Adjudication Rules on Third-Party Revocation Actions (1)

Adjudication Rules on Third-Party Revocation Actions (1)

01. Analysis of the constituent elements of a third-party revocation lawsuit

【Viewpoint Analysis】:

The purpose of revoking or changing an effective judgment that is truly erroneous is to remedy or modify the legitimate rights and interests of the third party who failed to participate in the litigation. Pursuant to paragraph 3 of Article 56 of the Civil Procedure Law, a third-party revocation lawsuit must meet the requirements of subject, procedure, time, jurisdiction, substance and result. The first four elements are usually reviewed at the prosecution and acceptance stage, and after entering the trial procedure, the people's court needs to focus on the substantive and outcome elements.

[Source of opinion]: The First Division of the Civil Trial of the Supreme People's Court, "Civil Trial Guidance and Reference", Vol. 64

02. Guiding Case No. 148: Gao v. Sanya Tiantong Hotel International Co., Ltd., Hainan Bochao Real Estate Development Co., Ltd., and other third parties withdrew the lawsuit

[Summary of the trial]:

Where a shareholder of a company does not have a direct interest in the effective judgment of a civil lawsuit between a legal person and another person, and does not meet the requirements for a third party as provided for in Article 56 of the Civil Procedure Law, and initiates a lawsuit for revocation by a third party in his capacity as a shareholder, the people's court shall not accept it.

The Supreme People's Court held that this case was a third-party revocation lawsuit filed by Gao against the effective Hainan Provincial High People's Court's (2012) Qiong Min Yi Chu Zi No. 3 Civil Judgment. The function of the third-party revocation lawsuit system is mainly to protect the legitimate rights and interests of third parties who have not participated in the original lawsuit who have been damaged by an erroneous effective judgment. In the case of a failure of the third party to participate in the original litigation due to reasons other than the third party's own failure to participate in the original litigation, resulting in an erroneous judgment being rendered by the people's court, the law grants the third party who should have participated in the original litigation the right to revoke the original effective judgment by means of a separate lawsuit. Therefore, the subject of the third-party revocation lawsuit must meet the status conditions that should have participated in the original lawsuit as a third party. In this case, Gao did not meet the conditions to participate in the litigation as a third party.

(1) Gao did not have an independent claim for the subject matter of the (2012) Qiong Min Yi Chu Zi No. 3 Civil Judgment case, and was not a third party with an independent claim in the case. A third party with the right to make an independent claim refers to a subject that has the right to make a claim as an independent entity rights holder for the subject matter of the litigation dispute between the parties. In the (2012) Qiong Min Yi Chu Zi No. 3 Civil Judgment case, Tiantong Company filed various litigation claims based on the Agreement signed between Tiantong Company and Bochao Company, and the Hainan Provincial High People's Court heard and rendered a judgment based on the Agreement Agreement. Gao is only one of the shareholders of Bochao Company and is not a party to the agreement, and he has no right to make a claim based on the agreement.

(2) Gao is not a third party who does not have the right to make an independent claim in the (2012) Qiong Min Yi Chu Zi No. 3 Civil Judgment case. A third party without an independent right to make a claim refers to an entity that has a legal interest in the outcome of the case, although it does not have an independent right to claim the subject matter of the litigation between the parties. The legal interest of a third party in the outcome of the case may be direct or indirect. In this case, the (2012) Qiong Min Yi Chu Zi No. 3 Civil Judgment only confirmed the legal obligations that Bochao Company should bear, and did not rule that Gao should bear civil liability, so Gao had no direct interest in the outcome of the (2012) Qiong Min Yi Chu Zi No. 3 Civil Judgment.

※ Regarding the question of whether there is an indirect interest

Generally speaking, there is a natural community of interests between shareholders and the company. The shareholders of the company have the right to income from the company's property, and the results of the company's foreign trading activities and civil lawsuits will generally affect the company's assets, thereby indirectly affecting the shareholders' right to income. From this point of view, the outcome of the civil lawsuit between the shareholder and the company has a legal indirect interest. However, since the interests of the company and the interests of shareholders are consistent, the company's external activities should be presumed to be the embodiment of the overall will of the shareholders, and the company's claims in litigation activities should also be deemed to represent the overall interests of the shareholders. Therefore, although the outcome of the corporate litigation will indirectly affect the interests of the shareholders, if the interests and opinions of the shareholders have already been represented and expressed by the company in the course of the litigation, the shareholders should not be added as a third party to participate in the litigation. In this case, although Gao is a shareholder of Bochao Company, in the litigation activities between Bochao Company and South Coast Company, Tianshi Company and Tiantong Company, the opinions of the shareholders have been represented by Bochao Company, so Gao, as a shareholder, should no longer participate in the litigation of the case as a third party without independent claim. As for the conflict of interest caused by the differences between different shareholders, it should be handled separately between shareholders and shareholders and between shareholders and the company in accordance with the law.

