Banking Board of Ecuador

RESOLUTION No. JB-2015-3520

THE BANKING BOARD

CONSIDERING:

THAT by Resolution No. JB-2015-3440 of May 27, 2015, the Banking Board accepted the claim contained in the review appeal filed by Dr. Wladimir Galarza León, Judicial Attorney of Banco del Austro S.A.; and, consequently, rendered ineffective the administrative act contained in Official Letter No. DNAE-SAU-2014-05364 of August 25, 2014, by which the Deputy Director of User Attention confirmed the administrative act contained in Official Letter No. DNAE-SAU-2014-03337 of May 28, 2014;

THAT to issue the resolution referred to in the preceding consideration, the Banking Board considered the following:

"(...)

THAT according to the last paragraph of the Second Transitional Provision of the Organic Monetary and Financial Code, published in the Official Register Second Supplement No. 332, of September 12, 2014, the Banking Board will continue to act until it resolves all appeals it was hearing as of the date of entry into force of this Code, for a period of one hundred and eighty days;

THAT by Resolution No. 054-2015-F, of March 5, 2015, published in the Official Register No. 467, of March 27, 2015, the aforementioned period has been extended by an additional one hundred and eighty days;

THAT by communication received at the Superintendency on March 14, 2014, Mr. Segundo Efrén Cedeño Angulo, filed an administrative complaint against Banco del Austro S.A., in the following terms:

"In June 2003, abusively and illegally, Banco del Austro initiated an executive lawsuit against me for debt in the Third Civil Court of the city and province of Esmeraldas, without having delivered me any money or the vehicle that was the subject of the transaction to which the parties obligated ourselves. More than ten years have passed in that discredited action against me, damaging my entire image of financial and credit registration in the risk center and credit bureaus.- After the lawsuit reached its end where the judgment in my favor became final, the aforementioned financial institution has not executed the respective action to lift all restrictions and damages caused to my person in the national private financial system, to corroborate the aforementioned regarding the establishment and conclusion of the lawsuit I am attaching the pertinent documents of first and second instance judgments as well as the pertinent reason for the finality of the case

(...)

For the foregoing, Mr. Superintendent, I request your intervention and your good offices in accordance with the Law, in order to free myself from all acts outside the order to which I was unjustly subjected in the country's financial system, in

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order to restore my name and my capacity to operate in the same without inconvenience";

THAT by Official Letter No. DNAE-SAU-2014-02618, of April 25, 2014, the Deputy Director of User Attention requested from the aforementioned financial institution substantiated and documented information with the respective physical backups regarding the aforementioned complaint; and, by Official Letter No. DNAE-SAU-2014-02619, of the same date, informed the complainant about the matter;

THAT through Official Letter No. JSC-R-2014-0309, of May 9, 2014, Mr. Paúl Córdova, Regional Manager Quito of Banco del Austro S.A., provided a response to the official letter of the control body, and attached several documents related to the complaint;

THAT by Official Letter No. DNAE-SAU-2014-03337, of May 28, 2014, the Acting Deputy Director of User Attention resolved the complaint in question, in the following terms:

"(...)

...this control body determines that the complaint of Mr. Segundo Efrén Cedeño Angulo is well-founded because prescription has operated, which having been declared judicially has become final for not having been appealed; in which case its execution corresponds, that is, that the information on credit behavior reflects what was dictated by the ordinary justice, that is, that the obligation has been extinguished by the prescription of the action.

In virtue of the above, the financial institution must rectify the information in the Risk Center, and send it to the National Directorate of Studies and Information of this Superintendency of Banks and Insurance, through the corresponding structures.

(...);"

THAT by communication received at the Superintendency on June 3, 2014, the Judicial Attorney of Banco del Austro S.A. filed a motion for reconsideration against the administrative act contained in Official Letter No. DNAE-SAU-2014-03337, of May 28, 2014, a motion that was rejected by Official Letter No. DNAE-SAU-2014-05364, of August 25 of the current year, in which the Deputy Director of User Attention confirmed the appealed administrative act;

THAT by writing received at the Superintendency on September 2, 2014, Dr. Wladimir Galarza León, Judicial Attorney of Banco del Austro S.A., with the professional sponsorship of lawyers Byron Salas López and Karina Artieda Salazar, filed a review appeal against Official Letter No. DNAE-SAU-2014-05364, of August 25, 2014;

THAT the argument of Dr. Ferdinand Galarza León, Judicial Attorney of Banco del Austro S.A., to file the review appeal against Official Letter No. DNAE-SAU-2014-05364, of August 25, 2014, is based on the fact that the judgments issued by the Third Judge of Civil and Commercial Court of Esmeraldas, as well as the one issued by the Single Chamber of the Provincial Court of Justice of

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Esmeraldas, declared only the prescription of the executive action, but not of the obligation, within Executive Lawsuit No. docketed 08303-2003-0193, which the aforementioned financial entity followed, against Mr. SEGUNDO EFRÉN CEDEÑO ANGULO, WILSON RAFAEL MERCADO ANGULO, FRANKLIN DAVID MERCADO ANGULO AND GUILLERMO ERNESTO MERCADO ANGULO, and which was processed in the Third Civil and Commercial Court of Esmeraldas;

