Judicial Determination of a Partially Subrogating Guarantor's Right to File a Mortgage-Secured Claim in Bankruptcy Proceedings
Judgment Gist: In bankruptcy proceedings, whether a partially subrogating guarantor has the right to file a claim should be determined based on the specific circumstances of the case. Where the creditor files a claim only for the unpaid portion, or the administrator confirms only that portion of the claim, and the creditor does not bring a claim confirmation lawsuit regarding the amount of the claim, the partially subrogating guarantor may file a claim for the portion it has paid on the debtor's behalf, but such claim should be subordinated to the creditor's unpaid claim in terms of repayment priority, so as to prevent the guarantor from exercising its right of recourse in a manner that harms the creditor's interests. Whether the claim filed by the guarantor constitutes a priority claim entitled to mortgage rights should be comprehensively determined by considering factors such as the nature of the creditor's claim, the composition of the guarantor's claim, and the actual value of the mortgaged property.
Case Facts: Plaintiff: Shanghai Moumi Household Products Co., Ltd. (hereinafter referred to as Moumi Company). Defendant: Shanghai Moukaluo Household Products Co., Ltd. (hereinafter referred to as Moukaluo Company). Moukaluo Company provided a maximum-amount mortgage guarantee using its standard industrial factory building located in Qingpu District, Shanghai, for loan contracts signed between it and China Construction Bank (CCB) during the period from May 1, 2014 to May 1, 2024. Moumi Company provided a maximum-amount guarantee for the loan debts incurred between Moukaluo Company and CCB during the period from July 22, 2021 to August 9, 2023, with the guarantee method being joint and several liability guarantee. As of December 2022, Moukaluo Company still owed CCB a loan principal balance of 40,875,372.60 yuan. After Moukaluo Company repaid part of the loan to CCB, the remaining loan became overdue. In May 2023, CCB required Moumi Company to assume guarantee liability. Thereafter, Moumi Company fulfilled part of its guarantee obligation by repaying loan principal and interest totaling 15,157,277.11 yuan to CCB on behalf of Moukaluo Company. In February 2024, the court ruled to accept the bankruptcy liquidation case of Moukaluo Company and designated an administrator in accordance with the law. In March of the same year, CCB filed a claim of 23,949,056.72 yuan, being the unpaid claim under its loan contract with Moukaluo Company, with the administrator. After review, the administrator confirmed the claim as a mortgage-secured claim. Subsequently, Moumi Company filed a claim with the administrator for the loan principal and interest it had repaid on behalf of Moukaluo Company, as well as losses from fund occupation interest, and asserted that the claim was a mortgage-secured claim. In June 2024, the administrator issued a notice refusing to confirm Moumi Company's filed claim. In September 2025, CCB filed a supplementary claim with the administrator for the portion of the claim that Moumi Company had repaid on its behalf, but the administrator also refused to confirm it. CCB explicitly stated that it would not bring a claim confirmation lawsuit regarding the above claim. In September 2025, the standard industrial factory building in Qingpu District, Shanghai, involved in the case was publicly auctioned at a transaction price of 80,954,825.00 yuan. Apart from CCB's mortgage right, there were no other secured claims on the factory building. Moumi Company alleged that, as a guarantor, it had repaid part of the debt to the creditor CCB on behalf of the debtor Moukaluo Company, and therefore had the right of recourse against Moukaluo Company in accordance with the law. Since Moukaluo Company had provided its own factory building as mortgage security for the debt involved, Moumi Company, within the scope of its subrogation payment, enjoyed mortgage rights over the mortgaged property in accordance with the law. Accordingly, it requested the court to order: confirmation that it enjoys a mortgage-secured claim of 15,503,540.06 yuan against Moukaluo Company (including: repaid loan principal and interest of 15,157,277.11 yuan, and fund occupation interest of 346,262.95 yuan). Moukaluo Company argued that, according to Article 23, Paragraph 2 of the Supreme People's Court's Interpretation on the Application of the Guarantee System Provisions of the Civil Code (hereinafter referred to as the Interpretation on the Guarantee System of the Civil Code), Moumi Company had only repaid part of the claim involved and had no right to replace the original creditor CCB in receiving priority repayment in the bankruptcy proceedings. Even if the court confirmed that Moumi Company enjoyed the right of recourse, its claim should be recognized as an ordinary claim. Moumi Company's request to confirm a mortgage-secured claim lacked legal basis, and the court was requested to dismiss all of its claims in accordance with the law.
