Case Law No. 39/2020/AL on the determination of a conditional civil transaction as invalid due to the impossibility of the condition occurring

Source of the Case Law:

Cassation Decision No. 29/2019/DS-GĐT dated November 12, 2019, of the Council of Justices of the Supreme People’s Court regarding the case “Dispute over a residential stay contract” in Ho Chi Minh City between the plaintiff, Mrs. Tran Van C, and the defendants, Mr. Nguyen Cong H, Mrs. Tran Thi C1, and T Travel One-Member Limited Liability Company; with 03 persons with related rights and obligations.

Location of the Case Law content:

Paragraph 1, Section “Assessment of the Court”.

Summary of the Case Law:

- Case scenario:

A lessee of state-owned housing (the seller) commits to transferring house ownership to the buyer after purchasing the house from the State through a price-subsidized sale (privatization). The seller has received payment and handed over the house to the buyer, but subsequently, the State does not privatize the house and does not recognize the ownership rights.

- Legal solution:

In this case, the house ownership transfer contract must be determined as a conditional civil transaction which is void because the condition of the contract cannot occur.

Legal provisions related to the Case Law:

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

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

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

Keywords of the Case Law:

“Conditional civil transaction”; “Non-occurrence of condition”; “Void transaction”.

CASE DETAILS:

In the Lawsuit Petition dated June 27, 2003, by Mrs. Tran Van C and the Petition for succession of procedural rights and obligations dated April 26, 2011, by Mrs. Le Thi Minh C2, Mr. Le Minh S, Mr. Le Minh D, Mr. Le Minh T2, and during the process of case resolution, the plaintiff, represented by Mrs. Le Thi Minh C2, stated:

In 1982, the family of Mr. Nguyen Viet L (died 1985) and Mrs. Tran Van C (died 2011), along with their 03 children, Mr. Le Minh S, Mr. Le Minh D, and Mr. Le Minh T2, were granted use of the front ground floor of house No. 182 A Street, Ward B, District D, Ho Chi Minh City by the State Bank of Vietnam. In May 1989, Mrs. C leased a part of the house with an area of 50.85 m2, located at the corner of the two fronts of A - D Streets, to the T Travel Company Branch to open a general service store. Mrs. C1, then acting as the store manager, along with her husband, Mr. Nguyen Cong H, directly conducted business and represented the T Travel Company Branch in paying the rent for June 1989 as 2.3 mace of 24K gold and continued paying the rent from July 1989 to December 1992 as 75 mace of 24K gold; the first installment paid on July 10, 1989, was 35 mace of 24K gold, and the second installment of 40 mace of gold was paid on September 01, 1989. In total, Mrs. C received 7.5 taels of 24K gold.

In December 1989, the T Travel Company Branch’s business was ineffective, so it was handed over to Mrs. C1 to continue the business and fulfill rent payments until the end of February 2002. From March 2002 to the present, Mrs. C1 and Mr. H still reside in this area and have not paid rent; part of the house is currently used by Mrs. T1, and another part by Mrs. K.

During the use of the house by Mrs. C1 and Mr. H, there were construction and repairs, so the disputed area has a value according to the valuation minutes dated January 22, 2014, of 1,427,421,900 VND; now requesting the Court to adjudicate according to the law. Regarding the Joint Venture Contract No. 05 signed on May 20, 1989, with the T Travel Company Branch, the plaintiff does not request resolution and withdraws the request to compel T Travel One-Member Limited Liability Company to pay 1.48 taels of 24K gold for house rent.

As there was no house sale between the two parties and the rental relationship no longer exists, the plaintiff requests the Court to declare the annulment of the commitment established and signed by Mrs. Tran Van C and Mrs. Tran Thi C1 on July 10, 1989; and compel Mrs. C1 and Mr. H to immediately return the residential part they are staying in. Agreeing to pay Mrs. C1 and Mr. H the house repair cost of 64,105,000 VND.

