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China Time Real Estate Group v. Yuhuan
County Administration of State Land of Zhejiang Province
(Case of Dispute over the Contract for Assignment of Land
Use Right)
Civil Judgment of the Supreme People’s Court
Final Judgment No. 82 [2003] of the First Civil Tribunal of
the Supreme People’s Court
Appellant (defendant in the original trial): China Time Real
Estate Group, Address: No. 321 of Eastern Chishan Road,
Jiaojiang District, Taizhou City, Zhejiang.
Legal Representative: Li Weijun, Chairman of the Board of
the Company.
Attorney-at-law (hereinafter referred to as defending
lawyer): Xie Guanbin, Attorney at Beijing Lifang Law Office.
Appellee (defendant in the original trial): Yuhuan County
Administration of State Land and Resources of Zhejiang
Province, Address: Eastern Chengguanyuxing Road, Pearl
Harbor Town, Yuhuan County of Taizhou City, Zhejiang.
Legal Representative: Wang Wuyong, Director General of the
Administration.
Attorney-at-law: Wu Yongmin, Attorney at Zhejiang Zeda Law
Firm.
Attorney-at-law: Huang Yan, Beijing Tongda Law Firm.
The Higher People’s Court of Zhejiang Province entered the
Civil Judgment No. 1 [2003] of the Higher People’s Court of
Zhejiang Province on October 24, 2003 for the case of
dispute over the contract for the assignment of land use
right between the appellant, China Time Real Estate Group
(hereafter “Time Group”), and the appellee, Yuhuan County
Administration of State Land and Resources (hereafter
“Administration of State Land”). Time Group refused to
accept the above-mentioned judgment and appealed to this
Court. This Court formed a collegial panel and opened a
court session to hear the case on February 9, 2004. Xie
Guanbin, defending lawyer of Time Group, and Wu Yongmin and
Huang Yan, attorneys-at-law of appellee Yuhuan County
Administration of State Land and Resources appeared in the
court to participate in the litigation. The hearing of this
case has now been concluded.
The court of the first instance ascertained after hearing
that: On November 7, 2002, Yuhuan Administration published
the Announcement of Yuhuan County Administration of State
Land and Resources on the Listed Assignment of State-owned
Land Use Rights (hereinafter referred to as the Announcement
on Listed Assignment) in the Yuhuan News, the main contents
of which were that: upon the approval of the people’s
government of Yuhuan County, the Administration of State
Land determines to make listed assignment on the following
state-owned land use rights at the real estate transaction
window of Yuhuan County from 8 o’clock of November 21, 2002
till 15 o’clock of December 4 of the same year: (1) The land
situated in the area of reclamation development projects of
Huaqiao Rock, Kanmen Fishing Harbor, Pearl Harbor Town of
Yuhuan County, the serial number for the development of
which is No. 2002-005, and the area of which is 25.9434
hectares. The land is used for mixed domicile houses (a
commercial/residential complex), and the lifespan of the
land use is 70 years. The plot ratio (floor area ratio)
shall be no larger than 1.5, and the afforestation rate
shall beno less than 35%, the sunshine distance shall be
more than 1:1.1, and the site coverage shall be under 30%.
The construction shall be completed within 5 years from the
day when the land use right is obtained; (2)The listed
starting price for bid for the land is RMB 43 million Yuan,
and 40% of the trading land price shall be paid after the
deal is clinched, while the remaining amount should be paid
off in light of the stipulations in the contract; (3) Any
company, enterprise, or other organization within and
outside the People’s Republic of China that has capital
strength and is capable of completing the construction
within the prescribed time limit may take part in the
bidding; (4) Time for signing-up: from November 1, 2002 till
15 o’clock November 20 of the same year. Place for
signing-up: Real Estate Transaction Window of Yuhuan County.
The materials that should be carried for signing-up: the
original copy of the duplicate of the business license, and
the certificate of the legal representative with the common
seal affixed in case the registered capital is more than RMB
100 million Yuan (with the paid-in capital of RMB 50 million
Yuan); (5) Those taking part in the bidding shall pay the
security deposit of RMB 20 million Yuan when signing up; and
(6) The time for listing: From 8 o’clock of November 21,
2002 till 15 o’clock of December 4 of the same year. Place
of listing: Real Estate Transaction Window of Yuhuan County.
