[1] Wrongly remitted payment frozen in account, execution objection is not the correct solution

Compiled from: Shandong High Court, China Court Network

[2] A consulting company mistakenly transferred 911,000 yuan to an information company's account due to an operational error by its staff. However, the information company's receiving account had already been frozen by the court at the time, preventing the refund of the payment. The consulting company learned that the account was frozen due to a litigation preservation application filed by a group company, which was owed a loan by the information company. Subsequently, the consulting company raised an objection to the litigation preservation, but it was dismissed, leading it to file an enforcement objection lawsuit by a non-party. After trial, the Beijing Haidian District People's Court ruled against the consulting company's claims.

Case Review

[3] The plaintiff consulting company alleged: In April 2022, while the court was hearing a loan dispute case between the group company and the information company, it issued a property preservation ruling, freezing the deposit account under the information company's name. In July 2022, the consulting company mistakenly transferred funds into the information company's frozen bank account. Later, in August, it filed a written objection to the enforcement preservation target. In October 2022, the court issued a ruling on the enforcement objection, dismissing the objection.

[4] Regarding the mistaken payment, the consulting company stated that in April 2022, it signed a "Product Supply Contract" with a digital company, with the consulting company as the buyer. The payment terms required the consulting company to first pay 10% of the total contract price as an advance payment, and then pay 90% of the total contract price, i.e., 911,000 yuan, to the digital company within 90 days from the manufacturer's shipment date. In July 2022, after receiving the goods, the consulting company intended to pay the contract balance of 911,000 yuan to the digital company via bank transfer. Due to an operational error, the funds were mistakenly transferred to the information company's involved bank account.

[5] At the time of the transfer, the information company's bank account had already been preserved, sealed, and frozen by the court. Additionally, the information company's bank deposits were insufficient to cover the amount specified in the preservation ruling, so the information company could not refund the mistakenly transferred 911,000 yuan to the consulting company. The consulting company filed the following claims with the court: 1. The frozen 911,000 yuan mistakenly transferred by the plaintiff consulting company into the third-party information company's bank account shall not be enforced; 2. Confirm that the ownership of the 911,000 yuan mistakenly transferred into the third-party information company's bank account belongs to the plaintiff consulting company; 3. Order that the plaintiff consulting company has the right to apply to the court for enforcement and return of the aforementioned funds.

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.

After trial, the court held that, based on evidence such as the supply contract submitted by the consulting company, the funds in question were indeed contract payments due from the consulting company to the digital company but were mistakenly transferred to the information company's account. Although the consulting company's erroneous transfer of its own funds to the information company's account, a judgment debtor, lacked the parties' true intent, for currency, a type of fungible property, the rule of "possession equals ownership" generally applies to determine ownership. Thus, the act does not fail to produce the legal effect of transferring the substantive rights to the funds due to the lack of true intent. Upon the funds reaching the judgment debtor's account, ownership transfers. A relationship of unjust enrichment arises between the consulting company and the information company, and the claim for unjust enrichment is an ordinary claim without priority for satisfaction and insufficient to preclude enforcement. The consulting company may seek resolution of its economic losses through a separate case.

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 deposited in financial institutions shall be determined based on the account names registered with the financial institution and the clearing institution; if securities are held in the name of a custodian institution with legitimate business qualifications, the determination shall be based on the account name of the actual investor registered with that 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.