Viewpoint... Whether the mortgagee has a priority right to pay the mortgage rent.

Published:

2023-04-19

Whether the mortgagee has a priority right to pay the rent generated by the mortgage, this paper makes the following analysis: 1. [link to the law]] Article 212 of the Civil Code stipulates: "If the debtor fails to perform the due debts or the realization of the mortgage right agreed by the parties occurs, resulting in the mortgaged property being seized by the people's court according to law, the mortgagee shall have the right to collect the natural or statutory fruits of the mortgaged property from the date of seizure, except where the mortgagee fails to notify the obligor who shall pay off the statutory fruits. The fruits provided for in the preceding paragraph shall first be offset against the cost of collecting the fruits." Article 321 of the Civil Code stipulates: "Natural fruits shall be obtained by the owner; if there is both an owner and a beneficial owner, they shall be obtained by the beneficial owner. If the parties agree otherwise, they shall follow their agreement. Legal fruits shall be obtained in accordance with the agreement; if there is no agreement or the agreement is unclear, they shall be obtained in accordance with the trading habits." Article 20 of the Provisions of the Supreme People's Court on the Seizure, Seizure and Freezing of Property in Civil Enforcement of the People's Courts stipulates: "The effect of seizure and seizure shall be as follows and natural fruits of the seizure and seizure." Article 197 of the original "Property Law" stipulates: "If the debtor fails to perform the due debts or the realization of the mortgage right agreed by the parties occurs, resulting in the mortgaged property being seized by the people's court according to law, the mortgagee shall have the right from the date of seizure. Collect the natural or statutory fruits of the mortgaged property, except where the mortgagee has not notified the obligor who should pay off the statutory fruits. The fruits provided for in the preceding paragraph shall first be offset against the cost of collecting the fruits." Analysis: According to the above-mentioned legal provisions of the Civil Code, the mortgagee's collection of rent from the mortgaged property is premised on the following four points: the 1. debtor fails to perform the due debt or the realization of the mortgage agreed upon by the parties; 2. the mortgaged property is seized by the people's court in accordance with the law (from the date of seizure, the mortgagee has the right to collect rent from the mortgaged property); 3. the mortgaged property; the 4. of the fruits shall first be offset against the cost of collecting the fruits. According to the above-mentioned law, the mortgagee has the right to collect the rent generated by the mortgage, then when there are other rights in the mortgage rent, the mortgagee has the right of priority to pay the rental income The Civil Code does not specify this. 2. Typical Case] Case 1:(2019) Supreme Law Enforcement No. 479 Case after: The building owned by Hou Fujiang, which is located at No. 13 Xiangyang Road, Linfen City, has been leased by co-owner Liu Shuping to Linfen Branch of Agricultural Development Bank of China at an annual rent of 1.8 million yuan since August 15, 2015. On May 19, 2016, Linfen Intermediate People's Court notified Linfen Branch of Agricultural Development Bank of China to assist executor Hou Fujiang in freezing (suspending payment) the rent of the building located at No. 13 Xiangyang Road, Linfen City, and executed the 2017 rent of the property in accordance with (2016) Jin 10 Executive Ruling No. 21. On January 28, 2015, Tang xiufen obtained the mortgage right of the real estate involved in the above-mentioned case of Hou fujiang, the executor. the other property right certificate of the house is (temporary housing mortgage) No. XX. On August 1, 2017, the mortgagee Tang Xiu Fen applied for the execution of the property in the Yaodu District People's Court, and the Yaodu District People's Court issued (2016) Jin 1002 Executive 2587 No. 2 execution ruling and seized the property. On March 29, 2018, the Yaodu District People's Court made (2016) an enforcement ruling of one of the 1002 executive 2587 of the Jin Dynasty, changing the application executor to Tang Dongjin. On July 20, 2018, the People's Court of Yaodu District, based on (2016) Jin 1002 Executive 2587 No. 5, executed the ruling and notified the lessee of the house to the Linfen Branch of the Agricultural Development Bank of China to assist in the extraction of the house rent. In the case of dispute over the loan contract between Shanxi Tongshida Coal Chemical Group Longshun Coke Iron Co., Ltd. and Li Junsheng, Bai Yunjie and Hou Fujiang executed by Linfen Intermediate People's Court, Tang Dongjin objected in writing to Linfen Intermediate People's Court's (2016) Jin 10 Executive No. 21 Assistance Notice requesting Linfen Branch of Agricultural Development Bank of China to assist in the execution of rent. The Court's view: In the Court's view, the focus of the case is whether 1. the effect of the mortgagee's priority payment of the mortgage is as good as the legal interest of the mortgage. 