CASE LAW NO. 39/2020/AL

On conditional civil transaction rendered null and void due to the impossibility of fulfilling the contract’s condition

Approved by the Judicial Council of the Supreme People’s Court on August 13^th, 2020, and published under Decision No. 276/QĐ-CA dated October 2^nd, 2020, by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

The Cassation Decision No. 29/2019/DS-GĐT dated November 12^th, 2019, of the Judicial Council of the Supreme People’s Court regarding the case “Residential House Lease Contract Dispute” in Hồ Chí Minh City between the plaintiff Mr. Trần Vân C and the defendants Mr. Nguyễn Công H, Mrs. Trần Thị C1, and One-member Limited Liability Tourism Company T; interested parties including 03 people.

Location of the Case Law’s Content:

Paragraph 1 of the “Court’s Opinion” section.

Summary of the Case Law:

– Case Background:

The lessee of a state-owned house, made a commitment that upon purchasing that state-owned house, they would transfer ownership to the buyer. The seller received payment and handed over the house to the buyer. Nevertheless, subsequently, the state then reversed the decision to sell said state-owned house and refused to recognize the house ownership rights.

– Legal Resolution:

In this case, the court must determine that the contract for the transfer of house ownership rights is a conditional civil transaction but rendered null and void due to the impossibility of fulfilling the contract’s condition.

Relevant Legal Provisions:

– Article 23 of the Civil Contracts Ordinance 1991 (corresponding to Article 406(6) of the Civil Code 2005, Article 402(6) of the Civil Code 2015);

– Article 21 of the Housing Law 2005 (corresponding to Article 10 of the Housing Law 2014);

– Article 256 of the Civil Code 2005 (corresponding to Article 166 of the Civil Code 2015).

Keywords:

“Conditional civil transaction”; “Condition not occurring”; “Null and void transaction”.

CASE DETAILS

In the Complaint filed on June 27^th, 2003, by Mr. Trần Vân C and the Petition for inheritance of litigation rights and obligations on April 26^th, 2011, by Mrs. Lê Thị Minh C2, Mr. Lê Minh S, Mr. Lê Minh Đ, Mr. Lê Minh T2, and during the case proceedings, the plaintiffs, represented by Mrs. Lê Thị Minh C2, presented:

In 1982, the family of Mr. Nguyễn Viết L (deceased in 1985) and Mr. Trần Vân C (deceased in 2011), along with their three children Mr. Lê Minh S, Mr. Lê Minh Đ, Mr. Lê Minh T2, were granted by the State Bank of Vietnam the ground floor of the house located at 182 A Street, B Ward, D District, Hồ Chí Minh City. In May 1989, Mr. C allowed the Branch of Tourism Company T to lease a part of the house with an area of 50.85m², located at the corner of A-Đ Streets, to open a general service store.

Mrs. C1 at that time acted as the store manager, with her husband Mr. Nguyễn Công H, directly managing and representing the Branch of Tourism Company T to pay rent. In June 1989, they paid 2.3 maces of 24K gold, and from July 1989 to December 1992, they paid 75 maces of 24K gold, with the first installment on July 10^th, 1989, being 35 maces of 24K gold, and the second installment on September 1^st, 1989, being 40 maces of 24K gold. In total, Mr. C received 7.5 taels of 24K gold.

In December 1989, due to ineffective business operations, the Branch of Tourism Company T continued to allow Mrs. C1 to manage and pay rent until the end of February 2002. From March 2002 until now, Mrs. C1 and Mr. H have continued to occupy this area without paying rent, part of which is currently used by Mrs. T1, and part by Mrs. K.

During Mrs. C1 and Mr. H’s use, they carried out construction and repairs on the disputed area, valued at VND 1,427,421,900 according to the valuation report dated January 22^nd, 2014. The plaintiffs now request the court to adjudicate in accordance with the law. Regarding Contract No. 05 signed on May 20^th, 1989, with the Branch of Tourism Company T, the plaintiffs did not request resolution and withdrew the demand to compel One-member Limited Liability Tourism Company T to pay 1.48 taels of 24K gold as rent.

Since there has been no property purchase and no longer a tenancy relationship between two parties, the plaintiffs requested the court to declare the cancellation of the commitment made by Mr. Trần Vân C and Mrs. Trần Thị C1 on July 10^th, 1989; compelling Mrs. C1 and Mr. H to immediately return the premises currently occupied. They agreed to reimburse Mrs. C1 and Mr. H for renovation costs of VND 64,105,000.

