What is Mortgage Fraud?

Malicious mortgage refers to a mortgage where a debtor with multiple ordinary creditors sets a mortgage with only one of the creditors to reduce the general guarantee of the debtor and infringe the interests of other creditors.

Malicious mortgage

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Malicious mortgage refers to multiple ordinary

The malicious mortgage is the object of the creditor's right of revocation, so it can be revoked by other creditors. In the malicious mortgage, the legal representative or direct responsible person of the mortgagor needs to bear civil liability for the victim.

As the law does not explicitly stipulate, scholars use this concept in the following three meanings: The first meaning refers to unenforceable or invalid mortgages set up to obtain loans, including the absence of collateral, collateral belonging to others or The value of the collateral is not real. State-owned

Malicious mortgage under bankruptcy law

Malicious mortgages in the security law refer to mortgages where the debtor has multiple creditors and is set up for one of the creditors only, resulting in the insolvency of other debts. The malicious mortgage on the guarantee law is concentrated in the relevant replies, replies and interpretations of the Supreme People's Court. As early as in the Supreme People's Court's "Reply on the Validity of Debtors Having Multiple Creditors and Pledges All Their Property to One Creditor" (Fu Fu [1994] No. 2), it was stipulated that when a debtor has multiple creditors, All its property was mortgaged to one of the creditors, so it lost the ability to perform other debts and damaged the legitimate rights and interests of other creditors. According to the provisions of Articles 4 and 5 of the General Principles of the Civil Law of the People's Republic of China, the mortgage agreement should be deemed invalid. . According to the reply, no matter whether the parties are subjectively malicious, as long as the debtor objectively mortgages the entire property to one of the multiple creditors, the malicious mortgage is invalid. This reply has two flaws. First, it is difficult to apply in practice. There are three reasons for this. One is the inability to define the entire property of the debtor. According to economic theory, property includes

Malicious mortgage is both an act of defrauding creditor's rights. When discussing the legal composition of a malicious mortgage, it should be compared with the legal components of the creditor's right of revocation to clarify the relevant legal issues in its objective and subjective requirements. (1) Objective requirements for malicious mortgage

1 The creditor's right of revocation does not need to be based on the expiry of the creditor's rights.

According to the Judicial Interpretation of the Security Law, the creditor can exercise the right of revocation only if the creditor's rights have reached the repayment period. For the unexpired debtor, since the obligation to repay has not yet occurred, it is not possible to talk about malicious mortgage. [4] We think this view is incorrect. The purpose of the right of revocation is to prevent the unjust reduction of the debtor's general property. The effect of exercising the right of revocation is only to declare the legal act performed by the debtor and others invalid to restore the original state. The creditor does not have the right to directly return the subject matter. In this regard, the creditor's right of revocation is different from the subrogation system. To exercise the right of subrogation, the creditor must rely on the debtor being delayed. And if it is emphasized that only the creditor who has reached the redemption period can exercise the right of revocation, the debtor can borrow the property before the expiry of the redemption period. So, the purpose of the creditor's right of revocation system is not defeated? When the debt has not yet reached the repayment period, the rights and interests of creditors are infringed, not actual damage but future damage. Objective judgment criteria should be adopted for such future damage. This criterion is to see if malicious mortgages cause damage to creditors.

2 A malicious mortgage is a mortgage that causes damage to creditors.

Article 69 of the Judicial Interpretation of the Security Law requires that the malicious mortgage must be that the debtor mortgages "all or part of its property to one of the creditors, thereby losing the ability to perform other debts and damaging the legitimate rights and interests of other creditors." According to this rule, malicious mortgages need to meet the following three conditions: the debtor mortgages all or part of the property to one of the creditors; loses the ability to perform other debts; and causes damage to the creditors. There are both requirements for ultimate results and behavioral requirements. The loss of the ability to perform other debts is the result of mortgage of all or part of the property to one of the creditors, and the end result is "damage to the creditors". This double-bedded house-type provision is actually consistent with the relevant provisions of the creditor's right of rescission in the contract law, but it is more specific. In other words, in accordance with Article 74 of the Contract Law, the creditor's right of revocation only needs to meet the objective requirement that the debtor's actions cause damage to the creditor, and there is no need to examine whether the debtor mortgages all or part of the property to one of the creditors; Whether you have lost the ability to meet other obligations. The reason for this provision in the Judicial Interpretation of the Security Law is probably the result of the traditional legislative tradition in China, which has always emphasized that "the debtor mortgages all or part of its property to one of multiple creditors".

(2) Subjective requirements for malicious mortgage

The legal issues concerning the subjective elements of malicious mortgages focus on whether malicious mortgages require malicious collusion between the mortgagor (debtor) and creditors. According to the "Judicial Interpretation of the Security Law", a malicious mortgage must be a malicious collusion between the debtor and one of the creditors. Malicious collusion is a legal concept commonly used in civil law in the mainland of China. It is equivalent to the "conspiracy and hypocrisy" in the traditional civil law system. Its constituent elements are: the act is inconsistent with the inner purpose; it must be false and intentional; It is necessary to conspire with the counterpart and implement other requirements. False conspiracy is often a fraud on a third person. Effectiveness of collusive false representation: invalidity between parties (collusion), in order to protect the security of the transaction, the false representation of collusive falsehood must not be against a bona fide third party [16]. Therefore, if the malicious mortgage subjectively requires the debtor and one of the creditors In spite of malicious collusion, the mortgage behavior is certainly invalid for other creditors, and there is no need to revoke the invalid behavior. The Judicial Interpretation of the Security Law requires that the debtor and the creditor's rights be subject to malicious collusion, while admitting that the malicious mortgage is not an invalid behavior but a revocable behavior. There is a theoretical contradiction between the two. The act of defrauding creditor's rights and the act of conspiracy to make false representations are strictly distinguished in the civil law system. For the purpose of the system, the reason why the latter can be revoked is to indicate that it is not true, while the former has the right of revocation to protect the general guarantee of other general creditors, which belongs to the security system of debt.

It is worth mentioning that, in accordance with Article 74 of the Contract Law, the unpaid behavior of the scope of application of the right of revocation refers only to the debtor's waiver of its due creditor's right or the transfer of property for free, causing damage to the creditor. The creation of mortgage rights is not included in the literal meaning. This should be expanded according to the purpose stipulated by the law, and the behavior of transferring property for free shall be interpreted as all acts of free property.

In summary, the mortgage behavior set at the same time requires malicious hostage to constitute a malicious mortgage; setting a mortgage afterwards does not require hostile hostility to constitute a malicious mortgage. The constituent elements of the malicious mortgage are consistent with the requirements of the object of the creditor's right of revocation. For this reason, there is no separate requirement for malicious mortgage in the guarantee law. On the premise that Article 69 of the Judicial Interpretation of the Security Law places too many restrictions on other creditors 'claims for revocation of malicious mortgages, the parties may file claims of creditors' right of revocation in accordance with Article 74 of the Contract Law. In this case, , The court shall not apply the Judicial Interpretation of the Security Law in accordance with its functions but not the Contract Law.