courts. So in the case of STS of 10 July 2020, if the expiration had not been estimated, the cancellation action would have been rejected due to the defect of consent.

 The action for annulment for lack of transparency is radical and imprescriptible

Except for previous claims to the STS of 15 November 2017, the vast majority of procedures on “Multicurrency mortgages” They exercise nullity due to lack of transparency of the multi-currency clause. It is about the nullity of the general contracting conditions that is radical, absolute, full and imprescriptible: It never expires. So, no matter how hard the lawyers who defend financial institutions strive, claims for multi-currency mortgage loans in which the action for annulment is exercised due to lack of transparency, They are not expired and never will be. And those that arise in the future through the same channel, they will not have expired either, regardless of your date.

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