Property transferred before seizure: change of property rights leaves nothing to seize.
Compiled from: Juye Court, Shandong High Court
Case Review
The applicant for enforcement, Zhang Moumou, applied to this court for the enforcement of the mortgaged property of Company A. The court issued a seizure ruling on March 25, 2022, seizing six properties under Company A's name.
An outsider, Company B, raised an enforcement objection, requesting a halt to the enforcement of the involved properties and the lifting of the seizure measures. It argued that the involved properties subject to Zhang Moumou's enforcement application had already belonged to it before the seizure, and submitted an enforcement ruling issued by an Intermediate People's Court on February 25, 2019, which transferred the ownership of the involved properties to Company B to settle debts.
The Intermediate People's Court issued a "Notice of Assistance in Enforcement" on June 19, 2019, which was served to the Bureau of Natural Resources and Planning on the same day, requesting assistance in transferring the six properties, including those seized by this court, to Company B's name. Due to issues with Company A's property documents, the transfer has not yet been completed.
Based on Zhang Moumou's application, the court issued a seizure ruling on March 25, 2022, seizing the six properties under Company A's name.
On February 25, 2019, the Intermediate People's Court had already issued an enforcement ruling, which explicitly stated that the ownership of the involved real estate would transfer from the time the ruling was served to the outsider Company B, and the ruling date was earlier than this court's seizure date. It is evident that the implementation of the seizure occurred later than the effective date of the other case's legal document, and that other case's legal document was a ruling on debt settlement with property. Such enforcement rulings are adjudicative documents based on property rights, taking effect to produce changes in property rights. This means that the enforcement measures lagged behind the effective legal document for debt settlement with property from the other case. Once a document takes effect, it possesses enforceability and binding force, high authority, legal binding effect on the parties, and preclusive effect on subsequent litigation activities. Therefore, the outsider's enforcement objection in this case is valid.
The court ruled to suspend the enforcement of the involved properties.
Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Enforcement Objections and Reconsideration Cases by People's Courts
Article 26
In the enforcement of monetary claims, if a third party raises an objection to the enforcement based on an effective legal instrument rendered in another case prior to the sealing up, seizure, or freezing of the enforcement subject matter, the people's court shall handle the matter according to the following circumstances:
(1) If the legal instrument concerns a dispute over ownership between the third party and the judgment debtor, or a contractual dispute such as lease, loan for use, or custody that does not aim to transfer property ownership, and it adjudicates or rules that the enforcement subject matter belongs to the third party or shall be returned to the third party, and the third party's right can preclude enforcement, support shall be given;
(2) If the legal instrument concerns a creditor's rights dispute between the third party and the judgment debtor other than the contracts listed in the preceding paragraph, and it adjudicates or rules that the enforcement subject matter belongs to the third party or shall be delivered or returned to the third party, support shall not be given.
(3) If the legal instrument is a ruling confirming the transfer of the enforcement subject matter through auction, sale, or offsetting debts with property, and the third party's right can preclude enforcement, support shall be given.
Civil Procedure Law of the People's Republic of China
Article 238
During the execution process, if a person not involved in the case raises a written objection to the subject matter of execution, the people's court shall review it within fifteen days from the date of receiving the written objection. If the reasons are valid, it shall rule to suspend the execution of that subject matter; if the reasons are invalid, it shall rule to reject the objection. If the person not involved in the case or the parties are dissatisfied with the ruling and believe that the original judgment or ruling is erroneous, they shall proceed in accordance with the trial supervision procedure; if it is unrelated to the original judgment or ruling, they may file a lawsuit with the people's court within fifteen days from the date of service of the ruling.
[4] Author's Opinion
This case serves as a crucial warning to the public: if there is a ruling clearly stating that the ownership of the involved real estate has been transferred to a third party (i.e., not a party in the seizure case) before the court's seizure, then the property rights have already been transferred based on this effective ruling prior to the seizure. Additionally, property rights are absolute rights against the world, and the principle that property rights take precedence over creditor's rights is a fundamental tenet of civil law. In other words, Zhang Moumou originally sought to enforce the seizure of Company A's real estate, but if the property rights had already been transferred to a third party, Company B, before the seizure, then the seizure could not be executed on this property, as it was no longer related to Company A. Therefore, to prevent malicious property transfers, it is often recommended to apply for pre-litigation preservation to prevent the opposing party from transferring assets through opportunistic means.
