Areti Kolokotroni, LL.M
Summary: The procedure of enforcement, which is brought by a creditor, on the basis of an enforceable title, for the satisfaction of his alleged claim against his debtor, may often suffer both on formal grounds, relating to the procedure of enforcement provided for, and on substantive grounds, such as, inter alia, the non-existence of the right, the extinction of the claim or the abuse of the procedure. In such cases, the debtor defendant-debtor may, in addition to seeking the annulment of the enforcement measure in question, claim, subject to certain conditions, compensation for the damage suffered by him as a result of the invalid enforcement proceedings against him.
1. Claim for compensation after irrevocable annulment of the execution:
The debtor against whom enforcement proceedings have been initiated has the right, if the enforcement against him has been irrevocably annulled by a court decision, to claim compensation from the person who accelerated the enforcement (enforcing creditor) for the damages caused by the enforcement, if the conditions of Articles 914 or 919 of the CC are met (Article 940(3) CCP).
In particular, conditions for the creation of the above claim are:
(a) the acceleration of enforcement, irrespective of the type of enforcement instrument on the basis of which it is accelerated, i.e. it may be a court judgment, a payment order or a notarial deed,
(b) irrevocable cancellation of enforcement following an appeal by the debtor,
(c) the existence of the conditions of Articles 914 or 919 of the CC, i.e. an act or omission of the creditor which is unlawful and culpable (i.e. due to fraud or negligence of the perpetrator, even slight) or contrary to good morals,
(d) damage to the defendant - debtor, pecuniary or non-pecuniary (moral damage),
(e) a causal link between the existing damage and the unlawful execution.
The above conditions must be met cumulatively. Consequently, according to the abovementioned provision, only the irrevocable annulment of the enforcement order, without the cumulative fulfilment of the other conditions mentioned above, does not give rise to a claim for compensation by the debtor.
The unlawfulness of the act lies in the acceleration of enforcement, while there are both substantive grounds for invalidity of the enforcement procedure, such as lack of rights, abuse of enforcement, etc., and formal grounds, as a result of which the enforcement was held to be unlawful. The prevailing view is that any act of enforcement which has been annulled by a court decision is unlawful, but for a claim for compensation to arise, there must also be an additional element of fault on the part of the creditor who has obtained the enforcement, in the form of fraud or negligence (even if slight) in causing the damage caused by the unlawful annulled act of enforcement.
Characteristic in this respect is the decision of the Rhodes Court of First Instance, number 22/2017, which concluded that no tort is established and therefore no claim for compensation arises, despite the fact that there was an irrevocable annulment of the enforcement act in question, because there is no fault of the secured creditor, with the following reasoning: "However, in view of all the above, it is proved that the defendant accelerated the enforcement proceedings against the plaintiff having a legal right to do so under the contract of sale between the parties, seeking the satisfaction of a legal right and not to the detriment of the plaintiff. The fact that in the end, the accelerated execution was irrevocably annulled for legal reasons, because the defendant's legal representative had not also signed the aforementioned cheques for execution, cannot be attributed to the defendant's fault, and even more so to the fact that it is causally linked to the damage allegedly suffered by the plaintiff, given that the defendant's lawyer in question had been handling the defendant's affairs for many years and was known to all those who had dealings with the defendant as its lawyer, had conversed with him and it was never disputed that he was its lawyer and had been appointed by the defendant to represent it'.
2. Failure to satisfy the condition of irrevocable annulment of enforcement:
It is clear from the above wording of the article that its application is in principle conditional on the irrevocable annulment of the enforcement order. But what happens when that condition is not met? In other words, if the debtor against whom enforcement is sought has not lodged any objection to the enforcement, or if the objection was lodged out of time, or if, despite the fact that it was lodged in due form and time, it was nevertheless rejected on formal or substantive grounds?
Over the years, this issue has divided both theory and case-law, with conflicting views on whether the debtor may seek reparation for the loss suffered as a result of an unlawful and wrongful act of enforcement where there has been no irrevocable annulment of the enforcement.
In order to present the issue more fully, the following distinctions should be made:
- In the absence of an opposition:
Where no opposition has been filed at all, with the consequence that the act of enforcement which brought about the prejudicial result is rendered unappealable, it is accepted that in the true meaning of the provision of Article 940 para. 3 of the Civil Code, interpreted in the light of Article 940(3) of the Civil Code, and in the light of Article 6 of the ECHR on the right to a fair trial and to effective legal protection, and Article 20(2) of the ECHR, it is correct that the Court's interpretation of Article 940(3) of the Civil Code, interpreted in the light of Article 20(1) of the ECHR on the right to a fair trial and to effective legal protection, is inadequate of the Constitution, the bringing of an independent action for damages for wrongful execution on the basis of the general provisions on tort/delict is not precluded. In this case, the question of the invalidity of any act of enforcement against which no opposition has been lodged will be examined in passing, in order to establish the right of the defendant to compensation in the action, but without the possibility of annulling that act, since the time-limit for challenging it will have expired and it will therefore have become inoperative.
