A recent incident in Vietnam has brought to light serious issues regarding the valuation of collateral used in bank loans. A couple, Huỳnh Anh K and Dương Thị H, faced financial difficulties and borrowed 300 million VND from Lê Minh T. To secure this loan, they authorized T to manage a piece of land measuring over 3,199 square meters.

However, just a day later, T borrowed 500 million VND from Đỗ Quốc B using the same land as collateral, which was subsequently transferred to B. On April 26, 2023, B used the land to secure a loan of 1.3 billion VND from a bank, despite the land's actual market value being only 500 million VND.

As the situation unfolded, B defaulted on the loan payments, leading the bank to initiate legal proceedings to recover 1.487 billion VND, including principal and interest. The bank sought to auction the land to settle the debt, but K and H contested this, arguing that their agreement with T was merely a loan guarantee and not a transfer of ownership.

The court found that both the authorization agreement between K and T and the transfer agreement between T and B were fraudulent transactions, declaring them void. The court noted that the bank failed to conduct proper due diligence on the collateral, which was a key factor in their decision.

During the appeal hearing on May 25, 2026, a settlement was reached where K and H agreed to pay 600 million VND, and T would pay 700 million VND on behalf of B. The court allowed the bank to handle the land if K and H failed to pay the agreed amount, but only within the limits of that payment.

This case underscores the critical need for banks to thoroughly assess the value of collateral to avoid similar disputes in the future. The court's ruling serves as a reminder of the importance of transparency and accuracy in financial transactions.