CASE LAW NO. 12/2017/AL

On determining the first-time absence of duly summoned litigants after the Court has adjourned the trial

Approved by the Judicial Council of the Supreme People’s Court on December 14^th, 2017, and published under Decision No. 299/QD-CA dated December 28^th, 2017, by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

Cassation Decision No. 14/2017/KDTM-GĐT dated June 6^th, 2017 of the Judicial Council of the Supreme People’s Court regarding the business and commercial case “Sale of goods Contract Dispute” in Quảng Trị Province between the plaintiff, Q Joint Stock Company (represented by legal representative Mr. Đặng Công D, authorized representative Mr. Hồ Nghĩa A), and the defendant, T Limited Liability Company (represented by legal representative Mr. Võ Văn T, authorized representative Ms. Võ Thị T).

Summary of the Case Law:

– Case Background:

The Court decided to adjourn the trial, and the adjournment was not due to the fault of the litigants (plaintiffs, defendants, or interested parties) or their legal or authorized representatives. When the trial resumed, the litigants or their representatives were absent after being duly summoned by the Court.

– Legal Resolution:

In this case, the Court must determine this absence constitutes the first instance of absence for the litigants or their representatives, despite having been duly summoned by the Court.

Related Legal Provisions:

Article 199, Article 202, paragraph 2 of Article 266 of the 2004 Civil Procedure Code (Article 227, Article 228, paragraph 2 of Article 296 of the 2015 Civil Procedure Code).

Keywords:

“Proper summoning”; “First proper summons”; “Litigants absent from trial”; “Adjournment of trial”.

CASE DETAILS

In the plaintiff’s lawsuit filed on November 5^th, 2012; amended complaint filed on May 26^th, 2013, and testimonies presented in court, Q Joint Stock Company (hereinafter referred to as Company Q) stated:

On January 3^rd, 2011, Company Q and T Limited Liability Company (hereinafter referred to as Company T) signed Rubber Seedlings Sales Contract No. 011/2011/HĐKT; on February 23^rd, 2011, both parties continued with Contract No. 021/2011/HĐKT with the same content. The total quantity of seedlings from both contracts was 400,000 rubber seedlings valued at Laotian Kip (LAK) 2,800,000,000 (each contract for 200,000 seedlings, valued at LAK 1,400,000,000). Following the contract signing, Company Q made an advance payment of LAK 930,000,000 to Company T (equivalent to VND 2,511,000,000).

During the course of contract performance, Company T requested to borrow 449,455 trees, which Company Q accepted. These trees were purchased by Company Q from Company V at a rate of VND 6,500 per tree. Company T delivered 40,600 trees to Company Q but still owes 408,855 trees. In the first phase, Company T only delivered 79,924 trees and subsequently failed to fulfill the contract. Despite multiple invitations from Company Q to resolve the issue, Company T did not attend. On October 5^th, 2011, Mr. Võ Văn T sent his daughter, Ms. Võ Thị T, to handle the matter.

To mitigate losses, Company Q conducted a full inventory, finding a total of 194,776 trees as of September 14, 2011, which was the count but not necessarily the actual delivery amount. By the end of the delivery period in September 2011, only 20% of the total amount had been delivered, accounting for 76% of the advance payment received by Company T from Company Q. Therefore, Company Q agreed with Ms. Võ Thị T to send workers to accept and count another batch of 117,833 trees in the second phase, bringing the total delivered to 197,757 Stump trees, equivalent to VND 3,623,897,000.

Additionally, Company Q lent various materials and fertilizers to Company T valued at VND 243,913.211, which have not been returned.

Company T delivered to Company Q 163,376 seedlings for processing, valued at LAK 39,414,000, equivalent to VND 105,629,500; nursery wood worth LAK 20,491,200, equivalent to VND 54,916,000, and an additional VND 18,096,000; for a total of VND 178,641,500. Now, Company Q requests the Court to adjudicate:

– Order Company T to compensate for damages resulting from breach of duty in fulfilling the above contracts, for the remaining 202,243 seedlings (with a monetary value of VND 3,706,102,975). According to the contracts, if breached, penalties amounting to five times the value of the undelivered seedlings, totaling VND 18,530,514,875;

– Order Company T to return 408,855 Stump seedlings borrowed from Company Q, valued at VND 2,657,557,500;

– Order Company T to return borrowed materials including PE bags (18 x 40) totaling 5,170kg, 500kg of Potassium, 1,000kg of DAP, and 2,800kg of urea, with a total value of LAK 91,212,392, equivalent to VND 243,913,210.

