Guiding Case No. 43 (Discussed and Passed by the Adjudication Committee of the Supreme People s Court Released on December 25, 2014)

Transcription

1 Haikou Binhai Avenue (Tianfu Hotel) Securities Business Department of Guotai Junan Securities Co., Ltd., A Case of an Application for Compensation for Erroneous Enforcement Guiding Case No. 43 (Discussed and Passed by the Adjudication Committee of the Supreme People s Court Released on December 25, 2014) CHINA GUIDING CASES PROJECT English Guiding Case (EGC43) September 15, 2015 Edition * * The citation of this translation of the Guiding Case is: 国泰君安证券股份有限公司海口滨海大道 ( 天福酒店 ) 证券营业部申请错误执行赔偿案 (Haikou Binhai Avenue (Tianfu Hotel) Securities Business Department of Guotai Junan Securities Co., Ltd., A Case of an Application for Compensation for Erroneous Enforcement), CHINA GUIDING CASES PROJECT, English Guiding Case (EGC43), Sept. 15, 2015 Edition, available at This document was primarily prepared by Tiantian Dai, Oma Lee, LUO Min, Jeremy Schlosser, Matthew Waters, Pei Zhang, and Shiyue Zhang. The document was finalized by Sean Webb, Jordan Corrente Beck, and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings to correspond with those boldfaced in the original Chinese version, was done to make the piece more comprehensible to readers. The following text, otherwise, is a direct translation of the original text and reflects the formatting of the Chinese document released by the Supreme People s Court. The following Guiding Case was discussed and passed by the Adjudication Committee of the Supreme People s Court of the People s Republic of China and was released on December 25, 2014, available at See also 最高人民法院关于发布第九批指导性案例的通知 (The Supreme People s Court s Notice Concerning the Release of the Ninth Batch of Guiding Cases), Dec. 24, 2014, available at

2 2 Keywords State Compensation Judicial Compensation Erroneous Enforcement Enforcement Reversal 1 Main Points of the Adjudication 1. Where a compensation claimant applies for state compensation on the grounds that a people s court infringes on [that claimant s] rights in violation of law in the manner set forth in Article 38 of the State Compensation Law of the People s Republic of China, 2 the people s court [handling the application] should concurrently review whether the judicial act complained of by the compensation claimant is in violation of law and whether [the court that performed the act] should bear liability for state compensation. 2. Where a people s court handles a case [involving] an objection to enforcement and rules to revoke the original enforcement act, restoring the property subject to enforcement to [its] pre-enforcement status, on the grounds that the [relevant] parties 1 Translators note: the original text reads 执行回转 ( enforcement reversal ), which refers to the procedure set forth in Article 233 of the Civil Procedure Law of the People s Republic of China: When enforcement is completed, but, the judgment, ruling, or other document upon which the enforcement is based is revoked by a people s court for being erroneous, the people s court should make a ruling on the property that has been subject to the enforcement, ordering the person who has acquired the property to return it. If the person refuses to return the property, [the court should order] compulsory enforcement. ( 执行完毕后, 据以执行的判决 裁定和其他法律文书确有错误, 被人民法院撤销的, 对已被执行的财产, 人民法院应当作出裁定, 责令取得财产的人返还 ; 拒不返还的, 强制执行 ) See 中华人民共和国民事诉讼法 (Civil Procedure Law of the People s Republic of China), passed, issued on, and effective as of Apr. 9, 1991, amended two times, most recently on Aug. 31, 2012, effective as of Jan. 1, 2013, available at 2 See 中华人民共和国国家赔偿法 (State Compensation Law of the People s Republic of China), Article 38, passed and issued on May 12, 1994, effective as of Jan. 1, 1995, amended two times, most recently on Oct. 26, 2012, effective as of Jan. 1, 2013, available at Article 38 provides: Where, in the course of civil litigation or administrative litigation, a people's court illegally adopts compulsory measures or preservation measures that impair the litigation, or erroneously enforces a judgment, ruling, or other effective legal document, and thereby resulting in harm, the criminal compensation procedures of this Law shall be applicable to the procedure for the compensation claimant to claim for compensation. ( 人民法院在民事诉讼 行政诉讼过程中, 违法采取对妨害诉讼的强制措施 保全措施或者对判决 裁定及其他生效法律文书执行错误, 造成损害的, 赔偿请求人要求赔偿的程序, 适用本法刑事赔偿程序的规定 )

