The Supreme Court rendered the 106-Tai-Shang-1388 Civil Decision of March 14, 2018 (hereinafter, the “Decision”), holding that Article 28, Paragraph 2 of the Personal Property Secured Transactions Law seeks to compensate impairment to the value of a transaction object, which is different from the right of claim over the rental price of personal property or the price of a good or product and to which a short statute of limitations does not apply.
According to the facts underlying this Decision, the Appellee alleged in his first instance complaint that he had set up a first mortgage with the maximum loan amount on the land at issue provided as a collateral for the debt before setting up the second mortgage with the maximum loan amount for Company A. Later, the Appellant became the mortgagee of the registered second mortgage at issue after acquiring Company A. However, since the Appellee did not own any debt and was not likely to incur any new debt, the Appellee sought to cancel the second mortgage at issue. The Appellant asserted that there was still an effective financing and leasing agreement and an outstanding installment sales agreement, and that he had still sustained losses due to his inability to recover relevant objects.
The original trial court held in the original decision that the amount of each installment collected under the financing and leasing agreement was a rental price charged by an operator of leased personal property, and the installment sales agreement collected by a person not a party to this litigation as collateral which was provided by the Appellant out of goods purchased from another person to the Appellee. Therefore, this pertained to prices of goods supplied by a merchant, and the right of claim should lapse if not exercised in two years in accordance with Article 127, Subparagraphs 3 and 8 of the Civil Code. It was also concluded that since the above statute of limitations of the Appellant had expired, a decision was rendered in favor of the Appellee. Dissatisfied, the Appellant appealed.
According to the Decision, in case of a claim obtained by a personal property lessor from a lease or by a merchant from the supply of goods or products, the right of claim over the price of a lease or the price of a good or product should be finalized as soon as possible due to the inherent high frequency of transactions. Therefore, a two-year statute of limitations is imposed for this purpose. The short statute of limitations does not apply to the exercise of other rights of claim. Article 28, Paragraph 2 of the Personal Property Secured Transaction Law provides that if the value of an object which is retrieved by the seller is obviously reduced, damages may be claimed from the seller. Such damages seek to compensate impairment to the value of a transaction object and are different from the right of claim over the rental price of leased personal property or of a good or product as mentioned above. Therefore, the above statute of limitations does not apply. The original decision which held that the two-year statute of limitations should apply to the damages claim was questionable already.
Furthermore, according to this Decision, the scope of collateral for the two mortgages at issue covered all liabilities and damages arising from lease relationship or goods payment. The damages which could be claimed as asserted by the Appellant not only include the residual value under the financing and leasing agreement but also damage to the leased object which was not yet returned (recovery of its original state). In addition, with respect to the installment sales agreement, there were still losses from the inability to retrieve the objects in addition to the uncollected total price (performance benefit). Therefore, a 15-year statute of limitations should apply. Since the original trial court was at fault when it jumped to the conclusion, without further exploration, that since the damages for various agreements all pertained to the extension of, or were derived from, the right of claim over the rental price of the above leased personal property or the prices of goods or products as mentioned above, the two-year statute of limitations should apply, the original decision was reversed and remanded.