LEY 57/1968 WON CASE in SUPREME COURT AGAINST CAJA INSULAR DE AHORROS DE CANARIAS (now BANKIA) FOR OUR CLIENTS WHO PURCHASED TWO OFF-PLAN PROPERTIES FROM THE DEVELOPER CONSTRUCCIONES LUAYRA S.L. AT THE ‘EL SOBRAO’ DEVELOPMENT IN TRIQUIVIJATE, FUERTEVENTURA
We were extremely pleased to inform our clients today that we had won their case against BANKIA in the SUPREME COURT.
The clients paid their off-plan deposit to the developer’s account at CAJA CANARIAS (now BANKIA). The clients did not receive an individual Guarantee for their off-plan deposit from the developer, Construcciones Luayra S.L. or from CAJA CANARIAS, the Bank that received the off-plan deposit and also advanced a construction mortgage loan to the developer.
The purchase contracts were signed in November 2006 and the off-plan deposit was paid in February 2007 by bank transfer to the developer’s account, designated in the contracts, at Caja Canarias.
In 2009 we filed a Lawsuit on behalf of our clients, against the developer for breach of contract. In 2010 the First Instance Court issued a Sentence cancelling the purchase contracts and condemning the developer to return the off-plan deposit plus interest from the date of the court summons. We enforced the Sentence, however due to its financial situation the developer did not pay.
In April 2011 we then filed a Lawsuit on behalf of our clients, against the developer’s Bank – Caja Canarias – asking for conviction of the bank according to its liability under Article 1.2 of LEY 57/1968. The Bank opposed the Lawsuit on the grounds that it had not opened a Special Account for the developer, had not issued the individual guarantee to the buyers and just because it had given a mortgage loan to the developer did not make it liable for the off-plan deposits paid by the buyers.
In September 2011 the First Instance Court dismissed the Lawsuit and absolved the Bank of all responsibility. Costs were imposed on our client. We filed an appeal and in September 2013 the Provincial Appeal Court dismissed the Appeal, confirmed the First Instance Sentence and imposed costs of the appeal on our client.
In October 2013 we drafted and filed a Cassation Appeal to the Supreme Court which was accepted into procedure in October 2014.
The Supreme Court has now upheld our Cassation Appeal, revoked the First Instance & Provincial Appeal Court sentences and condemned BANKIA to refund the off-plan deposit plus interest at the legal rate from the date the off-plan payments were paid to the developer’s account. Costs of the First Instance Procedure are now imposed on the Bank. In accordance with article 398.2 of the Civil Code costs of the Provincial Appeal Court procedure and the Supreme Court procedure are not imposed on any party. Therefore, each party will pay its own costs for the Appeal procedures.
The Supreme Court has now fixed jurisprudential doctrine regarding Banks liabilities and obligations according to LEY 57/1968 as follows:
‘In house sales governed by Law 57/1968 credit institutions (banks) that receive income from buyers in the promotor’s account without requiring the opening of a special account and the corresponding guarantee or warranty, shall be liable to the buyer for the total amounts paid by buyers and deposited in the account or accounts the developer has opened in that entity’
This is a significant achievement for our clients and for the Costaluz Lawyers/DeCastro legal teams. We began writing and posting about Banks liabilities according to LEY 57/1968 in 2009 when there was very little case law to support our arguments. In the period 2009 to 2012, not only did we have virtually no support for our legal arguments but we were at times criticised in the public domain by other Lawyers. Now the Supreme Court has fixed doctrine regarding developer’s Banks liabilities according to LEY 57/1968 using virtually the same words that we had repeatedly written more than 5 years ago.
The rest as they say is history and in the last 4 years we have won well over 150 cases for our clients against developer’s banks including the landmark Finca Parcs Action Group case in June 2012.
Re: YOUR CASE AGAINST CAJA INSULAR DE AHORROS DE CANARIAS (BANKIA S.A.U.) – PO-898/2011
Please find attached Sentence number 174/2016 from the TRIBUNAL SUPREMO (Supreme Court).
I am very pleased to advise you that your Cassation Appeal has been upheld and the Provincial Appeal Court Sentence and First Instance Sentence have been reversed.
