Perspective | Case Study - A Study of Relief Channels After the Execution Basis is Revoked

In 2016, Company A sued Company B, requesting repayment of the principal and interest of a loan of 100 million yuan, with Company C bearing joint and several liability. After trial, the court ordered Company B to repay Company A 100 million yuan in principal and interest, with Company C bearing joint and several liability. In 2017, Company A applied to the people's court for compulsory enforcement based on the effective judgment. During the enforcement process, Company C filed a retrial with the higher people's court, requesting the removal of its guarantee liability. After review, the court granted Company C's retrial application and revoked the part of the original judgment concerning Company C's joint and several liability. Because the execution basis was revoked, the executing court ruled to terminate the execution of the original case.

In 2023, Company A discovered new assets of Company B that could be executed and applied to the people's court to resume enforcement. Company B filed an objection to enforcement on the grounds that the case had exceeded the enforcement time limit.

After the legal document used for enforcement by the applicant is revoked, according to Article 264 of the "Civil Procedure Law of the People's Republic of China" (2021 revision): "The people's court shall rule to terminate enforcement under any of the following circumstances: (1) The applicant withdraws the application; (2) The legal document on which the execution is based is revoked; "...", the people's court should rule to terminate enforcement according to law.

The situation of terminating enforcement described in the case complies with the provisions of Article 264 of the Civil Procedure Law, and there is nothing inappropriate about the court's ruling to terminate the case's enforcement.

Generally, termination of execution is the end of the execution procedure. After a case's execution is terminated, the execution procedure is no longer initiated without special reasons, but the people's courts have made special provisions for the restoration procedure in some special cases.

In the "Notice on Several Issues Concerning the Filing and Closing of Enforcement Cases" (hereinafter referred to as the "Filing and Closing Opinions") issued by the Supreme People's Court in 2014 (Document No. [2014] 26), Article 6 stipulates the types of cases in which the people's court may file a case by way of restoration of enforcement, including:

(1) The applicant applies for the restoration of the original effective legal document because of fraud or coercion in reaching a settlement agreement with the respondent;

(2) One party fails to perform or fully perform the execution settlement agreement, and the other party applies for restoration of the original effective legal document;

(3) After the execution of the case is concluded by ruling to terminate the current execution procedure, if it is found that the respondent has assets available for execution, the applicant applies for or the people's court restores the execution ex officio;

(4) After the execution of the case is concluded due to entrusted execution, the entrusted court returns the entrustment because the entrustment is improper;

(5) For cases terminated in accordance with Article 257 of the Civil Procedure Law, if the conditions for applying for enforcement are met, the applicant may apply for the restoration of enforcement.

The fifth item of this article mainly focuses on the termination of execution after the execution basis is revoked, stipulating that when the conditions for applying for execution are met, the applicant may apply to the people's court for the restoration of execution.

According to Article 9 of the "Notice on the Strictly Regulating Termination of the Current Execution Procedure (Trial Implementation)" issued by the Supreme People's Court, the application for restoration of execution is not subject to the time limit for applying for execution. In summary, this provision extends the time limit for applying for relief after a case is revoked, and restoration of execution can be applied for at any time when the conditions for applying for execution are met.

Items (1), (2), and (5) of this article are cases that should be concluded by terminating execution according to law, while Articles 467 and 468 of the "Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China" (hereinafter referred to as the "Civil Procedure Interpretation") (2015 revision) (currently Articles 464 and 465 of the "Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China" (2022 revision)), revised in 2015 after the implementation of this law, only made further provisions and explanations for items (1) and (2), that is, non-performance after withdrawal of a settlement agreement should lead to the restoration of execution. At the same time, Article 520 was added to the Civil Procedure Interpretation (2015) (currently Article 518 of the Civil Procedure Interpretation (2022)): If the applicant applies to withdraw the execution, the people's court shall rule to terminate the execution according to law. If the applicant applies for execution again, the applicant should reapply for execution within the execution time limit.

