Precedent No. 43/2021/AL

On the validity of a mortgage contract in case the mortgaged property is real estate that the mortgagor accepts to transfer from another person but has not yet paid the full amount to the seller

Approved by the Council of Judges of the Supreme People's Court on February 24 , 2021 and promulgated under Decision No. 42 /QD-CA dated March 12, 2021 of the Chief Justice of the Supreme People's Court.

Source of case law:

Final judgment No. 01/2019/KDTM-GDT dated January 11, 2019 of the Council of Judges of the Supreme People's Court on the commercial business case "Credit contract dispute" in Ho Chi Minh City between the plaintiff, Bank A, and the defendant, Ms. Nguyen Thi L; the persons with related rights and obligations, Ms. Pham Thi Kim H, Mr. Duong Quoc K.

Location of case content :​​

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

Overview of case law:

- Case law:

The contract for transfer of house ownership and land use rights has been notarized, the buyer has been granted a certificate of house ownership and land use rights but has only paid a part of the purchase price for the house and land; the parties have not yet delivered the house. The buyer mortgaged the house and land to the Bank, and registered the mortgage in accordance with the law; the seller knew and agreed to let the buyer mortgage the house and land but later requested to cancel the contract for transfer of house ownership and land use rights.

- Legal solutions:

In this case, it is necessary to determine that the mortgage contract is legally valid, and not accept the request to cancel the contract for transferring house ownership rights and land use rights.

Legal provisions related to precedents:

- Articles 168, 323, 342, 425, 438, 689 of the 2005 Civil Code (corresponding to Articles 161, 298, 318, 423, 440, 502 of the 2015 Civil Code); Articles 439, 692 of the 2005 Civil Code;

- Article 10 of Decree No. 163/2006/ND-CP dated December 29, 2006 of the Government on secured transactions.

Keywords of precedent :

“Contract for transfer of ownership of housing and land use rights”; “Issuance of certificate of ownership of housing and land use rights”; “Not yet [1] paid in full for house and land purchase”; “Cancellation of contract for transfer of ownership of housing and land use rights”; “Mortgage contract”; “Mortgage registration”.

CASE CONTENT:

In the petition dated March 1, 2011 and the statements in Court, the plaintiff, Bank A (authorized by Ms. Tran Thi E), stated:

The bank lent Ms. Nguyen Thi L - Owner of Nguyen Tan D Private Trading and Service Enterprise a total of VND 8,000,000,000 under credit contract No. 6360-LAV-200900957 dated December 4, 2009, appendix to amending credit contract No. 01/PL/BS/HDTD dated December 4, 2009 and 02 debt acknowledgments (December 4, 2009 loan amount VND 7,750,000,000, December 4, 2009 loan amount VND 250,000,000) with an interest rate of 12%/year, overdue interest rate of 150% of the interest rate, loan term of 12 months. After that, the two parties signed the credit contract appendix No. 6360-LAV-200900957/PLHD dated December 15, 2010, agreeing to adjust the loan interest rate within the term to 16%/year. The collateral for the above loan includes:

- The right to use 298.3m2 ^of land and house belonging to plot number 7, map sheet number 93 at number 26D, ward Q, district P, Ho Chi Minh City according to the certificate of house ownership and land use rights number 7332/2008/UB.GCN issued by the People's Committee of district P, Ho Chi Minh City on November 7, 2008 to Ms. L.

- The right to use 113.16m2 ^of land and house belonging to plot No. 82, MPT 79, map sheet No. 89 located at No. 20/2T, Ward Q, District P, Ho Chi Minh City according to the certificate of house ownership and land use rights No. 7331/2008/UB.GCN issued by the People's Committee of District P, Ho Chi Minh City on November 7, 2008 to Ms. L.

Ms. L mortgaged the above assets under mortgage contract No. 6360-LCP-2009-00949 dated December 1, 2009, which was notarized and registered as mortgaged assets in accordance with the provisions of law.

