HongQiao ZhengHan represented Bank A in a seven-year rights protection campaign against the enforcement court’s unauthorized distribution of case funds without preparing a written distribution plan during the enforcement distribution procedure, which has recently yielded fruitful results. Through the retrial procedure of the Supreme People’s Court (the “SPC”), HongQiao ZhengHan successfully revoked the original second-instance ruling dismissing the lawsuit, and the SPC ordered the second-instance court to hear the case. The case has clarified the judicial criterion that procedural defects shall not deprive parties of their substantive remedy rights, opening up a solid path for rights protection for creditors encountering similar unfair enforcement distributions.
Keywords: SPC Retrial, HongQiao ZhengHan, Turning Defeat into Victory, Action Challenging Enforcement Distribution Plan, Procedural Justice, Remanding for Retrial, Protection of Priority Claims
I. Basic Facts of the Case
Bank A is the first-ranking mortgagee of the real estate involved in the case. During the enforcement distribution process, an intermediate people’s court in western China failed to prepare a written distribution plan in accordance with the law, ignored Bank A’s multiple objections, arbitrarily reduced the amount of Bank A’s priority claims, and distributed the substantial remaining auction proceeds to ordinary creditors. After representing Bank A in pursuing rights protection through various procedures including enforcement objection, reconsideration of enforcement objection, and procuratorial supervision, HongQiao ZhengHan finally filed an action challenging the distribution plan with the intermediate people’s court, but the case was procedurally dismissed by the high people’s court of the province (the second-instance court) on the ground that “the enforcement court did not issue a written plan, which does not meet the statutory conditions for case acceptance”.
II. Key Points and Difficulties
This case fell into a highly prevalent legal dilemma: the law stipulates that “a lawsuit may be filed if there is an objection to the distribution plan”, but if the enforcement court acts illegally by failing to issue a written distribution plan in the first place, does the creditor thus have no access to remedies? After the action challenging the distribution plan was accepted, the mechanical adjudication of the second-instance court trapped the creditor in a logical loop of “losing the right to sue due to the enforcement court’s prior illegal act”. The keys to resolving the deadlock in rights protection in this case were: how to get the court to accept the action challenging the distribution plan in the absence of a written distribution plan; and how to push the SPC to break through the formalistic constraints of the provisions and recognize the justiciability of the “de facto distribution plan”.
III. Highlights of Representation
Representing Bank A, HongQiao ZhengHan embarked on a seven-year journey of rights protection, exhausting all available paths for safeguarding rights, specifically including:
(1) Filing an enforcement objection with the intermediate people’s court, requesting the issuance of a distribution plan, which was dismissed by ruling.
(2) Dissatisfied with the dismissal ruling, applying for reconsideration of the enforcement objection to the high people’s court of the province, requesting the revocation of the dismissal ruling and ordering the intermediate people’s court to issue a distribution plan. The high people’s court of the province revoked the dismissal ruling but held that a distribution plan had been issued through the actual distribution act, and Bank A could file an action challenging the distribution.
(3) As the intermediate people’s court still refused to accept the action challenging the distribution, applying for enforcement supervision to the people’s procuratorate at the same level as the intermediate people’s court, which issued a procuratorial suggestion to correct the procedural illegality.
(4) Based on the procuratorial suggestion, the intermediate people’s court accepted Bank A’s action challenging the distribution plan, and the first-instance court upheld all of Bank A’s priority claims.
(5) The defendant appealed against the judgment, and the high people’s court of the province procedurally dismissed Bank A’s lawsuit on the ground that “the enforcement court did not issue a written plan, which does not meet the statutory conditions for case acceptance”.
(6) Dissatisfied with the second-instance dismissal ruling, HongQiao ZhengHan represented Bank A to file a retrial application with the SPC.
During the SPC retrial stage, HongQiao ZhengHan adopted a breakthrough strategy of “substantive rights protection”. In the desperate situation where the lawsuit was dismissed in the second instance and remedy measures were almost interrupted, it accurately refined the principle of “functional equivalence” and insisted that the enforcement court’s procedural illegality should not be borne by the law-abiding creditor. HongQiao ZhengHan argued from multiple dimensions that the enforcement court’s multiple enforcement acts had the substance of distribution, and Article 509 of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China did not limit the conditions for filing an action challenging the distribution plan to a “written distribution plan”, successfully persuading the collegial panel that procedural defects should not be a reason for depriving substantive rights. Ultimately, the SPC issued a reversed ruling, revoking the original ruling and ordering the high people’s court of the province to conduct a substantive hearing.
IV. Key Adjudication Points
The SPC adopted HongQiao ZhengHan’s representation opinions and clearly stated:
Substantive Functional Equivalence: Although the enforcement court did not prepare a formal plan, it clarified the distribution order and amount through documents such as replies and case closure notices, which functioned as a “de facto distribution plan”.
Priority in Protecting the Right to Sue: The enforcement court’s procedural illegality should not be an obstacle to the parties’ exercise of remedy rights, and the court should substantively resolve disputes.
Revocation of Ruling and Ordering Trial: The second-instance ruling constituted an error in application of law, and the second-instance court was ordered to conduct a substantive hearing to safeguard the creditor’s statutory remedy rights.
V. Case Implications
This case is of great reference significance for financial institutions and the general creditor community: when encountering unfair distribution caused by the enforcement court’s “arbitrary acts” or “inaction”, do not be deterred by “formal requirements”. Even without a nominal “plan”, as long as distribution facts exist, creditors can safeguard their rights through professional legal strategies. This ruling of the SPC has set a benchmark for enforcement distribution disputes across the country where “no access to sue” is encountered, ensuring that creditors’ priority right to repayment will no longer be frustrated due to defects in enforcement procedures.
