[1] Wrongly remitted payment frozen in account, execution objection is not the correct solution
Compiled from: Shandong High Court, China Court Network
A consulting company, due to an operational error by its staff, transferred 911,000 yuan in payment for goods to an information company’s account. However, at that time, the information company’s receiving account had already been frozen by a court, making it impossible to return the payment. The consulting company learned that the account had been subject to a litigation preservation application because the information company owed a loan to a certain group company. Subsequently, the consulting company raised an objection to the litigation preservation, but it was rejected, so it filed a lawsuit as an outsider to the enforcement proceedings. After trial, the Beijing Haidian District People’s Court ruled not to support the consulting company’s claims.
Case Review
The plaintiff, the consulting company, alleged that in April 2022, when the court was hearing a loan contract dispute between the group company and the information company, it issued a property preservation ruling freezing the deposits in the bank account involved in the case under the information company’s name. In July 2022, the consulting company mistakenly transferred funds into the frozen bank account of the information company, and subsequently in August submitted a written objection to the subject matter of the enforcement preservation. In October 2022, the court issued a ruling on the enforcement objection, dismissing the objection.
Regarding the mistaken payment, the consulting company stated that in April 2022, it signed a Product Supply Contract with a certain digital company, under which the consulting company was the buyer. The payment method was that the consulting company would first pay 10% of the total contract price as an advance payment, and within 90 days from the date the manufacturer shipped the goods, pay 90% of the total contract price, i.e., RMB 911,000, to the digital company. In July 2022, after receiving the goods, the consulting company intended to pay the remaining contract balance of RMB 911,000 to the digital company by bank transfer. Due to an operational error, the funds were mistakenly transferred to the bank account of the information company involved in this case.
When the consulting company made the remittance, the bank account under the information company’s name had already been preserved, seized, and frozen by the court. In addition, the information company’s bank deposits were insufficient to cover the amount involved in the preservation ruling. As a result, the information company was unable to refund the RMB 911,000 that the consulting company had mistakenly remitted. The consulting company filed the following claims with the court: 1. The frozen RMB 911,000 that the plaintiff consulting company mistakenly remitted into the bank account of the third party information company shall not be subject to enforcement; 2. It shall be confirmed that the owner of the RMB 911,000 mistakenly remitted into the bank account of the third party information company is the plaintiff consulting company; 3. The plaintiff consulting company shall be adjudged to have the right to apply to the court for enforcement of the aforesaid funds and for their return.
The defendant group company argued that the consulting company holds a claim for unjust enrichment against the information company, which cannot preclude freezing and enforcement. Currency, as a special type of movable property, has the effect of fund delivery upon transfer, and the civil rights arising from the lawful transfer of currency belong to the account holder, i.e., the information company. The right to claim unjust enrichment does not have priority over other ordinary monetary claims and cannot preclude enforcement, requesting the court to dismiss the consulting company's claim.
The third party, the information company, stated that the consulting company claimed a payment error, and the information company verified receipt of the funds. Due to the group company's application to freeze the information company's account, the account usage was restricted, preventing a refund. The information company believes the funds entered after the freeze, and it did not control the funds, which belong to the consulting company, thus acknowledging the consulting company's claim.
The court held after trial that the evidence submitted by the consulting company, including the supply contract, proved that the funds in question were indeed contract payments owed by the consulting company to the digital company, but were mistakenly transferred to the information company’s account due to operational error. Although the consulting company’s act of mistakenly transferring its own funds to the account of the information company, the judgment debtor, lacked the true expression of intent of the parties, the rule of “possession equals ownership” generally applies to money as a fungible asset in determining its ownership. Therefore, the act was not incapable of producing the legal effect of transferring the substantive rights and interests in the funds merely because it lacked a true expression of intent. The ownership of the funds transferred at the moment they reached the judgment debtor’s account. A debt of unjust enrichment had thus arisen between the consulting company and the information company. A claim for unjust enrichment is an ordinary claim that does not enjoy priority in repayment and is insufficient to preclude enforcement measures. The consulting company may resolve its resulting economic losses through separate proceedings.
After the judgment was pronounced, the consulting company did not appeal, and the judgment has taken effect.
Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Objections and Reconsideration in Enforcement by People's Courts
Article 25: For objections raised by a person not involved in the case, the people's court shall determine whether the person is the rights holder according to the following standards:
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(3) Bank deposits and securities held in custody with financial institutions shall be determined based on the account name registered with the financial institution and the registration and settlement institution; where securities are held in the name of a custodian institution with lawful operating qualifications, they shall be determined based on the name of the actual investor's account registered with such institution;
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[4] Author's Opinion
This case involves an objection raised by a consulting company during the execution of a preservation ruling by the court, claiming that it has substantive rights over the preserved property. According to the above provisions, the rights holder of bank deposits and securities deposited in financial institutions shall be determined based on the account names registered with the financial institution and the clearing institution, unless a separate effective legal document involving the third party confirms that the rights holder of the subject matter of execution is inconsistent with the account name registered with the bank.
Based on the above provisions, once the consulting company's remittance enters the information company's account, it is deemed to be the property of the information company. Therefore, general commercial entities and natural persons should correct the misconception that mistakenly transferred funds can be recovered through the execution objection procedure, and should exercise extreme caution before making remittances to avoid future disputes.