The final paragraph of the First Instance Sentence delivered on 12 September 2011 and notified on 16 September 2011 stated:
“I dismiss the Lawsuit filed on behalf of xxxxxx & xxxxx and absolve CAJA INSULAR DE AHORROS DE CANARIAS (BANKIA S.A.U) of all claims against it with the express imposition of costs on the plaintiff”
The final paragraph of the Appeal Court Sentence delivered on 24 July 2013 and notified on 27 September 2013 stated:
“That dismissing the Appeal filed by xxxxx & xxxxx against the Sentence of the First Instance Court No.16 of Las Palmas dated 12 September 2011 in ordinary procedure 898/11, we confirm that Sentence and impose the costs of this appeal on the appellant”.
The final paragraphs of the Supreme Court Sentence delivered on 17 March 2016 and notified on 21 March 2016 state:
“1. - Uphold the appeal for cassational interest brought by the applicants xxxxx & xxxxx, against the sentence delivered on 24 July 2013 by the 4th Section of the Provincial Appeal Court of Las Palmas in the appeal No. 69/2012.
2. - Settle the sentence under appeal, leaving it void.
3. - Reiterate the following jurisprudential doctrine: ‘In house sales governed by Law 57/1968 credit institutions (banks) that receive income from buyers in the promotor’s account without requiring the opening of a special account and the corresponding guarantee or warranty, shall be liable to the buyer for the total amounts paid by buyers and deposited in the account or accounts that the developer has opened in such entity’
4.- Consequently, upholding the appeal filed at the time by the said plaintiff against the judgment delivered on 12 September 2011 by the head judge of the Court of First Instance No. 16 of Las Palmas Gran Canaria , to revoke and instead:
A) Fully uphold the lawsuit filed by the appellant against the entity Caja Insular de Ahorros de Canarias (now Bankia SA).
B) And condemn the defendant to pay the plaintiffs the amount of 107,800 euros increased with the current legal interest rate since the off-plan payments were made in the developer’s accounts at Caja Insular de Ahorros de Canarias until the date of repayment.
5. - Not to impose the costs of the cassation appeal or those of the second instance (provincial court appeal) on any party, but impose on the defendant the costs of the first instance.
6. - And return to the appellant the deposit paid for the cassation appeal”
So your Cassation Appeal has been upheld by the Supreme Court.
The First Instance Sentence and Provincial Appeal Court Sentences have been reversed and rescinded.
So your Lawsuit against Caja Insular de Ahorros de Canarias (now Bankia) is now fully upheld. Bankia is condemned to pay you 107,800€ plus legal interest from the date you paid your off-plan deposit to the developer’s bank account until full repayment.
Costs of the First Instance procedure are now imposed on Caja Insular de Ahorros de Canarias (Bankia).
There is no express imposition of costs relating to the Provincial Court Appeal procedure or to the Cassation Appeal in the Supreme Court. So each party will pay its own costs in respect of the Provincial Court Appeal and for the Cassation Appeal.
Interesting statements in the Sentence from the Supreme Court Magistrates are:
”The First Chamber of the Supreme Court has seen the appeal brought by the plaintiffs xxxxx & xxxxx, against the sentence delivered on 24 July 2013 by the 4th Section of the Provincial Court of Las Palmas in the appeal No. 69/2012, arising out of ordinary procedure No. 898/2011 from the Court of First Instance No. 16 of Las Palmas on reclaiming of amounts paid. The party sued is the entity Bankia, S.A. (successor of Caja Insular de Ahorros de Canarias).
FACTUAL BACKGROUND
FIRST. - On 2 May 2011 a Lawsuit was filed by xxxxx & xxxxx against Caja Insular de Ahorros de Canarias, currently Bankia SA, requesting the sentencing as follows:
"a) To order the return of the amounts paid on account and deposited in such financial entity amounting to 107,800€.
b) plus statutory interest at 6% per annum, Article 3 of Law 57/68. Alternatively interest at the legal rate. In any case, from the date of delivery of the funds in current accounts of LA CAJA DE CANARIAS until full repayment. Alternatively, from the date of filing of the Lawsuit.
c) and the costs"
SECOND.- The Lawsuit was admitted to the Court of First Instance No. 16 of Las Palmas, leading to ordinary trial No. 898/2011. The defendant Bankia SA was located and answered the Lawsuit opposing it in full and stating the Lawsuit should be dismissed entirely, with the express imposition of costs to the claimant.
THIRD.- The Court of First Instance gave judgment on 12 September 2011 dismissing the claim, absolving the defendant and imposing the costs to the claimant.
FOURTH.- The applicant then appealed against the First Instance Sentence. The Appeal was dealt with under appeal No. 69/2012 in the 4th Section of the Provincial Court of Las Palmas, who issued a sentence on 24 July 2013 dismissing the appeal and imposing costs to the appellant.
