Banking Board of Ecuador

RESOLUTION No. JB-2015-3469

THE BANKING BOARD

CONSIDERING:

THAT through a communication received at the Superintendence of Banks on January 22, 2014, Mr. Yoshie Yoshinori Arikawa, Legal Representative of Casa Nori Cía. Ltda., filed a complaint against Banco de la Producción S.A. PRODUBANCO, in the following terms:

"On September 30, 2013, the banking institution Banco de la Producción S.A. PRODUBANCO, returned Check No. 001563, drawn on March 16, 2013, by Mr. Max Celi Ríos (SIC), holder of checking account no. (SIC) 02-017016866, in favor of CASA NORI CÍA. LTDA. The return was made with a reason stating 'loss (SIC) of subscriber and forgery of signature', as can be observed from the copy of the check attached.

(...)

The financial institution PRODUBANCO lacks the competence to determine the existence of a crime, and furthermore, such attribution and determination is contrary to the General Check Law, since only financial institutions can pay the check or protest it...

(...)

That you kindly order as a corrective and remedial measure that PRODUBANCO make the payment of the value USD$68,676.00 in favor of my represented party (value of the check subject of the complaint)

(...)";

THAT through Office No. IRG-DAYEU-V-R-2014-748, dated July 16, 2014, the Regional Intendancy of Guayaquil resolved the administrative complaint in question in the following terms:

"...ACCEPT the complaint filed by CASA NORI CÍA. LTDA... against BANCO DE LA PRODUCCIÓN S.A. PRODUBANCO. and order the payment of Check NO. 001563 for $ 68,676.00...";

THAT through a communication received at the Superintendence of Banks on August 6, 2014, Dr. Jorge Alvarado Carrera, General Secretary and Judicial Attorney of Banco de la Producción S.A., filed a review appeal against Office No. IRG-DAYEU-V-R-2014-748, dated July 16, 2014;

THAT the date of subscription of the checking account contract between Banco de la Producción S.A. PRODUBANCO and Mr. Max Celi Ríos; the date on which the check subject of the complaint was drawn; the date of its cancellation; the date on which the administrative complaint was filed before the Superintendence of Banks by the Manager of Casa Nori Cía. Ltda.; and, the date on which the complaint was resolved and appealed, are prior to September 12, 2014, the date on which the Organic Monetary and Financial Code was published in the Official Register. In virtue of this, and due to the arguments detailed below, the present case corresponds to applying the General Law of

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Institutions of the Financial System and other regulations in force at the date the facts occurred;

THAT Article 82 of the Constitution of the Republic of Ecuador provides as follows:

"Article 82.- The right to legal security is based on respect for the Constitution and on the existence of prior, clear, public legal norms and applied by competent authorities." (Emphasis added);

THAT Article 180, letters b) and o), of the General Law of Institutions of the Financial System, provided as follows:

"Article 180.- The Superintendent of Banks has the following functions and attributions:

(...)

b) To ensure the stability, solidity, and correct functioning of institutions subject to its control and, in general, that they comply with the norms governing their functioning, through permanent extra-situ supervision and in-situ inspection visits, in accordance with international best practices, without any restriction and allowing determination of the economic and financial situation of the entity, the management of its business, evaluation of the quality and control of risk management, and verification of the truthfulness of the information it generates;

(...)

o) To require that controlled institutions present and adopt the corresponding corrective and remedial measures in cases that so require;

(...)";

THAT Article 7, number 6, of the Civil Code provides as follows:

"Article 7.- The law provides only for the future; it has no retroactive effect; and in conflict of a later law with an earlier one, the following rules shall be observed:

(...)

6.- Mere expectations do not constitute rights;

(...)

