CASE LAW NO. 36/2020/AL

On the Validity of Land Use Rights Mortgage Contract when the Land Use Rights Certificate is Revoked or Annulled

Approved by the Judicial Council of the Supreme People’s Court on February 5^th, 2020, and published under Decision No. 50/QĐ-CA on February 25^th, 2020, by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

Cassation Decision No. 05/2018/KDTM-GĐT dated May 18^th, 2018, by the Judicial Council of the Supreme People’s Court concerning the business and commercial case of “Credit Contract Dispute” in Bà Rịa – Vũng Tàu Province between the plaintiff, Joint Stock Commercial Bank V, and the defendants, Mr. Nguyễn Văn C and Mrs. Vũ Thị T.

Location of the Case Law’s Content:

Paragraphs 2 and 3 of the “Court’s Opinion” section.

Summary of the Case Law:

– Case Background:

A land use rights mortgage contract was established following all legal procedures. However, the corresponding land use rights certificate was later revoked or annulled due to discrepancies in the land area and irregularities in the issuance process. It’s important to note that the revocation of the certificate doesn’t negate the legitimate land use rights of the land users.

– Legal Resolution:

Despite the revoked or annulled certificate, the land use rights mortgage contract remains legally valid in this scenario.

Relevant Legal Provisions:

– Articles 322 and 343 of the 2005 Civil Code; Articles 342 and 411 of the 2005 Civil Code (corresponding to Articles 317 and 408 of the 2015 Civil Code);

– Articles 61 and 62 of the 2003 Land Law; Articles 46 and 106 of the 2003 Land Law (corresponding to Articles 95 and 167 of the 2013 Land Law).

Keywords:

“Revoked or annulled land use rights certificate”; “Validity of mortgage contract”.

CASE DETAILS

In the complaint dated May 18^th, 2011, and during the proceedings, Joint Stock Commercial Bank V stated:

Bank V entered into Credit Contract No. 10.36.0015 with Mr. Nguyễn Văn C and Mrs. Vũ Thị T on March 22^nd, 2010. As per the terms of this contract, Bank V provided a loan of VND 900,000,000 to Mr. C and Mrs. T. The loan had an annual interest rate of 12% and had a duration of 12 months. In case of late payment, the interest rate would increase to 150% of the original rate. Mr. C and Mrs. T used their land use rights for a Plot of land measuring 3,989.7m², specifically Plot No. 12, Map Sheet No. 05 in Commune H, Town B, as collateral for the loan.

The land use rights were officially documented in Land Use Rights Certificate No. Đ544493, issued by the People’s Committee of Town B on July 14^th, 2004. This arrangement was made under Mortgage Contract No. 10.36.0015, dated March 18^th, 2010, to ensure the loan’s security. The security transaction was officially recorded at the Land Use Rights Registration Office of Town B on March 19^th, 2010.

Following the loan, Mr. C and Mrs. T failed to meet their payment commitments to Bank V. Hence, Bank V has requested that Mr. C and Mrs. T reimburse the full debt amounting to VND 1,449,537,500, which comprises VND 900,000,000 as the principal and VND 549,537,500 as the interest computed till July 17th, 2013, with additional interest collecting until the loan is fully repaid.

The People’s Committee of Town B issued Decision No. 3063/QĐ-UBND on August 31^st, 2011, revoking Land Use Rights Certificate No. Đ544493, while the Mortgage Contract was still in effect. Nevertheless, Bank V determined that the land use right for the 2,400m² area of land that Mr. C and Mrs. T had previously acquired (after being adjusted according to actual conditions) was legal and maintained the security for Mr. C and Mrs. T’s loan, despite the fact that Land Use Rights Certificate No. Đ544493 was no longer valid. Bank V would request that the Civil Judgment Enforcement Department of City B prioritize the auction proceeds to reimburse Bank V.

The defendant, Mr. Nguyễn Văn C, stated:

He confirmed the information regarding the Credit Contract and Mortgage Contract as presented by Bank V was accurate. After borrowing, he had partially repaid the interest to Bank V, amounting to VND 122,775,000, but had not repaid the principal and agreed with Bank V’s lawsuit request.

Mr. C and Mrs. T filed an administrative lawsuit against Decision No. 3063/QĐ-UBND dated August 31^st, 2011, by the People’s Committee of Town B. However, both the first-instance and appellate courts did not accept their request, so Mr. C requested the Court to resolve the matter according to the law because the secured property no longer existed.

In the First-instance Business and Commercial Judgment No. 04/2013/KDTM-ST dated December 10^th, 2013, the People’s Court of Bà Rịa – Vũng Tàu Province decided:

– Mr. Nguyễn Văn C and Mrs. Vũ Thị T were obligated to repay Joint Stock Commercial Bank V – Branch B VND 1,449,537,500, including VND 900,000,000 principal and VND 549,537,500 interest.

