20/07/2022 11:46

Be careful with the type of mortgage loan agreement with other people's property in Vietnam

Be careful with the type of mortgage loan agreement with other people's property in Vietnam

Currently, third-party mortgage loans are increasingly popular. Because many people believe that as long as there is collateral, even if the borrower does not fulfill the debt repayment obligation, they can still handle the collateral to pay.

However, in fact, because the "third party" has no obligations arising from the loan contract, but they only have the responsibility and obligations from the mortgage contract of their own property, the mortgage contracts are easily voided for a variety of reasons.

Specifically, in the Judgment 03/2018/KDTM-PT dated April 16, 2018 on the dispute over the credit business contract, the summary content is as follows:

"Commercial Joint Stock Bank SHB has loaned the couple Mr. Do Thanh Q and Mrs. Nguyen Thi Bach T an amount of VND 600,000,000 according to Credit Contract No. 22.10xx dated May 31, 2010. The mortgaged property includes: (1) The certificate of land use right No. BA 794627 dated May 13, 2010 bearing the name of Mr and Mrs. Q, Mrs. T under the Mortgage Contract No. 34/HDTC dated May 31, 2010. In addition, the above loan is also mortgaged with the property of a third party, including (2) Land use right certificate No. L102714 dated November 29, 1997 in the name of Mr. and Mrs. Nguyen Ngoc H and Mrs. Vu Thi L under Mortgage Contract No. 22B.10/HDTC; (3) Land use right certificate No. L102213 dated November 29, 1997 in the names of Mrs. Nguyen Thi N and Mr. Nguyen Phi L under Mortgage Contract No. 22A.10/HDTC dated May 31, 2010. Now SHB is suing Mr. Q and Mrs. T at the People's Court of Di Linh district.

After the first-instance trial and was protested against by cassation due to the fact that "Mortgage contracts for third parties do not specify the scope of specific obligation security, so they cannot enforce the judgment after the judgment has taken legal effect" between SHB and a third party that has signed an appendix to the mortgage contract to determine the scope of specific obligations of each property mortgage contract.”

The People's Court of Lam Dong province made the following judgment: in the land use right certificate (3) in the name of Mrs. N and her husband, Mr. L registered the land use right on September 19, 1997 with the number of registered land users in 1997 was 04 people, although However, when signing an appendix to the mortgage contract to determine the scope of security for her obligations, Ms. Nguyen Thi Lan A was not included in the settlement in the property mortgage contract and the property mortgage contract's appendix. For the above reasons and in accordance with the current legal provisions, the Court declared the mortgage contract and the mortgage contract appendix to the mortgage contract No. 22A.XX dated May 31, 2010 invalid.

In the above case, the mortgage contract was declared invalid by the Court in both first-instance trials for two different reasons given.

Firstly, in the opinion of the Court, because the mortgage contract does not specify the scope of security, it is impossible to determine whether the parties use the property to secure a part of the whole of the debt, which leads to the claim that the If the margin of settlement of security assets for debt repayment cannot be determined, the scope for judgment enforcement cannot be determined.

However, in the Civil Code 2005 of Vietnam there is a provision on the case where there is no agreement on the scope of guarantee as follows:

Article 319. Scope of security for the performance of a civil obligation

1. A civil obligation may be partially or fully secured as agreed upon or as provided for by law; if the scope of security is not agreed upon or provided for by law, the obligation shall be regarded as fully secured, including the obligation to pay interests and compensation for damage."

With the above provisions, it seems that the mortgage contract does not clearly agree on the scope of security without losing the validity and performance of the contract because even in the law there is a provision in the case of “No agreement and the law does not specify the scope of the guarantee”, shall be considered as security for the entire obligation. So, the Chief Justice of Lam Dong Province's People's Court has appealed against cassation on the grounds that “The scope of specific obligation cannot be determined, so it is impossible to execute the judgment after the judgment has taken legal effect” is really convincing while the law has specific provisions on how to understand and solve the problem, but it is not applied.

Secondly, the contract is invalid because there are not enough members of the household to sign it: The signing of the mortgage contract and the mortgage contract appendix mentioned above without the consent of all members in the disposition of the common property of the household, this violates the basic principle of Disposal of common property of households as prescribed in the 2005 Civil Code as follows:

“Article 109. Possession, use and disposition of common household property

1. The members of the household possess and use the common property of the household according to the agreed method.

2. The disposition of property being the means of production or common property of the great value of a household must be agreed upon by all members who are full fifteen years of age or older; for other types of common property, the consent of a majority of members aged full fifteen years or more must be agreed.”

For land users who are households, property rights are the right to be integrated and complete, or it can be understood that property rights only form when all members of the household agree, it is not possible to determine each individual's share of the common property. Disposing of common property without all members will not give effect to any transaction because at this time the property rights have not been fully considered to perform. The provisions of this Law are also similar to those in Article 212 of the Civil Code 2015, however, the Civil Code 2015 specifically emphasizes and specifies that the object of common property disposition is real estate, which must be agreed upon by all family members. At the same time, the Civil Code 2015 covers a broad adjustment of the capacity, subjects and members of the household when participating in the agreement and disposition of common property. In general, in both Codes, there is a great correlation in terms of content, understanding, and application to dispute resolution.

Through the above case, we can see that receiving collateral from a third party for security easily causes great risks, even a small mistake in establishing a transaction can make the voidable mortgage contracts cannot distrain security assets to repay debts. So, will the security at this time still protect the legitimate interests of the mortgagee while the mortgagor can both receive his property and not have to bear any obligations and responsibilities for the transaction? which I guarantee.

It can be seen that without collateral, the property can be handled to repay the debt, so when entering into a mortgage loan contract, it is best to rest assured when the collateral belongs to the borrower.

Dinh Thien
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