FIVE.- Against the sentence of the second instance the plaintiff-appellant appealed under Article 477.2.3. in conjunction with Article 477.3 of the LEC.
The appeal was based on two arguments:
"First Argument – Erroneous application of the fundamental legal facts that are declared proven. Violation of the provisions of the 2nd Rule of Article 1 of Law 57/1968, which determines the subsidiary responsibility of the financial institution that opens the current account, without requiring the developer to obtain guarantees in favour of the buyers, as said in that article "for the opening of these accounts or deposits, the bank or savings bank, under its responsibility, will require the guarantee referred to in the above condition"
"Second. Erroneous application of the fundamental legal facts that are declared proven. Violation of Article 1.902 of the Civil Code, which determines the extra contractual subsidiary responsibility of the financial institution that opens the special current account for the promoter without requiring the guarantees for buyers under Articles 1, 3 and 7 of Law 57/68, whose content is imperative and indispensable to the buyer. These articles provide "for opening these accounts or deposits, the bank or savings bank, under its responsibility, will require the guarantee referred to in the above condition"
SIX.- The Cassation Appeal was accepted by an order dated 7 October 2014. The respondent did not file notice of opposition to the appeal.
SEVENTH. - By an Order of 12 February 2016 the head magistrate was appointed and it was agreed to resolve the appeal without a hearing. The meeting of the Magistrates to decide the Appeal took place on 8 March 2016.
The Magistrate Mr. FRANCISCO MARÍN CASTÁN says:,
LEGAL BASIS
FIRST. - The plaintiffs, buyers of two off-plan houses under the regime of Law 57/1968 of 27 July on receiving of advance quantities in the construction and sale of housing (hereinafter Law 57/1968), resort to cassation appeal against the sentence of the Provincial Appeal Court that confirmed the First Instance Sentence, which dismissed their claim for reimbursement of the amounts advanced and not guaranteed, plus interest.
The decision on the appeal must be based on the following facts:
1. On 28 November 2006 xxxxx & xxxxx, signed with the developer Construcciones Luayra S.L. two contracts for the sale of separate houses with pool that were to be built in the real estate complex "El Sobrao" in Aljibe Blanco, Triquivijate, municipality of La Antigua de la Isla de Fuerteventura, at prices of 297,500 euros and 296,500 euros respectively plus VAT (5%).
2. The purchaser gave to the developer, on account of the price of both houses the total sum of 118,000 euros, of which 107,800 euros was paid through bank transfers on 2 February 2007 (61,500 euros) and 9 February 2007 (46,300 euros) to the account 2052 8148 6949 0001 5705 designated in the contracts, that the developer had opened in the office of the Caja Insular de Ahorros de Canarias in Puerto del Rosario (Fuerteventura). Repayment of those amounts was not guaranteed by the developer, neither with a Bank Guarantee or Insurance.
3. Construcciones Luayra S.L. had obtained a mortgage from Caja Insular de Ahorros de Canarias (now Bankia S.A.), as amended by public deed dated 2 October 2007. The initial amount was 360,000 euros. The mortgage was for, among others, the houses subject of the purchase contracts of the plaintiffs.
4. In a judgment of 30 March 2010, handed down in ordinary proceedings No. 91/2009 the Court of First Instance No. 1 of Puerto del Rosario declared the resolution of both sales contracts for breach of the seller Construcciones Luayra SL of the obligation to deliver the property in a timely fashion, condemning the developer to return the sum of 118,000 euros plus interest accrued from the date of delivery of the court summons to the developer.
5. The buyers urged the execution of the judgment, which resulted in the execution process legal title No. 591/2010 in which, by order of 17 December 2010, implementation was dispatched against Construcciones Luayra S.L. to address the payment of the principal of 118,000 euros plus 35,000 euros budgeted for interest and costs of enforcement. That enforcement has not been successful.
6. On 2 May 2011 the buyers filed a Lawsuit against Caja Insular de Ahorros de Canarias, which is the Lawsuit subject of this present case, asking for condemnation of the credit institution to the return of 107,800 euros plus interest at 6% per year, or alternatively at the legal rate of interest, in both cases from the date of payment in current account of the developer until full payment or, alternatively, from the date of filing of the Lawsuit. In support of its claim they alleged that the Bank, despite knowing the existence of the off-plan housing promotion and the origin and destination of the amounts received in the current account, were aware that the promoter had not demanded the guarantees imposed by Law 57/1968, due to which arose the legal responsibility of the Bank.
