Defendant-Appellant: Zhuhai Yufeng House Property Ltd.
Address: Xinshi Uptown 2nd Floor, Yuehua Road, Gongbei, Zhuhai City, Guangdong Province.
Legal Representative: Jian Yuqiang, general manager
Authorized Deputy: Wu Lizhong, deputy general manager
Authorized Attorney: Yang Zi, professor of Law College, Beijing Univesity
Plaintiff-Appellee: Guangdong Branch, China Bank
Address: Fengxi Road No. 197, Guangzhou City, Guangdong Province
Responsible Person: Tian Xiaoren, president of Guangdong Branch
Authorized Deputy: Wu Zexuan, clerk of Guangdong Branch
Authorized Attorney: Yi Minshen, attorney-in-law of Jinpeng Law Firm, Guangzhou
Defendant in original instance: Guanman Development Ltd.
Address: Room 1705, Hongkong Business Center, West Gannuo Avenue 186-191, Hongkong Special Administrative Region.
Legal Representative: Jian Yuqiang, president
Zhuhai House Property Ltd. (appellant), refusing to accept as final the civil cases judgement of Higher People??s Court of Guangdong for a controversy over a loan contract, which is filed as 1997-Yue-Jing-Er-Chu-Zi-5, has made an appeal to this Court. Pursuant to relevant laws this Court has organized a collegial panel, including the presiding judge Li Jian, the judge Wang Yun and the deputy judge Chen Jizhong, and held a trial. Gao Xiaoli is the court clerk. The case has now come to a close.
The following facts have been confirmed: On February 27, 1993, Guangdong Branch of China Bank (hereinafter referred to as Guangdong Branch) and Zhuhai Yufeng House Property Ltd. (hereinafter referred to as Yufeng Ltd.) reached a mortgage loan contract. It was stipulated that: Guangdong Branch provides a loan of $20,000,000 for one-year term at the interest rate of 4.5% (counted in term of floating interest rate and paid per half-year), and the interest arising from paying in delay is counted in term of the rate of compound interest; Yufeng Ltd. guarantee above loan by mortgaging the right to the use of 19,111-square-meter land lying the west side of Yingbin Avenue, Gongbei, Zhuhai City, together with the constructions built on the land; Yufeng Ltd. is forbidden to lease, convey, impawn, auction, remortgage or deal with the estate under mortgage with any other transactions, and the constructions built on the land shall be dealt with unconditionally at the same time when dealing with the estate under mortgage because the latter is land, and the profit of selling the merchantable houses shall be used to pay off the principal and relevant interest of loan prior after excluded the cost for building those houses; Guangdong Branch is entitled to collect the interest of loan at the rate of 20% to 50% or sell off the estate under mortgage if Yufeng Ltd. breaches the contract in order to pay off the principal and relevant interest. Then, two parties registered for the mortgage at Land and Resources Bureau of Zhuhai and Yufeng Ltd. handed the original certificate on the right to the use of state land to Guangdong Branch. On March 2, Guangdong Branch paid $20,000,000 to Yufeng Ltd. in accordance with the mortgage loan contract. Yufeng Ltd. requested to extend the term of loan two times when the term is to expire and both parties signed on the contract for extending the term of loan, on which the term of loan is extended to November 30, 1996. The extension of the loan was registered, too.
On November 27, 1993, Yufeng Ltd. loaned a sum of $5,000,000 from Guangdong Branch and took the estate under mortgage recorded in the former loan contract as the estate under mortgage. Yufeng Ltd. and Guangdong Branch signed another mortgage loan contract, on which it was stipulated: the term of loan is two years and the annually fixed interest shall be counted at the rate of 6% from the date of signing the contract; the interest for paying in delay is counted in term of compound interest rate; it must be agreed by Guangdong Branch for Yufeng Ltd. to sell the estate under mortgage, i.e. the 3.73-square-meter land lying at West Mingzhu Road, Qianshan, Zhuhai City, before paying off the sum recorded on the loan contract; otherwise, more interest of 20% to 50% shall be collected for the breach. Then, Guangdong Branch deposited the loan of $5,000,000 into the appointed account of Yufeng Ltd. in the light of Notification on Drawing issued by Yufeng Ltd.
