If there is an effective judgment on the same debt but it has not been executed, whether the creditor has the right to file a separate lawsuit

SPC Guiding Case No. 167: For the same debt, if there is an effective judgment but no enforcement is in place, does the creditor have the right to file a separate lawsuit?

Guiding Case No. 167

Beijing Datang Fuel Co., Ltd. v. Shandong Baifu Logistics Co., Ltd., a dispute over a sales contract

(Discussed and adopted by the Adjudication Committee of the Supreme People's Court, released on November 9, 2021)

Keywords: Civil/Sales Contract/Subrogation Lawsuit/Unsettled/Separate Litigation

Key Points of the Adjudication: In the enforcement of a subrogation lawsuit, if the enforcement procedure is terminated because the counterparty has no property available for enforcement, and the creditor separately claims rights against the debtor for the creditor's rights that have not actually been repaid, the people's court should support it.

Relevant legal provisions: Article 20 of the Interpretation (I) of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China (Note: Article 537 of the Civil Code of the People's Republic of China)

Basic facts of the case: Between January 20, 2012 and May 29, 2013, Beijing Datang Fuel Co., Ltd. (hereinafter referred to as Datang Company) and Shandong Baifu Logistics Co., Ltd. (hereinafter referred to as Baifu Company) signed a total of 41 procurement contracts, stipulating that Baifu Company would sell ferronickel, nickel ore, refined coal, metallurgical coke and other goods to Datang Company. In the process of performing the contract, the two parties pay the payment by rolling settlement, but the amount of each payment does not correspond to the amount of the payment agreed in each contract. From March 15, 2012 to January 8, 2014, Datang Company paid a total of RMB 182,7867,179.08 to PAX Company, and PAX Company issued a total of RMB 186,9151,565.63 in VAT invoices to Datang Company. Datang asserted that the cumulative value of the goods supplied by PAX was RMB 171,5683,565.63, and PAX claimed that it had supplied the goods in full according to the amount of VAT invoices issued.

On November 25, 2014, Datang Company, as the plaintiff, filed a creditor subrogation lawsuit with Ningbo Wanxiang Import and Export Co., Ltd. (hereinafter referred to as "Wanxiang Company") as the defendant and PAX Company as the third party. The court rendered the (2014) Zhe Yongshang Chu Zi No. 74 Civil Judgment, ordering Vientiane Company to pay 36,369,405.32 yuan to Datang Company. On September 28, 2016, Datang Company applied to the People's Court of Xiangshan County, Zhejiang Province for compulsory enforcement in the civil case (2014) Zheyong Shang Chu Zi No. 74. On October 8, 2016, the court issued an enforcement notice to Vientiane Company in accordance with the law, but Vientiane Company still failed to perform its obligations within the time limit, and Vientiane Company should still pay the execution fee of 36,369,405.32 yuan and interest, and bear the litigation fee of 209684 yuan and the execution fee of 103,769.41 yuan. According to the procuratorate's investigation, there were two motor vehicles in the name of Vientiane Company, which had been seized but not actually controlled. Datang Company failed to provide Vientiane Company's property for enforcement within the time limit, nor did it raise an objection to the court. On March 25, 2017, the court issued the (2016) Zhe 0225 Zhi No. 3676 Enforcement Ruling, ending the enforcement procedure.

Datang Company filed a lawsuit with the Higher People's Court of Shandong Province against PAX as the defendant, requesting that PAX be ordered to return the principal and interest to it.

Adjudication Results

On August 13, 2018, the Shandong Provincial High People's Court rendered the (2018) Lu Min Chu No. 10 Civil Judgment: 1. Shandong Baifu Logistics Co., Ltd. returned the payment of 75,814,208.13 yuan to Beijing Datang Fuel Co., Ltd.; 2. Shandong Baifu Logistics Co., Ltd. compensated Beijing Datang Fuel Co., Ltd. for the interest loss during the period of occupying the payment (based on 75,814,208.13 yuan, from November 25, 2014 to the date of actual payment of Shandong Baifu Logistics Co., Ltd., calculated according to the benchmark interest rate of similar loans of the People's Bank of China for the same period); 3. Other litigation claims of Beijing Datang Fuel Co., Ltd. are rejected. Datang Fuel Co., Ltd. appealed against the first-instance judgment. On June 20, 2019, the Supreme People's Court rendered the (2019) Zui Gao Fa Min Zhong No. 6 Civil Judgment: 1. Revoke the (2018) Lu Min Chu No. 10 Civil Judgment of the Shandong Provincial High People's Court; 2. Shandong Baifu Logistics Co., Ltd. returned the payment of 153468000 yuan to Beijing Datang Fuel Co., Ltd.; 3. Shandong Baifu Logistics Co., Ltd. shall compensate Beijing Datang Fuel Co., Ltd. for the interest loss during the period of occupation of the payment (based on 153468000 yuan, from November 25, 2014 to the date of actual payment of Shandong Baifu Logistics Co., Ltd., calculated according to the benchmark interest rate of similar loans in the same period of People's Bank of China); 4. Other litigation claims of Beijing Datang Fuel Co., Ltd. are rejected.