Trial: After hearing the case, the first-instance court held that the disputed issues in this case could be summarized as follows: First, whether Moumi Company has the right to exercise the right of recourse against Moukaluo Company; Second, in the bankruptcy proceedings, if Moumi Company's claim is confirmed, whether such claim constitutes a mortgage-secured claim. Regarding the first disputed issue. According to Article 700 of the Civil Code, after a guarantor assumes guarantee liability, it has the right to seek recourse from the debtor within the scope of the guarantee liability it has assumed, but shall not harm the creditor's interests. In this case, Moumi Company, as the joint and several liability guarantor of the loan involved, had repaid part of the loan principal and interest to CCB on behalf of the debtor in accordance with the agreement, actually assuming part of the guarantee liability, and thus obtained the right of recourse against the debtor Moukaluo Company in accordance with the law. Based on the facts ascertained in this case, CCB had filed and obtained confirmation of its unpaid claim as a mortgage-secured claim, and after its supplementary filing of the claim for the portion repaid by Moumi Company was not confirmed, it explicitly stated that it would not bring a claim confirmation lawsuit. Moumi Company's exercise of the right of recourse did not harm CCB's legitimate claim interests, so its claim to exercise the right of recourse should be supported in accordance with the law. Regarding the second disputed issue. Since Moukaluo Company had entered bankruptcy liquidation proceedings, Moumi Company, as a guarantor that had assumed part of the guarantee liability, could only assert its right of recourse through filing a bankruptcy claim. Based on the facts ascertained in the case, the claim involved was secured by a maximum-amount mortgage established by Moukaluo Company with its own factory building, and this mortgage security covered all the loan debts involved. The amount repaid by Moumi Company on behalf of the debtor also fell within the scope of the debts secured by the maximum-amount mortgage. On the premise that Moumi Company's exercise of the right of recourse did not harm CCB's legitimate claim interests, Moumi Company's filing of a mortgage-secured claim with the administrator for the portion it had actually repaid on behalf of the debtor conformed to the legislative intent of exercising security rights and should be confirmed in accordance with the law. As for the fund occupation interest loss also claimed by Moumi Company, since such interest did not fall within the scope of the debts secured by the maximum-amount mortgage involved, after a reasonable amount was determined in accordance with the law, it should be recognized as an ordinary bankruptcy claim. In summary, the first-instance court ruled: First, confirming that the plaintiff Moumi Company enjoys a mortgage-secured claim of 15,157,277.11 yuan against the defendant Moukaluo Company; Second, confirming that the plaintiff Moumi Company enjoys an ordinary bankruptcy claim of 219,929.92 yuan against the defendant Moukaluo Company. After the first-instance judgment, neither party appealed, and the judgment has taken legal effect.
Commentary by Wang Lina, Senior Judge of the Fourth Rank of the Bankruptcy Trial Division of the Shanghai Third Intermediate People's Court (Shanghai Intellectual Property Court, Shanghai Railway Transport Intermediate Court), and Chen Yongbo, Judge Assistant of the Bankruptcy Trial Division of the Shanghai Third Intermediate People's Court (Shanghai Intellectual Property Court, Shanghai Railway Transport Intermediate Court). The adjudication approach and handling rules of this case fill the adjudication gap in the trial of similar cases under new causes of action, clarify the boundaries of the exercise of rights by partially subrogating guarantors in bankruptcy proceedings and the standards for determining the nature of claims, and have important reference value and significance for the trial of subsequent similar dispute cases.
I. Application of Article 23, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code in This Case. Article 700 of the Civil Code provides: "After a guarantor assumes guarantee liability, unless otherwise agreed by the parties, it has the right to seek recourse from the debtor within the scope of the guarantee liability it has assumed, and enjoys the creditor's rights against the debtor, but shall not harm the creditor's interests." Article 23, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code further provides: "After a guarantor repays all of the creditor's claims, it may replace the creditor in receiving repayment in bankruptcy proceedings; before the creditor's claim is fully repaid, the guarantor may not replace the creditor in receiving repayment in bankruptcy proceedings, but has the right to request the creditor to return the portion of the total amount obtained by the creditor through bankruptcy distribution and realization of secured claims that exceeds the claim, within the scope of the guarantee liability it has assumed." The rule established by Article 700 of the Civil Code that a guarantor's recourse shall not harm the creditor's interests is centrally embodied in bankruptcy proceedings as regulation of the guarantor's claim filing conduct. On this basis, Article 23, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code further refines two paths for the exercise of rights by a guarantor in the debtor's bankruptcy proceedings after the creditor has received repayment from the guarantor: First, the situation where the guarantor has fully repaid. After the guarantor repays all claims, it has the right to replace the creditor in receiving repayment in bankruptcy proceedings; if the creditor has already filed a claim, the guarantor may request transfer of the corresponding bankruptcy distribution amount. Second, the situation where the guarantor has partially repaid. Before the creditor's claim is fully repaid, the guarantor in principle may not replace the creditor in receiving repayment in bankruptcy proceedings, and may only claim return of the portion by which the creditor has been over-repaid. In practice, a creditor filing a claim is not limited to the single situation of "filing the full claim and obtaining confirmation by the administrator." In addition, there are two other situations: First, the creditor files only the unpaid claim, and the administrator confirms it; Second, the creditor files the full claim, but the administrator confirms only the unpaid portion, and the creditor waives the right to bring a claim confirmation lawsuit. However, Article 23, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code only regulates the situation of "the creditor filing the full claim and obtaining confirmation by the administrator," and does not provide for the other two situations. Due to the gap in the application of legal norms, there has been considerable controversy in practice over whether a guarantor has the right to file a claim when the creditor has received only partial repayment. In the author's view, a blanket negative judgment is inappropriate; rather, determination should be made based on the specific circumstances of the case, so as to balance the protection of the interests of both the guarantor and the creditor. In this case, the administrator confirmed only the unpaid portion of CCB's claim and did not confirm the portion CCB had already been repaid by Moumi Company; CCB also explicitly stated that it would no longer bring a claim confirmation lawsuit. These circumstances exceed the scope stipulated in Article 23, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code. At this point, the claim filed by CCB had not been fully confirmed by the administrator. If the provisions of that article were still mechanically applied to restrict Moumi Company from filing a claim, the amount the guarantor had actually repaid on behalf of the debtor would lose judicial remedies, which would clearly violate the principles of fairness and rights protection. In summary, this case should no longer restrict Moumi Company from filing a claim based on that article.
II. Judgment in This Case That the Guarantor's Claim Filing Does Not Harm the Creditor's Interests. According to the foregoing, this case should not mechanically apply Article 23, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code to restrict Moumi Company from filing a claim. However, the legislative spirit of that article that a guarantor's exercise of the right of recourse shall not harm the creditor's interests should be consistently applied in this case. Accordingly, this case treated whether Moumi Company's claim filing harmed CCB's legitimate claim interests as a key review content and the basis for whether to support its claims. The specific adjudication rule is: if the guarantor's filing of a claim in bankruptcy proceedings will not harm the creditor's interests, its litigation claims shall be supported in accordance with the law; if harm would result, its relevant claims shall be dismissed. Regarding the specific standard for determining harm to interests, this case made a comprehensive determination based on the following three factors. First, examine the motivation for the creditor not filing the full claim. In judicial practice, some creditors do not file the full claim because they lack awareness of their own rights and do not understand that they are entitled to file a claim for the portion already repaid by the guarantor. In the trial of an individual case, if after explanation by the court or administrator the creditor makes a supplementary filing and the administrator confirms it, the guarantor has no right to file a claim for the repaid amount. Conversely, if the creditor voluntarily and actively waives filing the full claim, the guarantor has the right to file a claim. The reason is that the right granted to the creditor by Article 23, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code to file the full claim is essentially intended to counter the guarantor's claim filing and protect the creditor's priority repayment right; if the creditor voluntarily waives this right, it may be presumed that it does not object to the guarantor filing a claim. At this point, it is only necessary to make clear that the guarantor's claim is subordinated to the creditor's unpaid claim in repayment priority, which can eliminate the possibility of harm to the creditor's interests from the guarantor's exercise of the right of recourse in terms of repayment order. Second, examine the reason why the administrator did not confirm the creditor's full claim. If the administrator did not confirm the full amount merely due to insufficient professional ability or oversight by staff, and after explanation by the court the administrator re-confirms the creditor's full claim, the guarantor has no right to file a claim. If, after explanation by the court, the administrator still refuses to confirm, or the administrator itself intentionally refuses to confirm, and the creditor explicitly waives bringing a claim confirmation lawsuit, it should be determined that the guarantor has the right to file a claim. On the one hand, the creditor's waiver of the claim confirmation lawsuit further confirms that it has no willingness to actively assert the portion of the claim already repaid, and it may be presumed that it acquiesces to the guarantor's claim filing; on the other hand, if the guarantor is still restricted from filing a claim under such circumstances, after the bankruptcy proceedings conclude, the amount the guarantor has actually repaid on behalf of the debtor will lose remedies, and its legitimate rights and interests will suffer substantive harm, violating the principle of fairness. Third, examine the actual value of the debtor's assets. The value of the debtor's assets is a core factor affecting the repayment of the creditor's claim. In particular, when the creditor's claim is a mortgage-secured claim, the value of the mortgaged property determines whether the claim can be fully repaid. If the value of the mortgaged property is sufficient to cover the creditor's full claim, then whether the creditor files only the unpaid portion of the claim or files the full claim, its claim can be fully repaid. At this point, there is no need for the creditor to file the full claim, and whether the guarantor files a claim will not harm the creditor's claim interests. In this case, the industrial factory building mortgaged by Moukaluo Company was publicly auctioned, and the transaction price was far higher than the total amount of CCB's entire claim. The value of the mortgaged property was sufficient to cover CCB's claim. This is the reason CCB initially filed only the unpaid portion of the claim, and after its supplementary filing of the already repaid portion was rejected, it did not bring a claim confirmation lawsuit. In summary, even if Moumi Company filed a claim, it would not harm CCB's claim interests, so the court supported its claim filing request.
III. Determination in This Case Whether the Guarantor's Claim Is a Mortgage-Secured Claim. As to whether the claim filed by a partially subrogating guarantor in bankruptcy proceedings constitutes a priority claim entitled to mortgage rights, practice should make a comprehensive determination by considering factors such as the nature of the creditor's claim, the composition of the guarantor's claim, and the actual value of the mortgaged property, thereby achieving an organic unity between the legislative purpose of the guarantee system and the principle of fair repayment in bankruptcy proceedings.
(1) The claim acquired by the guarantor based on subrogation payment has the same nature as the creditor's claim. According to Article 700 of the Civil Code, after a guarantor assumes guarantee liability, it has the right to seek recourse from the debtor within the scope of the guarantee liability it has assumed, and enjoys the creditor's rights against the debtor. Article 18, Paragraph 2 of the Interpretation on the Guarantee System of the Civil Code further clarifies: "Where the same claim is secured by both a property guarantee provided by the debtor itself and a guarantee provided by a third party, and the third party that has assumed guarantee liability or compensation liability claims to exercise the security interest in the debtor's property enjoyed by the creditor, the people's court shall support it." Accordingly, after a guarantor assumes guarantee liability, it has dual rights: first, the right of recourse against the debtor; second, the subrogated enjoyment of the creditor's security interest in the debtor's property. The guarantor's subrogation right is premised on the valid establishment of the right of recourse, and its institutional value lies in effectively guaranteeing the ultimate realization of the guarantor's right of recourse through the exercise of security interests via subrogation. According to the basic principles of civil law subrogation, the claim acquired by the guarantor due to repayment of the debt on behalf of the debtor is consistent in nature with the creditor's claim against the debtor. In this case, the claim enjoyed by CCB against Moukaluo Company was a mortgage-secured claim. As a joint and several liability guarantor, after repaying principal and interest of 15,157,277.11 yuan on behalf of the debtor, Moumi Company's correspondingly acquired claim also constituted a mortgage-secured claim based on the statutory subrogation rule. In practice, some views hold that in bankruptcy proceedings the guarantor's claim and the creditor's claim are different in nature. For example, in this case the administrator argued that CCB's claim was a mortgage-secured claim, while Moumi Company's claim could only be recognized as an ordinary bankruptcy claim. The reason given was that before the creditor's claim is fully repaid, the guarantor's right of recourse is subordinated in repayment, so as to avoid weakening the debtor's ability to repay the creditor, consistent with the legislative spirit of Article 700 of the Civil Code that "a guarantor's exercise of the right of recourse shall not harm the creditor's interests." In the author's view, this view is clearly biased for the following reasons: First, the nature of a claim is the basis for determining repayment order, and claims of different natures correspond to different repayment orders, which is the embodiment of the fair repayment principle of the Enterprise Bankruptcy Law. Second, the actual repayment sequence is not equivalent to the legal repayment order. Even among claims in the same repayment order, a sequence of repayment may be agreed upon or determined based on party autonomy, special legal provisions, and other grounds. The mere fact that repayment occurs earlier or later cannot directly lead to the conclusion that the repayment order is different and thus that the nature of the claims differs. Third, China's Enterprise Bankruptcy Law does not provide for subordinated bankruptcy claims, and in practice principled guidance is mainly provided by judicial policy documents. According to judicial policy documents, subordinated bankruptcy claims are limited to specific types of claims such as punitive claims, and partially subrogating guarantor claims are not included within the scope of subordinated bankruptcy claims. However, if the above view were adopted, it would lead to the conclusion that "if the original claim is an ordinary bankruptcy claim, the guarantor's claim is a subordinated bankruptcy claim," which violates the basic rules for determining bankruptcy claims.
(2) The fund occupation interest loss in the guarantor's filed claim constitutes an ordinary bankruptcy claim. After a guarantor assumes guarantee liability, the claim it enjoys usually consists of two parts: first, the principal and interest of the main debt repaid to the creditor on behalf of the debtor; second, the fund occupation interest loss caused to the guarantor because the debtor failed to promptly reimburse the repaid amount. As for fund occupation interest loss, neither Article 700 of the Civil Code nor the Interpretation on the Guarantee System of the Civil Code explicitly includes it within the statutory scope of recourse. Judicial practice generally follows the adjudication rule of "if there is an agreement, follow the agreement; if there is no agreement, support the guarantor's claim for reasonable interest loss from the date of repayment on behalf of the debtor." Such interest loss is not within the scope of the guarantor's assumption of guarantee liability, but is compensation for losses arising after repayment on behalf of the debtor. Therefore, it does not fall within the coverage of the security interest and should be recognized as an ordinary bankruptcy claim in bankruptcy proceedings in accordance with the law. In this case, Moumi Company claimed fund occupation interest loss of 346,262.95 yuan, which, after a reasonable amount was verified in accordance with the law, was recognized as an ordinary bankruptcy claim.
(3) The determination of the guarantor's mortgage-secured claim is affected by the actual value of the mortgaged property. In this case, the auction transaction price of the mortgaged factory building involved reached more than 80 million yuan, while CCB's total claim amounted to only more than 40 million yuan. In addition, apart from CCB's mortgage right, there were no other secured claims on the mortgaged property. The realization value of the mortgaged property was sufficient to cover CCB's remaining claim and Moumi Company's subrogated claim. Under such circumstances, the court determined that the claim acquired by Moumi Company based on subrogation payment constituted a mortgage-secured claim. However, it must be particularly clarified that if the realization proceeds of the mortgaged property are insufficient to fully repay CCB's remaining claim, or if after all the mortgaged property proceeds are used to repay the creditor's claim, Moumi Company's subrogated claim still has an unpaid portion, then that unpaid portion will be converted into an ordinary bankruptcy claim. The legal basis is that the priority effect of mortgage rights is limited to the scope of the realization proceeds of the mortgaged property. When the realization proceeds of the mortgaged property are exhausted and the claim remains not fully repaid, the excess portion no longer has the priority of a security interest and essentially transforms into an ordinary monetary claim.
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