Posted Sep 2020
In its milestone decision no. 650/2020 the Greek Supreme Court ruled in favor of the mortgage holders, represented by our law firm, in a dispute against one of the major Greek systemic Banks. This long-lasting litigation involved novel legal questions never before addressed by the Supreme Court. Said decision will set a precedent for a large number of identical cases pending before the Courts below and will result in the vindication of claims raised by numerous mortgage holders against systemic Banks.
The dispute: A number of individuals entered into mortgage loan agreements with a systemic Bank. Under their terms, mortgage holders would pay interest on the loans directly to the Bank whereas payment of the loan capital would be made to a proxy appointed by the Bank, which, at that time was an insurance corporation, part of the same group of companies as the Bank. For that, the Bank requested that the mortgage holders enter into a separate – additional contract with the insurance corporation, under the terms of which the latter would deposit the aggregate loan capital to the bank, provided that all installments due shall first have been paid. Mortgage holders fully complied with their contractual obligations. However, prior to the final two installments, the insurance corporation suspended its activities as it entered a compulsory liquidation process imposed and overseen under the law by the Private Insurance Supervision Committee of the Bank of Greece. Due to this, the insolvent insurance corporation did not deposit the already paid installments to the Bank. Nevertheless, the latter sought and succeeded in getting a payment order against the mortgage holders for the aggregated capital of the loan on the basis of a contractual term in the loan agreement providing that the mortgage holders would remain liable towards the Bank until the full and final repayment of the loan.
Mortgage holders retained our law firm in order to challenge said payment order. The challenge was heard by the Court of First Instance in Athens which indeed found for the mortgage holders and annulled the payment order in question (CFI decision no. 1379/2016). The Bank appealed this decision before the Court of Appeals, which, rightly so, upheld the decision below (CoA decision no. 337/2018). After that, the Bank filed a petition for cassation with the Supreme Court. The Supreme Court by its decision no. 650/2020, upheld the decision of the Court of Appeals, holding that the insolvency risk of the insurance company may not be shifted to the mortgage holders by virtue of the dubious and abusive contractual term in question.
As noted above, this milestone decision creates a precedent that will most definitely prejudice the outcome of a vast number of identical or similar cases now pending before the Courts below in favor of the mortgage holders.