The defendants, Mr. Nguyen Cong H and Mrs. Tran Thi C1, stated: In 1989, Mr. H and Mrs. C1 transferred a portion of the area of about more than 40 m2 within house 182 A Street, District D, from Mrs. Tran Van C for a price of 7.5 taels of 24K gold; the two parties wrote a handwritten paper for the house sale on July 10, 1989. Mr. H and Mrs. C1 handed over this full amount of gold to Mrs. C, then gave an additional 05 mace, totaling a sale price of 08 taels of 24K gold. The transferred area is located at the corner of the two fronts of A - D Streets. At that time, Mrs. C was leasing the house from the State Bank of Vietnam, so ownership had not yet been granted; therefore, the two parties only wrote a handwritten paper and could not sign a sale contract. Subsequently, Mr. H and Mrs. C1 re-transferred a part of the house with an area of about 16 m2 to Mrs. Tran Thi Kim T1; the transfer with Mrs. T1 was only an oral agreement. Around 2005, Mr. H and Mrs. C1 cooperated in business with Mrs. Luong Thi K in the aforementioned area.

According to the commitment between the two parties in the handwritten paper dated July 10, 1989, whenever the State allows Mrs. C to purchase the house through privatization, Mr. H and Mrs. C1 must pay the privatization fee for the transferred area, and Mrs. C is responsible for completing the procedures for transferring the ownership of the transferred area to Mr. H and Mrs. C1. At the same time, based on the 2003 Land Law, Mr. H and Mrs. C1 have used the house and land for over 25 years, so they must be recognized for house and land use rights; therefore, requesting recognition of the house transfer according to the Commitment dated July 10, 1989, as this is a conditional civil transaction.

The request by the successors of Mrs. C’s rights and obligations to reclaim the house is baseless because, according to the Certificate of House Ownership, Mrs. C only owns 167 m2, while the aforementioned area is not owned by Mrs. C; therefore, she has no right to sue, and Mr. H and Mrs. C1 do not accept it. Since the dispute arose in 1989 and the statute of limitations has expired, they request the dismissal of the case.

The transfer of a portion of the area to Mrs. T1 and the business cooperation with Mrs. K do not require resolution. During the use, Mr. H and Mrs. C1 repaired the house with repair costs calculated at 64,105,000 VND. In the event the Court does not recognize the house transfer, they request to be reimbursed for this repair amount.

The defendant, T Travel One-Member Limited Liability Company, represented by Mr. Nguyen Van T3, stated: T Travel One-Member Limited Liability Company is the governing body of the T Travel Company Branch. In 1989, the Branch was directed by Mr. Nguyen S1 as the director; the Branch was dissolved in 1990. Regarding the Branch signing the joint venture contract with Mrs. Tran Van C, previously Mr. S1 did not report to the Company, and upon dissolution, there was no handover of debts; therefore, the Company has no basis to resolve the rent claim from Mrs. C. The successors of Mrs. C’s rights and obligations have no request for resolution regarding the Joint Venture Contract No. 05 dated May 20, 1989, and have withdrawn the request for 1.48 taels of 24K gold; thus, T Travel One-Member Limited Liability Company has no other opinions. Requesting adjudication according to the law, Mr. T3 requested to be absent.

The person with related rights and obligations, Mrs. Tran Thi Kim T1, stated: Mrs. T1 re-transferred a part of house No. 182 A Street, Ward B, District D, Ho Chi Minh City, with an area of about 16 m2 from Mrs. C1 in 1989 for a price of 04 taels of gold; the transfer was not documented. Now Mrs. T1 requests that Mrs. C’s side be responsible for completing ownership transfer procedures for Mr. H and Mrs. C1. The transfer between Mrs. T1 and Mr. H and Mrs. C1 does not require the Court's resolution. At the same time, according to Mrs. T1, the area in dispute is a common area of the households in house 182 A Street; Mrs. C does not have ownership rights and thus no right to sue.

