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Lawyers Blog
Money thrown down the drain, or how, after paying a suit fee.
2011-12-07

Money thrown down the drain, or how, after paying a suit fee (5% of the value of a vindicated claim) and obtaining a payment order, we hang this order as a picture decorating our wall.

As a warning motivating you not to delay with instituting an action, to track the financial condition of your debtors, to always require the signature of a declaration acknowledging debt and absolutely forget that it is inelegant and wrongly perceived by our contractors, I will quote a law suit situation that happened to my client.

It started in a traditional way: unpaid invoice, one, two, another one... The debtor promises to pay, but stops answering phone calls and is beyond reach.

The creditor decided to institute an action. It is quite costly, as it was not the debtor himself, but his employee, who signed all invoices, so a decision in payment order proceedings (which would relate to a lower expense to pay initial court fees) will rather not be possible. The court requested the creditor to pay a suit fee, and the total cost of suing the debtor – 5% of debt value – turned out to be high. Finally, a joyful day came, a day of issuing a payment order under the writ of payment proceedings. Some more emotions were followed by a full victory – the debtor has not raised an objection, the order will soon be legally valid and the bailiff will ask the debtor to quickly pay the debt back to the creditor together with interest and the cost of proceedings (5% suit fee and attorney’s remuneration). But there is a surprise... The court has just declared the debtor's bankruptcy, which the creditor knew nothing of. He did not expect it. 

The creditor loses the money spent on the above described court proceedings, concluded with issuing a decision, whose legal force, if the sued debtor does not raise an objection, is equal to a legally valid judgment.

Why is it so?

Because of Article 182 1 of the Code of Civil Proceedings.  Its provisions commit the court to dismiss the proceedings if the party sued is declared bankrupt.

But is the dismissal of proceedings equal to overruling a payment order if Article  505 of the Civil Code states that an order under the writ of payment proceedings loses legal force if a defendant raises an objection? So if there is no objection, the order becomes legally valid and is equal to a legally valid judgment. Does the court, after issuing the order, is really obliged to dismiss the proceedings, or are the proceedings concluded with an order? Is the court not bound by the decision it had made? It should be reminded that, pursuant to Article 332 of the Code of Civil Proceedings, the court is bound by the content of judgment from the moment it is issued. The rule also applies to payment orders under the writ of payment proceedings, which lose legal force only in the event of raising an objection. Being bound by a judgment issued means, above all, that it is impossible to overrule it.  A payment order is a legally existing decision and it may not be neglected or considered non-existent by the court. Article 182 1 of the Code of Civil Proceedings does not provide for an exception to the rule of a Court being bound by a judgment it had issued and it does not give a court a right to overrule it.

Pursuant to the standpoint of the Supreme Court expressed in its decision of 21st December 2010 IIICSK 12/10, declaring defendant’s bankruptcy including property liquidation after the court of first instance issues a judgment, does not justify – under Article 182 1 § 1 of the Code of Civil Proceedings – the overruling of this judgment by the same Court or the dismissal of proceedings. In the rationale, the Supreme Court explained that Article 182 1 is not targeted against the judgment, but against the proceedings as part of which such a judgment may be issued.

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Money thrown down the drain, or how, after paying a suit fee (5% of the value of a vindicated claim) and obtaining a payment order, we hang this order as a picture decorating our wall.

2011-12-07
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