18.- In every contract, the laws in force at the time of its celebration shall be understood to be incorporated

(...)". (Emphasis added);

THAT regarding the topic of the application of the Law in time SALGADO PESANTES states: "With the aim of establishing when a law can be retroactive and when it is not, some theories have been elaborated such as that of the

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acquired rights...The essential point of this theory considered as classic, lies in differentiating between acquired rights and mere expectations. Here, respect for acquired rights is proclaimed, which although not easy to define, are indicated as those that have already been incorporated into our patrimony; in other words, they are rights that already belong to their holder and from which they cannot be deprived. Facing acquired rights are mere expectations, which are simple hopes of acquiring a right, something not yet realized...Once promulgated, the Law has efficacy for facts subsequent to its validity, that is, its effects are for the future, which constitutes the principle of non-retroactivity. Art. 7 of the Civil Code says that the Law provides only for the future and in rule 6th it states that mere expectation does not constitute Law.";

THAT in consideration of numbers 6 and 18 of Article 7 of the Civil Code and the theory of acquired rights, more so when mere expectations do not constitute Law, it is appropriate to pose this present legal analysis in consideration of the acquired rights by parties; in accordance with the General Law of Institutions of the Financial System, in its momentary validity;

THAT Articles 180, letters b) and o), of the General Law of Institutions of the Financial System, 157 of the Organic Monetary and Financial Code, and 5 of Chapter IV, of Title XX, of Book I, of the Codification of Resolutions of the Superintendence of Banks, empower the control organism to know and resolve complaints of users against controlled financial institutions. In the present case, due to the considerations stated above, the pertinence of the financial user's petition will be analyzed under the General Law of Institutions of the Financial System and regulatory norms in force at the date the legal relationship arose and the administrator presented his petition before the control organism, since at that date what was provided in the Organic Monetary and Financial Code was a mere expectation;

THAT in that line, the Final Provision of the Organic Monetary and Financial Code states: "This Code shall enter into force from its publication in the Official Register.";

THAT Articles 44, 45, 48, 49, and 50 of the Regulation of the Check Law, published in Official Register No. 532, of September 12, 2011, in force at the date of the complaint, provided as follows:

"ARTICLE 44.- Cancellation is the act by which the holder requests the bank to declare one or more check forms void, and if these are presented for collection, the bank shall abstain from paying them because they are presumed forged.

For the cancellation to take effect, it will not be required that there are sufficient and available funds in the checking account.

When the bank verifies that the check has been issued by the holder or by any person authorized for this effect, and therefore the cancellation request was based on false or fraudulent facts, declared judicially, it will proceed to close the checking account for a period of three years and will communicate the incident to the Superintendence of Banks and Insurance."

H. Salgado Pesantes. Introduction to the Study of Law, 1st Edition, Quito: Editora Nacional, 2002, pages 104-106.

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"ARTICLE 45.- To request cancellation, the holder will communicate in writing to the bank, with his registered signature, his request, which must contain the following:

45.1 Number of the checking account.

45.2 Number of the form or forms of checks for which cancellation is requested.

45.3 Determination of the reason for which he requests cancellation (theft, loss, deterioration, or destruction of one or more check forms).

45.4 Express declaration that the holder assumes the civil or penal responsibilities derived from the cancellation of the form or forms of checks.

Banks may supply the holder or whoever is authorized to draw on the account, printed forms adequate to record the cancellation request. These printed forms will contain the requirements indicated for the proceeding of the cancellation, and must be signed by the holder of the account, with the registered signature.

The request and declaration made to the bank must be recognized before a Civil Judge or before a Notary." (Emphasis added)

"ARTICLE 48.- The drawer may also request the bank to cancel one or more check forms through electronic means or by consigning the information required in Article 45 of this chapter. The request made by this means constitutes a binding declaration of will for the holder of the account who will be responsible, both civilly and penally, for the consequences derived from the orders given to the banking institution.

The drawer of the account, so that the cancellation is left without effect, must present a written request to the bank.

In any case, the bank must proceed according to what the preceding norms dispose, relative to cancellation."

"ARTICLE 49.- The bank must have a permanent telephone system for the reception of requests for suspension of payment, revocation, or cancellation. When the suspension, revocation, or cancellation is requested by this means or by electronic means, which do not include the electronic signature of the holder, he must formalize such request in writing, within the term of forty-eight (48) hours subsequent to the telephone notification, backing it with a copy of the respective complaint before the competent judicial or police authority." (Emphasis added)

"ARTICLE 50.- In cases of suspension of payment, revocation, or cancellation, the following provisions shall be observed:

50.1 The drawn bank may demand the proofs it deems convenient, directly, on the fact or facts that are based on each

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case, and in the suspension or in the revocation, it will retain the value of the check.