– Declared Mortgage Contract No. 10.36.0015 dated March 18^th, 2010, signed between Joint Stock Commercial Bank V – Branch B and Mr. Nguyễn Văn C and Mrs. Vũ Thị T, concerning the mortgage of a 3,989.7m² land area, Plot No. 12, Map Sheet No. 05, Commune H, Town B, according to Land Use Rights Certificate No. Đ544493 issued by the People’s Committee of Town B (now the People’s Committee of City B) on July 14^th, 2004, in the names of Mr. Nguyễn Văn C and Mrs. Vũ Thị T, to be invalid.

Consequently, it did not guarantee the redemption of the loan under Credit Contract No. 10.36.0015, which was executed on March 22^nd, 2010.

On December 23^rd, 2013, Joint Stock Commercial Bank V – Branch B filed an appeal.

In the Appellate Business and Commercial Judgment No. 48/2014/KDTM-PT dated August 15^th, 2014, the Appellate Court of the Supreme People’s Court in Hồ Chí Minh City decided:

– The appeal of Joint Stock Commercial Bank V – Branch B was not accepted; the First-instance Business and Commercial Judgment No. 04/2013/KDTM-ST dated December 10, 2013, of the People’s Court of Bà Rịa – Vũng Tàu Province was upheld.

– The complaint of Joint Stock Commercial Bank V – Branch B regarding the credit contract dispute with Mr. Nguyễn Văn C and Mrs. Vũ Thị T was accepted.

– Mr. Nguyễn Văn C and Mrs. Vũ Thị T were ordered to pay Joint Stock Commercial Bank V – Branch B VND 1,449,573,500, including VND 900,000,000 principal and VND 549,573,500 interest.

– Mortgage Contract No. 10.36.0015 dated March 18^th, 2010, signed between Joint Stock Commercial Bank V – Branch B and Mr. Nguyễn Văn C and Mrs. Vũ Thị T, concerning the mortgage of a 3,989.7m² land area, Plot No. 12, Map Sheet No. 05, Commune H, Town B, according to Land Use Rights Certificate No. Đ544493 issued by the People’s Committee of Town B (now City B) on July 14^th, 2004, in the names of Mr. Nguyễn Văn C and Mrs. Vũ Thị T, was declared invalid.

Consequently, it did not guarantee the redemption of the loan under Credit Contract No. 10.36.0015, which was executed on March 22^nd, 2010.

Other decisions of the First-Instance Judgment that were not appealed or protested became legally effective from the expiration date of the appeal and protest periods.

After the appellate trial, Bank V submitted a petition for cassation review of the aforementioned Appellate Judgment.

On August 15^th, 2014, the Chief Justice of the Supreme People’s Court protested the Appellate Business and Commercial Judgment No. 48/2014/KDTM-PT of the Appellate Court of the Supreme People’s Court in Hồ Chí Minh City concerning the part declaring Mortgage Contract No. 10.36.0015 dated March 18^th, 2010, invalid; requesting the Judicial Council of the Supreme People’s Court to conduct a cassation review, vacate the part of the aforementioned Appellate Judgment and the part of the First-instance Business and Commercial Judgment No. 04/2013/KDTM-ST dated December 10^th, 2013, of the People’s Court of Bà Rịa – Vũng Tàu Province declaring Mortgage Contract No. 10.36.0015 dated March 18^th, 2010, invalid; and remand the case to the People’s Court of Bà Rịa – Vũng Tàu Province for  first-instance re-trial according to legal regulations.

At the cassation review hearing, the representative of the Supreme People’s Procuracy proposed that the Judicial Council of the Supreme People’s Court accept the protest of the Chief Justice of the Supreme People’s Court.

COURT’S OPINION:

[1] Bank V and Mr. Nguyễn Văn C both confirmed that Bank V and Mr. Nguyễn Văn C, Mrs. Vũ Thị T signed Credit Contract No. 10.36.0015 on March 22^nd, 2010, and Mortgage Contract No. 10.36.0015 on March 18^th, 2010. The mortgaged property was a 3,989.7m² land area, Plot No. 12, Map Sheet No. 05 in Commune H, Town B, according to Land Use Rights Certificate No. Đ544493 issued by the People’s Committee of Town B on July 14^th, 2004, in the names of Mr. Nguyễn Văn C and Mrs. Vũ Thị T.

The property was registered for secured transaction at the Land Use Right Registration Office of Town B on March 19^th, 2010. According to the provisions of Article 343 of the 2005 Civil Code; Point c, Clause 1, Article 10 and Point a, Clause 1, Article 12 of Decree No. 163/2006/ND-CP dated December 29^th, 2006, on secured transactions, the mortgage of the land use right mentioned above was in compliance with legal regulations.

[2] The People’s Committee of Town B issued Decision No. 3063/QĐ-UBND on August 31, 2011, to revoke and annul Land Use Rights Certificate No. Đ544493, which was issued by the People’s Committee of Town B on July 14, 2004, in the names of Mr. Nguyễn Văn C and Mrs. Vũ Thị T. The Land Use Rights Certificate was revoked and annulled as a result of errors in the land area and the procedure for issuing it to Mr. C and Mrs. T.

