J. T. Capital Watch. Can creditors who pay for their debts exclude court enforcement?

Published:

2022-11-30

1. Introduction In the case of A v. Company B's loan contract dispute, according to A's application, the People's Court made a civil ruling in October 2017 and seized Company B's house. After the effective judgment supports A's claim, A applies to the people's court for compulsory execution. C is based on the non-fault buyer stipulated in Article 28 of the Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Enforcement Objection and Reconsideration Cases by People's Courts (hereinafter referred to as the "Provisions on Enforcement Objection and Reconsideration"). The main basis is: Company B owes C 2 million yuan and uses the house involved in the case to offset the debt, the two parties signed a house-to-house debt settlement agreement dated August 2017; the property company issued a detailed list of entry charges on the same day. So, can C, as a creditor of a house-to-house debt, exclude court enforcement based on the provisions of Article 28 of the "Enforcement Objection and Reconsideration Provisions")? Regarding the issue of whether creditors outside the case can exclude the enforcement of general monetary claims, the current legal norms are not clearly stipulated, and there are large differences in the practice of this issue, this paper attempts to sort out the judicial point of view, with a view to providing a reference perspective. 2. Supreme Court View After searching the judicial views and cases of the Supreme Court, the Supreme Court has different views on the issue of "whether the creditor of the debt with the house can exclude the enforcement of the court", and one group holds that the creditor of the debt with the house is sufficient to exclude the enforcement of the general (I. e. unsecured) monetary claim (hereinafter referred to as "definitely excluding the enforcement"); the second category holds that creditors who set off their debts cannot exclude the enforcement of general (I. e. unsecured) monetary claims (hereinafter referred to as "negative exclusion of enforcement"). (I) positive exclusion of execution 1. Representative judicial perspective In the minutes of the 12th meeting of judges of the Supreme Court in 2019, the Second Circuit Court of the Supreme Court pointed out that if the debt-for-property agreement is actually performed, the ownership of the debt has changed, and the recipient's claim to exclude the enforcement of the debt should be supported. 2. Typical cases of the Supreme Court (1)(2020) Supreme Law Min Shen No. 4743, the opinion of the judge: when the Provisions on Objection and Reconsideration of Execution were formulated, "debt in rem" was originally intended to be included in the scope of protection of the right of expectation of real right. In view of the fact that the outsider and the person subject to execution may collude with each other in bad faith to reverse the signing time to exclude the execution power of other creditors, in the absence of the technical means to identify the exact time of the signing of the contract, it is not sufficient to exclude the possible moral hazard, so the "debt in rem" is not included in the scope of the right of expectation. However, the Court believes that if there is evidence to prove that the "debt in kind" agreement was signed at a specific time and conforms to the provisions of Article 28, its right to exclude enforcement should still be protected. "Debt to debt" is actually a kind of value exchange, that is, the value of the creditor's rights in exchange for "things" of goods, "debt to debt" in line with the external characteristics of the general real estate sale, on the basis of the right to expect, enjoy the civil rights and interests of excluding enforcement. (2)(2019) Supreme Law Civil Final No. 1894, the referee's view: the creditor of the house to pay the debt does have evidence to prove that the parties have formed a separate real estate sale relationship, and the payment of the purchase price is to the seller's debt to offset the top, can exclude the debtor's other creditors of the enforcement. (3)(2017) Supreme Law Minshen No. 785, the referee's point of view: before the property involved was preserved and sealed up, the person subject to execution signed an agreement with an outsider to repay debts in kind. The outsider actually invested in the construction and occupied the house involved in the case, and has fulfilled the obligations stipulated in the legal and valid contract. Although he has not gone through the transfer procedures, the reason why he has not handled the transfer is that the project has not been completed as a whole and cannot be handled objectively. With reference to the provisions of Article 28 of the Provisions on Objection and Reconsideration of Execution, it shall be determined that a company's request for exclusion of execution of the property involved in the case is justified. Summary: To sum up, the affirmative point of view is that it is generally believed that the creditor who pays the debt with the house does have the true intention to purchase the debt-paying house, there is no situation of evading execution or evading the debt, and has actually occupied the house before the people's court takes enforcement measures., There is no fault for not transferring the ownership of the house, that is, the creditor who pays the debt with the house conforms to Article 28 of the "Implementation Objection and Reconsideration Regulations. (II) negative exclusion execution 1. Representative judicial perspective (1) The second paragraph on page 304 of the "Understanding and Application of the Minutes of the National Court's Civil and Commercial Trial Work Conference" (edited by the Second Civil Trial Division of the Supreme People's Court, published by the People's Court Publishing House, 2019 Edition) holds that non-case creditors cannot fight against the execution of money debts based on debt-in-kind agreements, mainly based on two considerations: one is to prevent outsiders from colluding maliciously with the executed to reverse the time to damage the rights of the debt-case, under the circumstances that it is difficult to accurately determine the time when the contract was signed and it is difficult to determine the malicious collusion of the parties, only a more cautious attitude can be taken towards debt repayment with property. The second is to violate the equality of debts, that is, the purpose of setting up debt repayment with property is to eliminate the old money debt, and the debt repayment with property is still the debt of money in essence, which should not take precedence over another money debt. (2) The minutes of the 15th judges' meeting of the Second Circuit Court of the Supreme People's Court in 2021 held that Article 28 of the Provisions on Objection and Reconsideration of Execution stipulates four conditions under which buyers of non-fault real estate can exclude the enforcement of monetary creditors. As long as one element is not met, the enforcement of monetary claims cannot be excluded. A debt-for-property agreement is different from a contract of sale and purchase in that it is either a new debt settlement or a debt renewal. In the case of new debt settlement, there are both old and new debt, which is quite different from the contract of sale of a single debt nature, and in the case of debt renewal, the creditor only has the right without the obligation to pay, and is not the same as the contract of sale that requires the payment of consideration. Thus, relying solely on a debt-for-rem agreement is not sufficient to preclude the enforcement of another monetary claim. 