The defendants, Mr. Nguyễn Công H and Mrs. Trần Thị C1, stated the following:

In 1989, Mr. H and Mrs. C1 transferred a portion of the area of approximately 40m² within house 182 A Street, D District of Mr. Trần Vân C for 7.5 taels of 24K gold. Both parties made a handwritten sale agreement on July 10^th, 1989. Mr. H and Mrs. C1 delivered this amount of gold to Mr. C, and later added 05 maces, totaling the sale price to 08 taels of 24K gold. The transferred area is located at the corner of A-Đ Streets.

At that time, Mr. C was leasing the house from the State Bank of Vietnam, so they could not obtain ownership rights, hence they only wrote a handwritten agreement without signing a sales contract. Later, Mr. H and Mrs. C1 transferred to Mrs. Trần Thị Kim T1 a portion of the house with an area of about 16m², with only the oral agreement. Around 2005, Mr. H and Mrs. C1 collaborated in business with Mrs. Lương Thị K in the above area.

According to the commitment agreement between the parties in the handwritten document dated July 10^th, 1989, whenever the State allows Mr. C to purchase the house, Mr. H and Mrs. C1 must pay for the portion of the transferred area, and Mr. C is responsible for transferring ownership of the transferred area to Mr. H and Mrs. C1. Simultaneously, based on the Land Law of 2003, since Mr. H and Mrs. C1 have used the house and land for over 25 years, they are entitled to recognition of their rights to use the land and house, thereby demanding recognition of the house transfer under the Commitment Document dated July 10^th, 1989, as this constitutes a conditional civil transaction.

The successors of Mr. C’s rights and obligations requesting the return of house have no basis, as per the House Ownership Certificate, Mr. C only owns 167m², and therefore lacks ownership over the disputed area, thus lacking standing to sue. Mr. H and Mrs. C1 do not accept this. Due to the expiration of the dispute from 1989, the request to suspend the case is warranted.

The partial transfer of the area to Mrs. T1 and the business cooperation with Mrs. K do not require resolution. During their use, Mr. H and Mrs. C1 renovated the house, incurring repair costs amounting to VND 64,105,000 according to the itemized bill. Should the court not recognize the house transfer, reimbursement of these renovation costs is required.

The defendant, One-member Limited Liability Tourism Company T represented by Mr. Nguyễn Văn T3, stated the following:

One-member Limited Liability Tourism Company T is the parent company of the Branch of Tourism Company T. During 1989, under Director Nguyễn S1, the Branch was dissolved in 1990. The facts were, the Branch signed a collaboration contract with Mr. Trần Vân C without reporting to the parent company and before the Branch’ dissolution there were no debts being transferred.

Therefore, Tourism Company T had no basis to address Mr. C’s house rent claims. Mr. C’s successors do not seek resolution regarding Contract No. 05 dated May 20^th, 1989, with the Branch of Tourism Company T and have withdrawn their 1.48 taels of 24K gold house rent claim, so One-member Limited Liability Tourism Company T has no further comments. One-member Limited Liability Tourism Company T requests that case be adjudicated as per legal provisions and Mr. T3 requests to be absent from the case proceedings.

Mrs. Trần Thị Kim T1, a interested party, presented the following:

In 1989, Mrs. T1 bought from Mrs. C1 a portion of house No. 182 on A Street, B Ward, D District, Hồ Chí Minh City, approximately 16m² for 04 taels of gold, without formal documentation. Mrs. T1 now requests Mr. C to undertake the ownership transfer procedures for Mr. H and Mrs. C1. The disputed area among the parties is communal space within 182 A Street, B Ward, D District, Hồ Chí Minh City, which Mr. C does not own and thus lacks standing to litigate.

Mrs. Lương Thị K, a interested party, presented the following:

On April 1^st, 2005, Ms. K collaborated in business with Mrs. C1, holding a business license at 182 A Street, B Ward, D District, Hồ Chí Minh City, unaware of the house’s legal status. Mr. C and Mrs. C1’s dispute does not concern her, and she has no requests. Regarding her collaboration with Mrs. C1, both parties resolved the matter independently.

Mrs. Phạm Thúy H1, representing Property Management Company N, a interested party, presented the following:

Property Management Company N sold house No. 182 on A Street, B Ward, D District, Hồ Chí Minh City in 2001, with prior verification of usage by each household. As per the report, the disputed house and land usage falls under the owner (the deceased Mr. C)’s right of use until the State reclaims for road expansion. Mr. C’s acts of accommodation, leasing, and transfer contradict regulations, hence Property Management Company N disagrees. Company N requesting the case be adjudicated as per legal provisions.

