4 February 2021
The Supreme Court rendered the 109-Tai-Shang-234 Decision of September 10, 2020 (hereinafter, the “Decision”), holding that if the third party obviously knows or is expected to know that the apparent agent has no right of agency, the act with theapparent agentis malicious or negligent, the principal is exempt from the same liability as the authorizer.
According to the facts underlying this Decision, A, the Appellant’s son and not a party to this lawsuit, misappropriated the Appellant’s specimen seal (hereinafter, the “Specimen Seal at Issue”) and identification documents, stole his property deed and forged his documentary proof of seal specimen in order to set up Mortgage X on the Lot No. OO land owned by the Appellant for the benefit of Appellee B. In addition, A also forged the signature on the promissory note at issue for delivery to Appellee C, and set up Mortgage Y on the Appellant’s land (hereinafter, together with the above Lot No. OO land, referred to as the “Land at Issue”) for the benefit of Appellee C (hereinafter, together with the above maximum limit mortgage, referred to as the “Mortgage at Issue”). A subsequently committed suicide and died. The Appellant had not learned about the above facts until he checked A’s financial status when he was alive. Therefore, the Appellant sought a decision that declares that the Mortgage at Issue and the claim secured by it as well as the claim over the Appellant’s promissory note at issue did not exist and compels B and C to cancel the registration of the Mortgage at Issue.
According to the Decision, the apparent agent under Article 169 of the Civil Code is designed to protect third parties. If the principal makes a third party believe that the right of agency has been granted to another person with whom the third party trades out of the belief, the principal shall be responsible as the authorizer. However, if the third party obviously knows or is expected to know that an apparent agent has no right of agency, any act with the apparent agent would be engaged in bad faith or out of negligence, and this is not a legitimate expectation under the principle of legitimate expectation. Therefore, in spite of the appearance of apparent agency, there is also no need to grant the protection. Under the proviso of the same article, the principal may still be exempt from the same liability as the authorizer.
Moreover, according to the Decision, the Appellant asserted that after A privately set up Mortgage Y for the benefit of C, the Specimen Seal at Issue was put under C’s custody. This obviously violated common transaction practices. In addition, the video footage of A’s withdrawal of money from a surveillance camera shows that he was accompanied by two other men. In addition, according to news reports, A was seduced by an illegal ring and committed suicide and died for fear that he would be blamed by his family. It is difficult to rule out that C was part of the same group of people who prompted or instigated A to borrow money based on the Appellant’s Land at Issue. Is it absolutely absurd if C is required to assume the liability for the security of the transaction while the Appellant is not liable for the apparent agent? There is still room for further exploration. This is critical to determine if C was obviously aware or was expected to be aware that A had no right of agency and if the legal act with A was engaged out of bad faith or negligence. The original court was silent as to the important offensive method concerning whether the Appellant shall assume the liability of the apparent agent and elected to render a decision unfavorable to the Appellant. Therefore, the original decision was rash and unlawful for insufficiency of ground. The gist of the appeal, which criticized the inappropriateness of this aspect of the original decision, is not groundless.
For further information, please contact:
Jenny Chen, Lee Tsai & Partners
lawtec@leetsai.com
