Chen v. Guan, Guo, and Han: Dispute over a Service Contract

Keywords: Service fraud; entity bearing responsibility; evidentiary force

Counseling Attorney: Wu Xing

Basic Facts of the Case:

In this case, attorney Wu Xing, acting as the agent for Chen, filed a lawsuit requesting Guan, Guo, and Han to return the remaining service fees. After trial, the court found that the Yimei Aoti Branch was established on September 10, 2020, upon approval, as a branch of Yimei Company. Its registered address is L3008, No. 16 Jinka Road, Hunnan District, Shenyang City. The registered person in charge was Wei Chi. On October 26 of the same year, the registration of the person in charge was changed to Li. The branch was actually operated by the defendant Guan. On May 5, 2022, the Yimei Aoti Branch completed its deregistration. Yimei Company was a single-member limited liability company established with investment from the defendant Guan. It was approved for establishment on August 13, 2020. On December 28, 2022, Yimei Company completed its deregistration. On December 28, 2022, the company completed its deregistration. In the “Simplified Deregistration Commitment Letter” issued by the defendant Guan on December 28, 2022, he stated: “Before applying for deregistration, this market entity has already settled all its debts and claims, and there are no outstanding liabilities such as unpaid settlement expenses, employee wages, social insurance contributions, statutory compensation payments, taxes payable (including late payment penalties and fines), or other unresolved matters. The liquidation process has been fully completed... All investors of this market entity shall be responsible for the authenticity of the above commitments. Should any violation of law or breach of trust occur, all investors shall bear the corresponding legal consequences and responsibilities and voluntarily submit to the constraints and penalties imposed by the relevant administrative enforcement authorities.”

Starting November 9, 2020, the plaintiff Chen received wellness services provided by the Yimei Ao Branch and paid the corresponding service fees. During the trial of this case, the plaintiff Chen claimed that he had paid (recharged) a total of 283,870 yuan in service fees at the Yimei Ao Branch and had already consumed 50,400 yuan. The defendant, Guan, argued that the plaintiff Chen had paid (recharged) a total of 86,070 yuan in service fees at the Yimei Ao Branch and had already consumed 78,570 yuan.

On June 12, 2021, the defendant, a certain country (Party B), entered into a “Transfer Contract” with Li, the registered representative of the Yi Meiao branch (Party A, signed by Yuichi on behalf of Party A), thereby completing the transfer of the store.

After Defendant Guo and Li signed a “Transfer Contract” with Yi’s Meiao Branch, Defendant Guo took over the premises and continued to provide relevant health and beauty services to customers—including Plaintiff Chen—who still had outstanding service fees to be consumed. On August 27, 2021, Yimou Beauty Salon (an individual business) was duly registered at the original location of Yi’s Meiao Branch. The registered operator was Defendant Guo. On December 1, 2021, Yimou Beauty Salon completed its deregistration. On December 10, 2021, Yimou Health Center (an individual business) was duly registered at the same business location. The registered operator was Defendant Han. On August 1, 2022, Yimou Health Center completed its deregistration. During the court hearing in this case, both Defendants Guo and Han stated that during the period when the aforementioned premises were in operation, they had actually been running the business jointly as partners.

During the trial of this case, the plaintiff Chen provided a “Record of Membership Purchase of Product Items,” issued by the health and beauty institution involved in the case and signed by the plaintiff Chen himself. Now, the plaintiff Chen has filed a lawsuit with this court, requesting that the defendants Guan, Guo, and Han be jointly ordered to refund the remaining service fees. The aforementioned facts are supported by documentary evidence including the on-the-spot statements of both the plaintiff and the defendant, sales receipts, delivery notes from the health club, the record of purchased product items, the customer file’s service item record form, enterprise business registration information files, the transfer contract, bank transaction details, the shareholders’ resolution of the Yimao Fitness Branch, and the member’s daily consumption and care records—all of which have been examined and verified during the trial and are hereby confirmed by this court.

