Precedent No. 36/2020/AL

Precedent No. 36/2020/AL on the validity of a mortgage contract on land use rights when the land use right certificate is revoked or cancelled was adopted by the Council of Judges of the Supreme People's Court on February 5, 2020 and promulgated under Decision No. 50/QD-CA dated February 25, 2020 of the Chief Justice of the Supreme People's Court.

Source of case law:

Final judgment No. 05/2018/KDTM-GDT dated May 18, 2018 of the Council of Judges of the Supreme People's Court on the commercial business case  "Credit contract dispute"  in Ba Ria - Vung Tau province between the plaintiff, Joint Stock Commercial Bank V, and the defendants, Mr. Nguyen Van C and Ms. Vu Thi T.

Location of case law:

Paragraph 2, 3 of the “Court's Opinion” section.

Overview of case law:

- Case law:

The land use rights mortgage contract complies with the provisions of law, but the land use rights certificate is later revoked or canceled due to errors in land area and procedures for granting land use rights certificates. The revocation or cancellation of the land use rights certificate does not remove the legal land use rights of the land user.

- Legal solutions:

In this case, it is necessary to determine whether the land use rights mortgage contract is legally valid.

Legal provisions relating to precedents:

- Articles 322, 343 of the 2005 Civil Code; Articles 342, 411 of the 2005 Civil Code (corresponding to Articles 317, 408 of the 2015 Civil Code);

- Articles 61 and 62 of the 2003 Land Law; Articles 46 and 106 of the 2003 Land Law (corresponding to Articles 95 and 167 of the 2013 Land Law).

Keywords of case law:

“Land use right certificate revoked or cancelled”; “Validity of mortgage contract”.

CASE CONTENT

In the petition dated May 18, 2011 and during the proceedings, Joint Stock Commercial Bank V stated:

On March 22, 2010, Bank V signed Credit Contract No. 10.36.0015 with Mr. Nguyen Van C and Ms. Vu Thi T. Accordingly, Bank V lent Mr. C and Ms. T VND 900,000,000, with a term interest rate of 12%/year; overdue interest rate of 150% of the term interest rate; loan term of 12 months. To secure the loan, Mr. C and Ms. T mortgaged the property being the right to use a land plot with an area of ​​3,989.7m2 ^belonging  to plot No. 12, map sheet No. 05, commune H, town B (Land use right certificate No. D544493 issued by the People's Committee of town B on July 14, 2004) according to Mortgage Contract No. 10.36.0015 dated March 18, 2010. The secured transaction was registered at the Land Use Rights Registration Office of Town B on March 19, 2010.

After borrowing money, Mr. C and Ms. T did not fulfill their payment obligations to Bank V. Therefore, Bank V requested Mr. C and Ms. T to pay the entire debt of VND 1,449,537,500 (including VND 900,000,000 in principal and VND 549,537,500 in provisional interest calculated up to July 17, 2013 and interest accrued up to the repayment date).

During the period when the Mortgage Contract was in effect, the People's Committee of Town B issued Decision No. 3063/QD-UBND dated August 31, 2011 to revoke the Land Use Right Certificate No. D544493. However, Bank V determined that although the Land Use Right Certificate No. D544493 no longer exists, the right to use the area of ​​2,400m2 of ^land  that Mr. C and Ms. T previously received the transfer (after adjusting according to reality) has been completed, so it still has value as a guarantee for the loan of Mr. C and Ms. T. Bank V will request the Civil Judgment Enforcement Office of City B to prioritize auctioning and payment to Bank V.

The defendant, Mr. Nguyen Van C, stated:

He confirmed that the information about the Credit Contract and Mortgage Contract as presented by Bank V is correct. After borrowing, he paid Bank V a part of the interest debt of VND 122,775,000, but has not paid the principal, and he agreed with Bank V's request to sue.

Mr. and Mrs. T filed an administrative lawsuit against Decision No. 3063/QD-UBND dated August 31, 2011 of the People's Committee of Town B. Although the Court of First Instance and the Court of Appeal both did not accept his request, he requested the Court to resolve the case according to the provisions of law because the secured assets no longer exist.

In the First Instance Commercial Judgment No. 04/2013/KDTM-ST dated December 10, 2013, the People's Court of Ba Ria - Vung Tau province decided:

Force Mr. Nguyen Van C and Ms. Vu Thi T to pay Joint Stock Commercial Bank V - Branch B the amount of VND 1,449,537,500, of which VND 900,000,000 is the principal and VND 549,537,500 is the interest.

