The Taichung Branch of the Taiwan High Court rendered the 104-Shang-207 Civil Decision of December 2, 2015 (hereinafter, the “Decision”), holding that in a case involving the auction of maximum limit collateral, the court only needs to conduct formal examination of documents submitted by the mortgagee, and disputes about the mortgage should be separately resolved via litigation.
According to the facts underlying this Decision, the Appellant in this matter asserted as follows. Appellee A had invited Individual B, not a party to this lawsuit, to be the joint guarantor for a loan from the Appellant. However, the loan subsequently became delinquent. After the collateral was auctioned, the loan has not been fully repaid even today. The Appellant foreclosed all of the lands owned by the debtor (i.e., Individual B) on the ground that the loan at issue was not repaid. After two court auctions, since the lands at issue were still encumbered with maximum limit mortgage set by Appellees B and C (hereinafter collectively, the “Mortgage at Issue”), there were no actual benefits from the auctions. Therefore, the lands were returned to the original entity applying for the auctions and this case was closed. However, since there was never any creditor participating in the distribution of the foreclosure auction during the past 21 and 19 years in which the Mortgage at Issue existed, this shows that the Mortgage at Issue and the claims secured by it did not exist. A complaint was filed to seek a declaratory judgment to confirm the claims did not exist and to request the removal of the Mortgage at Issue on behalf of the mortgagors.
According to the Decision, application to auction collateral is not a litigation matter. The court only needs to conduct formal examination of documents submitted by the mortgagee within the maximum mortgage limit. If the court believes that a claim exists within the scope of registered mortgage and that the claim has matured but not yet satisfied, the court should approve the auction of the collateral. As for the circumstances where a debtor or mortgagor denies the authenticity of such documents and disputes the existence of the mortgage, this matter should be separately resolved via litigation. A mortgagee is not required to file a complaint to confirm the existence of its right before applying to auction the collateral.
According to the Decision, the Mortgage at Issue was established after the land office recorded the registration data based on formal examination according to relevant materials submitted by the parties and cannot confirm whether substantive law relations effectively exist. Since the Appellees could not substantiate the existence of the claim, the Appellant’s complaint to confirm that neither the Mortgage at Issue nor the claim secured by it existed and the Appellant’s request to remove the registration of the second-order mortgage at issue were well-grounded. Therefore, a decision was rendered in favor of the Appellant.