Pledge and mortgage assets at Global Petroleum Joint Stock Commercial Bank GP.Bank

"The legality of secured property rights and some recommendations for building and perfecting the Vietnamese Civil Code ".

Each scientist has a way of exploring and exploiting the topic from a different perspective. However, no scientist has yet researched "Asset mortgage and asset pledge at Global Petroleum Joint Stock Commercial Bank (GP.Bank)".

3. Research object and scope

The research object of the thesis is the general theoretical issues of property pledge and property mortgage; the current status of legal regulations on property pledge and property mortgage; the current status of applying regulations on property pledge and property mortgage.

Mortgaging and pledging assets at GP.Bank include many issues. The author does not have the ambition to mention all the issues but only focuses on the most basic and prominent issues at GP.Bank. The thesis only focuses on clarifying some issues related to mortgaging assets and pledging assets such as: concepts, characteristics, roles of these two measures, issues arising at GP.Bank related to mortgaging assets and pledging assets and related recommendations.

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4. Research purpose and tasks of the thesis

The purpose of the thesis is to study and clarify theoretical and legal issues on property pledge and mortgage. On that basis, analyze and evaluate the current status of applying the provisions of the law on property pledge and mortgage at GP.Bank. At the same time, propose some opinions and solutions to improve the law related to property pledge and mortgage in Vietnam today.

To achieve the above purpose, the thesis has the following tasks:

- Research on positive law on property pledge and mortgage.

- Research and evaluate the current status of law application on property mortgage and asset pledge at GP.Bank.

- Proposing solutions to improve laws related to property mortgage and asset pledge.

5. Scope of research

- Research on property mortgage and asset pledge according to Vietnamese law.

- Research on practical application of property mortgage and asset pledge laws at GP.Bank.

6. Research methods

- Dialectical and historical method.

- Analysis and synthesis methods.

- Comparison and statistical methods.

- Sociological investigation methods, seminars and experts.

- Modeling and systematization methods.

7. Structure of the thesis

In addition to the introduction, conclusion and list of references, the content of the thesis includes 3 chapters:

Chapter 1 : Some general theoretical issues on property pledge and property mortgage.

Chapter 2 : Current status of legal regulations on property mortgage and asset pledge.

Chapter 3 : Current status of applying regulations on property mortgage and asset pledge at GP.Bank and recommendations to improve application efficiency.

Chapter 1

SOME GENERAL THEORETICAL ISSUES

ON ASSET PLEDGE AND MORTGAGE

1.1. PLEDGE OF ASSETS - A MEASURE TO SECURE OBLIGATIONS

1.1.1. Concept of property mortgage

* Property mortgage is one of the common measures to secure the performance of civil obligations, in which the obligated party (called the Mortgagor) transfers his/her property to the entitled party (called the Mortgagee) to ensure that the obligation to the entitled party will be performed (detailed in Article 326 of the 2005 Civil Code - hereinafter referred to as the Civil Code).

* The subject of the mortgage is property (according to the provisions of the Civil Code, it includes both movable and immovable property, but according to the provisions of the 2003 Land Law, land use rights can only be received in the form of property mortgage). However, for the property mortgage measure, the obligation to transfer the property of the mortgagor to the mortgagee is a condition for the validity of the transaction, so most of the mortgaged property used is movable property (which can be objects or money, valuable papers, property rights).

The transfer of the pledged property to the pledgee must be the actual transfer of the property, that is, the pledgee actually holds the pledged property and not just takes possession of the documents. If the pledgor does not actually hand over the property to the pledgee, it is not a measure of pledge but a mortgage, although the property may be movable property and for some types of movable property, the law previously allowed the application of both measures of pledge and mortgage to secure the performance of obligations (pledge and mortgage of ships according to the 1990 Maritime Code), but now it is only used as mortgage to secure the performance of civil obligations such as mortgaging ships according to the 2005 Maritime Code.

