CASE LAW NO. 55/2022/AL On the Recognition of the Validity of Contracts that Violate Formality Conditions (Please note that this image is not related to the specific case being discussed).

CASE LAW NO. 55/2022/AL

On the Recognition of the Validity of Contracts that Violate Formality Conditions

Approved by the Judicial Council of the Supreme People’s Court on September 7^th, 2022, and published under Decision No. 323/QD-CA on October 14^th, 2022, by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

The Appellate Civil Judgment No. 16/2019/DS-PT dated March 19^th, 2019, of the People’s Court of Quảng Ngãi Province regarding the case of “Land Use Rights Transfer Contract Dispute” between the plaintiff Mr. Võ Sĩ M and the defendant Mr. Đoàn C; the interested parties including 05 people.

Location of the Case Law’s Content:

Paragraph 6 of the “Court’s Opinion” section.

Summary of the Case Law:

– Case Background:

The contract for the transfer of land use rights was established before January 1^st, 2017, without notarization/certification, but the transferee has fulfilled 2/3 of their obligations.

– Legal Resolution:

In this case, the Court recognizes the validity of the contract.

Relevant Legal Provisions:

– Article 129, Clause 1 of Article 502, and Point b Clause 1 of Article 688 of the 2015 Civil Code;

– Point a Clause 3 of Article 167, Clause 1 of Article 188 of the 2013 Land Law.

Keywords:

“Transfer of land use rights”; “Not notarized/certified”; “Fulfillment of 2/3 obligations”; “Recognition of contract validity”.

CASE DETAILS

In the complaint dated April 18^th, 2017, amended and supplemented on June 6^th, 2017, the written statements and at the first-instance trial, the plaintiff Mr. Võ Sĩ M and Mrs. Phùng Thị N presented the followings:

The plaintiffs and the defendants, Mr. Đoàn C, Mrs. Trần Thị L, are relatives. In 2009, due to their need for funds to construct a house for their son, Mr. Đoàn Tấn L1, the defendants agreed and entered into a contract with the plaintiffs to transfer land use rights. The specific land area transferred was part of lot B from the defendants’ land, allocated by the State for resettlement purposes in Village H area, following the State’s acquisition of the defendants’ land. The agreed price for this transfer was VND 90,000,000, which the plaintiffs paid in full to the defendants.

In 2011, the State demarcated the boundaries of the land allocated to the defendants into three adjacent lots along the frontage. Subsequently, the defendants and Mr. Đoàn Tấn L1 requested an additional VND 30,000,000 from the plaintiffs, citing the higher price of the frontage land. The plaintiffs agreed to pay an additional VND 20,000,000 immediately, with the remaining VND 10,000,000 to be paid upon completion of the transfer procedures. At this juncture, the defendants showed the plaintiffs the position and boundaries of the transferred land.

While awaiting the completion of transfer procedures, on June 5^th, 2014, the plaintiffs leased this land area to Mrs. Nguyễn Thị M1, residing at Village V, Commune P, District D, Quảng Ngãi Province, for use as a business premise, without objection from any party.

In October 2016, the State issued a land use rights certificate to the defendants. However, despite this issuance, the defendants and Mr. Đoàn Tấn L1 provided the plaintiffs with the land use rights certificate for Plot No. 877, Map Sheet No. 24 of Commune P (hereinafter referred to as Plot 877) but did not finalize the transfer procedures. Presently, the plaintiffs have commenced construction by laying a stone foundation on Plot 877. Consequently, the plaintiffs now seek an order for the defendants to complete the transfer procedures for Plot 877, Map Sheet No. 24, Commune P, District D, Quảng Ngãi Province.

During the case proceedings, the defendants Mr. Đoàn C, Mrs. Trần Thị L, and their authorized representative, Mr. Trương Quang T, presented the followings:

The defendants acknowledged the agreement and the contract for transferring land use rights as described by the plaintiffs, even though the land had not yet been allocated by the State at the time of contract execution. They received VND 90,000,000 in full from the plaintiffs and an additional VND 20,000,000, purportedly for completing the transfer procedures.

