Teresa Huang
The Supreme Court rendered the 108-Tai-Shang-779 Decision of August 14, 2019 (hereinafter, the “Decision”), holding that although Article 16, Paragraph 1 of the Company Law specifically provides that a company shall not serve as a guarantor, still a company is allowed to jointly issue or endorse checks within the remit of the law.
According to the facts underlying this Decision, the Appellee asserted that the Appellant presented a promissory note jointly issued by the Appellee’s predecessor Company A to the Taipei District Court of Taiwan in a compulsory enforcement motion, which was granted by the court. However, since the impression of the seal on Company A’s promissory note at issue is not consistent with the seal specimen in the company’s incorporation registration form, the promissory note should be forged. Even if it is not, Company A neither had business or tax debts nor issued the promissory note at issue, nor accepted any such payment from the Appellant. Therefore, the promissory note claim does not exist. The Appellee also asserted that Co-defendant C in the first instance trial had issued the promissory note on behalf of Company A merely for the purpose of guaranteeing the debt Co-defendant C owed to B, not a party to this lawsuit. Since this was not an operation matter of the company and was not recognized by the company, it was not binding to the Appellee. In addition, since the Appellee did not operate a guarantee business, the guarantee is also invalid under Article 16, Paragraph 1 of the Company Law. The Appellee held that since the parties are direct parties to the negotiable instrument, the Appellee raised a defense based on the cause of defense between the parties according to the opposite interpretation in the first part of Article 13 of the Negotiable Instruments Law. Since the Appellant did not enjoy the right over the promissory note at issue, the Appellant sought to declare that the Appellant’s claim for the Appellee’s promissory note at issue did not exist.
According to the Decision, although Article 16, Paragraph 1 of the Company Law provides that a company shall not serve as a guarantor, still the law does not prohibit a company from jointly issuing or endorsing checks. The Appellant contended time and again in the trial court that Co-defendant C issued and delivered the promissory note at issue on behalf of Company A, which is different from the requirement that a company shall not provide a guarantee set forth in Article 16 of the Company Law. Since this is closely tied to the existence of the Appellant’s claim for the promissory note at issue and is an important defense method, the original trial court was certainly erroneous for insufficiency of grounds due to its failure to explain the opinions considered and rejected in detail in the decision reasons before rendering a decision against the Appellant. In addition, Co-defendant C testified in the hearing of the matter concerning the non-existence of the promissory note claim at the Taipei District Court that Company A only had one director, namely, Co-defendant C, who issued the promissory note to repay his NT$200 million debt owed under a specific contract. If that is true, does it mean that Co-defendant C’s issuance and delivery of the promissory note are not attributable to Company A’s act of guarantee? In this case, the court held that since the original trial court made a determination unfavorable to the Appellant without exploring the details, the gist of the appeal, which criticized the original decision for its violation of laws and regulations and requested its reversal, is not groundless.