On January 30, 1994, Yufeng Ltd. loaned a sum of $2,000,000 and still took the 19,111-square-meter land and the constructions built on the land as the estate under mortgage. In the mortgage loan contract reached by Yufeng Ltd. and Guangdong Branch, it was stipulated: the term of loan is three months and the fixed interest is counted at the rate of 10%; the interest shall be counted in term of compound interest in case the loan is paid in delay. According to the requisition of Yufeng Ltd., two parties signed the extension contract for above mortgage loan on June 20, 1996, in order to extend the term of loan to November 30, 1996.
On September 12, 1994, Yufeng Ltd. applied a loan in foreign exchange from Guangdong Branch and still guarantee with the estate under mortgage that is same with the former contracts. In Loan Contract of Foreign Capital, two parties stipulated: Guangdong Branch loans $1,071,405.34 for three times to Yufeng Ltd. with the term of one year; the interest is counted at the rate of 6-month floating interest, beginning from 8.775%; Guangdong Branch is entitled to collect the fine interest at the rate of 20% to 50% for paying in delay. Then, Guangdong Branch paid the stipulated loan to Yufeng Ltd. on December 22, on December 28 and on January 5, 1994, respectively.
Except for the sum of $460,000 paid off on September 1, 1993, the sum of $817,500 paid off on September 1, 1994, the sum of $151,111.11 paid off on October 30, 1995, which are $1,428,611.11 in total, the residual sum of loan has not been paid off till now.
The fact is also affirmed: On September 1, 1993, Zhuhai Yi??an Development Company (the associated company to Yufeng Ltd., hereinafter referred to as Yi??an Company) issued a receipt to Foushan Jinda Exploitation Industry Company (the enterprise run by Guangdong Branch, hereinafter referred to as Jinda Company), on which the former confirmed to have received the capital of ?¤10,000,000. On December 24, 1993, Yufeng Ltd. issued a guaranty to Guangdong Branch, on which it was said that Yufeng Ltd. loaned a sum of ?¤19,000,000 from Guangdong Branch in order to pay the sum of money for the project ?°YUHUAYUAN?± by mortgaging above project and the project of ?°YUHEQINGJIN?± lying at Qianshan, Zhuhai City, the existing 1,500-square-meter building and the 1,600-square-meter house property of ?°YUYUAN JIUJIA?±, and promised to pay off the loan within 3 months. Nevertheless, Yufeng Ltd. and Guangdong Branch did not sign a loan contract. Yufeng Ltd. received the sum of ?¤19,000,000 the next day and issued a receipt to Jinda Company. On September 1,1994, Yufeng Ltd. issued two receipts to Jinda Company on which it is shown that Jinda Company paid a sum of ?¤4,565,000 as the interest of above sums of money, though Jinda Company did not pay above interest actually.
On July 11, 1994, Guangdong Branch notified Yufeng Ltd. that it agreed Yufeng Ltd. to sell ?°YUHUAYUAN?± lying at the west side of Gongbei Avenue, Zhuhai City, and relevant sum shall be deposited into the appointed account ?°Wanzai Branch of China Bank?±. On August 19, the parties involved in this case signed an agreement for house property sale. It was stipulated in the agreement: Yufeng Ltd. sells the 15,951.36-square-meter area of the project ?°YUHUAYUAN?± to Guangdong Branch with the unit price of ?¤4,800 per square meter, in total ?¤76,566,528; the total sum that Guangdong Branch shall pay to Yufeng Ltd. offsets the sum of ?¤33,656,000 that Guangdong Branch has loaned to Yufeng Ltd. (including the principal of ?¤29,000,000 and relevant interest of ?¤4,656,000), and Guangdong Branch shall pay the residual sum in installment plan to Yufeng Ltd. according to the construction plan of the project ?°YUHUAYUAN?± and the total needed sum after Guangdong Branch checks; Yufeng Ltd. would has paid off all loans and relevant interest after above sum of ?