Viewpoint... "Discussion of the period of exercise of mortgage."

Published:

2021-11-26

Problem Background On May 2, 2017, Company A and Bank B signed the Liquidity Loan Contract, agreeing that Bank B would grant it a loan of $50 million for a period of 12 months. On the same day, the two parties signed the Maximum Mortgage Contract, which agreed that Company A would provide a mortgage guarantee for the claim with the property in its name and register the mortgage. When the loan matures, Company A is unable to repay the loan and Bank B takes it to court. On July 20, 2018, under the mediation of the court, the two parties reached a settlement, agreeing that Company A will repay Bank B 50 million yuan of principal and interest within three days after the effective date of the mediation agreement, and the case acceptance fee will be borne by Company A. Later, because Company A did not fulfill its repayment obligations, Bank B applied to the People's Court for enforcement based on the effective civil mediation, and the court ruled on September 23, 2020 to terminate the enforcement procedure. In this case, the court's mediation did not confirm the mortgage enjoyed by the bank, so did Bank B lose the mortgage, or what remedy was sought to realize the mortgage? The lack of confirmation of the mortgage right in the judgment and mediation statement 1. in force does not result in the loss of the mortgage right of the mortgagee. First of all, the "Maximum Mortgage Contract" signed by Company A and Bank B clearly stipulates the mortgage matters, and goes through the mortgage registration procedures to obtain the other title certificate of the property involved in the case. In accordance with the provisions of Article 172 of the Civil Code, the mortgage is established in accordance with the law. Secondly, according to Article 140 of the Civil Code, the meaning of silence can only have legal effect if the law clearly stipulates and the parties have special agreement. Although the civil mediation statement does not state that Bank B has a mortgage on the property involved in the case, nor does it state that Bank B waives the mortgage on the property involved in the case. Bank B has not expressly renounced the mortgage, and has not canceled the mortgage registration, in the absence of an express agreement or no special provisions of the law, it is not appropriate to presume that Bank B has renounced its rights, so Bank B still enjoys the mortgage on the property involved in the case. (Reference Case:(2021) Supreme Famin Shen No. 1134) Period of exercise of the mortgage of 2. B Bank Article 419 of the Civil Code stipulates that the mortgagee shall exercise the mortgage right during the limitation period of the main claim. As we all know, the statute of limitations system was established to urge civil rights holders to actively claim their rights within the statutory period, and if the statute of limitations expires and the principal claim loses the protection of legal coercion, the debtor can defend it. The statute of limitations system does not apply to security interests, as a security right and a mortgage from the right, can only be exercised during the statute of limitations for the principal claim, I .e., during the exercise of the mortgage. In the light of the above background, the problems during the exercise of the mortgage in judicial practice are classified as follows: Scenario 1: Bank B fails to sue this claim during the statute of limitations for the principal claim. The creditor did not bring a lawsuit against the claim within the limitation period of the main claim, and when the limitation period expires, the claim becomes a natural debt, that is, it loses the protection of legal force and is a debt that cannot be requested for enforcement. If Company A defends this, the court does not protect the claim. A mortgage is a subordinate right, subordinate to the principal claim, in which case the mortgage of Bank B is not protected by law under Article 419 of the Civil Code. If the mortgage registration of Bank B continues to be protected, it loses its legal basis. Therefore, Company A may request the registration of the cancellation of the mortgage in accordance with Article 59 of the Minutes of the National Court's Civil and Commercial Trial Work Conference. Scenario 2: Bank B files a lawsuit against the principal claim during the statute of limitations for the principal claim, fails to apply for confirmation of the mortgage, and fails to apply for enforcement during the enforcement period after the judgment becomes effective. Before the expiration of the statute of limitations for the principal creditor's rights, Bank B only filed a principal creditor's rights lawsuit against Company A, and did not request the court to confirm its mortgage right. After the judgment or mediation of the people's court, it did not apply for execution of the debtor within the time limit for application for execution stipulated in the Civil Procedure Law. If it claims to exercise the mortgage right to the mortgagor, the people's court will not support it. The view in the Judicial Interpretation and Application of the Guarantee System of the Civil Code of the Supreme People's Court: "Since the current law of our country has modified the period of application for enforcement, even if the claim has been confirmed by the people's court, it will no longer be protected by the people's court because the period of limitation for enforcement has passed. Since the principal claim is no longer protected by the people's court, the security interest subordinate to the principal claim is naturally no longer protected by the people's court." In such cases, the period during which the mortgagee exercises the mortgage is up to the time when the statute of limitations for enforcement of the principal claim judgment has elapsed. Scenario 3: Bank B only filed a lawsuit against the principal claim during the statute of limitations for the principal claim, did not apply for confirmation of the mortgage, applied for enforcement within the statute of limitations after the judgment of the principal claim came into effect, and then reached a settlement agreement with Company A under court mediation, withdrew the application for enforcement, and the court ruled to terminate the enforcement proceedings in the case. In this case, the court ruled that the termination of the case was due to the request to withdraw the execution application after the applicant and the person subject to execution reached a settlement agreement. According to the law, the termination of the execution of the case means the end of the execution procedure, which is different from the termination of the execution procedure. In principle, after