Circular on Issuing the 14th Batch of Guiding Cases of the Supreme People's Procuratorate
Circular on Issuing the 14th Batch of Guiding Cases of the Supreme People's Procuratorate
Circular on Issuing the 14th Batch of Guiding Cases of the Supreme People's Procuratorate
May 21, 2019
People's procuratorates of all provinces, autonomous regions and municipalities directly under the Central Government, the PLA Military Procuratorate and the People's Procuratorate of Xinjiang Production and Construction Corps,
Following the decision made at the 17th Session of the 13th Procuratorial Committee of the Supreme People's Procuratorate on April 22, 2019, five guiding cases (Jian Li No.52-No.56) including the case of Guangzhou XXXX Real Estate Company and others involving defrauding of payment orders and execution of supervision of false litigation are hereby released as the 14th batch of guiding cases for reference and application.
Case of Guangzhou XXXX Real Estate Company and Others Involving Defrauding of Payment Orders and Execution of Supervision of False Litigation (Jian Li No.52)
[Keywords]
Defrauding of payment order, embezzlement of state-owned assets, procuratorial suggestions
[Highlights]
When the parties concerned collude with ill intent and fabricate debts to defraud the courts of payment orders, and conspire to reach settlement agreements in the course of execution so as to embezzle state-owned assets by paying debts in kind, which damages the judicial order, such acts constitute false litigation. Procuratorial organs should supervise such cases according to the law, give full play to the functions of legal supervision, safeguard judicial order and protect state-owned assets.
[Basic Facts]
Starting from 2003, State-owned enterprise XXXX Agriculture, Industry and Commerce Company was sued in court for failing to repay its bank loan on time, and its bank account was sealed up. In an attempt to transfer out the assets of XXXX Agriculture, Industry and Commerce Company and its affiliated companies, members of the leadership of the company invested in their own names and established Guangzhou XXXX Real Estate Company on May 26, 2003. Zhang XX, a manager of XXXX Agriculture, Industry and Commerce Company was made Chairman of XXXX Real Estate Company, while the other members of the leadership of XXXX Agriculture, Industry and Commerce Company served as shareholders and management personnel of XXXX Real Estate Company.
On June 23, 2004 and February 20, 2005, XXXX Real Estate Company respectively signed loan agreements with XXXX Industrial Company and XXXX Orchard Farm, which were both subsidiaries of XXXX Agriculture, Industry and Commerce Company, with CNY2,518,460 and CNY16 million lent respectively. XXXX Industrial Company provided mortgage guarantees for the loans with its own house properties. XXXX Real Estate Company did not have its own working capital or business, and the funds it lent mainly came from the funds which XXXX Agriculture, Industry and Commerce Company entrusted to its escrow.
When XXXX Industrial Company borrowed the money, XXXX Agriculture, Industry and Commerce Company had already deposited CNY13,893,401.67 at XXXX Real Estate Company, which was wealth management funds that could be transferred out. However, XXXX Agriculture, Industry and Commerce Company did not transfer the wealth management funds. Instead, its subsidiary XXXX Industrial Company borrowed the money by way of house property mortgage. When XXXX Orchard Farm borrowed its money, it transferred the CNY16 million loan to the account of a party outside of the case in the name of "current accounts" within 1~3 days after the loan was transferred into its account, and the said outsider party in turn transferred an equal amount of funds to XXXX Real Estate Company within five days via bank transfer.
Upon the expiration of the above-mentioned loan, XXXX Real Estate Company immediately applied to Guangzhou Baiyun District People's Court for a payment order demanding the repayment of the loan. On September 6, 2004, the Court issued (2004) Yun Fa Min Er Du Zi No.23 Payment Order, ordering XXXX Industrial Company to fulfill its payment obligations; on November 9, 2005, the Court issued (2005) Yun Fa Min Er Du Zi No.16 Payment Order, ordering XXXX Orchard Farm to fulfill its payment obligations. Neither XXXX Industrial Company nor XXXX Orchard Farm raised objections. And in the course of execution of the court orders, XXXX Industrial Company quickly reached a settlement agreement with XXXX Real Estate Company. On October 11, 2004, XXXX Industrial Company signed a settlement agreement with XXXX Real Estate Company to compensate it for the debt of CNY2,518,460 with its own house properties. XXXX Industrial Company also took the initiative to use the 36 house properties which it owned to provide an execution guarantee for the money borrowed by XXXX Orchard Farm. In February and April 2006, the Court successively ruled that the house properties of XXXX Orchard Farm should be valued at CNY6,117,212 and the properties offered as guarantee of XXXX Industrial Company should be valued at CNY3,969,387 to pay their debts in kind to XXXX Real Estate Company.
