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Chapter Law Content

Title: Civil Code CH
Category: Ministry of Justice(法務部)
Part Ⅲ Rights In Rem
Chapter 6 Mortgage
Section 2 - Line of Credit Mortgages
Article 881-1
A line of credit mortgage is a mortgage created for not more than a specified maximum amount on real property belonging to a debtor or a third party and provided thereby to secure a creditor's unspecified claim within a specific scope against the debtor.
Claims secured by line of credit mortgages shall be limited to claims deriving from specific legal relationships or to rights deriving from negotiable instruments.
For rights deriving from negotiable instruments, with the exception of those obtained on the basis of a specific legal relationship with a debtor as referred to in the preceding paragraph, if the mortgagee accepts any further transfers of negotiable instruments once the debtor has ceased payment and begun liquidation proceedings, or once there has been any composition agreement, application for bankruptcy, or application for company reorganization pursuant to the Bankruptcy Act, the rights under such negotiable instruments are not a claim secured by the line of credit mortgage. This restriction shall not apply, however, if the mortgagee has accepted transfer of a negotiable instrument without knowledge of those circumstances.
Article 881-2
The mortgagee of a line of credit mortgage may exercise rights with respect to the principal claim, once it has been determined, only within the stipulated maximum amount.
The mortgagee of a line of credit mortgage may exercise rights with respect to interest, default interest, and default penalties on a claim under the preceding paragraph only insofar as the aggregate sum of those items and the claim under the preceding paragraph does not exceed the stipulated maximum amount.
Article 881-3
Prior to the determination of the principal claim, the mortgagee and the mortgagor may stipulate a change in the scope or in the debtor of a claim as set out in Article 881-1, paragraph 2.
A change referred to in the preceding paragraph does not require the consent of mortgagees holding junior mortgages or other interested parties.
Article 881-4
A line of credit mortgage may stipulate a date on which the principal claim it secures shall be determined, and prior to the determination date, a change in that date may be stipulated.
The determination date referred to in the preceding paragraph may not be more than 30 years from the time the mortgage is created. If a period of 30 years from that time is exceeded, the period will be reduced to 30 years.
The time period referred to in the preceding paragraph may be renewed by the parties.
Article 881-5
If no date has been stipulated for determination of the principal claim secured by a line of credit mortgage, the mortgagor or the mortgagee may at any time demand determination of the principal claim secured by the mortgage.
Under the circumstances referred to in the preceding paragraph, the day 15 days from the date of the demand will be the date for determination of the principal claim, unless otherwise stipulated between mortgagor and mortgagee.
Article 881-6
If the claim secured by a line of credit mortgage is assigned to another person prior to determination of the principal claim, the line of credit mortgage is not transferred along with the claim. The same shall be true when a third party satisfies the debt on behalf of the debtor.
If, prior to determination of the principal claim, a third party assumes the claim secured by a line of credit mortgage, and the debtor is exempted from liability, the mortgagee may not exercise the line of credit mortgage with respect to the portion that has been assumed.
Article 881-7
If, prior to the determination of the principal claim, the mortgagee or the debtor of a line of credit mortgage is a juristic person and undergoes a merger, the mortgagor may, within 15 days from the date on which it learns of the merger, demand determination of the principal claim. This provision shall not apply, however, more than 30 days after the record date of the merger or when the mortgagor is a party to the merger.
When a demand is made pursuant to the preceding paragraph, the principal claim shall be determined at the time of merger.
The juristic person surviving or created by the merger shall notify the mortgagor within 15 days from the date of the merger, and shall be liable for damages for any injury to the mortgager resulting from failure to make such notification.
The provisions of the preceding three paragraphs apply mutatis mutandis under the circumstances set out in Article 306 or to demerger by the juristic person.
Article 881-8
Prior to determination of the principal claim, the mortgagee may, with the consent of the mortgagor, assign the line of credit mortgage in whole or divide and assign it in part to a third person.