3 3 enforcement settlement agreement on which the original enforcement act was based has infringed upon the legal rights and interests of parties external to the case, the revocation ruling and the act of reversing the enforcement are not enforcement errors as set forth in Article 38 of the State Compensation Law of the People s Republic of China. Related Legal Rule(s) Article 38 of the State Compensation Law of the People s Republic of China Basic Facts of the Case Compensation claimant Haikou Binhai Avenue (Tianfu Hotel) Securities Business Department of Guotai Junan Securities Co., Ltd. 3 ( 国泰君安证券股份有限公司海口滨海大道 ( 天福酒店 ) 证券营业部 ) (hereinafter referred to as Guotai Haikou Business Department ) applied [for compensation], claiming: the Higher People s Court of Hainan Province (hereinafter referred to as the Hainan Higher Court ), without [first] carrying out a retrial 4 [to review] the original effective judgment 5 and [the Hainan Higher Court s] (1999) Qiong Gao Fa Zhi Zi Nos. 9-10, 9-11, 9-12, 9-13 Rulings (hereinafter referred to as the No. 9-10, 9-11, 9-12, and 9-13 Ruling, respectively) in accordance with law, rendered the (1999) Qiong Gao Fa Zhi Zi No Ruling (hereinafter referred to as the No Ruling ) and, based on the [No Ruling], reversed the enforcement and revoked the original Nos. 9-11, 9-12, and 9-13 Rulings, causing Guotai Haikou Business Department s loss of legally acquired building property. [The acts of the Hainan Higher Court] should be determined to be in violation of law and [Guotai Haikou Business Department] should be granted state compensation. The Hainan Higher Court replied, claiming: The [Hainan Higher] Court s No Ruling merely corrected the errors of a previous enforcement ruling and did not change the basis of the original enforcement. [Therefore,] there was no need to go through adjudication 3 Translators note: the name 国泰君安证券股份有限公司 is translated here as Guotai Junan Securities Co., Ltd. in accordance with the translation used on the company s website, at 4 Translators note: the original text reads 再审 ( retrial ). For the latest rules on retrials, see 最高人民法院关于民事审判监督程序严格依法适用指令再审和发回重审若干问题的规定 (Provisions of the Supreme People s Court on Several Issues Concerning Strictly and Legally Applying [Rules on] Ordering Retrial of a Case and Remanding a Case for Retrial in the Civil Adjudication Supervision Procedures), passed by the Adjudication Committee of the Supreme People s Court on Feb. 2, 2015, issued on Feb. 16, 2015, effective as of Mar. 15, 2015, available at 5 Translators note: the term 原生效判决 ( original effective judgment ) refers to the (1998) Qiong Jing Chu Zi No. 8 Civil Judgment rendered by the Hainan Higher Court. See infra main text of this Guiding Case.

4 4 supervision procedures. 6 The court s No Ruling and its act of reversing the enforcement restored the property rights of the building property in dispute to their status as of the commencement of the enforcement case, on the basis of its review and finding that an external party s objection to the enforcement was [well-]founded. There was no causal relationship between [the court s] act and [either] Guotai Haikou Business Department s claims of debt as confirmed by the [original] judgment or [Guotai Haikou Business Department s] alleged losses, which remained unclear. The compensation claim of Guotai Haikou Business Department could not stand, and should be rejected. The court handled the case and ascertained: On September 21, 1998, with respect to a securities repurchase dispute brought by Guotai Haikou Business Department against Hainan International Leasing Co., Ltd. (hereinafter referred to as Hainan Leasing Company ), the Hainan Higher Court rendered the (1998) Qiong Jing Chu Zi No. 8 Civil Judgment, ordering Hainan Leasing Company to pay Guotai Haikou Business Department the securities repurchase principal of RMB 36,200,000 and the interest [accrued] through November 30, 1997 of RMB 16,362,296; and [ordering] Hainan Leasing Company to pay Guotai Haikou Business Department [further] interest on the securities repurchase principal of RMB 36,200,000, [using the] interest calculation method: [interest amount] to be calculated using an annual interest rate of 18% from December 1, 1997 to the date of final payment. In December 1998, Guotai Haikou Business Department applied to the Hainan Higher Court for enforcement of the [(1998) Qiong Jing Chu Zi No. 8 Civil Judgment]. After the Hainan Higher Court accepted [the case], [it] issued an enforcement notice to Hainan Leasing Company and ascertained that the company had no property available for enforcement. Hainan Leasing Company stated that it held matured claims of debt against third-party Hainan Zhongbiao Property Development Co., Ltd. ( 海南中标物业发展有限公司 ) (hereinafter referred to as Zhongbiao Company ). Zhongbiao Company recognized [this fact] and stated that it was willing to pay Guotai Haikou Business Department compensation directly with partial property of the Jingrui Building in order to repay part of the debt that it owed to Hainan Leasing Company. Consequently, on June 13, 2006, the Hainan Higher Court rendered the No Ruling to seal up 7 partial property of Jingrui Building and issued a public notice on the same day. 6 Translators note: the original text reads 审判监督程序 ( adjudication supervision procedures ). For detailed rules on adjudication supervision of civil cases, see 最高人民法院关于民事审判监督程序严格依法适用指令再审和发回重审若干问题的规定 (Provisions of the Supreme People s Court on Several Issues concerning Strictly and Legally Applying Ordered Retrial of a Case and Remanding of a Case for Retrial in the Civil Trial Supervision Procedure), supra note 4. 7 Translators note: the original text reads 查封 ( seal up ). According to Article 9 of the Provisions of the Supreme People s Court on the Sealing up, Distrainment, and Freezing of Properties by People s Courts in Civil Enforcement, when a people s court seals up an immovable property, it should attach a strip of sealing or issue an announcement and may obtain and keep relevant certificates of the property rights. See 最高人民法院关于人民法院民事执行中查封 扣押 冻结财产的规定 (Provisions of the Supreme People s Court on the Sealing up, Distrainment, and Freezing of Properties by People s Courts in Civil Enforcement), passed by the Adjudication Committee of the Supreme People s Court on Oct. 26, 2004, issued on Nov. 4, 2004, effective as of Jan. 1, 2005,

