Contract disputes. The fifth part of the Judicial Interpretation of the General Provisions on Contracts of the Civil Code, from Articles 33 to 49, is "Preservation of Contracts", which respectively provides specific interpretations on the rules for the exercise of the right of subrogation and the right of revocation.
In the subrogation part, there are several characteristics: first, as a judicial interpretation of the substantive law, it directly stipulates the jurisdictional issues that should be provided for in the procedural law, and the author believes that there is a suspicion of overstepping the position, which may damage the relevant procedural rights of the parties;Second,There are vulnerabilities that cannot prevent malicious collusion. In dealing with arbitration and court-competent cases, the design of "suspension of litigation in the first arbitration" cannot prevent the debtor from colluding with the counterparty, thereby continuing to harm the interests of creditors.
In this issue, we will first talk about subrogation. In order to visualize the relevant subjects of subrogation, we use A to represent the creditor and B to represent the debtor of A;C denotes the debtor of B.
What is subrogation?In layman's terms, there is such a triangular relationship that C owes money to B and B owes money to A. The law stipulates that when B does not repay the money to A and does not claim a claim against C, A can directly sue C if the conditions are met. The so-called subrogation, in a way that everyone can understand, means that A crosses B to exercise B's claims and related subordinate rights against C.
Here B is in the middle, and his position is that of the debtor of a. The person who is subrogated by C is the counterpart of B according to the provisions of the judicial interpretation.
The content of the claims that can be subrogated includes the main claims of B against C and the related subordinate rights. Subordinate rights include, but are not limited to, security rights, avoidance rights, etc.
In the structure of the lawsuit, the creditor is the plaintiff and the counterparty is the defendant. If the plaintiff does not sue B and lists it as a third party, the court will ex officio list debtor B as a third party.
As a legal system, the law should stipulate the specific rules for exercising the right of subrogation, that is, when it can be exercised, which court will accept the case, and how many claims can be claimed.
1. The content of subrogation as provided for in the Civil Code
1.What can be exercised is B's claim against C and its subordinate rights, and is no longer limited to the "creditor's right" stipulated in the original contract law. For example, B has a security interest and a right of avoidance against C's claim, and A can exercise them together
2.A's claim against B has matured, and maturity means that it has not been fully repaid at the agreed time ("completely" is added by the author, and partial repayment will be discussed later).
3.Debtor B's claim against C cannot be exclusive to B itself, and the author calls it a claim that cannot be subrogated, and excludes A from exercising subrogation against it in accordance with the law, which is specifically stipulated in this judicial interpretation.
II. New Additions to Subrogation in Judicial Interpretations
1) Determination of the debtor's "negligence in exercising creditor's rights".
If the debtor (b) fails to perform its due debts to the creditor (a) and does not claim the creditor's rights or subordinate rights related to the creditor's rights against the counterparty (c) by way of litigation or arbitration, resulting in the creditor's due creditor's rights not being realized, it is "negligent in exercising its creditor's rights or subordinate rights related to the creditor's rights".
The original meaning of "negligence" is negative, that is, debtor B did not find a way to repay the debt of creditor A, and even if he had a claim against counterparty C, he did not actively increase his ability to repay by litigation or arbitration. Therefore, the law should give B's negative behavior a disadvantage in litigation, and the most effective way is to allow creditor A to sue C.
2) The expenses incurred by the creditor in exercising the right of subrogation shall be borne by debtor B.
The Civil Code stipulates that the necessary expenses for the creditor to exercise the right of subrogation shall be borne by the debtor.
c).Cannot be subrogatedScope: Identity attributes.
Under the provisions of subrogation, creditors have the right to sue the debtor directly in their own name. However, the exception is that the rights that belong to the debtor cannot be subrogated. The following rights may be determined by the people's court to be exclusive to the debtor as provided for in the first paragraph of Article 535 of the Civil Code:
1.The right to claim alimony, alimony or alimony;
2.The right to claim compensation for personal injury;
3.The right to claim remuneration for labor, except for the part exceeding the necessary living expenses of the debtor and the dependents;
4.Request for payment of basic pension insurance, unemployment insurance money, minimum living allowance and other rights to ensure the basic livelihood of the person concerned;
5.Other rights that are exclusive to the debtor.
From the content of the above five items and the analysis of logical "factors", it can be seen that the reason why these claims are "exclusive to the debtor itself" is inseparable from their personal rights based on the debtor itself. The most typical is the right to claim compensation for personal injury. It would be immoral and unjust to allow a creditor to sue the insurance company directly against the debtor who suffered a traffic accident and take away the compensation received for the personal injury. Therefore, the law stipulates that such claims cannot be subrogated.
Subrogation Actions.
3. Arbitration and litigation and jurisdiction of subrogation
The Civil Procedure Law stipulates only three articles of the subrogation system, and the principle of the Civil Procedure Law to determine the jurisdiction and jurisdiction is arbitration with an arbitration agreement, and the litigation jurisdiction shall be based on the valid agreement of the parties, and if there is no agreement, the plaintiff shall file a lawsuit with the defendant's location in accordance with the principle of "the plaintiff is the defendant".