The Bank disbursed to Ms. L a total amount of VND 8,000,000,000. During the contract implementation process, Ms. L did not make full payment, and only paid interest on the due date of May 12, 2010, so the Bank transferred the overdue debt to the credit contract and contract appendices.

The bank sued and requested Ms. L to pay the outstanding debt as of December 7, 2012, which was VND 14,780,416,666, of which the principal debt was VND 8,000,000,000, the interest debt within the term was VND 2,879,083,333, and the overdue interest was VND 3,901,333,333. If Ms. L cannot pay the debt, the bank requested the mortgaged property to be auctioned to recover the debt.

The defendant, Ms. Nguyen Thi L, stated:

She admitted to having signed the credit contract, contract appendices, debt receipts, and confirmed that the outstanding debt to the Bank as of December 7, 2012 was VND 14,780,416,666 (including principal of VND 8,000,000,000, interest on time of VND 2,879,083,333, overdue interest of VND 3,901,333,333) as stated by the Bank. She committed to paying the Bank the outstanding debt and interest within 30 days from the date the judgment took legal effect; if she could not pay, she agreed to auction off the mortgaged assets for the Bank to recover the debt.

However, the two houses are mortgaged at the Bank that she bought from Mr. Duong Quoc K and Ms. Pham Thi Kim H in 2008 for VND 5,500,000,000. She has paid VND 3,000,000,000, and still owes Mr. K and Ms. H VND 2,500,000,000. The two parties have completed the purchase and sale procedures in accordance with the law and she has registered her name on the certificate of house ownership and land use rights for the above-mentioned houses and land. Mr. K and Ms. H are still managing and using these two houses because the two parties have not yet delivered the houses.

At the end of 2010, Mr. K and Ms. H filed a lawsuit demanding that she pay the above debt. If she could not pay, they would reclaim the house. The case is being resolved by the People's Court of Tan Phu District.

Persons with related rights and obligations:

Mr. Duong Quoc K, Ms. Pham Thi Kim H presented:

On November 3, 2008, Mr. and Mrs. agreed to sell to Ms. L two houses No. 26D and No. 20/2T for VND 5,500,000,000; Ms. L has paid VND 3,000,000,000, still owes VND 2,500,000,000, and promised to pay in full by November 3, 2009 to receive the house. Ms. L asked Mr. and Mrs. to sign a notarization for Ms. L to have the house and land in her name so that she could mortgage it to the bank. After borrowing money from the bank, Ms. L did not pay in full to buy the house for Mr. and Mrs. L. Later, Mr. and Mrs. L learned that the bank had lent Ms. L an amount exceeding the State's regulations. Currently, Mr. and Mrs. L are still managing and using these two houses. They request to take back the houses and return to Ms. L the VND 3,000,000,000 they had previously received.

First instance commercial judgment No. 287/2013/KDTM-ST dated March 19, 2013 of the People's Court of Ho Chi Minh City decided:

Accept all of the plaintiff's requests, forcing Ms. Nguyen Thi L - Owner of Nguyen Tan D Private Enterprise to be responsible for paying Bank A the total debt as of March 19, 2013 of VND 13,367,083,333, of which the loan principal is VND 8,000,000,000, the interest on time is VND 921,750,000, the overdue interest is VND 4,445,333,333 and the interest arising from March 20, 2013 until the date of full repayment of the loan principal at the overdue interest rate of 24%/year.

The payment deadline is within 6 months after the judgment takes legal effect. If Ms. Nguyen Thi L - Owner of Nguyen Tan D Private Enterprise fails to pay or fails to pay in full after the deadline, Bank A has the right to request the auction of the mortgaged assets, which are two houses and lands of Ms. Nguyen Thi L, to recover the debt, including:

- The house and land have an area of ​​298.30m2 ^on plot 7, map sheet number 93 (BĐĐC) located at 26Đ, ward Q, district P, Ho Chi Minh City of Ms. Nguyen Thi L according to the certificate of house ownership and land use rights number 7332/2008/UB.GCN dated November 7, 2008 of the People's Committee of district P, Ho Chi Minh City.

