Association, at the tenth Annual Meeting yesterday, the Chairman drew pointed attention to the unsatisfactory state of the administration of the law in relation to real property in Shanghai, The onelusion of the experts whom. the Association has consulted is that the fault ties not so much with the Legal Code as with the application and administration of the law. For redress a petition has been sent to the appropriate department of the National Government, and copies of it to the Consular Body and other important public organizations in Shanghai, The subject been discussed in these columns at length and there is little to add to this journal's exposition of the importance of the issue. So Jong ago as September last it was pointed out in these columns that the Legislative Yuan's decision of February 4, 1936, had in some degree corrected' the excessive latitude previously inherent in the administration of the law relating to the sale of mortgaged property by auction. That decision provided that when a mortgagee had not been paid in duc time. the court could order the sale of the mortgaged property by auction without awaiting a final judgment, but in-eluded the qualification that such an order was open to objection either on the part of the mortgagor or a third party, So the mortgagee was still exposed to the risk of protracted court proceedings, for obviously the mortgagor would readily take advantage of the opportunity thus afforded, The situation has, therefore, remained very much what it was'and credit facilities have consequently been seriously restricted.
Even more important, because it! in fact the basis on' which the mortgage system operates, has been the sudden acceptance by courts of their right to interfere between, landlord and tenant in declaring, what is or what is not fair rent.
From this has developed an extra ordinarily unsatisfactory situation. Defaulting tenants have been able to use the machinery of the! Jaw to aggravate their evasion of their just dues, and the landlord has been able to secure his rights only after much expenditure of time and money. The result is that] the honest tenant is penalized owing, to the flagrant dishonesty of those who take advantage of the defects in the legal administration to obtain what effect occupancy of premises without paying rent. Several cases have been cited these columns of tenants who have been in occupation for over a year without paying any rent and enjoy= ing a considerable advantage in the} process by reason of the operation of the legal machinery. So the mortgage deed, formerly a beneficent instrument for providing Shanghai with the credit facilities which a big commercial community requires, has been deprived of its vital attribute of Muidity by the delays attaching to the sale of property when the mortgagor defaults. addition, the value of the property has been gravely prejudiced by the cover given to the dishonest tricks of recalcitrant tenants. The essential merit of a mortgage lies, of course, in the fact that the owner of the property can depend on receiving from his tenants the rent Jagreed upon in regular and punctual form. If there is no certainty that this interest on his capital is to be forthcoming, it follows naturally that the mortgage deed has, on that account alone, decreased in value. Then, on the top of it, when the mortgagee realizes that he cannot depend on a quick recovery of the money due to him in the very event against which the deed expressly provides, he must of necessity look askance at that form of investment.
So the value of the mortgage as A means of raising credit and financing business "has become almost negligible in Shanghai. This has contributed seriously to the stagnation which has arisen from the depression, Many people hope and believe that the depression is lifting, but it is no exaggeration to say that the process is being gravely retarded by the disability now attaching to ownership of property and to the mortgage deed as an instrument of credit.
In this week's "Finance & Commerce" Mr. C, 8, Kwel, a Chinese lawyer of repute, -makes the teresting suggestion that the dimculty could be overcome if in a mortgage deed it were mutually agreed that upon default on the date of maturity the creditor might apply to the court to appoint someone to supervise the auction of the pro perty mortgaged or to appoint some auctioneering concern to conduct the auction, such agreement to be recognized as valid. Mr. Kwei considers that thus delay in obtaining order for auction would be avoided, and if a creditor had com~ mitted a tort against the interest of the debtor as the result of an auction, the latter would still have the right to institute a damage suit against the creditor. He fortifies his argument with the statement that the practice has been widely accepted in other countries and he considers that it should be adopted in China. Mr. Kwel realizes, however, that the basic difficulty stilt to be found in the unsatisfactory state of the administration of the Jaw regarding landlord and tenant. He says:
It rentals can be collected with reasonable certainty, real estate will come back to its own as a Tela of investment, and properties under mortgage can be auctioned off with comparative case, Careful study of the subject, as has already been indicated, does not ead to criticism of the actual law prescribed under the Civil Code. 'This was made clear at the Property Owners' meeting yesterday. It is emphasized both by Mr, Kwel and by "Finance & Commerce" itself in commenting on his article. Tt has been consistently affirmed in these columns. There is, ebriously, ull the more justification for urging that the Government should give prompt attention to this most important subject. If the issue demanded attention to the complicated process of altering the law it would be another matter—but when all that is wanted is a practical adaptation of the administration of the law to the requirements of " recognized ud much-valued instrument of commercial organization, the Gov ernment surely would be ile advised if it hesitated to take speedy and effective action. So fre quently has this ground been covered that it Is unnecessary to say much more, particularly as the Government' is now in full posses sion of the facts, carefully marshalled by the experts who have given their minds to the problem, It is suMicient, perhaps, therefore, to point out that at a time when the financial advancement of the country. is of such imperative importance to the Government and to the nation as a whole. there is more than a moral justification for speedy reform—derives directly and simply from the prosaic stimulus of self interest.
Text read from the printed page and cleaned; old type leaves the occasional error.