Subsequently, after the State acquired the defendants’ family land, it was announced that three lots would be allocated to the defendants’ family, consisting of two lot Bs and one lot A. The contract explicitly specified lot B of their choosing. Given that the land was not allocated by the State when the contract was formed, there was no land available for transfer to the plaintiffs.

Furthermore, according to legal requirements, any transfer contract must be in writing and notarized or certified. The land in question belonged to the defendants’ household, which encompassed multiple members. However, only the defendants agreed to the transfer, which constitutes a legal irregularity. Therefore, the defendants seek a declaration of the invalidity of the land use rights transfer contract and request the resolution of ensuing consequences by mutual restitution of what each party has received.

Mr. Đoàn Tấn L1, an interested party, presented the followings:

He is the son of the defendants and agrees with the authorized representative of the defendants. He added that he participated in selling the land with his parents due to extreme hardship at the time, and the transfer of the land use rights certificate to the plaintiffs was under duress.

He admitted to scattering stone on the disputed land to build a shop for his parents but, since it was not used, sold it to the plaintiffs for VND 6,450,000. When the plaintiffs unilaterally constructed a stone foundation, he was informed by Mr. M, but he did not give his consent and took steps to prevent the construction.

The Statements from Other Interested Parties:

Mr. Đoàn Tấn N1, Ms. Đoàn Thị Thu V, and Ms. Đoàn Thị Mỹ N2:

They assert that they have shared household registration with their parents since the State acquired the land until the present, entitling them to rights in the family’s common property. They contend that their parents and Mr. L1 unilaterally transferred the land use rights, which constitute common property, without consulting them, thereby infringing upon their rights. Consequently, they disagree with the transaction and request a declaration of the invalidity of the land transfer document dated August 10, 2009.

Mrs. Nguyễn Thị M1:

Mrs. Nguyễn Thị M1 recounts that in 2014, upon approaching the defendants to rent Plot 877 for a beverage shop, she was informed that the land had already been sold to the plaintiffs. Subsequently, she arranged with the plaintiffs to lease the land for her shop, agreeing to annual rent payments, and engaged Mr. C, one of the defendants, to construct the shop.

Following mediation at the Commune level, she observed Mr. L1 spreading stones on the plot. Upon commencement of the plaintiffs’ construction of the foundation, Mr. L1 objected two days later and halted the construction. Mrs. Nguyễn Thị M1 refrains from expressing an opinion on the plaintiffs’ claim but affirms her intention to dismantle the shop independently and relinquish any further demands upon the transfer of the land.

In the First-instance Civil Judgment No. 22/2017/DS-ST dated September 21^st, 2017, the People’s Court of Đức Phổ District made the following rulings:

– The court accepted the plaintiff’s claim and recognized the land use rights transfer contract dated August 10^th, 2009. It ordered the defendants to complete the transfer procedures for Plot 877 to the plaintiffs.

– The court did not accept the defendants’ counterclaim to annul the land use rights transfer contract dated August 10^th, 2009.

– Additionally, the judgment addressed procedural costs, court fees, and the parties’ right to appeal.

On October 2^nd, 2017, the defendants and interested parties, Đoàn Tấn L1, Đoàn Tấn N1, Đoàn Thị Thu V, and Đoàn Thị Mỹ N2, filed an appeal, requesting the appellate court to vacate the First-instance Judgment for reconsideration. At the appellate hearing, the appellants amended their appeal, requesting the Trial Panel to amend the First-instance Judgment, declare the land use rights transfer contract dated August 10^th, 2009, invalid, and address the consequences of the invalid contract.

On October 5^th, 2017, the Chief Prosecutor of People’s Procuracy of Đức Phổ District issued the Appeal Decision No. 1317/QĐKNPT-VKS-DS, requesting the appellate court to amend the First-instance Judgment, reject the plaintiff’s claim, accept the defendants’ counterclaim, declare the land use rights transfer contract between the plaintiffs and defendants invalid, and order the parties to return what they had received. At the appellate hearing, the representative of the Procuracy withdrew the appeal entirely.

In the Appellate Civil Judgment No. 24/2018/DS-PT dated February 1^st, 2018, the People’s Court of Quảng Ngãi Province made the following rulings:

The court amended the First-instance Civil Judgment No. 22/2017/DS-ST dated September 21^st, 2017, of the People’s Court of Đức Phổ District; it did not accept the plaintiff’s claim and accepted the defendants’ counterclaim.