Reasons for the Adjudication

The Supreme People's Court held that: on the issue of the creditor's rights of 36,369,405.32 yuan involved in the (2014) Zheyong Shang Chu Zi No. 74 Civil Judgment. Datang Company has the right to make a separate claim against PAX for the payment.

First, Article 20 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China (I) (hereinafter referred to as the "Interpretation of the Contract Law (I)") stipulates that if a subrogation lawsuit filed by a creditor against a secondary debtor is determined to be established after trial by the people's court, the secondary debtor shall perform the repayment obligation to the creditor, and the corresponding creditor-debt relationship between the creditor and the debtor and the debtor and the secondary debtor shall be extinguished. According to this provision, the premise for determining the extinction of the corresponding creditor-debtor relationship between the creditor and the debtor is that the secondary debtor has actually performed the corresponding repayment obligations to the creditor. In the enforcement case involved in this case, the People's Court of Xiangshan County, Zhejiang Province has made a ruling to terminate the enforcement because the property of Vientiane Company has not been enforced, so the creditor's rights and debts relationship between Datang Company and PAX Company has not been extinguished under the circumstance that Vientiane Company has not actually fulfilled its repayment obligations, and Datang Company has the right to make a separate claim against PAX Company.

Second, the subrogation lawsuit belongs to the debt preservation system, which is designed to prevent the debtor's property from being improperly reduced or increased but not increased when it should be, creating obstacles to the creditor's realization of the creditor's rights, rather than requiring the creditor to choose between the debtor and the secondary debtor as the subject of the performance of the obligation. If the creditor is required to choose one choice, it is tantamount to requiring the creditor to fully investigate the solvency of the secondary debtor before initiating a subrogation lawsuit, otherwise it should bear the risk that the debt will not be discharged, which not only increases the economic cost of the creditor to file a subrogation lawsuit, but also seriously dampens the enthusiasm of the creditor to file a subrogation lawsuit, which is contrary to the purpose of the establishment of the subrogation litigation system.

Third, this case does not violate the principle of non bis idem. According to Article 247 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China, the main conditions for determining whether a duplicate lawsuit is constituted are whether the parties, the subject matter of the litigation, and the litigation claims are the same, or whether the litigation claims of the later litigation substantially negate the judgment result of the previous litigation. From the perspective of the parties, a subrogation action takes the creditor as the plaintiff and the secondary debtor as the defendant, while the lawsuit against the debtor takes the creditor as the plaintiff and the debtor as the defendant, and the identity of the two defendants is not the same. From the perspective of the subject matter of the litigation and the litigation claims, although the subrogation lawsuit requires the secondary debtor to directly perform the repayment obligation to the creditor, it is aimed at the creditor's rights and debts between the debtor and the secondary debtor, while the lawsuit against the debtor requires the debtor to perform the repayment obligation to the creditor, and is aimed at the creditor's rights and debts between the creditor and the debtor, and the two are also different in terms of the scope of the subject matter and the legal relationship. From the perspective of the requirements for filing a lawsuit, unlike a lawsuit against the debtor, a subrogation lawsuit not only requires the filing conditions stipulated in the Civil Procedure Law, but also the litigation conditions stipulated in Article 11 of the Interpretation (I) of the Contract Law. Based on the above differences, the subrogation lawsuit and the lawsuit against the debtor are not the same cause, and the two are only legally related, so the filing of this lawsuit by Datang Company does not constitute a duplicate lawsuit.

(Effective referees and judges: Li Wei, Wang Yuying, Su Bei)