First, the formulation of questions

In the financing trust projects handled by trust companies, requiring the counterparty to provide collateral guarantee with collateral is usually an indispensable guarantee measure for the project, and when handling mortgage registration, there are reasons such as the registration agency requiring the trust company to handle the maximum amount of mortgage on the grounds that the loan contract stipulates that the loan will be issued in installments, and the loan amount is uncertain (only "not exceeding XX amount"). So is there a legal risk for a trust company to handle the maximum mortgage, and in judicial practice, how to determine the maximum amount of debt authority registered with the maximum mortgage?

2. Legal analysis

(1) The relevant laws and regulations on the maximum amount of mortgage

Article 59 of the Guarantee Law stipulates that "the maximum mortgage as used in this Law refers to an agreement between the mortgagor and the mortgagee to guarantee the claims that have occurred continuously within a certain period of time with the collateral within the maximum amount of claims." ”

Article 83 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application <中华人民共和国担保法>stipulates that "if an unspecified claim secured by a maximum mortgage has expired after a certain period of repayment, the mortgagee of the highest amount may exercise its mortgage right in accordance with the provisions of ordinary mortgage." When the mortgagee realizes the maximum mortgage right, if the actual balance of claims incurred is higher than the maximum limit, the maximum limit shall be limited, and the excess part shall not have the effect of priority payment; If the actual balance of claims incurred is lower than the maximum limit, the collateral shall be paid in priority up to the balance of claims actually incurred. ”

Article 203 of the Property Law stipulates, "If the debtor or a third party provides security property for claims that will occur continuously within a certain period of time for the performance of the obligation, and the debtor fails to perform the due debt or the realization of the mortgage right as agreed by the parties occurs, the mortgagee has the right to receive priority compensation for the secured property within the maximum amount of the claim." ”

Article 420 of the Civil Code stipulates that "if the debtor or a third party provides security property for the performance of a guaranteed debt for claims that will occur continuously within a certain period of time, and the debtor fails to perform its debts when due or the realization of the mortgage rights as agreed by the parties occurs, the mortgagee shall have the right to receive priority compensation for the secured property within the maximum amount of claims." ”

(2) Determination of the maximum amount of creditor's rights

The Guarantee Law, the Property Law and the Civil Code all provide for maximum mortgages, and the Civil Code completely follows the provisions of the Property Law on maximum mortgages, and the "maximum amount limit" is used in the relevant provisions. Regarding the determination of the "maximum amount of claims" and "maximum limit" in the above-mentioned provisions, there has always been controversy in theory and judicial practice, and the determination of the maximum limit mainly depends on the theory of the maximum amount of principal and the maximum limit of claims. The principal maximum limit theory holds that the principal of a claim must not exceed the maximum limit, but the combined calculation amount of the main claim, interest, liquidated damages, etc. is not subject to the maximum limit. The maximum limit of claims means that the main claim, interest, liquidated damages, etc. are combined to calculate the amount, and the whole is limited by the maximum limit, and the part of the total amount exceeding the maximum limit does not have a priority right to payment.

In judicial practice, the court's judgment on the maximum mortgage is different, there are cases where the parties agree on the maximum amount of the secured claim and make a judgment (that is, the maximum amount of the claim and the maximum principal amount are judged separately), and there are cases where the parties agree on the maximum amount of the claim but the court judges the maximum amount of the principal, or the parties agree on the maximum amount of the principal but the court judges the maximum amount of the claim, and the first instance, the second instance and the retrial also make different determinations and judgments on the same agreement. The following are two cases in which the "maximum limit of claims" and the "maximum limit of principal" were cited:

Judgment according to the "maximum limit of claims"

In the Appeal Case of Financial Loan Contract Dispute between Haikou Mingguang Hotel Co., Ltd. and Longkun Branch of Haikou Rural Commercial Bank Co., Ltd. [Supreme People's Court (2017) Supreme Law Min Zhong No. 230], Haikou Rural Commercial Bank and Mingguang Hotel Company signed the Maximum Mortgage Contract, in which Mingguang Hotel Company provided the highest mortgage guarantee within the maximum loan balance of 190 million yuan for the two loans involved in the case, and completed the registration of the highest mortgage, with the highest registered debt authority of 190 million yuan. Haikou Rural Commercial Bank and Mingguang Hotel Company had different understandings of the maximum amount of claims, with Haikou Rural Commercial Bank claiming that the registered RMB 190 million was the maximum principal limit, and Mingguang Hotel Company claiming the registered RMB 190 million as the maximum limit of claims. The Supreme People's Court held in its judgment that "a maximum mortgage refers to an agreement between the mortgagor and the mortgagee to guarantee claims that occur continuously within a certain period of time with collateral within the maximum amount of claims. According to Article 203 of the Property Law and Article 59 of the Guarantee Law, the essence of the maximum mortgage right lies in the fact that the claim it guarantees is an unspecified claim and has a maximum limit. The scope of the claim secured by the maximum mortgage may include the main claim and its interest, liquidated damages, damages, etc., but the total shall not exceed the predetermined maximum limit that has been registered, and the mortgagee cannot exercise the mortgage right beyond the part. Paragraph 2 of Article 83 of the Interpretation of the Guarantee Law also clearly stipulates that when the mortgagee realizes the maximum mortgage right, if the actual balance of claims incurred is higher than the maximum limit, the maximum limit shall be limited, and the excess part shall not have the effect of priority payment. ”