5 5 On June 29 of the same year, Guotai Haikou Business Department, Hainan Leasing Company, and Zhongbiao Company jointly signed the Written Settlement on Enforcement, stipulating that Hainan Leasing Company and Zhongbiao Company [would] settle debts [owed to] Guotai Haikou Business Department with the partial property of the Jingrui Building owned by Zhongbiao Company. Based on this, the Hainan Higher Court rendered the No Ruling on June 30, recognizing the settlement agreement. In the course of processing the [property] transfer, the liquidation group of Hainan Development Bank (hereinafter referred to as the HDB Liquidation Group ) and Hainan Chuangren Real Estate Co., Ltd. (hereinafter referred to as Chuangren Company ), [both of which were] external parties, raised objections to enforcement on the grounds that the building property to be used to offset the debts, [as confirmed in] the Hainan Higher Court s No Ruling, was owned by them and that the ruling adversely affected their legal rights and interests. After reviewing [these objections], the Hainan Higher Court rendered the No and No Rulings to reject [each of their] objections, respectively. On March 14, 2002, Guotai Haikou Business Department, in accordance with the No Ruling, changed to its own name the registration of the property rights of the aforementioned building property for offsetting debts and paid the related taxes and fees. After the HDB Liquidation Group and Chuangren Company [filed their] petition, the Hainan Higher Court reviewed [the case] again and opined: The No Ruling treated the building property, which had been purchased from Zhongbiao Company by the original Jintong Urban Credit Cooperative (later merged into Hainan Development Bank) and of which a large portion of the price had already been paid, as Zhongbiao Company s building property [used] for offsetting the debts [owed to] Guotai Haikou Business Department. [This] adversely affected the interests of the HDB Liquidation Group and was clearly inappropriate. The grounds for the HDB Liquidation Group s objection [therefore] stood and the objection asserted by Chuangren Company should be resolved through litigation procedures. Based on this, the Hainan Higher Court rendered the No Ruling on July 31, 2003, revoking the Nos. 9-11, 9-12, and 9-13 Rulings and transferring the [ownership] of the building property originally determined in the rulings for offsetting debts back to its pre-enforcement status. On December 18, 2004, with respect to the confirmation of the housing property rights dispute [in which] the HDB Liquidation Group was the plaintiff, Zhongbiao Company was the defendant, and Chuangren Company was the third-party, the Intermediate People s Court of Haikou Municipality (hereinafter referred to as the Haikou Intermediate Court ) rendered the (2003) Hai Zhong Fa Min Zai Zi No. 37 Civil Judgment, confirming that the building property originally [intended for] offsetting debts was owned by Chuangren Company and the HDB Liquidation Group. That judgment had already come into legal effect. 8 In June 2005, Guotai amended on Dec. 16, 2008, effective as of Dec. 31, 2008, available at 8 Translators note: the original text reads 判决已发生法律效力 ( the judgment has already come into legal effect ). According to Article 155 of the Civil Procedure Law of the People s Republic of China, judgments