There are two inconsistent views in practice on the application of the above-mentioned documents. The first view is that although item (5) of Article 6 of the normative document "Filing and Closing Opinions," which came into effect on January 1, 2015, stipulates that the case may be restored if the conditions for execution are met after the execution basis is revoked, this situation is not further reflected in the 2015 Civil Procedure Interpretation. The Civil Procedure Interpretation limits the cases that can be restored after the termination of execution to "the applicant and the respondent have reached a settlement agreement and then request to withdraw the application for execution, and the people's court may rule to terminate the execution" and "termination of execution due to withdrawal of the application." Moreover, the "Filing and Closing Opinions" was implemented earlier, and the Civil Procedure Interpretation was implemented later, therefore the provisions of the judicial interpretation should take precedence. The second view is that, although the "Filing and Closing Opinions" was implemented earlier and the Civil Procedure Interpretation was implemented later, both documents are judicial interpretation documents formulated by the Supreme People's Court, and their provisions are not in conflict in their application. Therefore, there should be no order of priority when applying them.

Case Summary:

In the case of a loan contract dispute between China Guangda Bank Co., Ltd., Chongqing Branch (hereinafter referred to as Guangda Bank Chongqing Branch) and Chongqing Waimao Tongneng Materials Co., Ltd. (hereinafter referred to as Tongneng Materials Co.) and China Chongqing International Economic and Technological Cooperation Asia America Industrial Co., Ltd. (hereinafter referred to as Asia America Industrial Co.), the Chongqing Higher People's Court (hereinafter referred to as Chongqing High Court) made a civil mediation document (2000) Yu Gao Fa Jing Yi Chu Zi No. 18, the main contents of which are: 1. Tongneng Materials Co. shall pay Guangda Bank Chongqing Branch US$4,205,000 in foreign exchange loans and interest; 2. Asia America Industrial Co. shall bear joint and several liability for the above-mentioned amount.

After the case entered the enforcement procedure, Chongqing High Court found that: 1. Tongneng Materials Company had no business activities, no business income, and all the company's assets had been mortgaged to creditors, and its liabilities exceeded its assets, and there were indeed no assets available for enforcement; 2. Yamei Industrial Company, since its establishment, had no major business operations and was severely investigated by customs for smuggling and tax evasion. Due to lack of capital investment in business operations and the dispersal of personnel, the company had long ceased operations and had no assets to bear joint and several liability for repayment. Accordingly, on November 24, 2000, Chongqing High Court made a civil ruling (2000) Yu Gao Fa Jing Zhi Zi Di 66 Hao, terminating the enforcement of this case.

After Chongqing High Court made the ruling to terminate the enforcement, the Chongqing branch of China Everbright Bank submitted a written application to Chongqing High Court, applying to resume enforcement of the case.

Chongqing High Court's Judicial Reasoning:

Chongqing High Court held that termination of enforcement refers to a system in civil enforcement procedures where, due to statutory reasons, the civil enforcement agency terminates the civil enforcement procedure because it is no longer necessary or impossible to continue enforcement. Generally speaking, termination of enforcement means that the enforcement procedure is completely and irreversibly terminated, and there is no possibility of restoration. Therefore, in principle, after the case's enforcement is terminated, the enforcement procedure cannot be restarted. Although Article 6, paragraph (5), of the normative document on case filing and closing opinions, which came into effect on January 1, 2015, stipulates that "In cases where enforcement is terminated in accordance with Article 257 of the Civil Procedure Law, the application for enforcement can be resumed when the conditions for application for enforcement are met." However, the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China (hereinafter referred to as the Civil Procedure Law Interpretation), which came into effect on February 4, 2015, clearly stipulates that the circumstances under which the termination of enforcement can be resumed are limited to two situations, namely: "Where the applicant and the respondent reach a settlement agreement and request to withdraw the enforcement application, the people's court may rule to terminate the enforcement" and "Where the enforcement is terminated due to withdrawal of the application". The case filing and closing opinions are normative documents that were implemented earlier, while the Civil Procedure Law Interpretation is a judicial interpretation that came into effect later. This case should be governed by the judicial interpretation.

Supreme Court's Judicial Reasoning:

The legal issue of whether enforcement should be resumed in this case. Based on the ascertained facts, Chongqing High Court terminated enforcement based on the fact that the respondent Tongneng Materials Company had no assets available for enforcement, which is a case of termination of this enforcement procedure. The provisions of Article 519 of the Civil Procedure Law Interpretation and Article 6, paragraph (3), of the case filing and closing opinions should be applied for examination. Chongqing High Court's examination of this issue in the objection ruling is inappropriate in the application of the law.