The above reasoning has been followed by numerous judgments of the Courts of the country, holding that the debtor may in this case claim compensation for the damage suffered by him, by means of an independent action in tort under Articles 914 or 919 CC, provided, that is, that there is an unlawful and culpable act of enforcement. The above position was initially adopted by the Plenary of the Supreme Court in its decision No 9/2010, followed by a series of similar decisions.
Indicatively, in decision No. 1379/2018 of the Supreme Court it was held that: "Consequently, the person aggrieved by the abusive acceleration of enforcement against him may claim by action, even if he did not seek for this reason the annulment of the enforcement, i.e. regardless of the provision of Art. 940 § 3 of the Civil Code, the recognition as abusive and invalid of his creditor's conduct, which, by means of enforcement proceedings, results in the satisfaction of his claim, which is substantially weakened after the new regulation, and therefore to request the recognition or, accordingly, the rejection of damages in tort in his favour.
Likewise, in Supreme Court decision No. 1291/2019: "In particular, the person against whom the enforcement was carried out has the right to claim from the accelerator, irrespective of any opposition to the enforcement proceedings, compensation for the damages suffered by him as well as monetary compensation for moral damages, provided that the conditions of Articles 914, 919 and 932 of the CC are met".
- Rejection of the opposition on formal grounds:
Where a statement of opposition has been lodged against the contested enforcement act but it has been rejected on formal grounds, such as, for example, because it was lodged prematurely or because it was not proved that the claims which extinguish the claim were not proved, it is accepted that in such cases too, the possibility of bringing an independent action in tort is available.
The case law had been particularly concerned with how to deal with the case where an opposition to enforcement has been lodged but the plea in opposition has been rejected as inadmissible because it has not been proved by documentary or judicial confession, as required by law (Article 933(4) of the CCP), if it concerns the extinguishment of the claim. It is accepted that this rejection does not have any influence, nor does it create any kind of precedent for the validity of the enforcement act, with the result that ex post facto compensation can be claimed in a separate action, provided of course that this time the reason for the extinguishment is proven under the conditions laid down by law.
The above judgment was initially reached by the Plenary of the Supreme Court in its judgment No 49/2005, by virtue of which it was held that: "In the true meaning, therefore, of the provision of Article 940 para. 3 of the CCP, interpreted also in the light of compliance with the principle of a fair trial under Article 6 of the ECHR, and the above-mentioned identical provisions of that International Covenant, but also of Article 20(3) of the International Covenant on Civil and Commercial Matters. 1 of the Constitution, claims which were dismissed in the enforcement proceedings as not having been immediately proven under Article 933(1) of the ECHR, and which were not immediately proven under Article 933(1) of the ECHR, are not admissible in the proceedings. 4 of the Civil Code, may, in addition to the case referred to in that Article (940(3)), be raised for investigation as to their merits if they are essential, such as the non-existence or extinction or invalidity of the claim under substantive law, in the context of proceedings opened in an action for damages under Articles 914 et seq. or, in the alternative, under Articles 904 et seq. CC, as not being able to be repelled by the res judicata under Article 330 of the CCP, since the latter, in this case, does not cover the substance of the rejected claim", while the same reasoning was subsequently adopted by a series of judicial decisions (indicatively decision No. 342/2016 of the Court of Appeal of Piraeus), while the same reasoning was subsequently adopted by a series of judicial decisions (indicatively decision No. 342/2016 of the Court of Appeal of Piraeus).
- On the rejection of the opposition on substantive grounds:
Contrary to the above cases, when an opposition is filed against a specific enforcement act and it has been rejected on the merits, a precedent is created as to the validity of the enforcement procedure, and therefore any subsequent claim for damages will also be rejected, since due to the precedent, the Court of Compensation cannot decide otherwise, i.e. that the act is illegal by awarding compensation for the resulting damage.
3. Damage that is recoverable:
The damage suffered by the debtor-defendant from unlawful and wrongful enforcement may be pecuniary, positive (in the form of reduction of existing property) or consequential (in the form of loss of profit), present or future, if the latter can be foreseen in the normal course of events, or non-pecuniary (moral damage) and exists when the wrongful conduct was capable, on the basis of objective criteria in the normal course of events, of producing the harmful result and actually did so in the particular case. Furthermore, where the enforcement procedure as a whole is not vitiated, the damage that can be remedied must be causally linked to the specific wrongful act of enforcement that has been committed in the procedure. The causal link between the unlawful act of enforcement and the resulting damage must be examined on a case-by-case basis.