¤33,656,000 is paid off. On the same day, two parties also signed a supplement agreement. It was stipulated: Guangdong Branch entrusts Yufeng Ltd. to sell 136 sets of houses purchased in term of the agreement of sale and opens a special account for depositing all relevant sum of money, among which the sum exceeds the unit price of ?¤7,000 per square meter is put aside to Yufeng Ltd. as the premium; Yufeng Ltd. shall purchase all sets of houses with the unit price of ?¤7,000 per square meter from Guangdong Branch if it fails to sell out before July 30, 1995. Guangdong Branch also issued a guaranty to Jinda Company on the same day. It was written in above guaranty: ?°This branch would provide all sum of money for constructing ?°YUHUAYAN?± in the light of the agreement for house property sale reached between this branch and Yufeng Ltd. Jinda Company is entrusted to put aside all sum of money be stages in order to supervise the management of the sum of money conveniently. This branch would notify Jinda Company to put aside the sum according to the schedule of project. The sum of ?¤19,000,000 and the sum of ?¤10,000,000 that this branch loaned to Yufeng Ltd., together with relevant interest of ?¤4,565,000, are transferred as the loan recorded on this agreement.?± Then, Guangdong Branch entrusted Jinda Company to pay the sum of ?¤10,000,000 on August 22, the sum of ?¤5,883,000,000 on September 12, the sum of ?¤8,000,000 on October 10, the sum of ?¤5,000,000 on December 7, the sum of ?¤20,000,000 on December 29, and the sum of ?¤1,830,000 on April 27, 1995, respectively. The total sum Guangdong Branch paid to Yufeng Ltd. was the sum of ?¤45,418,300, and Yufeng Ltd. issued receipts to Jinda Company respectively. However, Yufeng Ltd. did not pay the sum of money to Guangdong Branch in term of the agreement for house property sale and the supplement agreement after gaining above sum.
On January 10, 1996, Guangdong Branch issued a notification on urging to pay off the overdue principal and relevant interest to Yufeng Ltd., Yi??an Company, Beijing Jiancheng Electrical Lamp-house Ltd. (the associated company to Yufeng Ltd.) and it was affirmed on the list of loan, which was the annex of the notification, that the total sum of money loaned to Yufeng Ltd. was ?¤79,074,300. On December 10, 1996, Guangdong Branch issued another notification on urging to pay off the overdue principal and relevant interest to Yufeng Ltd. and asked Yufeng Ltd. to pay off the principal of $28,071,405.34 and relevant interest of ?¤79,074,300 before December 20, 1996. Otherwise, relevant interest would be collected at the rate of four ten-thousandth per day for US dollar and at the rate of five ten-thousandth per day for RMB from January 1, 1997.
On August 18, 1997, Guangdong Branch brought the litigation to the court of original instance and claimed to decide Yufeng Ltd. to pay off the principal of $28,071,405.34 and relevant interest of $7,570,250.71, the principal of ?¤79,074,300 and relevant interest of ?¤20,400,811.94 (above interest is counted till August 31, 1997) and to decide Guanman Company to take the debt of Yufeng Ltd. within the registered capital of $4,500,000 that it invested to Yufeng Ltd.
The Higher People??s Court of Guangdong holds: Since Guangdong Branch is an organ dealing with banking finance and Yufeng Ltd. is a solely foreign-owned enterprise invested by Guanman Company which is registered in China, the mortgage loan contracts and relevant extension contracts are valid. The registered mortgage of property that Yufeng Ltd. provides to Guangdong Branch in order to obtain the loans is valid, too. Guangdong Branch has paid the loan of $28,071,405.34 respectively to Yufeng Ltd in term of the contracts. However, Yufeng Ltd. fails to pay off the principal and relevant interest after the term of loan expires, excluding the interest of $1,428,611.11. Yufeng Ltd. has breached the contracts and shall bear the liability for breach. Yufeng Ltd. shall pay off the principal of $28,071,405.34 and relevant unpaid interest, and pay the interest counted form January 1, 1997, till the day on which all sum is paid off at the rate of four ten-thousandth per day.