Nevertheless, the revocation and annulment of the Land Use Rights Certificate did not result in the abolition of the legitimate land use rights of Mr. C and Mrs. T. This is due to the fact that the land use right transfer between Ms. Trần Thị Ngọc H, Mr. Trần Huỳnh L, and Mr. C and Mrs. T was finalized, and there were no disputes regarding the Land Use Right Transfer Contract.

[3] Additionally, Mr. C and Mrs. T had mortgaged the Land Use Rights Certificate to the Bank on numerous occasions prior to its revocation, with the most recent mortgage occurring on March 19, 2010. The land use rights mortgage contract between Mr. C and Mrs. T and the Bank was legally effective due to its compliance with legal regulations. The first-instance and appellate courts’ conclusion that the Land Use Right Mortgage Contract No. 10.36.0015, dated March 18th, 2010, was invalid due to the non-existence of the mortgaged property was incorrect, as it was based on Article 411 of the 2005 Civil Code.

[4] According to Dispatch No. 887/CNVPĐK-ĐKCG dated March 28^th, 2017, the Branch of the Land Registration Office of City B confirmed: After the People’s Committee of Town B issued Decision No. 3063/QĐ-UBND to revoke and annul Land Use Rights Certificate No. Đ544493 and the Appellate Administrative Judgment No. 01/2013/HC-PT dated January 4^th, 2013, of the People’s Court of Bà Rịa – Vũng Tàu Province became legally effective, the Civil Judgment Enforcement Department of City B issued enforcement decisions according to legally effective civil judgments that Ms. Trần Thị Ngọc H was obligated to enforce.

Accordingly, the auction of the 2,741.1m² land area of Plot 386, Map Sheet No. 05 in Commune H was organized. Mr. Bùi Văn C1 was the successful bidder for the land use right of the 2,747.1m² land area. On March 14^th, 2016, the People’s Committee of City B issued Land Use Rights Certificate No. CA959055 for the auctioned land area to Mr. Bùi Văn C1.

[5] Thus, in order to guarantee the rights and obligations of the parties involved, the first-instance court must include the Civil Judgment Enforcement Department of City B, Ms. Trần Thị Ngọc H, Mr. Bùi Văn C1, and the People’s Committee of City B as interested parties in the proceedings, as stipulated in Clause 4, Article 68 of the Civil Procedure Code. This will ensure a comprehensive and thorough resolution of the case.

In light of the foregoing,

IT IS DECIDED:

Pursuant to Point a, Clause 2, Article 137, Clause 3, Article 343, and Article 345 of the 2015 Civil Procedure Code:

1. Accept the Cassation Decision No. 17/2017/KN-KDTM dated August 4, 2017, of the Chief Justice of the Supreme People’s Court.
2. Annul part of the Appellate Business and Commercial Judgment No. 48/2014/KDTM-PT dated August 15, 2014, of the Appellate Court of the Supreme People’s Court in Hồ Chí Minh City and annul part of the First-instance Business and Commercial Judgment No. 04/2013/KDTM-ST dated December 10, 2013, of the People’s Court of Bà Rịa – Vũng Tàu Province concerning the “Credit Contract Dispute” between the plaintiff, Joint Stock Commercial Bank V, and the defendants, Mr. Nguyễn Văn C and Mrs. Vũ Thị T, regarding the declaration of Mortgage Contract No. 10.36.0015 dated March 18, 2010, as invalid.
3. Remand the case file to the People’s Court of Bà Rịa – Vũng Tàu Province for re-trial according to the first-instance procedure, in compliance with legal regulations.

CONTENT OF THE CASE LAW:

“[2] The People’s Committee of Town B issued Decision No. 3063/QĐ-UBND on August 31, 2011, to revoke and annul Land Use Rights Certificate No. Đ544493, which was issued by the People’s Committee of Town B on July 14, 2004, in the names of Mr. Nguyễn Văn C and Mrs. Vũ Thị T. The Land Use Rights Certificate was revoked and annulled as a result of errors in the land area and the procedure for issuing it to Mr. C and Mrs. T.

Nevertheless, the revocation and annulment of the Land Use Rights Certificate did not result in the abolition of the legitimate land use rights of Mr. C and Mrs. T. This is due to the fact that the land use right transfer between Ms. Trần Thị Ngọc H, Mr. Trần Huỳnh L, and Mr. C and Mrs. T was finalized, and there were no disputes regarding the Land Use Right Transfer Contract.

[3] Additionally, Mr. C and Mrs. T had mortgaged the Land Use Rights Certificate to the Bank on numerous occasions prior to its revocation, with the most recent mortgage occurring on March 19, 2010. The land use rights mortgage contract between Mr. C and Mrs. T and the Bank was legally effective due to its compliance with legal regulations. The first-instance and appellate courts’ conclusion that the Land Use Right Mortgage Contract No. 10.36.0015, dated March 18th, 2010, was invalid due to the non-existence of the mortgaged property was incorrect, as it was based on Article 411 of the 2005 Civil Code.”

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