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  • Interpretation
  • No.119
  • Date
  • 1967/02/01
  • Issue
    • The owner first has his immovable property mortgaged, and then creates a dien thereon. Shall the mortgagee or dien-holder have priority of claim to the proceeds from sale of said immovable property?
  • Holding
    •        When an owner mortgages his land first, then places a dien[1] on the land later, the mortgage interest is not affected by the subsequently recorded dien. Should the mortgagee be in default and an auction be held, however, due to the existence of the dien, no bidder of a price sufficient to discharge the mortgage can be found, the court may order that the dien be removed and a second sale be held. If, after satisfying the mortgage, any surplus remains from the proceeds from auction, the dien-holder shall have priority right for claim to the surplus over any subsequently recorded interests. The court conducting the auction, when issuing title transfer documents, shall notify the agency in charge of land administration to erase the recordation of dien of the land.
  • Reasoning
    •        Article 866 of the Civil Code permitted an owner to mortgage his land first, then place a dien on the land later. But a proviso of the same Article also stated that the mortgage interest would not be affected. The latter created a dien on the land, but if it jeopardized the mortgage interest in any way, it should not have any force on the mortgagee at all. To reconcile the interests of the mortgagee and dien-holder, should a mortgagee be in default and an auction be held, however, due to the existence of the dien, no bidder of a price sufficient to discharge the mortgage can be found, the court may order that the dien be removed and a second sale be held. If, after satisfying the mortgage, any surplus remains from the proceeds from the auction, the dien-holder shall have priority right for claim to the surplus over any subsequently recorded interests. The court conducting the auction, when issuing title transfer documents, shall notify the agency in charge of land administration to erase the recordation of dien of the land. We hereby elaborate on the J.Y. Interpretation Yuan-tse No.1446.  Note:[1] A dien is a unique form of transferring the immovable property’s title as security in the traditional Chinese legal system and has been accepted as a part of Civil Code governing the rights over things, under which the dien-maker (owner) in consideration of a price usually at 50% of the actual value of the immovable property, transfers title and possession of the object to the dien-holder and reserves for himself a naked right of redemption upon paying back the price so received with no interest within the period as agreed thereto by the parties, but under no circumstances may the period exceed 30 years. For details, refer to the Civil Code, Book of Rights over Things, Articles 911-927.
      
    • *Translated by Robert Huai-Ching Tsai.
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