How to invalidate a mortgage agreement; Sun decision

In 2014, our client filed a lawsuit against Praveks-Bank to invalidate the mortgage agreement.

In support of the claim, she referred to the fact that she was in a registered marriage and when concluding the mortgage agreement, her consent as a co-owner of real estate was absent.

During their marriage, the spouses acquired ownership of the apartment. At the same time, the husband, without his wife's consent, entered into a mortgage agreement with Praveks-Bank, under the terms of which he transferred the apartment to secure his obligations under the loan agreement.

The case was reviewed by the courts several times. The latest decision of the Obolonsky District Court of Kiev dated May 31, 2019, upheld by the decision of the Kiev Court of Appeal dated November 7, 2019, dismissed the claim.

The decisions of the courts of previous instances are motivated by the fact that at the time of the loan agreement and the mortgage agreement from the lender, who had the goal of securing credit obligations, information about the fact of the borrower's stay in a registered marriage was hidden and information was not provided, which excluded the possibility requirements and registration of the written consent of the other spouse. At the time of signing the mortgage agreement, the lender did not have and could not have information that the apartment was purchased with credit received from Pravex-Bank by a person who was in a registered marriage. Also, at the time of the mortgage transaction, there were no court decisions on recognizing the mortgage apartment as the joint joint property of the spouses.

Thus, the courts concluded that at the time of the conclusion of the mortgage agreement, the bank was acting in good faith and adhered to all the requirements stipulated by the current legislation, therefore, the claim was refused.

The cassation appeal is motivated by the fact that the courts of previous instances came to groundless conclusions about the refusal to satisfy the claim, since the apartment is the joint property of the plaintiff and her husband, she did not provide consent to transfer the apartment to mortgage. The marriage between the parties was not dissolved. The plaintiff points out that she learned about the violation of her right at the end of 2013, when she intended to sell the disputed property, and in 2014 the notary informed her that the property was under encumbrance.

The motives behind the Supreme Court's decision and the rule of law was applied

The courts of first and appellate instance came to the conclusion that the disputed apartment is subject to the joint property rights of the spouses, however, at the time of the mortgage agreement, the bank did not have information that the apartment was in common joint ownership, since the defendant said that he is not married, and the apartment is his personal property.

The court of cassation agrees with such conclusions of the courts of previous instances, since it has been confirmed by appropriate and admissible evidence in the case that the apartment was acquired by the defendant while being married to the plaintiff.

Refusing to satisfy the claim, the court of first instance, with the conclusions of which the appellate court also agreed, proceeded from the fact that when concluding the mortgage agreement, the bank acted in good faith and did not know and could not know that the apartment was located in common joint property.

The appeal court cannot agree with such conclusions, given the following:

Consent of a spouse to the other spouse to conclude a transaction is by its legal nature a separate unilateral transaction that must be concluded in writing.

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