During the trial, Company Q only requested an 8% penalty for breach of contract regarding the undelivered seedlings, totaling VND 296,488,000. In total, Company T must pay Company Q VND 3,088,822,500. After deducting the amount Company Q owes to Company T, which is VND 1,367,934,000, Company T must pay Company Q VND 1,720,888,500.

The defendant, T Limited Liability Company, stated:

Confirming the contract details as presented by Company Q. Company T fulfilled its obligations under the contracts, but when the deadline for delivering the seedlings arrived, Company Q postponed acceptance, citing insufficient labor and transportation means to receive the seedlings. Company Q’s representative stated that due to reduced planting areas compared to the previous year’s plan, they were unsure where to plant the seedlings upon receiving them.

Therefore, on July 19^th, 2011, Company Q only accepted the first batch of 79,924 seedlings, and it was not until September 21^st, 2011 that they transported all aforementioned seedlings. Company T repeatedly requested Company Q to accept the remaining seedlings, but Company Q did not comply. By early September 2011, Company Q scheduled a technician to inspect the remaining seedlings on September 14, 2011, for possible use, and to store them at Company T’s nursery until planting plans were finalized.

On September 14^th, 2011, Company Q counted 194,766 seedlings, in addition to the 79,924 seedlings already received, totaling 274,690 seedlings. The delay in accepting the remaining seedlings led to 125,310 seedlings dying. Therefore, for the total of 400,000 seedlings from both contracts, Company T delivered the full amount. Company Q’s failure to accept the seedlings beyond the deadline resulted in their loss. Company T fulfilled its duty to deliver the seedlings under the contracts. Company T has repeatedly requested payment for the remaining amount from the two contracts, but Company Q has refused to pay.

Company Q advanced LAK 930,000,000, equivalent to VND 2,511,000,000, under the 02 contracts. The fertilizers and materials lent by Company Q to Company T totaled LAK 91,212,392 Kip Lao. Thus, Company T’s total obligation to Company Q is LAK 1,021,212,392, equivalent to VND 2,757,273,454.

The total value of the two contracts that Company T has completed is LAK 2,800,000,000. Company Q has received nursery wood from Company T worth LAK 20,491,200 and VND 18,096,000. The PE planting bags that Company Q received from Company T in the first batch are worth LAK 32,865,000, and in the second batch, they are worth LAK 7,875,000. The processing cost for the planting bags is LAK 39,406,291. Thus, the total amount that Company Q is obligated to pay Company T is LAK 2,900,637,491, equivalent to VND 7,831,721,225. After offsetting the obligations of both parties, Company T counter-sued, requesting Company Q to pay LAK 1,879,425,009 (equivalent to VND 5,074,447,767) and VND 18,096,000. The total is VND 5,092,543,767.

At the trial, Company T only requested payment for the following amounts:

– The value of 400,000 seedlings delivered as per the contract is LAK 1,870,000,000 (after deducting the advance payment of LAK 930,000,000 by Company Q), equivalent to VND 4,895,288,000;

– The value of the nursery wood is LAK 20,491,200, equivalent to VND 53,642,000 and VND 18,096,000;

– The value of 163,376 planting bags is LAK 39,414,000, equivalent to VND 103,158,000. In total, Company T is requesting Company Q to pay VND 4,967,026,000;

– Regarding the 449,455 trees borrowed by Company T from Company Q, 40,600 trees have been returned, leaving 408,855 trees. Company T agrees to return these in kind and does not accept payment in cash.

In the First-instance Business and Commercial Judgment No. 08/2013/KDTM-ST dated September 4^th, 2013, the People’s Court of Quảng Trị Province ruled:

Apply Clause 1 of Article 34, Clause 1 of Article 35, Clause 1 of Article 37, Article 54, 55, 56, 300, 301 of the 2005 Commercial Law; Clause 1 of Article 131 of the Civil Procedure Code; Clause 4, Clause 5 of Article 27 of the Ordinance on Court fees and charges:

– Accept the plaintiff’s claim: Order the defendant, T Limited Liability Company, to pay the plaintiff, Joint Stock Company Q, the amount of VND 1,720,888,500.

– Reject the counterclaim of the defendant for the amount of VND 3,602,837,000.

The court of first instance also ruled on court fees and the right to appeal of the parties concerned.

On September 4^th, 2013, Company T filed an appeal against the entire first-instance judgment.

On October 1^st, 2013, the Chief Prosecutor of Quảng Trị Provincial People’s Procuracy issued Decision No. 2110/QDKNPT-P12 to protest the first-instance judgment No. 08/2013/KDTM-ST dated September 4^th, 2013 of the People’s Court of Quảng Trị Province.

