A dispute over a financial lease contract between a company in Xuzhou and Liu Mou I, Huang Mou, and Liu Mou II.

Keywords: Financial leasing; assignment of claims; review of evidence

Counseling Attorney: Liu Qinqun

Basic Facts of the Case:

     On May 8, 2013, the non-party A Company and the non-party Liu Mou San (who is the son of the defendant Liu Mou Er; the same applies hereinafter) entered into a “Product Sales Contract,” agreeing that the non-party Liu Mou San would purchase three concrete pump trucks of a certain model from the non-party A Company. The defendant Liu Mou Yi signed and affixed his seal in the section designated as “Agent authorized by the buyer.” After the contract was concluded, the non-party A Company delivered the equipment involved in this case to the defendant Liu Mou Er.

On June 15, 2013, Company B, as the lessor, and the defendant Liu Mouyi, as the lessee, entered into a “Financial Lease Contract (Sale-and-Leaseback)” stipulating that a financial lease would be established for the three pieces of equipment involved in this case. After the contract was signed, Company B claimed to have paid the corresponding amount. After making partial rental payments, the lessee failed to make any further rental payments. Subsequently, the plaintiff, Xuzhou某某 Company, stated that it had advanced payment for the outstanding rent and other related amounts, and Company B subsequently assigned the corresponding creditor’s rights to the plaintiff, Xuzhou某某 Company.

In September 2017, Party A, represented by the third-party company A, Party B, represented by the defendant Liu Yi, Party C, represented by the plaintiff Xuzhou某某 Company, and Party D, represented by the defendant Liu Er (as guarantor), entered into an “Agreement” stipulating that the defendant Liu Er would provide a guarantee for the debt involved in this case. Subsequently, the plaintiff Xuzhou某某 Company filed a lawsuit requesting that the defendants Liu Yi and Huang, Liu Yi’s wife, jointly repay the outstanding rent and interest, with the defendant Liu Er bearing joint and several guarantee liability.

Case Highlights:

By carefully examining the opposing party’s evidence, focus your attack on their evidentiary weaknesses and address the issue at its most fundamental root.

Typical significance:

     The key to winning this case lies in focusing, when organizing the case’s evidentiary materials, on scrutinizing evidence closely related to the establishment and effectiveness of the legal relationship at issue. In this case, lawyer Liu Qinqun, upon reviewing the relevant evidence, found that although the plaintiff, a certain company from Xuzhou, claimed to have acquired the disputed debt from Company B, none of the evidence it presented could prove that Company B had actually disbursed the financing funds or that the plaintiff company had actually paid the consideration for acquiring the equity interest. Consequently, Lawyer Liu Qinqun reasonably suspected that Company B and the plaintiff company had colluded maliciously—with the intent of selling vehicles and collecting so-called rental interest—to induce the two defendants in this case to sign the “Financing Lease Contract,” its annexes and related agreements, as well as the “Equity Purchase Agreement” and the “Agreement,” thereby violating the provisions of Article 52, items (2) and (3) of the Contract Law: namely, malicious collusion that harms the legitimate rights and interests of third parties (the defendants in this case, Liu Yi and Liu Er), and using a lawful form to conceal an illegal purpose. Therefore, the aforementioned contracts involved in this case can be deemed invalid. This case should be adjudicated according to the true nature of the sales contract relationship, identifying the actual parties entitled to rights and obligations under the contract and determining their respective responsibilities. However, the plaintiff is not a proper party to the case; hence, the client and his wife should not bear responsibility for repayment.

After reviewing a series of pieces of evidence, the People’s Court adopted part of Attorney Liu Qinqun’s arguments and held that, where the trustee enters into a contract with a third party in its own name within the scope of the principal’s authorization, and the third party was aware at the time of entering into the contract of the agency relationship between the trustee and the principal, such contract directly binds both the principal and the third party. In this case, the defendant, Liu Yi, was entrusted by Liu Er and Liu San to sign the “Financial Lease Contract.” However, Liu Yi himself did not genuinely intend to establish a financial lease relationship with Company B. Both Company B and Liu Er were fully aware of this fact. Moreover, the pump truck in question was actually delivered to Liu Er for use and possession. Therefore, Liu Yi bears no responsibility for the rights and obligations under the “Financial Lease Contract” nor for any subsequent transfer of rights and interests related thereto. Liu Yi is not a true party to the financial lease contract in this case. Ultimately, the court ruled that neither Liu Yi nor his wife should bear the obligation to repay the loan, thereby saving the client from losses totaling nearly ten million yuan.