Legal Application Practice. The priority of advance registration in banking business from the perspective of the Civil Code (below)

Published:

2022-02-14

Abstract: The Supreme People's Court on the application<中华人民共和国民法典>After the promulgation of the Interpretation of the Guarantee System (hereinafter referred to as the "Interpretation of the Guarantee System"), the advance notice registration and this registration have been fully connected. Under the circumstances that the building has the conditions for the first registration of ownership, the advance notice registration is valid and the property registered in advance notice is consistent with the property registered for the first time, it is presumed that the obligee of the advance notice registration has the same effect as that of mortgage registration. Advance registration presumption of the establishment of a mortgage, the effectiveness of the stage guarantee. Typically, in order to secure the realization of the creditor's claim, the developer or the security company is often liable for the creditor in stages during the period from advance registration to mortgage registration. After the interpretation and implementation of the security system, if the provisions of Article 52 are met, the mortgage is presumed to be established and the creditor has priority. At this time, there are two major controversies in practice regarding the disposition of phased guarantees: 1. One view is that the stage guarantee of the developer or guarantee company and the creditor's acquisition of real estate mortgage belong to the undertaking relationship, and if the creditor obtains the mortgage right, the stage guarantee liability is exempted. Such: (1) Qingdao Intermediate People's Court of Shandong Province (2021) Lu 02 Min Zhong No. 8922: Liu Xia, Qingdao Green City Huajing Real Estate Co., Ltd. and Industrial Bank Co., Ltd. Qingdao Branch Financial Loan Contract Dispute Civil Second Instance Civil Case Judgment "The original intention of the establishment of the phased guarantee is to reduce the risk of debt settlement due to incomplete registration of formal property rights, to encourage developers to complete the development and construction of projects in a timely manner, and to actively assist in the registration of property rights. In this case, Greentown Huajing Real Estate has submitted evidence to prove that it has fulfilled its relevant obligations. The reason why the property involved in the case failed to formally handle the property right registration and mortgage registration is that the property involved was sealed up in another case. Therefore, Greentown Huajing Real Estate has no fault in failing to complete the mortgage registration, and its periodic guarantee liability should be exempted. Therefore, the court supports the appeal claim of Greentown Huajing Real Estate in accordance with the law." (2) Weihai Intermediate People's Court of Shandong Province (2021) Lu 10 Min Zhong No. 1631: China Everbright Bank Co., Ltd. Weihai Branch, Weihai Dongxin Real Estate Co., Ltd. and other civil judgments of second instance on financial loan contract disputes "The Court believes that the focus of this case is whether Everbright Bank has a priority right to compensation for the mortgaged property involved. According to Article 52 of the Interpretation of the Supreme People's Court on the Application of the Relevant Guarantee System, after the parties have registered the mortgage advance notice, the advance notice registration obligee requests priority compensation for the mortgaged property. After examination, there are cases where the first registration of building ownership has not been completed, the property registered in advance notice is inconsistent with the property at the time of the first registration of building ownership, and the mortgage advance notice registration has expired, the people's court shall not support it; if the first registration of the ownership of the building has been completed after examination, and there is no failure of the advance notice registration, the people's court shall support it and shall determine that the mortgage right is established from the date of advance notice registration. After trial, it was found that the real estate involved in the case went through the advance registration of the mortgage right of the pre-purchased commercial housing on November 19, 2015, and Dongxin Real Estate has gone through the first registration of the ownership of the building, and there is no case that the advance registration is invalid, so the mortgage of the real estate involved The right was established from the date of advance registration. The court of first instance held that Everbright Bank did not enjoy the priority of the property involved in the property and should be corrected. As for the question of whether the guarantee liability of Dongxin Real Estate is exempted. According to the contract involved in the case, the phased guarantee of Dongxin Real Estate starts from the date of signing the contract to the date when the mortgagor has effectively established a mortgage on the mortgage, and the relevant mortgage right certificate and relevant supporting documents for setting the mortgage are delivered to the lender for formal management. According to the law, the mortgage right of the real estate involved in the case has been established from the date of advance notice registration, and Dongxin Real Estate should no longer bear joint and joint guarantee liability, however, since Dongxin Real Estate did not raise a defense in the original trial and did not file an appeal after the judgment of the first instance, it was regarded as a waiver of the right, and the court did not review the defense of Dongxin Real Estate." 2. Another view is that the stage guarantee should be terminated according to the contract agreement: if it is a conditional discharge, the establishment of the presumption of the mortgage does not mean the substantive establishment of the mortgage, and the stage guarantor should still bear the responsibility for the guarantee. Such: Henan Zhengzhou Intermediate People's Court (2021) Yu 01 Min Zhong No. 9445: Industrial Bank Co., Ltd. Zhengzhou Branch, Zhang Wei and Other Financial Loan Contract Disputes Civil Second Instance Civil Judgment "The focus of the dispute in this case is whether the conditions for the release of the guarantee liability of the harmonious company as agreed in the Personal Purchase Mortgage (Guarantee) Loan Contract have been achieved. The case involves the "Personal Purchase Mortgage (Guarantee) Loan Contract" stipulates that if the debtor has completed the registration procedures of the house ownership certificate and the mortgage of the house with the creditor as the mortgagee, the guarantor's guarantee liability shall be discharged from the date when the debtor hands over the original mortgage certificate of the house to the creditor's right. However, the guarantor shall still be liable for the obligations of the debtor due before that date and the obligations under this contract arising from