On September 19^th, 2018, the Chief Justice of the High People’s Court in Đà Nẵng issued the Cassation Appeal Decision No. 68/2018/KN-DS dated September 19^th, 2018, recommending the Appellate Civil Judgment No. 24/2018/DS-PT dated February 1^st, 2018, of the People’s Court of Quảng Ngãi Province to be vacated and the case file to be remanded to the People’s Court of Quảng Ngãi Province for a new appellate trial.

In the Cassation Decision No. 93/2018/DS-GĐT dated November 29^th, 2018, the Judicial Committee of the High People’s Court in Đà Nẵng made the following rulings:

The court accepted the Cassation Appeal Decision No. 68/2018/KN-DS dated September 19^th, 2018, of the Chief Justice of the High People’s Court in Đà Nẵng; vacated the entire Appellate Civil Judgment No. 24/2018/DS-PT dated February 1^st, 2018, of the People’s Court of Quảng Ngãi Province, and remanded the case file to the People’s Court of Quảng Ngãi Province for a new appellate trial.

At the appellate hearing, the Representative of the People’s Procuracy of Quảng Ngãi Province affirmed that all procedural regulations stipulated by the Civil Procedure Code were duly observed by the judge, trial panel, court clerk, and the involved parties. The appeals filed by the defendants and interested parties were submitted within the statutory deadline and deemed valid.

Regarding the substantive merits of the case, it was established that the land transfer contract, specifically dated August 10^th, 2009, involved the plaintiffs paying VND 90,000,000 to the defendants. Subsequently, due to the defendants not receiving lot B for resettlement as initially agreed, the parties modified the agreement to transfer lot A at a revised price of VND 120,000,000. The plaintiffs paid an additional VND 20,000,000, with the remaining VND 10,000,000 intended upon completion of transfer procedures.

Based on testimonies from Mr. Phạm Văn H (Exhibit 190) and Mrs. Nguyễn Thị M1 (Exhibit 118), it was substantiated that the defendants transferred both the land and the associated land use rights certificate to the plaintiffs. The plaintiffs proceeded to construct a foundation and leased the land for business purposes to Mrs. M1. Notably, the land use rights certificate bore the defendants’ names, enabling them to effectuate the transfer without requiring consent from other household members.

Despite procedural formalities being disregarded, the contract is currently being executed, falling under the purview of resolution under the 2015 Civil Code. Pursuant to Clause 2, Article 129 of the 2015 Civil Code, the contract is acknowledged as valid. However, the initial court’s failure to mandate the plaintiffs to remit the remaining VND 10,000,000 to the defendants was noted as an oversight.

In light of the foregoing, the Appellate Council is urged to base its decision on Article 289, Clause 2 of Article 308, and Article 309 of the Civil Procedure Code, with the following directives:

– Dismiss the appellate review concerning the appeal withdrawal by the People’s Procuracy of Quảng Ngãi Province and the appeal by the Chief Prosecutor of People’s Procuracy of Đức Phổ District.

– Reject the appeals lodged by the defendants and interested parties.

– Amend the First-instance Judgment to affirm the validity of the transfer contract for Plot 877. The plaintiffs are mandated to remit VND 10,000,000 to the defendants, and they retain the right to approach competent state authorities for acquisition of the land use rights certificate pertaining to Plot 877.

COURT’S OPINION:

[1] During the appellate hearing, the representative of the Quảng Ngãi Provincial People’s Procuracy formally withdrew Appeal Decision No. 1317/QĐKNPT-VKS-DS dated October 5th, 2017, issued by the Chief Prosecutor of the People’s Procuracy of Đức Phổ District. Consequently, in accordance with Article 284 of the Civil Procedure Code, it is appropriate to terminate the appellate review concerning the withdrawn portion of the case.

[2] Prior to the issuance of the first-instance judgment, none of the parties involved in the case invoked the statute of limitations. Therefore, pursuant to Clause 2, Article 184 of the Civil Procedure Code, the statute of limitations was not considered.