In the Appellate Business and Commercial Judgment No. 19/2014/KDTM-PT dated February 26^th, 2014, the Appellate Court of the Supreme People’s Court in Da Nang ruled:

– Suspend the appellate trial regarding the appeal of the defendant, Limited Liability Company T.

– Reject the Decision No. 2110/QDKNPT-P12 dated October 1^st, 2013 of the Chief Prosecutor of Quảng Trị Provincial People’s Procuracy. Uphold the  first-instance judgment.

After the appellate trial, Company T filed a motion for cassation review of the above-mentioned Appellate Business and Commercial Judgment.

In the Cassation Decision No. 01/2017/KN-KDTM dated February 24^th, 2017, the Chief Justice of the Supreme People’s Court appealed against the Appellate Business and Commercial Judgment No. 19/2014/KDTM-PT dated February 26^th, 2014 of the Appellate Court of the Supreme People’s Court in Da Nang, requesting the Judicial Council of the Supreme People’s Court to vacate the above-mentioned Appellate Business and Commercial Judgment and the First-Instance Business and Commercial Judgment No. 08/2013/KDTM-ST dated September 4^th, 2013 of the People’s Court of Quảng Trị Province; remand the case file to the People’s Court of Quảng Trị Province for first-instance retrial in accordance with the legal procedures.

At the cassation session, the representative of the Supreme People’s Procuracy requested the Judicial Council of the Supreme People’s Court to accept the appeal of the Chief Justice of the Supreme People’s Court.

COURT’S OPINION:

[1] Regarding procedural matters: At the appellate trial session on November 26th, 2013, all parties appeared as summoned. However, the court adjourned to permit the submission of additional evidence. When the appellate trial reconvened on February 26th, 2014, the defendant and their counsel were absent. In this scenario, the defendant’s absence should have been deemed their first non-appearance, as the initial adjournment was for evidence submission, not attributable to the defendant.

In accordance with Articles 199 and Clause 2, Article 266 of the Civil Procedure Code, the appellate court should have recognized the defendant’s initial summons and first absence, then adjourned accordingly. However, the appellate court erred in concluding that the defendant’s February 26th absence constituted their second non-appearance. This led to an improper suspension of the appellate trial concerning the defendant’s appeal, contravening Articles 199, 202, and 266 of the Civil Procedure Code. Consequently, the defendant was unjustly denied their right to appeal, adversely affecting their legal rights and interests.

[2] Regarding the determination of faults of the parties: According to Article 3 of the Contract for the Purchase and Sale of Rubber Seedlings dated January 3^rd, 2011, the parties agreed that by July 31^st, 2011 at the latest, Party B (Company T) must deliver a quantity of 200,000 up-to-standard seedlings to Party A (Company Q). 

At the meeting session on July 15^th, 2011 between Mr. Hồ Duy L, an employee of the Agricultural Technical Department of Company Q, and Ms. Võ Thị T representing Company T regarding the inspection and evaluation of the quality of seedlings at the collection field until July 15^th, 2011, the results were recorded as follows: “Stump, seedling with leaves moved to the field 15,550 stumps; Stump, seedling with leaves moved to the field achieved from 2-3 layers of leaves or more; stable leaf layer, good quality Stump, seedling with leaves.”

From July 15^th, 2011 to July 31^th, 2011 (the last day to implement the delivery according to the contract), neither party delivered nor received seedlings, nor was there any agreement in writing to extend the delivery period. Company Q argued that Company T’s failure to have more than 15,550 seedlings of acceptable quality by July 15^th, 2011, rendered them unable to deliver the required 400,000 seedlings by July 31^st, 2011, thereby constituting a breach of contract. Conversely, Company T argued that Company Q only accepted 3,268 seedlings by July 31^st, 2011 (despite Company T having 15,550 seedlings ready for delivery), thus placing the breach of contract on Company Q.

[3] At the appellate court session on November 26^th, 2013, Company Q explained the reason: by July 31^st, 2011 (the final date for the delivery and acceptance of the seedlings according to the contract), Company Q did not document the delivery and acceptance of seedlings, and in September 2011, they continued to fulfill the contract by accepting seedlings because Company T had inspected, but Company T only delivered over 79,000 seedlings. The remaining quantity did not meet the contractual standards for delivery, so Company Q agreed to extend the delivery period to offset debts and allowed Company T to continue caring for the seedlings to meet the delivery standards.