It was specified in Article 13 of the Instructions of Yuhuan
County Administration of State Land and Resources for Listed
Assignment of State-owned Land Use Rights (hereinafter
referred to as the Instructions for Listed Assignment) that:
“At the expiry of the time limit for listing, the following
provisions shall be followed in determining whether a
bargaining is completed: (1) if only one bidder makes a
quotation within the time limit for listing, and the
quotation is higher than the base price but complies with
other conditions, then the listed assignment is completed;
(2) if two or more bidders make quotations within the time
limit for listing, the bid winner shall be the one that
quotes the highest price; if the quotations are the same,
the bid winner shall be the one who submits its quotation at
an earlier time, unless the quotation is otherwise lower
than the base price; (3) if, within the time limit for
listing, no one makes a quotation or the quotations made by
the bidders are lower than the base price, then the listed
assignment shall not be completed; and (4) If two or more
bidders request for making quotations at the time when the
time limit for listing expires, the assigner may determine
to make an on-site bidding, or may determine another time to
make bidding through auction, and the bid winner shall be
the one who quoted the highest price”. On November 20, 2002,
the Administration of State Land received the Application
Letter for Bidding on Listed Assignment from Time Group),
which specified that: “Upon careful examination on the
documents of your Administration on listed assignment of
state-owned land use rights, we would like to abide by the
requirements and provisions on the documents of listed
assignment of state-owned land, and determined to apply for
taking part in the bidding for the listed assignment of
state-owned land use rights conducted by your Administration
at Yuhuan County Real Estate Transaction Window from
November 21, 2002 till December 4 of the same year.” On the
same day, the Time Group remitted the agreed RMB 20 million
Yuan to the Land Reserve Center of Yuhuan County, and the
Administration of State Land issued a copy of the receipt
for business transactions of Zhejiang administrative
institutions, and confirmed the receipt of the sum of money.
On the following day, the Time Group provided the “Quotation
List of Bidding on Listed Assignment to the Administration
of State Land, with the quotation of RMB 50 million Yuan.
On December 14, 2001, Zhejiang Yuhui Real Estate Co., Ltd.
(hereinafter referred to as the Yuhui Company) sign the
Referendum Contract on the Assignment of State-owned Land
Use Rights with the Administration of State Land, and
Articles 4 and 7 of the Referendum Contract stipulated that:
“The land assigned under this Contract is used for building
Haijing Garden Residential Quarter I of the General
Development Plan for Kanmen Bay Tourism Spot of Yunhuan
County of Zhejiang Province (Draft)”; “The fees for
assignment of the right to use the land under this Contract
shall be RMB 165 Yuan per square meter, and the total fees
shall be RMB 44 million Yuan”. On December 18 of the same
year, Yuhui Company remitted RMB 1 million Yuan to Kanmen
Fishing Harbor Development Center of Yuhuan County, Zhejiang
Province, and the Center confirmed the receipt of the sum of
money. On October 17, 2002, Yuhui Company remitted RMB 11.2
million Yuan to the Finance Bureau of Yuhuan County; on the
same day, Yuhui Company remitted another RMB 2 million Yuan
to the Finance Bureau of Yuhuan County; the next day, Yuhui
Company remitted RMB 3 million Yuan to the Finance Bureau of
Yuhuan County once again. On November 14 of the same year,
Yuhui Company provided a Report on Changing the Land
Transfer Fee That Should Be Refunded into Security Deposit
for Listing of Land to the Administration of State Land,
requesting changing the aforesaid money directly into the
security deposit for listed bidding. On November 18 of the
same year, Wang Wuyong, legal representative of the
Administration of State Land, agreed to change it into
security deposit. On November 20 of the same year, Yuhui
Company remitted RMB 2.8 million Yuan to the Land Reserve
Center of Yuhuan County, and the Administration of State
Land issued the receipt for receiving the sum of money on
the same day. On November 22 of the same year, the said sum
of money was remitted into the account of Land Reserve
Center of Yuhuan County. On November 21 of the same year,
Yuhui Company provided a Quotation List of Bidding on Listed
Assignment to the Administration of State Land, with the
quotation of RMB 51 million Yuan.
On November 20, 2002, the Administration of State Land kept
the letter of base price which reads that “The base price
for listed assignment of Golden Harbor Bay of New Costal
Town of Yuhuan County (namely, the No.2002-005 sea area
development land) was RMB 57 million Yuan” at the notary
office of Yunhuan County.
On November 20, 2002, after the Department of State Land and
Resources of Zhejiang Province received an offence report
claiming that the Administration of State Land had
irregularity and under-the-table acts in the listed
assignment of the land in Golden Sea Bay of Kanmen Fishing
Harbor on the current day, it ascertained that the land was
being submitted for examination and approval and had not
been approved, then it requested the Administration of State
Land to stop listing before the land was approved according
to law. On November 22 of the same year, the Administration
of State Land delivered to Time Group and Yuhui Company
respectively a Notice on Stopping the Listed Assignment on
the No.2002-005 Sea Area Development Land, which specified
that: “According to the opinions of the Department of State
Land and Resources of Zhejiang Province, Golden Harbor Bay
in Coastal New City of Yuhuan County, namely, the sea area
development land with the serial number for development of
No.2002-005 shall not be transferred through listed
assignment before being approved by the provincial office.
