[Title] Case of Dispute over A Company’s Claim That the People’s Government of B District Fails to Fulfill Its Obligation to Provide Compensation for Expropriation

[Keywords] Administrative/Performing duties related to expropriation compensation

【Key Points of the Ruling】 According to the clearly stipulated implementation plan for this demolition project, enterprises holding certificates for the use of village collective land shall receive compensation for the land they use based on the compensation standards applicable to requisitioned agricultural land. Article 9 of the “Demolition Compensation Agreement” signed between Company A and the demolition authority explicitly states that the total compensation amount specified in the agreement does not include land compensation. Moreover, Article 12 provides that if there are matters not covered by the agreement, the parties may enter into supplementary compensation clauses. During the first-instance proceedings, the B District Government failed to submit within the prescribed time limit the relevant evidence demonstrating that it had already paid the compensation for the land in question to the village committee. Although the B District Government submitted three bank deposit slips and receipts for receipt of funds in the second-instance proceedings, these documents alone were insufficient to prove that the compensation for the land in question had been paid to the village committee. Meanwhile, the “Interrogation Record” provided by Company A confirmed that the compensation for the land in question had not been paid to the village committee. According to the terms of the 1999 agreement, Company A was authorized to receive the compensation for the use rights of the collective construction land in question. In this case, both Company A and Company C, which falls within the same demolition scope, obtained their rights to use collective construction land through agreements signed with the village collective economic organization. Company C has already received compensation for its rights to use collective construction land in accordance with the demolition implementation plan. Treating the parties equally is a fundamental principle of lawful administration. If an administrative agency fails to treat the parties equally, thereby causing excessive harm to their interests, such conduct constitutes an abuse of administrative discretion. Therefore, Company A is entitled to receive the compensation for the use rights of the collective construction land in question, and its request that the B District Government be ordered to pay the compensation is well-founded.

[Basic Facts of the Case] In 1999, Company A signed a “Real Estate Transaction and Land Use Rights Agreement” with the village’s collective economic organization. The agreement stipulated that, following deliberations and decisions by the village Party branch and the village committee, the permanent use rights to the buildings and land belonging to the village’s industrial enterprise would be sold to Company A; however, the land itself remained collectively owned by the village. The village’s collective economic organization guaranteed Company A’s perpetual right to use the site. Should the state requisition the land in the future, any compensation for structures on the land would go to Company A, and whoever developed or occupied Company A’s site would be responsible for finding alternative premises for Company A. Company A paid the transfer price to the village’s collective economic organization, thereby acquiring the use rights to the disputed collectively-owned construction land and obtaining the “Certificate of Collective Construction Land Use Rights” in December 2000. In 2010, the area was subject to demolition. In February 2011, Company A signed a “Demolition Compensation Agreement” with the demolition authority regarding the buildings and equipment on the site. The agreement explicitly stated that the total compensation amount specified in the demolition compensation agreement did not include compensation for the land itself, and that any matters not covered by the agreement could be addressed through supplementary compensation clauses agreed upon by both parties. Subsequently, although Company A repeatedly requested the demolition authority and the B District Government to pay compensation for the land, it received no compensation whatsoever. Consequently, Company A filed a lawsuit in court, requesting the court to order the B District Government and the demolition authority to pay Company A compensation for its collective construction land use rights, together with interest.

【Judgment Result】 First-instance judgment: 1. Within fifteen days after this judgment takes effect, the B District Government shall fulfill its obligation to pay A Company compensation for the use rights of collectively-owned construction land in the amount of 1,842,836.80 yuan; 2. Within fifteen days after this judgment becomes legally effective, the B District Government shall pay A Company interest on the compensation for the use rights of collectively-owned construction land in the amount of 1,842,836.80 yuan (calculated at the prevailing bank deposit interest rate for the same period, from February 17, 2011, until the date of actual payment); 3. A Company’s other claims are dismissed. Second-instance judgment: The appeal is dismissed, and the original judgment is upheld.