7. Bankia S.A. (successor of Caja Insular de Ahorros de Canarias) opposed the lawsuit alleging the following facts: a) lacked standing to be sued for not having delivered collateral to guarantee repayment of advances and even assuming that it issued a Global policy or General guarantee would not be obliged to refund the amounts paid for failing to issue individual policy or guarantee certificates; b) that it did not open the special account for the developer; and c) the fact that they had advanced mortgage funds to the promoter did not make it responsible for the repayment of the off-plan amounts paid by buyers.
8. The Sentence of the First Instance Court dismissed the Lawsuit because the developer-seller did not sign any guarantee with the defendant bank or any other entity mentioned in art. 1 of Law 57/1968, and that there was no trace of the guarantee or insurance that the developer must arrange, and that buyers demand, as security of the amounts paid to the account.
9. The above sentence was appealed by the plaintiffs and the Court of Appeal dismissed their appeal.
10. Against that judgment the buyer-appellant has lodged a Cassation Appeal under item 3 of Art. 477.2 LEC, which was justified by the contradictory jurisprudence from the Provincial Appeal Courts regarding the responsibility of the bank which opens the account without requiring promoter to obtain guarantees for the repayment of advance payments.
SECOND. - The Cassation Appeal (common to both reasons, which are therefore considered together) focuses on the responsibility of the financial institution in which the promoter has opened an account, which does not appear to be the special account as required by Law 57/1968, in which buyers made off-plan payments for the purchase of housing or off-plan construction whose return was not secured by insurance or guarantee.
The issue has already been resolved by this Court, in its judgment of 21 December 2015 (rec. 2470/2012), with the following legal doctrine: "In house sales governed by Law 57/1968 credit institutions (banks) that receive income from buyers in an account of the promoter without requiring the opening of a special account and the corresponding security shall be liable to the buyer for the total amounts anticipated by buyers and deposited in the account or accounts that the developer has opened in that entity"
More recently still, the judgment of 9 March 2016 (rec. 2648/2013) has reiterated the same doctrine in a case where the entity receiving the amounts advanced by buyers in a current account of the developer, not titled as a special account as required by Law 57/1968, had only endorsed a portion of those amounts and opposed to respond to the remaining amount due to the absence of a special account or guarantee.
THIRD.- Consequently, the contested sentence opposes the jurisprudence of this Court, because the responsibility to the buyers for control over the accounts of the promoter legally corresponds to the credit institution where the promoter has one or multiple accounts.
In this case, moreover, the defendant obstinately denied the reality of the off-plan payments made by the buyers, who were not the only ones to pay off-plan amounts to the said account, until that reality was incontestably established. Its legal duty to control the buyer’s funds was hardly debatable as it was precisely the entity that had granted the mortgage loan to the developer for the construction.
FOURTH.- According to art. 487.2 LEC, ruling on the case must be done in the sense of upholding the appeal of the applicant and overturning the ruling of the First Instance as the Bank has violated article 1 of Law 57/1968 and is fully responsible to the buyers for failing to require the developer to obtain the mandatory guarantee.
We must therefore fully uphold the lawsuit and condemn the defendant Bank to pay the plaintiffs the amount of 107,800 euros, the total sum of the amounts advanced and deposited in the account opened promoter in that entity, together with legal interest accrued from the date of payment, but not at the rate of 6% per annum as set in article 3 of Law 57/1968, as requested primarily, because this rule must be understood to have been repealed by the Additional 1st Provision of the Law on Construction Planning, which sets "legal interest on money in force until such time as its return is effected"
Finally, uncertainty about the execution of the original sentence won by buyers against the promoter in a previous case cannot prevent the upholding of the lawsuit against the Bank, because the insolvency of the promoter is alleged and the defendant bank has not contested this fact, and in any case, the execution of this Supreme Court judgment will prevent the applicant being paid twice for the same concept.
FIVE.- According to art. 398.2 LEC, we should not impose on any party the costs of this appeal, because it has been upheld, nor those of the second instance, because the appeal of the plaintiffs should have been upheld.
Pursuant to art. 394.1 LEC, be imposed on the defendant the costs of the first instance, as the lawsuit is now fully upheld even though the claim for interest was at 6% per year because it was followed by an alternative request for interest at the legal rate which itself has been upheld”
Fuerteventura, Canary Islands, South of Spain