Selected Papers of The Jurist (法学家), Volume 6
Edited by Jichun Shi
Chapter 7: Priority rules of chattel mortgages in China
When there is the coexistence of several chattel mortgages, or the coexistence of a chattel mortgage with a floating charge, or the coexistence of a chattel mortgage with a pledge, the priority of these rights should be uniformly determined based on the sequence of public notice, regardless of the distinction between bona fide party and mala fide party. When the coexistence of a chattel mortgagee with a buyer of the collateral occurs: (1) if the buyer buys the collateral “in ordinary course of business”, the buyer could obtain the ownership of the collateral without any burdens, whether or not the right to mortgage has been registered and whether or not the buyer knows of the existence of the mortgage; (2) if the buyer does not buy the collateral “in ordinary course of business”, only when the mortgagee makes no registration and the buyer is bona fide could the buyer obtain the ownership of the collateral without any burdens; if the mortgagee has achieved registration before the buyer takes possession of the collateral, whether or not the buyer is bona fide, the right to mortgage prevails. Due to the conflict of title retention and chattel mortgage, it is necessary to establish a complete public notice system for title retention.
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