Case Number: :(2015) Qiong Min Yi Chu Zi No. 43 (2017) Gao Gao Fa Min Zhong No. 63

03. Communiqué case: Huang Mouna v. Haikou Dongliang Industrial Co., Ltd. and Guangdong Yangjiang Jian'an Group Co., Ltd. Hainan Branch Commercial Housing Sales Contract Dispute

[Summary of the trial]:

I. The registered owner of the immovable property in dispute in the case has a legal interest in the outcome of the case and may be the third party in the case.

II. Where the major shareholder of a party transfers the subject matter of the dispute in the course of the litigation of the case, but does not participate in the litigation as a third party, and files a lawsuit for revocation by a third party after the judgment of the case takes effect, the court presumes that it is aware of the circumstances of the case and does not participate in the litigation for reasons not attributable to him, which is in line with common sense and trading practice. The lawsuit filed by the above-mentioned major shareholder for revocation by a third party does not meet the requirements for filing a lawsuit and should be ruled inadmissible.

The Supreme People's Court held that: the first issue in this case is whether Huang Mouna can be the third party in the case of Yangjiang Company v. Dongliang Company over a construction contract dispute; The second is whether Huang Mouna's failure to participate in the aforementioned lawsuit can be attributed to herself.

On the issue of whether Huang Mouna can be the third party in the construction contract dispute between Yangjiang Company and Dongliang Company, according to Article 56 of the Civil Procedure Law of the People's Republic of China, the third party in civil litigation includes a person who has an independent right to claim the subject matter of the case, and a person who does not have such a right of claim but has a legal interest in the outcome of the case. In the case of Yangjiang Company v. Dongliang Company, the Intermediate People's Court of Haikou City, Hainan Province, in the second instance of the (2014) Qionghuan Min Zhong Zi No. 7 Civil Judgment, ruled that Dongliang Company should hand over 334 square meters of the first floor of Huayuan Building to Yangjiang Company and assist in the transfer procedures. In this case, Huang Mouna claimed that she had purchased the first floor of Huayuan Building of 1320m from Dongliang Company and went through the transfer procedures. Therefore, the final judgment of the above-mentioned Yangjiang Company v. Dongliang Company affected Huang Mouna's rights to the Xing real estate, and it should be the first in this case

On the issue of whether Huang Mouna's failure to participate in the aforementioned litigation can be attributed to her. According to the facts ascertained in the (2014) Qionghuan Min Zhong Zi No. 7 Civil Judgment and the content of Huang Mouna's lawsuit in this case, she and Dongliang Company signed a sales contract for the house involved in the case in the course of the public prosecution of Yangjiang Company v. Dongliang Company, and Huang Mouna was a shareholder holding 50% of the shares of Dongliang Company at that time. Knowing the outcome of the above-mentioned second-instance judgment is better knowing what the conditions are different for the entire litigation process of the case. The court of first instance in this case, based on Huang Mouna's identity as a shareholder, the shareholding ratio at that time, and the relationship between the signing of the housing sales contract involved in the case and the time of filing the lawsuit in the previous case, presumed that Huang Mouna was aware of the previous case, which was in line with common sense and the general business decision-making practice of the enterprise, and the court of first instance ruled that Huang Mouna should have known about the litigation of the previous case, and that she could not prove that she did not participate in the litigation of the case for reasons that could not be attributed to her, so the principal rate lawsuit filed by her did not meet the requirements of Article 56 of the Civil Procedure Law of the People's Republic of China on the acceptance of a lawsuit for revocation by a third party.

Case No.: :(2015) Min Yi Zhong Zi No. 37

[Case source]: Gazette of the Supreme People's Court, Issue 09, 2016

04. Determination of the qualification of the plaintiff in the lawsuit for revocation by a third party - a lawsuit revoked by a third party between Liu and China Railway Fifth Bureau Group Construction Engineering Co., Ltd. and Tongren Shengshi Mingcheng Real Estate Development Co., Ltd

[Summary of the trial]:

The effective judgment of the prior construction contract dispute held that the contractor had the priority right to be compensated for the construction project price of the commercial housing involved in the case. In the third-party revocation lawsuit filed against the effective judgment, the plaintiff, as the creditor, entered into a contract for the sale and purchase of the commercial housing involved in the case with the employer (developer) as the debtor as a guarantee for the loan, and registered the pre-sale contract of the commercial housing. The plaintiff has the right to choose to dispose of the commercial housing involved in the case when the developer fails to repay the loan within the time limit. Later, the plaintiff applied for compulsory enforcement, and the people's court sealed the commercial housing involved in the case before the effective judgment was rendered. In this case, it should be determined that the plaintiff is a third party as provided for in article 56 of the Civil Procedure Law, and has the subject standing to file a third-party revocation lawsuit against the effective judgment.