Prior to determination of the principal claim, the mortgagee may, with the consent of the mortgagor, cause another or others to become joint mortgage holders of the line of credit mortgage.
Article 881-9
If multiple persons are joint mortgage holders of a line of credit mortgage, the share of each joint mortgage holder in proceeds to which the holders are preferentially entitled is allotted pro-rata to the holder's proportional share in the claim, unless otherwise stipulated by the joint mortgage holders prior to determination of the principal claim.
The right of a joint mortgage holder to be allotted a share pro-rata to its proportional share in the claim pursuant to the preceding paragraph may not be disposed of without the consent of all of the joint mortgage holders, unless prior stipulations have been made concerning the shares to which the mortgage holders are entitled.
Article 881-10
If line of credit mortgages are created on multiple real properties for the purpose of securing the same claim, and if there occurs cause for determination of the principal claim with respect even to just one among the mortgaged real properties securing the principal claim, the principal claim secured by each of the line of credit mortgages will thereupon be determined.
Article 881-11
A line of credit mortgage is not affected by the death of the mortgagee, mortgagor, or debtor, unless such event has been stipulated as a cause for determination of the principal claim.
Article 881-12
Unless otherwise provided in this Section, any of the events below will be cause for determination of the principal claim secured by a line of credit mortgage:
1. The arrival of the stipulated date for determination of the principal claim.
2. A change in the scope of the secured claim, or any other event, that results in discontinuance of the principal claim.
3. The termination of the legal relationship under which the secured claim was incurred, or extinguishment of that relationship due to any other cause.
4. Refusal by the creditor to allow incurrence of further claims, and a demand by the debtor for determination.
5. An application by the mortgagee of a line of credit mortgage for a court ruling for auction of the mortgaged property; a demand for transfer of ownership of the mortgaged property pursuant to Article 873-1; or the establishment of a contract pursuant to Article 878.
6. Attachment of the mortgaged property by a court due to an application by another creditor for compulsory execution, where the mortgagee of the line of credit mortgage knows of the attachment, or where the executing court notifies the mortgagee of the same, provided that this will not apply if the attachment of the property has been cancelled.
7. A court ruling pronouncing bankruptcy of the debtor or mortgagor, provided that this will not apply if the bankruptcy ruling has been vacated by a final and unappealable court ruling.
The provisions of Article 881-5, paragraph 2, apply mutatis mutandis to subparagraph 4 of the preceding paragraph.
The provisos of paragraph 1, subparagraphs 6 and 7 do not apply if, after determination of the principal claim, a third party has taken assignment of the secured claim, or has created any right to which the claim is subject.
Article 881-13
After the occurrence of a cause for determination of the principal claim secured by a line of credit mortgage, the debtor or mortgagor may demand that the mortgagee provide a final accounting of the actual amount of the claim incurred, and may demand registration of that amount as amended to a regular mortgage. The amount registered, however, may not exceed the originally stipulated maximum amount of the mortgage.
Article 881-14
Except as otherwise provided in this Section, once the principal claim secured by a line of credit mortgage has been determined, the effectiveness of the security does not extend to any claim further incurred or any right in a negotiable instrument obtained subsequent to such determination.
Article 881-15
Once the right of claim over the claim secured by a line of credit mortgage has been extinguished by prescription, if the mortgagee does not enforce its mortgage right during the five years following the completion of such prescription, that claim is thenceforth excluded from the scope secured by the line of credit mortgage.
Article 881-16
Following determination of the principal claim secured by a line of credit mortgage, if the actual amount of the claim exceeds the stipulated maximum amount of the mortgage, a third person who established the mortgage for the debtor, or any other person with a legal interest in the existence of the mortgage, may apply for its cancellation after repayment of an amount equivalent to the maximum amount.
Article 881-17
The provisions regarding regular mortgage apply mutatis mutandis to line of credit mortgages, with the exception of the provisions of Article 861, paragraph 2, Article 869, paragraph 1, Article 870, Article 870-1, Article 870-2, and Article 880.
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