Restoration of rights on lost bearer securities and warrant securities

        According to Article 12 of the Law of the Republic of Kazakhstan "On Mortgage of Immovable Property", a mortgage certificate is an order security certifying the right of its legal owner.:

1) to receive fulfillment of the main obligation;

2) to foreclose on mortgaged immovable property in order to obtain fulfillment of the main obligation.

By the ruling of the Semey City Court of the East Kazakhstan region dated September 4, 2014, based on the plaintiff's application, the civil case on the application of Temirbank JSC for invalidation of the lost mortgage certificate and restoration of rights under the mortgage certificate was left without consideration.

The decisions of the Pavlodar City Court dated July 18, 2014 and November 19, 2014 satisfied the claims of JSC "Subsidiary of BTA Bank Joint Stock Company "BTA Mortgage" against Vinogradov P.I. and Kasimbekova G.U. on the recognition of the lost mortgage certificate as invalid and the restoration of rights under it on the basis of Chapter 39 of the CPC – Restoration of rights under lost bearer securities and warrant securities.

Similar decisions were made by the Ust-Kamenogorsk City Court on November 26, 2014 and the Semey City Court of the East Kazakhstan region on December 24, 2014, to satisfy the claims of BTA Ipoteka JSC on invalidation of the lost document (mortgage certificate) and Temirbank JSC on invalidation of the mortgage certificate and restoration of rights under it.

All four civil cases considered on the merits by these courts are identical and are based on the same circumstances related to the conclusion of loan agreements for mortgages of real estate (borrowers' apartments), the conclusion of mortgage agreements with the issuance of mortgage certificates, and the loss of these certificates by employees of mortgagees.

According to Article 324 of the Code of Civil Procedure, a person who has lost a bearer security or an order security (hereinafter referred to as a document), in the cases specified in the law, may ask the court to declare the lost document invalid and restore rights under it.

The rights under the document can also be restored if the document loses its payment status as a result of improper storage or for other reasons. The decisions in these cases are based on art.324 of the CPC with a study of the same evidence – loan agreements, mortgages, explanations of debtors (mortgagors), etc.

Some issues related to securities disputes are regulated by the Law of the Republic of Kazakhstan "On Mortgage of Immovable Property" dated December 23, 1995 (hereinafter referred to as the Law).

In this law, special attention should be paid to Chapter 3 - Mortgage certificate. The mentioned chapter (art.12) provides the concept of a mortgage certificate, which is a stock security certifying the right of its rightful owner.:

1) to receive fulfillment of the main obligation;

2) to foreclose on mortgaged immovable property in order to obtain fulfillment of the main obligation. The mortgage certificate is drawn up in one copy and handed over to the mortgagee. The mortgage certificate can be supplemented with an appendix, which is issued in the form of additional sheets, which are an integral part of it. It is not allowed to draw up more than one mortgage certificate in respect of the same immovable property that is the subject of a mortgage on a residential mortgage loan, or part of it. The mortgage certificate must contain:

1) the words "Mortgage certificate" included in the title of the document;

2) the name(s) and place of residence (location) of the pledgor;

3) the name(s) and place of residence (location) of the pledgee;

4) the name(s) and place of residence (location) of the debtor, if the debtor is not a pledgor under the main obligation.;

5) date and place of conclusion of the mortgage agreement;

6) indication of the amount of the main obligation and the amount of remuneration, if they are payable;

7) an indication of the deadline for payment of the amount of the main obligation and remuneration, if they are payable, and if this amount and/or remuneration are payable in installments, the timing or frequency of the corresponding payments and the amount of each of them, or the conditions allowing them to be determined;

8) inventory and location of mortgaged real estate;

9) the name of the right by virtue of which the property that is the subject of the mortgage belongs to the mortgagor;

10) an indication of whether there are other mortgage certificates for the immovable property that is the subject of a mortgage, or for a part of this property, with the exception of mortgage certificates under housing mortgage loan agreements, whether this immovable property or part of it is leased, or whether it is otherwise encumbered or not;

11) signature of the pledgor;

12) the date of issue of the mortgage certificate;

13) attachment to the mortgage certificate.

Failure to comply with the requirements set out in paragraph 1 of this article, as well as the presence of erasures and corrections, invalidates the mortgage certificate. Amendments and (or) additions to the mortgage certificate are regulated by Articles 13-1 of the Law.

When exercising their rights provided for by this Law or the mortgage agreement, the holder of the mortgage certificate is obliged to present it to the mortgagor.

The mortgagor who has fulfilled the main obligation has the right to demand the transfer of the mortgage certificate to him.

The mortgagor, who has partially fulfilled the main obligation, has the right to demand a mark on the mortgage certificate on the fulfillment of the relevant part of the obligation, which is made by the mortgagee (owner of the mortgage certificate) upon the written application of the mortgagor.

When a mortgage certificate is transferred to a new owner, a note of partial execution is mandatory.

The presence of a mortgage certificate in the possession of its rightful owner or the absence on the mortgage certificate of a note indicating partial fulfillment of the main obligation indicates, unless otherwise proven, that this obligation or, accordingly, part of it has not been fulfilled.