Judgment is based on the "principal maximum"

In the civil judgment of the retrial of the lawsuit against the objection to the distribution plan between Jiangsu Huiyin Pawn Co., Ltd. and Yao Canbin (Jiangsu Provincial High Court, case number: (2018) Su Min Zai No. 170), Sun Xiangdong and Yang Dan borrowed 5.5 million yuan from Huiyin Pawn Company, with a maximum mortgage amount of 5.5 million yuan, and when the mortgage registration authority registered the mortgage, the maximum amount of mortgage claims recorded in other warrants issued by the registration authority was also 5.5 million yuan. The courts of first instance and second instance both found that Huiyin Pawnbroking Company could only enjoy a priority right to be reimbursed for the auction price of the collateral within the maximum limit of RMB 5.5 million. In its retrial judgment, the Jiangsu Provincial Higher People's Court held that "Article 203 of the Property Law of the People's Republic of China stipulates that if the debtor or a third party provides security property for claims that will occur continuously within a certain period of time in order to guarantee the performance of an obligation, and the debtor fails to perform the debt when due or the realization of the mortgage right as agreed by the parties occurs, the mortgagee has the right to receive priority compensation for the secured property within the maximum amount of the claim. The maximum amount of claim stipulated in this article should refer to the amount of the principal amount of the claim, and the Taizhou Intermediate Court (2016) Su 12 Min Zhong No. 2978 Civil Judgment held that the sum of the principal of the claim, interest, liquidated damages, damages and the cost of realizing the claim did not exceed the maximum amount of the claim. ”

The author notes that the "Understanding and Application of the Property Rights Part of the Civil Code of the People's Republic of China" edited by the Supreme People's Court Leading Group for the Implementation of the Civil Code also specifically discusses the issue of whether the maximum amount of claims in the maximum mortgage limit is the maximum limit of the claim or the maximum principal, which mentions that the German Civil Code, the Japanese Civil Code and the Taiwan Civil Code all stipulate that the maximum amount of claims is the maximum limit of claims, and believes that " The maximum amount of claims in China's maximum mortgage is the maximum limit of claims, including original claims, interest, delay interest and liquidated damages."

3. Recommendations for maximum mortgage operations

01

Be cautious about maximum mortgages

In ordinary trust projects, although there may be installment loans, they are all claims and debts under the same main contract, and there is no need to sign multiple main contracts with the debtor for a period of time. In view of the fact that China's current laws, regulations and judicial interpretations do not clearly stipulate how to understand the maximum amount of claims in the maximum mortgage, and there is uncertainty in how to adjudicate in judicial practice, it is recommended to handle ordinary mortgages on the determined main contract as much as possible and handle the maximum mortgage cautiously.

02

The maximum amount is clearly agreed in the mortgage contract or the maximum amount acceptable to the registration agency is filled in

In the case that only the maximum amount of mortgage can be handled according to the requirements of the registration authority, if the maximum amount is filled in as the principal amount, in order to clarify the true intention of the parties, it is recommended that the maximum amount of mortgage contract clearly stipulate that the maximum amount is the principal limit, and stipulate that the interest, liquidated damages, etc. corresponding to the principal amount within the maximum limit belong to the scope of guarantee, or on the premise of meeting the operational requirements of the registration institution, fill in the maximum amount acceptable to the registration institution for the maximum amount of the claim and can overcover the principal of the claim, interest, liquidated damages, Damages, costs for realizing claims, etc.

03

Clearly stipulate the period for determining claims

Based on the characteristics of the highest amount of mortgage, it is necessary to clearly agree on the period of determination of claims, and the start date of the period of filling in the determination of claims should be earlier than or equal to the first trust loan lending date, and the end date should be later than the last trust loan lending date.

04

It is advisable to disclose the risks to investors in the trust document

If the maximum amount of the claim registered by the registration authority is only the principal of the claim, considering the Supreme People's Court's understanding of the maximum amount of creditor's authority, it is likely that the subsequent disposal of the collateral will only be reimbursed within the maximum limit, and it is recommended to disclose the corresponding risks to investors in the trust document.

Past Recommendations

One of the "Trust Practice Issues":

How to apply the capital ratio of foreign-invested real estate projects

Trust Practice Issues 2:

Whether the external guarantee and domestic loan business must go through the registration/filing procedures

Trust Practice Issues No. 3:

The capital reserve is the exclusive legal effect of the trust company

Trust Practice Issues No. 4:

The legal nature and effect of pre-dividends

Trust Practice Issues No. 5:

The question of the effectiveness of alternative operations to the mortgage register

Trust Practice Issues VI:

Priority of partnership priority limited partners

(This article is translated by software translator for reference only.)