Research Of The In Rem Subrogation Of A Security Right

The traditional understanding of the in rem subrogation of a security right is limited to the three situations where in rem subrogation occurs in the event of destruction,loss or expropriation of the security,and the scope of subrogation is also limited to insurance,indemnity and compensation.Article 390 of the Civil Code provides that the word "etc." in the phrase "insurance money,compensation,indemnity,etc." is not clearly explained by any authority.Moreover,from the existing regulations and theories,the study of subrogation in rem is mostly focused on existing objects,while little attention has been paid to whether subrogation in rem occurs over future or prospective objects.Although the Supreme People’s Court in Article 52 of Interpretation of the Relevant Guarantee System of the Civil Code affirms the priority effect of the registration of a pre-mortgage under certain conditions,it substantially denies the possibility of pre-sold commercial properties as collateral,so that there is no possibility of subrogation in rem on such preparatory property.This narrow legislative and doctrinal understanding of in rem subrogation of a security right stems from a misunderstanding of the substance of in rem subrogation and a misapplication of the object specificity requirement of a general right in rem to a security right.As a right to value,a security right attaches importance to the value of the collateral,irrespective of the form of the collateral.Thus,a security right itself is a break with the principle of object specificity of property rights,and its requirements for object specificity should be lower than those of ordinary property rights,and the scope of the security may include future or prospective objects of value.Subrogation in rem is a change in the object of the legal relationship.When the form of the security is changed,the abstract security right remains in the subrogated object,but the specific type of conversion of the security right depends on the specific circumstances.The requirements for object specificity need not be unduly stringent,either in respect of the initial security before the change or in respect of the subrogation after the change.In the case of in rem subrogation on the "preparatory object" of the target security right,the most typical cases are the registration of an advance mortgage on a pre-sale commercial property and the pledge of patent application rights.According to functionalism and the doctrine of anticipatory rights,both pre-sale houses and patent application rights are property values with a high degree of certainty of future property and are suitable as direct collateral to meet the financing needs of enterprises in practice.In the case of subrogation in rem on the "deformed object" of the target security right,the scope of subrogation goes beyond the "three gold items" provided for in the Civil Code and it is advisable to include the price,rent,additions,etc.,after the value of the initial collateral has been transformed into a subrogated object.When the form of the collateral is converted,the specific type of security right in it is also changed,by analogy with the conversion of the form of the collateral.When a security interest holder exercises its subrogation rights in rem,it may face difficulties in determining the subrogated property because it is mixed with other property of the guarantor,which may be determined by applying the rules of attachment and the doctrine of fiduciary relationship.With respect to the registration and publicity rules for subrogation,it is advisable to unify the warning registration and publicity regime for security rights in immovable property and security rights in movable property.In addition,the problem of conflicting rights in subrogation may be resolved by reference to the application of the conflict-of-rights rules for security interests.