Liu v. Cheng A et al., a dispute over the invalidity of the contract
-- The debtor's spouse's malicious collusion with others to transfer the joint property of the husband and wife to evade debts shall be null and void
keyword
- civil
- Confirmation of the validity of the contract
- Contract for the sale and purchase of a house
- Non-debtor
- Co-ownership
- Liability Property
- Circumvention of enforcement
- Review of the validity of the contract
Basic facts of the case
Liu's appeal: 1. Confirm that the contract for the sale and purchase of stock housing in Beijing signed by Cheng A and Cheng B on August 28, 2019 is invalid, 2. Judgment that Cheng B assist in registering the transfer of the real estate involved in the case to Cheng A's name, and 3. The defendant shall bear the litigation costs. Facts and reasons: Cheng Jia and Zhu Jia are husband and wife. In April 2019, Liu sued Zhu Jia for a private loan dispute, and the effective judgment confirmed that Zhu Jia repaid Liu's principal of 9 172 22.8 yuan and paid interest. In the course of the litigation, Zhu Jia and Cheng Jia transferred the property jointly owned by the husband and wife to Cheng Yi in August 2019 (Cheng B did not pay any consideration), and divorced by agreement in January 2020, resulting in Liu's application to the people's court to enforce Zhu Jia's case that could not be enforced. According to Article 52 of the Contract Law of the People's Republic of China, a contract that maliciously colludes and harms the interests of the state, the collective or a third party is invalid. The malicious collusion between Cheng A and Cheng B harmed Liu's interests, and the contract should be invalid.
Cheng B and Cheng A argued: 1. Cheng B's house and Cheng A's house were interchangeable and belonged to a normal equivalent exchange. The subject of the sales contract and the signing procedure did not violate the mandatory provisions of the law, nor did it transfer without compensation, and the contract was legal and valid. 2. The real estate involved in the sales contract is all the personal premarital property of the defendant Cheng Jia. Although the resettlement housing contract was signed within the marriage between Cheng Jia and Zhu Jia, the demolition plan and compensation and resettlement plan had been determined before Cheng Jia's marriage, and the purchase price paid for the house later had nothing to do with Zhu Jia. Therefore, Liu did not enjoy the benefit of the lawsuit against Cheng A and Cheng B. 3. Liu had corresponding rights based on the private lending dispute between him and Zhu Jia. The debt owed by Zhu Jia to Liu was not a joint debt between Zhu Jia and Cheng Jia, and Liu had no interest in the sales contract between Cheng A and Cheng B. 4. In another case, Zhu Jia participated in the litigation as a third party, the defendants were Cheng A and Cheng B, and the basic facts asserted by Liu were completely consistent with this case, and the Shijingshan District People's Court had already made a judgment, so this case was a duplicate lawsuit, and the court was requested to reject the plaintiff Liu's lawsuit.
After trial, the court ascertained that Cheng A and Cheng B were sisters, Cheng A and Zhu Jia registered their marriage on December 26, 1994, and their divorce was registered on January 10, 2020, and they had a daughter Zhu Yi in marriage. In 1998, Cheng Jia purchased the house No. XX located in Shijingshan District, Beijing (hereinafter referred to as the "Disputed House"), and the Disputed House was registered in Cheng Jia's name.
On April 17, 2019, Liu sued Zhu Jia to the People's Court of Xixia County, Henan Province for a private loan dispute, requesting Zhu Jia to repay the loan. On September 10, 2020, the Xixia County People's Court rendered the (2019) Yu 1323 Min Chu No. 4735 Civil Judgment, ordering Zhu Jia to repay Liu's principal of 917 222.8 yuan and corresponding interest. Liu appealed against the judgment, and on January 7, 2021, the court of second instance upheld the original judgment.
On August 5, 2019, Cheng Yi and Zhu Yi, the daughter of Cheng A, signed a house sale contract, stipulating that the seller, Cheng Yi, would sell the house No. XX902 in Haidian District, Beijing (hereinafter referred to as the "902 house") under the seller's name to Zhu Yi at a price of 1 million yuan, and the buyer Zhu Yi should pay the house price to the seller before August 7, 2019. On the day the contract was signed, the transfer of ownership of the 902 house was registered in Zhu Yi's name.
On August 28, 2019, the buyer Cheng B and the seller Cheng A entered into a house sale contract, stipulating that Cheng A would sell the disputed house to Cheng B at a price of RMB 500,000, and that the buyer Cheng B should pay the purchase price to the seller before August 30, 2019. On August 29, 2019, the transfer of ownership of the disputed house was registered in the name of Cheng Yi.
On January 10, 2020, Cheng Jia and Zhu Jia signed a divorce agreement, stipulating that due to various factors, the relationship between the husband and wife broke down, and there was no possibility of reconciliation: 1. The man and woman divorced voluntarily; 2. The husband and wife do not have real estate; 3. The two parties have no claims and debts.