1. Whether the effect of the mortgagee's priority payment of the mortgage is as good as the legal interest of the mortgage. According to Article 197 of the the People's Republic of China Property Law, the mortgage creditor may collect the legal interest of the security if the mortgage claim has expired and the court takes measures to seize it. The effect of the mortgage right is not as good as the statutory interest before the seizure, but the court's seizure of the mortgaged property means that the mortgage right enters the realization procedure, and the mortgagee has the right to receive the natural or statutory interest of the mortgaged property from the date of seizure. The essence of the mortgage is to guarantee the realization of the mortgage claim by the exchange value of the mortgage, and after the court seizes the property, the rent, as part of the exchange value of the mortgage, should be included in the scope of the priority payment of the mortgage. In this case, the Yaodu District People's Court, as the enforcement court for the enforcement of priority creditor's rights, notified the lessee of the house on July 20, 2018 that it would assist the executor Linfen Branch of the Agricultural Development Bank of China to assist in withdrawing the house rent. Therefore, the house rent after July 20, 2018 can be obtained by the Yaodu District People's Court as the legal interest of the mortgaged house. 2. Whether the mortgagee has the right to receive the statutory interest if the statutory interest of the mortgage is seized by another court as a result of the ordinary monetary claim in another case. Does the provision of article 197 of the the People's Republic of China Property Law on the collection of fruits by a creditor mean that the creditor can be paid off directly with the fruits. "Right to receive" means that the creditor has the right to manage the civil interest rather than the right to dispose of it. The right of the mortgagee to receive the interest does not affect the ownership of the interest, which remains in the possession of the mortgagee. Therefore, no matter which creditor obtains the interest in this case, it cannot obtain the legal effect of being directly liquidated. The mortgage, regardless of which court of enforcement of the claim is seized, does not affect the mortgagee's right of priority payment. In the objection procedure of this case, Linfen Intermediate People's Court transferred the right to collect the house rent after July 20, 2018 to Yaodu District People's Court, the priority creditor's rights enforcement court, which guaranteed the mortgagee's right to collect legal fruits. Its (2018) Jin 10 Zhiyi No. 112 enforcement ruling complied with the law. Shanxi High Court (2019) Jin Zhi Fu No. 39 Executive Ruling Revokes Linfen Intermediate People's Court (2018) Jin 10 Zhi Yi No. 112 Executive Ruling is unfounded and should be corrected. Case 2:(2020) Supreme Famin Shen No. 2989 Case after: November 22, 2016. On the 23rd, Shenzhen Huizhong Company, as the pledgee, and Wan Zhao Company, as the pledgee, went through the unified registration of movable property ownership-change registration in the Credit Information Center of the People's Bank of China: the description of the pledged property clearly states that the pledgee will pledge the current and future rental income rights of 4 commercial properties in Block C of Tianlang Garden in Beijing with its ownership until the borrower pays off the principal and interest on the loan. On January 26, 2016, Tianbao Sub-branch of Bank A went through the mortgage registration procedures for the commercial real estate in Beijing owned by Shenzhen Huizhong Company. On May 12, 2017, the Higher People's Court of City A seized 4 commercial properties under the name of Shenzhen Huizhong Company, located in Block C of Tianlang Garden, Beijing, for the period from May 12, 2017 to May 11, 2020. On June 5, 2018, the Taiyuan Intermediate People's Court seized the above-mentioned properties. On June 29, 2018, the Hohhot Intermediate People's Court seized the above-mentioned properties. In the case of a dispute over the loan contract between Bank A Tianbao Sub-branch and Junan Company and Shenzhen Huizhong Company, the Higher People's Court of City A issued a civil judgment confirming the priority right to compensation for the commercial real estate owned by Huizhong Company in Chaoyang District, Beijing. After the judgment came into effect, Bank A Tianbao Sub-branch applied to the Higher People's Court of City A for enforcement. The Higher People's Court of City A designates the Second Intermediate People's Court of City A to be responsible for the execution. The Second Intermediate People's Court of Later A City made an executive ruling (2018) No. 621 of Jin 02: Auction of Commercial Real Estate in Chaoyang District of Beijing under the name of Shenzhen Huizhong Company. Ten Thousand Mega Company raised an objection to the execution of the auction of commercial real estate located in Chaoyang District, Beijing under the name of Shenzhen Huizhong Company. The Court's view: The Court believes that: combined with the reasons set out in the application for retrial of Wanzhao Company and the evidence provided, the main issue examined by the Court is: Wanzhao Company's claim to suspend the execution of the commercial real estate located in Chaoyang District, Beijing under the name of Huizhong Company can be established. In order to protect the legitimate rights and interests of outsiders and parties to the subject matter of enforcement, the current law provides for a system of enforcement objections. The purpose of an action filed by an outsider or a party to an execution objection is to request the people's court to exclude or continue the execution of a particular subject matter of execution. Thus, whether there is a cause sufficient to exclude or continue the execution of a particular subject matter of execution is the key to the people's court's judgment of whether the party's claim can be established. In this case, Wanzhao Company, as an outsider, filed an enforcement objection lawsuit, requesting the court to suspend the enforcement of the commercial real estate located