In First-instance Civil Judgment No. 28/DS-ST dated July 27^th, 2006, the People’s Court of District 3, Hồ Chí Minh City decided:

– Nullify the commitment dated July 10^th, 1989, between Mr. C and Mr. H, Mrs. C1.

– Mr. H, Mrs. C1, Mrs. T1, Mrs. K are responsible for returning to Mr. C a portion of the ground floor of house 182 A Street, B Ward, D District, Hồ Chí Minh City with an area of 50.85m².

– Mr. C is to reimburses Mr. H, Mrs. C1 08 taels of gold received plus 27.49 taels of gold in damages plus 64,105,000 VND for renovations, totaling 35.49 taels of gold and 64,105,000 VND.

Both the plaintiff and defendant have filed appeals.

In Appellate Civil Judgment No. 188/2007/DS-PT dated February 7^th, 2007, the People’s Court of Hồ Chí Minh City decided:

Amend part of the First-Instance Judgment:

Recognize the house purchase contract between Mr. Trần Vân C and Mr. Nguyễn Công H, Mrs. Trần Thị C1 under the commitment dated July 10^th, 1989.

Mr. C is responsible for transferring house ownership to Mr. H, Mrs. C1. 

Mr. H, Mrs. C1 are to reimburse Mr. C the amount of VND 169,432,000.

In Decision No. 138/QD-KNGDT-V5 dated November 13^th, 2007, the Chief Procurator of the Supreme People’s Procuracy appealed the above-mentioned Appellate Civil Judgment.

In Decision No. 01/2008/DS-GĐT dated January 25^th, 2008, the Civil Court of the Supreme People’s Court decided: to vacate the First-Instance Civil Judgment No. 28/DS-ST dated July 27^th, 2006 of the People’s Court of District 3 and the Appellate Civil Judgment No. 188/2007/DS-PT dated February 7^th, 2007 of the People’s Court of Hồ Chí Minh City; and remand the case file to the People’s Court of District 3 for first-instance trial.

In the First-Instance Civil Judgment No. 12/2014/DS-ST dated April 16^th, 2014, the People’s Court of District 3, Hồ Chí Minh City decided: to accept some of the requests of the inheritors of the rights and obligations of Mr. Trần Vân C.

– Declare the commitment regarding the transfer of the right to use a part of house No. 182, A Street, B Ward, D District, Hồ Chí Minh City signed on July 10^th, 1989 between Mr. Trần Vân C and Mrs. Trần Thị C1 null and void.

– Oblige the inheritors of the rights and obligations of Mr. Trần Vân C, namely Mrs. Lê Thị Minh C2, Mr. Lê Minh S, Mr. Lê Minh D, Mr. Lê Minh T2, to reimburse Mr. Nguyễn Công H, Mrs. Trần Thị C1 the received 08 maces of 24K gold, equaling VND 276,320,000.

– Oblige the inheritors of the rights and obligations of Mr. Trần Vân C, namely Mrs. Lê Thị Minh C2, Mr. Lê Minh S, Mr. Lê Minh D, Mr. Lê Minh T2, to reimburse Mr. Nguyễn Công H, Mrs. Trần Thị C1 the construction and repair expenses for the house totaling VND 64,105,000.

– Oblige the inheritors of the rights and obligations of Mr. Trần Vân C, namely Mrs. Lê Thị Minh C2, Mr. Lê Minh S, Mr. Lê Minh D, Mr. Lê Minh T2, to compensate Mr. Nguyễn Công H, Mrs. Trần Thị C1 an amount of VND 575,550,950 in damages.

– Oblige Mr. Nguyễn Công H, Mrs. Trần Thị C1, Mrs. Trần Thị Kim T1, Mrs. Luong Thi K to return to the inheritors of the rights and obligations of Mr. Trần Vân C, namely Mrs. Lê Thị Minh C2, Mr. Lê Minh S, Mr. Lê Minh D, Mr. Lê Minh T2 the area of the house and land in house No. 182, A Street, B Ward, D District, Hồ Chí Minh City, including: Area of the main house with upper floor, compliant with planning is 8.11m² plus the area of house and land within the public right-of-way is 42.74m².

The first-instance court also decided on court fees and the right to appeal of the parties.

On April 24^th, 2014, Mr. Nguyễn Công H, Mrs. Trần Thị C1, Mrs. Trần Thị Kim T1 filed an appeal.