- The house and land have an area of ​​113.16m2 ^[2] belonging to plot 82, MPT 79, map sheet number 89 (BĐĐC) located at 20/2T, ward Q, district P, Ho Chi Minh City of Ms. Nguyen Thi L according to the certificate of house ownership and land use rights number 7331/2008/UB.GCN dated November 7, 2008 of the People's Committee of district P, Ho Chi Minh City.

On April 2, 2013, Ms. Pham Thi Kim H and Ms. Nguyen Thi L both filed appeals.

The commercial and business appeal judgment No. 171/2013/KDTM-PT dated October 10, 2013 of the Appellate Court of the Supreme People's Court in Ho Chi Minh City decided to amend the first instance judgment as follows:

- Partially accept the plaintiff's petition, Bank A (Bank A Branch, District B).

- Force Ms. Nguyen Thi L - Owner of Nguyen Tan D private commercial service enterprise to pay the plaintiff the capital of 8,000,000,000 VND, the interest within the term of 921,750,000 VND, the overdue interest of 4,445,333,333 VND as of the date of the first instance trial on March 19, 2013, a total of 13,367,083,333 VND; from March 20, 2013 until the date of full payment of the loan principal, interest will be calculated according to the overdue interest rate at each time according to the signed contract.

- Invalidate the mortgage contract No. 6360-LCP-2009-00949 between Bank A - Branch B and Ms. Nguyen Thi L - Owner of Nguyen Tan D private commercial service enterprise for house No. 26D, Ward Q, District P, Ho Chi Minh City and house No. 20/2T, Ward Q, District P, Ho Chi Minh City signed and notarized on December 1, 2009. Bank A (Bank A Branch, District B) must return 02 certificates of house ownership and land use rights No. 7332/2008/UB.GCN dated November 7, 2008 and No. 7331/2008/UB.GCN dated November 7, 2008 issued by the People's Committee of District P to Ms. Nguyen Thi L.

On December 18, 2013, Bank A submitted a request for review under the cassation procedure for the above-mentioned commercial and business appellate judgment.

In Decision No. 24/2016/KN-KDTM dated August 15, 2016, the Chief Justice of the Supreme People's Court appealed against the Appellate Business and Commercial Judgment No. 171/2013/KDTM-PT dated October 10, 2013 of the Appellate Court of the Supreme People's Court in Ho Chi Minh City; requested the Council of Judges of the Supreme People's Court to review the case, annul the above-mentioned Appellate Business and Commercial Judgment; and transfer the case file to the High People's Court in Ho Chi Minh City for retrial according to the appellate procedure in accordance with the provisions of law.

At the appeal hearing, the representative of the Supreme People's Procuracy agreed with the appeal of the Chief Justice of the Supreme People's Court.

JUDGMENT OF THE COURT:

[1] Regarding the principal and interest debt between Bank A and Ms. Nguyen Thi L, the parties agreed and there was no dispute. The court of first instance ordered Ms. L to pay the Bank the total debt as of March 19, 2013 of VND 13,367,083,333 and the interest accrued from March 20, 2013 until the date of full repayment of the loan at the overdue interest rate of 24%/year, which was in accordance with the agreement between the parties. The appellate court ordered Ms. L to pay the Bank a total of VND 13,367,083,333 and continue to calculate interest at the overdue interest rate at each time according to the signed contract, which was incorrect because the credit contract No. 6360-LAV-200900957 dated December 4, 2009 and the appendices to the credit contract did not stipulate interest adjustment.