[3] The defendants, Mr. C and Mrs. L, along with the interested parties, Mr. L1, acknowledged their awareness that their family would receive three plots of resettlement land (comprising one plot A and two plots B) following the state’s acquisition of their land. In light of this, they agreed and executed a “Residential Land Transfer Agreement” on August 10th, 2009 (Exhibit 27) with the plaintiffs, Mr. M and Mrs. N.

According to the agreement, the defendants and Mr. L1 undertook to transfer one plot B, measuring 5m x 20m, to the plaintiffs for a sum of VND 90,000,000. Mr. L1 assumed responsibility for securing the land use rights certificate and transferring the land to the plaintiffs. All parties involved in the transaction endorsed the agreement, and the plaintiffs remitted VND 90,000,000 to the defendants. These facts require no further substantiation under Clause 2, Article 92 of the Civil Procedure Code.

[4] The defendants contested the plaintiffs’ assertion that the transfer agreement was amended from lot B to lot A for VND 120,000,000. They maintained that they only obtained their land use rights certificate in 2016 and clarified that the additional VND 20,000,000 received was solely for securing this certificate.

However, during the appellate hearing, Mr. L1 admitted that by 2011, the defendants were aware of the locations of the three resettlement plots depicted on the map, none of which included a plot B as initially agreed upon with the plaintiffs. Plot 877 was among the designated plots.

Furthermore, in his witness statement (Exhibit 192), Mr. C affirmed that he had constructed a house on one of the resettlement plots in 2013. Hence, despite the land use rights certificate not yet being issued, the defendants were cognizant of the locations of the resettlement plots allocated by the State.

[5] The evidence, including the actual use of Plot 877, Mrs. Nguyễn Thị M1’s testimony, the “Land Lease Agreement” (Exhibit 27), and Mr. Đoàn C’s testimony on July 25, 2017 (Exhibit 192), substantiates that the defendants transferred Plot 877 along with its corresponding land use rights certificate to the plaintiffs. Subsequently, the plaintiffs leased the land to Mrs. M1 for the construction of a shop. Mr. C facilitated the construction process for Mrs. M1 without any disputes. Additionally, Mr. L1 prepared the site by spreading stones on Plot 877 and sold it to the plaintiffs for the purpose of laying the foundation for their residence.

[6] The duration of the transaction was determined from the inception of the agreement until the defendants fulfilled their obligation to transfer the land use rights certificate to the plaintiffs, rendering it an ongoing transaction. The agreement’s content and form comply with the provisions of the 2015 Civil Code, justifying its application under Point b, Clause 1, Article 688 of the 2015 Civil Code.

Although the initial land transfer agreement was initially documented in writing before the defendants obtained the land, subsequent oral modifications were made to specifically transfer Plot 877 once the land was secured. The parties continued to execute the contract by exchanging additional funds, land, and the land use rights certificate. The transfer of the land use rights certificate under the defendants’ name met the required conditions for transfer.

According to Article 116 and Clause 2, Article 129 of the 2015 Civil Code, despite the initial land transfer agreement not fully adhering to the formalities in Clause 1, Article 502 of the 2015 Civil Code, the plaintiffs paid the defendants VND 110,000,000, and the defendants transferred the land use rights to the plaintiffs, fulfilling more than two-thirds of the transaction obligations, thereby validating the transaction. The first-instance court’s recognition of the transaction’s validity was lawful.

However, the directive for the defendants to complete the transfer procedures for Plot 877 to the plaintiffs was deemed unnecessary. Upon validation of the transaction’s validity, the plaintiffs retained the right to liaise with the competent state authority to obtain the land use rights certificate under the legally effective judgment.

[7] The interested parties, namely Mr. Đoàn Tấn L1, Mr. Đoàn Tấn N1, Ms. Đoàn Thị Thu V, and Ms. Đoàn Thị Mỹ N2, who are members of the defendants’ family, lodged appeals asserting that their parents transferred the land use rights without their consent, thereby impinging upon their legitimate rights and interests. However, the land use rights certificate for Plot 877 was issued in the defendants’ names, distinct from the family household, thereby granting the defendants the authority to effectuate the transfer.

