Enforcement order procedure and accrual in owners’ associations debt claims

General terms and conditions of contract

ENFORCEMENT ORDER PROCEDURE AND ACCRUAL IN OWNERS’ ASSOCIATIONS DEBT CLAIMS

By Valentina Vargas

The purpose of this article is to briefly analyse the enforcement order procedure and assess the accrual of defaulted credits by the Owners’ Association.

I. THE ENFORCEMENT ORDER PROCEDURE

The purpose of the enforcement order procedure is to protect the defaulting credit, seeking security and quickness in claiming the defaulted credit and after the claim, obtaining an enforceable instrument with which certify a due and payable debt thus achieving the credit satisfaction. We must underline that the amount claimed in such proceedings has no limit.

The enforcement order procedure is regulated in the Civil Procedure Act, particularly, in sections 812 to 818.

No Court Liaison or Lawyer is required to file an enforcement order procedure, provided that the amount claimed does not exceed 2,000 Euros. Otherwise, the Court Liaison and Lawyer shall be required.

The initial request shall be submitted in writing, determining the amount and submitting any supporting document of the debt, such as invoices, delivery notes or any document establishing the debt and the signature or any indication on the debtor. Only documented debts may be claimed under an enforcement order procedure. No compensation may be claimed since they require a court assessment and recognition which do not fall within summary proceedings, such as the enforcement order procedure.

The filing of the initial request shall be addressed to the Court of First Instance of the debtor’s domicile and if such address is not known, the address shall be considered as the place where the debtor may be located and notified.

After the request has been filed, the admission shall be agreed and then the debtor shall be required to pay and appear both to object and to submit any allegations the debtor may deem appropriate as regards the defaulted credit. In this stage, three situations may occur:

1) That the debtor pays the credit, so that the procedure shall be closed.

2) That the debtor does not pay the credit and does not answer the payment order, so that the court shall issue an Order establishing the termination of the procedure and serving the creditor to request the enforcement without being obliged to wait for 20 days, as established in ordinary and oral proceedings.

3) That the debtor opposes the claim, thus the enforcement order procedure being terminated and continuing in another channel, where the options would be:

(a) If the defaulted credit does not exceed 6.000 Euros, the procedure shall continue under an oral trial

(b) If the defaulted credit exceeds 6.000 Euros, the procedure shall continue under an ordinary trial.

II. ACCRUAL OF ACTIONS IN CLAIMING CREDITS FROM THE OWNERS’ ASSOCIATION

Doctrine and case law discuss the accrual of actions in enforcement order procedures, so that acting prudently, no accrual of different claims in an enforcement order procedure is advisable, although the creditor and the debtor may be the same person.

However, it is out of question whether to claim due expenses from the Owners’ Association under the enforcement order procedure, since it is expressly regulated in section 812.2. 2 of the Civil Procedure Act and section 21 of the Condominium Act.

Such regulations set forth the possibility to claim debts, which must be evidenced by means of a default certificate, due under common expenses of the Condominium Owners’ Association by means of the enforcement order procedure.

In order to start the claim under the enforcement order procedure, the certification of the Meeting’s resolution by the secretary approving the settlement of the debt with the Owners’ Association shall be required, with the approval of the chairman, provided that such resolution has been notified to all owners involved.

III. SUBJECTIVE ACCRUAL ASSESSMENT

We must differentiate between objective accrual, which is the accrual of different claims against the same person in one sole complaint, from subjective accrual, which is the accrual of the same claims against different persons. In the case of credits of the Owners’ Association, the objective accrual is obviously the option accepted, but the subjective accrual is discussed., i.e., the possibility to file one sole enforcement order procedure to claim against several owners with debts to the Owners’ Community.

In this regard, we find two sides of doctrine and case law opinions:

(1) The first one is the acceptance of the subjective accrual in accordance with section 72 of the Civil Procedure Act, which regulates the subjective accrual establishing the existence of a link on grounds of cause of action and right to relief as a material requirement between actions. Such requirement would be fulfilled since the origin of the action is the non-payment of the Owners’ Association shares. To the extent that section 72 is a general provision, it is understood that it may be generally applied to all proceedings, even the enforcement order procedure; what is more, there is no precept forbidding the accrual of actions in the enforcement order procedure, so that the claim of expenses payable to the Owners’ Association against several debtors could be accrued to the extent that the non-existence of a specific rule imposes the application of the general rule.

