Date: September 27, 2012 E.C.

Legal Rule:

• Checks as Payment Instruments: A check is a payment instrument, and the issuer is obligated to pay the stated amount unless a valid legal defense is demonstrated. (Commercial Code Article 717/1 allows defenses based on personal relationships with the payee.)
• Usury ("Arata"): To prove usury, it must be shown that the lender exploited the borrower's vulnerable situation. Simply charging a higher interest rate than the 12% per annum limit does not automatically constitute usury. (Following precedent from Cassation Case No. 178414.)
• Proof of Payment: A debtor must provide sufficient evidence to prove repayment of a debt.

Summary of Facts:

The Applicant sued the Respondent for the amount of two bounced checks. The Respondent claimed the checks were for a usurious loan from the Applicant's brother (not the Applicant directly), that he had repaid a portion of the loan, and that the checks were security for interest payments. The lower courts ruled in favor of the Applicant in part.

Decision of the Supreme Court:

The Supreme Court reversed the High Court's decision and reinstated the First Instance Court's ruling. The Court emphasized the nature of checks as payment instruments. They reiterated the principles of proving usury, requiring evidence of exploitation of vulnerability, not just a high interest rate. The Court held that even if the Respondent had a separate agreement with the Applicant's sister (who endorsed one of the checks to the Applicant), this did not affect the Applicant's right to claim payment on the check. The Court also found that the High Court erred in deducting a payment that was made before the checks were issued and not proven to be related to the checks in question. The Respondent was ordered to pay the full amount of the checks plus interest.