language

Land Research | The Main Differences Between "Settlement During Enforcement" and "Settlement Outside Enforcement" Based on Supreme Court Guiding Cases

Publish Time:

Sep 15,2023

Source:

Author of this article: Jiang Shoupeng & Gu Tianchen

Case Background

Regarding the construction project contract dispute case between Anhui Chuzhou Construction and Installation Engineering Co., Ltd. (hereinafter referred to as Chuzhou Jianan Company) and Hubei Zhui Ri Electric Power Co., Ltd. (hereinafter referred to as Zhui Ri Electric Company), the Qinghai Provincial High People's Court (hereinafter referred to as Qinghai High Court) rendered a first-instance judgment on April 18, 2016. Zhui Ri Electric Company was not satisfied and filed an appeal with the Supreme People's Court.

During the second-instance proceedings, Zhui Ri Electric Company and Chuzhou Jianan Company signed a "Settlement Agreement" on September 27, 2016. After the settlement agreement was signed, Zhui Ri Electric Company applied to the Supreme People's Court to withdraw the appeal as agreed, and Chuzhou Jianan Company also applied to the Qinghai High Court as agreed to lift the preservation measures against Zhui Ri Electric Company.

Later, on December 25, 2017, Chuzhou Jianan Company asserted the invalidity of the "Settlement Agreement" on the grounds that "Wang Xinggang, the signatory of the agreement, had no agency authority," and applied to the Qinghai High Court for enforcement. The Qinghai High Court issued an enforcement ruling on January 4, 2018: Seize, detain, and freeze RMB 10 million or assets of equivalent value belonging to the obligor, Zhui Ri Electric Company. In fact, a total of over RMB 1.26 million in deposits in three bank accounts of Zhui Ri Electric Company were frozen, and the enforcement ruling was served on Zhui Ri Electric Company.

Zhui Ri Electric Company was not satisfied with the aforementioned enforcement ruling of the Qinghai High Court and filed a written objection with the court. The objection stated: Both parties negotiated and signed the "Settlement Agreement" on September 27, 2016, and Zhui Ri Electric Company has now fully fulfilled all obligations stipulated in the said agreement. Chuzhou Jianan Company's assertion of the invalidity of the "Settlement Agreement" on the grounds that Wang Xinggang, the signatory of the agreement, had no agency authority, and the reasons for its application for enforcement, are clearly untenable and violate the principle of good faith. Later, the Qinghai High Court revoked the aforementioned enforcement ruling. The applicant for enforcement, Chuzhou Jianan Company, was not satisfied and filed a reconsideration application with the Supreme People's Court.

Reasons for Judgment (Excerpt)

The Supreme People's Court held that:

The "Settlement Agreement" involved in this case is a settlement agreement reached voluntarily by the parties before the commencement of enforcement proceedings, which constitutes an out-of-enforcement settlement. Compared with an in-enforcement settlement agreement, an out-of-enforcement settlement agreement cannot automatically affect the people's court's compulsory enforcement. The parties still have the right to apply to the people's court for enforcement. If Zhui Ri Electric Company raises an objection to enforcement on the grounds that the "Settlement Agreement" voluntarily reached by the parties has been fully performed, the people's court may, in accordance with Article 19 of the "Provisions of the Supreme People's Court on Several Issues Concerning Settlement in Enforcement," examine the validity and performance of the settlement agreement, and then determine whether to terminate the enforcement.

Judgment Result

Application dismissed, original ruling upheld.

Interpretation of Law Through Cases

In enforcement practice, the application of law is the fundamental basis for handling enforcement cases. To this end, in 2022, the Supreme People's Court revised the "Norms for People's Courts to Handle Enforcement Cases." Article 18 of the "Norms" stipulates: "If parties reach an out-of-court settlement agreement during the second-instance proceedings and withdraw their appeal, they may apply to the people's court for enforcement of the first-instance judgment. If the obligor raises an objection to enforcement on the grounds that the settlement agreement has been performed, it may be reviewed and handled with reference to Article 109 of these Norms."

Article 19 of the "Provisions of the Supreme People's Court on Several Issues Concerning Settlement in Enforcement" stipulates: During enforcement, if the obligor raises an objection in accordance with Article 225 of the Civil Procedure Law, based on a settlement agreement voluntarily reached by the parties but not submitted to the people's court, or a settlement agreement submitted by one party to the people's court but not recognized by other parties, the people's court shall handle it according to the following circumstances:

(1) If the settlement agreement has been fully performed, the enforcement of the original effective legal document shall be ruled terminated;

(2) If the performance period stipulated in the settlement agreement has not yet arrived or the performance conditions have not yet been met, the enforcement shall be ruled suspended, unless it falls under the circumstances stipulated in Article 108 of the Contract Law;

(3) If the obligor is performing obligations as agreed in the settlement agreement, the enforcement shall be ruled suspended;

(4) If the obligor fails to perform the settlement agreement, the objection shall be ruled dismissed;

(5) If the settlement agreement is not established, has not become effective, or is invalid, the objection shall be ruled dismissed.

From this, it can be seen that "settlement in enforcement" is divided into "in-enforcement settlement" and "out-of-enforcement settlement", and only "in-enforcement settlement" can directly lead to the suspension of enforcement. "Out-of-enforcement settlement" cannot directly impede enforcement, and the parties still need to raise a defense through an objection to enforcement, and the people's court shall review and handle their objection. If the settlement agreement has been fully performed, the enforcement shall be ruled terminated; if the performance period stipulated in the settlement agreement has not yet arrived or the conditions have not yet been met, and if the obligor is performing obligations according to the settlement agreement, the enforcement shall be ruled suspended. In this case, both parties involved reached an "out-of-enforcement settlement."

Lawyer Profile

None

Earth Case | May every legal professional hold the sword of law and become the light of law - Fan's fraud case was detained for 922 days, lasted three years and went through three trials, and was finally declared innocent!

None

COOKIES

Our website uses cookies and similar technologies to personalize the advertising shown to you and to help you get the best experience on our website. For more information, see our Privacy & Cookie Policy

COOKIES

required

These cookies are necessary for basic functions such as payment. Standard cookies cannot be turned off and do not store any of your information.

analyze

These cookies collect information, such as how many people are using our site or which pages are popular, to help us improve the customer experience. Turning these cookies off will mean we can't collect information to improve your experience.

Feature

These cookies enable the website to provide enhanced functionality and personalization. They may be set by us or by third-party providers whose services we have added to our pages. If you do not allow these cookies, some or all of these services may not function properly.

advertise

These cookies help us understand what you are interested in so that we can show you relevant advertising on other websites. Turning these cookies off will mean we are unable to show you any personalized advertising.

Business License

Website Construction：300.CN | Tags | Privacy Policy