A certain company sues a certain district government. 
Cases involving the fulfillment of expropriation and compensation duties 
[Keywords] 
Administrative/Performance of Compensation Collection Duties/Illegal Construction/Collection Exceeding Approved Land Acquisition Area/Illlegal Buildings 
Attorneys in Charge: Wu Jianping, Dai Suning 
【Key Points of the Ruling】 
The district government exceeded the approved land acquisition area, resulting in the loss of land-use rights for the expropriated parties over land that was not within the scope of the provincial government’s land-expropriation approval, and the demolition of their buildings. The expropriated parties retain certain legitimate rights with respect to the buildings constructed on the land exceeding the approved acquisition area. Since the expropriated parties engaged in unauthorized construction after the district government issued the expropriation notice without following the legally prescribed approval procedures, the compensation amount should take into account both the fact that the houses were built after the issuance of the expropriation notice and the circumstance that such construction was carried out illegally without obtaining the required legal approvals. 
The transitional resettlement allowance is a subsidy provided to enterprises undergoing property rights exchange during the transition period. If the expropriated party chooses monetary compensation, the relevant laws and regulations pertaining to transitional resettlement allowances shall not apply. 
[Basic Facts of the Case] 
A certain company is located in a certain district of Shenyang City. After its establishment in June 2000, the company initially had only one plant site—the West Plant. In August 2007, with coordination from the district government, the company paid 1.7 million yuan to a village committee under the guise of land requisition, thereby acquiring a collectively-owned piece of land measuring 16,046.93 square meters in the village (the East Plant). 
On July 1, 2010, the district government issued a “Demolition Notice” deciding to carry out demolition and relocation in 18 villages. The company’s factory area was within the scope of this demolition notice. Between October 2010 and October 2011, the company commenced construction on the eastern factory site, building a total of 11 structures covering an area of 9,788.76 square meters and erecting 238.1 meters of perimeter wall. On July 11, 2012, the company reached a “Demolition Compensation Agreement” with the subdistrict office of the district regarding the western factory site. Subsequently, the company withdrew from the western factory site, and both parties had no disputes over the compensation for that site. In November 2012, the company withdrew from the eastern factory site and independently demolished part of the buildings there. Later, the district government proceeded to demolish the entire eastern factory site. 
On December 31, 2013, the People's Government of Liaoning Province issued Land Acquisition Approval No. Liao Zheng Di (2013) No. 1967, which approved the acquisition of 2,338.55 square meters of land in the eastern plant area of a certain company. As the company and the district government failed to reach an agreement on compensation for the buildings standing on the land in the eastern plant area, the company filed a lawsuit against the district government in the Shenyang Intermediate People's Court in 2014. 
After trial, the Shenyang Intermediate People’s Court issued Administrative Judgment No. 227 of 2014 (Shen Zhong Xing Chu Zi No. 227), ruling that the district government shall, within 60 days from the date the judgment becomes legally effective, address the compensation issue concerning the eastern plant area of a certain company. Both parties appealed against this judgment to the Liaoning Provincial Higher People’s Court. After review, the Liaoning Provincial Higher People’s Court issued Administrative Ruling No. 90 of 2015 (Liao Xing Zhong Zi No. 90), revoking the Administrative Judgment No. 227 of 2014 (Shen Zhong Xing Chu Zi No. 227) issued by the Shenyang Intermediate People’s Court and remanding the case back to the Shenyang Intermediate People’s Court for retrial by a newly constituted panel of judges. Attorney Tang Ning accepted the district government’s commission and acted as the litigation agent in the proceedings. 
【Judgment Result】 
I. Reversal and Remand for Retrial of the First-Instance Judgment: 
The Shenyang Intermediate People's Court issued Administrative Judgment No. [2015] Shen Zhong Xing Chu Zi No. 202, ruling as follows: 
1. Within 30 days from the date this judgment becomes legally effective, the defendant shall compensate the plaintiff RMB 4,232,216 for the house and associated facilities in the East Factory Area. 
