The High-Flying Fiasco: Jack’s Turbulent Investment Adventure

Once upon a time, in the grand old city of Beijing, a high school reunion transformed into the stage for a tale of ambition, science, and a touch of financial folly. Our hero, Jack, a regular Joe with a zest for seizing the day, found himself hobnobbing with an old chum, Alex—the quintessential mad scientist with a cap and gown from none other than MIT.

As the night unfolded amidst laughter and the clinking of glasses, Jack’s ears perked up to Alex’s latest escapade: a revolutionary airplane fuel that promised to outshine kerosene like a supernova, all while pinching pennies to the tune of less than half the cost. Jack’s imagination took flight, and dollar signs gleamed in his eyes.

In a moment of bravado—or perhaps after one too many toasts to the good old days—Jack did the unthinkable. He pledged a cool million Yuan to Alex’s venture. There was just one teeny problem: Jack’s wallet was emptier than a politician’s promises. Undeterred, he turned to Derek, another pal who had the kind of cash you don’t find under couch cushions. Jack mortgaged his house faster than you can say “economic bubble,” promising to repay the sum with a 3% annual interest in two years’ time.

Fast forward two years, and Alex’s fuel wasn’t the firestarter they’d hoped. It fizzled out, leaving Jack’s investment up in smoke. As the repayment deadline loomed like a storm cloud, Jack’s pockets were as barren as a desert.

Derek, now more creditor than buddy, came knocking. “Where’s the money?” he inquired with the subtle grace of a tax collector.

“Swallowed by a scientist’s dream,” Jack retorted with a heavy heart. “I hoped to double down on the dough I borrowed from you.”

Derek, unamused by the turn of events, threatened to turn Jack’s abode into a cash conversion. “Borrowed money comes back with interest, or I turn your house keys into cash,” he declared.

But Jack, with a smirk, played his final card. “Jokes on you, Derek. You forgot to register the mortgage agreement. Adios!”

Now, to answer the million-Yuan question: Is an unregistered mortgage contract as useless as a screen door on a submarine?

 

Law In A Minute

Derek is unable to liquidate Jack’s property to recoup the 2 million Yuan owed to him.

Legally, upon the execution of a mortgage agreement, it is imperative to register the contract with the relevant department of real estate administration in the area where the property is situated, and this must be done within a 30-day period.

Since Derek neglected to adhere to the required registration process, the mortgage contract is deemed void. Nonetheless, the invalidity of the mortgage does not nullify the underlying debt. Derek retains the right to initiate legal proceedings against Jack for the sum of the 2 million Yuan by filing a lawsuit at the people’s court.

 

Legal Basis

Civil Code

Article 215

A contract concluded by the parties concerned on the creation, change, transfer or elimination of the real right of a real property shall become effective upon the conclusion of the contract, except it is otherwise prescribed by any law; and whether the real right has been registered does not affect the validity of the contract.

Article 402

The property specified in Items 1 to 3 of Paragraph 1 of Article 395 of this law, or the buildings under construction specified in Item 5, shall be subject to mortgage registration. The mortgage right is established at the time of registration.

Measures on the Administration of Mortgage of Urban Real Estate

Article 30

The parties to a mortgage shall make the registration of real estate mortgage at the department of real estate administration of the place where the real estate is located within 30 days from the day on which the real estate contract is signed.