the execution of the case is concluded, the execution procedure cannot be started again. However, the "Interpretation of the Supreme People's Court on the Application of the the People's Republic of China Civil Procedure Law" clearly stipulates that the circumstances in which the termination of execution can be resumed are limited to two types of situations, that is, "after the applicant and the person subject to execution have reached a settlement agreement, the people's court may decide to terminate the execution" and "terminate the execution due to the cancellation of the application". In the case of termination of execution under the above two circumstances, if the party subject to execution fails to perform the execution of the settlement agreement, the person applying for execution may apply to the enforcement court to resume the execution of the original effective legal document, or file a lawsuit for the performance of the settlement agreement. It is worth noting that the application for resumption of enforcement should be restricted by the provisions on the limitation of enforcement in the Civil procedure Law and judicial interpretation. (Reference Case:(2020) Supreme Law Enforcement No. 4) The view in the Supreme People's Court Civil Code Guarantee System Judicial Interpretation and Application: In trial practice, the only criterion for supporting the mortgagor is whether the statute of limitations for the principal claim has elapsed. As long as the statute of limitations period for the principal claim has not elapsed, the creditor's request should be supported. Of course, if the limitation period of the main claim expires and the creditor claims to exercise the mortgage, the people's court shall not support it. After the execution of the judgment has failed, the period of limitation of action shall be recalculated. The "failure of enforcement" here should be understood as the decision of the enforcement court to conclude the enforcement proceedings in this case on the judgment of the principal claim. Scenario 4: Bank B only filed a lawsuit against the principal claim during the statute of limitations for the principal claim, did not apply for confirmation of the mortgage, applied for enforcement within the statute of limitations after the judgment of the principal claim became effective, and then reached a settlement with Company A under court mediation, and the court ruled to terminate the enforcement proceedings. Issued by the Supreme People's Court<关于执行案件立案、结案若干问题的意见>(Fa [2014] No. 26) ", the people's court ruled that after the termination of the execution procedure, if it finds that the person subject to execution has property, it may resume execution on the application of the person applying for execution or ex officio. If the executor applies for the resumption of execution, it shall not be subject to the time limit for applying for execution. In this case, since the principal claim judgment has entered into force and Bank B has applied for enforcement within the statutory time limit, there is no question of interruption, suspension or extension of the statute of limitations for the principal claim. As a subordinate right, there is no question of interruption, suspension or extension during the exercise of the mortgage. Bank B may, when applying for the resumption of enforcement proceedings, claim the exercise of the mortgage together with the enforcement court. Scenario 5: Bank B only filed a lawsuit against the principal claim during the statute of limitations for the principal claim, did not apply for confirmation of the mortgage, applied for enforcement within the statute of limitations after the judgment of the principal claim became effective, reached a settlement with Company A under court mediation, and the court ruled to terminate the enforcement proceedings. Company A then files for bankruptcy and liquidation, and Bank B files a claim with the administrator within the statutory period. Although Company A applied to the people's court for bankruptcy liquidation in the course of execution, Bank B, with an effective judgment, declared the claim to the bankruptcy administrator during the period of filing the claim as stipulated by law, and the administrator shall confirm that the claim is a claim secured by property. The period of declaration of claims is also the period of legal protection, because Bank B exercises the main claim within the period prescribed by law, so the main claim is still protected by law, and accordingly, its mortgage should also be protected by law. Trial point of view: mortgage, as a kind of security right, does not apply the statute of limitations system. However, in order to prevent the mortgagee from exercising the mortgage right and give full play to the economic utility of the mortgaged property, the property law stipulates that the mortgagee should exercise the mortgage right within the limitation period of the main creditor's right, which is to make it clear that the mortgagee should exercise the mortgage right within the period when the main creditor's right is protected by law. The period of protection of the law, before the main claim has not been determined by the effective decision, the main claim limitation period. When the main claim is determined by the effective decision of the proceedings, at this time the main claim is not the statute of limitations, but after the decision takes effect, the main claim may not be realized, in the case of the debtor's failure to take the initiative to perform, there is still the problem of enforcement. As long as the parties apply for enforcement against the debtor during the period of application for enforcement, with reference to Article 202 of the Property Law, the mortgagee shall be deemed to have exercised his rights during the period during which the principal claim is protected by law, and the rights of the mortgagee shall still be protected. In other words, after the principal claim has been confirmed by the effective decision, the period during which the principal claim is protected by law at this time is no longer the limitation period, but the period during which the application is made. Similarly, in the case of the debtor's bankruptcy, the period during which the principal claim is protected by law is the period during which the claim is declared under the law. (Reference Case:(2021) Supreme Famin No. 154) In summary, although the law provides for the corresponding protection of the creditor's mortgage, but as the right holder, should still actively claim the right, to avoid exceeding the statutory protection period, otherwise will bear the adverse consequences of the loss of rights.</关于执行案件立案、结案若干问题的意见>

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