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26.04.2023

The Supreme Court analyzed judicial practice regarding the meaning of debts in the division of marital property

Judges of the Supreme Court in the Civil Court of Cassation Vasyl Krat and Olga Stupak spoke during a webinar organized by the Committee on Civil, Family and Inheritance Law of the Association of Lawyers of Ukraine.

Vasyl Krat in his report talked about:

  • credit and division of property;
  • invalidity of transactions, creditors and debts of spouses;
  • solidarity and debts of spouses;
  • abuse of law, good conscience and division of property.

The judge noted that the Joint Chamber of the Supreme Court of the Supreme Court is considering a case regarding the possibility of dividing the funds of the spouses, spent during the marriage to pay off the personal obligations of one of them, acquired before the marriage. In this case, one of the spouses took out a loan before the marriage, and the debt under the loan agreement was repaid during the marriage (decision of the OP of the Supreme Court of Ukraine dated October 5, 2022 in case No. 712/8602/19).

The speaker drew attention to the Principles of European Family Law Regarding Parental Responsibilities. In particular, they provide that the debts of one of the spouses are his personal debts; payment of personal debts takes place at the expense of personal property belonging to each of the spouses; the property is considered the property of the spouses, unless it is proven that it is the personal property of one of the spouses (presumption of community property of the spouses), etc.

Jurisprudence developed in such a way that when a credit agreement was concluded before marriage by one of the spouses and the debts under the agreement were repaid during the marriage at the expense of the joint property of the spouses, the other spouse had the right to compensation. OP KCS, in particular, must decide: the other spouse will have the right to a share in the property purchased with credit funds or only to monetary compensation.

Vasyl Krat also cited the resolution of the Supreme Court of Ukraine of the Supreme Court dated September 26, 2018 in case No. 713/285/2012, in which it was concluded that in order to conclude a loan agreement (for which one of the spouses is the borrower), obtaining the consent of the other spouse is not necessary, since that one of the spouses who concludes the loan agreement (borrows funds) does not dispose of the joint property of the spouses, he becomes a participant in binding legal relations.

At the same time, the Grand Chamber of the Supreme Court is considering the following questions: whether the prescriptions of parts 2 and 3 of Art. 65 of the SC of Ukraine; whether a loan agreement for an amount that exceeds the limits of a minor household transaction concluded by one of the spouses without the consent of the other spouse to its conclusion can be invalidated; under such a loan agreement, does the other spouse (who was not a party to it) have the right to receive funds from the husband (wife) of the party to the agreement (decision of the Supreme Court of Ukraine dated June 30, 2021 in case No. 756/8056/19) .

Regarding joint or partial liability, the speaker noted that there is a presumption of partial obligation, and solidarity appears only in the case of indivisibility of the subject of the obligation (if it is about money, they are always divisible) or in cases expressly provided for by law.

At the same time, the judge drew attention to the conclusion set out in the resolution of the Supreme Court of the Supreme Court of June 30, 2020 in case No. 638/18231/15-ts, about the joint liability of spouses for obligations arising from acts committed in the interests of the family, unless otherwise provided by such acts.

In addition, Vasyl Krat spoke about the judicial practice regarding the abuse of the right when dividing the property of the spouses either by one of the spouses, or by both spouses jointly. In particular, several resolutions of both the CCC and the OP of the CCC of the Supreme Court in cases related to the fraudulent division of property concluded that the division of joint property of spouses cannot be used by participants in a civil transaction to avoid payment of a debt by the debtor or the execution of a court decision on debt collection. The judge cited specific cases of resolving such disputes.

Olga Stupak drew attention to the resolution of the Supreme Court of Ukraine dated February 13, 2020 in case No. 320/3072/18, which concerns the recognition of the right to ½ of an apartment purchased during marriage with credit funds. The defendant noted that already after the termination of the marital relationship, he independently repaid the loan for several years. The CCS of the Supreme Court agreed with the decisions of the previous instances on the satisfaction of the claim. He pointed out that during the division of property, debts of the spouses and legal relations for obligations arising in the interests of the family are also taken into account. The defendant is not deprived of the opportunity, if there are legal grounds, to ask questions about the return at the plaintiff’s expense of half of the funds paid by him after the divorce to repay the loan, as a joint debtor.

In another case, during the marriage, the husband took out loans for the purchase of two apartments. After the divorce, three children lived with the plaintiff, the courts recognized the plaintiff’s right to one of the apartments in full, and half of the second. The defendant stated in the cassation complaint that he is a borrower, repays the loan funds already after the divorce and that the courts actually deprived him of ownership of the apartments, for which he has to settle until 2031. The CCS of the Supreme Court referred the case for a new consideration, indicating that the obligations in marriage also become joint, and for the correct decision of the court it was necessary to establish which part of the loan was repaid during the marriage, which part was returned independently by the defendant, and which part remains unpaid, to determine the amount joint debt and distribute the property taking it into account (resolution of the Central Committee of the Supreme Court of July 8, 2020 in case No. 754/11103/16-ts).

Olga Stupak noted that in a similar situation, if the claimant’s right to the first apartment was recognized, the defendant could stop repaying the loan and the bank would foreclose on the mortgaged property. After all, the transfer of ownership of the mortgaged property does not terminate the mortgage. “Therefore, if you want to help a client, you must think in advance about the possible consequences of a decision made in his favor,” the judge told the lawyers.

In another case, the disputed apartment was purchased with credit funds before the marriage. The plaintiff noted that they had repaid a significant part of the loan during their marriage. The Supreme Administrative Court indicated that the plaintiff’s payment of part of the funds under the loan agreement concluded for the purchase of an apartment does not change the legal status of the apartment, since the loan agreement was concluded between the bank and the defendant before the marriage. Payment of the debts of one of the spouses, which arose before the conclusion of the marriage, at the expense of the spouse’s funds can, under certain circumstances, be taken into account when resolving a dispute about the division of joint property of the spouses or debt obligations (resolution of the Supreme Court of the Supreme Court of July 3, 2019 in case No. 554/14662 /15-ts).

Olha Stupak also spoke about court practice regarding recovery from the other spouse in the order of retrogression of part of the funds paid as joint obligations; debt recovery under the loan agreement jointly and severally with the spouses; that the receipt does not confirm the use of borrowed funds for the purposes specified in this receipt, etc.

Vasyl Krat’s presentation – https://bit.ly/3V40J4A .

Olga Stupak’s presentation – https://bit.ly/41UPv4C .

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