The person with related rights and obligations, Mrs. Luong Thi K, stated: On April 01, 2005, Mrs. K cooperated in business with Mrs. C1. The business license was in Mrs. K’s name at No. 182 A Street; when cooperating, Mrs. K did not clearly know the legal status of the house. Now that Mrs. C and Mrs. C1 have a dispute, she has no opinion and no request. Regarding the cooperation with Mrs. C1, the two parties will resolve it themselves.

The person with related rights and obligations, N Housing Business Management Company, represented by Mrs. Pham Thuy H1, stated: N Housing Business Management Company proceeded to sell house No. 182 A Street in 2001; before the sale, minutes were made to inspect the area used by each household. According to the minutes, the disputed house and land area is located within the road safety corridor (lộ giới) under the use of the owner (Mrs. C - deceased) until the State recovers it for the road expansion project. Mrs. C’s granting of residential stay, leasing, or transferring is contrary to regulations, so N Housing Management Company does not agree. Requesting adjudication according to the law.

In the First Instance Civil Judgment No. 28/DS-ST dated July 27, 2006, the People’s Court of District 3, Ho Chi Minh City decided: To annul the commitment dated July 10, 1989, between Mrs. C and Mr. H, Mrs. C1. Mr. H, Mrs. C1, Mrs. T1, and Mrs. K are responsible for returning to Mrs. C a part of the ground floor of house 182 A Street with an area of 50.85 m2. Mrs. C shall pay Mr. H and Mrs. C1: 08 taels of gold received + 27.49 taels of gold for damages + 64,105,000 VND for repair costs. Totaling 35.49 taels of gold and 64,105,000 VND.

Both the plaintiff and defendant filed appeals.

In the Appellate Civil Judgment No. 188/2007/DS-PT dated February 07, 2007, the People’s Court of Ho Chi Minh City decided: To partially amend the First Instance Judgment: Recognize the house sale contract between Mrs. Tran Van C and Mr. Nguyen Cong H, Mrs. Tran Thi C1 according to the commitment paper dated July 10, 1989. Mrs. C is responsible for transferring house ownership to Mr. H and Mrs. C1. Mr. H and Mrs. C1 shall pay Mrs. C the privatization fee of 169,432,000 VND.

In Decision No. 138/QD-KNGĐT-V5 dated November 13, 2007, the Prosecutor General of the Supreme People’s Procuracy protested the aforementioned appellate civil judgment.

In Cassation Decision No. 01/2008/DS-GĐT dated January 25, 2008, the Civil Court of the Supreme People’s Court decided: To annul the First Instance Civil Judgment No. 28/DS-ST and the Appellate Civil Judgment No. 188/2007/DS-PT; and to transfer 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, 2014, the People’s Court of District 3 decided: To partially accept the request of the successors of Mrs. Tran Van C’s rights and obligations. Declare the commitment regarding the transfer of use rights for a part of house No. 182 A Street signed on July 10, 1989, between Mrs. Tran Van C and Mrs. Tran Thi C1 as void. Compel the successors of Mrs. Tran Van C’s rights and obligations, Mrs. Le Thị Minh C2, Mr. Le Minh S, Mr. Le Minh D, and Mr. Le Minh T2, to refund Mr. Nguyen Cong H and Mrs. Tran Thi C1 the amount of gold received as 08 taels of 24K gold = 276,320,000 VND. Compel the successors of Mrs. Tran Van C’s rights and obligations to refund Mr. Nguyen Cong H and Mrs. Tran Thi C1 the construction and repair costs of 64,105,000 VND. Compel the successors of Mrs. Tran Van C’s rights and obligations to compensate Mr. Nguyen Cong H and Mrs. Tran Thi C1 the amount of 575,550,950 VND. Compel Mr. Nguyen Cong H, Mrs. Tran Thi C1, Mrs. Tran Thi Kim T1, and Mrs. Luong Thi K to return to the successors of Mrs. Tran Van C’s rights and obligations the house and land area in house No. 182 A Street, including: House and land area in the main house with a floor, consistent with planning as 8.11 m2 + house and land area within the road safety corridor as 42.74 m2.

