Precedent No. 25/2018/AL

About no deposit penalty for objective reasons

Adopted by the Council of Judges of the Supreme People's Court on October 17, 2018 and promulgated under Decision No. 269/QD-CA dated November 6, 2018 of the Chief Justice of the Supreme People's Court.

Source of case law:

Final judgment No. 79/2012/DS-GDT dated February 23, 2012 of the Civil Court of the Supreme People's Court on the civil case "Deposit contract dispute" in Ho Chi Minh City between the plaintiff Mr. Phan Thanh L and the defendant Ms. Truong Hong Ngoc H; the person with related rights and obligations is Mr. Lai Quang T.

Location of case law:

Paragraphs 1, 3, 4 of the “Court's Opinion” section.

Overview of case law:

- Case law:

The deposit contract to secure the signing of a house sale and purchase contract has an agreement that within a certain period of time the deposit recipient must complete the procedures to be granted a house ownership certificate. If violated, the deposit recipient must pay a penalty.

After the agreed term, the deposit recipient has not been granted a house ownership certificate due to reasons from the competent state agency.

- Legal solutions:

In this case, it must be determined that the failure of the deposit recipient to fulfill its commitment is due to objective reasons and the deposit recipient is not subject to a deposit penalty.

Legal provisions relating to precedents:

Article 358 of the 2005 Civil Code (corresponding to Article 328 of the 2015 Civil Code).

Keywords of case law:

“Deposit contract”; “House sale contract”; “Deposit penalty”; “Contract conclusion”; “Objective reasons”.

CASE CONTENT:

According to the petition dated July 20, 2009, the plaintiff Mr. Phan Thanh L stated:

On May 12, 2009, Ms. Truong Hong Ngoc H agreed to sell to Mr. Phan Thanh L the house No. 1222C (new number is 25/2) on Street 43, Ward T, District H, Ho Chi Minh City, which was purchased by Ms. H at auction from the Ho Chi Minh City Civil Judgment Enforcement Agency under the decision on property transfer No. 786/QD-THA dated March 2, 2009. After the agreement, Mr. L deposited VND 2,000,000,000 to Ms. H. In Article 5 of the deposit contract, the parties agreed that from the date of signing the contract, Ms. H must complete the procedures to be granted a certificate of ownership of the above house, then sign a notarized sales contract; if she violates the above deadline, Ms. H must pay a fine equivalent to the deposit of VND 2,000,000,000. By the deadline of June 12, 2009, Ms. H did not comply with the agreement, so the parties could not perform according to the contract. On July 1, 2009, Ms. H sent a letter requesting Mr. L for a 60-day extension. On July 7, 2009, Mr. L sent a reply letter disagreeing with Ms. H's extension and requesting Ms. H to return the deposit and the penalty as agreed. After 5 months of breaching the contract, Ms. H still did not comply with the commitment, Mr. L filed a lawsuit requesting Ms. H to return the deposit and the penalty, totaling 4,000,000,000 VND.

Defendant Ms. Truong Hong Ngoc H stated:

Ms. H admitted that she had agreed to deposit to sell the above house to Mr. L as Mr. L had stated. After receiving the deposit, Ms. H tried to complete the procedures to be granted the house ownership certificate within 30 days as agreed, but due to objective obstacles, she could not do so. She admitted that she had violated the commitment with Mr. L, she agreed to return the deposit and interest according to regulations, and did not agree to the penalty.

The person with related rights and obligations, Mr. Lai Quang T, presented:

Mr. T has lived with Ms. H since 1997, without registering their marriage. The house is the joint property of Mr. T and Ms. H. He admitted that he and Ms. H received Mr. L's deposit. He agreed to return the deposit and interest to Mr. L according to the law, but did not agree to pay a penalty as Mr. L requested.

In the Civil Judgment at First Instance No. 344/2009/DS-ST dated November 11, 2009, the People's Court of Phu Nhuan District, Ho Chi Minh City decided:

Accept the lawsuit request of Mr. Phan Thanh L represented by Mr. Duong Nguyen YL.