On April 28^th, 2014, Mrs. Lê Thị Minh C2 filed an appeal.

In Appellate Civil Judgment No. 1515/2014/DS-PT dated December 1^st, 2014, the People’s Court of Hồ Chí Minh City decided:

Reject the appeals of Mrs. Lê Thị Minh C2, Mrs. Trần Thị C1, Mr. Nguyễn Công H, and Mrs. Trần Thị Kim T1, upholding the first-Instance Civil Judgment.

The appellate court also decided on court fees.

After the appellate trial, the defendants, Mr. Nguyễn Công H, Mrs. Trần Thị C1 filed a request for review under cassation procedure regarding Appellate Civil Judgment No. 1515/2014/DS-PT dated December 1^st, 2014.

In the Appeal Decision No. 38/KNGĐT-VC3-V2 dated March 21^st, 2016, the Chief Prosecutor of the High People’s Procuracy of Hồ Chí Minh City lodged a protest against the Appellate Civil Judgment No. 1515/2014/DS-PT dated December 1^st, 2014 of the People’s Court of Hồ Chí Minh City;

proposed that the Judicial Committee of the High People’s Court of Hồ Chí Minh City to conduct a cassation trial in order to vacate the aforementioned Appellate Civil Judgment and the First-instance Civil Judgment No. 12/2014/DS-ST dated April 16^th, 2014 of the People’s Court of District 3, Hồ Chí Minh City; remand the case file to the first-instance level court for first-instance trial.

In the Cassation Decision No. 234/2016/DS-GĐT dated September 9^th, 2016, the Judicial Committee of the High People’s Court of Hồ Chí Minh City decided:

Reject the Appeal No. 38/KNGĐT-VC3-V2 dated March 21^st, 2016 from the Chief Prosecutor of the High People’s Procuracy of Hồ Chí Minh City, upholding the Appellate Civil Judgment No. 1515/2014/DS-PT dated December 1^st, 2014 of the People’s Court of Hồ Chí Minh City.

On January 21^st, 2017, Mr. Nguyễn Công H, Mrs. Trần Thị C1, Mrs. Trần Thị Kim T1 filed a request for review under cassation procedure regarding the Cassation Decision No. 234/2016/DS-GĐT dated September 9^th, 2016.

In Cassation Appeal Decision No. 56/2019/KN-DS dated August 5^th, 2019, the Chief Justice of the Supreme People’s Court appealed against the Cassation Decision No. 234/2016/DS-GĐT dated September 9^th, 2016 of the Judicial Committee of the High People’s Court of Hồ Chí Minh City; 

proposing that the Judicial Council of the Supreme People’s Court to conduct a cassation trial in order to vacate the Cassation Decision No. 234/2016/DS-GĐT dated September 9^th, 2016 of the Judicial Committee of the High People’s Court of Hồ Chí Minh City, vacate the Appellate Civil Judgment No. 1515/2014/DS-PT dated December 1^st, 2014 of the People’s Court of Hồ Chí Minh City and First-Instance Civil Judgment No. 12/2014/DS-ST dated April 16^th, 2014 of the People’s Court of District 3, Hồ Chí Minh City; remand the case file to the People’s Court of District 3, Hồ Chí Minh City for first-instance trial in accordance with the law.

In the cassation session, the representative of the Supreme People’s Procuracy concurred with the Cassation Decision of the Chief Justice of the Supreme People’s Court.

COURT’S OPINION:

[1] According to the case file and evidence, on July 10th, 1989, Mr. Trần Vân C and Ms. Trần Thị C1 entered into a Commitment Agreement and a Receipt. The agreement stated that Mr. C received 75 maces of gold from Mrs. C1 and her husband, in exchange for granting Mrs. C1 full rights to use a 45m² area in the property located at 182 A Street, B Ward, D District, Hồ Chí Minh City. Mr. C will not regain ownership of the house, and Mr. and Mrs. C1 will not regain possession of the gold.

When the State grants permission to Mr. C to buy the house, Mr. H and Mrs. C1 are required to pay the price for the portion of the property they are utilizing, and Mr. C is responsible for transferring the ownership rights of that portion to Mr. H and Mrs. C1. Therefore, it has been confirmed that Mr. C has agreed to sell a part of the house located at 182 A Street, which is currently being leased from the State, to Mrs. C1. However, this sale is conditional upon Mr. C being granted permission by the State to purchase the property. Only when this permission is granted will the transaction become effective.