50.2 The drawn bank will publish at the expense of the petitioner an notice in one of the newspapers of greatest circulation in the locality, edited in that plaza or in another different one if none existed in that one, warning whoever might have right to present their corresponding opposition to the request for suspension, revocation, or cancellation of the or the checks described in the same publication, within the term of sixty days counted from the date of publication. Within the same term, opposition may be presented to said request, even in the case that no publication existed.

50.3 The notice will contain: name of the drawer, name of the beneficiary, and value of the amount of the check; number of the check, and any other data that the bank deems appropriate, warning that, if no one opposes the request, the drawn bank will leave without effect the request for suspension or revocation or cancellation, and will deliver the amount to the drawer or to the beneficiary or to the holder who requested it.

50.4 If the value of the check is less than two unified basic salaries, no publication will be necessary and the amount of the check must be retained by the bank only for the term of sixty days, counted from the date on which the mentioned communication was received, within which term the corresponding oppositions may be presented to the bank.

50.5 After the term of sixty days has elapsed, without the check having been presented for collection, or without opposition from the holder having occurred, the bank, freed from responsibility, will declare the request without effect, will lift the retention, and will return the amount to the drawer, being able at its judgment, to demand a guarantee to respond for any indemnification in favor of third parties, a guarantee that must be lifted if the check is returned to the bank, or if the term determined in Article 50 of the Check Law has elapsed. If the check is presented subsequently for collection, it will return it with the legend "RETURNED FOR SUSPENSION", "RETURNED FOR REVOCATION", or "RETURNED FOR CANCELLATION", as appropriate. If there is opposition from the holder, the retention will be maintained until the Judge resolves what is convenient or until the term indicated in the first paragraph of Article 50 of the General Check Law has elapsed." (Emphasis added);

THAT both in Office No. IRG-DAYEU-V-R-2014-748, as well as in Office No. DAYEU-2015-016, which contains the technical report on the present review appeal, the Regional Intendancy of Guayaquil observes in the management of Banco de la Producción S.A. Produbanco the lack of application of the norms pertinent to the cancellation of check forms contained in the Regulation to the Check Law, detailed above. The cancellation of check forms implies the fulfillment, by the drawer and drawn bank, of several formalities tending to safeguard the interests of the beneficiary of the check; it is thus that it is required, among other requirements, that the request and declaration of cancellation be recognized before a Civil Judge or before a Notary. In the case that the cancellation request is made through electronic means, it is indispensable that such request be formalized in writing, within the term of forty-eight (48) hours

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subsequent to the initial notification, attaching a copy of the respective complaint before the competent judicial or police authority;

THAT in the technical report issued by the Regional Intendancy of Guayaquil, contained in Office No. DAYEU-2015-016, it is manifested that "From the review of the documentation that exists in the present complaint, this Office evidences the lack of documentary proof that supports the process of cancellation of Check No. 001563...that is, the respective request for cancellation and declaration recognized before a civil judge or notary, as well as also the corresponding complaint presented before the competent judicial or police authority...". This argument, which motivates the order for restitution of values, forms part of the administrative act appealed; however, it was not rebutted in the filing of the review appeal since Banco de la Producción S.A. Produbanco did not attach, with reason of the appeal, the documentation that justifies the compliance with the norms that regulate the cancellation of checks;

THAT it is evidenced that Banco de la Producción S.A. PRODUBANCO failed to comply with the norm regarding the cancellation of checks, which configures an incorrect procedure of the financial institution that violated the right of the beneficiary of the check, which merits the application of Article 5, of Chapter IV, of Title XX, of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, detailed above;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0325 of April 16, 2015, recommended to the Banking Board to reject the pretension contained in the review appeal filed;

AND,

IN exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- REJECT the petition contained in the review appeal filed; and, consequently, RATIFY Office No. IRG-DAYEU-V-R-2014-748, of July 16, 2014.

COMMUNICATE.- Given at the Superintendence of Banks, in Quito, Metropolitan District, on the tenth of June of two thousand fifteen.

Econ. Rodrigo Landeta Parra
GENERAL INTENDANT, S
PRESIDENT OF THE BANKING BOARD, E

I CERTIFY.- Quito, Metropolitan District, on the tenth of June of two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD