Case Background

Ms. A, our client, used her life savings to purchase a beautiful condo in the suburbs of New Taipei City from developer B, with the intention of enjoying a wonderful retirement in her new home. She thought everything would proceed smoothly according to her retirement plans. However, after completing the transfer of ownership, taking possession of the property, and registering her ownership, she discovered something strange: there was a mortgage registered on the property by a third party. Furthermore, the mortgage holder subsequently claimed the right to enforce the mortgage and auction the condo. Ms. A felt scared and helpless, fearing she had fallen victim to a fraudulent developer and that her life savings were at risk. In her desperation, she sought help from our law firm.

District Court: Winning the Case

In response to this situation, we filed a civil lawsuit on behalf of Ms. A, seeking to rescind the contract and claim damages from developer B.

When Ms. A signed the real estate purchase contract for the condo with the developer, the condo had not yet been mortgaged to a third party. The mortgage was set up after the purchase contract was signed but before the property was handed over and the ownership transferred. When the property was handed over and ownership transferred to Ms. A, the mortgage had not been canceled. This situation, ownership became unclear after the contract was established and a third party claimed rights against Ms. A, constitutes "defective performance" under Article 227 of the Civil Code. Therefore, based on the relevant provisions of defective performance under the Civil Code, we claimed contract rescission and demanded that developer B return the full amount paid by Ms. A for the property and compensate for damages incurred (including attorney fees, decoration costs, intermediary fees, etc.).

Ultimately, our litigation strategy succeeded, and Ms. A won the case. The court issued the following judgment: "When developer B sold the condo to Ms. A, they should have ensured that no third party could claim any rights against Ms. A regarding the property. The existence of a mortgage set up by a third party on the property constitutes a defect in rights. If this defect occurs after the establishment of the sales contract, it falls under 'defective performance' due to non-performance of obligations. Developer B set up a mortgage on the condo for a third party after the sales contract was established. When transferring ownership to Ms. A, they did not cancel the mortgage registration. This means Ms. A did not obtain full ownership of the condo, as it was significantly restricted, leading to the mortgage holder (third party) enforcing the mortgage. Developer B clearly violated their warranty obligation to ensure clear property rights. Therefore, Ms. A's claim that developer B failed to deliver the property as per the contract, resulting in defective performance attributable to the seller (developer B), is justified. Thus, even though developer B transferred ownership and handed over the condo to Ms. A, the uncanceled mortgage registration and imminent auction by the third party constitute defective performance and render the performance impossible. Consequently, the court approved the rescission of the contract, ordering developer B to refund the full purchase price and compensate for the damages incurred (including attorney fees, decoration costs, intermediary fees, etc.)."