Therefore, this Department terminated the listed assignment
on the sea area development land No.2002-005, and shall make
a public notice additionally in case it transfers it through
listing assignment once again.” On the same day, the
Administration of State Land refunded the RMB 20 million
Yuan to the Time Group. After receiving the aforesaid Notice
and the sum of money, the Time Group sent to the
Administration of State Land the Letter of Reply to the
Notice of Stopping Listed Assignment on No.2002-005 Sea Area
Development Land on December 6 of the same year, alleging
that “It was a lawful civil conduct for your Administration
to issue a public notice and accept cash pledges for listing
and for our company to make listed quotations, which had
legal binding force on both parties. The act of your
Administration to terminate the listing without permission
had violated the relevant legal provisions of our country,
and shall be deemed as an invalid act. Our company now
requests your Administration to resume the listing and
assign the land according to law. If your Administration
goes your own way, our Company shall request your
Administration to refund us the cash pledges for the listing
in double amount according to law and compensate us the
corresponding economic losses. Please give us reply within 5
workdays after your Administration receives the Letter, or
otherwise our Company will bring a lawsuit against your
Administration according to law.”
In addition, the court of first instance entrusted the
department of judicial authentication of the Higher People’s
Court of Zhejiang Province (hereinafter referred to as the
judicial authentication department) to make an
authentication on the following matters on May 22, 2003 upon
the application of the Time Group: (1) The genuineness of
the letter with the base price of listed assignment of RMB
57 million Yuan on November 20, 2002, namely, whether the
printed characters in the letter and the seal of the
Administration of State Land thereof were written and
affixed on November 20 or before; (2) Whether the printed
characters and written letters in the Quotation List of
Bidding on Listed Assignment of November 21 of 2002 and the
seal of Yuhui Company thereof were written and affixed on
November 21, 2002 or before. On June 27, 2003, the judicial
authentication department issued a letter for returning the
files, with the conclusion of “It is impossible to make an
expert’s conclusion due to insufficient materials in the
samples and the restriction of technical conditions of
authentication.” The two parties did not demur with the
letter, but the Time Group believed that it should be sent
to a more authoritative department to make an
authentication, so it filed an application once again.
On January 9, 2003, the Time Group brought a lawsuit to the
Higher People’s Court of Zhejiang Province, claiming that:
On November 7, 2002, the Administration of State Land
published an Announcement on Listed Assignment in the Yuhuan
News, specifying that the Administration of State Land will
transfer through listed assignment the state-owned land use
right of the land with the development serial number of
No.2002-005, with an area of 25.9434 hectares, and the
purpose for commercial/residential complex, and the lifespan
of the land use of 70 years upon the approval of the
people’s government of Yuhuan County. According to the offer
announced, the Time Group submitted the duplicate of its
business license with a registered capital of RMB 100.89
million Yuan and paid a cash pledge for listing of RMB 20
million Yuan on November 20, 2002. On November 21, 2002, the
Time Group participated in the listed bidding activities
according to law at the real estate transaction window of
Yuhuan County, which was the place of listing as designed by
the Administration of State Land, and listed the quotation
of RMB 50 million Yuan at 14:30 of the current day. On
November 22, 2002, the Administration of State Land notified
the Time Group to stop the listed assignment of the
development land by the reason that the development land was
not approved by the Department of State Land and Resources
of Zhejiang Province, and refused to sign the contract for
the assignment of state-owned land use right with the Time
Group. The Time Group believed that, according to the
provisions of the state law, “the various operational use of
land such as commercial, tourism, entertainment, and
commercial residences, and etc. shall be assigned by way of
bid invitation, auction, or listing”. As the only one
department that assigns state-owned land on behalf of the
state, it was generally impossible for the Administration of
State Land to cancel the listing after it issued the
announcement on listing without the approval of the
authoritative department, and the Administration of State
Land shall undertake all the legal liabilities to its
vicious breach of the contract. The Time Group had obtained
the highest quotation of the listing for this time, and was
the bid winner for the listing. According to the provisions
of Article 29 of the Measures of Tai Zhou City for the
Administration of Assignment of State-owned Land Use Rights
through Bidding and Auction (Order No. 74 of the People’s
Government of Taizhou City) (hereinafter referred to as the
Order of Taizhou Municipal Government) on November 11, 2001,
the security deposit for the performance of the contract
paid by the Time Group was the earnest money for contract
conclusion as agreed upon by the Time Group and the
Administration of State Land before they entered into the
contract for the assignment of state-owned land use rights.
The Administration of State Land shall refund the earnest
money in double amount in accordance with the provisions of
Articles 89 and 90 of the Guarantee Law of the People’s
Republic of China (hereinafter referred to as the Guarantee
Law). According to the principle of fairness as prescribed
in Article 4 of the General Principles of the Civil Law of
the People’s Republic of China and Article 5 of the Contract
Law of the People’s Republic of China (hereinafter referred
to as the Contract Law) and the spirit of the Notice on
Strictly Implementing the Listed Assignment of Operational
Land Use Right through Bidding and Auction, which was issued
by the Ministry of State Land and Resources and the Ministry
of Supervision on August 26, 2002, and in order to prevent
the loss of state-owned assets, the Administration of State
Land shall not change the conditions on the subjects of
signing-up as determined in the Announcement on Listed
Assignment and Instructions for Listed Assignment, shall
make up the relevant formalities as soon as possible, and
continue to perform the obligations as determined in the
Announcement. Therefore, the Time Group requested: (1) to
order the Administration of State Land continue performing
the contract and assign the development land with the
development serial number of No.2002-005 to the Time Group;
(2) to order the Administration of State Land return to the
Time Group the agreed-upon security deposit with the nature
of earnest money in double amount, which totaled RMB 40
million Yuan (of which 20 million Yuan had been refunded);
and (3) the Administration of State Land shall undertake the
case acceptance fees.