Declaration of Mortgage Contract No. 10.36.0015 dated March 18, 2010 signed between Joint Stock Commercial Bank V - Branch B with Mr. Nguyen Van C and Ms. Vu Thi T on the mortgage of land area of ​​3,989.7m2 ^belonging  to plot No. 12, map sheet No. 05, H commune, B town, according to Land Use Right Certificate No. D544493 issued by the People's Committee of B town (now the People's Committee of B city) on July 14, 2004 in the name of Mr. Nguyen Van C and Ms. Vu Thi T is invalid. Therefore, there is no value to secure debt payment for Credit Contract No. 10.36.0015 dated March 22, 2010.

On December 23, 2013, Joint Stock Commercial Bank V - Branch B filed an appeal.

In the Commercial Appeal Judgment No. 48/2014/KDTM-PT dated August 15, 2014, the Appeal Court of the Supreme People's Court in Ho Chi Minh City decided:

Not accepting the appeal request of Joint Stock Commercial Bank V - Branch B; upholding the First Instance Commercial Judgment No. 04/2013/KDTM-ST dated December 10, 2013 of the People's Court of Ba Ria - Vung Tau province.

Accept the lawsuit request of Joint Stock Commercial Bank V - Branch B regarding the credit contract dispute against Mr. Nguyen Van C and Ms. Vu Thi T.

– Force Mr. Nguyen Van C and Ms. Vu Thi T to pay Joint Stock Commercial Bank V – Branch B the amount of VND 1,449,573,500, of which the principal is VND 900,000,000 and the interest is VND 549,573,500.

– Declare that mortgage contract No. 10.36.0015 dated March 18, 2010 signed between Joint Stock Commercial Bank V – Branch B with Mr. Nguyen Van C and Ms. Vu Thi T on the mortgage of an area of ​​3,989.7m2 ^belonging  to land plot No. 12, map sheet No. 5, H commune, B town according to Land Use Right Certificate No. D544493 issued by the People's Committee of B town (now B city) on July 14, 2004 in the name of Mr. Nguyen Van C and Ms. Vu Thi T is invalid. There is no value to secure debt payment for credit contract No. 10.36.0015 dated March 22, 2010.

Other decisions of the first instance judgment that are not appealed or protested shall take legal effect from the date of expiration of the appeal or protest period.

After the appeal trial, Bank V filed a request for review under the cassation procedure for the above-mentioned Appellate Judgment.

On August 15, 2014, the Chief Justice of the Supreme People's Court protested the Commercial and Business Appeal Judgment No. 48/2014/KDTM-PT of the Appellate Court of the Supreme People's Court in Ho Chi Minh City regarding the part declaring the Mortgage Contract No. 10.36.0015 dated March 18, 2010 invalid; requested the Council of Judges of the Supreme People's Court to review the case and partially annul the above Commercial and Business Appeal Judgment and partially annul the Commercial and Business First Instance Judgment No. 04/2013/KDTM-ST dated December 10, 2013 of the People's Court of Ba Ria - Vung Tau province regarding the part declaring the Mortgage Contract No. 10.36.0015 dated March 18, 2010 invalid; and transferred the case file to the People's Court of Ba Ria - Vung Tau province for retrial in accordance with the provisions of law.

At the appeal hearing, the representative of the Supreme People's Procuracy requested the Supreme People's Court's Judicial Council to accept the Appeal of the Chief Justice of the Supreme People's Court.

JUDGMENT OF THE COURT

[1] Bank V and Mr. Nguyen Van C jointly confirm that Bank V, Mr. Nguyen Van C and Ms. Vu Thi T signed Credit Contract No. 10.36.0015 dated March 22, 2010 and Mortgage Contract No. 10.36.0015 dated March 18, 2010. The mortgaged property is a land area of ​​3,989.7m2 ^belonging  to plot No. 12, map sheet No. 05, H commune, B town, according to Land Use Rights Certificate No. D544493 issued by the People's Committee of B town on July 14, 2004 in the name of Mr. Nguyen Van C and Ms. Vu Thi T. The property was registered for secured transaction at the Land Use Rights Registration Office of B town on March 19, 2010. According to the provisions of Article 343 of the 2005 Civil Code; Point c, Clause 1, Article 10 and Point a, Clause 1, Article 12 of Decree No. 163/2006/ND-CP dated December 29, 2006 of the Government on secured transactions, the above mortgage of land use rights is in accordance with the provisions of law.

[2] On August 31, 2011, the People's Committee of Town B issued Decision No. 3063/QD-UBND on the revocation and cancellation of Land Use Right Certificate No. D544493 issued by the People's Committee of Town B on July 14, 2004 in the name of Mr. Nguyen Van C and Ms. Vu Thi T. The revocation and cancellation of the above Land Use Right Certificate was due to errors in land area and procedures for granting the Land Use Right Certificate to Mr. C and Ms. T. However, the revocation and cancellation of the Land Use Right Certificate does not remove the legal right to use the transferred land of Mr. C and Ms. T, because the transfer of land use rights between Mrs. Tran Thi Ngoc H, Mr. Tran Huynh L and Mr. C and Ms. T has been completed, and the parties have no dispute over this Transfer Contract.

