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  • Interpretation
  • No.292
  • Date
  • 1992/02/28
  • Issue
    • The Judicial Yuan directive requires that in case of bankruptcy, the proceeding for enforcement against the debtor*s bankruptcy estate, except for the exercise of exclusionary rights, shall be stayed until the creditors are notified. Is the said directive unconstitutional?
  • Holding
    •        Article 99 of the Bankruptcy Act providing that "a right of claim in bankruptcy may be exercised only in pursuance of bankruptcy procedure" is intended to enable all creditors of the bankrupt to receive pro rata distribution of the property of the bankruptcy estate unless otherwise provided by law. In case one of the creditors petitions for commencement of or for continued enforcement against such property in a compulsory execution proceeding, the right of the other creditors to pro rata distribution will be impaired. Thus, it is necessary to set a restriction on such petitions, and such a restriction is essential to preventing interference with the exercise of right by other persons and is permissible under Article 23 of the Constitution. Rule 9(1) of the Judicial Yuan Directive on Precautionary Matters on Handling Compulsory Enforcement, as amended on October 18, 1982, prescribes that "where the debtor is adjudged bankrupt, the proceeding for enforcement against any property of the debtor that shall be included in the bankruptcy estate, with the exception of property in which right of exclusion has been claimed by a creditor, shall be stayed, and the creditors shall be notified accordingly." Said rule is intended to be a reminder of the essence embodied in Article 99 of the Bankruptcy Act quoted above and Article 108 thereof rather than an imposition of any additional restriction on the exercise of the right of the people and is therefore not in conflict with the Constitution.
  • Reasoning
    •        While a creditor has the right to request the State to compel the debtor to perform in order to materialize his right of claim, the exercise of such right must be carried out according to legal procedures and is subject to legal restrictions in circumstances specified by Article 23 of the Constitution. The property of the debtor is a common security for the claims of all creditors. If the debtor is adjudged bankrupt because his property is insufficient for payment of all debts, all claims against the bankrupt established prior to the adjudication of bankruptcy, with the exception of those with the right of exclusion, shall be claims in bankruptcy under Article 98 of the Bankruptcy Act. The Act further provides in Article 108, Paragraphs 1 and 2, that "a person who has a pledge, mortgage, or right of retention on the property of the debtor created or acquired prior to the adjudication of bankruptcy shall have the right of exclusion in respect of such property" and that "a creditor with the right of exclusion is entitled to exercise his right without being subject to the bankruptcy procedure." Furthermore, the Compulsory Enforcement Act prescribes in Article 18, Paragraph 1, thereof that "unless otherwise provided by law, a compulsory enforcement proceeding shall not be stayed after commencement thereof." Conversely, such provisions do not apply where the law says otherwise. Thus, Article 99 of the Bankruptcy Act provides that "a right of claim in bankruptcy may be exercised only in pursuance of bankruptcy procedure" and the provision is intended to enable all creditors without the right of exclusion to receive pro rata distribution of the property of the bankruptcy estate. In case one of the creditors petitions for commencement of or for continued enforcement against such property in a compulsory execution proceeding, the right of other creditors to pro rata distribution will be impaired. Such a restriction provides a statutory cause for a stay of the enforcement proceeding and is essential to preventing interference with the exercise of right by other persons and is permissible under Article 23 of the Constitution. Rule 9(1) of the Judicial Yuan Directive on Precautionary Matters on Handling Compulsory Enforcement, as amended on October 18, 1982, prescribes that "where the debtor is adjudged bankrupt, the proceeding for enforcement against any property of the debtor that shall be included in the bankruptcy estate, with the exception of property in which right of exclusion has been claimed by a creditor, shall be stayed, and the creditors shall be notified accordingly." Said rule is intended to be a reminder of the essence embodied in the above articles of the Bankruptcy Act and the Compulsory Enforcement Act rather than an imposition of any additional restriction on the exercise of the right of the people or an increase in any obligation of the people, and is therefore not in conflict with the Constitution.
      
    • *Translated by Raymond T. Chu.
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