Force Ms. Truong Hong Ngoc H to pay Mr. Phan Thanh L 4,000,000,000 VND immediately after the judgment comes into legal effect.

In addition, the Court of First Instance also decides on court fees and the right to appeal.

On November 18, 2009, Ms. Truong Hong Ngoc H appealed, disagreeing with the first instance judgment.

On November 19, 2009, Mr. Lai Quang T appealed, disagreeing with the first instance judgment.

In the civil appeal judgment No. 522/2010/DS-PT dated May 6, 2010, the People's Court of Ho Chi Minh City decided:

Uphold the Civil Judgment at First Instance No. 344/DS-ST dated November 11, 2009 of the People's Court of Phu Nhuan District, Ho Chi Minh City.

Accept the request of Mr. Phan Thanh L.

Force Ms. Truong Hong Ngoc H to pay Mr. Phan Thanh L 2,000,000,000 VND deposit and 2,000,000,000 VND deposit penalty. Total 4,000,000,000 VND immediately after the judgment comes into legal effect.

Maintain Decision No. 495/2010/QD-BPKCTT dated May 4, 2010 of the People's Court of Ho Chi Minh City on the prohibition of transferring property rights to the land and house at No. 25/2, Street 43, Ward T, District H, Ho Chi Minh City.

In addition, the Court of Appeal also decides on court costs.

On June 23, 2010, Ms. Truong Hong Ngoc H filed a complaint stating that she did not agree to compensate for the deposit, because she believed that the reason for not being able to execute the agreement on time was due to objective factors, specifically because the enforcement agency was slow to transfer the house ownership to Ms. H, so Ms. H could not transfer the name to Mr. L.

In Decision No. 688/2011/KN-DS dated November 18, 2011, the Chief Justice of the Supreme People's Court protested the above-mentioned appellate judgment according to the cassation procedure, requested the Civil Court of the Supreme People's Court to review and annul the above-mentioned appellate judgment and annul the Civil Judgment at First Instance No. 344/2009/DS-ST dated November 11, 2009 of the People's Court of Phu Nhuan District, Ho Chi Minh City, and transfer the case file to the People's Court of Phu Nhuan District, Ho Chi Minh City for retrial at first instance in accordance with the provisions of law.

At the trial, the representative of the Supreme People's Procuracy agreed with the protest of the Chief Justice of the Supreme People's Court, requesting the Trial Panel to annul the Civil Appeal Judgment No. 522/2010/DS-PT dated May 6, 2010 of the People's Court of Ho Chi Minh City and annul the Civil Judgment at First Instance No. 344/2009/DS-ST dated November 11, 2009 of the People's Court of Phu Nhuan District, Ho Chi Minh City, and transfer the case file to the People's Court of Phu Nhuan District, Ho Chi Minh City for retrial in accordance with the provisions of law.

JUDGMENT OF THE COURT:

[1] On May 12, 2009, Mr. Phan Thanh L deposited VND 2,000,000,000 to Ms. Truong Hong Ngoc H to buy house No. 1222C (new number is 25/2) Street 43, Ward T, District H, Ho Chi Minh City, which was purchased by Ms. H at auction from the Ho Chi Minh City Civil Judgment Enforcement Agency, according to the decision on property transfer No. 786/QD-THA dated March 2, 2009. Article 5 of the deposit contract states that within 30 days from the date of signing the contract, Ms. H must complete the procedures to be granted a certificate of ownership of the above house, then sign a notarized sales contract; if she violates the above deadline, Ms. H will be fined an amount equivalent to the deposit of VND 2,000,000,000. After the above deadline, Ms. H did not fulfill her commitment, so Mr. L filed a lawsuit requesting Ms. H to return the deposit of VND 2,000,000,000 and a deposit penalty of VND 2,000,000,000.

[2] Ms. Truong Hong Ngoc H did not agree to pay the deposit penalty, only agreed to pay the deposit along with interest according to the bank's interest rate, because she believed that the reason she could not fulfill her commitment was because the civil enforcement agency was slow to transfer the name to her.

