Decision No. 50/21.10.2024 regarding the interpretation and application of Article 628(4) of the Code of Civil Procedure in relation to Article 1.535 of the Civil Code.
The High Court of Cassation and Justice was asked to issue a preliminary ruling on the following legal matter:
Are the provisions of Article 628(4) of the Code of Civil Procedure applicable and enforceable by the enforcement court when the creditor claims contractual late penalties (agreed upon by the parties), or do they apply only when the creditor requests statutory interest?
Relevant Legal Provisions
Article 628: Obligations Subject to Enforcement
(1) The following obligations may be enforced: payment of a sum of money, delivery or use of an asset, demolition of a construction, plantation, or other work, custody of a minor, establishment of residence and visitation rights, or any other measure set by the enforceable title.
(2) If the enforceable title grants interest, penalties, or other amounts due to the creditor without specifying their amount, the bailiff will calculate them according to the law.
(3) The bailiff may also update the value of the principal monetary obligation, regardless of its source, based on the criteria in the enforceable title. If no such criteria exist, the update will be based on inflation, calculated from the date the court decision became enforceable (or from when the claim became due in other cases) until full payment.
(4) If the enforceable title does not specify interest, penalties, or other amounts, but the creditor is legally entitled to them under Article 1.535 of the Civil Code or other special legal provisions, these amounts will be determined by the enforcement court at the creditor’s request, by way of a court ruling, after summoning the parties.
(5) The ruling issued by the enforcement court or bailiff under paragraphs (1)-(4) constitutes an enforceable title.
Article 1.535: Default Damages for Monetary Obligations
(1) If a sum of money is not paid on time, the creditor is entitled to default damages from the due date until payment, either in the agreed amount or, if absent, in the amount prescribed by law, without needing to prove any loss. The debtor cannot argue that the creditor’s actual loss was lower.
(2) If, before the due date, the debtor owed interest higher than the statutory interest, default damages will be due at the previously applicable rate.
(3) If the debtor was not subject to higher contractual interest, the creditor is entitled to statutory interest plus additional damages to fully compensate for the loss.
Key Considerations of the High Court of Cassation and Justice (ICCJ)
Application of Article 628(4) requires that:
- The amounts claimed by the creditor fall within the categories of compensations mentioned in the provision.
- The creditor does not already have an enforceable title for those amounts.
- The enforcement court’s role is distinct from that of the bailiff:
- Under Article 628(2), the bailiff calculates pre-determined interest or penalties.
- Under Article 628(4), the enforcement court determines new sums that the creditor is entitled to but were not included in the enforceable title.
- The court’s assessment is not limited to mathematical calculations:
- The enforcement court examines the creditor’s entitlement to default damages.
- It can review contractual penalty clauses, including their validity.
- It may even reduce excessive penalties if necessary.
Key interpretation:
- Both statutory interest and contractual penalties qualify as amounts “due by right” under Article 1.535 of the Civil Code.
- No notice of default is required for these amounts to accrue.
- The debtor cannot argue that the actual loss was lower.
Final Ruling
The High Court ruled that:
In interpreting and applying Article 628(4) of the Code of Civil Procedure, the enforcement court determines interest, penalties, or other sums due by right to the creditor under Article 1.535 of the Civil Code or other special legal provisions, including when the creditor claims contractual late penalties.