THAT once the study of the judgment issued on December 23, 2010, by Dr. Ángel Moisés Pereira, Third Judge of Civil and Commercial Court of Esmeraldas, was carried out, it is observed that in the THIRD consideration of the same, it says:

"The defendants, upon answering the lawsuit, present exceptions among others the prescription of the action and lack of cause of the defendant to this effect the lawsuit has been filed on June 2, 2003 and the last publication by the press has been carried out on November 5, 2010, consequently in accordance with Art. 2414 of the Civil Code, it states that prescription extinguishes actions and rights of others and requires only a certain period of time during which said actions have not been exercised, the time is counted from when the obligation became enforceable; Art. 2415 ibid expresses that the time is generally 5 years for executive actions and 10 for ordinary ones, consequently in the present case from when the obligation became enforceable, that is, from when the lawsuit was filed until the last citation by the press, more than 5 years have passed, therefore the prescription of the action proceeds";

THAT in the dispositive part of said judgment, the Judge orders:

"For the above and without being necessary other considerations.- ADMINISTERING JUSTICE IN THE NAME OF THE SOVEREIGN PEOPLE OF ECUADOR AND BY AUTHORITY OF THE CONSTITUTION AND THE LAWS OF THE REPUBLIC. - Accepting the exception of prescription of the action, the lawsuit is declared without place without costs or fees to regulate";

THAT in the judgment issued on October 17, 2013, by the Single Chamber of the Provincial Court of Justice of Esmeraldas, it is observed that in the SEVENTH consideration of the same, it says:

"Art. 2414 of the Civil Code, provides that prescription extinguishes actions and rights of others and requires only a certain period of time during which said actions have not been exercised, the time is counted from when the obligation became enforceable; Art. 2415 ibid expresses that the time is generally 5 years for executive actions and 10 for ordinary ones, consequently in the present case from when the obligation became enforceable, that is, from when the lawsuit was filed until the last citation by the press, more than 5 years have passed, therefore the prescription of the action proceeds";

THAT in the dispositive part of said judgment, the Chamber orders:

"For the above, ADMINISTERING JUSTICE IN THE NAME OF THE SOVEREIGN PEOPLE OF ECUADOR AND BY AUTHORITY OF THE CONSTITUTION AND THE LAWS OF THE REPUBLIC .- Rejects the appeal

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accepting the exception of prescription of the action, with costs and fees to regulate.- Notify";

THAT by ruling issued on October 30, 2013, the Single Chamber of the Provincial Court of Justice of Esmeraldas, attending the request made by Mr. Segundo Efrén Cedeño Angulo, expands the judgment, "in the sense that as a consequence of the declaration of prescription of the action, the cancellation of the precautionary measures ordered in the present cause is ordered...";

THAT as can be appreciated both from the judgment issued on December 23, 2010, by Dr. Ángel Moisés Pereira, Third Judge of Civil and Commercial Court of Esmeraldas, as well as from the judgment issued on October 17, 2013, by the Single Chamber of the Provincial Court of Justice of Esmeraldas and its expansion dictated in the ruling of October 30 of that same year, it is not recorded that ordinary justice has declared the prescription of the obligation, since the defendants never raised this exception;

THAT in the present case, the obligation contained in the executive title that gave rise to Executive Lawsuit No. 08303-2003-0193, which Banco del Austro S.A. followed, against Mr. SEGUNDO EFRÉN CEDEÑO ANGULO, WILSON RAFAEL MERCADO ANGULO, FRANKLIN DAVID MERCADO ANGULO AND GUILLERMO ERNESTO MERCADO ANGULO, and which was processed in the Third Civil and Commercial Court of Esmeraldas, constitutes a credit right in favor of said financial entity. On this topic, the Civil Code in its article 2392, which is transcribed below, when regulating prescription, refers not only to actions, but also to rights of others:

"Art. 2392.- Prescription is a way to acquire things of others, or to extinguish actions and rights of others, by having possessed the things, or not having exercised said actions and rights, during a certain time, and meeting the other legal requirements.

An action or right is said to prescribe when it is extinguished by prescription.";

THAT in the present case, ordinary justice has declared prescribed "the action" and not the right (obligation), since said prescription was never alleged by the defendants;

THAT therefore, this collegiate body shares the criterion of the Judicial Attorney of the control body, constant in Memorandum No. PJ-2014-845, of October 31, 2014, whose pertinent part is transcribed below:

"(...)

In the case that the prescription of the right (obligation) had been alleged, which has not happened, it corresponded to the judge to declare the right (obligation) extinguished, which has also not occurred, because said allegation was not raised before the Judge, and therefore he could not pronounce himself according to what is provided in Art. 2393 of the Civil Code, which says: "The

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who wishes to take advantage of prescription must allege it. The judge cannot declare it ex officio", in such a way that neither the Third Judge of Civil and Commercial Court of Esmeraldas, nor the Single Chamber of the Provincial Court of Justice of Esmeraldas, could declare the prescription of the right (obligation) ex officio.