Such amendment of the regulation is completely in line with the practical application because if the ship mortgage is applied, the mortgagor will hand over the ship to the mortgagee for safekeeping.

- That is, if the mortgagee can no longer use the ship, it will not be feasible.

* General principles when applying property mortgage measures:

- In a mortgage transaction, an asset can secure one obligation or multiple obligations, or multiple assets may be required to secure one obligation. The case of multiple assets being used to secure one obligation is more complicated than other cases.

Article 334 of the Civil Code stipulates : "In case of mortgaging many properties to secure the performance of a civil obligation, each property is determined to secure the performance of the entire obligation. The parties may also agree that each property secures the performance of part of the obligation" [49].

Accordingly, the solution for this case is as follows:

+ If the obligation is divided into parts, the parties may agree that each asset will be used to secure a certain part of the obligation. Accordingly, the handling of assets must comply with the agreement. If the parties do not have an agreement, one asset will be determined to secure the performance of the entire civil obligation.

+ If there is no agreement on each property used to secure the performance of a part of the obligation, each property is determined to secure the performance of the entire civil obligation.

- The property used as collateral to secure the performance of the pledgor's obligations is property owned by the pledgor, permitted to be traded and free of dispute, specifically:

+ The property is owned by the mortgagor. This condition seems to be extremely simple, but in reality, not all cases of ownership of the property are clearly defined in terms of content and form as prescribed by law. Not to mention the customer's fraud when participating in the transaction.

mortgage, leading to the bank being extremely disadvantaged when it needs to handle those assets later. For example, leased or borrowed assets are mortgaged... In case the mortgaged assets are not registered for ownership, the mortgagee must be responsible first if the mortgaged assets are sued by an owner other than the mortgagor according to the provisions of Article 256 of the Civil Code: "Right to reclaim assets". This provision of our Civil Code is different from the laws of many countries in the world such as: Article 336 of the Russian Civil Code; Article 747 of the Thai Civil Code; Article 342 of the Japanese Civil Code... according to which the mortgaged property does not necessarily have to be owned by the mortgagor. The mortgagee is always guaranteed in all cases, they have priority over other creditors, even in cases where the mortgaged property is not owned by the mortgagor.

+ Assets that are allowed to be traded are assets that the law allows or does not prohibit from being bought, sold, donated, converted, transferred, pledged, mortgaged, guaranteed and other transactions. However, there are assets that may be legally owned but are not allowed to be traded, for example: assets that are being temporarily detained, sealed, or frozen by competent authorities, assets that are undergoing dissolution or bankruptcy procedures of enterprises. From there, it can be broadly understood that "allowed to be traded" means that according to the provisions of the law, the asset is allowed to be put into a transaction, becoming the subject of the transaction, the category of allowed transactions is inferred by excluding cases that are prohibited or restricted from participating in transactions according to the provisions of the law such as opium, rare animals, etc.

+ In addition, the condition of no dispute over the property is understood to mean that this property has no dispute over legal obligations in legal relations at the time of signing the guarantee contract. The borrower and the guarantor must commit in writing to the bank that the mortgaged property has no dispute at the time of signing the mortgage contract and must be legally responsible for their commitment. In fact, the bank does not know what basis to use to accurately verify that the mortgaged property is "no dispute property".

But no local government has confirmed this issue because they believe that the superior agency has not yet issued a guiding document.

1.1.2. Form of property mortgage

In all cases, the pledge must be made in writing. An oral agreement on the pledge of property will not be considered as having evidentiary value in the event of a dispute. This agreement can be stipulated in the main contract or can also be made into a separate contract. Regardless of the form, the parties should fully agree on the contents of the pledge to ensure the performance of obligations such as: full name; address of the parties; characteristics of the pledged property, quantity, value...; used to secure which obligation; term of the pledge; rights and obligations of the parties; method of handling the property when the obligation arises and the obligated party cannot perform.

