The Supreme Court rendered the 108-Tai-Chien-Shang-9 Decision of July 25, 2019 (hereinafter, the “Decision”). According to the facts underlying this Decision, the Appellant, a shareholder and employee of Guang Da Xing International Co., Ltd. (hereinafter, “GDX Co.”), issued the promissory note at issue to GDX Co. to guarantee the payment of goods purchased from Xuxie. The Appellee, the legal representative of GDX Co., obtained the promissory note at issue from GDX Co. However, when the Appellee sought to assert rights over the Appellant, the Appellant contended that he had issued the promissory note to GDX Co. under coercion and asserted that since the Appellee obtained the promissory note at issue in bad faith, the Appellee should not be the rights holder of the promissory note.
According to this Decision, the requirement that a person who acquires a negotiable instrument in bad faith shall not enjoy any rights in the negotiable instrument under Article 14, Paragraph 1 of the Negotiable Instruments Law refers to the circumstance where the ownership of the negotiable instrument is originally obtained from a person without a disposal right; and the rights over the negotiable instrument may be enjoyed only if the negotiable instrument is assigned by a person with a legitimate disposal right. In addition, if the promissory note at issue was acquired in bad faith, this would merely trigger the provision of the proviso of Article 13 of the Negotiable Instruments Law, which provides that the obligor of a negotiable instrument may assert his/her disputes with the predecessor of the issuer or holder against the holder. Therefore, the court in this case concluded that since the promissory note was handed over by GDX Co. to the Appellee, the Appellee received the negotiable instrument assigned by a person with a legitimate disposal right and thus should be entitled to the rights over the negotiable instrument.