Finding a mortgage certificate with the mortgagor indicates, unless otherwise proven, that the obligation secured by the mortgage has been fulfilled. The conditions and procedure for the registration of a library certificate are regulated by art.15 of the Law.

The issuance of a mortgage certificate, amendments and (or) additions to the mortgage certificate and its subsequent transfer to other owners are subject to state registration at the location of the immovable property that is the subject of the mortgage, in accordance with the procedure established for registration of rights to immovable property.

The transfer of rights under a mortgage certificate is carried out by making a transfer inscription on it in favor of another person and transferring the mortgage certificate to this person.

The transfer inscription must accurately and fully indicate the name(s) of the person to whom the rights are transferred under the mortgage certificate. Blank transfer labels on the mortgage certificate are considered invalid.

The transfer inscription must be signed by the mortgagee indicated in the mortgage certificate, and if this inscription is not the first one, by the owner of the mortgage certificate named in the previous transfer inscription.

The transfer of rights under a mortgage certificate to another person means the transfer of rights under the main obligation to the same person. The legal owner of the mortgage certificate owns all the rights arising from its content, including the rights of the mortgagee and the rights of the creditor under the main obligation.

The owner of a mortgage certificate is considered legitimate if his rights to the mortgage certificate are based on a continuous series of transfer inscriptions on it. The owner of a mortgage certificate is considered illegal if it is proved that it was removed from the possession of one of the persons who made the transfer inscriptions as a result of theft or otherwise against the will of this person, which the owner knew or should have known about when purchasing the mortgage certificate. The inscriptions on the mortgage certificate prohibiting its subsequent transfer to other persons are invalid. The restoration of rights on a lost mortgage certificate is carried out by the court in accordance with the procedure established by the procedural legislation, namely Chapter 39 of the CPC.

The rights under the mortgage certificate, which was transferred by the mortgagee to a third party, can be restored if all the transfer inscriptions made on the lost mortgage certificate are installed.

Based on the court's decision, the mortgagor issues a duplicate mortgage certificate with a "duplicate" mark on it.

According to Article 18 of the Law, the pledge of a mortgage certificate to ensure the fulfillment of the obligations of the legal owner of the mortgage certificate is carried out in accordance with the Civil Code of the Republic of Kazakhstan, namely, Article 325 of the Civil Code.

In case of non-fulfillment of an obligation secured by a mortgage certificate, the mortgagee of the mortgage certificate has the right to demand the transfer to him of the rights under the main obligation in accordance with the procedure, on the terms and with the consequences provided for in Article 16 of the Law.

In case of refusal to transfer these rights, the mortgagee of the mortgage certificate may demand in court the transfer of such rights to himself.

The mortgagee of the mortgage certificate, to whom the rights under the mortgage certificate have been transferred or transferred by the court, has the right to foreclose on the mortgage subject in accordance with the terms of the mortgage certificate and the main obligation.

The mortgage certificate is terminated in accordance with Article 19 of the Law.:

1) when exercising the rights arising from it;

2) upon its voluntary transfer to the pledgor;

3) if the claims arising from it are not presented to the debtor for the main obligation before the expiration of one month after the due date of the main obligation;

4) in case of loss of the mortgage item. Upon termination of the mortgage certificate on the grounds provided for in subitems 3 and 4 of paragraph 1 of this Article, the rights of the owner of the mortgage certificate to fulfill the main obligation shall remain.

Regulatory legal framework.

The general concept of securities is given in Article 129 of the Civil Code, according to paragraph 1 of which, a security is a set of certain records and other designations certifying property rights. Other legally established requirements for the creation, modification, loss of rights to securities, their turnover, etc. are given in paragraph 2 of Chapter 3 of the Civil Code (Objects of civil rights).

Since shares are also securities, disputes over their turnover must be resolved in accordance with Section III (Joint Stock Company), paragraph 2, Chapter 2 of the Civil Code (Subjects of Civil Rights). More precise and detailed requirements are given in the Law of the Republic of Kazakhstan "On Joint Stock Companies" dated May 13, 2003 No. 145. Chapter 4 of this Law establishes general provisions on shares and other securities of the company.

The uniform application of legislation on joint-stock companies is the subject of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan "On the application of Legislation on Joint-Stock Companies". The issues of acquisition, sale of shares, and receipt of dividends on them are resolved in paragraphs 6, 8-11 of this resolution.

The main regulatory act on this issue is the Law of the Republic of Kazakhstan "On the Securities Market" dated July 2, 2003.  No. 461, which regulates public relations arising in the process of issuance, placement, circulation and repayment of equity securities and other financial instruments, the specifics of the creation and operation of securities market entities, defines the procedure for regulation, control and supervision of the securities market in order to ensure the safe, open and effective functioning of the securities market, protection of the rights of investors and holders of securities, fair competition of securities market participants.

In addition to these regulations, there are a significant number of acts of the authorized body on the issue of securities circulation – resolutions of the Board of the National Bank of the Republic of Kazakhstan regulating various issues related to securities, their movement, registration, training of personnel to work with them and organization of activities in this area of second-tier banks.

 

 

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