For mortgage transactions, the law does not require registration of secured transactions as a condition for the validity of the transaction. The mortgagee may choose to register upon request to ensure the order of priority of payment from the value of the secured assets to the obligations due.

1.1.3. Contents of property mortgage

* For parties involved in mortgage transactions, it is necessary to note the following very specific characteristics:

- The mortgagor must hand over the property to the mortgagee as committed. This is a prominent feature and also the "starting point" for the differences in the property mortgage measures. Accordingly,

+ The mortgagor has the right to request the mortgagee to suspend the use of the mortgaged property in case of detecting damage/signs of depreciation or risk of depreciation of the mortgaged property and at the same time request the mortgage holder to compensate for damages. If there is a dispute, the mortgagor has the right to request the Court to resolve it.

+ The mortgagee has become the subject with the right to legally possess the mortgaged property. Therefore, if there is an illegal infringement or illegal possession or use of the mortgaged property by a third party, the mortgagee has the right to request the third party to return the property to him/her. If that person does not voluntarily return it, the mortgagee has the right to request the competent state agency to intervene.

+ The party mortgaging the property is not obliged to transfer the documents confirming the ownership of the property to the mortgagee, but the mortgagee can also request the mortgagee to show him the certificate of ownership of the property (if the property has registered ownership) to determine whether the property belongs to the mortgagee or not. The mortgagee delivers the mortgaged property to the mortgagee and retains the certificate of ownership of the property and the mortgage document as evidence to reclaim the property when the obligation secured by the mortgaged property has been fulfilled. However, in reality, the mortgagee often requests to directly keep the certificates of ownership of the property to be mortgaged. There are also conflicting opinions on this issue.

- In addition, the parties have agreed in the Guarantee Contract that:

+ The mortgagee has the right to collect fees from the mortgagor related to the preservation and maintenance of the mortgaged property;

+ The mortgagor may sell the mortgaged property if the mortgagee agrees. In this case, the proceeds from the sale of the mortgaged property will be given priority in payment for the obligation secured by the mortgaged property;

+ The mortgagor may replace the mortgaged property with another property. This change must be clearly recorded in the mortgage document signed (and sealed in the case of an organization) by the parties;

+ Hire a third party to keep the mortgaged property;

+ The mortgagee is allowed to exploit the benefits and income from the mortgaged property if the mortgagor agrees.

- Third party rights to the mortgaged property (Clause 2, Article 330 of the Civil Code): In case the mortgage transaction has a third party with interests and the third party as well as the mortgagee are both bona fide in the transaction with the mortgagee, the mortgagee has the right to request the cancellation of the mortgage contract and request compensation for damages arising or maintain the contract and accept the rights of the third party. This is also a common risk in credit activities if the credit officer is negligent in the appraisal stage. For assets that have had transactions arising before the time of mortgage at the bank, it means that the bank will have to share the interests with that bona fide third party (the third party here can be the person to whom the property owner promised to sell/transfer/donate/donate the property or the lessee...)

For example, a bank grants credit to a customer based on the value of the collateral. If a breach occurs and a third party has rights to the collateral, the bank cancels the contract and requests compensation. The credit facility becomes an unsecured credit facility, and the bank will have difficulty collecting the full amount of the customer's debt. Therefore, the safer solution in this case is for the bank to maintain the collateral contract and recognize the rights of the third party.

- The mortgagee is not allowed to sell, exchange, donate, lease, or lend the mortgaged property, nor is it allowed to use the mortgaged property as security for the performance of other obligations, unless permitted by the property owner.

* The mortgage of property ends when:

Clause 1 and Clause 2, Article 339 of the Civil Code: "The pledge of property terminates in the following cases: 1. The obligation secured by the pledge terminates; 2. The pledge of property is cancelled or replaced by another security measure" [49].

Article 335 of the Civil Code: "The mortgage of property may be cancelled, if agreed by the mortgagee" [49].