Yufeng Ltd. applies the loans from Guangdong Branch in order to construct the project ?°YUHUAYUAN?± and still guarantees with the estate under mortgage, which has been mortgaged for the loans in foreign exchange, and other relevant property. Guangdong Branch loans the sum of ?¤10,000,000 on September 1 and the sum of ?¤19,000,000 on December 24 respectively in 1993. Yufeng Ltd. also issues the guaranty for promising to pay off the loans. Therefore, the valid jural relation exists between Guangdong Branch and Yufeng Ltd. Then, two parties sign the agreement for house property sale and relevant supplement agreement, which are both valid because the content in above agreements show the true will of two parties and do not violate the provision of law. Two parties agree: Yufeng Ltd. sells the 15,951.36-square-meter area of ?°YUHUAYUAN?± (136 sets in total) to Guangdong Branch. The sum of money that Guangdong Branch shall pay for the house property offsets the sum of ?¤33,656,000 (including principal and relevant interest) of the loans, and the residual sum of ?¤42,910,528 is paid in the form of new loan to Yufeng Ltd. Yufeng Ltd. deposits the sum of money earned by selling above house property into the account appointed by Guangdong Branch. The true will of two parties is to pay off the loans by purchasing the house property instead to replace the relation of loan with the agreement of purchasing house property. Since Yufeng Ltd. does not deposit the sum of money earned by selling the house property into the account appointed by Guangdong Branch, the agreement for house property sale is not performed and the debt of loan still exists. Thus, Yufeng Ltd. is obligate to pay off the principal and relevant interest for the mature loans to Guangdong Branch. Yufeng Ltd. has breached the contract because it does not pay off the sum of ?¤79,074,300 on time and shall bear the liability for breach. The interest for the overdue payment shall be counted at the rate of five ten-thousandth per day. The claim that Yufeng Ltd. is obligate to pay off the principal and relevant interest of all loans shall be supported.
Yufeng Ltd. alleges that Guangdong Branch has obtained the ownership of assets of Yufeng Ltd. in Hongkong and Beijing without consideration, whose value is equal to the principal and relevant interest of the loans, and Guangdong Branch has no right to ask Yufeng Ltd. to pay off the principal and relevant interest of all loans. Since Yufeng Ltd. fails to submit valid evidences, this court does not support the claims. Yufeng Ltd. claims that Guangdong Branch has no right to ask Yufeng Ltd. to pay off the loans because all loans have been transferred as the sum of money for purchasing house property, which does not conform to the fact and lacks legal basis. This court does not support the claim. Yufeng Ltd., being a legal person, has the independent civil capacity and is able to take the debts arising from its own transaction. Guangdong Branch fail to submit evidence for its claim that Guanman Company shall bear the joint and several liability for paying off the debt within the registered capital of $4,500,000. The claim shall be dismissed due to the lack of factual and legal basis. This court hereby decides as follow pursuant to Article 36, Article 84, Clause 2 of Article 89, Article 90, Article 108 of General Principles of Civil Law of the People??s Republic of China, Article 16 of Regulations on Loan Contract: 1. The mortgage loan contract, the extension contract for the term of loan, the loan contract for foreign exchange, the agreement for house property sale and its supplement agreement are all valid; 2. Yufeng Ltd. shall pay off the sum of $28,071,405.34 and relevant interest to Guangdong Branch, excluding the paid interest of $1,428,611.11. The residual interest is counted from the date of obtaining the loan to December 31, 1996, at the stipulated rate. And the interest from January 1, 1997, to the date of paying off is counted at the rate of four ten-thousandth per day; 3. Yufeng Ltd. shall pay off the sum of ?¤79,074,300 and relevant interest to Guangdong Branch. The relevant interest is counted from the date of obtaining the loan to December 31, 1996, at the stipulated rate. And the interest from January 1, 1997, to the date of paying off is counted at the rate of five ten-thousandth per day; 4. The claim against Guanman Company shall be dismissed. Above obligation of payment shall be performed within 10 days from the next day on which the judgment is in effective. The interest of debt shall be collected double in case to pay in delay. Yufeng Ltd. shall bear the sum of ?¤3,329,016.92 in total, including the cost of ?¤1,674,518.46 for this case and the sum of ?¤1,654,498.46 for attachment.
