December 2022
Sean Tang and Pei-Ching Ji
The Grand Civil Chamber of the Supreme Court rendered the 110-Tai-Kang-Da-1069 Civil Ruling of October 21, 2022 (hereinafter, the “Ruling), holding that when a creditor of a line of credit mortgage applies for compulsory enforcement with the ruling on the auction of the collaterals as the enforcement title, although the secured claim on which the enforcement title based does not exist according to a final and binding judgement, if the enforcement court believes, according to its formal review, that based on other claim supporting documents submitted by the debtor, it is sufficient to confirm the existence of other past-due outstanding secured claims, the compulsory enforcement application shall not be dismissed based on the debtor’s statement of objection.
The issue of this Ruling is that after an application for a ruling that approves the auction of the collaterals by the creditor of the line of credit mortgage holding a promissory note as the claim supporting document is granted, the creditor then applies to the court for compulsory enforcement with the ruling as the enforcement title. If a final and binding judgement is rendered to confirm that the promissory note claim relied on by the creditor as the enforcement title does not exist, while the same judgement also affirms the existence of other claims secured by the mortgage, can the enforcement court dismiss the creditor’s compulsory enforcement application on the ground that the basis of the enforceability of the enforcement title is lost according to the debtor’s statement of objection?
1. The facts in the Ruling:
A creditor of the line of credit mortgage used a ruling on the auction of the collaterals as the enforcement title and applied for compulsory enforcement to auction the collaterals on the ground that the promissory note claim was not satisfied. The debtor filed a lawsuit to: (1) confirm the non-existence of the claim involved in the line of credit mortgage and of the promissory note claim; and (2) cancel the registration of the line of credit mortgage. The court of the above-mentioned lawsuit determined that although the price claim arising from the installment payment sales contract between the predecessor of the creditor and the debtor and the promissory note claim of the same amount did not exist, still for the debtor ‘s claim seeking to cancel the mortgage registration, the court held that for the mortgage specified in the enforcement title there was still an outstanding claim of over NT$100 million and was still secured by the line of credit mortgage. Therefore, the court dismissed the debtor’s request to cancel the mortgage registration. The debtor asserted that the enforceability of the ruling on the auction of the collaterals had been extinguished and could not serve as the basis of enforcement anymore, since the mortgage claim and the promissory note claim that serve as the basis of the enforcement title for applying for the auction of the collaterals did not exist pursuant to the court decision.
2. The opinion in the Ruling:
(1) The enforcement court should conduct compulsory enforcement based on the matters of enforcement as indicated in the enforcement title, and the matters of enforcement should be determined by the main text of the ruling. As for the reasons for the ruling concerning the claim application, they only suggested that since the creditor’s secured claim has become due and not yet satisfied, the criteria for the application to auction the collaterals are met, and the reasons have no bearing on the objective scope of the enforceability of the ruling.
(2) Pursuant to Article 881-1, Paragraphs 1 and 2 and Article 881-12, Paragraph 1, Subparagraph 5 of the Civil Code, since the principal claim secured by the line of credit mortgage is determined when the mortgagee applies for a ruling on the auction of the collaterals, the claim which has existed when the mortgagee applies for a ruling to auction the collaterals, and derived from a specific legal relationship is secured by the mortgage.
(3) Therefore, a creditor applies for compulsory enforcement based on a ruling on the auction of the collaterals as the enforcement title and submits the evidentiary documents for the claim and mortgage and the original copy of the ruling in accordance with Article 6, Paragraph 1, Subparagraph 5 of the Compulsory Enforcement Act for the formal review by the enforcement court to determine if the enforcement procedure is to be initiated and how much should be delivered or distributed to the creditor after the auction is concluded and settled. If the enforcement court believes that there is still any past-due and outstanding secured claim, the enforcement procedure may certainly be initiated based on the ruling of the non-litigation court as the enforcement title without giving rise to the issue of replacing the authority of the non-litigation court with that of the enforcement court.
