On April 5, 2016, Division A of the Argentine Court of Appeals in Civil Matters (hereinafter, the “Higher Court”) confirmed the ruling issued by the lower court that dismissed the lawsuit initiated in judicial proceedings “Producción Animal SRL vs B.M.I. in re consignment” (file No. 23,284/2013).
The lawsuit was filed by the acquiring party of a fraction of land in the Province of Buenos Aires, who committed to pay the price in US dollars. The first payment was made upon execution of the public deed transferring ownership on August 31, 2012, committing the debtor to pay the balance of the price in four installments and securing payment with an in-rem guarantee of mortgage.
The agreement reached between the parties expressly stipulated that the payment in US dollar bills was an essential condition of the contract of sale.
The indebted party stated expressly in the contract that they knew the risks involved and irreversibly and irrevocably waived the right to claim or invoke any reason or cause of unpredictability, among others, since they knew the economic situation of the country and had carried out a detailed analysis and evaluation of “all economic and financial and legal variants of the situation and prospects and risks of fluctuations of prices in the US currency in the national and international market, none of which would prevent them from meeting their obligations in the fixed currency and/or claim another form of restitution and/or payment (...)”. In addition, in the contract the parties expressly agreed on alternative mechanisms to acquire the bills needed to cancel the debt in the agreed currency.
Prior to the expiration of the first installment of the balance of the price, the debtor sustained that in February 2013 a formal notice was sent to creditors requesting them to indicate a bank account in local currency, in which they could deposit the amounts due in Argentine pesos. Upon the refusal of the creditors to receive a payment in the terms offered by the debtor, the latter brought a lawsuit to deposit the payment, stressing that the context in which the agreement had been reached had changed considerably and that the theory of unforeseen events was applicable.
Although the plaintiff argued that a measure ordered by the Argentine Government prevented them from accessing the foreign exchange market, the creditors and the lower court pointed out that the referenced provisions of the Argentine Central Bank (“BCRA”) and resolutions of the Argentine tax authority (“AFIP”) were already in force when the loan agreement with mortgage guarantee was executed, which the claimant was already aware of at the time of committing to pay in foreign currency. Also, emphasis was made that the regulations of the BCRA issued on November 11, 2011 required that prior authorization be requested from the AFIP to acquire foreign currencies and that the plaintiff neither demonstrated having made this request nor filed evidence of the refusal by the authority before such a request.
The first instance ruling rejected the lawsuit and the plaintiff filed an appeal before the Higher Court.
In order to analyze the controversial facts, the Higher Court began by pointing out that the provisions of the new Argentine Civil and Commercial Code approved by law No. 26,994 (“CCCN”) do not apply to the already completed parts of the development of a legal relationship, but rather the law that was in force at the time the legal relationship occurred. Therefore, it moved on to verify if the situations and their consequences were completed or not and if a discretionary or mandatory provision was at stake, taking into account the new exception applicable to consumer relations when a more favorable provision to the consumer is involved.
For this, the Higher Court took into consideration Section 962 of the CCCN that sets forth that the legal provisions relating to contracts are supplementary of the will of the parties, unless from their form of expression, from their content, or from their context, their non-discretional nature is evidenced. It also noted the last paragraph of Section 7 of the CCCN which provides that the new supplementary provisions do not apply to contracts in course of execution, stating that the supplementary regulations in force at the time of the conclusion of the contract should be applied.
With this in mind, the Higher Court continued by analyzing Section 765 of the CCCN which the appellant referenced, clarifying that it is not a rule of public order.
The Higher Court held that as a consequence of the inexistence of provisions establishing the mandatory nature of the last paragraph of Section 765 of the CCCN and of the circumstance of not being able to ascertain that “from its form of expression, from its content, or from its context, results its mandatory nature”, such provision must be considered of a supplementary nature under the general principle established by Section 962 of the CCCN. This statement of the Higher Court shows that a deeper analysis of the regulations of the CCCN has been carried out, also adding that “(...) The form of expression admits a possibility to cancel the debt in favor of the debtor, “the debtor can be released”, is expressed, in a way which is far from being mandatory and which may be of current application when the requisite of equivalence that the same text requires may be fulfilled through the identification between the real value and the exchange rate (...)”.
Since it is not a mandatory provision, the Higher Court considered that there would be no impediment if the parties agree that the debtor must deliver the corresponding amount in the designated currency according to the provisions of Section 766 of the CCCN and in use of the autonomy of will protected by Section 958 of the same code.
Thus, the Higher Court established that the particular provisions of the contract, to which Section 963 of the CCCN gives priority after the mandatory provisions of special laws and of the same CCCN which prevail, are applicable to the case. Taking into account that Section 7 of the CCCN sets forth that the new supplementary laws are not applicable to the contracts in course of execution, with the exception raised by such provision; the supplementary regulations in force at the time of conclusion of the contract are next in the order of precedence. The Higher Court referred to these provisions contained in Sections 617 and 619 of the repealed Civil Code, which establish that if the obligation was stipulated in currency that is not legal tender, this should be considered as of delivering a sum of money, and the debtor of an obligation to deliver a sum of a determined species or quality of currency, fulfills the obligation by giving the designated currency on the day of its expiration.
The Higher Court then continued to analyze the various concurrent circumstances upheld by the previous judge.
It stressed that the possibility of fulfilling the obligation by way of the currency equivalent required a physical or legal impossibility of compliance with the obligation, which would be overriding, objective and absolute. In this sense, the Higher Court emphasized that even if there were legal impediments to “(...) acquire all of the sums required to cancel their obligations directly in a financial institution, it is certain that in its detriment there were mechanisms (...)” as alternative to obtain the committed currency, such “(...) as the acquisition of securities of the public debt and their subsequent liquidation in the stock market (...)”, which although can be “(...) eventually more onerous for the debtors it does not imply that we can speak of impossibility of compliance, insofar as such must always be of an absolute nature (...)” to sustain failure to pay in the agreed currency.
Finally, the Higher Court rejected the deposit and upheld the appealed ruling. By making this in-depth analysis, Division A supports the conclusion that Section 765 is not a rule of public order with new arguments and is therefore discretional for the parties who can agree freely on the currency in which they must fulfill their obligations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