Case law has alleged another reason of great significance which confirms the subjective accrual under procedural economy, since it would make no sense to divide such claim when the same may be settled with one procedure thus avoiding the filing of several proceedings.

A different thing is how to act against debtors’ actions, i.e., there is the possibility that one of the debtors does not oppose the enforcement order procedure, another debtor files an opposition claim, and a third debtor pays the defaulted debt. These cases would not result in defencelessness since as stated by the Province Court of Murcia, section 1, judgment of 21 January 2003, in cases of different positions, different proceedings could be brought for continuing and resolving each case.

In the third case where the debtor pays the due amount, we would be dealing with partial acquiescence as set forth in section 21.2 LEC (Civil Procedure Act). In this case, a partial acquiescence ruling would be issued and the same would be enforceable as regards the other pending debts as established in section 517 et seq. of the LEC, so that a separate court decision could be issued without pre-judging the other not acquiesced issues, in relation to which the procedure would continue.

If we analyse section 21 of the LPH (Condominium Act), fourth paragraph (“the initial request may be filed against any of the obligors or jointly against all of them”,). We can see that the reference in this article is in plural, but despite this plurality we insist on the fact that the general rule does not prevent the subjective accrual, so that we can understood its acceptance in our legal system.

2) As the second option, we deal with the non-acceptance of the subjective accrual.

Some doctrine and case law understand that subjective accrual cannot be accepted based on the non-existence of express regulation.

We find another reasoning that confirms the non-acceptance of subjective accrual in our legal system, particularly, section 812 et seq. of the LEC, which refer to the “debt” and the “debtor”, i.e., a singular reference, so that the rule could not be understood as referring to several debts or several debtors.

Therefore, as many enforcement order procedures as existing debtors should be filed.

This would be a literal interpretation of that established in the written regulations.

Another argument is that the enforcement order procedure has been designed to streamline the debt collection, the accrual being contrary to such streamlining since the different debtors’ positions could delay the other debts and contravene procedural economy. But the most relevant point is that, under a literal interpretation of the rule, in no event does the rule authorise the accrual of actions.

In conclusion, we are dealing with a two-sided issue. Despite the majority accepting the subjective accrual, i.e., they accept the possibility to claim against several defaulting debtors in the same enforcement order procedure in which the same enforceable instrument is claimed, there are no clear regulations to avoid confusion and delays when claiming pending credits.

GENERAL TERMS AND CONDITIONS OF CONTRACT

By Paloma Calvo

I. GENERAL TERMS AND CONDITIONS OF CONTRACTS CONCEPT

Act 7/1998, of 13 April, on general terms and conditions of contract (hereinafter LCGC) establishes in article 1, section one that “General terms and conditions of contract mean such proposed clauses whose incorporation into the contract may be imposed by any of the parties, regardless of the material authorship thereof, their external appearance, their extension and any other circumstances, the same being drawn up to be incorporated into a plurality of contracts. ”

Furthermore, such Act establishes a list of types of contracts excluded from such regulation, regardless of the fact that such contracts may include general terms and conditions of contract (art. 4 LCGC). They are the following:

• Administrative contracts
• Work contracts
• Corporate incorporation contracts
• Contracts regulating family relationships
• Succession contracts
• Provisions or principles of International Conventions to which the Kingdom of Spain may be a party, or those specifically regulated by a general legal or administrative provision and which may be of mandatory application for the contracting parties.

It is worth mentioning that the concept of terms and conditions of contract is independent from the consumer contracts. There are terms and conditions both in consumer contracts (which is the most common action) and in contracts between companies and/or professionals, and the regulations are equally applied in both cases.

II. REQUIREMENTS FOR THEIR VALIDITY WITHIN THE CONTRACT

It is particularly important that the general terms and conditions of contract included in contracts fulfil certain requirements to be considered valid and effective.

Such requirements are regulated in art. 5 LCGC and consist of:

(a) That the general terms and conditions are accepted by the subscribing party, are signed and are referred to by the contract.

(b) That the proposing party informs on their existence and provides a copy.

(c) That their drawing-up is transparent, clear, specific and simple.