After the incident happened, the governing organization of XXXX Agriculture, Industry and Commerce Company commissioned an evaluation on September 10, 2013. The evaluation report showed that as of the date of debt payment ruled by the Court which was taken as the evaluation reference date, the value of the house properties involved in the case totaled more than CNY109 million, which was CNY96.4 million higher than the price of the debt payment in kind ruled by the Court, which meant that state-owned assets were seriously damaged.
[Supervision by Procuratorial Organ]
Discovery of evidence: When handling the criminal case of embezzlement and bribe taking by Zhang XX of XXXX Agriculture, Industry and Commerce Company in April 2016, Guangdong People's Procuratorate found that XXXX Real Estate Company might have committed the acts of defrauding of payment orders and embezzlement of state-owned assets, and then submitted the case evidence to Guangzhou People's Procuratorate for handling. Guangzhou People's Procuratorate initiated supervision procedures according to its functions and powers, and formed a case handling team with Baiyun District People's Procuratorate to deal with the case together.
Investigation and verification: The case handling team retrieved the court payment orders and case execution files. Upon examination, it was found that the statements made by XXXX Real Estate Company, XXXX Industrial Company and XXXX Orchard Farm on the loan facts and other matters were highly identical in the course of litigation; and that the three parties all took the initiative to quickly reach settlement agreements to pay their debts in kind in the course of execution, while lacking the usual adverbial nature of litigation. In the examination of the criminal files on Zhang XX's embezzlement and bribe taking, it was found that there existed a subjective intention of collusion and embezzlement of state-owned assets among members of the leaderships of XXXX Agriculture, Industry and Commerce Company and XXXX Real Estate Company; in the examination of the industry and commerce registration materials, it was found that XXXX Real Estate Company had no funds of its own and its funds came from the funds of XXXX Agriculture, Industry and Commerce Company entrusted to its escrow; and upon retrieving the bank statement list, the situation of the circulation of the borrowed funds was verified. Following up with the transfer routes of the funds and house properties involved in the case, the case handling team gradually sorted out the developments of the case, made inquiries with the relevant personnel again, finally obtained the testimonies of Zhang XX and others, and further consolidated the evidence.
Supervision opinion: On October 8, 2016, Baiyun District People's Procuratorate respectively issued Sui Yun Jian Min (Xing) Wei Jian (2016) No.4 and No.5 Procuratorial Suggestions concerning the two aforementioned payment orders made by Baiyun District People's Court, pointing out that XXXX Real Estate Company colluded with XXXX Industrial Company and XXXX Orchard Farm with ill intent, fabricated debts, defrauded the Court of payment orders, embezzled state-owned assets through the implementation of reconciliation procedures and damaged the normal judicial order and suggested that the Court should revoke its payment orders involved in the case.
Supervision result: On May 15, 2018, Baiyun District People's Court issued (2018) Yue 0111 Min Du Jian No.1 and No.2 Civil Rulings which respectively confirmed that the aforementioned payment orders were wrong, ruled to revoke the two payment orders and rejected the application of XXXX Real Estate Company for payment orders. In October of the same year, Baiyun District People's Court executed a reversal in accordance with the already effective rulings. By then, the loss of more than CNY109 million of state-owned assets was recovered. Zhang XX and other members of the former leadership of XXXX Agriculture, Industry and Commerce Company were prosecuted by Guangzhou People's Procuratorate for the suspected crimes of embezzlement and bribery.