What happens when a creditor files a subrogation action, which involves more complex issues, for example, if there is an arbitration agreement between B and C, or if there is a competent court in the contractThis is the focus of this judicial interpretation, and of course, as a judicial interpretation of substantive law, it is extremely exceptional to stipulate the jurisdiction of litigation.
According to the Civil Procedure Law and its judicial interpretations, litigation arising from contract disputes is subject to the jurisdiction of the place where the contract is performed or the place where the defendant is domiciled, while the Civil Code, as a substantive law, stipulates substantive rights and obligations, and the issue of jurisdiction is a procedural issue, which should be determined by citing the provisions of the procedural law, rather than by citing other substantive laws. The Civil Code and judicial interpretations may provide for the determination of the place of performance of a contract, for example, the place of delivery and the place of payment may be the place of performance of the contract, but this judicial interpretation directly stipulates that the jurisdiction of the defendant's domicile is indeed an exception to the jurisdiction of the subrogation lawsuit.
However, the judicial interpretation still provides relevant provisions on the jurisdiction of arbitration and litigation
(1) Unless there is exclusive jurisdiction, the court at the place where the defendant is domiciled shall have jurisdiction over the subrogation action. Even if the debtor (b) and the counterparty (including C and other entities such as the guarantor, etc.) have entered into a jurisdiction agreement (or jurisdiction clause), they may not raise a jurisdictional objection, and even if they do, they will be dismissed. This is what the author mentioned in the first part of the article, whether the provision of jurisdiction in the substantive law will damage the litigation rights of the debtor's counterpart
The author understands that the reason why the judicial interpretation makes such a direct, definite and non-permissible provision on jurisdiction in the substantive law is undoubtedly a mandatory provision for the current situation of some parties abusing jurisdictional objections in practice. If this issue is then resolved by the procedural law, and the relevant interpretations are revised, it will increase the cost in terms of efficiency and economy. Therefore, this is the embodiment of the principle of "economy and efficiency" mentioned by the author in the preface.
b) in the creditor in accordance with the above jurisdiction alreadyAfter filing a subrogation lawsuit, the debtor or the counterparty raises an objection to the court supervisor on the ground that there is an arbitration agreement between the creditor's rights and debts between the parties, the people's court will not support it.
As for this provision, the author believes that it is debatable, as it is tantamount to depriving the debtor and the counterparty of the right to agree on arbitration and choose arbitration. The reasons are as follows: First, the counterparty is passively responding to the lawsuit, and the creditor will not inform the counterparty in advance when to sue, and the counterparty has no way of knowing whether the creditor will sue. Therefore, as long as the counterparty receives the notice of acceptance of the case and the summons from the court, the arbitration agreement between him and the debtor cannot oppose the court's litigation supervisor. Second, even if there is evidence to prove that the creditor knew that the debtor and the counterparty had an arbitration agreement before the creditor filed a lawsuit, but still chose to litigate, the arbitration agreement would not have the effect against the competent court of the court.
In this regard, the author extends its understanding that the judicial interpretation has already given the creditor the jurisdictional interest of filing a lawsuit with the court where the defendant is located, so the creditor's choice of the court to be in charge of hearing the case should balance this relationship. But,From the perspective of procedural fairness, in a subrogation lawsuit in which the creditor knows or should know that the debtor and the counterparty have an arbitration agreement, the litigation rights of the counterparty as a passive respondent shall be protected, and the creditor shall choose whether to accept the trial by the court or suspend the litigation first in accordance with Article 36 of this Interpretation. After all, the subrogation lawsuit is not at fault for the counterparty, and the fault lies with the debtor B.
c) as an exception, debtors and counterpartiesTo activate the arbitration agreementThe validity of the election of arbitration must be validly initiated before the first **.
The original text of the judicial interpretation reads: "If the debtor or the counterparty applies for arbitration on the creditor's rights and debts relationship between the debtor and the counterparty before the first time, the people's court may suspend the subrogation lawsuit in accordance with law." The word "may" here should mean: the litigation may be suspended and the arbitration result may be awaitedIt is also possible not to suspend the litigation, and the court may continue the trial.
Then there are a few more questions here:
1.Loopholes in the system. If the debtor and the counterparty take advantage of this loophole and submit a notice of acceptance of arbitration for the first time, and the court suspends the litigation, will they not fall into a long wait?There is no doubt that this loses its meaning to the original intent of the judicial interpretation to directly provide for jurisdiction, because as long as the debtor and the counterparty submit a notice of acceptance of the arbitration application before the first time, it is more effective than raising a jurisdictional objection. Therefore, this judicial interpretation is a bit of a dilemma on this issue, but between the two is a loophole.
