The Supreme Court rendered the 108-Tai-Shang-1038 Decision of August 22, 2019 (hereinafter, the “Decision”), holding that since a legal representative and a juristic person have a relationship concerning one subject of right, while an agent and a principal have a relationship concerning two subjects of right, these two scenarios involve different systems with different legal characteristics and effects.
According to the facts underlying this Decision, Company A issued a letter of authorization on April 2, 2015 to authorize Individual B, not a party to this lawsuit, to enter into a loan agreement with the Appellee on behalf of the company to take out a loan from the Appellee. Company A provided a check issued by itself and endorsed by Individual C, its legal agent, a check issued by the Appellant’s company and endorsed by Individual C and a promissory note issued by Individual C as the collateral. The Appellee remitted the loan to the account designated by the company shortly thereafter. However, Company A failed to repay the loan as scheduled by the repayment deadline. The checks presented to be cashed by the Appellee were both rejected, and no payment was made, either, when the promissory note was presented to Individual C. Therefore, the Appellee asserted that the Appellant should be requested to honor the payment for the negotiable instruments. In addition, since Company A had a claim over the Appellant but was negligent in exercising its right and it was necessary for the Appellee to secure the claim over the loan by way of subrogation, the Appellant could be requested repay the loan, and when any person from Company A makes the repayment, the other individual should be exempt from the repayment obligation within the scope of the repayment in accordance with Article 144, to which Paragraph 1 of Article 85 of the law applies mutatis mutandis, of the Negotiable Instruments Law; or a court decision may be sought on behalf of Company A under Article 242 of the Civil Code to require that the Appellant shall pay Company A and the Appellee shall receive the payment by way of subrogation in accordance with Article 478 of the Civil Code.
According to the Decision, the Appellant, who issued the checks at issue, is required to be liable for the negotiable instruments according to their literal meaning. This is different from the circumstances under the Civil Code that when the principal debtor fails to perform an obligation, the guarantor set forth in the guarantee agreement shall perform the obligation on behalf of the debtor. Therefore, the Appellant’s issuance of the checks does not fall within the scope of prohibition under Article 16, Paragraph 1 of the Company Law. In addition, the legal characteristics and effect of “representative” and “agent” are both different. A “representative” is indispensable in the organic law for juristic persons. The representative and the juristic person have a relationship concerning one subject of right, and the representative’s act, be it a legal act, factual act or an act of tort, is equivalent to the act of the juristic person. As for the relationship between the agent and the principal, since it pertains to two subjects of right, the agent’s act is not equivalent to the act of the principal and the effect of such act only applies to the principal, not to mention that an agent may only engage in a legal act or quasi-legal act on behalf of the principal.
It was further pointed out in this Decision that since the checks at issue were endorsed by Individual C after they were issued and then handed over to Company A for transfer to the Appellee, the above-mentioned acts concerning the negotiable instruments did not involve any agent, and there was no issue concerning the principal’s agent or the agent of both parties. The original trial court, which concluded that the Appellee could seek payment for the checks from the Appellant, was not legally inappropriate. The appeal arguments were groundless.