2. Within 30 days from the date this judgment becomes legally effective, the defendant shall compensate the plaintiff RMB 2,936,628 for relocation expenses during the transitional period at the East Factory site. 
3. Within 30 days from the date this judgment becomes legally effective, the defendant shall compensate the plaintiff, Dongguang District, RMB 100,000 for relocation expenses. 
The appraisal and expert assessment fees for this case, totaling 70,000 yuan, as well as the case filing fee of 50 yuan, shall be borne by the defendant. 
II. Reversal and Remand: Second-Instance Judgment Result: 
The Liaoning Provincial Higher People's Court issued Administrative Judgment No. (2016) Liao Xing Zhong Zhi 1181, ruling as follows: 
1. Revoke the administrative judgment (2015) Shen Zhong Xing Chu Zi No. 202 issued by the Shenyang Intermediate People’s Court; 
2. Within 30 days from the date this judgment becomes legally effective, the defendant in the original trial shall compensate the plaintiff in the original trial RMB 2,539,329 for the buildings and appurtenances located in the East Factory Area. 
The appeal fee of 100 yuan shall be borne by the defendant in the original trial. The appraisal and expert assessment fees totaling 70,000 yuan shall be borne by the plaintiff in the original trial at 70%, amounting to 49,000 yuan, and by the defendant in the original trial at 30%, amounting to 21,000 yuan. 
This judgment is final. 
【Reasoning of the Ruling】 
In remanding the case for retrial, the second-instance court held that the central issue in this case is whether the original plaintiff (a certain company) had legitimate rights and interests, and whether the amount of compensation determined in the first instance was correct. 
1. Regarding whether the original plaintiff, a certain forging and pressing company, has legitimate rights and interests. 
As the county-level local people’s government responsible for organizing and implementing land acquisition, the defendant in the original trial—the district government—has a statutory duty to provide compensation for the expropriation of collectively owned land. The plaintiff in the original trial, a forging and pressing company, reached an agreement with the Dongbao Village Committee of Baitabao Town, Dongling District, Shenyang City, and paid a certain consideration in exchange for obtaining the right to use the land in question. The buildings constructed by the company in the eastern plant area fall within the scope of the demolition notice issued by the defendant district government. Due to the district government’s overstepping its authority in the scope of land acquisition, the forging and pressing company lost its right to use the land that was not included in the provincial government’s approval for land expropriation, and its buildings were subsequently demolished. Therefore, the forging and pressing company enjoys certain legitimate rights and interests with respect to the disputed property. 
2. Regarding the amount to be compensated. 
The second-instance court held that all the buildings involved in the litigation, owned by the company, had begun construction after October 2010—i.e., after the district government issued the demolition notice on July 1, 2010—and had been constructed without any approval procedures. The first-instance court’s decision to determine the compensation amount at only 50% of the assessed value, solely on the ground that the buildings were constructed on agricultural land without proper approvals, was improper. On the other hand, when the district government issued the demolition notice, it had not yet obtained the approval for land expropriation. Moreover, among the 16,046.93 square meters of land used by the company for forging and pressing, only 2,338.55 square meters were covered by the provincial government’s land-use approval dated December 31, 2013. Therefore, the second-instance court considered it more reasonable to award the company a certain compensation for the cost loss associated with the above-ground structures. Accordingly, the second-instance court determined that a compensation ratio of 30% would be appropriate. 
3. Regarding compensation for relocation expenses during the transition period. 
The second-instance court held that, according to the “Measures for Compensation of Demolition of Collective Land Houses and Structures on Such Land (Provisional)” issued by the district government on June 28, 2010, the Shenyang Municipal Government’s Order No. [2004]31, “Administrative Measures for Urban Housing Demolition in Shenyang City,” and the “Implementation Plan for Compensation Work in a Certain Region,” the transitional allowance is intended as a subsidy for enterprises undergoing property rights exchange during the transition period and is therefore not applicable to the present case. Moreover, the forging and pressing company did not submit sufficient evidence to prove that the buildings in question were being operated and used, thus failing to meet the conditions stipulated in Article 6 of the “Implementation Plan for Compensation Work in a Certain Region.” Consequently, the first-instance judgment awarding compensation for this loss lacked both factual and legal basis and should be reversed. 