The Administration of State Land defended that: (1) The
Announcement on Listed Assignment of November 7, 2002 was,
by law, an invitation to offer, which was issued to an
unspecific general public, and was not an offer. Therefore,
the act of the Administration of State Land in revoking the
announcement on assignment was by nature an invitation to
offer according to the instructions of the Department of
State Land and Resources of Zhejiang Province after it had
issued the Announcement, and was not an act in breach of the
contract, not to mention the continuous performance of the
contract; (2) the Administration of State Land was not out
of malice in stopping the listed assignment of the
development land, but did it for the purpose of executing
the instructions of the Department of State Land and
Resources of Zhejiang Province and observing the procedural
provisions. On November 21, 2002, the Administration of
State Land had not only received the Quotation List of
Bidding on Listed Assignment of the Time Group, but also
received that of the Yuhui Company, and the Time Group was
not the one that made the highest quotation. After the Time
Group signed up, it demanded the Administration of State
Land to give it listing materials on site. Because there
were too many people handling affairs at the Administration
of State Land at that time, the staff members of the
Administration of State Land had no spare time, and asked
the Time Group to receive the materials 30 minutes later,
which was met with the unreasonable suspect of the Time
Group. The Time Group made an offence report immediately to
the Department of State Land and Resources of Zhejiang
Province alleging that the Administration of State Land had
under-the-table deals. Considering that there was an offence
report on the listed bidding for this time, and the land was
transferred through listed assignment without approval,
which violated the relevant provisions of the Land
Management Law of the People’s Republic of China
(hereinafter referred to as the Land Management Law), the
Administration of State Land delivered a notice on stopping
the listing to the Time Group under the intervention of the
Department of the State Land and Resources of Zhejiang
Province. Therefore, the Administration of State Land did
not have any malice in stopping the listed assignment; and
(3) It was recorded clearly both in the Announcement on
Listed Assignment issued by the Administration of State Land
and the receipts of the money of the administrative
institutions issued by the Administration of State Land that
the RMB 20 million Yuan paid by Time Group to the
Administration of State Land on November 20, 2002 was a
security deposit rather than an earnest money, and the Time
Group had no legal basis to claim that the guaranty fee was
an earnest money. Therefore the Administration of State Land
pleaded to reject the claims of the Time Group.
The court of first instance held that: On the issue
concerning whether the RMB 20 million Yuan was a security
deposit or earnest money, according to the provisions of
Article 90 of the Guarantee Law, “An earnest money shall be
stipulated in written form. The parties shall stipulate the
time limit for delivering the earnest money in the earnest
money contract. The earnest money contract shall take effect
from the day when the earnest money was actually delivered”.
Seen from the evidence of this case, the two parties did not
sign any written earnest money contract or earnest money
clause. The two parties only stipulated the security deposit
RMB 20 million Yuan in the relevant documents concerning
listed assignment. While Article 118 of the Interpretations
of the Supreme People’s Court on Some Issues concerning the
Application of the Guarantee Law of the People’s Republic of
China (hereinafter referred to as the Interpretations on
Some Issues concerning the Guarantee Law) prescribed that
“The parties who provide money of lien, security, security
deposit, earnest money for contract conclusion, cash pledge
or earnest money have not agreed on the nature of earnest
money, if the parties claim for the right of earnest money,
the court will not support it”. From this provision we could
see that the Time Group had no legal basis to claim for the
right to earnest money. Agreement means the meeting of minds
between both parties, while the Order of Taizhou Municipal
Government was an administrative regulation independent of
the parties’ intent. Therefore, the Time Group’s contention
that the contents of the Order of Taizhou Municipal
Government were the contents of the intent of both could not
be established. With regard to the issue of whether the
contract for the assignment of state-owned land use right
between both parties could be established, Paragraph one of
Article 15 of the Contract Law prescribed that “An
invitation to offer is a proposal requesting others to make
offers to the principal. Mailed price lists, public notices
of auction and tender, prospectuses and commercial
advertisements, etc. are invitations to offer.” According to
this provision, the announcement on listing in this case was
an invitation to offer rather than an offer. The Time
Group’s reason that this case was an offer could not be
established. The quotation of the Time Group on November 21,
2002 was an offer. According to Article 19 of the Provisions
on Listed Assignment of State-owned Land Use Rights through
Bidding and Auction, which was issued by the Ministry of
State Land and Resources of the People’s Republic of China
on May 9, 2002, provide that “If the time limit for listing
expires, the bargaining shall be determined in light of the
following provisions: (1) if only one bidder makes a
quotation within the time limit for listing, and the
quotation is higher than the base price and complies with
other conditions, then the listing shall be completed; (2)
if two or more bidders make quotations within the time limit
for listing, the bid winner shall be the one that quotes the
highest price; if the quotations are the same, the bid
winner shall be the one who submits the price quotation list
at an earlier time, unless the quotation is otherwise lower
than the base price; (3) if, within the time limit for
listing, no one makes a quotation or the quotations made by
the bidders are lower than the base price or do not comply
with the other conditions, then the listing is not
completed. If two or more bidders request to make quotations
at the time when the time limit for listing expires, the
assigner shall make on-site bidding on the listed land, and
the bid winner shall be the one who quotes the highest
price”. In this case, the Administration of State Land made
listed assignment on the state-owned land use right without
being lawfully approved, and the Department of State Land
and Resources of Zhejiang Province ordered it to stop
listing. Under such conditions, neither did it determine the
Time Group as the bid winner, nor did it sign any
confirmation letter with the Time Group, and the
Administration of State Land did not make any commitment.