[Guiding Significance]
1. Fabricating debts to defraud payment orders has become one form of manifestation of civil false litigations, and legal supervision of such practice should be strengthened. The supervision procedures stipulated in the Civil Procedure Law aims to enable creditors to conveniently and efficiently obtain the basis for forceful enforcement and settle disputes. In judicial practice, some parties, taking advantage of the fact that the payment orders issued by courts are mainly examined in form and the substantive problems are not easy to be discovered, are engaged in collusion with ill intent and fabricate debts to defraud payment orders and obtain execution, thus infringing the legitimate rights and interests of other civil subjects. In this case, XXXX Real Estate Company colluded with XXXX Industrial Company and XXXX Orchard Farm with ill intent and fabricated debts to apply for payment orders, which constituted false litigation. Because the courts only need to conduct formal examination of the facts and evidence provided by the parties concerned without the need to go through litigation procedures when issuing a payment order, false litigation cases involving the defrauding of payment orders are usually shrouded in secrecy. Procuratorial organs should strengthen their supervision of such cases and give full play to the function of legal supervision.
2. In the handling of false litigation cases, procuratorial organs should focus on the examination of fabricated facts. False litigations usually start civil proceedings with fabricated facts, which should be the focus of investigation and verification by procuratorial organs. In the handling process of the current case, the case handling team grasped the facts of the case by retrieving the criminal case files of Zhang XX, and took the fixed evidence in the criminal case as the breakthrough point for handling the case. By focusing on examining the business licenses, articles of association, company registration applications, shareholders' meeting resolutions and other industry and commerce materials of the companies involved, the case handling team confirmed the facts that XXXX Industrial Company and XXXX Orchard Farm were established by XXXX Agriculture, Industry and Commerce Company and both were enterprises owned by the whole people, that the house properties under their names were state-owned properties and that leading members of the leaderships of the above-mentioned companies held cross positions in the companies. By retrieving the tax returns, accounting books, fund escrow agreements and other archival materials, the case handling team found that XXXX Real Estate Company had no working capital or business of its own and its funds came from the funds which XXXX Agriculture, Industry and Commerce Company entrusted to its escrow. By retrieving the bank statement list, the case handling team found that upon the transfer of its borrowed money into its account, XXXX Orchard Farm transferred the money to an outsider's account in the name of "current accounts" and the said outsider immediately transferred an equal amount of the funds back to XXXX Real Estate Company. Through this, the case handling team obtained a clear idea of the circulation of the borrowed funds.
......
May 21, 2019
People's procuratorates of all provinces, autonomous regions and municipalities directly under the Central Government, the PLA Military Procuratorate and the People's Procuratorate of Xinjiang Production and Construction Corps,
Following the decision made at the 17th Session of the 13th Procuratorial Committee of the Supreme People's Procuratorate on April 22, 2019, five guiding cases (Jian Li No.52-No.56) including the case of Guangzhou XXXX Real Estate Company and others involving defrauding of payment orders and execution of supervision of false litigation are hereby released as the 14th batch of guiding cases for reference and application.
Case of Guangzhou XXXX Real Estate Company and Others Involving Defrauding of Payment Orders and Execution of Supervision of False Litigation (Jian Li No.52)
[Keywords]
Defrauding of payment order, embezzlement of state-owned assets, procuratorial suggestions
[Highlights]
When the parties concerned collude with ill intent and fabricate debts to defraud the courts of payment orders, and conspire to reach settlement agreements in the course of execution so as to embezzle state-owned assets by paying debts in kind, which damages the judicial order, such acts constitute false litigation. Procuratorial organs should supervise such cases according to the law, give full play to the functions of legal supervision, safeguard judicial order and protect state-owned assets.
[Basic Facts]
Starting from 2003, State-owned enterprise XXXX Agriculture, Industry and Commerce Company was sued in court for failing to repay its bank loan on time, and its bank account was sealed up. In an attempt to transfer out the assets of XXXX Agriculture, Industry and Commerce Company and its affiliated companies, members of the leadership of the company invested in their own names and established Guangzhou XXXX Real Estate Company on May 26, 2003. Zhang XX, a manager of XXXX Agriculture, Industry and Commerce Company was made Chairman of XXXX Real Estate Company, while the other members of the leadership of XXXX Agriculture, Industry and Commerce Company served as shareholders and management personnel of XXXX Real Estate Company.
