Guiding Case No. 2

Subsequent Cases Referencing the Guiding Case

Full Text of the Guiding Case

Keyword(s)

Main Points of the Adjudication

During the second instance of a civil case in which the two parties reach a settlement agreement and the people’s court [of second instance] approves the withdrawal of the appeal, that settlement agreement has [, therefore,] not been made into a bill of mediation by the people’s court in accordance with law [1] and belongs to [the class of] agreements reached outside of litigation. If one party does not perform the settlement agreement and the other party applies to enforce the judgment of first instance, the people’s court should support the application.

Article 207, Paragraph 2 of the Civil Procedure Law of the People’s Republic of China

Basic Facts of the Case

The plaintiff, WU Mei (吴梅), was the proprietor of Wu Mei Recycle Station of Dongpo District, Meishan Municipality, Sichuan Province and was engaged in the business of acquiring abandoned products. Since around 2004, WU Mei had sold abandoned books to the defendant, Meishan Xicheng Paper Co., Ltd. of Sichuan Province (四川省眉山西城纸业有限公司) (hereinafter referred to as “Xicheng Paper Company”). On April 14, 2009, after the two parties settled their account, Xicheng Paper Company issued WU Mei an IOU, which clearly stated:

Today, an amount of exactly ONE MILLION NINE HUNDRED AND SEVENTY THOUSAND YUAN (RMB 1,970,000.00) for abandoned books is owed to WU Mei.

On June 11 of the same year, the two parties also conducted a settlement of their account for amounts due for later [sales of] goods. Xicheng Paper Company issued WU Mei an IOU, which clearly stated:

Today, an amount of exactly FIVE HUNDRED AND FORTY EIGHT THOUSAND YUAN (RMB 548,000.00) for abandoned books is owed to WU Mei.

Because WU Mei urged receipt of the abovementioned payments multiple times, but to no avail, she brought a lawsuit with the Dongpo District People’s Court of Meishan Municipality requesting that the court order Xicheng Paper Company to pay an amount of RMB 2,518,000 for goods plus interest. Defendant Xicheng Paper Company did not raise any objections to the fact that it owed WU Mei an amount of RMB 2,518,000 for goods.

After the trial, the court of first instance held: Defendant Xicheng Paper Company shall pay plaintiff WU Mei an amount of RMB 2,518,000 for goods plus the default interest within ten days after this judgment comes into effect.

After the judgment was pronounced, Xicheng Paper Company appealed to the Intermediate People’s Court of Meishan Municipality. While the second instance [of the case] was being handled, Xicheng Paper Company and WU Mei signed a repayment agreement on October 15, 2009 by which they agreed upon a plan for repayment by Xicheng Paper Company and WU Mei [agreed to] relinquish her request for interest payments.

On October 20 of the same year, Xicheng Paper Company applied to withdraw its appeal on the grounds that it had voluntarily reached a settlement agreement with the other party. After the Intermediate People’s Court of Meishan Municipality ruled to allow the withdrawal, because Xicheng Paper Company had not fully performed the settlement agreement, WU Mei applied to the court of first instance for the enforcement of the judgment of first instance. The Dongpo District People’s Court of Meishan Municipality supported WU Mei’s application to enforce the judgment of first instance. Xicheng Paper Company applied to the Intermediate People’s Court of Meishan Municipality for enforcement supervision, claiming that the original judgment of first instance should not be enforced.

Results of the Adjudication

On July 7, 2010, the Intermediate People’s Court of Meishan Municipality issued the (2010) Mei Zhi Du Zi No. 4 Reply, in which it opined: Based upon WU Mei’s application, there is nothing inappropriate in the court of first instance’s accepting [the request] to enforce a legal document that has already come into effect. The court of first instance should continue enforcing [the judgment].

Reasons for the Adjudication

The court opined: Xicheng Paper Company should have known the legal consequence of withdrawing an appeal, which was that once the court ruled to allow it to withdraw the appeal, the Dongpo District People’s Court of Meishan Municipality’s judgment of first instance immediately became a legally effective judgment, and possessed compulsory enforcement authority. Although the settlement agreement that the two parties reached in second-instance proceedings on the basis of their own volition did set forth stipulations on related rights and obligations, [and] through signing the agreement, Xicheng Paper Company gave up exercising the right to appeal and WU Mei abandoned [monetary] interest; [nevertheless], this settlement agreement was [of the class of] agreements reached by two parties outside of litigation, not possessing compulsory enforcement authority before being affirmed and turned into a bill of mediation by a people’s court in accordance with law. Xicheng Paper Company did not act in accord with the settlement agreement to perform its repayment obligations, violating the parties’ agreement and the principle of good faith. As a result, the court did not support Xicheng Paper Company’s claim that the effective original judgment should not be enforced on the grounds that the two parties had already reached a settlement agreement.

Endnotes

*           The citation of this translation of the Guiding Case is: 《吴梅诉四川省眉山西城纸业有限公司买卖合同纠纷案》(WU Mei v. Meishan Xicheng Paper Co., Ltd. of Sichuan Province, A Sale and Purchase Contract Dispute), China Guiding Cases Project, English Guiding Case (EGC2), Jan. 9, 2012 Edition, available at https://cgc.law.stanford.edu/guiding-cases/guiding-case-2.

This document was primarily prepared by Joseph Casey, WEI Chuchu, and XIA Shengying. The document was finalized by Jennifer Ingram and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings to correspond with those boldfaced in the original Chinese version, was done to make the piece more comprehensible to readers. The following text, otherwise, is a direct translation of the original text and reflects formatting of the Chinese document released by the Supreme People’s Court.

The following Guiding Case was discussed and passed by the Adjudication Committee of the Supreme People’s Court of the People’s Republic of China and was released on December 20, 2011, available at http://old.chinacourt.org/public/detail.php?id=472159. See also 《最高人民法院关于发布第一批指导性案例的通知》 (The Supreme People’s Court’s Notice Concerning the Release of the First Batch of Guiding Cases), Dec. 20, 2011, available at http://old.chinacourt.org/html/article/201112/21/472164.shtml.

[1]           In a piece of commentary contributed to the China Guiding Cases Project, Judge JIANG Heping wrote: “Parties who reach a settlement can, based on actual situations, choose between withdrawal and mediation procedures, where different procedures have entirely different legal consequences. If the parties choose withdrawal, the second-instance proceeding will terminate and the first-instance judgment will take legal effect. If the parties choose mediation, the court will examine the agreement reached by the parties; an agreement affirmed and established after examination will be made into a bill of mediation by the court, endowing the settlement agreement with legal authority equivalent to judgment.” JIANG Heping, A Brief Commentary on Guiding Case No. 2, China Guiding Cases Project, Jan. 16, 2012 (Randy WU trans., 2012), available at https://cgc.law.stanford.edu/commentary/1-judge-jiang.