Influence of Transaction of Mortgaged Property on Hypothec: Systematic Application of Article 403, 404, 406 Civil Code

Civil Code Articles 403, 404 and 406 introduce new regulations on the transfer of mortgaged property, so their relationship needs to be clarified. Article 406, paragraph 1, sentence 3 should be limited to real estate mortgage. In the field of chattel mortgage Article 403, sub-sentence 2, and Article 404 take the role as lex specials, each of which provides a reason for the elimination of chattel mortgage. The former is the "burdenless acquisition by a bona fide assignee", while, the latter is the "rule of normal transaction". Since the "rule of normal transaction" is extended to fixed mortgage, there are highly complex conflicts between Article 403, sub-sentence 2 und Article 404. These conflicts can only be resolved by distinguishing different types of cases. When the chattel mortgage is not registered, Article 403, sub-sentence 2 shall prevail as lex specialis if the assignee is in good faith. If the assignee is malicious, then Article 404 applies in succession to Article 403, sub-sentence 2, so that the malicious assignee can also claim the elimination of the mortgage. When the chattel mortgage has been registered, the central issue is whether the registration content can cover the transacted specific subject. If not, the applicability of Article 404 should be affirmed so that registration does not prevent the elimination of the mortgage under Article 404.