[3] On the other hand, before the Land Use Rights Certificate of Mr. C and Mrs. T was revoked, Mr. C and Mrs. T mortgaged this land use rights to the Bank many times to borrow money, most recently on March 19, 2010. The land use rights mortgage contract of Mr. C and Mrs. T with the Bank complied with legal regulations, so this Contract is legally valid. The Court of First Instance and the Court of Appeal based on Article 411 of the 2005 Civil Code held that the Land Use Rights Mortgage Contract No. 10.36.0015 dated March 18, 2010 mentioned above was invalid because the subject of this Mortgage Contract was no longer valid.

[4] In Official Dispatch No. 887/CNVPĐK-ĐKCG dated March 28, 2017, the Branch of the Land Registration Office of City B determined: After the People's Committee of Town B issued Decision No. 3063/QD-UBND on the revocation and cancellation of the Land Use Right Certificate No. D544493 and the Administrative Appeal Judgment No. 01/2013/HC-PT dated January 4, 2013 of the People's Court of Ba Ria - Vung Tau province with legal effect, the Civil Judgment Enforcement Office of City B issued Decisions to enforce judgments according to the civil judgments that had come into legal effect that Ms. Tran Thi Ngoc H was obliged to enforce. Accordingly, the auction of the property area of ​​2,741.1m2 ^of  land belonging to plot 386, map sheet No. 05, H commune was held. Mr. Bui Van C1 was the winner of the auction of the right to use the area of ​​2,747.1m2 of ^land  . On March 14, 2016, the People's Committee of City B issued the Certificate of Land Use Rights No. CA959055 for the above auctioned area to Mr. Bui Van C1.

[5] Therefore, to ensure the rights and obligations of the parties, when re-examining the case, the Court of First Instance must base on Clause 4, Article 68 of the Civil Procedure Code to include the Civil Judgment Enforcement Office of City B, Ms. Tran Thi Ngoc H, Mr. Bui Van C1 and the People's Committee of City B in the proceedings as persons with related rights and obligations to comprehensively and thoroughly resolve the case.

For the above reasons;

DECISION

Pursuant to Point a, Clause 2, Article 137, Clause 3, Article 343 and Article 345 of the 2015 Civil Procedure Code;

1. Accept the Decision of appeal for review No. 17/2017/KN-KDTM dated August 4, 2017 of the Chief Justice of the Supreme People's Court.
2. Partially annul the Commercial Appellate Judgment No. 48/2014/KDTM-PT dated August 15, 2014 of the Appellate Court of the Supreme People's Court in Ho Chi Minh City and partially annul the Commercial First Instance Judgment No. 04/2013/KDTM-ST dated December 10, 2013 of the People's Court of Ba Ria-Vung Tau Province regarding the case "Credit Contract Dispute" between the plaintiff, Joint Stock Commercial Bank V, and the defendants, Mr. Nguyen Van C and Ms. Vu Thi T, regarding the declaration of the Mortgage Contract No. 10.36.0015 dated March 18, 2010 as invalid.
3. Transfer the case file to the People's Court of Ba Ria - Vung Tau province for retrial according to first instance procedures, in accordance with the provisions of law.

CONTENT OF PRECEDENT

“[2] On August 31, 2011, the People's Committee of Town B issued Decision No. 3063/QD-UBND on the revocation and cancellation of the Land Use Right Certificate No. D544493 issued by the People's Committee of Town B on July 14, 2004 in the name of Mr. Nguyen Van C and Ms. Vu Thi T. The revocation and cancellation of the above-mentioned Land Use Right Certificate were due to errors in the land area and procedures for granting the Land Use Right Certificate to Mr. C and Ms. T. However, the revocation and cancellation of the Land Use Right Certificate did not remove the legal right to use the transferred land of Mr. C and Ms. T, because the transfer of land use rights between Mrs. Tran Thi Ngoc H, Mr. Tran Huynh L and Mr. C and Ms. T was completed, and the parties had no dispute over this Transfer Contract.

[3] On the other hand, before the Land Use Rights Certificate of Mr. C and Mrs. T was revoked, Mr. C and Mrs. T mortgaged this land use rights to the Bank many times to borrow money, most recently on March 19, 2010. The land use rights mortgage contract of Mr. C and Mrs. T with the Bank complied with legal regulations, so this Contract is legally valid. The Court of First Instance and the Court of Appeal based on Article 411 of the 2005 Civil Code held that the Land Use Rights Mortgage Contract No. 10.36.0015 dated March 18, 2010 above is invalid because the subject of this Mortgage Contract is no longer valid.

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