The Taiwan High Court rendered the 105-Shang-583 Civil Decision of January 11, 2017 (hereinafter, the “Decision”), holding that a bank is responsible for relevant credit investigation and identity verification before a mortgage loan is established and shall not determine that the principal shall be liable for the loan for authorizing an apparent agent solely on account of the principal’s seal and seal specimen presented by another person.
According to the facts underlying this Decision, the Appellee asserted that he had handed over his seal to A only and agreed that the property at issue would be registered in the name of him through name borrowing without agreeing to or authorizing A’s application for the loan at issue from the Appellant. In addition, the signature in the mortgage loan agreement was not affixed by the Appellee personally but rather forged by A, who forged a copy of the Appellee’s ID card by attaching A’s photo on top of the Appellee’s in the ID card. Therefore, a complaint was filed to seek a declaratory judgment that the loan at issue did not exist. The original trial court rendered a decision against the Appellant. Dissatisfied, the Appellant appealed.
According to the Decision, any person who indicates, by way of his/her action, authorization to another person shall be liable as an authorizer. However, this scenario is valid only when it is supported by a fact of apparent agency to an extent that a third party believes in the existence of such agency rights. Although the Appellee provided his seal and seal specimen, still he admitted that he only agreed to authorize A to register the ownership of the property at issue through name borrowing, and that there was no other evidence that substantiated the Appellee also authorized the application for the loan at issue. In addition, taking out a mortgage loan from a bank is a major financial transaction for ordinary members of society. To avoid ambiguity and exercise prudence and internal risk control, a bank is required to establish its internal control and audit systems. Therefore, it should have put in place all kinds of credit investigation operations and identity verification and audit procedures. Since the Appellant is required to conduct relevant credit investigation and identity verification for the loan at issue to be established, it is certainly difficult to determine that the Appellee shall be liable for the loan at issue for authorizing an apparent agent solely on account of the Appellee’s seal and seal specimen presented by A. Therefore, the Appellant’s appeal was dismissed.