Precedent No. 43/2021/AL was adopted by the Judicial Council of the Supreme People’s Court on February 23, 2021, and published under Decision No. 42/QD-CA dated March 12, 2021, by the Chief Justice of the Supreme People’s Court.
1. What is a precedent?
Precedents are arguments and rulings in legally effective judgments and decisions of the Courts regarding specific cases selected by the Judicial Council of the Supreme People’s Court and published by the Chief Justice of the Supreme People’s Court as precedents for Courts to study and apply in adjudication. (Article 1 of Resolution 04/2019/NQ-HĐTP)
Selected precedents must meet the following criteria:
– Possess value in clarifying provisions of the law that have different interpretations, analyzing and explaining legal issues and events, and pointing out principles, handling directions, and legal norms to be applied in a specific case or demonstrating fairness for issues not yet specifically regulated by law;
– Possess standard characteristics;
– Possess value in guiding the uniform application of the law in adjudication.
2. Precedent No. 43/2021/AL on the validity of a mortgage contract in cases where the mortgaged asset is real estate transferred to the mortgagor by another person but the purchase price has not been fully paid to the seller
2.1. Source of the precedent
Cassation Decision No. 01/2019/KDTM-GĐT dated January 11, 2019, of the Judicial Council of the Supreme People’s Court regarding the commercial business case “Dispute over credit contract” in Ho Chi Minh City between the plaintiff, Bank A, and the defendant, Ms. Nguyen Thi L; persons with related rights and obligations being Ms. Pham Thi Kim H and Mr. Duong Quoc K.
Location of the precedent content:
Paragraph 2 of the “Court’s Assessment” section.
2.2. Overview of the precedent content
– Precedent situation:
A contract for the transfer of house ownership and residential land use rights has been notarized, the buyer has been granted a certificate of house ownership and residential land use rights but has only paid a portion of the purchase price; the parties have not yet performed the handover of the house. The buyer mortgages the house and land to a Bank, with the mortgage registered in accordance with the law; the seller knows and agrees to the buyer mortgaging the house and land but later requests to cancel the transfer contract for house ownership and residential land use rights.
– Legal solution:
In this case, it must be determined that the mortgage contract is legally valid, and the request to cancel the contract for the transfer of house ownership and residential land use rights is not accepted.
Legal provisions related to the precedent:
– Articles 168, 323, 342, 425, 438, 689 of the Civil Code of Vietnam 2005 (corresponding to Articles 161, 298, 318, 423, 440, 502 of the Civil Code of Vietnam 2015); Articles 439, 692 of the Civil Code 2005;
– Article 10 of Decree No. 163/2006/ND-CP dated December 29, 2006, of the Government on secured transactions.
Keywords of the precedent:
“Contract for the transfer of house ownership and residential land use rights”; “Granting of certificates of house ownership and residential land use rights”; “Not [1] fully paid the purchase price for house and land”; “Cancellation of the contract for the transfer of house ownership and residential land use rights”; “Mortgage contract”; “Mortgage registration”.
CASE CONTENT:
In the petition dated March 1, 2011, and testimonies at the Court, the plaintiff, Bank A (authorized to Ms. Tran Thi E), stated:
The Bank lent Ms. Nguyen Thi L – Owner of Nguyen Tan D Trading Service Private Enterprise a total of 8,000,000,000 VND under credit contract No. 6360-LAV-200900957 dated December 4, 2009, the appendix to the amendment of the credit contract No. 01/PL/BS/HĐTD dated December 4, 2009, and 02 debt admission papers (dated December 4, 2009, for the loan amount of 7,750,000,000 VND; dated December 4, 2009, for the loan amount of 250,000,000 VND) with an in-term interest rate of 12%/year, overdue interest rate of 150% of the in-term interest rate, and a loan term of 12 months. Subsequently, the two parties signed an appendix to the credit contract No. 6360-LAV-200900957/PLHĐ dated December 15, 2010, agreeing to adjust the in-term interest rate to 16%/year. The collateral for the above loan included:
– The right to use 298.3m2 of land and house at land lot No. 7, map sheet No. 93 at No. 26D, Ward Q, District P, Ho Chi Minh City according to the certificate of house ownership and residential land use rights No. 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 at land lot 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 residential 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 law.
The Bank disbursed a total amount of 8,000,000,000 VND to Ms. L. During the execution of the contract, Ms. L did not make full payments; upon maturity, Ms. L only paid the in-term interest on May 12, 2010, so the Bank transferred the credit contract and contract appendices to overdue debt status.
The Bank filed a lawsuit requesting Ms. L to pay the outstanding debt as of December 7, 2012, totaling 14,780,416,666 VND, of which the principal was 8,000,000,000 VND, in-term interest was 2,879,083,333 VND, and overdue interest was 3,901,333,333 VND. If Ms. L cannot pay the debt, the Bank requests the liquidation of the mortgaged assets to recover the debt.