On December 7, 2021, the Beijing Shijingshan District People's Court rendered the (2021) Jing 0107 Min Chu No. 1818 Civil Judgment, which found that the house at issue in this case was the joint property of Cheng A and Zhu Jia, and the judgment had taken effect.
Liu filed a lawsuit to confirm the invalidity of the house sale contract signed by Cheng A and Cheng B on the grounds that Cheng A and Cheng B maliciously colluded to harm their legitimate rights and interests, and requested that the transfer of ownership of the disputed house be registered in Cheng A's name. During the trial of the case, Mr. Liu applied for property preservation of the disputed house. During the trial, Cheng A and Cheng B stated that the two parties had exchanged their respective houses for equivalent value, so Zhu B did not pay the purchase price to Cheng B, and Cheng B did not pay the purchase price to Cheng A, and the transaction was true and valid.
On August 22, 2022, the Beijing Shijingshan District People's Court rendered the (2022) Jing 0107 Min Chu No. 4822 Civil Judgment: 1. Confirm that the Beijing stock housing sales contract signed by Cheng A and Cheng B on August 28, 2019 is invalid; 2. Within 15 days from the effective date of the judgment, Cheng B shall restore the registration of the ownership of the disputed house to Cheng A's name. After the judgment was pronounced, Cheng A and Cheng B appealed on the grounds that there was no legal relationship between them and Liu, and that the house involved in the case was Cheng A's personal property and not the joint property of the husband and wife with Zhu Jia. On November 21, 2022, the Beijing No. 1 Intermediate People's Court rendered the (2022) Jing 01 Min Zhong No. 8867 Civil Judgment: rejecting the appeal and upholding the original judgment.
Reasons for the Adjudication
The effective judgment of the court held that a contract that maliciously colludes and harms the interests of the state, the collective or a third party is invalid. In this case, after the People's Court of Xixia County, Henan Province made the first first-instance judgment on the private lending dispute between Liu and Zhu Jia, Cheng A signed a house sale contract with Cheng B and immediately carried out the transfer of ownership of the house, and Cheng B did not pay Cheng A the purchase price from beginning to end. Although Cheng A and Cheng B asserted that the two parties had exchanged houses in the name of house sales, the 902 house in Cheng B's name was not registered in Cheng A's name, but the disputed house in Cheng A's name was registered in Cheng B's name. In addition, there are many contradictions in Cheng Jia's statements in the separate litigation and in the first and second instance of this case as to the reason why the 902 house under Cheng Yi's name was registered under the name of Cheng A's daughter Zhu Yi. For example, in another lawsuit, Cheng Jia claimed that because he did not have the qualifications to buy a house, he registered the 902 house in Zhu Yi's name; In the first instance of this case, Cheng Jia stated that he could not register in Cheng Jia's name due to Beijing's purchase restriction policy; In the second instance of this case, Cheng A asserted that he registered the 902 house under Zhu Yi's name out of tax avoidance considerations. Cheng Jia failed to provide a reasonable explanation for the aforesaid contradictory statements. The house at issue is the joint property of Zhu Jia and Cheng Jia, which has been confirmed by the effective judgment. Cheng Jia, knowing that Zhu Jia had not paid off Liu's arrears so far, signed a house sale contract with his sister Cheng B during the existence of his husband and wife relationship with Zhu Jia, and transferred and registered the house jointly owned by Cheng A and Zhu Jia to Cheng B's name, so that Zhu Jia's liability property was directly derogated and Liu's creditor's rights were difficult to repay. Therefore, Cheng A and Cheng B constituted malicious collusion and infringed upon Liu's legitimate rights, and the house sale contract signed by the two parties in respect of the disputed house was invalid, and the ownership of the disputed house should be restored to the name of Cheng A.
Summary of the trial
To determine whether the housing sales contract signed by the non-debtor and the counterparty is malicious collusion to harm the legitimate rights and interests of the creditor, it is necessary to make a substantive judgment based on the special identity relationship between the debtor and the parties to the contract, the transaction price and payment, the time of transfer, whether the debtor has rights to the subject house, and whether the creditor's liability property is reduced. If the housing transaction of the parties conforms to the formal characteristics of the housing transaction, but substantially derogates from the debtor's liability property and causes the risk of non-repayment of the creditor's rights of others, and the debtor cannot provide sufficient and effective performance guarantees, it shall be deemed to be an act of debt evasion in malicious collusion, and the transfer shall be invalid.
Associate indexes
Articles 154 and 157 of the People's Republic of China Civil Code (Articles 52 and 58 of the People's Republic of China Contract Law, which came into force on October 1, 1999, are applicable in this case)
First instance: Beijing Shijingshan District People's Court (2022) Jing 0107 Min Chu No. 4822 Civil Judgment (August 22, 2022)
Second instance: Beijing No. 1 Intermediate People's Court (2022) Jing 01 Min Zhong No. 8867 Civil Judgment (November 21, 2022)