Authored by Gao Ping (firstname.lastname@example.org)
The preservation of property is a very important step in civil actions. The timely and effective preservation of property plays a vital role in the smooth execution of the case in the future. In practice, the property of the defendant or the person subject to enforcement is often insufficient to meet the requirements of the preservation and enforcement, but at the same time, it is found that the defendant enjoys a large claims owed to it by an outside party. How should these claims be preserved and enforced?
As provided in Article 105 of the "Opinions on Certain Issues Concerning the Application of the Civil Procedure Law of the People’s Republic of China by the Supreme People’s Court" the People’s Court may rule that in accordance with the creditor’s application, where the debtor’s property cannot fulfill the injunction but has debts owed to it by a third party, the third party may not settle with the debtor. When the third party is required to pay, the third party must hold the property or price in escrow. It can be seen that the credit due to the defendant may be preserved by ruling that the third party may not settle the debt to the defendant. This kind of "credit preservation" is different from the preservation of the defendant’s property, and its function is limited. It can only prevent the defendant from privately transferring the property after receiving payment from the third party. But it cannot prevent the third party from paying off other creditors, nor prevent the third party from disposing their own property. Therefore, the ruling cannot be deemed as the preservation of the third party’s property.
How should the debt owed to the defendant be enforced? In accordance with the provisions of Article 61 of the Supreme People’s Court’s "Regulations on Several Issues Concerning the People’s Court Enforcement Work (For Trial Implementation)" the applicant can apply to the court to issue a notice of its due debts to the third party and require the third party fulfill its debt directly to the applicant. The People’s Court may not force the implementation of the application on the third party if said third party raises objection within the time limit specified by the notice. It is thus clear that the court may exercise the property of the third party directly in the process of enforcement procedure when the stipulated conditions are satisfied. Here, it is necessary to pay attention to several issues:
1. The precondition to enforcing the preservation of the third party’s property is that the third party did not raise objections. If the third party objects, the court may not enforce the application nor may they review the objection raised by the third party.
2. The scope of the enforcement on the third party is limited to the debt owed to the person subject to the enforcement.
3. If the third party does not have property available for enforcement, the court may not then enforce the application against those that owe debts to the third party.
Although the people’s court may directly exercise enforcement on the third party according to the above regulations, but in practice, if the person subject to enforcement colludes with the third party, avoiding the enforcement can still happen. For example, the person subject to enforcement can abandon his claims against the third party, delay the term for when the third party must perform their obligation, or the third party may settle their debt with the defendant without authorization, etc. In the event that these circumstances occur, the applicant may apply to the people’s court to confirm that the abandonment of the claim or the delaying of the time limit for the performance of the debt is invalid and can also require the third party to assume joint liability to settle the obligation within the scope of the property paid to the defendant. The applicant may also gain relief by filing a right of revocation litigation with a court of competent jurisdiction.