the default of the guarantor or/and the debtor before that date. The agreement is specific and clear, including two levels of meaning: First, the borrower has completed the house ownership certificate involved in the case and completed the house mortgage registration procedures with the lender as the mortgagee, which guarantees the termination conditions attached to the legal relationship for Harmony Company; Second, for the debts that have expired before that date, and the debts under this contract caused by the guarantor or/and the borrower's default before that date, the guarantor shall still bear the corresponding liability for breach of contract or guarantee liability, which means that in the event of a breach of contract by Harmony Company, a breach of contract by the borrower or both, Harmony Company shall not be relieved of the claim to waive the guarantee liability by stage joint and several guarantee liability. In this case, the house involved has not yet completed the house ownership certificate, and the conditions for the release of Harmony Company's guarantee liability have not been fulfilled, so Harmony Company should still bear joint and several guarantee liability for the loan involved." In response to the above-mentioned disputes, our lawyers prefer the first view, from the point of view of trading habits and contractual purposes, the purpose of establishing a phased guarantee is to protect the rights of creditors rather than to increase the burden of the phased guarantor. If the creditor's rights have been determined by other means, the purpose of the establishment of the phased security has been achieved, the basis of its existence has been lost, and the role of the real estate mortgage has been completed. Therefore, when financial institutions, small loan companies or other entities (hereinafter referred to as "obligees") act as creditors, they should exercise their rights in a timely manner, and actively urge mortgagors and developers to assist in mortgage registration when conditions are met, so as to avoid the loss of rights. The above opinion does not exclude the possibility that the court in judicial practice determines whether the stage guarantor is exempt from the liability of the guarantee after the right holder obtains the priority of the mortgage involved in the case on the basis of the specific agreement in the stage guarantee contract. Other views based on case search: if the real estate involved in the case is pre-sealed by the court after the advance registration, can the right holder of the advance registration continue to register the mortgage? Case: Jiangsu Higher People's Court (2018) Su Min Zai No. 100: Civil Judgment of Retrial of Disputes over Financial Loan Contract between Nanjing Renheng Real Estate Co., Ltd. and Nanjing Hubei Road Sub-branch of China Everbright Bank Co., Ltd. and Wan Xinjing Viewpoint: The right holder of the advance notice registration of the mortgage right does not have the right of priority compensation. However, the house involved in the case was pre-sealed by the court after the advance registration of the mortgage, which did not affect the registration of the mortgage. Mortgage advance registration rights holders may, after formal registration, according to the mortgage on the case-related housing priority compensation. The referee stated that the house involved in the case was pre-sealed by the court after the advance notice registration of the mortgage right, which did not affect the registration of the house mortgage right and the Hubei Road Branch of Everbright Bank gave priority to the compensation of the house involved in the case. First, the advance registration of mortgage rights is designed to enable creditors to determine the acquisition of mortgage rights after the corresponding conditions are met, and if it is considered that after the real estate has been seized or pre-seized, the advance registration of mortgage rights cannot be converted into mortgage registration even if the conditions are met, it is clearly contrary to the purpose of advance registration. Second, even if the pre-registration of mortgage rights on the seized or pre-seized real estate is converted into mortgage registration, it will not affect the effectiveness of the seizure or pre-seizure, and will not harm the interests of the applicant. Third, before the seizure or pre-seizure, the advance notice registration of mortgage rights that can be converted into mortgage registration in the future has been publicized through advance notice registration, and according to the law, the advance notice registration of mortgage rights can be converted into mortgage registration when conditions are met. This transformation based on the nature of registration in the first place does not constitute an obstruction to the court's enforcement measures. Therefore, although the "Real Estate Registration Data Inquiry Result Certificate" shows that after the advance notice registration of the housing mortgage involved in the case on July 23, 2014, the People's Court of Yuhuatai District, Nanjing City, Jiangsu Province and other courts seized the housing involved in the case, but it does not affect the case. The exclusive effect of the advance notice registration of the housing mortgage, the aforementioned seizure does not affect the priority of the housing compensation of Everbright Bank Hubei Road Branch. Relevant legal advice In summary, in order to protect the realization of the right holder's claim, it is recommended that the right holder, when registering the advance mortgage: 1, strictly abide by the internal business norms, to ensure that the mortgagee, the right holder signed the pre-mortgage/mortgage guarantee contract is the true intention of both parties; 2. Timely update the terms of the developer's phased guarantee contract according to the latest judicial practice, such as increasing the conditions that the developer should meet to exempt the phased guarantee liability, and clarifying that for whatever reason, the developer should continue to bear the phased guarantee liability if there is no formal mortgage registration of the creditor's rights; 3. Check whether the property registered in advance is the same as the property at the time of the first registration of the ownership of the building; 4. In accordance with Article 221 of the Civil Code and the interpretation of the guarantee system, after the advance mortgage registration and the first registration of the building, promptly urge the mortgagor and the developer to assist in the registration of the real estate mortgage, and retain the relevant evidence to urge the mortgagor and the developer to register the real estate mortgage; 5. During the period of advance notice registration, follow up the status of the mortgage involved in the case in a timely manner. For the sake of insurance, the formal mortgage registration shall be completed within 90 days from the date when the real estate registration can be carried out after the advance notice registration.</中华人民共和国民法典>

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