6 6 Haikou Business Department applied to the Haikou Local Taxation Bureau 9 for a tax refund. The Haikou Local Taxation Bureau refunded the deed tax to Guotai Haikou Business Department. On August 4, 2006, the Hainan Higher Court rendered the No Civil Ruling, terminating the enforcement of the (1998) Qiong Jing Chu Zi No. 8 Civil Judgment on the grounds that Hainan Leasing Company had already been declared bankrupt for debts to be repaid and that the reasons that Hainan Leasing Company s liquidation group gave for requesting termination of enforcement were sound. The debt claims involved in the (1998) Qiong Jing Chu Zi No. 8 Civil Judgment were transferred by agreement to Guotai Junan Investment Management Co., Ltd. (hereinafter referred to as Guotai Investment Company ) in July On November 29, 2005, Hainan Leasing Company applied to the Haikou Intermediate Court for bankruptcy and liquidation. While the bankruptcy case was being handled, Guotai Investment Company declared related claims of debt to the Hainan Leasing Company s [bankruptcy] administrator, including the claims of debt confirmed in the (1998) Qiong Jing Chu Zi No. 8 Civil Judgment. On March 31, 2009, the Haikou Intermediate Court rendered the (2005) Hai Zhong Fa Po Zi No Civil Ruling, terminating the bankruptcy and liquidation procedures. Guotai Investment Company s claims of debt were not cleared. On December 27, 2010, Guotai Haikou Business Department applied to the [Hainan Higher Court] for state compensation on [two] grounds: [first,] the Hainan Higher Court s No Ruling and [related] acts were in violation of law, and [second,] the building property [confirmed by] the No Ruling to be used for the offsetting of debt should be returned or compensation for related losses should be paid. On July 4, 2011, the Hainan Higher Court rendered the (2011) Qiong Fa Pei Zi No. 1 Compensation Decision in response to Guotai Haikou Business Department s compensation application, deciding against the grant of compensation. Dissatisfied with the decision, Guotai Haikou Business Department applied to the Compensation Committee of the Supreme People s Court for the rendering of a compensation decision. Results of the Adjudication On March 23, 2012, the Compensation Committee of the Supreme People s Court rendered the (2011) Fa Wei Pei Zi No. 3 State Compensation Decision: [the Committee] upholds the Hainan Higher People s Court s (2011) Qiong Fa Pei Zi No. 1 Compensation Decision. and rulings that have already come into legal effect are judgments and rulings of the Supreme People s Court as well as judgments and rulings which, according to law, may not be appealed or which have not been appealed within the prescribed time limit. See 中华人民共和国民事诉讼法 (Civil Procedure Law of the People s Republic of China), supra note 1. 9 Translators note: the name 海口市地方税务局 is translated here as Haikou Local Taxation Bureau in accordance with the translation used on the bureau s website, at

7 7 Reasons for the Adjudication The Supreme People s Court opined: Hainan Leasing Company, the [legal] person subject to enforcement, did not have the ability to clear its debts. Because [Hainan Leasing Company] held matured claims of debt against third-party Zhongbiao Company and, regarding this fact, Zhongbiao Company did not raise any objection and recognized [the need for it] to fulfill the debt. [However,] Zhongbiao Company concealed the fact that it had already signed a contract for sale of the building property with external parties, that it had received a large portion of the price for the building, and that the three parties, [namely, Zhongbiao Company], Guotai Haikou Business Department, and Hainan Leasing Company had reached a Written Settlement on Enforcement. Based on this, the Hainan Higher Court rendered the No Ruling. The aforementioned agreement regarding settlement of the enforcement infringed upon the legal rights and interests of the external parties. [Therefore,] the property rights of the building property in dispute that Guotai Haikou Business Department obtained based on the agreement should not be protected by law. On the basis that the objection to enforcement raised by the external parties during the enforcement procedure [was found] to stand after review, the Hainan Higher Court s No Ruling was [rendered] to revoke the original No Ruling and restore the [ownership of] the building property in dispute that was already subject to enforcement to its pre-enforcement status. The [No. 9-16] Ruling and the act of reversing the enforcement were not in violation of legal provisions. In addition, [the facts upon which the No Ruling] were based were verified by the ascertained content of the effective (2003) Hai Zhong Fa Min Zai Zi No. 37 Civil Judgment [rendered by] the Haikou Intermediate Court. [Thus,] the [Hainan Higher Court s] handling of the substantive [legal issues in this case] was not inappropriate. The essential [cause] of Guotai Haikou Business Department s being unable to realize its debt claims was Hainan Leasing Company s lack of competence to clear debts. Although Guotai Haikou Business Department and its debt claims assignees declared their claims during the [related] bankruptcy [process], [they] were still unable to receive clearance [of the debts]. There was no causal relationship in law between the unrealized claims and either the Hainan Higher Court s No Ruling or its enforcement act. Consequently, the Hainan Higher Court s No Ruling and its act of reversing the enforcement were not erroneous enforcement situations as set forth in the State Compensation Law of the People s Republic of China and related judicial interpretations.