Viewpoint... The issue of mortgage determination when the creditor is inconsistent with the nominal mortgagee.

The Supreme People's Court on the application<中华人民共和国民法典>Article 4 of the interpretation of the relevant guarantee system stipulates that "in one of the following circumstances, the parties register the real right for security in the name of another person, the debtor fails to perform the due debt or the realization of the real right for security agreed by the parties occurs, and the creditor or its trustee claims priority compensation for the property, the people's court shall support it according to law: 'the real right for security provided by the (I) for bondholders shall be registered in the name of the bond trustee; the security interest provided by the (II) for the entrusted lender is registered in the name of the trustee; (III) other situations where the guarantor knows that there is an entrustment relationship between the creditor and others'", this article clarifies the feasibility of mortgage realization when the nominal mortgagee is not the real obligee, under the creditor's rights relationship, entrusted loan relationship and the guarantor knows that there is an entrustment relationship between the actual creditor and the registered mortgagee.

The entrusted holding of the security right breaks through the subordinate attribute of the security in form, resulting in the inconsistency between the registered security right holder and the creditor, and the legal basis of the entrusted holding of the security right is the anonymous agent, that is, the trustee registers the mortgage right on behalf of the actual creditor in his own name. According to Article 925 of the the People's Republic of China Civil Code, "if the trustee concludes a contract with a third party in his own name within the scope of the authorization of the principal, if the third party knows the agency relationship between the trustee and the principal at the time of conclusion of the contract, the contract directly binds the principal and the third party; however, it can be seen that there is definite evidence to prove that the contract only binds the trustee and the third party, to satisfy the actual creditor's entitlement to the pledgee and to break through the subordination of the security, it is necessary to satisfy and prove that the guarantor is aware of the existence of a principal relationship between the actual creditor and the other person.

On January 20, 2013, Wang mou (lender) and company a (borrower) signed the loan contract. the contract stipulates that the loan amount is 169.5 million yuan and the loan period is from January 21, 2013 to August 20, 2013. The borrower's shareholders shall provide repayment guarantee and sign a separate guarantee contract. The borrower shall provide not less than 500 mu of land use right under its name as guarantee for repayment and register the mortgage, and sign a separate land mortgage contract. The borrower's shareholders pledge 70% of their equity in company a to the lender as repayment guarantee, and sign a separate equity pledge agreement.

After A company and B company signed two "land mortgage contract", A company in its name under the state-owned land use rights, for Wang under the "loan contract" under the mortgage guarantee. After the signing of the contract, both parties applied for the issuance of other rights certificates, stating that the owner of other rights to the land is Company B and the obligor is Company A, and the scope of registration is the scope of registration of the above-mentioned state-owned land use certificate.

Borrower A company failed to repay the loan principal and interest on time in accordance with the "loan contract", Wang, B company to the court of first instance, demanding that A company repay the loan principal and interest and Wang on the above-mentioned mortgage land auction, sale of the proceeds of the price of priority compensation.

1. Views of the Court of First Instance

In the first instance, the court took whether Wang had the priority right to compensation for the land use right involved in the case as the main focus of the dispute. The court of first instance held that, according to Article 179 of the Property Law, when the parties set up a mortgage, the mortgagee should be a creditor, that is, the two should be consistent. In this case, although the two Land Mortgage Contracts signed by Company A and Company B stipulate that the main contract of the Land Mortgage Contract is the Loan Contract signed by Wang and Company A, it also states that the mortgagee is Company B, and the mortgagee specified in other title certificates corresponding to the above Land Mortgage Contract is also Company B, that is, the creditor is Wang, the mortgagee is Company B, the mortgagor is Company A, and the creditor is inconsistent with the mortgagee. In accordance with Article 172 of the Property Law, which states that "the creation of security interests shall be in accordance with the provisions of this Law and other laws. The guarantee contract is the subordinate contract of the principal creditor's right and debt contract. The mortgage contract is the subordinate contract of the creditor's right and debt contract. The purpose of setting the mortgage right according to the mortgage contract is to guarantee the realization of the creditor's right. Only when there is a creditor's right can there be a mortgage right. Therefore, the subordinate attribute is an important characteristic of the mortgage right, which is reflected in the establishment of the mortgage right on the premise of the creditor's right. Article 192 of the Property Law, which stipulates that mortgages may not be transferred separately from claims or as security for other claims, also clarifies the subordination of the disposition of mortgages. As mentioned above, in this case, although Wang is a creditor, but not the mortgage contract agreement and other certificate of the mortgagee, therefore, the main contract in the Land Mortgage Contract signed by Company A and Company B regarding the guarantee of the contract is the agreement of the Loan Contract between Wang and Company A, and the creation of the mortgage accordingly does not comply with the law. Therefore, according to the case involving the "land mortgage contract" and other certificates, Wang claimed that the legal basis for the priority of compensation for the land use right involved in his case was insufficient, and the court of first instance did not support it. As for Wang mou's argument that the above-mentioned land use right could not be mortgaged and registered in his name because the registration authority did not allow the land use right to be mortgaged and registered in the name of a natural person, which is not within the scope of the trial of this case, nor can it be used as the reason for the mortgage registration of the land use right under the name of company B.