The defendants’ transfer of Plot 877 did not contravene any legal prohibitions, contrary to the contentions of both the defendants and the interested parties. Even if Plot 877 were considered part of the family’s common property, the defendants’ transfer of one of the three resettlement plots would still fall within their property rights over the family’s shared assets.

[8] Consequently, the appeals filed by the defendants, Mr. C and Mrs. L, and the interested parties, Mr. L1, Mr. N1, Ms. V, and Mrs. N2, are not upheld.

[9] Nonetheless, in accordance with the transfer agreement, the plaintiffs remain obligated to pay the defendants VND 10,000,000. While the first-instance court acknowledged the validity of the contract, it omitted the directive for the plaintiffs to remit the outstanding amount to the defendants. Therefore, the first-instance judgment necessitates amendment on this particular issue.

[10] During the appellate hearing, the plaintiffs voluntarily consented to allow Mrs. Nguyễn Thị M1’s temporary beverage shop, measuring 25m² and constructed from eucalyptus wood with an iron sheet roof and cement floor, to continue existing on the land, should the court endorse the plaintiffs’ claim. Given that the plaintiffs hold lawful land usage rights, their voluntary agreement is duly recognized.

[11] Regarding the stone foundation erected by the plaintiffs on Plot 877, Map Sheet 24, Commune P, valued at VND 9,400,000, it is established that the plaintiffs purchased the materials and undertook the construction themselves, thereby asserting ownership over the foundation.

[12] Other aspects of the first-instance judgment that conform to legal provisions remain unchanged.

[13] The opinion expressed by the representative of the People’s Procuracy of Quảng Ngãi Province is well-founded and lawful, and accordingly, it is accepted.

[14] Given the defendants’ elderly status and their application for exemption from court fees, it is appropriate to grant exemption from appellate civil court fees to the defendants under Point đ, Clause 1, Article 12 of Resolution 326/2016/UBTVQH14 dated December 30, 2016, of the National Assembly Standing Committee.

Similarly, the interested parties, Mr. L1, Mr. N1, Ms. V, and Ms. N2, are exempt from appellate civil court fees as per Clause 2, Article 148 of the Civil Procedure Code.

In light of the foregoing,

IT IS DECIDED:

Pursuant to Clause 1, Article 147; Clause 2, Article 148; Article 289; Clause 2, Article 308; Article 309 of the Civil Procedure Code; Article 116; Clause 2, Article 129 of the 2015 Civil Code; Article 106 of the 2003 Land Law; Point đ, Clause 1, Article 12 of Resolution No. 326/2016/UBTVQH14 dated December 30^th, 2016, of the National Assembly Standing Committee.

The appellate review of part of the case regarding the Appeal Decision No. 1317/QĐKNPT-VKS-DS dated October 5^th, 2017, by the Chief Prosecutor of  the People’s Procuracy Đức Phổ District is suspended.

The appeal of the defendants, Mr. Đoàn C, Mrs. Trần Thị L, and the interested parties, Mr. Đoàn Tấn L1, Mr. Đoàn Tấn N1, Ms. Đoàn Thị Thu V, and Ms. Đoàn Thị Mỹ N2, is not upheld.

The First-instance Civil Judgment No. 22/2017/DS-ST dated September 21^st, 2017, of the People’s Court of Đức Phổ District is partially amended.

1. The plaintiffs’ claim, Mr. Võ Sĩ M and Mrs. Phùng Thị N, is accepted;

The land use rights transfer contract concerning Plot 877, Map Sheet 24, Commune P, between Mr. Võ Sĩ M, Mrs. Phùng Thị N, on one hand, and Mr. Đoàn C, Mrs. Trần Thị L, on the other, is affirmed as valid. Mr. M and Mrs. N hold the rightful usage of Plot 877, Map Sheet 24, Commune P. They are obligated to initiate contact with the competent state authority to secure the land use rights certificate for Plot 877, Map Sheet 24, Commune P, Đức Phổ District, Quảng Ngãi Province. 

Mr. Võ Sĩ M and Mrs. Phùng Thị N are obligated to remit VND 10,000,000 (Ten million dong) to Mr. Đoàn C and Mrs. Trần Thị L.