The first-instance court also decided on court fees and the right to appeal. On April 24, 2014, Mr. Nguyen Cong H, Mrs. Tran Thi C1, and Mrs. Tran Thi Kim T1 filed an appeal. On April 28, 2014, Mrs. Le Thi Minh C2 filed an appeal.

In the Appellate Civil Judgment No. 1515/2014/DS-PT dated December 01, 2014, the People’s Court of Ho Chi Minh City decided: To not accept the appeals of Mrs. Le Thị Minh C2, Mrs. Tran Thi C1, Mr. Nguyen Cong H, and Mrs. Tran Thi Kim T1, and to uphold the first-instance civil judgment. The appellate court also decided on court fees.

After the appellate trial, the defendants, Mr. Nguyen Cong H and Mrs. Tran Thi C1, filed a petition to review under cassation procedures for the aforementioned Judgment No. 1515/2014/DS-PT.

In Protest Decision No. 38/KNGĐT-VC3-V2 dated March 21, 2016, the Prosecutor General of the High People’s Procuracy in Ho Chi Minh City protested the Appellate Civil Judgment No. 1515/2014/DS-PT; requested the Council of Judges of the High People’s Court in Ho Chi Minh City to conduct a cassation trial to annul the aforementioned appellate judgment and the First Instance Civil Judgment No. 12/2014/DS-ST; and transfer the case file to the first-instance court for retrial.

In Cassation Decision No. 234/2016/DS-GĐT dated September 09, 2016, the Council of Judges of the High People’s Court in Ho Chi Minh City decided: To not accept the Protest No. 38/KNGĐT-VC3-V2 dated March 21, 2016; and to uphold the Appellate Civil Judgment No. 1515/2014/DS-PT.

On January 21, 2017, Mr. Nguyen Cong H, Mrs. Tran Thi C1, and Mrs. Tran Thi Kim T1 filed a petition to review under cassation procedures for the aforementioned Cassation Decision No. 234/2016/DS-GĐT.

In the Cassation Protest Decision No. 56/2019/KN-DS dated August 05, 2019, the Chief Justice of the Supreme People’s Court protested the Cassation Decision No. 234/2016/DS-GĐT; requested the Council of Justices of the Supreme People’s Court to conduct a cassation trial to annul Decision No. 234/2016/DS-GĐT, annul the Appellate Civil Judgment No. 1515/2014/DS-PT and the First Instance Civil Judgment No. 12/2014/DS-ST; and transfer the case file to the People’s Court of District 3 for retrial.

At the cassation trial, the representative of the Supreme People’s Procuracy agreed with the protest decision of the Chief Justice of the Supreme People’s Court.

ASSESSMENT OF THE COURT:

1. The case file and evidence show that on July 10, 1989, Mrs. Tran Van C and Mrs. Tran Thi C1 signed a Commitment and a Receipt with the following content: Mrs. C received 75 mace of gold from Mrs. C1, granting Mrs. C1 and her husband the full right to use the area of 45 m2 at house No. 182 A Street; Mrs. C would never reclaim the house, and Mrs. C1 and her husband would not reclaim the gold; whenever the State allows Mrs. C to purchase the house through privatization, Mr. H and Mrs. C1 must pay the privatization fee for the area they are using, and Mrs. C is responsible for completing the ownership transfer procedures for Mr. H and Mrs. C1. Thus, there is a basis to determine that Mrs. C agreed to sell a part of house No. 182 A Street, which she was leasing from the State, to Mrs. C1 on the condition that Mrs. C is allowed by the State to purchase the house through privatization; in other words, the transaction between Mrs. C and Mrs. C1 is a conditional civil transaction, and the transaction becomes effective when Mrs. C is allowed by the State to purchase the house. Article 23 of the 1991 Ordinance on Civil Contracts stipulates: “In cases where the parties agree on an event as a condition for the performance or termination of a contract, when that event occurs, the contract must be performed or terminated.” Although the condition agreed in the contract does not violate legal prohibitions or social ethics, a portion of the house and land Mrs. C agreed to transfer to Mrs. C1 has an area of 42.74 m2 located within the road safety corridor, for which the State does not privatize or recognize Mrs. C’s ownership of the house or land use rights; therefore, the majority of the condition cannot occur. Consequently, the agreement between Mrs. C and Mrs. C1 does not take effect, and the declaration of nullity by the First Instance and Appellate Courts is well-founded.

