Viewpoint... Practical reflection on the performance of the order under the mixed guarantee.
Published:
2023-12-21
1. case review
On November 21, 2022, the Supreme Law made (2022) the Supreme Law Minre -239 retrial civil judgment. The case, as an ordinary financial loan contract dispute, has been tried three times and the context of the case can be summarized as follows:
The credit enhancement measures adopted by banks to ensure the smooth recovery of loans include pledges of movable property provided by borrowers and guarantees by natural persons. Among them, the case involves the "Maximum Movable Property Pledge Guarantee Contract", which stipulates that when the borrower fails to perform the due debts or the realization of the pledge right as agreed by both parties, regardless of whether the creditor's rights under the bank's main contract have other guarantees (including but not limited to guarantees, mortgages, pledges, etc.), the bank has the right to directly require the borrower to bear the guarantee liability within the scope of its pledge guarantee. At the same time, the "maximum guarantee contract" involved in the case stipulates that when the borrower fails to perform the due debts, when Huatong Company fails to perform, regardless of whether the bank has other guarantees (including but not limited to guarantees, mortgages, pledges, etc.) for the claims under the main contract, the bank has the right to directly require the guarantor to bear the guarantee liability within the scope of its guarantee.
The above-mentioned contractual agreement is a common contractual format in financial loan contract disputes in which most banks are parties. Under normal circumstances, as long as the lender proves that the loan is true and valid, the guarantee and pledge are true and valid, and there is no guarantee period or limitation period, the bank is a well-deserved winner. The court of first instance will support the bank's claim for priority compensation of the pledge, support the guarantor to assume the guarantee responsibility for the loan, and rule that the guarantor can recover from the borrower. This decision is consistent with the first instance of the (2022) Supreme Court Minre 239 case: in the presence of mixed guarantees, and each credit contract has a priority payment or direct recovery agreement, the court did not realize the performance of the guarantee through the decision to clarify. In practice, in order to achieve faster payment, the guarantor and the pledge will be recovered together in the execution procedure, and due to the pressure of the court and the disposal cycle of the pledge, the recovery from the guarantor often takes precedence over the auction of the pledge.
But (2022) the second instance of the case of Supreme Court Minzai No. 239 holds that the bank not only has the right to require the borrower to give priority to the guarantee liability within the scope of the pledge guarantee provided, but also has the right to directly require the guarantor to take the guarantee liability within the scope of its guarantee. From the perspective of the comprehensive guarantee contract and the pledge contract, "the two contracts have the meaning of agreement priority", therefore, it is a case of "the contract is not clear about this agreement" in the mixed guarantee. According to the provisions of Article 176 of the the People's Republic of China Property Law, in this case, the bank shall first realize the creditor's rights on the pledge provided by the debtor itself. When the proceeds from the auction and sale of the pledge are not enough to pay off the creditor's rights, the guarantors shall bear joint and several guarantee liability for the insufficient part. After assuming the guarantee liability, the guarantor has the right to recover from the debtor.
The views of the Supreme People's Court in the retrial of this case are basically the same as those of the second instance of the case: both believe that there is an unclear contractual agreement.
2. point of view analysis
Analysis of the non-conflict between (I) legal provisions and contractual agreements
Under the condition that Article 392 of the the People's Republic of China Civil Code does not amend Article 176 of the the People's Republic of China Property Law,(2022) the Supreme People's Court case No. 239 has changed greatly compared with the classic case (2017) the Supreme People's Court case No. 971:(2017) in the Supreme People's Court case No. 971, the bank also made priority agreements in both the maximum mortgage contract and the maximum guarantee contract, however, the Supreme People's Court did not review the contract from the perspective of "comprehensive guarantee contract and mortgage contract", and held that there was no unclear agreement in the contract, and supported the creditor's direct recourse to the guarantor.
From the perspective of the meaning of the text: Article 392 of the Civil Code and Article 176 of the Property Law both stipulate that "if the secured creditor's right has both property security and human security, the debtor fails to perform the due debt or the parties agree to realize the security right, the creditor shall realize the creditor's right in accordance with the agreement; If there is no agreement or the agreement is unclear, and the debtor provides the security of the property, the creditor shall first realize the claim on the security; where a third party provides security in rem, the creditor may realize the claim in respect of the security in rem, or may request the guarantor to assume the responsibility for the guarantee. After the third party providing the guarantee assumes the liability for the guarantee, it has the right to recover from the debtor." From the point of view of the interpretation of the text, in the case of the existence of both security and guarantee, the provision on "the debtor's non-performance of the due debt or the occurrence of the realization of the security interest agreed upon by the parties" more restrictions on the "occurrence of the realization of the security interest agreed upon by the parties" with the same harmfulness as "the debtor's non-performance of the due debt", rather than limiting the performance of the performance of the security and the security of the security interests of the security; if and only if there is no agreement between the parties on the order of performance, or if the agreement is unclear, this article plays its guiding role.
In practice, banks make priority payment agreements through independent maximum pledge contracts and maximum guarantee contracts, focusing more on:(1) clarifying the bank's priority payment rights in the pledge relationship; and (2) emphasizing the front-loading of the guarantor's guarantee liability. Because the contracts are independent of each other, there is no situation in which the guarantor and the pledgee sign in the same contract both to advance the property insurance and to forward the guarantee liability.
The pre-(II) of the liability for assurance is in line with the logic of practical compensation.
On October 16, 2023, the Shanghai Higher People's Court notified the Shanghai Court of Financial and Commercial Trials in 2022 and issued the "Top Ten Cases of Financial and Commercial Trials in Shanghai Courts in 2022", of which Case 6 is "Determination of the performance of the debtor's property guarantee and guarantee insurance". The referee's point of view is that: "In the case of a debt with both the debtor's property security and the guarantee insurance, if the parties do not agree on the performance of the subrogation, the creditor has the right to choose. If the priority of claiming the liability of the property security will increase the risk of the insurer's subrogation claim, the creditor shall follow the principle of good faith and choose to perform the guarantee insurance first, otherwise the creditor causes the insurer to expand the loss, the part, the insurer has the right to refuse." The Shanghai Financial Court settled on the expansion of losses and explained the damage to the guarantee insurance by giving priority to the realization of self-security in the guarantee insurance. That is, the court believes that the creditor chooses to realize the priority right of repayment of the property mortgage first, and the insufficient part is recovered from the guarantee insurer, which means that the mortgage is not enough to cover the creditor's rights and ensure that the insurer loses the property protection in the subsequent compensation. Moreover, the process of realizing the mortgage right is relatively long, and after calculating the high overdue interest, the result is that the principal of the loan is still owed after deducting the high overdue interest from the execution refund, thus caused by the loss, guaranteed that the insurer is not liable for compensation. Using the above logic, in the mixed guarantee of the coexistence of guarantee and pledge, limited by the influence of the saturation of the court's execution work, in the case of the above-mentioned agreement in the contract, the priority to realize the self-property guarantee or pledge will also lead to the risk of expanding the guarantor's loss; If the guarantor cannot be required to bear the guarantee responsibility first, it will also objectively aggravate the dilemma of difficult execution.
3. practical recommendations
In order to reduce the increase in trial costs caused by the above-mentioned disputes over the terms of the contract, the following recommendations are made: (1) to clearly guarantee the claims of liability before the litigation, so as to reduce the risk of vague performance of the litigation itself as far as possible; to (II) full communication in the litigation, from the perspective of jurisprudence, meaning and practical operation to explain the point of view.
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