Therefore, the contract relationship between the two parties
had not been established yet. The Time Group’s reasons for
claiming that the two parties had a contractual relationship
could not be established. Considering that the letter on
November 20, 2002 for the listed assignment with the base
price of RMB 57 million Yuan and the Quotation List of
Bidding on Listed Assignment of November 21, 2002 were not
the major evidence of this case, and the determination on
the said evidence would not affect the substantive handling
of this case, therefore, this Court could not support the
Time Group’s request to reapply for authentication on the
aforesaid two copies of evidence. With regard to the issue
whether the contract for the assignment of state-owned land
use right between the two parties was valid, because the
contract on the assignment of state-owned land use rights
between the two parties had not been established, there was
no problem concerning the effect of the contract on the
assignment of state-owned land use right. As to the issue
concerning the effect of the listed assignment act for this
time, there were no provisions on the scope of power for the
assignment of land in the Land Management Law, Urban Real
Estate Administration Law of the People’s Republic of China
(hereinafter referred to as the Urban Real Estate
Administration Law), Regulation of the People’s Republic of
China on the Implementation of the Land Management Law, and
the Regulation on the Administration of Urban Real Estate
Development and Operation, as well as other laws and
regulations. However, Article 21 of the Measures of Zhejiang
Province for the Implementation of Land Management Law of
the People’s Republic of China, which was promulgated by the
Standing Committee of the People’s Congress of Zhejiang
Province and implemented on July 5, 2000 prescribe that “The
formalities for the examination and approval of the concrete
construction use land shall be handled in light of the
following provisions within the scope of farm land whose
change of use has been approved and the scope of original
land for construction use: 1. The land used for construction
projects with an area of less than two hectares shall be
subject to the examination of the administrative department
of land of the people’s government of a county or city, and
be reported to the people’s government at the corresponding
level for approval, and then be reported to the
administrative department of land of a districted city as
well as the provincial people’s government for archival
filing; 2. The land used for construction projects with an
area of more than two hectares but less than five hectares
shall be subject to the examination of the competent
administrative department of land of the people’s government
of a districted city and be reported to the people’s
government at the corresponding level for approval, and then
be reported to the competent administrative department of
land of the provincial people’s government for archival
filing. While the people’s governments at Hangzhou and
Ningbo cities may approve the land used for construction
projects of more than two hectares and less than six
hectares; and 3. The land used for construction projects
with an area of more than six hectares in Hangzhou and
Ningbo cities and with an area of more than five hectares in
other districted cities shall be subject to the examination
of the competent administrative department of land of the
provincial people’s government, and be reported to the
provincial people’s government for approval. If there is
necessity to occupy any unused state-owned land as
determined by the general plan for land use for a specific
construction project, the formalities for the examination
and approval shall be gone through in light of the preceding
provisions, unless it is otherwise specified differently by
any law or administrative regulation. ” In this case, the
land under dispute amounted to 25.9434 hectares, which shall
be reported to the provincial government for approval
according to the aforesaid provisions. However, the
Administration of State Land did not report to the
provincial government for approval before making an
announcement on listed assignment, therefore, the listing
act shall be invalid. To sum up, the court of first instance
believed that the act of listed assignment of the
Administration of State Land was invalid because it did not
obtain the approval of the people’s government of Zhejiang
Province. During the process of listing, the Administration
of State Land stopped its act of listed assignment upon the
determent of the Department of State Land and Resources of
Zhejiang Province, and did not confirm the Time Group as the
bid winning entity, nor it did make any promise to the
quotations of the Time Group, so the contractal relationship
between the two parties had not been established. The Time
Group’s claim for ordering the two parties to continue
performing the contract and assign the land under dispute to
the Time Group had no legal basis, and shall not be
supported. Furthermore, the two parties did not stipulate
that the RMB 20 million Yuan paid by the Time Group was
earnest money in nature. Therefore, the Time Group’s claim
for returning the earnest money in double amount shall not
be supported. According to Article 15 of the Contract Law,
Article 90 of the Guarantee Law, and Article 118 of the
Interpretations on Several Issues concerning the Guarantee
Law, and the provisions of Article 64 of the Civil Procedure
Law of the People’s Republic of China, this Court ruled
that: the claims of the Time Group shall be rejected, and
the case acceptance fees RMB 360,010 Yuan shall be borne by
the Time Group.