Similarly, the aforementioned Act stipulates that for contracts not to be executed in writing and for which the proposing party delivers a supporting receipt of the consideration received “it shall be sufficient for the proposing party to announce the general terms and conditions in a visible place within the place where the business is carried out, that the proposing party introduces them in the contract documentation during the execution; or that, the proposing party may otherwise ensure the subscribing party an effective possibility of knowing their existence and contents upon the execution.”

In contrast, art. 7 LCGC sets forth the general terms and conditions of contract that are not incorporated into the contract, which logically are those not fulfilling the requirements above:

(a) Those that the subscribing party had no real opportunity to know upon the execution of the contract or which may have not been signed.

(b) Those that may be illegible, ambiguous, opaque and incomprehensible, unless they have been expressly accepted in writing and may be transparent pursuant to the applicable specific regulations.

III. TERMS AND CONDITIONS INTERPRETATION

The LCGC solve certain situations that may arise upon interpreting the general terms and conditions of contract incorporated into a contract. In any event, the Act will always favour the subscribing party as we will detail below when explaining the situations arisen:

(a) In the event of any inconsistency between general terms and conditions and particular terms and conditions, particular terms and conditions shall prevail, unless the general terms and conditions may be more beneficial for the subscribing party.

(b) Any doubts of interpretation on opaque general terms and conditions shall be resolved in favour of the subscribing party.

Similarly, the LCGC, in general terms, resorts to the provisions on contracts of the Civil Code.

IV. NULLITY OF THE GENERAL TERMS AND CONDITIONS OF CONTRACT

Article 8 LCGC establishes that the following terms and conditions are null and void:

(a) Any conditions contravening that set forth in the mandatory or prohibitive law or rule in detriment of the subscribing party, unless a different effect is provided for therein in the event of contravention.

(b) Any abusive terms, when the contract have been entered into with a consumer under that set forth in General Law 26/1984, of 19 July, for the Defence of Consumers and Users.

However, the law establishes that the declaration of non-incorporation or nullity of general terms and conditions of contract must be requested by the subscribing party pursuant to the standards regulating the contractual nullity (art. 9 LCGC).

Obviously, the declaration of nullity results in considering such terms and conditions, i.e., the rights and obligations provided for in such general terms and conditions, as non-applicable. Instead, the particular terms and conditions shall be applied and, in anything omitted thereby, the applicable law, which shall be usually the Civil Code and the Code of Commerce, shall govern.

V. CURRENT CONTROVERSY IN COURT PROCEEDINGS

The vast majority of contracts in the current commercial trade apply all requirements of the LCGC for their clauses to be valid and be deemed as incorporated into the contract. However, there are contracts subscribed before the Act and the last amendment dated 28 March 2014.

Such contracts entered into between the dates above are the most controversial in court proceedings.

In this situation, Courts differentiate whether the contracting parties are natural or legal personal, given that natural persons are more protected under the General Law for the Defence of Consumers and Users and other development laws.

However, natural persons may be also businessmen and enter into the contract in such condition, argument which must be certified in court proceedings and whose evidential value corresponds to the proposing party of the contract, in view of the special protection provided for the subscribing party.

Moreover, when analysing the contents of the general terms and conditions of a contract, the terms must be proven not to be contrary to good faith, that the same do not imply an unbalance between the parties and that the subscribing party of the contract perfectly knew the contents thereof upon its execution.

Despite the foregoing, Courts sometimes still takes position in favour of the subscribing party of the contract, which leads to a damaging situation to the commercial relationship of the contacting party, when the counterparty initially consented and accepted such contents.

In this regard, there is a legal uncertainty situation because the case law is not uniform when interpreting the specific cases of general terms and conditions or defining the effects of the declaration of nullity.

As an example, we set out a usual case: the declaration of nullity of the clause of default or penalty interest for breach of the payment obligation in general terms and conditions. Some Courts rule that the effect of the nullity of such clause is that no default interest or charge is applied, that is, that the debtor must only pay the principal debt. And other Courts rule that the effect must be the application of the general rule of the Civil Code, which regulates that the monetary debt shall accrue the legal interest of money.

We understand that the correct interpretation is the second one, because the law regulates so in the event of non-agreement between the parties as regards default. But it is, however, a litigious and debatable issue that nowadays creates legal uncertainty.