...It is evident then, that the prescription of the action declared in the present case, has not extinguished the obligation contracted by Mr. SEGUNDO EFRÉN CEDEÑO ANGULO, WILSON RAFAEL MERCADO ANGULO, FRANKLIN DAVID MERCADO ANGULO AND GUILLERMO ERNESTO MERCADO ANGULO in favor of Banco del Austro S.A., and in no way, the prescription of the action can render the obligation nonexistent, as stated by the Deputy Director of User Attention in Memorandum No. DNAE-SAU-2014-01171, for the expressly provided in Art.2415 of the Civil Code, which says:

"Art. 2415.- This time is, in general, five years for executive actions and ten for ordinary ones.

The executive action becomes ordinary by the lapse of five years; and converted into ordinary, it will last only another five"

That is, that once the executive action has prescribed, the ordinary action is available, and what has been declared in the species is only the prescription of the executive action and not of the ordinary one, apart from the fact that the prescription of the right or of the obligation has not been declared as stated above.

For this reason, the allegation of Banco del Austro is perfectly valid that: "IT IS THE EXECUTIVE ACTION THAT PRESCRIBED, NOT THE RIGHT OF BANCO DEL AUSTRO S.A. AS CREDITOR TO COLLECT THE OBLIGATION BY ANOTHER PATH LIKE THE ORDINARY ONE".

(...);"

THAT the National Legal Intendency, through Memorandum INJ-DNJ-SAL-2014-1033 of December 18, 2014, recommended to the Banking Board to accept the claim contained in the review appeal filed;

THAT by writing of June 25, 2015, Mr. Segundo Efrén Cedeño Angulo, with the professional sponsorship of Dr. César E. Hernández Pazmiño, filed a motion for reconsideration against the administrative act contained in Resolution No. JB-2015-3440 of May 27, 2015;

THAT through communication of July 10, 2015, Dr. Wladimir Galarza León, Judicial Attorney of Banco del Austro S.A., sponsored by lawyer Karina Arieta Salazar, attached a simple copy of the ordinary lawsuit filed by said bank against Mr. Segundo Efrén Cedeño Angulo, so that the defendant is condemned to pay the lent capital for the sum of twelve thousand nine hundred and eighty-eight dollars (US$ 12,988.00) plus the interest due and that will become due until the cancellation of the credit(...);

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THAT the claim, object or subject matter of the ordinary judicial action referred to in the preceding consideration, that is, the collection of a credit obligation, is the object of contradiction by the appellant in the motion for reconsideration, filed in the administrative venue, before the Banking Board, in which he mainly alleges that: there is no debt; that a contract was signed in 2002 for the credit for a vehicle that was never delivered to him, that the ordinary action is prescribed, among other challenges regarding the alleged obligation, currently sued before ordinary justice;

THAT articles 168, numerals 1) and 3) and 226 of the Constitution of the Republic of Ecuador; and article 8 of the Organic Code of the Judicial Function, provide as follows:

Article 168, numerals 1) and 3), and article 226 of the Constitution of the Republic of Ecuador:

"Art. 168.- The administration of justice, in the fulfillment of its duties and in the exercise of its attributes, will apply the following principles:

1. The bodies of the Judicial Function will enjoy internal and external independence. Any violation of this principle will entail administrative, civil and criminal responsibility in accordance with the law. (The underline belongs to me)

2. (...)

3. By virtue of jurisdictional unity, no authority from the other functions of the State may perform functions of ordinary administration of justice, without prejudice to the jurisdictional powers recognized by the Constitution.

(...);"

"Art. 226.- The institutions of the State, its bodies, dependencies, the public servants and public employees and the persons who act by virtue of a state power will exercise only the competencies and faculties attributed to them in the Constitution and the law. (...)"

Article 8 of the Organic Code of the Judicial Function:

"Art. 8.- PRINCIPLE OF INDEPENDENCE.- The judges are only subject in the exercise of the jurisdictional power to the Constitution, to the international instruments of human rights and to the law. In exercising it, they are independent even before the other bodies of the Judicial Function.

No Function, body or authority of the State may interfere in the exercise of the duties and attributes of the Judicial Function.

Any violation of this principle will entail administrative, civil and/or criminal responsibility, in accordance with the law.";

IN exercise of its legal attributes,

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RESOLVES:

SINGLE ARTICLE.- ABSTAIN from resolving the motion for reconsideration filed by Mr. Segundo Efrén Cedeño Angulo against the administrative act contained in Resolution No. JB-2015-3440 of May 27, 2015.

NOTIFY.- Given at the Superintendency of Banks and Insurance, in Quito, Metropolitan District, on July 15, two thousand fifteen.

Econ. Rodrigo Landeta Parra GENERAL INTENDENT (S) PRESIDENT OF THE BANKING BOARD SESSION (E)

I CERTIFY.- Quito, Metropolitan District, on July 15, two thousand fifteen.

Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD

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Banking Board of Ecuador