[2] Regarding the handling of mortgaged assets: According to the documents in the case file, the mortgaged assets are the real estate at No. 26D and 20/2T mentioned above, which are transferred by Ms. L from Mr. Duong Quoc K and Ms. Pham Thi Kim H according to the contracts for transferring ownership of the house and land use rights notarized on November 4, 2008. On November 7, 2008, Ms. L was granted a certificate of ownership of the house and land use rights. Thus, the two real estates above have been owned by Ms. L since November 7, 2008, so Ms. L has the right to use these two real estates as collateral to the Bank to borrow money; Mr. K and Ms. H also knew and agreed to let Ms. L mortgage the real estate above with the Bank. The mortgage contract has been notarized, registered for mortgage and registered for legal secured transaction, so it is legally valid. Mr. K and Ms. H's claim that Ms. L has not paid in full for the house and land purchase and still owes VND 2,500,000,000, and their request to cancel the house purchase contract and return VND 3,000,000,000 they received to Ms. L is groundless. If Ms. L does not pay in full the remaining amount for the house and land purchase, Mr. K and Ms. H have the right to file another lawsuit to request Ms. L to pay this amount. Therefore, the Court of First Instance's decision that Bank A has the right to request the auction of the above-mentioned 2 houses and land of Ms. L to recover the debt when Ms. L does not pay or does not pay in full within 6 months from the date the judgment takes legal effect is well-founded and in accordance with the law. The Court of Appeal declared the mortgage contract No. 6360-LCP-2009-00949 between the Bank and Ms. L for house No. 26D and house No. 20/2T, Ward Q, District P, Ho Chi Minh City, dated December 1, 2009, invalid, affecting the legitimate rights and interests of the plaintiff.

[3] Therefore, the appeal of the Chief Justice of the Supreme People's Court requesting the Council of Judges of the Supreme People's Court to annul the commercial business judgment of the Supreme People's Court of Appeal in Ho Chi Minh City is well-founded and consistent with the proposal of the representative of the Supreme People's Procuracy.

For the above reasons,

DECISION:

Pursuant to Point b, Clause 2, Article 337, Clause 2, Article 343 of the Civil Procedure Code;

1. Accept the Chief Justice's Appeal No. 24/2016/KN-KDTM dated August 15, 2016.
2. Annul the business and commercial appeal judgment No. 171/2013/KDTM-PT dated October 10, 2013 of the Appellate Court of the Supreme People's Court in Ho Chi Minh City on the case of "Credit contract dispute" between the plaintiff, Bank A, and the defendant, Ms. Nguyen Thi L; the persons with related rights and obligations, Ms. Pham Thi Kim H and Mr. Duong Quoc K.
3. 3. Uphold the first instance commercial and business judgment No. 287/2013/KDTM-ST dated March 19, 2013 of the People's Court of Ho Chi Minh City.

CONTENT OF PRECEDENT

“ [2] Regarding the handling of mortgaged property: According to the documents in the case file, the mortgaged property is the house and land at No. 26D and 20/2T mentioned above, which is owned by Ms. L and transferred from Mr. Duong Quoc K and Ms. Pham Thi Kim H according to the contracts for transferring house ownership rights and land use rights notarized on November 4 , 2008. On November 7, 2008, Ms. L was granted a certificate of house ownership rights and land use rights. Thus, the two houses and land above have been owned by Ms. L since November 7, 2008, so Ms. L has the right to use these two houses and land as collateral to the Bank to borrow money; Mr. K and Ms. H also knew and agreed to let Ms. L mortgage the above houses and land with the Bank. The mortgage contract has been notarized, registered as a mortgage and registered as a legal secured transaction, so it is legally valid. Mr. K and Ms. H said that Ms. L had not paid in full for the house and land purchase, and still owed 2,500,000,000 VND, so their request to cancel the house sale contract and return 3,000,000,000 VND received to Ms. L was baseless. If Ms. L does not pay the full amount of the house and land purchase debt, Mr. K and Ms. H have the right to file another lawsuit to request Ms. L to pay this amount ... The Court of Appeal declared the mortgage contract No. 6360-LCP-2009-00949 between the Bank and Ms. L for house No. 26D and house No. 20/2T, Ward Q, District P , Ho Chi Minh City on December 1, 2009 to be invalid, affecting the legitimate rights and interests of the plaintiff. "

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