4. Compensation for the relocation expenses of the East Factory Area. 
The second-instance court held that the existing evidence was insufficient to prove that the company had incurred “secondary compensation for equipment disassembly, assembly, commissioning, and transportation, as well as secondary transportation costs for products and goods.” Therefore, the first-instance judgment awarding compensation for this loss lacked both factual and legal basis and should be reversed. 
[Relevant Statutes] 
Article 2 of the Land Management Law of the People's Republic of China stipulates that, for the needs of public interest, the State may, in accordance with the law, expropriate or requisition land and provide compensation. 
Article 46 of the Land Management Law of the People's Republic of China: When the state acquires land, after approval according to the prescribed legal procedures, the local people's government at or above the county level shall issue a public notice and organize implementation. 
Article 47 of the Land Management Law of the People's Republic of China: Where land is requisitioned, compensation shall be provided according to the original intended use of the requisitioned land. 
Article 49 of the “Administrative Measures for Urban Housing Demolition in Shenyang City”: If non-residential buildings are demolished and property rights are exchanged, in addition to the compensation stipulated in Items 1, 2, and 3 of Article 48 of these Measures, the demolisher shall also bear the following expenses: 
(1) Employees of enterprises that have suspended production and operations due to demolition will receive a transitional subsidy. The subsidy rates are as follows: For commercial properties—such as shopping malls, stores, storefronts, and outlets—that are located along the street and directly used for business operations, the subsidy will be RMB 50 per square meter per month based on the building area of the demolished property. For non-commercial properties—including office buildings, warehouses, production plants, and garages—the subsidy will be RMB 25 per square meter per month based on the building area of the demolished property. For those utilizing land for production and business activities, the subsidy will be RMB 10 per square meter per month based on the land area. 
(2) Each year, a monetary compensation shall be provided equal to 20% of the enterprise’s total after-tax profits for the preceding two years. 
[Lawyer’s Perspective] 
In this case, the main arguments presented by the attorney representing the client are as follows: The buildings on the eastern factory site were hastily constructed after the district government issued a “Demolition Notice” in July 2010. Moreover, all buildings on the eastern factory site were erected without obtaining the necessary rural construction planning permits or going through the required procedures for converting agricultural land to non-agricultural use; thus, they constitute illegal structures. The company obtained the land for the eastern factory site without undergoing the legally prescribed approval procedures. Even if the district government had exceeded the approved land acquisition area, this act would be entirely separate and independent from the company’s unauthorized construction of illegal buildings. In other words, regardless of whether the district government exceeded the approved land acquisition area, it would not alter the fact that the buildings on the company’s eastern factory site are indeed illegal structures. Based on these facts, any losses incurred by Hengwei Company during the relocation process should be borne by the company itself, and it is entitled to no compensation whatsoever. 
The second-instance court upheld the appeal submitted by our firm’s lawyers, holding that the eastern plant area claimed by a certain company was constructed illegally. However, since the district government had not obtained approval for land expropriation when it issued the demolition notice, and only 2,338.55 square meters of the 16,046.93 square meters of land used by the company for forging and pressing were covered by the provincial government’s land-use approval dated December 31, 2013, the second-instance court ruled that the district government should provide the company with appropriate compensation for the cost losses incurred in constructing the above-ground buildings. Accordingly, the court determined to award compensation equivalent to 30% of the assessed value. The lawyers believe that the second-instance court’s ruling is consistent with judicial practice, reasonable and lawful, and duly balances the legitimate rights and interests of both the appellant—the district government—and the respondent—the company.