2.There is no way to prevent malicious collusion。There is no doubt that the debtor and the counterparty have some degree of common interest in relation to a creditor's subrogation action. If the dispute between the three parties is resolved in a subrogation lawsuit that has already been filed, because all three parties participate in the litigation, the dispute can be completely resolved in the system, but the judicial interpretation gives the debtor and the counterparty a separate arbitration against the litigation that has already been conducted, which constitutes a procedural obstacle, and in the arbitration procedure between the debtor and the counterparty, the creditor seems to have no subject status, and whether the arbitration is fair and impartial depends on whether the debtor and the counterparty are in good faith. Therefore, if the debtor and the counterparty reach a consensus to jointly oppose the creditor's lawsuit, it is inevitable that the creditor's claim will continue to be damaged due to malicious collusion.
The unclear status of creditors in arbitration proceedings will still affect the interests of creditors。For example, the judicial interpretation stipulates that if a creditor files a subrogation lawsuit with the debtor's counterpart as the defendant, and the debtor is not listed as a third party, the people's court shall add the debtor as a third party. However, in the arbitration proceedings between the debtor and the counterparty, the creditor does not seem to join the litigation as "having an independent claim", and of course, it is impossible for the arbitration institution to list the creditor as a third party or respondent.
Fourth, multiple creditors against the same counterparty in subrogation lawsuits, "more monks and less porridge" are proportionately distributed
According to the provisions of the Civil Code, if the people's court determines that the right of subrogation is established, the debtor's counterpart shall perform its obligations to the creditor, and after the creditor accepts the performance, the corresponding rights and obligations between the creditor and the debtor, and between the debtor and the counterparty, shall be terminated.
This is a good case for "one-to-one" subrogation proceedings. However, what if multiple creditors file a subrogation lawsuit, and one counterparty has limited assets that are not enough to repay the claims of so many "creditors"?
This is the legal basis for judicial interpretations that need to be interpreted.
The second paragraph of Article 37 of the judicial interpretation stipulates: "Where two or more creditors file a subrogation lawsuit with the same counterparty of the debtor as the defendant, the people's court may join the trial. Where the debtor's creditor's rights against the counterparty are insufficient to pay off the debts it bears to two or more creditors, the people's court shall determine the counterparty's share of performance in accordance with the proportion of the creditor's rights, except as otherwise provided by law. ”
5. Where a creditor initiates a principal creditor's right lawsuit and a subrogation lawsuit in the same court, it shall be handled separately according to whether the court has common jurisdiction
(1) Consolidated trials. If, after suing the debtor, the creditor files a subrogation lawsuit against the debtor's counterpart in the same people's court, that is, it files a principal claim lawsuit against debtor B and a subrogation lawsuit against counterparty C in the same court, as long as the case suing C also belongs to the "defendant's domicile", that is, C's domicile, the two lawsuits can be heard together.
(2) Inform of separate prosecution. If the subrogation lawsuit does not fall within the jurisdiction of the people's court of the principal creditor's rights lawsuit, it shall be notified to file a separate lawsuit with the people's court at the place where the counterparty is domiciled. The court's refusal to uphold implicated jurisdiction once again underscores the jurisdictional interest enjoyed by defendants in subrogation proceedings. At the same time, the subrogation action shall be suspended until the lawsuit against the debtor is concluded.
To summarize briefly, the premise that a creditor can file a main claim lawsuit and a subrogation lawsuit against debtor B and counterparty C in the same court is that the court to which the lawsuit is filed has the same jurisdiction over the two lawsuits. Otherwise, the subrogation action will be sued separately.
5. The court's trial and handling of subrogation lawsuits
(1) If the conditions for exercising the right of subrogation are not met, the litigation claim shall be dismissedHowever, when the creditor fulfills the condition, it can still sue again on the basis of new facts, which does not violate the principle of "res judicata".
(2) The counterparty's defense that "the creditor's right has not been confirmed by an effective legal document" is invalid and is not supported by the court. Where the debtor's counterpart claims that the lawsuit filed by the creditor does not meet the requirements for exercising subrogation only on the grounds that the creditor's rights and debts relationship between the creditor and the debtor has not been confirmed by effective legal documents at the time the creditor initiates the subrogation lawsuit, the people's court will not support it.
(3) The counterparty cannot enjoy the benefits of harmful creditor's rights. The debtor's reduction or relief of the counterparty's debts, such as relief and grace, shall be regarded as harmful creditor's rights and shall not be supported. Where, after a creditor initiates a subrogation lawsuit, the debtor reduces or reduces the counterparty's debts or extends the counterparty's performance period without justifiable reasons, and the counterparty uses this to defend against the creditor, the people's court will not support it.
If we conduct in-depth research on laws or judicial interpretations, we will find many problems, which are theoretical "loopholes" that need to be filled by combining theory and practice. For example, "the debtor's non-performance of its debts due to the creditor" is a prerequisite for the exercise of subrogation, but whether the "non-performance" here is full or partial, and if part is performed, can the exercise of subrogation be prevented?As mentioned above, what is the justification and impropriety of "relief without justification"?
There seems to be no specific and clear stipulation on the above details. The law does not stipulate these specific issues, and judicial interpretations cannot "explain" all these problems to the end, so the filling of these legal holes is also the charm of judges and lawyers studying the law as legal practitioners.
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