The central issue in this case is whether the defendants, Guan, Guo, and Han, are obligated to refund the plaintiff, Chen; and if so, how the amount of the refund should be determined.

First, regarding whether the defendants Guan, Guo, and Han should bear the obligation to refund money to the plaintiff Chen.

In this case, on November 9, 2020, the plaintiff Chen entered into a service contract with the Yimmei Sports Branch, actually operated by the defendant Guan, under which the branch provided health and wellness services to the plaintiff Chen. This agreement was reached through mutual consent between the parties and does not violate any mandatory provisions of laws and regulations; therefore, this court hereby confirms its validity.

After the aforementioned contractual relationship was established, the plaintiff Chen paid (recharged) a service fee to the Yimei Ao Branch. During the performance of the contract, Li, the registered representative of the Yimei Ao Branch, entered into a store-transfer agreement with the defendant Guo, transferring the Yimei Ao Branch to the defendant Guo. On this basis, in August 2021, the defendant Guo established the Yi Moumou Beauty Salon at the original location, and in December 2021, the defendant Han established the Yi Moumou Wellness Center at the same location, with both defendants jointly operating these businesses. According to the established facts, the Yimei Ao Branch (which was deregistered on May 5, 2022) was a branch of Yimei Company, which was a single-member limited liability company established with investment by the defendant Guan. This company completed its deregistration on December 28, 2022. In the “Simplified Deregistration Commitment Letter by All Investors,” the defendant Guan pledged: “Before applying for deregistration, this market entity has already settled all its debts and claims... We take full responsibility for the truthfulness of the above commitment; if we violate laws or breach trust, all investors shall bear the corresponding legal consequences and liabilities...” Based on the above facts, regarding the transfer of the Yimei Ao Branch’s premises, the defendant Guan admitted that he had not explained or informed the plaintiff Chen about this transfer. This also indicates that the defendant Guan’s promise made during the deregistration of Yimei Company—that “all debts and claims have been settled before applying for deregistration”—was inconsistent with the actual situation. Therefore, the defendant Guan should bear the corresponding civil liability according to law. As for the issue of liability borne by the defendants Guo and Han, the existing evidence mentioned earlier cannot prove that these two defendants explained to the plaintiff Chen the details of the store’s acquisition and transfer. Moreover, given that the plaintiff Chen, an ordinary consumer nearing the age of eighty, did not notice any changes in the location where she received wellness services nor any substantial adjustments to the specific wellness services provided, it would be excessively strict to require her to explicitly know that the commercial entity providing these wellness services had changed. Meanwhile, according to the established facts, prior to re-transferring the “Yi Moumou Beauty Salon” to others on July 26, 2022, the defendants Guo and Han had actually already deregistered the Yi Moumou Beauty Salon on December 1, 2021, and the Yi Moumou Wellness Center on August 1, 2022. Since the purpose of the contract under which the plaintiff Chen received services from the wellness institution could no longer be fulfilled, the defendants Guo and Han, as joint operators, should jointly bear the responsibility of refunding the plaintiff Chen’s payment.

Based on the foregoing facts, after the defendant Guan entered into a service contract with the plaintiff Chen, during the performance of the contract, without informing or explaining to the plaintiff Chen about the transfer of the store, the defendant unilaterally transferred the entire store to the defendant Guo (Han). This constitutes a breach of contract. Moreover, none of the defendants has provided sufficient and clear evidence to prove that, when the defendant Guan transferred the store in question to the defendant Guo, the parties had already completed the handover of the specific remaining services and their corresponding values as agreed upon by the plaintiff Chen and the defendant Guan. Therefore, the defendant Guan shall bear joint and several liability for the refund amounts owed by the defendants Guo and Han.