2. The counterclaim filed by Mr. Đoàn C, Mrs. Trần Thị L, and the interested parties, Mr. Đoàn Tấn L1, Mr. Đoàn Tấn N1, Ms. Đoàn Thị Thu V, and Ms. Đoàn Thị Mỹ N2, seeking to invalidate the land use rights transfer contract dated August 10th, 2009, and to address the ramifications of its nullification, is rejected.
3. Mr. Võ Sĩ M and Mrs. Phùng Thị N’s voluntary consent to permit Mrs. Nguyễn Thị M1’s temporary beverage shop, measuring 25m² and constructed from eucalyptus wood with an iron sheet roof and cement floor, to continue existing on Plot 877, Map Sheet 24, Commune P, is recognized.
4. Mr. Võ Sĩ M and Mrs. Phùng Thị N’s voluntary commitment to cover the expenses related to on-site inspection and appraisal is acknowledged.
5. Regarding court fees:

5.1. Mr. Võ Sĩ M and Mrs. Phùng Thị N are exempt from first-instance civil court fees, and the VND 300,000 (Three hundred thousand dong) advance court fee paid by Mr. M and Mrs. N, as per receipt No. AA/2014/003747 dated June 7^th, 2017, of the Civil Judgment Enforcement Department of Đức Phổ District, Quảng Ngãi Province, is refunded.

5.2. Mr. Đoàn C and Mrs. Trần Thị L are exempt from first-instance and appellate civil court fees.

5.3. Mr. Đoàn Tấn L1, Mr. Đoàn Tấn N1, Ms. Đoàn Thị Thu V, and Ms. Đoàn Thị Mỹ N2 are not required to pay appellate civil court fees. Each of them is refunded VND 300,000 (Three hundred thousand dong) of the advance appellate court fee paid, as per receipts No. AA/2014/0003856, AA/2014/0003859, AA/2014/0003857, AA/2014/0003858, all dated October 19^th, 2017, of the Civil Judgment Enforcement Department of Đức Phổ District, Quảng Ngãi Province.

6. Upon submission of a request for judgment enforcement by the judgment creditor, if the judgment debtor delays enforcement, interest shall accrue on the delayed amount for the duration of the delay, at the interest rate agreed upon by the parties or as specified in Clause 2, Article 357 of the 2015 Civil Code in the absence of an agreement.
7. Under the provisions of Article 2 of the Law on Civil Judgment Enforcement, the judgment creditor and judgment debtor retain the rights to negotiate enforcement, request enforcement, voluntarily comply with enforcement, or be subject to enforcement as outlined in Articles 6, 7, 7a, 7b, and 9 of the Law on Civil Judgment Enforcement. The statute of limitations for judgment enforcement is governed by Article 30 of the Law on Civil Judgment Enforcement.
8. This appellate judgment takes legal effect from the date of its pronouncement.

CONTENT OF THE CASE LAW:

“[6] The duration of the transaction was determined from the inception of the agreement until the defendants fulfilled their obligation to transfer the land use rights certificate to the plaintiffs, rendering it an ongoing transaction. The agreement’s content and form comply with the provisions of the 2015 Civil Code, justifying its application under Point b, Clause 1, Article 688 of the 2015 Civil Code.

Although the initial land transfer agreement was initially documented in writing before the defendants obtained the land, subsequent oral modifications were made to specifically transfer Plot 877 once the land was secured. The parties continued to execute the contract by exchanging additional funds, land, and the land use rights certificate. The transfer of the land use rights certificate under the defendants’ name met the required conditions for transfer.

According to Article 116 and Clause 2, Article 129 of the 2015 Civil Code, despite the initial land transfer agreement not fully adhering to the formalities in Clause 1, Article 502 of the 2015 Civil Code, the plaintiffs paid the defendants VND 110,000,000, and the defendants transferred the land use rights to the plaintiffs, fulfilling more than two-thirds of the transaction obligations, thereby validating the transaction. The first-instance court’s recognition of the transaction’s validity was lawful.

However, the directive for the defendants to complete the transfer procedures for Plot 877 to the plaintiffs was deemed unnecessary. Upon validation of the transaction’s validity, the plaintiffs retained the right to liaise with the competent state authority to obtain the land use rights certificate under the legally effective judgment.”

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

You can also download the .docx version here.