- In decision no. 855/2018 of the Athens Court of Appeal, it was held that the invalidity of the cheque for payment, which initiates the enforcement proceedings, and which in the present case had been cancelled irrevocably, is causally linked to the damage suffered by the applicant from the subsequent seizure and auction of the said properties. In particular, it was held that the competent bodies of the banking institution, which has an organised legal service, failed to ascertain the lack of evidence when issuing and serving the cancelled cheque for payment, so as not to proceed with further enforcement actions based on a void cheque, even though they could easily have diagnosed the voidness and done so. As a result of that negligent conduct, the properties were auctioned off and the applicant suffered direct losses equal to the value of the lost properties, as determined at the time of the hearing of the action. In addition, the plaintiff was compensated for the estimated amount of rent which in the ordinary course of events it would have received if it had proceeded to lease the properties, for the period from the date of the auction (and the final loss of the properties) until the time of the action. In determining the expected rent, the condition of the properties, their good construction, surface area and location were taken into account in this case.
- On the contrary, by virtue of the decision of the Court of First Instance in Case No. 2207/2009 of the Supreme Court, it was held that in the present case, the forced seizure of the debtor's property, imposed on the basis of a notarial document, was irrevocably annulled on the grounds that the report of the forced seizure was served without time limit, as it was fraudulently delivered to a person who was considered to be the debtor's tenant in a residence in which the debtor had no night or daytime accommodation, even if only temporarily, the defendant-debtor of the execution is not entitled to claim as compensation the actual value of the object of the execution which was subsequently auctioned off, as well as lost rents, in the absence of a causal link between the invalid surrender and the loss of the property.
- Furthermore, as regards the determination of the damage, the Supreme Court's decision No. 9/2015, which ruled that the damage suffered by the plaintiff consists of the loss of his apartment that was illegally auctioned, is indicative. The Court held that the actual value of the apartment at the relevant time of the dispute in the action should be taken into account, after deducting the amount of the debt owed to the enforcing lender (the defendant), which was paid from the auction sale in satisfaction of the claim. In determining the value of the property, he arrived at his judgment by taking into account "the objective value of the apartment which, according to the property deed no. 18237 /12-11-2008 document of its determination by the competent body of the H΄ Municipal Financial Service of Thessaloniki, on 12-11-2008 amounted to 195. 049,89 euros, the difference between the objective value and the market value of the property and the reduction of its market value, which occurred due to the lapse of time from 12-11-2008 until the critical time of the discussion of the lawsuit (25-5-2011), i.e. its obsolescence, given that the age of the building was more than twenty (20) years and the reduction in the sale prices of real estate due to the economic recession, which (reduction in its value) amounts to a total of 40% of the above amount, so that its actual value at the aforementioned critical time amounted to the above amount of (195. 049,89 times 60%) EUR 117.029,93'". While further, he was awarded the sum of €10,000 for the non-material damage suffered as a result of the auction and the loss of his home, on the following grounds: "Finally, because of the mental pain experienced by the appellant, the suffering he underwent as a result of the deprivation of his home from which he was forcibly expelled by the report of the bailiff at the Court of First Instance of Thessaloniki, N. G.., which he relies on and lawfully submits, and the diminution of his personality as a result of both the auction and the publicity given to that event, he has suffered non-material damage for which he is entitled to reasonable compensation. In view of the circumstances in which the auction took place, the degree of fault of both the competent bodies of the defendant and the applicant, the social and economic situation of the parties, namely the applicant as a businessman and the defendant as a financially strong bank, and the rules of common experience, the Court considers that the amount of the applicant's reasonable monetary compensation to be awarded to him is EUR 10 000.00".
- In addition, the amount by which the value of the auctioned property had increased up to the time of the hearing of the action may be claimed and awarded as lost profit. This is similar to the Supreme Court's decision No. 1085/2013, which ruled on a claim for compensation by a successful bidder against the accelerating lender for the loss suffered from an invalid auction that was overturned. It was held that: "The loss suffered by the successful bidder in the case of an irrevocable cancellation of the auction may consist not only of the value of the premium paid, but also of any increased value that the property acquired by the successful bidder would have had if the auction had not been cancelled. The successful bidder shall be entitled to claim this difference in value, which shall constitute a loss, in an action for damages against the person who called the invalid auction".
4. Limitation period:
If the conditions of Article 940 par. 3 of the Civil Code (i.e. if the condition of irrevocable annulment of the contested enforcement act is also fulfilled), the claim is time-barred after five years from the irrevocable annulment of the enforcement act. However, it may be brought even before the irrevocable annulment, provided that this condition is fulfilled at the time the action for damages is brought. On the contrary, the relevant time for the commencement of the limitation period when the independent claim for damages is based on the provisions on tort/delict without the annulment of the execution having taken place is the time when the unlawful act of execution in question was carried out, e.g. starting from the date of the auction. The limitation period for this claim is similarly five years and starts to run for all damages uniformly, from the time when the injured party - debtor became aware of the first harmful consequences of the act and of the person liable for compensation.