The defendant, Ms. Nguyen Thi L, stated:
She admitted to signing the credit contract, contract appendices, and debt admission papers, and confirmed the outstanding debt to the Bank as of December 7, 2012, was 14,780,416,666 VND (including principal of 8,000,000,000 VND, in-term interest of 2,879,083,333 VND, and overdue interest of 3,901,333,333 VND) as presented by the Bank. She committed to paying the Bank the outstanding amount and any arising interest within 30 days from the date the judgment takes legal effect; if she cannot pay, she agrees to the liquidation of the mortgaged assets for the Bank to recover the debt.
However, the two houses being mortgaged at the Bank were purchased by her from Mr. Duong Quoc K and Ms. Pham Thị Kim H in 2008 for 5,500,000,000 VND. She has paid 3,000,000,000 VND and still owes Mr. K and Ms. H 2,500,000,000 VND. Both parties completed the purchase procedures in accordance with the law, and she has been named the owner on the certificates of house ownership and residential land use rights for the aforementioned houses; Mr. K and Ms. H are still managing and using these two houses because the parties have not yet performed the handover.
At the end of 2010, Mr. K and Ms. H filed a lawsuit requesting her to pay the aforementioned debt; if she could not pay, they would reclaim the houses, and the matter is being resolved by the People’s Court of Tan Phu District.
Persons with related rights and obligations:
Mr. Duong Quoc K and Ms. Pham Thi Kim H stated:
On November 3, 2008, they agreed to sell Ms. L the two houses at No. 26D and No. 20/2T for 5,500,000,000 VND; Ms. L has paid 3,000,000,000 VND and still owes 2,500,000,000 VND, promised to be fully paid by November 3, 2009, to receive the houses. Ms. L requested them to sign the notarized documents for her to be named as the owner so she could mortgage them to the Bank. After obtaining the loan from the Bank, Ms. L did not pay the full purchase price to them. Later, they learned that the Bank had lent Ms. L an amount exceeding State regulations. Currently, they are still managing and using these two houses; they request to take back the houses and return the 3,000,000,000 VND previously received to Ms. L.
The 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 the entire request of the plaintiff, compelling 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, which was 13,367,083,333 VND, of which principal was 8,000,000,000 VND, in-term interest was 921,750,000 VND, overdue interest was 4,445,333,333 VND and interest arising from March 20, 2013, until the loan principal is fully paid at an overdue interest rate of 24%/year.
Payment term is within 6 months after the judgment takes legal effect. If the term expires and Ms. Nguyen Thi L – Owner of Nguyen Tan D Private Enterprise has not paid or paid in full, Bank A has the right to request the liquidation of the mortgaged assets, which are the two properties of Ms. Nguyen Thi L, to recover the debt, including:
– House and land with an area of 298.30m2 under lot 7, map sheet No. 93 (BĐĐC) located at 26D, Ward Q, District P, Ho Chi Minh City of Ms. Nguyen Thi L according to the certificate of house ownership and residential land use rights No. 7332/2008/UB.GCN dated November 7, 2008, of the People’s Committee of District P, Ho Chi Minh City.
– House and land with an area of 113.16m2 under lot 82, MPT 79, map sheet No. 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 residential land use rights No. 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 appellate 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 decided to amend the first-instance judgment as follows:
– Partially accept the petition of the plaintiff Bank A (Bank A Branch, District B).
– Compel Ms. Nguyen Thi L – Owner of Nguyen Tan D Trading Service Private Enterprise to pay the plaintiff a principal of 8,000,000,000 VND, in-term interest of 921,750,000 VND, overdue interest of 4,445,333,333 VND calculated up to the first-instance trial date of March 19, 2013, totaling 13,367,083,333 VND; from March 20, 2013, until the loan principal is fully paid, interest shall be calculated at the overdue interest rate at each period according to the signed contract.
– Declare void the mortgage contract No. 6360-LCP-2009-00949 between Bank A – Branch B and Ms. Nguyen Thi L – Owner of Nguyen Tan D Trading Service Private Enterprise regarding the house at No. 26D, Ward Q, District P, Ho Chi Minh City and the house at 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 residential 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 filed a request for consideration under cassation procedures against the aforementioned appellate commercial judgment.
In Decision No. 24/2016/KN-KDTM dated August 15, 2016, the Chief Justice of the Supreme People’s Court protested the Appellate 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; proposed that the Judicial Council of the Supreme People’s Court conduct a cassation trial, cancel the aforementioned appellate commercial judgment; and transfer the case file to the High People’s Court in Ho Chi Minh City for a retrial under appellate procedures in accordance with the law.