After trial, the Supreme People's Court held that in this case, Liu, as a creditor of Shengshi Mingcheng Real Estate Development Company, signed a commercial housing sales contract with Shengshi Mingcheng Real Estate Development Company for the 78 houses involved in the case as a guarantee for the private loan contract. The commercial housing sales contracts of the 78 houses involved in the case have been registered and filed as commercial housing pre-sale contracts. Liu has the right to choose to dispose of the house involved in the case on his own. The Guiyang Intermediate People's Court issued a notice of assistance in enforcement and sealed 78 houses involved in the case. According to Article 24 of the Provisions on Private Lending Cases (amended in August 2020), if a party concludes a sales contract as a guarantee for a private lending contract, and the borrower fails to repay the loan after the loan expires, and the lender requests performance of the sales contract, the people's court shall hear the case in accordance with the legal relationship of private lending. If the borrower fails to perform the monetary debts determined by the effective judgment after the judgment rendered in accordance with the legal relationship of private lending takes effect, the lender may apply for an auction of the subject matter of the sales contract to repay the debts. Therefore, Liu could apply for the auction of the 78 houses involved in the case to realize the creditor's rights, and the Guiyang Intermediate People's Court also sealed the 78 houses involved in the case in December 2018 before the judgment of the original case was rendered. Item 3 of the original judgment, namely that China Railway Fifth Bureau has the priority right to be compensated for the construction project price within the scope of the project price of 70,302,509 yuan, the construction project includes 78 houses involved in the case, and has a legal interest in Liu. Mr. Liu is a third party as provided for in Article 56 of the Civil Procedure Law, and has the standing to file a lawsuit for revocation by a third party. Comprehensively considering the relevant factors of this case, the original judgment should make a final determination on the time of payment and whether the priority right to compensation is established in the trial stage based on the specific circumstances of the case. Therefore, the court revoked the first-instance ruling and ordered the Guizhou Provincial High People's Court to hear the case.

Case Number: :(2021) Supreme Law Min Zhong No. 353

05. There are four conditions for filing a lawsuit for revocation by a third party

[Summary of the trial]:

According to Article 59 of the Civil Procedure Law of the People's Republic of China and <中华人民共和国民事诉讼法>Article 290 of the Interpretation of the Supreme People's Court on Application, the following conditions shall be met at the same time for initiating a lawsuit for revocation by a third party:

I. The main elements, that is, "the third party believes that the third party has an independent right to make a claim on the subject matter of the litigation between the parties" and "although the third party does not have an independent claim on the subject matter of the litigation between the parties, he has a legal interest in the outcome of the case".

II. Procedural elements, i.e., the third party does not participate in the litigation for reasons that cannot be attributed to him/her.

III. Substantive elements, that is, there is evidence to prove that part or all of the contents of the legally effective judgment, ruling, or mediation document are wrong, harming the civil rights and interests of third parties.

IV. Time element, that is, the third party files a lawsuit for revocation by a third party within six months from the date on which it knows or should know that its civil rights and interests have been harmed.

Case Number: :(2022) Supreme Law Min Zhong No. 229

06. In the event of a conflict between the exclusive jurisdiction of a third-party revocation lawsuit and the exclusive jurisdiction of a bankruptcy debtor's civil case, the jurisdiction provisions of the third-party revocation lawsuit shall apply.

[Rule Description]:

The exclusive jurisdiction of a lawsuit for revocation by a third party refers to the special litigation jurisdiction provided for in paragraph 3 of Article 59 of the Civil Procedure Law (2021 Amendment), that is, if a third party does not participate in the original litigation due to reasons that cannot be attributed to him/her, but there is evidence to prove that part or all of the contents of the legally effective judgment, ruling, or mediation document are wrong, and his or her civil rights and interests are harmed, he or she may, within 6 months from the date on which he knows or should know that his or her civil rights and interests have been harmed, file a lawsuit with the people's court that made the judgment, ruling, or mediation document.

Exclusive jurisdiction over civil cases of bankruptcy debtors refers to the special litigation jurisdiction provided for in Article 21 of the Enterprise Bankruptcy Law, that is, after the debtor's bankruptcy application is accepted by the people's court, a civil lawsuit concerning the debtor can only be filed with the people's court that accepts the bankruptcy application. In order to maintain the authority of the people's court's adjudication power that makes effective judgments, rulings and mediation documents, when there is a conflict between the exclusive jurisdiction of a third-party revocation lawsuit and the exclusive jurisdiction of a bankruptcy debtor's civil case, the jurisdiction provisions of the third-party revocation lawsuit shall apply. A lawsuit for revocation by a third party initiated by a bankrupt debtor shall be filed with the people's court that made the judgment, ruling or mediation document in accordance with the provisions on the exclusive jurisdiction of the lawsuit for revocation by a third party, and shall not be filed with the people's court that accepts the bankruptcy application in accordance with the provisions on exclusive jurisdiction of civil cases involving the bankruptcy debtor.

Source of opinion: Wang Yuying, editor-in-chief, Rules for the Adjudication of Third-Party Revocation Cases, Law Press.

Transferred from the same judgment rule for similar cases