Mortgagee Sequence

Market-oriented economy is credit economy. Based on the inevitable requirements for the full protection of creditor's right, promotion of capital flow and avoidance of financial risks, security interest system plays an important role in maintaining market credit and boosting the development of market-oriented economy. Mortgage, being one of important kinds of warranty against thing, is featured significantly by the possession with no subject matter transferred. In other words, the owner of the guaranty still holds the guaranty while the creditor is merely in symbolic possession of it. This feature of mortgage makes double uses of the utilization value and the exchanging value of the guaranty. However, such feature and the divisibility of exchanging value of the mortgage, together with the conflict between the scarce resources and the increasing demand of financing, collectively make it hard to establish an exclusive corresponding relationship between the subject and the object, thus causing the possibility of the combined amount of credit warranted by a couple of mortgages exceeding the value of the guaranty. Under this circumstance, conflict of interest arises out of the different mortgages against the one and the same guaranty. The sequence of materialization of the mortgages eventually affects whether and how much (if any) the priority of mortgages can be realized, which generates the issue concerning the sequence of mortgages. China's "Property Law" merely has some general provisions with respect to the issue. Whether based on the increasing demand for financing, or the concerns of mortgagee about the materialization of mortgage, it is of realistic significance to make a discussion on the issue concerning the sequence of mortgages. This author also makes a study on the issue in the hope to provide some insights into the legal practice. The thesis consists of five chapters together with the preamble as follows:In the first chapter, the author thinks, based on an introduction of the concept and the nature of the sequence of mortgages, that the establishment of the sequence of mortgages is beneficial to protect the interests of creditors, boost the capital flow and commodity transfer, and reduce the cost of trade. Afterwards, the author makes a discussion on the rules of establishment of the sequence of mortgages, deeming that the provisions regarding the identification of the sequence of materialization of mortgages based on whether the mortgages have been gone through the registration formalities as well as the sequence of the registration within the existing "Property Law" have a full theoretic ground. This chapter ends with the discussion on how to handle the issue arising from the inconsistency between the sequence of mortgages and the performance date of secured claim.The second chapter focuses on the discussion on the generation of the issue concerning the sequence of mortgages and the theoretical ground thereon. On the one hand, the sequence of mortgages is generated because the mortgage, being a kind of right of value itself, is permitted by law to be created on the one and the same guaranty, in other words, the one and the same guaranty may be against a couple of mortgages regardless of the relationships between the combined amount of credit warranted by a couple of mortgages and the real value of the warranty. If repetitive mortgage is forbidden by laws and regulations, it is unlikely to generate the issue concerning the sequence of mortgages. On the another hand, the exclusivity of property right also leads to the unequal mortgages and the priority of validity of exercise of the mortgages.The third chapter analyzes the issue whether the subsequent mortgage shall be ascended naturally if the prior mortgage is eliminated. For different mortgages against the one and the same guaranty, 2 kinds of principles are applied in different countries and regions adopt, namely, ascending principle and fixation principle. France and Japan adopt the ascending principle while the fixation principle is featured by the owner's mortgage adopted by Germany and blank security system adopted by Switzerland. The author, based on the definitions of 2 kinds of legislation pattern, legal effects and the debates between them and combined with China's social situation and legal traditions, makes a discussion and comes to an conclusion that there is a solid legal ground for China to adopt the ascending principle for the sequence of mortgages.The last two chapters mainly discuss the disposition of the sequence of mortgages. The sequence of mortgages is essentially a kind of interest of property law. Like mortgage, the sequence of mortgages is not the exclusive right on property, therefore, mortgagee may dispose it in its own discretion to the extent permitted by law, which demonstrates the mortgagee has this right. In accordance with the laws and regulations and viewpoints of scholars in other countries, the disposition of the sequence of mortgages shall include the abandon, alteration and assignment. China's "Property Law" merely stipulates specifically the abandon and alteration of the sequence of mortgage. For the 2 kinds of disposition of the sequence of mortgages, the author mainly focuses on their definitions, constitutive elements and the impacts on the exercise of mortgage in the fourth chapter. Although there is no specific provisions regarding whether the mortgagees may assign the sequence of mortgages within China's "Property Law", the assignment of the sequence of mortgages belongs to the scope of autonomy of the parties' will, and the mortgagee may, without prejudice to the legitimate rights and interests of other interested parties, disposal the sequence of mortgage in its own discretion. The fifth chapter, based on the detailed introduction to the definition, constitutive elements, validity and the impact on the exercise of mortgage, bring forward that the assignment of the sequence of mortgage is more feasible in practice and shall be acknowledged by law.