Case Summary:

In the case of a loan contract dispute between the Laiwu branch of the Industrial and Commercial Bank of China (hereinafter referred to as ICBC Laiwu branch) and Laiwu Duoyou Footwear Co., Ltd. (hereinafter referred to as Duoyou Company), on November 10, 2004, the ICBC Laiwu branch applied to the Laiwu Intermediate People's Court (hereinafter referred to as Laiwu Intermediate Court) for compulsory enforcement based on the certificate of notarization of a debt instrument with compulsory enforcement power, No. (2004) Lai Er Zheng Jing Zi Di 2216 Hao, issued by the Second Notary Office of Laiwu City, and the enforcement certificate, No. (2004) Lai Zheng Zhi Zi Di 24 Hao, issued by the Notary Office of Laiwu City. The court filed the case for enforcement on the same day under case number (2004) Lai Zhong Zhi Zi Di 136 Hao. On November 30, 2004, Laiwu Intermediate Court made a civil ruling (2004) Lai Zhong Zhi Zi Di 136 Hao, ruling to terminate the enforcement of the enforcement certificate (2004) Lai Zheng Zhi Zi Di 24 Hao. On December 3, 2004, the staff of the ICBC Laiwu branch received the ruling. On June 26, 2015, the Jinan office of the Great Wall Asset Management Company (hereinafter referred to as the Great Wall Company Jinan Office) applied to the Laiwu Intermediate Court for resumption of enforcement on the grounds that it had acquired the debt rights of the ICBC Laiwu branch and had discovered new property clues. Laiwu Intermediate Court resumed enforcement under case number (2015) Lai Zhong Zhi Hui Zi Di 7 Hao. The respondent, Duoyou Company, filed an objection, arguing that the resumption of enforcement by the Laiwu Intermediate Court had no legal basis and requested that the enforcement measures taken against it be lifted.

Laiwu Intermediate Court's Judicial Reasoning:

Laiwu Intermediate Court held that the key issue in this case is whether there is a legal basis for the resumption of enforcement. During the enforcement process, on November 24, 2004, the Laiwu Intermediate Court coordinated between the two parties. In the enforcement record, the staff of the applicant, ICBC Laiwu branch, stated that they "waived all rights against Duoyou". Based on this, the Laiwu Intermediate Court's ruling to terminate enforcement was in accordance with the law. After the staff of the ICBC Laiwu branch signed for the ruling, the ruling terminating the enforcement took legal effect, and they did not raise any objection to the Laiwu Intermediate Court before signing the debt assignment agreement with the Great Wall Company Jinan Office. Therefore, it should be deemed that they acknowledged the ruling terminating the enforcement. Therefore, there is no legal basis for resuming enforcement after the enforcement in this case was terminated.

Shandong High Court's Judicial Reasoning:

Shandong High Court held that the Laiwu Intermediate Court confirmed that the respondent had no assets available for enforcement based on the enforcement record of November 24, 2004, and on November 30, 2004, made an enforcement ruling (2004) Lai Zhong Zhi Zi Di 136 Hao, ruling to terminate enforcement of the execution certificate (2004) Lai Zheng Zhi Zi Di 24 Hao issued by the Notary Office of Laiwu City on the grounds that the respondent was unable to fulfill the debt, in accordance with Article 235 (currently Article 257) paragraph (6) of the Civil Procedure Law of the People's Republic of China. Therefore, this termination of enforcement should be deemed as the termination of this enforcement procedure. The Great Wall Company Jinan Office applied for the resumption of enforcement in this case on the grounds of acquiring the debt rights of the ICBC Laiwu branch and discovering new property clues. The Laiwu Intermediate Court, in accordance with the provisions of Article 6 of the Supreme People's Court's Opinions on Several Issues Concerning the Filing and Closing of Enforcement Cases, legally resumed enforcement of this case and took measures to seize part of the respondent's property, which was appropriate. The Laiwu Intermediate Court's objection ruling rejected the Great Wall Company's application for resumption of enforcement and revoked the relevant seizure ruling, which had no legal basis and should be corrected according to law.

Supreme Court's Judicial Reasoning:

Shandong High Court revoked the Laiwu Intermediate Court's objection ruling rejecting the Great Wall Company Jinan Office's application for resumption of enforcement, resumed enforcement of the case, and confirmed that the facts were clear and the application of the law was correct.

In the above two judicial cases, the people's courts both demonstrated an attitude of prioritizing the application of the "Case Filing and Closing Opinions". There are no cases in the Supreme Court's rulings where the application level of the "Case Filing and Closing Opinions" is after the "Civil Procedure Law Interpretation".