The Time Group was not satisfied with the judgment of the
first instance, and thus appealed to this Court, alleging
that: The court of first instance did not clearly determine
the facts, had no sufficient evidence, and erred in law
application. It requested to revoke the judgment of first
instance, to support its claims, and to order the
Administration of State Land to undertake the legal cost of
this case. The main facts and the reasons were that: 1. The
court of first instance erred in determining the basic
facts. The Time Group shall be the only lawful bidder for
the listed bidding, but the Administration of State Land
fabricated the facts that the outsider Yuhui Company had
participated in the listed bidding. There was no base price
in the listed transaction, the Administration of State Land
had colluded with the local notary office to issue a false
certificate of base price. The Administration of State Land
had signed an assignment contract with Yuhui Company before
making announcement on listing in respect of the land in
question, and the public notice of listing was tailored for
Yuhui Company. 2. The court of first instance did not
properly apply the law. (1) The judgment of first instance
mixed up the legal relationship of listed assignment with
the legal relationship of assignment of state-owned land use
right. (2) The listed assignment contract between the Time
Group and the Administration of State Land had been
established, and the act of the Administration of State Land
for listed assignment of state-owned land use right shall be
effective. Paragraph one of Article 15 of the Contract Law
did not exclude the circumstance in which the announcement
on listing was an offer, it was clarified in the
announcement of listing of this case that the Administration
of State Land would enter into a contract with the one that
quoted the highest price, which complied with all the
elements of the Contract Law for an offer. The Time Group
was the only bidder that had the qualification, and its
quotation of RMB 50 million Yuan was higher than the price
for starting the auction of RMB 43 million Yuan. Under the
circumstance that there was no successive bidding, the
quotation was an effective promise to the offer of the
Administration of State Land. The act of the Department of
State Land and Resources of Zhejiang Province to notify its
subsidiaries by telephone was a good administrative act, and
shall not affect the validity of the legal relationship of
listed assignment between the two parties. According to the
provisions of Urban Real Estate Management Law, the land in
question shall be subject to the approval of the People’s
Government of Yuhuan County, and to the specific assignment
of the Administration of State Land. Therefore, the
Administration of State Land was the only government organ
that had the power to organize the implementation of
assignment of the land in dispute, which complied with the
legal provisions on the subject of assignment of land use
right. According to the provisions of Article 4 of the
Interpretations of the Supreme People’s Court on Some Issues
concerning the Application of the Contract Law of the
People’s Republic of China (I), the court of first instance
improperly confirmed the invalidity of the act of listed
assignment implemented by the Administration of State Land
by taking the local statutes enacted by the standing
committee of the people’s congress of Zhejiang Province as
the legal basis. (3) After the objects of transaction and
the transaction price were determined through effective
listing, the contract for the assignment of state-owned land
use right between the two parties would be established, but
as it had not been approved by the relevant departments, and
its effect remains to be determined. The contentions of the
court of first instance that the land under dispute shall
not be transferred through listed assignment until it has
been approved by the relevant departments and the contract
for the assignment of state-owned land use right of the two
parties had not been established had no legal basis. (4) The
security deposit of RMB 20 million Yuan paid by the Time
Group to the Administration of State Land during the listed
transaction shall be determined as the earnest money for
contract conclusion in law, the court of first instance
improperly determined that it was not earnest money by
nature. According to the provisions of Article 29 of the
Order of Taizhou Municipal Government, the security deposit
in the assignment of state-owned land use rights in Taizhou
city shall be earnest money, which was an open and true
intent of Taizhou municipal government as an equal civil
subject in such activities, and was not the act of
promulgation of administrative regulations by the government
as determined by the court of first instance. According to
Article 118 of the Interpretations on Some Issues concerning
the Guarantee Law, the earnest money of RMB 20 million Yuan
paid by the Time Group was earnest money by nature, and the
relevant provisions of the Guarantee Law on the penalties to
earnest money shall be applied. The Administration of State
Land requested the Time Group to pay the 20 million Yuan for
the purpose of preventing the Time Group from failing to
entering into an assignment contract as prescribed or paying
the corresponding money after the success of the bidding.
Meanwhile, according to Article 60 of the Law of the
People’s Republic of China on Bid Invitation and Tendering,
if the bid winner refused to sign the contract on land
assignment, the security deposit shall not be refunded. It
was obvious that the security deposit had the nature of
earnest money for making a contract for guaranteeing the
contract conclusion officially in this case. Therefore, the
Administration of State Land shall continue its performance
of the contract, otherwise it shall undertake the
liabilities for refunding the earnest money in double
amount.