[3] Considering Mr. Phan Thanh L's request for a deposit penalty, it is found that at the time Mr. L deposited VND 2,000,000,000 to Ms. Truong Hong Ngoc H, Ms. H had received the house but had not yet completed the name change procedures because the Ho Chi Minh City Civil Judgment Enforcement Agency was managing all documents related to the house. Therefore, the fact that Ms. H did not register the house ownership within 30 days as originally agreed must be considered due to Ms. H's subjective fault in not contacting the civil judgment enforcement agency to complete the name change procedures or due to the objective fault of the civil judgment enforcement agency in delaying the name change to Ms. H.

[4] After the appeal trial, along with the complaint, Ms. H also submitted to the Supreme People's Court Official Letter No. 4362/THA dated June 5, 2009 of the Ho Chi Minh City Civil Judgment Enforcement Agency. The content of the official letter explained that the reason why the auction winner, Ms. H, had not yet completed the registration transfer procedure was due to a complaint from Mr. Nguyen Tan L1 requesting Ms. Tram Thi Kim P to pay the 38 taels of SJC gold that was still owed when Mr. L1 bought the above house. Therefore, when re-examining the case, the Court needs to verify and collect the original Official Letter No. 4362/THA dated June 5, 2009 of the Ho Chi Minh City Civil Judgment Enforcement Agency and the procedure for transferring ownership to the auction winner of the civil judgment enforcement agency. If there is a basis to determine that the civil enforcement agency delayed in transferring the ownership rights to Ms. H, then the fault that led to Ms. H not being able to fulfill her commitment to Mr. L is objective, and Ms. H does not have to pay the deposit penalty. If there is a basis to determine that Ms. H delayed in completing the procedures to transfer the ownership rights, then the fault lies entirely with Ms. H, and Ms. H has to pay the deposit penalty.

[5] The Court of First Instance and the Court of Appeal have not verified and clarified the above issues, but immediately accepted Mr. Phan Thanh L's request to sue Ms. Truong Hong Ngoc H to pay a deposit penalty of VND 2,000,000,000, which is not sufficient basis.

For the above reasons, based on Clause 2, Article 291, Clause 3, Article 297 of the Civil Procedure Code;

DECISION:

Annul the Civil Appeal Judgment No. 522/2010/DS-PT dated May 6, 2010 of the People's Court of Ho Chi Minh City, and annul the Civil First Instance Judgment No. 344/DS-ST dated November 11, 2009 of the People's Court of Phu Nhuan District, Ho Chi Minh City, regarding the case of "Deposit contract dispute" between the plaintiff Mr. Phan Thanh L and the defendant Ms. Truong Hong Ngoc H; the person with related rights and obligations is Mr. Lai Quang T.

Transfer the case file to the People's Court of Phu Nhuan District, Ho Chi Minh City for retrial in accordance with the provisions of law.

CONTENT OF PRECEDENT

“[1]…Article 5 of the deposit contract states that within 30 days from the date of signing the contract, Ms. H must complete the procedures to be granted a certificate of ownership of the above house, then sign a notarized sales contract; if she violates the above deadline, Ms. H will be fined an amount equivalent to the deposit of VND 2,000,000,000. After the above deadline, Ms. H did not fulfill her commitment, so Mr. L filed a lawsuit requesting Ms. H to return the deposit of VND 2,000,000,000 and a deposit fine of VND 2,000,000,000.

[3]…at the time Mr. L deposited 2,000,000,000 VND to Ms. Truong Hong Ngoc H, Ms. H had received the house but had not completed the name change procedures because the Ho Chi Minh City Civil Judgment Enforcement Agency was managing all documents related to the house…

[4]…If there is a basis to determine that the civil enforcement agency delayed in transferring the ownership title to Ms. H, then the fault leading to Ms. H not being able to fulfill her commitment to Mr. L belongs to the objective side, and Ms. H does not have to pay the deposit penalty…”