[Title] Execution Objection Litigation Filed by the Plaintiff, Shenyang Real Estate Consulting Co., Ltd., against the Defendants Fu Mou and Shenyang Development Co., Ltd.

[Keywords] Civil/Action for Objection to Enforcement/Third-Party Objection to Enforcement/Substantive Rights Sufficient to Exclude Enforcement

【Key Ruling Points】The storefront involved in the case was purchased prior to the seizure, and the defendant, Fu, provided evidence to substantiate this. A legally valid written sales contract was signed before the court’s seizure, the full purchase price has been paid, and the real estate has been occupied; moreover, the failure to complete the transfer registration was not caused by the buyer’s own fault. The court based on Article 28 of the “Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Cases Involving Objections and Review Applications in Enforcement Proceedings” holds that the defendant, Fu, enjoys civil rights sufficient to preclude compulsory enforcement with respect to the subject matter of enforcement, and thus dismisses the plaintiff’s claim.

[Basic Facts of the Case] On July 12, 2013, the defendant Fu entered into a contract for the sale and purchase of commercial housing with the defendant Shenyang某 Development Co., Ltd., agreeing to purchase the property located at No. A, Gate B, Yulongshan Road, YuHong District, Shenyang City. On the day the contract was signed, the defendant Fu paid the full purchase price. On June 1, 2015, Shenyang某 Development Co., Ltd. delivered the property in question to Fu. Fu subsequently paid the property management fees, electricity charges, and heating costs, and completed the move-in procedures. The property is now used for selling auto parts and accessories. On July 13, 2015, Shenyang某 Development Co., Ltd. issued a purchase invoice to Fu.

In a separate case, the defendant, a certain development company in Shenyang, is involved in a dispute with the plaintiff. In a dispute over a commissioned agency sales contract for commercial housing involving a real estate consulting company in Shenyang, the People’s Court of Yuhong District, Shenyang City, issued a civil mediation agreement. The defendant... Shenyang Development Co., Ltd. shall pay the plaintiff by August 1, 2016. The agency fee for a real estate consulting company in Shenyang is RMB 9 million. The defendant. A certain development company in Shenyang failed to fulfill its obligations under the mediation agreement upon its expiration; the plaintiff... A real estate consulting company in Shenyang applied to the People’s Court of Yuhong District, Shenyang City, for compulsory enforcement. The People’s Court of Yuhong District, Shenyang City, then... On August 23, 2016, several properties under the name of a certain development company in Shenyang were sealed off, including the property involved in the case that had been sold to Mr. Fu. During the enforcement proceedings, Mr. Fu, as a third party not involved in the case, filed an objection to the enforcement. The People's Court of Yuhong District, Shenyang City, issued an enforcement ruling suspending the enforcement against the property located at No. A, Gate B, Yulongshan Road, Yuhong District, Shenyang City. On July 19, 2017, the plaintiff, a real estate consulting company based in Shenyang, received the ruling and filed a lawsuit challenging the ruling, requesting that the third party’s objection be dismissed.

[Judgment Result] The plaintiff, Shenyang [Name of Real Estate Consulting Co., Ltd.],’s claim is dismissed. The case filing fee of 100 yuan shall be borne by the plaintiff, Shenyang [Name of Real Estate Consulting Co., Ltd.].

【Court’s Reasoning】This court holds that, pursuant to Article 28 of the “Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Execution Objections and Review Cases by People’s Courts,” in the execution of monetary claims, if a purchaser raises an objection to real estate registered under the name of the judgment debtor and such objection meets the following conditions and the purchaser’s rights can be exempted from execution, the People’s Court shall uphold the objection: (1) A legally valid written sales contract was signed before the property was sealed by the People’s Court; (2) The purchaser had lawfully taken possession of the real estate prior to its sealing by the People’s Court; (3) The purchaser has paid the full purchase price, or has paid part of the purchase price as agreed in the contract and the remaining balance has been delivered for execution as required by the People’s Court; (4) The failure to complete the transfer registration was not due to the purchaser’s own fault. In this case, the defendant Fu Mou (a third party) entered into a lawful residential property sales contract with the defendant Shenyang某 Development Co., Ltd. on July 12, 2013. This contract reflects the true intentions of both parties, has been duly established and become effective. During the performance of the contract, Fu Mou paid the full purchase price, completed the check-in procedures, and has been actually occupying and using the property ever since. Therefore, the ownership of the disputed property in this case vests in Fu Mou. As the creditor of the defendant Shenyang某 Development Co., Ltd., the plaintiff Shenyang某 Real Estate Consulting Co., Ltd., during the execution proceedings, seized the commercial premises located at No. A, Gate B, Yulongshan Road, YuHong District, Shenyang City, which had been purchased by Fu Mou and registered under the name of the defendant Shenyang某 Development Co., Ltd. Fu Mou, as a third party, filed an objection to the execution. The court issued an execution ruling suspending the execution against the property located at No. A, Gate B, Yulongshan Road, YuHong District, Shenyang City. Now, the plaintiff Shenyang某 Real Estate Consulting Co., Ltd., as the original plaintiff in this case, has filed an action challenging the execution objection, requesting the court to dismiss Fu Mou’s application for execution objection. The defendant Fu Mou is the owner of the commercial premises located at No. A, Gate B, Yulongshan Road, YuHong District, Shenyang City; Shenyang某 Development Co., Ltd. is not the true owner of the property. Consequently, the creditors of Shenyang某 Development Co., Ltd. have no right to seize this property. The failure to register the property under Fu Mou’s name was caused by the negligence of Shenyang某 Development Co., Ltd. Since the defendant Fu Mou, as a third party, enjoys civil rights sufficient to preclude compulsory execution over the subject matter of the execution, this court does not support the plaintiff’s request to dismiss Fu Mou’s application for execution objection.