Yufeng Ltd. refuses to accept the judgement and appeals to this court. It alleges: The judgement of original instance is incorrect when affirming the facts and applying the laws. It not only encroaches the appellant??s legal interests and endangers the safety of a great number of state assets but also cumbers the enforcement of several effective judgement made by Zhuhai Intermediate People??s Court to confirm the appellee??s claims. It is obviously unfair to affirm that the appellee has the certificate on property right of the estate under mortgage while to decide the appellant shall bear the charge for attachment. Yufeng Ltd. claims: 1. To withdraw the judgement of original instance and to dismiss the appellee??s claims; 2. To decide the appellee to bear all cost of this case; 3. To decide the appellee to return the unjust enrichment. In the course of the second instance, Yufeng Ltd. alleges: 1. The appellee obtains the property right of the land of Beijing project and other assets without consideration by taking the reason that the loan that the appellee provides to the appellant for the Beijing project (the shortened name for three Chinese and foreign equity joint ventures or Chinese and foreign cooperative joint ventures established and controlled by Jian Yuqiang??s Hongkong Jiancheng Estate Ltd.) exceeds the term of loan. It lacks legal basis for the appellee to obtain the assets of Beijing whose value exceeds the loans in great sum till now and to claim the appellant to pay off the loan. The appellee has no right to ask the creditor??s right and shall return the unjust enrichment; 2. No loan agreement exists between the two parties involved in this case. It is true that the appellant owes the sum of money earned by selling house property. However, above sum of money shall not be defined as the loan or the arrearage after transferring Beijign project. On the contrary, it shall be the sum that has not been settled. Moreover, the sum of ?¤2,507,772 included in the sum of ?¤79,074,300 lacks the contract or any other legal basis; 3. Great difference exists between two notifications. The appellee fakes the latter one in order to support its unreasonable claim. The court of original instance does not examine, which results in the inaccuracy when affirming the nature of the sum of money in RMB and the relation of credit and debt in this case; 4. It is incorrect in the judgement of original instance to affirm the existence of mortgage because the range of original mortgage has been changed when the appellee entrusts the appellant to sell. In the light of the fact that ?°YUHUAYUAN?± has been sold out, the relation of loan and arrearage have been changed into the relation of credit and debt without consideration, and the relation of mortgage has ended. The appellant shall bear the charge of attachment.
Guangdong Branch does not allege in written form. In the course of second instance, Guangdong Branch alleges: 1.The appellant fails to submit affirmed evidence to support its claim that its debt has been paid off. As far as the Beijing project, it is another jural relation independent of this case; 2. The nature of the loan in RMB is a loan which is affirmed by the form of house property sale; 3. The appellee has never cancelled its right to the estate under mortgage. Therefore, the appellee has the right to claim attachment.
This court holds: The four loan contracts in US dollar signed by Yufeng Ltd. and Guangdong Branch are valid because they indicate the true will of two parties and do not violate any provisions of laws in China. Guangdong Branch has loaned the sum of $28,071,405.34 in term of the loan contracts. Yufeng Ltd. shall bear the liability for breach because it does not pay off the principal and relevant interest excluding the interest of $1,428,611.11. Yufeng Ltd. shall pay off above principal and relevant interest to Guangdong Branch and pay stipulated interest in term of the loan contracts. Nevertheless, the decision made in the judgement of original instance according to the content of Notification on Urging the Overdue Principal and Relevant Interest that Yufeng Ltd. shall pay the interest counted by stages shall be corrected due to the lack of factual and legal basis.
Although Yufeng Ltd. and Guangdong Branch do not sign the loan contract in RMB, both parties confirm the relation of loan including the principal of ?¤29,000,000 and relevant interest of ?¤33,656,000 by signing the agreement of house property sale and stipulate the form of paying off above loan by Guangdong Branch purchasing the house property and entrusting to sell the house property at the same time. The true goal for two parties to sign above agreement is to obtain the loan in the form of Yufeng Ltd. selling house property instead to perform the obligation of purchasing and selling house property. Therefore, Guangdong Branch loan the sum of ?¤45,418,300 for six time according to the agreement and its supplement agreement. The two notifications on urging overdue principal and relevant interest issued by Guangdong Branch regard the capital transaction between Guangdong Branch and Yufeng Ltd. as loan, and Yufeng Ltd. does not demur at that time. Since Yufeng Ltd. fails to pay the sum of money earned by selling house property to Guangdong Branch in accordance with the agreement for house property sale and its supplement agreement, above agreements shall be cancelled and Yufeng Ltd. shall be obligate to return the total sum of ?¤79,074,300, including the sum of ?¤33,656,000 before the agreement and the sum of ?¤45,418,300 after the agreement. The interest counted in the judgement of original instance shall be corrected because two parties does not stipulated on the form of paying relevant interest. The interest of the sum of ?¤45,418,300 shall be counted from the actual date of obtain to the actual date of payment at the rate of loan interest announced by China Bank at the same period.