Additionally, Mr. H (Head of the Agricultural Technical Department of Company Q – a witness) explained that the reason Company Q only received 3,000 seedlings by July 31^st, 2011, was due to Company Q having only 03 vehicles (02 Kazma and 01 Isuzu) during the rainy season in Laos, which made transportation difficult despite Ms. T’s call for Company Q to collect the seedlings.

[4] Given these circumstances, it’s evident that both parties entered into a contract specifying a delivery period for the seedlings from June 30th, 2011, to July 31st, 2011, with a total quantity of 200,000 seedlings (400,000 under both contracts). However, by July 15^th, 2011, while Company T had 15,500 seedlings ready for delivery, Company Q only accepted 3,200 due to adverse weather conditions, including rain and muddy roads, coupled with limited transportation capacity (only three vehicles). 

Although not formally documented, by October 5^th, 2011, Company Q implicitly agreed to an extension of the delivery period, committing to receive all remaining seedlings within 12 days. As of September 21^st, 2011, Company Q had received 79,924 seedlings, and both parties continued the delivery and acceptance process through October 24^th, 2011. (This is evidenced by the Seedling Delivery Report on October 24^th, 2011, which confirms the delivery of 83,867 high-quality PB260 seedlings with two-tier leaf structures between October 6th and October 24^th, 2011). 

Therefore, there is sufficient basis to conclude that both Company T and Company Q share responsibility for the delays in seedling delivery and acceptance. The lower courts’ determination that Company T was solely at fault and the subsequent application of the maximum penalty rate under Article 301 of the Commercial Law (8%) was inappropriate. The degree of fault attributable to each party should be reassessed to determine the correct penalty.

[5] Regarding the borrowed seedlings: the case file lacks a formal agreement between the parties, yet both acknowledge that Company Q lent 449,455 seedlings to Company T, of which 40,600 have been returned, leaving an outstanding balance of 408,855 seedlings. Company T asserts having sufficient seedlings for return and agrees to do so in kind, rejecting a cash conversion.

Conversely, Company Q argues for cash compensation since Company T cannot return seedlings of the same type. Based on Articles 471 and 474 of the 2005 Civil Code on loan contracts and Article 514 on borrowing contracts, which collectively stipulate the borrower’s obligation to repay the lender in kind, it was remiss of the lower courts to not assess Company T’s capacity to return the seedlings in kind. Only if Company T is unable to return seedlings of the same type should they be required to compensate in cash.

In light of the foregoing,

DECISION:

Pursuant to Clause 2, Article 337, Clause 3, Article 343, and Article 345 of the Civil Procedure Code 2015; Resolution No. 103/2015/QH13 dated November 25, 2015, of the National Assembly on the implementation of the Civil Procedure Code.

1. Accept the Cassation Decision, dated February 24^th, 2017, No. 01/2017/KN-KDTM, of the Chief Justice of the Supreme People’s Court against the Appellate Business and Commercial Judgment No. 19/2014/KDTM-PT, dated February 26^th, 2014 of the Appellate Court of the Supreme People’s Court in Đà Nẵng regarding the business and commercial case “Sale of goods Contract Dispute” between the plaintiff, Joint Stock Company Q, and the defendant, Limited Liability Company T.
2. Vacate the Appellate Business and Commercial Judgment No. 19/2014/KDTM-PT, dated February 26^th, 2014 of the Appellate Court of the Supreme People’s Court in Đà Nẵng and the First-instance Business and Commercial Judgment No. 08/2013/KDTM-ST dated September 4^th, 2013, of the People’s Court of Quảng Trị Province.
3. Remand the case file to the People’s Court of Quảng Trị Province for first-instance retrial according to the correct procedures stipulated by law.

CONTENT OF THE CASE LAW:

“[1] Regarding procedural matters: At the appellate trial session on November 26th, 2013, all parties appeared as summoned. However, the court adjourned to permit the submission of additional evidence. When the appellate trial reconvened on February 26th, 2014, the defendant and their counsel were absent. In this scenario, the defendant’s absence should have been deemed their first non-appearance, as the initial adjournment was for evidence submission, not attributable to the defendant. In accordance with Articles 199 and Clause 2, Article 266 of the Civil Procedure Code, the appellate court should have recognized the defendant’s initial summons and first absence, then adjourned accordingly. 

However, the appellate court erred in concluding that the defendant’s February 26th absence constituted their second non-appearance. This led to an improper suspension of the appellate trial concerning the defendant’s appeal, contravening Articles 199, 202, and 266 of the Civil Procedure Code. Consequently, the defendant was unjustly denied their right to appeal, adversely affecting their legal rights and interests.”

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