Legal Issue
On July 8, 2021, the Financial Ombudsman requested the Supreme Court to make a resolution regarding the following legal issue:
“In the event of termination of a loan agreement by the lender, does the running of the statute of limitations for the lender’s claims for payment of installments, whose payment deadlines expired before the moment of termination, commence from the moment of termination or from the expiration of a separate payment deadline for each installment specified in the agreement?”
In the mentioned request, the Financial Ombudsman emphasized that a consistent view in case law and doctrine is to qualify the installment repayment of a loan as a single, non-periodic performance, even though the loan repayment occurs in specified installments spread over time. It was also noted that the statute of limitations for the bank’s claims is three years, which is related to the bank’s commercial activities.
Three Lines of Jurisprudence
In case law, three lines of jurisprudence have emerged concerning the discussed legal issue.
First line of jurisprudence: This line of jurisprudence adopts an interpretation of Article 120 § 1 sentence 1 of the Civil Code, according to which the performance under a loan agreement, treated as a single performance, has one due date that should be linked to the date of the final repayment of the loan or the expiration of the notice period. Separate due dates for each installment only apply to periodic performances.
Second line of jurisprudence: According to the second line of jurisprudence, Article 120 § 1 sentence 1 of the Civil Code indicates that each loan installment has a different due date determined by the agreement and repayment schedule. Consequently, each installment’s claim becomes time-barred separately after a three-year period from the day following the day on which it should have been repaid according to the loan agreement. However, in the event of termination of the agreement by the bank due to the borrower’s failure to meet the loan conditions or non-repayment, the entire outstanding loan becomes due, and the remaining installments become immediately due. From that moment, the statute of limitations starts running for the entire loan claim, including installments whose payment deadlines expired before the termination.
Third line of jurisprudence: According to the third line of jurisprudence, each loan installment has a different due date determined by the agreement and repayment schedule. Consequently, each installment’s claim becomes time-barred separately after a three-year period from the day following the day on which it should have been repaid according to the agreement. In the event of termination of the agreement by the bank due to the borrower’s failure to meet the loan conditions or non-repayment, the entire outstanding loan becomes due, but the statute of limitations for installments whose payment deadlines have not occurred before the termination remains unchanged. The termination of the loan agreement does not affect the due dates of installments whose payment deadlines have already passed.
Position of the Financial Ombudsman
According to the position presented by the Financial Ombudsman in the application for a resolution, the interpretation of Article 120 § 1 sentence 1 of the Civil Code should be understood as follows: the due date of installment payments in a loan agreement should not be tied to the date of final repayment specified in the agreement or resulting from the termination of the agreement. If the loan agreement stipulates that it is to be repaid in installments and each installment has a specified payment deadline, it means that with the arrival of that deadline, it becomes due, and therefore each installment becomes time-barred separately, after the expiration of a 3-year limitation period, counting from the next day on which it should have been paid. According to this interpretation of Article 120 § 1 sentence 1 of the Civil Code, putting the entire loan in a due state, the termination of the loan agreement should not change the due dates that have already occurred, but only the due date of future installments, which will occur earlier due to the termination. Accepting the interpretation presented in the first or second line of case law would imply the possibility of seeking fulfillment of the performance even after 10 or 20 years have passed, thus violating the provisions of substantive law that establish an absolute prohibition on extending the statute of limitations.
Resolution of the Supreme Court dated May 10, 2023, III CZP 52/22
In the resolution dated May 10, 2023, file reference III CZP 52/22, the Supreme Court supported the position presented by the Financial Ombudsman, stating that the termination of a loan agreement does not affect the running of the statute of limitations for claims regarding the payment of loan installments that became due before the termination.
The position of the Supreme Court should be considered correct, as it respects the prohibition, provided by the provisions of the Civil Code, on extending the statute of limitations for claims.