Loan agreement is considered not concluded in the absence of the fact of money transfer — Supreme Court in a case about a debt of 30,000 USD

The Supreme Court, composed of judges of the First Judicial Panel of the Civil Cassation Court in case No. 477/1340/23, upheld the decisions of the lower courts which recovered 30,000 USD from the defendant under a loan agreement formalized by a receipt.

The cassation appeal of the defense party, which insisted on the absence of the fact of receiving the funds, was rejected by the court as an attempt to re-evaluate the evidence.

Case circumstances

The plaintiff applied to the court claiming that in 2020 he lent the defendant 30,000 USD. According to the plaintiff, the fact of money transfer was confirmed by a receipt in which the defendant was obliged to return the amount by the end of 2020. Since the money was not returned, the plaintiff filed a claim for debt recovery.

The courts of first and appellate instances recovered from the defendant 30,000 USD, which is equivalent to over 1,108,500.00 UAH, court costs, and legal assistance expenses.

Additionally, the defendant was ordered to pay the plaintiff a court fee of 11,085.00 UAH and 1,073.60 UAH for filing a motion to secure the claim.

The courts rejected the defendant's arguments about the unproven fact of receiving the money under the loan agreement, as well as his claim that the disputed funds were transferred as payment under a contract for the sale of corporate rights to a share in the charter capital of an agricultural limited liability company. The courts noted that both the fact of money transfer and the true nature of the legal relations between the parties are directly confirmed by the content of the receipt.

Supreme Court decision

The cassation court emphasized that according to Articles 626 and 627 of the Civil Code of Ukraine, a contract is an agreement between parties, and the parties are free to conclude it and determine its terms, but such freedom is limited by legal requirements. According to Article 1046 of the Civil Code of Ukraine, a loan agreement is real in nature and is considered concluded only from the moment of transferring money or things defined by generic characteristics. The fact of money transfer is decisive for the emergence of the obligation. The Supreme Court referred to Article 1047 of the Civil Code of Ukraine, which states that confirmation of the loan agreement and its terms can be a debtor's receipt, which simultaneously certifies both the fact of concluding the agreement and the fact of receiving the money.

Thus, the receipt has not only evidentiary value but also confirms the very fact of the obligation's emergence.

The Court also stressed that in cases of this category, courts are obliged to establish the real content of the legal relations between the parties and verify whether the money transfer actually took place, since this determines the conclusion about the loan agreement being concluded. In the absence of the fact of money transfer, the loan agreement is considered not concluded.

The Supreme Court noted that each party must prove the circumstances it refers to, and the court evaluates the evidence as a whole based on its inner conviction. No evidence has predetermined strength, but written evidence in the form of a receipt has decisive importance in loan cases.

Evaluating the cassation appeal arguments, the Supreme Court agreed with the conclusions of the lower courts that the parties actually had loan relations. This is confirmed by the receipt personally drawn up by the debtor, which contains confirmation of receiving 30,000.00 USD and the obligation to return it by the end of 2020. According to the court, the content of the receipt indicates the existence of a debt obligation and refutes the defendant's arguments about a different legal nature of the transferred funds.

The court also rejected the applicant's arguments that the funds were transferred as payment under a contract for the sale of corporate rights, since such arguments are not confirmed by the content of the receipt, and the plaintiff was not a party to the relevant transaction. Therefore, the courts reasonably concluded that the real nature of the legal relations is determined by the content of the written document drawn up by the defendant.

Furthermore, the Supreme Court rejected the reference to witness testimony as proof of non-transfer of funds, noting that according to Article 1051 of the Civil Code of Ukraine and procedural norms, in the case of a written loan agreement, witness testimony cannot be proper evidence to deny the fact of receiving money, except in cases of fraud, violence, or other circumstances directly provided by law. No such circumstances were established in this case.

The Supreme Court emphasized that establishing the factual circumstances of the case and evaluating evidence belong to the powers of the courts of first and appellate instances, and the cassation court has no right to re-evaluate evidence if no significant violations of procedural law are found.

As a result of the case review, the Supreme Court dismissed the cassation appeal and left the decisions of the courts of first and appellate instances unchanged, also deciding on the allocation of court costs in favor of the plaintiff.

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