Oli Wong
The Taiwan High Court rendered the 105-Shang-181 Civil Decision of May 24, 2016 (hereinafter, the “Decision”), holding that if an issuer who has delivered a promissory note to the holder to guarantee performance of an agreement subsequently fails to return the investment principal to the holder pursuant to the agreement, there is no unjust enrichment for the holder to exercise of the right over the promissory note.
The Appellant asserted as follows. Both parties had entered into the cooperation agreement at issue with consignment characteristics and agreed that the Appellee would wire payment to the Appellant’s account and then the Appellant will consign Company A to engage in copy trading on his behalf. After the deal was done, the Appellant would wire the profits to the Appellee’s designated account. After the Appellee’s remittance, the Appellant also handed over a promissory note to the Appellee as security for performing the cooperation agreement at issue. However, since Company A’s Hong Kong agent made away with the money, resulting in the Appellant’s failure to recover the money invested by the Appellee even today. Since the Appellant was not obligated to ensure the principal protection of the investment fund under the agreement, the debt secured by the promissory note issued by the Appellant did not exist. Therefore, the Appellant filed a declaratory suit to confirm that the debt secured by the promissory note did not exist on the ground of causation defense.
According to the Decision, a close review of the cooperation agreement at issue indicates that there is no provision or anything similar in nature that indicates the Appellant is not obligated to return the principal in the event of any investment loss. Moreover, Articles 1 and 4 of the cooperation agreement at issue provide that regardless of whether the investment generates profits or incurs losses, the Appellee may request the return of the investment principal at any time. Therefore, the Appellant’s issuance and delivery of the promissory note to the Appellee sought to guarantee his performance of the cooperation agreement at issue. Since the Appellant subsequently did not return the investment principal to the Appellee pursuant to the cooperation agreement at issue, the Appellee could certainly exercise his right over the promissory note. In addition, since the Appellant did not prove that the Appellee’s right over the promissory note did not exist, the Appellant could not contend that the Appellee’s promissory note claim over the Appellant did not exist simply on the ground of the causation relationship between the parties immediately prior to the holder of the promissory note under Article 13 of the Negotiable Instruments Law (to guarantee the performance of the cooperation agreement at issue). Therefore, after the Appellee applied to the court to approve the compulsory enforcement of the promissory note, the application to the court to compulsorily enforce the Appellant’s assets so that the Appellee could receive the Appellant’s bank deposit had valid legal reasons without giving rise to the issue of unjust enrichment under Article 179 of the Civil Code. Therefore, the Taiwan High Court rejected the Appellant’s appeal for insufficiency of ground.