【Reasoning of the Ruling】 In this case, Company A obtained the right to use the collective construction land in question pursuant to the “Real Estate Transaction and Land Use Right Agreement” it signed with the collective economic organization. In December 2000, Company A acquired the “Certificate of Use for Collectively-Owned Construction Land.” The land in question falls entirely within the demolition zone designated in the “Demolition Notice.” The implementation plan for the demolition prepared by the demolition authority explicitly stipulates that enterprises holding certificates of use for village collective land shall receive compensation for their houses according to the valuation standards set by the appraisal agency, while the land used by these enterprises shall be compensated at the standard applicable to expropriated agricultural land. Although the B District Government claimed that this regulation was not actually implemented, it failed to provide any valid evidence to substantiate this claim and also failed to offer a reasonable explanation for the basis on which Company C’s right to use the collective construction land was compensated. Therefore, this court does not uphold the District Government’s argument. Article 9 of the “Demolition Compensation Agreement” signed between Company A and the demolition authority in February 2011 expressly states that the total compensation amount specified in the agreement does not include compensation for the land itself. Moreover, Article 12 provides that if there are matters not covered by the agreement, the parties may enter into supplementary compensation clauses. During the first-instance trial, the court had requested the B District Government to submit, within five days after the hearing, evidence regarding whether the compensation funds for the land in question had been paid to the village committee. The court also informed the District Government that failure to provide such evidence within the prescribed time frame would result in adverse consequences. However, the B District Government failed to submit the required evidence within the stipulated period and only provided three sets of bank deposit slips and receipt documents to this court during the second-instance proceedings. Yet, these pieces of evidence are insufficient to prove that the compensation funds for the land in question had indeed been paid to the village committee. Furthermore, the “Interrogation Records” additionally submitted by Company A to this court reveal that both the village secretary and the former accountant of the village committee confirmed that the compensation funds for the land in question had not been paid to the village committee. According to the agreement reached in 1999, Company A was authorized to receive the compensation funds for the right to use the collective construction land in question. Based on these facts, Company A is entitled to receive the compensation funds for its right to use the collective construction land, and its request that the B District Government pay such compensation is well-founded.

Treating all parties equally is a fundamental principle of administrative governance based on the rule of law. The principle of equal treatment requires that administrative agencies treat parties with the same legal status in the same way, without showing favoritism or discrimination based on individual differences. If an administrative agency fails to treat parties equally, thereby causing excessive harm to their interests, it constitutes an abuse of administrative discretion. In this case, both Company A and Company C, which falls within the same demolition area, obtained the right to use collectively-owned construction land by signing agreements with the village collective economic organization. Company C has already obtained the right to use such land pursuant to the demolition implementation plan. Although Company A’s agreement was neither approved by the District Economic System Reform Committee nor notarized by a notary office, these procedural differences do not affect Company A’s right—just like Company C’s—to receive compensation for the right to use collectively-owned construction land. Since the “Demolition Compensation Agreement” signed between Company C and the Demolition Office stipulates that the compensation standard for the right to use collectively-owned construction land, as determined through assessment, is 296 yuan per square meter, and given that the collectively-owned construction land used by Company A is adjacent to that used by Company C, the first-instance court’s decision to set the compensation amount for Company A’s right to use collectively-owned construction land at the same rate of 296 yuan per square meter was entirely appropriate. The delay in Company A’s receipt of the aforementioned compensation was caused by the B District Government’s unjustified refusal to make payment; therefore, Company A’s claim for overdue interest from the B District Government should be upheld.

Article 46, Paragraph 1 of the Land Management Law stipulates that when the State acquires land, after obtaining approval in accordance with the prescribed legal procedures, the local people's government at or above the county level shall issue a public notice and organize the implementation. In this case, the demolition and relocation implementation plan was approved by the B District Government. Therefore, the court of first instance correctly held that the B District Government was the entity responsible for the acquisition and compensation of the collective land involved, while the Management Committee and the Relocation Office were merely the specific implementing agencies. This conclusion is supported by both factual evidence and legal grounds and is entirely appropriate.

Article 47, Paragraph 1 of the Administrative Litigation Law of the People’s Republic of China and Article 66 of the Supreme People’s Court’s Interpretation on the Application of the Administrative Litigation Law of the People’s Republic of China stipulate the method for calculating the statute of limitations for filing a lawsuit in cases where an administrative agency is required to perform its statutory duties upon application. However, in this case, the compensation and requisition duties that Company A requested the B District Government to fulfill constitute statutory duties that the administrative agency is obligated to perform ex officio; therefore, these duties are not subject to the aforementioned statute of limitations.

【Relevant Statutes】 Article 47, Article 69, and Article 73 of the Administrative Litigation Law of the People’s Republic of China; Article 46, Paragraph 1 of the Land Management Law.