3. Analysis (Conclusion)
Regarding the issue of whether the enforceability of the original enforcement title still exists if the debtor files a suit to confirm the nonexistence of the claim and obtains a favorable final and binding court decision after the enforcement title for the compulsory enforcement of a nonlitigation matter is established, the Supreme Court’s long-standing position is that the enforceability of the original enforcement title in the above situation certainly does not exist. If the matter is still under compulsory enforcement, the debtor may file a statement of objection in accordance with Article 12 of the Compulsory Enforcement Act. This opinion was adopted in both the 79-Tai-Kang-300 and the 80-Tai-Shang-36 Decisions of the Supreme Court (hereinafter, the “Previous Cases”).
The opinion in this Ruling is that during the period of compulsory enforcement of a line of credit mortgage for which an auction application is filed, when the claim relied on by the enforcement title is determined by a court decision to be nonexistent, if the enforcement court can sufficiently determine, based on its formal review, that there are still other past-due secured claims, it should not dismiss the compulsory enforcement application. It is necessary to clarify if this opinion overturns the opinion reflected in the Previous Cases and raises the concern of violating the seperation of powers between the non-litigation court and the enforcement court and thus undermines the authority of the non-litigation court.
As to whether this Ruling overturns the opinions in the Supreme Court’s previous decisions, since the Grand Chamber’s ruling is an interlocutory ruling in nature that only binds individual cases, it is necessary to observe the facts of this case. The type of mortgage involved in this case is a line of credit mortgage, and the judgement that confirmed that the promissory note claim relied on as the enforcement title did not exist also concurrently concluded that there were still past-due and outstanding claims and both were secured by the line of credit mortgage at issue, which is different from the Previous Cases, in which the facts of the cases pertained to ordinary mortgages. Therefore, this Ruling has the effect of an earlier ruling for line of credit mortgage cases only, and if different courts adopt different legal opinions, they should initiate inquiries again and apply to the Grand Chamber. The opinion in the Previous Cases still applies to ordinary mortgage cases.
With respect to the seperation of powers between the non-litigation court and the enforcement court, the dissenting opinions in this Ruling are based on the differences in the procedural protection of the parties between the procedure for applying to the non-litigation court for a ruling on the auction of the collaterals and the enforcement procedure of the enforcement court and hold that the enforcement court should not replace the non-litigation court in reviewing the existence of the secured claim. Therefore, for the claim relied on by the mortgagee to obtain a ruling that approves the auction of the collaterals, if the debtor or mortgagor files a suit to confirm that the claim does not exist and secures a favorable final decision, the enforceability of the enforcement title will no longer exist on the basis of the formal review. In addition, some of the dissenting opinions in this Ruling hold that the application of this Ruling should be limited to a past-due secured claim when the non-litigation court renders a ruling to approve the auction of the collaterals. However, secured claims that become due only after the non-litigation court renders a ruling to approve the auction of the collaterals do not fall within the scope of the conclusions of the Ruling.
Since the Grand Chamber only instructed the facts in the application and did not provide an abstract normative statement that goes beyond the scope of the application, this Ruling holds: (1) the judgement in this case that confirms the nonexistence of the promissory note claim relied on as the enforcement title also concurrently holds in its reasons that there are still past-due and outstanding claims and that both are secured by the line of credit mortgage at issue, and (2) Article 74 of the Non-litigation Matters Act had not been amended when the ruling on the auction of the collaterals in this case was rendered, and the provision that the debtor should be given an opportunity to state his/her opinion regarding the amount of the claim secured by the mortgage before a ruling on the auction of the collaterals is rendered does not apply. When the case facts do not obviously differ in terms of the review procedures of the non-litigation court and the enforcement court for such an aspect, it remains to be seen if the conclusions always apply to line of credit mortgage compulsory enforcement cases.
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