Chen, Chun-Chi dissatisfied with the Executive Yuan’s appeal decision and filed an administrative proceeding with Taipei High Administrative Court with regard to its violation of the Fair Trade Law

Case:

Chen, Chun-Chi dissatisfied with the Executive Yuan’s appeal decision and filed an administrative proceeding with Taipei High Administrative Court with regard to its violation of the Fair Trade Law

Key Words:

guaranty contract, right of offset

Reference:

(2004) Taipei High Administrative Court’s Decision (93) Su Tzu No. 621

Industry:

Banks (6212)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. This case originated from the plaintiff Chen, Chun-Chi’s claim that the concerned party Cathay United Commercial Bank did not give him the photocopy of deed after he signed the guaranty contract with the aforementioned Bank. And, in accordance with the agreement of the guaranty contract, Cathay United Bank did not need to inform the contractor and may proceed to dispose the collateral when the rate of guaranty maintenance for the collateral rises to 140% and then falls below 140%. Again, Cathay United Commercial Bank did not inform the plaintiff beforehand when the Bank disposed the collateral and exercised its right of offsets (the so-called exercise acceleration clause), thus has violated the provision of Article 24 of the Fair Trade Law (FTL). Consequently, the plaintiff has filed the complaint with the defendant. On September 16, 2003, the defendant replied the plaintiff in the letter Kung-Yi-Tzu 0920008816 stating that the 618th Commissioners’ Meeting of the defendant has resolved the issue according to the present evidence and it was difficult to conclude the Bank’s conducts have violated the FTL. The plaintiff was dissatisfied with the decision and filed an appeal that was also rejected by the defendant later. Hence, the plaintiff has subsequently filed administrative proceedings with Taipei High Administrative Court.
2. According to the provision of Article 24 of the FTL, “In addition to what is provided for in this Law, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is able to adversely affect trading order.” Therefore, for any business conducts, if there is no concrete evidence to sufficiently conclude it has violated the aforementioned provision, in other words,if the conduct does not satisfy the aforementioned constitution conditions, then, the Article 24 of the FTL is not applicable. The debatable points in this case that must be looked into are: (1) whether the concerned party has not given the plaintiff a copy of the signed guarantee contract; (2) whether the concerned party has not informed the plaintiff beforehand when it disposed the collateral and exercised the right of offsets (that is exercises the acceleration clause) and (3) when the rate of guaranty maintenance for the collateral falls below the agreed standard again, whether the concerned party has to inform the plaintiff again before it can dispose the collateral.
3. With respect to whether the concerned party has not given the plaintiff a copy of the signed guaranty contract: The investigation did not find any concrete evidence that the concerned party has refused to give the plaintiff a copy of the guaranty contract. Furthermore, the plaintiff and the concerned party have business transaction with each other for more than five years, the plaintiff never requested contracts from the concerned party nor there was any incident of the plaintiff’s request being turned down, therefore, based on the aforementioned statements given by the plaintiff and the defendant, it is difficult to conclude that the concerned party has refused to give the plaintiff contracts as well as having conduct of sufficient to adversely affect trading order as stipulated in the provision of Article 24 of the FTL.
4. With regard to whether the concerned party has not informed the plaintiff beforehand when it disposed the collateral and exercised the right of offsets (that is exercises the acceleration clause): On June 26, 2001, the concerned party send a letter to the plaintiff notifying him to pay off partial loan or give additional collateral to make up the deficiency. On July 18 of the same year, the concerned party send a letter to the plaintiff again notifying him that he was urged to make up the deficiency of NT$ 600,000 before July 20 or he can present other negotiable securities that were accepted by the concerned party to cover the aforementioned deficiency, reiterated in the letter that the concerned party will proceed to dispose the collateral if such make up payment was not made before the deadline. Therefore, the argument of the concerned party that it has duly performed the notification obligation according to the deed before it disposed the shares at issue was appropriate.
5. With regard to when the rate of guaranty maintenance for the collateral falls below the agreed standard again, whether the concerned party has to inform the plaintiff again before it can dispose the collateral: The Clause 7-1-1-4 of the loan agreement at issue stipulates “Within three business days after the Bank sends out notification, if the contractor does not pay off the difference or only pay off partial difference and the rate of guaranty maintenance for the account is less than 140%, the Bank may auction or realize the collateral at stock exchange market or over-the-counter market starting from the forth business day after sending out the notification.” The Clause 7-1-1-5 stipulates “In the case that the rate of guaranty maintenance for the account rises to 140% within three business days after the Bank sends out notification, even though the contractor has not paid off the difference within three business days after the Bank sends out notification, the Bank may temporarily not disposing the collaterals on the forth business day after sending out notification. However, when the rate of guaranty maintenance for the account falls below 140% again on any business day henceforth, the contractor must pay off the difference spontaneously and promptly in the same afternoon, otherwise, the Bank may dispose the collaterals starting from the next business day.” Also, Clause 7-1-3 to Clause 7-1-6 stipulate that the rate of guaranty maintenance for the account shall be maintained at 170%, once the figure falls below 140%, the concerned party shall send notification to request the borrower, that is the plaintiff in this case, to make up the deficiency before exercising acceleration clause. In the case of circumstance as described in Clause 7-1-1-5 is found, that is, the rate of guaranty maintenance for the account rises to 140%, although the plaintiff temporarily does not have to pay off the difference, but since the concerned party has already sent out notification, the plaintiff should know the rate of guaranty maintenance for the account thereof is less than 170% and only around 140%, the figure may fall below 140% anytime, therefore, it is the plaintiff’s responsibility to take note of the rate and make up the difference, such responsibility of paying attention shall be removed when the rate of guaranty maintenance rises above 170% or paying off the difference prior to the disposal of collaterals. In another words, after the concerned party sends out notification of rate of guaranty maintenance deficiency, if the rate of guaranty maintenance for the plaintiff remains below the agreed rate of guaranty maintenance within three business days, the concerned party is then free to dispose the collaterals on the forth business day after sending out notification without any further notification prior to the disposal. In the case that the rate of guaranty maintenance for the plaintiff rises back to the agreed rate of maintenance within three business days, the concerned party may temporarily not disposing the collaterals. However, when the rate of guaranty maintenance falls below the agreed rate of maintenance again, the concerned party henceforth may dispose the collaterals starting from the next business days without any need of giving further notification.
   To sum up, the plaintiff’s appeal is groundless and shall be dismissed.

    

Summarized by Lai, Chia-Ching; Supervised by Wang, Rong-Ging