2. According to the provisions of Article 21 of the 2005 Law on Housing, point h Clause 1 Article 10 of the 2014 Law on Housing, and Article 256 of the 2005 Civil Code, the owner or the subject with other rights to the property has the right to reclaim the property from an unlawful possessor, user, or beneficiary. Since the disputed house and land area of 42.74 m2 is located within the road safety corridor, and the State does not privatize or recognize Mrs. C’s house ownership or land use rights, Mrs. C and her heirs do not have the right to sue for the reclamation of that house and land area. The First Instance and Appellate Courts’ compelling Mr. H, Mrs. C1, Mrs. T1, and Mrs. K to be responsible for returning the house and land area within the road safety corridor to the successors of Mrs. C’s procedural rights and obligations, for which the State does not recognize ownership or use rights, is without basis. The cassation decision of the Council of Judges of the High People’s Court in Ho Chi Minh City failed to recognize the errors of the first-instance and appellate courts, thereby declaring to not accept the protest of the Prosecutor General of the High People’s Procuracy in Ho Chi Minh City and upholding the appellate judgment, which is not in accordance with Clause 2 Article 345 of the 2015 Civil Procedure Code.

For these reasons,

DECISION:

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

1. Accept the Cassation Protest Decision No. 56/2019/KN-DS dated August 05, 2019, of the Chief Justice of the Supreme People’s Court.

2. Annul the Cassation Decision No. 234/2016/DS-GĐT dated September 09, 2016, of the Council of Judges of the High People’s Court in Ho Chi Minh City; annul the Appellate Civil Judgment No. 1515/2014/DS-PT dated December 01, 2014, of the People’s Court of Ho Chi Minh City; and annul the First Instance Civil Judgment No. 12/2014/DS-ST dated April 16, 2014, of the People’s Court of District 3, Ho Chi Minh City regarding the case “Dispute over a residential stay contract” between the plaintiff, Mrs. Tran Van C (died April 02, 2011); the successors of Mrs. Tran Van C’s rights and obligations, Mrs. Le Thị Minh C2, Mr. Le Minh S, Mr. Le Minh D, Mr. Le Minh T2, and the defendants, Mr. Nguyen Cong H, Mrs. Tran Thi C1, and other persons with related rights and obligations.

3. Transfer the case file to the People’s Court of District 3, Ho Chi Minh City, for retrial under first-instance procedures according to the law.

CASE LAW CONTENT:

“[1]...Thus, there is a basis to determine that Mrs. C agreed to sell a part of house No. 182 A Street, which she was leasing from the State, to Mrs. C1 on the condition that Mrs. C is allowed by the State to purchase the house through privatization; in other words, the transaction between Mrs. C and Mrs. C1 is a conditional civil transaction, and the transaction becomes effective when Mrs. C is allowed by the State to purchase the house. Article 23 of the 1991 Ordinance on Civil Contracts stipulates: “In cases where the parties agree on an event as a condition for the performance or termination of a contract, when that event occurs, the contract must be performed or terminated.” Although the condition agreed in the contract does not violate legal prohibitions or social ethics, a portion of the house and land Mrs. C agreed to transfer to Mrs. C1 has an area of 42.74 m2 located within the road safety corridor, for which the State does not privatize or recognize Mrs. C’s ownership of the house or land use rights; therefore, the majority of the condition cannot occur. Consequently, the agreement between Mrs. C and Mrs. C1 does not take effect, and the declaration of nullity by the First Instance and Appellate Courts is well-founded.”

The full text of the Case Law can be viewed here.

Note: The English translation is for reference only.