Article 23 of the 1991 Civil Contract Ordinance stipulates: “In cases where parties agree on an event as a condition for performance or termination of a contract, when that event occurs, the contract must be performed or terminated.” While the agreed condition in the contract does not violate any laws or ethical standards, it is important to note that the portion of Mr. C’s property, measuring 42.74m², which was supposed to be transferred to Mrs. C1, is located within the public right-of-way.

This means that the State did not provide permit that area to be sold and did not officially recognize Mr. C’s ownership or land use rights. As a result, most of the agreed conditions could not be fulfilled. Hence, the agreement between Mr. C and Mrs. C1 did not come into force, and the rulings of the first-instance and appellate courts to invalidate the agreement were justified.

[2] According to Article 21 of the Housing Law 2005, point h, Clause 1 of Article 10 of the Housing Law 2014, and Article 256 of the Civil Code 2005, property owners and other entities with property rights have the legal right to request the return of their property from individuals who are in possession, using, or benefiting from it without a valid legal reason. Mr. C and his heirs do not have the legal right to file a lawsuit in order to regain ownership of the 42.74m2 land area within the public right-of-way.

The State has not allowed the sale of this land and does not recognize Mr. C’s ownership or land use rights. The rulings of the first-instance and appellate courts, which ordered Mr. H, Mrs. C1, Mrs. T1, and Mrs. K to return the portion of the house and land situated in the public right-of-way to the rightful inheritors of Mr. C’s litigation rights and obligations, were found to lack legal justification. This is because the State did not recognize the ownership of the house and the rights to use the land in question.

The Judicial Committee of the High People’s Court of Hồ Chí Minh City, in the Cassation Decision, found no mistakes in the decisions made by the court of first instance and the appellate court. As a result, it dismissed the appeal made by the Chief Prosecutor of the High People’s Procuracy of Hồ Chí Minh City and upheld the appellate judgment. This ruling contradicts the stipulations outlined in Clause 2 of Article 345 of the Civil Procedure Code 2015.

In light of the foregoing,

IT IS DECIDED:

Pursuant to Clause 2 of Article 337, Clause 3 of Article 343, and Clause 2 of Article 345 of the Civil Procedure Code 2015;

1. To accept the Cassation Appeal Decision No. 56/2019/KN-DS dated August 5^th, 2019 of the Chief Justice of the Supreme People’s Court.
2. To vacate the Cassation Decision No. 234/2016/DS-GĐT dated September 9^th, 2016 of the Judicial Committee of the High People’s Court of Hồ Chí Minh City, vacate the Appellate Civil Judgment No. 1515/2014/DS-PT dated December 1^st, 2014 of the People’s Court of Hồ Chí Minh City and First-Instance Civil Judgment No. 12/2014/DS-ST dated April 16^th, 2014 of the People’s Court of District 3, Hồ Chí Minh City regarding the case “Residential House Lease Contract Dispute” in Hồ Chí Minh City between the plaintiff Mr. Trần Vân C (deceased on April 2^nd, 2011); the inheritors of rights and obligations of Mr. C being Mrs. Lê Thị Minh C2, Mr. Lê Minh S, Mr. Lê Minh Đ, Mr. Lê Minh T2 and the defendants Mr. Nguyễn Công H, Mrs. Trần Thị C1; and other interested parties.
3. To remand the case file to the People’s Court of District 3, Hồ Chí Minh City, for first-instance trial in accordance with legal procedures.

CONTENT OF THE CASE LAW:

“[1] … Thus, it is established that Mr. C agreed to conditionally sell a portion of the house at 182 A Street, currently leased from the State, to Mrs. C1, with the condition that when Mr. C is permitted by the State to purchase the house at a subsidized price, the transaction will become effective.

Article 23 of the 1991 Civil Contract Law stipulates: ‘In cases where parties agree on an event as a condition for performance or termination of a contract, when that event occurs, the contract must be performed or terminated.’ Although the agreed condition in the contract does not violate legal prohibitions or social ethics, regarding the portion of Mr. C’s real estate agreed to be transferred to Mrs. C1, measuring 42.74m2 and situated within the public right-of-way, since the State did not subsidize the area and did not recognize Mr. C’s ownership rights or land use rights, the majority of the conditions did not materialize.

Therefore, the agreement between Mr. C and Mrs. C1 did not become effective, and the decisions of the court of first instance and appellate court to annul the agreement were well-founded.”

If you need more consulting, please Contact Us at TNHH NT International Law Firm (ntpartnerlawfirm.com)

You can also download the .docx version here.