At the cassation trial, the representative of the Supreme People’s Procuracy agreed with the cassation protest of the Chief Justice of the Supreme People’s Court.
COURT’S ASSESSMENT:
[1] Regarding the principal and interest debt between Bank A and Ms. Nguyen Thi L, all parties were in agreement and there was no dispute. The first-instance court ruled that Ms. L was responsible for paying the Bank the total debt as of March 19, 2013, of 13,367,083,333 VND and interest arising from March 20, 2013, until the principal is fully paid at an overdue interest rate of 24%/year, which is consistent with the agreement between the parties. The appellate court ruled that Ms. L must pay the Bank a total of 13,367,083,333 VND and continue to calculate interest at the overdue interest rate at each period according to the signed contract, which is incorrect because credit contract No. 6360-LAV-200900957 dated December 4, 2009, and the credit contract appendices do not stipulate interest adjustments.
[2] Regarding the handling of mortgaged assets: According to the documents in the case file, it is determined that the mortgaged assets, being house and land at No. 26D and 20/2T mentioned above, were transferred to Ms. L by Mr. Duong Quoc K and Ms. Pham Thi Kim H under transfer contracts for house ownership and residential land use rights notarized on November 4, 2008. On November 7, 2008, Ms. L was granted the certificate of house ownership and residential land use rights. Thus, the two properties belonged to Ms. L’s ownership from November 7, 2008, so Ms. L had the right to use these two properties to mortgage to the Bank for a loan; Mr. K and Ms. H also knew and agreed for Ms. L to mortgage the properties to the Bank. The mortgage contract was notarized, the mortgage registered, and the secured transaction registered legally, thus it is legally effective. Mr. K and Ms. H claimed that Ms. L had not fully paid for the properties and still owed 2,500,000,000 VND to request the cancellation of the house purchase contract and return the 3,000,000,000 VND received to Ms. L, which is groundless. If Ms. L does not pay the remaining amount for the properties, Mr. K and Ms. H have the right to file another lawsuit to request Ms. L to pay this amount. Therefore, the first-instance court’s decision that Bank A has the right to request the liquidation of the two properties mentioned above of Ms. L to recover the debt if Ms. L fails to pay or pays insufficiently within 6 months from the date the judgment takes effect is well-founded and lawful. The appellate court’s declaration of voiding the mortgage contract No. 6360-LCP-2009-00949 between the Bank and Ms. L regarding the houses at No. 26D and No. 20/2T, Ward Q, District P, Ho Chi Minh City on December 1, 2009, is incorrect, affecting the legal rights and interests of the plaintiff.
[3] Therefore, the protest by the Chief Justice of the Supreme People’s Court requesting the Judicial Council of the Supreme People’s Court to cancel the commercial judgment of the Appellate Court of the Supreme People’s Court 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 Cassation Protest No. 24/2016/KN-KDTM dated August 15, 2016, of the Chief Justice of the Supreme People’s Court.
2. Cancel the appellate 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 regarding the “Dispute over credit contract” between the plaintiff Bank A and the defendant Ms. Nguyen Thi L; the persons with related rights and obligations being Ms. Pham Thi Kim H and Mr. Duong Quoc K.
3. Uphold the first-instance commercial judgment No. 287/2013/KDTM-ST dated March 19, 2013, of the People’s Court of Ho Chi Minh City.
CONTENT OF THE PRECEDENT
“[2] Regarding the handling of mortgaged assets: According to the documents in the case file, it is determined that the mortgaged assets, being house and land at No. 26D and 20/2T mentioned above, were transferred to Ms. L by Mr. Duong Quoc K and Ms. Pham Thi Kim H under transfer contracts for house ownership and residential land use rights notarized on November 4, 2008. On November 7, 2008, Ms. L was granted the certificate of house ownership and residential land use rights. Thus, the two properties belonged to Ms. L’s ownership from November 7, 2008, so Ms. L had the right to use these two properties to mortgage to the Bank for a loan; Mr. K and Ms. H also knew and agreed for Ms. L to mortgage the properties to the Bank. The mortgage contract was notarized, the mortgage registered, and the secured transaction registered legally, thus it is legally effective. Mr. K and Ms. H claimed that Ms. L had not fully paid for the properties and still owed 2,500,000,000 VND to request the cancellation of the house purchase contract and return the 3,000,000,000 VND received to Ms. L, which is groundless. If Ms. L does not pay the remaining amount for the properties, Mr. K and Ms. H have the right to file another lawsuit to request Ms. L to pay this amount… The appellate court’s declaration of voiding the mortgage contract No. 6360-LCP-2009-00949 between the Bank and Ms. L regarding the house at No. 26D and the house at No. 20/2T, Ward Q, District P, Ho Chi Minh City on December 1, 2009, is incorrect, affecting the legal rights and interests of the plaintiff.”