On June 23, 2004 and February 20, 2005, XXXX Real Estate Company respectively signed loan agreements with XXXX Industrial Company and XXXX Orchard Farm, which were both subsidiaries of XXXX Agriculture, Industry and Commerce Company, with CNY2,518,460 and CNY16 million lent respectively. XXXX Industrial Company provided mortgage guarantees for the loans with its own house properties. XXXX Real Estate Company did not have its own working capital or business, and the funds it lent mainly came from the funds which XXXX Agriculture, Industry and Commerce Company entrusted to its escrow.
When XXXX Industrial Company borrowed the money, XXXX Agriculture, Industry and Commerce Company had already deposited CNY13,893,401.67 at XXXX Real Estate Company, which was wealth management funds that could be transferred out. However, XXXX Agriculture, Industry and Commerce Company did not transfer the wealth management funds. Instead, its subsidiary XXXX Industrial Company borrowed the money by way of house property mortgage. When XXXX Orchard Farm borrowed its money, it transferred the CNY16 million loan to the account of a party outside of the case in the name of "current accounts" within 1~3 days after the loan was transferred into its account, and the said outsider party in turn transferred an equal amount of funds to XXXX Real Estate Company within five days via bank transfer.
Upon the expiration of the above-mentioned loan, XXXX Real Estate Company immediately applied to Guangzhou Baiyun District People's Court for a payment order demanding the repayment of the loan. On September 6, 2004, the Court issued (2004) Yun Fa Min Er Du Zi No.23 Payment Order, ordering XXXX Industrial Company to fulfill its payment obligations; on November 9, 2005, the Court issued (2005) Yun Fa Min Er Du Zi No.16 Payment Order, ordering XXXX Orchard Farm to fulfill its payment obligations. Neither XXXX Industrial Company nor XXXX Orchard Farm raised objections. And in the course of execution of the court orders, XXXX Industrial Company quickly reached a settlement agreement with XXXX Real Estate Company. On October 11, 2004, XXXX Industrial Company signed a settlement agreement with XXXX Real Estate Company to compensate it for the debt of CNY2,518,460 with its own house properties. XXXX Industrial Company also took the initiative to use the 36 house properties which it owned to provide an execution guarantee for the money borrowed by XXXX Orchard Farm. In February and April 2006, the Court successively ruled that the house properties of XXXX Orchard Farm should be valued at CNY6,117,212 and the properties offered as guarantee of XXXX Industrial Company should be valued at CNY3,969,387 to pay their debts in kind to XXXX Real Estate Company.
After the incident happened, the governing organization of XXXX Agriculture, Industry and Commerce Company commissioned an evaluation on September 10, 2013. The evaluation report showed that as of the date of debt payment ruled by the Court which was taken as the evaluation reference date, the value of the house properties involved in the case totaled more than CNY109 million, which was CNY96.4 million higher than the price of the debt payment in kind ruled by the Court, which meant that state-owned assets were seriously damaged.
[Supervision by Procuratorial Organ]
Discovery of evidence: When handling the criminal case of embezzlement and bribe taking by Zhang XX of XXXX Agriculture, Industry and Commerce Company in April 2016, Guangdong People's Procuratorate found that XXXX Real Estate Company might have committed the acts of defrauding of payment orders and embezzlement of state-owned assets, and then submitted the case evidence to Guangzhou People's Procuratorate for handling. Guangzhou People's Procuratorate initiated supervision procedures according to its functions and powers, and formed a case handling team with Baiyun District People's Procuratorate to deal with the case together.
Investigation and verification: The case handling team retrieved the court payment orders and case execution files. Upon examination, it was found that the statements made by XXXX Real Estate Company, XXXX Industrial Company and XXXX Orchard Farm on the loan facts and other matters were highly identical in the course of litigation; and that the three parties all took the initiative to quickly reach settlement agreements to pay their debts in kind in the course of execution, while lacking the usual adverbial nature of litigation. In the examination of the criminal files on Zhang XX's embezzlement and bribe taking, it was found that there existed a subjective intention of collusion and embezzlement of state-owned assets among members of the leaderships of XXXX Agriculture, Industry and Commerce Company and XXXX Real Estate Company; in the examination of the industry and commerce registration materials, it was found that XXXX Real Estate Company had no funds of its own and its funds came from the funds of XXXX Agriculture, Industry and Commerce Company entrusted to its escrow; and upon retrieving the bank statement list, the situation of the circulation of the borrowed funds was verified. Following up with the transfer routes of the funds and house properties involved in the case, the case handling team gradually sorted out the developments of the case, made inquiries with the relevant personnel again, finally obtained the testimonies of Zhang XX and others, and further consolidated the evidence.