[Lawyer’s Perspective] This is a case involving a dispute over compensation for the use rights of collectively-owned construction land in rural areas. Article 48 of the Land Management Law stipulates that compensation for the expropriation of collectively-owned land includes land compensation fees, resettlement subsidies, and compensation for structures and young crops on the land; however, it does not provide explicit provisions regarding compensation for the use rights of collectively-owned construction land. Minutes of the Symposium on Civil Adjudication Work of the Liaoning Provincial Higher People's Court [Liao Gao Fa (2009) No. 120]: “I. Real Estate Section 3: On Compensation for the Expropriation of Rural Collective Construction Land Use Rights—When rural collective construction land is expropriated, the land use rights of those who hold such rights but are not the land owners shall, in accordance with law, be entitled to appropriate economic compensation.” It is explicitly stipulated that the land use rights of those holding rural collective construction land use rights who are not the land owners shall, in accordance with law, be entitled to appropriate economic compensation. However, in actual administrative adjudication practice in Liaoning Province, there currently remains no case law addressing compensation for rural collective construction land use rights during the expropriation process. In this case, in addition to the issue of whether Company A’s rural collective construction land use rights should be compensated, numerous other issues are also involved, including the statute of limitations for filing a lawsuit and the determination of the proper litigant.

    Regarding the question of whether Company A should be compensated for its collective construction land use rights, courts at both levels argued from four perspectives, clarifying that Company A is entitled to compensation for its collective construction land use rights. First, The implementation plan for demolition prepared by the demolition authority explicitly stipulates that enterprises holding certificates of collective land use rights shall receive compensation for the land they use according to the compensation standards applicable to requisitioned agricultural land. In this case, Company A has already obtained a “Certificate of Collective Land Use for Construction Purposes,” and all the land involved is within the demolition area designated in the “Demolition Notice.” Therefore, according to the implementation plan, Company A is entitled to compensation. Second, Article 9 of the “Demolition Compensation Agreement” signed between Company A and the demolition authority clearly states that the total compensation amount specified in the agreement does not include land compensation. Moreover, Article 12 provides that if there are matters not covered by the agreement, the parties may enter into supplementary compensation clauses. This provision demonstrates that both parties were aware that the original demolition compensation agreement did not include land compensation. Third, the B government has failed to provide evidence proving that it has paid the compensation for the land in question to the village committee. However, the “Interrogation Records” submitted by Company A to the court show that both the village secretary and the former accountant of the village committee confirmed that the compensation for the land in question had not been paid to the village committee. According to the 1999 agreement, it was agreed that Company A could receive the compensation for the use rights of the collective construction land in question. This fact clearly indicates that the B government has failed to fulfill its obligation to pay the compensation for the collective land to the village committee, and the village committee itself acknowledged that Company A should receive the compensation for the use rights of the collective construction land as stipulated in the agreement. Fourth, both Company A and Company C, which is located within the same demolition area, obtained the use rights of collective construction land by signing agreements with the village’s collective economic organization. Company C has already obtained the use rights of collective construction land in accordance with the demolition implementation plan. Equal treatment of the parties is a fundamental principle of administrative governance based on law, and Company A is entitled to receive the land compensation.

Regarding the issue of compensation standards for the use rights of collectively-owned construction land, since the “Demolition Compensation Agreement” signed between Company C and the Demolition Office stipulates that the compensation standard for the use rights of collectively-owned construction land, as determined through appraisal, is 296 yuan per square meter, and given that the collectively-owned construction land used by Company A in this case is adjacent to the collectively-owned construction land owned by Company C, the court has accordingly determined, at its discretion, to compensate Company A for its use rights in the collectively-owned construction land based on the compensation standard of 296 yuan per square meter.

With regard to the issue of interest, Company A’s delay in obtaining the aforementioned compensation payment was caused by the B District Government’s unjustified refusal to make the payment. Therefore, its claim for overdue interest from the B District Government should be upheld.

Regarding the issue of the defendant’s legal status, according to Article 46, Paragraph 1 of the Land Management Law, when the state acquires land, after obtaining approval through the prescribed legal procedures, the local people’s government at or above the county level shall issue a public notice and organize the implementation. In this case, the demolition implementation plan was approved by the B District Government. The court held that the Management Committee and the Demolition Office are merely the specific implementing agencies, while the B District Government is the entity responsible for the acquisition and compensation of the collective land involved in this case.

Regarding the issue of the statute of limitations for filing a lawsuit, although the legal provisions specify how the statute of limitations should be calculated in cases where administrative agencies are required to perform their statutory duties upon application, in this case, the compensation and expropriation duty that Company A requested the B District Government to fulfill is a statutory duty that the administrative agency is obligated to perform on its own initiative. Therefore, this duty is not subject to the aforementioned statute of limitations.

In the course of representing this case, the attorney-in-charge started with the evidence, independently collected a large amount of evidence, and requested the court to obtain additional evidence. Thanks to the thoroughness of the evidence and the soundness of the arguments, the attorney’s position was upheld by the court.