in Chaoyang District, Beijing under the name of Huizhong Company. The main reason is that Wanzhao Company and Huizhong Company signed a "guarantee contract" and went through the "unified registration of movable property ownership" with the credit reference center of the people's Bank of China. Does Tianbao Branch of Bank A have the mortgage right to the real estate involved in the case, none of them can fight against the rental pledge right of the 10,000-dollar company to the property involved in the case. According to the facts of the case that have been ascertained, on January 26, 2016, Tianbao Sub-branch of Bank A went through the mortgage registration formalities for the real estate involved in the case. On November 22, 2016, Wanzhao Company registered the present and future rental income of the property involved in the case. The aforementioned facts show that Bank A Tianbao Branch has a mortgage right to the property involved in the case in accordance with the law, that is, in the event of the debtor's failure to perform the debt, the mortgagee Bank A Tianbao Branch has the right to enjoy the right of priority payment within the scope of the mortgage guarantee for the price of the property involved in the case at a discount, auction and sale of the mortgage. Wanzhao Company, on the other hand, has a preferential right to payment of the rental income of the property involved only compared to unsecured ordinary creditors. From the current legal provisions, where the same property is mortgaged to more than two creditors, the law establishes rules for determining the order of liquidation based on whether or not publicity has been completed and the order of publicity. Obviously, the quality right enjoyed by the company in this case is not enough to fight the mortgage right of the Tianbao branch of Bank A. As a result, Bank A Tianbao Sub-branch applied to the People's Court for the execution of the property-related request has a legal basis, and Wanzhao Company, on the grounds that it enjoys the right to pledge its accounts receivable against the mortgage of Bank A Tianbao Sub-branch, claimed that the legal basis for suspending the execution of the property-related request is insufficient. The company may only have the right of priority in the payment of the remaining part of the rent after the creditor of the mortgagee A Bank Tianbao Branch has been fully paid. In addition, the legal nature of the mortgagee's notification obligation under Article 197, paragraph 1, of the the People's Republic of China Property Law. Wanzhao Company's application for retrial claimed that the mortgagee's notification obligation was the effective element of the mortgage and the effective element of the rental income interest, not the confrontation element, and the court of first instance found that the confrontation element was wrong. The Court is of the view that this ground is also untenable. First of all, as a non-possessory security right, the mortgage is generally established, the interest generated by the mortgaged property should be owned by the mortgagor. However, after the mortgaged property is seized, the mortgagee's rights and interests are realized through the law enforcement agency's possession. Based on this, the interest after the mortgage property is seized should belong to the mortgagee. Secondly, from the point of view of legislative purpose, the provisions of the law on the interest of mortgaged property are to prevent the mortgagee from delaying the disposal of the mortgage in order to collect the interest after the mortgage has entered the realization procedure. The interest of the mortgaged property is enjoyed by the mortgagee in favor of the realization of the mortgage, in line with the purpose of legal norms. Third, the interest of mortgaged property usually involves the settlement of the rights and interests of the legal interest obligor, and the notification obligation given to the mortgagee is conducive to preventing the debtor's wrong payment and also to safeguarding the rights and interests of the mortgagee. However, whether the mortgagee fulfills the obligation of notification does not affect whether the effect of the mortgage right extends to the interest. That is, if the mortgagee fails to fulfill the obligation of notification, the liquidating obligor pays the legal interest to the mortgagor because he does not know that the property is mortgaged, and its legal consequences still have the effect of liquidation. Summary of 3. Lawyers From the above case one and case two, it can be seen that case one and case two both recognize the effect of the mortgagee on the priority of mortgage payment and the rent generated by the mortgage, which is the current mainstream view on the priority of mortgage payment. At the same time, after the mortgage is established, the rent generated by the mortgage should be owned by the mortgagor, and after the mortgage is seized, the rights and interests of the mortgagee can be realized by the law enforcement agency, in this case, the rent after the mortgage is seized belongs to the mortgagee. At the same time, whether the mortgagee fulfills the obligation of notification to the obligor who should pay off the legal fruits does not affect whether the effectiveness of the mortgage affects the fruits. That is, if the mortgagee fails to fulfill the obligation of notification, the obligor will pay the legal fruits to the mortgagee because he does not know that the property is mortgaged, the legal consequences will still have the effect of liquidation, the mortgagee may not claim the invalidity of the liquidation and may not oppose the bona fide liquidation obligor.

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