Second, regarding the determination of the refund amount involved in this case: As previously stated, the defendant Guan should refund to the plaintiff Chen the service fees that have not yet been fully consumed, and he should also bear joint and several liability for the refund amounts that the defendants Guo and Han are jointly and severally obligated to pay. As for how the specific refund amount should be determined: In this case, the plaintiff Chen claims that he paid (or recharged) a total of 283,380 yuan in service fees at the Yimei Ao Sports branch, of which 50,400 yuan has been consumed. The defendant Guan, on the other hand, contends that the plaintiff Chen paid (or recharged) a total of 86,070 yuan in service fees at the Yimei Ao Sports branch, of which 78,570 yuan has been consumed. However, according to the “Membership Purchase of Products/Projects Record” provided by the plaintiff, from July 4, 2021, to August 14, 2022, the plaintiff Chen actually purchased products worth 316,100 yuan at the store. Furthermore, the defendants Guo and Han claim that the plaintiff Chen paid (or recharged) a total of 43,500 yuan at the store they jointly operated, of which 2,160 yuan has been consumed, leaving a balance of 41,340 yuan. However, with regard to the above-mentioned facts asserted by all parties, the evidence submitted by both the plaintiff and the defendants suffers from significant imperfections and formal defects, and thus is insufficient to adequately substantiate the claims of any party. According to Article 85, Paragraph 1 of the Supreme People’s Court’s Provisions on Civil Litigation Evidence, the people’s court shall make its judgment in accordance with the law based on the facts of the case that can be proven by the evidence. Article 88 further stipulates that the adjudicators shall comprehensively examine and evaluate all evidence in the case, taking into account such factors as the degree of relevance between each piece of evidence and the facts of the case, as well as the interconnections among the various pieces of evidence. Accordingly, after a comprehensive review of all evidence submitted by the plaintiff and the defendants and considering the specific circumstances of this case, this court determines, at its discretion, that the defendant Guan shall refund 50,000 yuan in service fees to the plaintiff Chen; and that the defendants Guo and Han shall jointly and severally refund 80,000 yuan in service fees to the plaintiff Chen. At the same time, the defendant Guan shall bear joint and several liability for this repayment obligation.

With regard to the excess portion claimed by the plaintiff, Chen, since the supporting evidence is insufficient, this court does not uphold it.

It should be noted that the People’s Court makes its judgments in accordance with the law, based on the facts of the case that can be substantiated by the existing evidence. Looking at this case as a whole, the evidence submitted by the plaintiff, Chen, and by each defendant lacks sufficient relevance to the relevant facts and is relatively weak in terms of probative force. As a person with full civil capacity, the plaintiff Chen, and as commercial entities engaged in business operations, the defendants should further enhance their awareness of the importance of evidence and establish a strong evidentiary culture when conducting various economic activities and commercial transactions, so as to avoid situations where unclear facts and damage to rights and interests arise due to the absence of proper evidence.

The above judgment is as follows:

1. Defendant Guan shall, within ten days from the date this judgment becomes effective, refund to Plaintiff Chen the service fee of 50,000 yuan.

II. The defendants, Mr. Mou and Mr. Han, shall jointly refund within ten days from the date this judgment becomes effective.

Reimburse the plaintiff, Chen, 80,000 yuan for service fees;

3. The defendant, Guan, shall bear joint and several liability for the monetary payment obligations set forth in the second item above.

