This conclusion was reached by the Grand Chamber of the Supreme Court in a decision of May 26, 2020 in case № 910/13109/18.

THE ESSENCE OF THE DISPUTE

The creditor filed a lawsuit against the guarantor for recovery. The plaintiff (bank) requested jointly and severally to collect the debt under the banking service agreement from the borrower (LLC) and its guarantor (individual) on the basis of improper fulfillment by the borrower of the banking service agreement, due to which the debt arose, and given that the debtor secured by a guarantee.

COURT POSITION

The local and appellate courts satisfied the claims and collected the debt jointly from the debtor and the guarantor. However, the Grand Chamber of the Supreme Court disagreed with this conclusion and dismissed the claim.

Arguments of GCh SC:

✔ In case of breach by the debtor of the obligation secured by the surety, the debtor and the surety are liable to the creditor as joint and several debtors, if the surety agreement does not establish additional (subsidiary) liability of the surety (part 1 of Article 554 of the Civil Code). The guarantor is liable to the creditor to the same extent as the debtor, including payment of principal, interest, penalties, damages, unless otherwise provided by the surety agreement (Part 2 of Article 554 of the Civil Code of Ukraine).

✔ St. 559 of the Civil Code provides that a change in the debtor's obligations may be grounds for termination of the guarantee. In particular, the guarantee is terminated with the termination of the obligation secured by it, as well as in the event of a change in the obligation without the consent of the guarantor, resulting in an increase in his liability.

✔ In accordance with Part 1 of Article 526 of the Civil Code of Ukraine, the obligation must be performed properly in accordance with the terms of the contract and the requirements of this Code, other acts of civil law, and in the absence of such conditions and requirements - in accordance with business practices or other requirements. .

✔ Even if the terms of the surety agreement provide that the guarantor at the conclusion of the contract agrees to increase the principal obligation, this does not preclude the application of the provisions of paragraph 3 of Part 3 of Art. 202 of the Civil Code, and, accordingly, does not exempt from the need to coordinate certain unilaterally made changes to the main obligation with the guarantor in the appropriate form.

✔ In accordance with Part 1 of Art. 654 of the Civil Code change of the contract is made in the same form, as the contract which is changed if other is not established by the contract or the law or does not follow from customs of a business turn.

The Grand Chamber noted that since the credit limit on the debtor's credit obligations was increased without the consent of the guarantor, the appellate court erred in concluding that there were grounds for joint and several recovery of the disputed amounts from the debtor and the guarantor, as the guarantee was terminated. Part 1 of Art. 559 of the Civil Code (as amended).

The full text of the decision of the Grand Chamber of the Supreme Court in case № 910/13109/18 is available at the link.