【Relevant Statutes】 Article 227 of the Civil Procedure Law of the People's Republic of China, Article 313 of the Supreme People's Court’s Interpretations on the Application of the Civil Procedure Law of the People's Republic of China, and Article 28 of the Supreme People's Court’s Provisions on Several Issues Concerning the Handling of Objections and Review Cases by People’s Courts.

[Lawyer’s Perspective]

1. The central issue in a third-party objection lawsuit is whether the third party has substantive rights that would preclude compulsory enforcement against the property involved in the case.

2. A third-party objection lawsuit in enforcement proceedings requires a substantive review. The third party shall bear the burden of proof regarding the facts that it holds ownership or other civil rights sufficient to preclude the compulsory enforcement of the subject matter of enforcement. Article 28 of the “Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Objections and Review Cases by People’s Courts” applies to situations where a purchaser raises an objection to real estate registered under the name of the judgment debtor; whereas Article 29 applies to situations where a purchaser raises an objection to commercial housing registered under the name of the real estate development enterprise that is subject to enforcement. In current judicial practice, Articles 28 and 29 overlap in their applicable scenarios: as long as a purchaser meets the requirements of either one of these provisions, the purchaser shall enjoy civil rights sufficient to preclude compulsory enforcement.

3. In judicial practice, third parties purchasing property need to provide sufficient evidence to demonstrate that they hold civil rights sufficient to preclude compulsory enforcement. Such evidence typically includes the following items: (1) the property purchase contract; (2) proof of payment, such as bank transfer records. In practice, parties may claim that all payments were made in cash; in such cases, it becomes more difficult for the court to accept the evidence, and the court may require additional supporting evidence, such as deposit and withdrawal records and proof of income sources. However, if only a portion of the final payment was made in cash, the court will generally accept this evidence; (3) the property purchase invoice; (4) evidence of actual occupancy and use, such as check-in procedures, renovation contracts and receipts, payment receipts for property management fees, utility bills (water, electricity, heating, broadband), and photographs showing the current condition of the property; (5) evidence demonstrating that the failure to complete the property transfer was not due to the party’s own actions.

In this case, as the attorney representing the defendant, Fu, we have primarily organized our evidence around whether the objection raised by the defendant, Fu, complies with the provisions of Article 28 of the “Regulations of the Supreme People’s Court on Several Issues Concerning the Handling of Execution Objections and Review Cases by People’s Courts.” Specifically, in order for Fu to raise an objection to the property involved, which is registered under the name of a certain development company in Shenyang, Fu must prove that prior to the seizure by the People’s Court, he had already entered into a lawful and valid written sales contract for the property in question, had lawfully taken possession of the real estate, had paid the full purchase price or had paid a portion of the purchase price as agreed in the contract while the remaining balance was delivered for enforcement as required by the People’s Court, and furthermore, that the failure to complete the transfer registration was not due to any fault on the part of the buyer himself. The date on which the court seized the property involved in this case was... On August 23, 2016, Fu signed a sales contract for the property in question with the defendant, Shenyang Certain Development Co., Ltd., on July 12, 2013. Fu paid the full purchase price on July 12, 2013, and took possession of and began using the property on June 1, 2015. The storefront was renovated for the purpose of operating an auto parts business. The applicant provided evidence—including utility payment receipts, heating fee collection receipts from 2015 to 2017, and property fee payment receipts—to demonstrate possession and use of the premises. Additionally, after the property in question was delivered to Mr. Fu, no registration filing was completed—not due to any fault on Mr. Fu’s part. Following the delivery of the property, Mr. Fu repeatedly requested Shenyang Certain Development Co., Ltd. to fulfill its registration-filing obligation; however, the company consistently failed to do so. According to Article 15 of the commodity housing sales contract signed by both parties, the seller was required to complete the registration-filing within 720 days after the delivery and use of the commodity housing. Since the property in question was delivered for use on June 1, 2015, the seller’s failure to complete the registration-filing by June 1, 2017, constituted a breach of contract. Therefore, the fact that the storefront in question had not been registered prior to the court’s seizure was not attributable to the buyer’s own actions. Consequently, the court upheld Mr. Fu’s objection to enforcement and dismissed the plaintiff’s claim.