2. Judgment of the Court of First Instance

The court of first instance issued (2014) Wan Min Er Chu Zi No. 00017 civil judgment, which confirmed that Wang enjoyed the principal and corresponding interest of the creditor's rights against Company A, enjoyed the right of equity pledge and required the guarantor to bear joint and several liability for settlement, but rejected Wang's claim to realize the land mortgage.

1. Views of the court of second instance

The court of second instance held that, on the question of whether Wang had the priority right to compensation for the land use right involved in the case, first of all, according to the facts ascertained in this case, after Company A signed the Loan Contract with Wang, because the local mortgage registration department did not allow the mortgage registration of the land use right under the name of a natural person, in order to fulfill the stipulations in the Loan Contract that "the Borrower shall provide the land use right of not less than 500 mu under his name as the guarantee for repayment and carry out mortgage registration, and sign the Land Mortgage Contract separately", both parties agree that Company A and Company B shall sign the Land Mortgage Contract and register the land use right involved in the case under the name of Company B, and clearly stated for the "loan contract" creditor Wang's claim to provide collateral security. In the case that the mortgage registration system is not perfect and the mortgage registration department does not allow the mortgage registration of the land use right under the name of a natural person, Company A and Wang agree that Company B and Company A sign the Land Mortgage Contract, and handle the mortgage registration in the name of Company B to provide mortgage guarantee for the Loan Contract between Company A and Wang, in essence, it is a transaction arrangement between Company A and a company in order to perform the Loan Contract between the parties. Such a transaction arrangement reflects the true intention of Company A and Wang to provide mortgage guarantee for the loan between the two parties with the land use right involved in the case, and does not violate the mandatory provisions of laws and administrative regulations. Therefore, the Loan Contract and the Land Mortgage Contract are both legal and valid.

Secondly, the Land Mortgage Contract between Company A and Company B clearly states that: in order to guarantee the performance of the debt under the main contract, that is, the Loan Contract between Company A and Wang, Company A voluntarily establishes a mortgage guarantee for the creditor's rights of the lender Wang under the main contract of the land use right registered in its name, that is, the Loan Contract. The purpose of the Land Mortgage Contract between Company A and Company B is not to mortgage the land use rights involved in the case to Company B, but to provide a mortgage guarantee for Company A's loan to Wang. That is, Company A is the case of land use rights mortgaged to the "loan contract" creditor Wang, in order to fulfill its "loan contract" between Wang, to achieve the purpose of the contract to borrow money from Wang. It can be seen that the Land Mortgage Contract between Company A and Company B is not an independent contract, but a subordinate contract attached to the Loan Contract between Company A and Wang, that is, without the Loan Contract between Company A and Wang, there would be no Land Mortgage Contract between Company A and Company B. Therefore, the establishment of the mortgage in this case did not break through the subordination of the mortgage, and there is no independent mortgage from the creditor's rights. The mortgage of the right to use the land in question complies with the provisions of Article 172 of the Property Law on the subordination of security interests.

Thirdly, Company A and Wang arranged for Company B to sign the Land Mortgage Contract and register the mortgage in the name of Company B, which is in line with the provisions of Article 187 of the Property Law on the mortgage of property such as the right to use construction land, which shall be registered and established from the time of registration. The registration of the land use right involved in the case by mortgage indicates that there is a right burden of security right on the land use right involved in the case, which has the effect of public trust to the outside world. The agreement in the Land Mortgage Contract between Company A and Company B that the land use right in the case provides a mortgage guarantee for Wang's claim is binding on Company A, Company B and Wang. In the absence of a bona fide third party relying on registration to claim rights, the attribution of rights should be determined on the basis of the agreement of the parties. According to the "Land Mortgage Contract" signed by Company A and Company B, Wang has the actual mortgage right to the land use right involved in the case and is the actual mortgagee of the land use right involved in the case. Company B is only the nominal mortgagee stipulated in the Land Mortgage Contract, and does not have the mortgage right to the land use right involved in the case, and Company B does not claim any right in the lawsuit. Due to the imperfect registration system and the fact that the registration department does not allow the mortgage of the land use right to be registered in the name of a natural person, the creditor in this case is inconsistent with the mortgagee on the registration, but the creditor and the mortgagee are inconsistent in form, in essence, the creditor and the mortgagee are still the same, and there is no substantial separation of the mortgage and the creditor's rights. Wang is not only the creditor of the Loan Contract, but also the actual mortgagee of the land use right in the case agreed in the Land Mortgage Contract, and Wang's claim to Company A is essentially the main claim of the mortgage guarantee. Therefore, Wang, as a creditor in this case, enjoys the mortgage right of the land use right involved in the case, which conforms to the general provisions of Article 179 of the Property Law on mortgage. Based on the above reasons, Wang's appeal claims that the priority of the land use right involved in the case has a contractual and legal basis, and the court supports it. The first-instance judgment found that the mortgage right in this case was separated from the creditor's rights, and Wang did not enjoy priority to the land use right involved in the case, which was an error of applicable law, and the court corrected it.

2. Court of Second Instance Judgment

The court of second instance issued a civil judgment (2015) Min Yizong Zi No. 107, revoking part of the judgment of first instance and confirming that Wang, as a creditor in this case, enjoys the mortgage right of the land use right involved in the case.