2. Typical cases of the Supreme Court (1)(2022) Supreme Law Minshen No. 104, Referee's View: The right to expect housing obtained through "debt in kind" generally cannot prevent execution. The key substantive problem of the execution objection is to compare the effectiveness of the different types of rights existing in the subject matter of the execution. Although the right of expectation of the ordinary buyer is given the name of "real right", it is not a vested right after all, and is still essentially a claim for creditor's rights. For the housing sales contract signed by "debt in kind", we should not only consider whether the debt has the priority attribute, but also consider the true meaning of the civil legal act. Generally speaking, the real intention of both parties lies in the transfer of the subject matter of the house as the way of paying off the old debt, which is different from the real sense of the house sale. Before the transfer of the house, the new debt arising from the contract of sale has not been eliminated, resulting in the coexistence of new debts and old debts, so the buyer's right to oppose the executor outside the contract of sale should not exceed the validity of the old debt. (2)(2021) Supreme Law Civil Final No. 1245, the judgment view: the buyer obtains the right of expectation of the property right by way of debt relief, but its inferior position is inferior to the security right, can not exclude the mortgagee's enforcement of the house. (3)(2020) Supreme Law Minshen No. 6858, the judgment point of view: if the debt relief creditor can exclude the other money creditors of the seller from the enforcement of the debt relief, it is tantamount to the "buyer" obtaining the legal status of taking precedence over other ordinary money creditors through the new debt settlement or the property settlement agreement of the nature of the property settlement appointment, the ordinary claims, which should have been in an equal position of payment, will thus have a difference between priority and inferiority, violating the principle of equality of debt and harming the legitimate rights and interests of other ordinary monetary creditors. (4)(2017) Supreme Law Civil Final No. 354, judgment view: the debt-for-property agreement between the parties in this case, can not reflect the true intention of the two sides to buy and sell houses, but the debtor's alternative way of performing the debt, does not necessarily cause the change of housing ownership. And the house in dispute has not completed the change of ownership registration procedures, creditors only have the right to claim, not the property right. In this case, the delivery of the property agreed upon in the property settlement agreement is the performance of the debt for the purpose of eliminating the pecuniary debt, and before the registration of the change of the house is completed, the property settlement agreement does not form an interest superior to other claims, and undermines the principle of equal payment of the claims. Summary: To sum up, it is generally believed that the debt repayment with house is based on the behavior of borrowing to offset the account, and its purpose is to eliminate the creditor's rights, rather than the simple behavior of buying and selling houses, which cannot reflect the true intention of transforming the relationship between creditor's rights and debts into the relationship between buying and selling houses. Therefore, before the registration of ownership of houses is completed, the obligee only enjoys the right to claim as a creditor, based on the principle of equality of debt, the general claims they enjoy do not have a priority value benefit over the enforcement claims. 3. local judicial documents The author's search found that, although the current norms at the national level do not clearly on the housing debt can exclude enforcement, but some local higher people's courts combined with local trial practice, issued the corresponding judgment guidelines, see the table below: Summary: From the above-mentioned judicial documents of the local higher people's court, it can be seen that whether the obligee of the house-to-house debt can be excluded from the court's enforcement, generally from the authenticity of the house-to-house debt agreement, the absence of circumstances such as evasion of execution or evasion of debt, the signing time of the house-to-house debt agreement, the fact that the assignee of the debt occupies the property, the value of the property, the debt amount and the property, the value of the property, the equivalent, and the fault of, it is believed that court enforcement can be excluded if the conditions are met. 4. summary and suggestions (I) Summary After searching the cases, the author believes that in recent years, in the practice of adjudication, it is often believed that the parties' opinions on the disposal of the house should be respected. Under the circumstances that there is no evasion of execution or evasion of debts or malicious collusion to damage the legitimate rights and interests of third parties, at the same time, it meets the provisions of Article 28 of the Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Enforcement Objection and Reconsideration Cases by the People's Court (I. e., the court has signed a house-to-debt agreement, has legally occupied the house, the debt-to-debt exists objectively and meets the requirements of debt-to-debt, and the failure to register the transfer is not caused by the outsider's own reasons), and can exclude the court from the enforcement. (II) recommendations 1. From the buyer's point of view, it is suggested that when obtaining a house by means of debt repayment, the true intention of purchasing the house should be clearly expressed, and the signed housing agreement should state the housing ownership registration certificate, the location, area, price and other matters, and it is suggested that the housing transfer registration procedures should be handled in a timely manner. 2. From the creditor's point of view, it is suggested that if the buyer excludes the creditor's enforcement by claiming in rem, the creditor should clarify the nature of its own claim, that is, whether it belongs to the general claim or the security right. If it is a creditor of a general claim, it is recommended to examine in strict accordance with the law whether the buyer has a civil interest and whether it can meet the conditions for excluding enforcement. If it belongs to the creditor of the security right, it is suggested that the right to live in accordance with the right of the purchase consumer takes precedence over the security right to the right of expectation, and then formulate a litigation strategy to fully safeguard their legitimate rights and interests.

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