The Administration of State Land defended that: The court of
first instance clearly determined the facts, and correctly
applied the law. It requested to reject the appeal and
affirm the original judgment. The main facts and reasons
were that: (1) The Time Group was not the only legal bidder
for the listed assignment this time, and the quotation of
Yuhui Company, which also complied with the conditions of a
bidder, was obviously higher than that of the Time Group.
The Time Group had no basis to allege that the original
certificate provided by the relevant departments of the
government and the certificate issued by them were forged.
(2) There was a base price in the listing. It was
sufficiently specified in Article 13 of the Instructions for
Listed Assignment and the originals of the base price kept
within the notary office of Yuhuan County that the two
parties had clarified there was a base price in the listing
and the base price could not be an after-the-event
fabrication. (3) According to law, the announcement on
listing was an invitation to offer issued to an unspecific
general public, and the Administration of State Land could
not make any promise to the Time Group’s quotation that had
not reached the base price, nor could it sign any
confirmation letter with the Time Group, therefore the Time
Group’s claiming that the contract had been established had
no factual and legal basis, and could not be established.
(4) The listing in question was a measure of the
Administration of State Land, as a functional department of
the government, for carrying out the activities of
assignment of state-owned land use rights in strict
accordance with the provisions of administrative
regulations. There was no problem of the so-called
“tailoring” for Yuhui Company as alleged by the Time Group.
The assignment contract between the Administration of State
Land and Yuhui Company was drafted before the Ministry of
State Land and Resources promulgated the Provisions on
Listed Assignment of State-owned Land Use Rights through
Bidding and Auction. (5) The security deposit of RMB 20
million Yuan paid by the Time Group could not be interpreted
as earnest money of the guaranty nature, and could not be
refunded in double amount. The announcement on listing only
prescribed that the RMB 20 million Yuan was a security
deposit for the performance of the contract, and both
parties did not make any stipulation on the security deposit
as earnest money, nor did they conclude any special earnest
money contract or earnest money clause. Article 29 of the
order of Taizhou municipal government could not be taken as
the legal basis for handling this case because it had no
legislation power and the contents thereof was totally
different. And (6) The facts in this case did not comply
with the legal circumstances for the contract of pending
effect. The Administration of State Land transferred through
listed assignment on the land under dispute without the
approval of the authoritative organ, which violated the
provisions of the Land Management Law and the Contract Law,
and the listed act shall be determined as invalid.
This Court ascertained after the second trial that the
assignment of the state-owned land use right with the
development serial number of No.2002-005 in the reclamation
development project area of Huaqiao Rock, Kanmen Fishing
Harbor, Pearl Harbor Town of Yuhuan County had not been
approved by the people’s government of Zhejiang Province
till the end of the court session of the second instance.
During the second instance, the Time Group submitted a copy
of new evidence at the court, namely, the Minutes of
Executive Meeting No.4 [2003] of the People’s Government of
Yuhuan County, which supported that the Administration of
State Land was preparing to assign the land involved in the
case to Yuhui Company by agreement under the condition that
the case was not settled, which showed the Administration of
State Land lacked the basic faith of performing its listed
obligations. The Administration of State Land did not issue
any opinion of cross-examination because it believed that
the evidence had exceeded the time limit for producing
evidence.
Other facts ascertained by this Court in the second instance
were basically the same as those ascertained by the court of
first instance.
After the end of the court session of the second instance,
the Time Group filed a written application requesting to
make an authentication once again on the truthfulness of the
quotation list of Yuhui Company and the list of the base
price of the Administration of State Land, and make an
investigation so as to obtain evidence on whether Yuhui
Company had actually paid the earnest money of RMB 20
million Yuan.
This Court held that the issue whether the contractual
relationship on the assignment of state-owned land use
rights between the Time Group and the Administration of
State Land had established was the precondition for the Time
Group to request continuing the performance of the contract,
and was also the basis for the Administration of State Land
to undertake the contract liabilities. The issue shall be
determined by comprehensively taking into consideration of
the contents in such three aspects as the legal nature of
the Announcement on Listed Assignment, whether there was any
acceptance in this case, and the legal basis for the
Administration of State Land to undertake liabilities. The
issue whether the Announcement on Listed Assignment was an
invitation to offer or an offer in legal nature shall be
firstly determined according to law. Article 15 of the
Contract Law prescribed that the announcement of auction and
announcement of bidding were invitations to offer in their
legal nature, and the Announcement on Listed Assignment
published in the newspapers in this case was the same as the
announcement of auction and announcement of bidding, and was
also an expression of intent issued to an unspecific general
public for the purpose of attracting or inviting other
parties to send an offer, expecting the bidder to bring
forward price clauses, and shall be determined as an
invitation to offer by nature. The quotation made by Time
Group on November 21, 2002 shall be an offer of this case.
The Time Group’s contention that the Announcement on Listed
Assignment was an offer lacked legal basis and could not be
established. The Contract Law did not restrict the
withdrawal of an invitation to offer at its own will. If the
one that made an invitation to offer withdrew the invitation
to offer after issuing it, he/it need not undertake legal
liabilities so long as he did not result in damage of
reliance interest to the bona fide counterpart. An
invitation to offer could not produce any contract
relationship, and the withdrawal of the invitation to offer
could not produce any liability in the contract, either.