4. The other claims of the plaintiff, Chen, are dismissed.

Case Highlights ：

Mr. Chen is a senior citizen living alone. He moved to Shenyang from another region and has limited education, lacking the ability to properly assess and understand his surrounding living environment and social conditions. The defendant sold various beauty and health products to Mr. Chen, with each transaction exceeding 10,000 yuan. In particular, several transactions involved single purchases as high as 50,000 or 70,000 yuan. Under such substantial expenditures, a merchant acting in good faith and with integrity should have informed Mr. Chen’s family members about these purchases and obtained their consent. However, in this case, documents—including customer profile records provided by the defendant—repeatedly included notes instructing that family members not be notified, such as “Absolutely do not call,” and “Don’t call; the young lady doesn’t know I’m doing business here.” Given these circumstances, it appears that the defendants took advantage of Mr. Chen’s cognitive vulnerability to enter into contracts with him. There is also reason to suspect that the defendants used the pretext of health and wellness services to sell high-priced health products that lacked any real value. Moreover, none of the defendants submitted valid evidence proving that the relevant services had actually been performed. Therefore, the trial court rightly ruled that the defendants must refund the corresponding contract payments and amounts to Mr. Chen. The sunset may be beautiful, but the evening glow is even more precious. Respecting, cherishing, caring for, and assisting the elderly are time-honored virtues of the Chinese nation. Ensuring that seniors enjoy a peaceful and secure old age is a heartfelt aspiration shared by all of society. Misappropriating “retirement funds” or “personal savings” not only causes financial losses for the elderly but also inflicts severe psychological harm, seriously violating their legitimate rights and interests. All defendants must take this case as a warning, operate legally and in compliance with regulations, and conduct business with integrity. Likewise, the children of the elderly should learn from this case, pay more attention to their parents, frequently check in on them, spend time with them, and safeguard their parents’ retirement savings carefully.

Typical significance:

The primary issue in this case concerns whether the defendants, Guan, Guo, and Han, are obligated to refund the fees paid by the plaintiff, Chen. Given that the beauty salon providing the services to the plaintiff has undergone multiple changes in its legal entity, and the registered addresses of the three aforementioned beauty salons are all located at the same address, it can be concluded that these three beauty salons share the same registered address and their operating periods overlap. Furthermore, there is an overlap in their business activities and operating entities. Therefore, Defendant No. 1 should bear joint and several liability for all fees owed by the three beauty salons to the plaintiff. Defendant No. 1’s company, Shenyang Yi Mou Mei Health & Wellness Co., Ltd., was dissolved without undergoing the legally prescribed liquidation procedures; hence, Defendant No. 1 is liable for the external debts of Shenyang Yi Mou Mei Health & Wellness Co., Ltd. Defendant No. 3 has previously registered and operated multiple beauty establishments under his personal name, all of which are legally classified as individual business households.

For the plaintiff, Mr. Chen, an ordinary consumer nearing the age of 80, it would clearly be overly stringent to require him to explicitly know that the commercial entity providing his health-care services had changed, especially when the location where he received these services remained unchanged and the specific services he received were not substantially altered. Considering the above-mentioned facts, after the defendant Guan entered into a service contract with the plaintiff Mr. Chen at the Yi Mou Mei Ao branch, Guan unilaterally transferred the entire business premises to the defendant Guo (Han) without informing or explaining to Mr. Chen the details of the store’s transfer. This constitutes a breach of contract. Moreover, none of the defendants has provided sufficient and clear evidence to prove that, when Guan transferred the premises in question to the defendant Guo, the two parties had already completed a formal handover regarding the specific remaining services provided to the plaintiff, Mr. Chen, as well as the corresponding monetary value of those services. Therefore, the defendant Guan should bear joint and several liability for the refund amounts owed by the defendants Guo and Han.

• Regarding the determination of the refund amount involved in this case: While multiple pieces of evidence in this case can confirm the amount paid by Chen, the evidence submitted by both the plaintiff and the defendant regarding the aforementioned facts all exhibit imperfections and significant formal defects, making them insufficient to adequately substantiate the claims of either party. Accordingly, after a comprehensive review of all evidence provided by the plaintiff and the defendant and taking into account the specific circumstances of this case, this court determines, at its discretion, that the defendant Guan shall refund the plaintiff Chen RMB 50,000 in service fees; and that the defendants Guo and Han shall jointly and severally refund the plaintiff Chen RMB 80,000 in service fees. At the same time, the defendant Guan shall bear joint and several liability for these repayments.

In summary, this case, while respecting objective facts, combines legal principles with human compassion and fully upholds public order and good morals. It effectively safeguards the rights and interests of vulnerable groups, addresses the concerns of the elderly, demonstrates the fairness and justice of the law, and highlights the superiority of the socialist rule of law.