Yufeng Ltd. provides the estate under mortgage when applying the loan in foreign exchange from Guangdong Branch and registers. The four loan contracts shall be valid because they all show the true will of two parties and conform to the provisions on mortgage prescribed in Guaranty Law. In the course of mortgage, Yufeng Ltd. is entrusted by Guangdong Branch to sell all estate under mortgage. It shall be considered that Guangdong Branch give up its hypothec when entrusting to sell the estate under mortgage, and the relation of mortgage shall be ended. Guangdong Branch shall return the certificate on the use of land to Yufeng Ltd. The charge of attachment shall be borne by Guangdong Branch. The claim of Yufeng Ltd. that the appellant shall bear all charge of attachment due to the end to the relation of mortgage shall be supported.
Yufeng Ltd. alleges that the former debt has been cancelled when Guangdong Branch obtains the assets of Beijing project without consideration, that is, the sum obtained by Guangdong Branch is greatly exceeds the sum of debt according to the loan in foreign exchange and the agreement for house property sale. However, Yufeng Ltd. fails to submit the written agreement according to which Beijing project is transferred to Guangdong Branch. The so-called Beijing project is independent of this case, and Yufeng Ltd. shall claim its right in other cases. No evidence exists to show that the relation of credit and debt between Yufeng Ltd. and Guangdong Branch has ended. The appellant??s claim that the assets of Beijing project has offset the debt in this case shall not be supported because of the lack of factual basis.
In sum, the judgement of original instance affirms the fact almost correctly. However, the interest that Yufeng Ltd. shall pay to Guangdong Branch is counted inaccurately and shall be corrected. This court hereby decides as follow pursuant to Item 1 and Item 3 of Clause 1 of Article 153 of Civil Procedure Law of the People??s Republic of China:
1. To change the 1st decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People??s Court of Guangodng into ?°The mortgage loan contract, the extension contract for the mortgage loan and the loan contract for foreign exchange are valid; The agreement for house property sale and its supplement agreement signed by Guangdong Branch and Yufeng Ltd. shall be cancelled?±.
2. To change the 2nd decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People??s Court of Guangodng into ?°Yufeng Ltd. shall pay the sum of $28,071,405.34 and relevant interest (excluded the paid interest of $1,428,611.11, and counted from the date of obtaining the loan to the date of paying actually at the rate of the stipulated interest rate in the loan contract)?±.
3. To change the 3rd decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People??s Court of Guangodng into ?°Yufeng Ltd. shall pay the sum of ?¤79,074,300 and relevant interest (no interest shall be paid for the sum of ?¤4,656,000, the interest of the sum of ?¤29,000,000 is counted from September 1, 1994, to the date of paying actually at the rate of loan interest rate announced by China Bank at the same period, and the interest of the sum of ?¤45,418,300 is counted from the date of obtaining the loan actually to the date of paying actually at the rate of loan interest rate announced by China Bank at the same period)?±.
4. To confirm the 4th decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People??s Court of Guangodng.
The cost of first instance is ?¤1,674,518.46 and shall be borne by Yufeng Ltd.. The charge of attachment of ?¤1,654,498.46 shall be borne by Guangdong Branch. The cost of seconde instance is ?¤1,674,518.46 shall be borne by Yufeng Ltd..
This judgement is final.
Presiding Judge: Li Jian
Judge: Wang Yun
Deputy Judge: Chen Jizhong
Date: February 14, 2001
Court Clerk : Gao Xiaoli
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