Supervision opinion: On October 8, 2016, Baiyun District People's Procuratorate respectively issued Sui Yun Jian Min (Xing) Wei Jian (2016) No.4 and No.5 Procuratorial Suggestions concerning the two aforementioned payment orders made by Baiyun District People's Court, pointing out that XXXX Real Estate Company colluded with XXXX Industrial Company and XXXX Orchard Farm with ill intent, fabricated debts, defrauded the Court of payment orders, embezzled state-owned assets through the implementation of reconciliation procedures and damaged the normal judicial order and suggested that the Court should revoke its payment orders involved in the case.
Supervision result: On May 15, 2018, Baiyun District People's Court issued (2018) Yue 0111 Min Du Jian No.1 and No.2 Civil Rulings which respectively confirmed that the aforementioned payment orders were wrong, ruled to revoke the two payment orders and rejected the application of XXXX Real Estate Company for payment orders. In October of the same year, Baiyun District People's Court executed a reversal in accordance with the already effective rulings. By then, the loss of more than CNY109 million of state-owned assets was recovered. Zhang XX and other members of the former leadership of XXXX Agriculture, Industry and Commerce Company were prosecuted by Guangzhou People's Procuratorate for the suspected crimes of embezzlement and bribery.
[Guiding Significance]
1. Fabricating debts to defraud payment orders has become one form of manifestation of civil false litigations, and legal supervision of such practice should be strengthened. The supervision procedures stipulated in the Civil Procedure Law aims to enable creditors to conveniently and efficiently obtain the basis for forceful enforcement and settle disputes. In judicial practice, some parties, taking advantage of the fact that the payment orders issued by courts are mainly examined in form and the substantive problems are not easy to be discovered, are engaged in collusion with ill intent and fabricate debts to defraud payment orders and obtain execution, thus infringing the legitimate rights and interests of other civil subjects. In this case, XXXX Real Estate Company colluded with XXXX Industrial Company and XXXX Orchard Farm with ill intent and fabricated debts to apply for payment orders, which constituted false litigation. Because the courts only need to conduct formal examination of the facts and evidence provided by the parties concerned without the need to go through litigation procedures when issuing a payment order, false litigation cases involving the defrauding of payment orders are usually shrouded in secrecy. Procuratorial organs should strengthen their supervision of such cases and give full play to the function of legal supervision.
2. In the handling of false litigation cases, procuratorial organs should focus on the examination of fabricated facts. False litigations usually start civil proceedings with fabricated facts, which should be the focus of investigation and verification by procuratorial organs. In the handling process of the current case, the case handling team grasped the facts of the case by retrieving the criminal case files of Zhang XX, and took the fixed evidence in the criminal case as the breakthrough point for handling the case. By focusing on examining the business licenses, articles of association, company registration applications, shareholders' meeting resolutions and other industry and commerce materials of the companies involved, the case handling team confirmed the facts that XXXX Industrial Company and XXXX Orchard Farm were established by XXXX Agriculture, Industry and Commerce Company and both were enterprises owned by the whole people, that the house properties under their names were state-owned properties and that leading members of the leaderships of the above-mentioned companies held cross positions in the companies. By retrieving the tax returns, accounting books, fund escrow agreements and other archival materials, the case handling team found that XXXX Real Estate Company had no working capital or business of its own and its funds came from the funds which XXXX Agriculture, Industry and Commerce Company entrusted to its escrow. By retrieving the bank statement list, the case handling team found that upon the transfer of its borrowed money into its account, XXXX Orchard Farm transferred the money to an outsider's account in the name of "current accounts" and the said outsider immediately transferred an equal amount of the funds back to XXXX Real Estate Company. Through this, the case handling team obtained a clear idea of the circulation of the borrowed funds.
......