Therefore, the Time Group’s contention to request the
Administration of State Land continue listing and conclude
the contract for the assignment of state-owned land use
right had no legal basis, and could not be supported. With
regard to the issue whether there was an acceptance in this
case, on November 22, 2002, namely, the morrow after the
Time Group and Yuhui Company made quotations but the bidding
had not yet started, the Department of State Land and
Resources of Zhejiang Province ordered the Administration of
State Land to stop listing on the ground that “the
state-owned land use right was transferred through listed
assignment without being lawfully approved”, which resulted
in the interruption of the on-going contracting act due to
the occurrence of factual reasons. At that time, the time
limit for bidding in the procedures for listed assignment
had not expired, and the main clause of the contract for the
assignment of the state-owned land use right, namely, the
price of the land use right in dispute had not been
determined, the Administration of State Land had not
accepted the quotation of the Time Group, and the
relationship of the two parties was still in the stage of
offer for contract conclusion. Therefore, the contract in
this case had not been established because no acceptance was
made, so there was no contractual relationship between the
two parties. The Time Group’s reasons for claiming that
there was an effective acceptance, and a contractual
relationship had been established between the two parties
could not be established. Since the contract in this case
had not been established, we could not support the Time
Group’s claim that there was a contract with pending effect
between the Administration of State Land and itself. With
regard to the legal basis for the Administration of State
Land to undertake liabilities, the on-going listed
transaction of state-owned land use right in this case had
not gone through examination and approval at the time of
listing, and still had not been approved by the People’s
Government of Zhejiang Province at the time when the court
session of second instance of this Court ended, which
resulted in the Time Group’s inability to realize its
expected interests through the conclusion of contract for
the assignment of state-owned land use right. The
Administration of State Land had fault in this case, and
shall undertake corresponding liabilities for its negligence
in contract conclusion. The loss of reliance interests
occurred in contract conclusion shall be protected through
independent pleading for compensation. During the second
trial of this case, the Administration of State Land agreed
to undertake compensation liabilities for its negligence in
contact conclusion, but the Time Group insisted that the
Administration of State Land undertake the liabilities for
continuing the performance of the contract or refunding the
earnest money in double amount before the end of the court
session of the second instance, and did not claim for
compensation on its losses caused by the negligence of the
Administration of State Land in contract conclusion. Due to
extent of the pleadings of the parties and the scope of
hearing of the cases in the second instance, this Court will
hear this issue. Considering the contractual relationship
between the parties of this case had not been established,
the court of first instance rejected the Time Group’s claim
for requesting the Administration of State Land undertake
the contract liabilities, which was not inappropriate in law
application. As to the issue concerning whether the security
deposit of RMB 20 million Yuan as prescribed in the
Announcement on Listed Assignment and the Instructions for
Listed Assignment was an earnest money, the 20 million Yuan
was specified as a security deposit in the Announcement on
Listed Assignment of this case, and the two parties did not
stipulate it as earnest money. The Guarantee Law and the
Interpretations on Several Issues concerning the Guarantee
Law have prescribed the standards for defining the earnest
money and security deposit, namely, the precondition for the
parties to claim for security deposit as earnest money was
that both parties had made clear stipulation on it. The
provisions of Article 29 of the Order of the Taizhou
Municipal Government quoted by the Time Group on taking the
security deposit as an earnest money was neither the
stipulation of the two parties nor does it comply with the
relevant legal provisions, the government order could not be
taken as the legal basis for determining the security
deposit of RMB 20 million Yuan as an earnest money. The
court of first instance correctly applied law in determining
the security deposit of RMB 20 million Yuan as an earnest
money. The Time Group’s contentions that the security
deposit of RMB 20 million Yuan shall be the earnest money
for guaranteeing contract conclusion, and the Administration
of State Land shall refund it in double amount lacked
factual and legal basis, which could not be supported by
this Court. The Time Group proposed to make an
authentication on the truthfulness of the quotation of Yuhui
Company and the list of base price of the Administration of
State Land during the second instance, and make an
investigation into whether Yuhui Company had actually paid
the security deposit of RMB 20 million Yuan, which did not
affect this Court’s determination of whether the contract
between the two parties had not been established. Therefore,
this Court does not grant its approval. To sum up, the court
of first instance clearly determined the facts, and
correctly applied law. According to the provisions of Item
(1) of Paragraph One of Article 153 of the Civil Procedure
Law of the People’s Republic of China, this Court ruled as
follows:
The appeal shall be rejected, and the original judgment
shall be affirmed.
The case acceptance fee for the second instance, which was
RMB 360,010 Yuan, the Time Group shall assume RMB 240,010
Yuan, and the Administration of State Land shall assume RMB
120,000 Yuan.
This judgment shall be final.
Presiding Judge Hu Shihao
Judge: Zhang Yafen
Acting Judge: Zhang Yingxin
June 15, 2004
Clerk: Wang Dongying |
