Fang Haifeng v Wang Enhai in respect of Dispute over Loan Agreement for Ship's Operation

Last update time:2019-10-20 20:17:15

Fang Haifeng v Wang Enhai in respect of Dispute over Loan Agreement for Ship’s Operation

 

Case No.: (2015) QHFSCZ No.21

Cause of action:  Dispute over loan contract for ship’s operation

Sea area involved: N/A

Date:  5 May 2015

 

Gist

 

  1.  When both parties agree that the transferor continues to possess the movables while the property right of such movables is being transferred, the said property right shall be valid as of the time when the said agreement becomes effective.
  2.  Where the infringement of the property right causes damages to an obligee, the obligee may request compensation for the damages and may also request the infringing party to assume other civil liabilities.

 

Applicable laws

 

  1. Articles 27 and 37 of the Property Law of the People’s Republic of China
  2. Paragraph 1 in Article 64 of the Civil Procedure Law of the People’s Republic of China

 

Basic facts

 

On 30 May 2006, the Defendant (Claimant in the counterclaim) Wang Enhai and his wife Zhang Chunlei borrowed RMB30,000 from the Claimant (Defendant in the counterclaim) Fang Haifeng for the operation of the fishing boat “Qiong Le Dong 11147”. Later, Wang Enhai borrowed money from Fang Haifeng in his own name for several times. On 6 August 2012, with witness by third parties, Li Guo and Liang Zhenjun, Fang Haifeng and Wang Enhai concluded a loan agreement under which Wang Enhai agreed to use the fishing boat “Qiong Le Dong 11147” (including the ship’s certificate, fishery fuel subsidy) to offset all the loans (including the said RMB30,000) owed to Fang Haifeng. According to the agreement, the fishing boat was temporarily managed by Wang Enhai for normal fishing operation in the next three years. Wang Enhai shall cooperate with Fang Haifeng handle formalities relating to the ship’s certificate and application for fishery fuel subsidy, which be paid to Fang Haifeng. The agreement became effective as of the signatures of both parties. Afterwards, Wang Enhai handed to Fang Haifeng the deposit book (account No.: 3270418200000317) and deposit card (card No.: 6210366455003654517) with the passwords for receiving the fishery fuel subsidy.

 

On 30 January 2013, fuel subsidy for “Qiong Le Dong 11147” in an amount of RMB3,821.73 was paid into the said account, from which Fang Haifeng withdrew a sum of RMB3,800 on 8 February 2013. On 28 September 2014, fuel subsidy for “Qiong Le Dong 11147” for the year 2012 amounting RMB20,353.85 was paid into the said account, from which Fang Haifeng withdrew RMB20,000 in the next day. On 12 December 2014,fuel subsidy for “Qiong Le Dong 11147” for the year 2012 amounting to 12,296.65 was paid into the said account, from which Wang Enhai withdrew RMB12,300 in the next day. On 12 February 2015, fuel subsidy for “Qiong Le Dong 11147” for the year of 2013 amounting RMB35,773.82 was paid into the said account.

 

During the court hearing, Wang Enhai admitted: 1. After the conclusion of the Agreement, he had sold the net hauler on the fishing boat “Qiong Le Dong 11147”at a price around three to four hundred; 2. Before withdrawing the sum of RMB12,300, he had, by means of reporting a loss of the deposit book and card, applied for a new deposit book (with the same account number) and deposit card (card No.: 6210366455017315451) and changed the passwords accordingly.

 

In addition, this Court found that Wang Enhai used the account of 3270418200000317 with the card number of 6210366455017315451 opened at the Rural Cooperatives Credit Union in Ledong Li Autonomous County for receiving the fishery fuel subsidy for “Qiong Le Dong 11147”. On 7 January 2015, as per Fang Haifeng’s application for pre-litigation property preservation this Court rendered the Civil Ruling of (2015) QHFBZ No.2 freezing the deposit amounting RMB35,000 in the aforesaid account.

 

Fang Haifeng’s claims were: 1. To confirm that the fishing boat “Qiong Le Dong 11147” is owned by Fang Haifeng; 2. To confirm that the fishery fuel subsidy for “Qiong Le Dong 11147” for the year of 2013 amounting RMB34,755 and all the fishery fuel subsidy paid thereafter belongs to Fang Haifeng; 3. To order Wang Enhai to return the proceeds amounting RMB30,000 by selling the net hauler, engine and fishing net.

 

Wang Enhai’s claim in his counterclaim is to request the court to order Fang Haifeng to return the fisher fuel subsidy amounting RMB20,000 he had withdrawn and assume all the court fees.

 

Reasoning

 

The effective judgement held:

 

This was a case of dispute over loan agreement for ship’s operation. The Agreement signed by and between Fang Haifeng and Wang Enhai on 6 August 2012 was the true intention of the two parties and the content of which was lawful. Hence, it’s a valid agreement by which both parties shall abide. According to the Agreement, Wang Enhai used his fishing boat “Qiong Le Dong 11147” to offset the debts he owed to Fang Haifeng and the boat was temporarily managed by Wang Enhai for a three-year operation. As per Article 27 of the Property Law of the People’s Republic of China, Fang Haifeng had obtain the ownership of the fishing boat “Qiong Le Dong 11147” when the Agreement became effective. Hence, this Court supported Fang Haifeng’s claim for confirming his ownership to the fishing boat “Qiong Le Dong 11147”.

 

The focal issues in this case were: 1. Since when the fishery fuel subsidy for the fishing boat “Qiong Le Dong 11147” used to offset the debts by the parties shall belong to Fang Haifeng; 2. Whether Wang Enhai should return the proceeds he earned by selling the engine, net hauler and fishing net.

 

  1. Since when the fishery fuel subsidy for the fishing boat “Qiong Le Dong 11147” used to offset the debts by the parties shall belong to Fang Haifeng?

 

In the Agreement, both parties agreed that the fishery fuel subsidy for “Qiong Le Dong 11147” shall be received by Fang Haifeng. It’s agreed that the Agreement shall become effective as of the signatures by both parties, but no clear indication in the Agreement on the commencement date when the fuel subsidy shall belong to Fang Haifeng. This Court held that Wang Enhai, as a fisherman in fishery business for a long time, had received fishery subsidy for several years before the conclusion of the Agreement, and should know and had experienced that usually there was a lag for the payment of fishery fuel subsidy in Hainan Province. Hence, at the time of signing the Agreement, he shall predict that the subsidy which should be paid but has not yet been paid for the years before the conclusion of the Agreement will actually be paid after the conclusion of the Agreement. Under such circumstance, it’s only agreed by both parties in the Agreement that “all fuel subsidy is used for offsetting the debts owed to Fang Haifeng”, without further explanation in this respect. Subsequently, Wang Enhai handed to Fang Haifeng the deposit book and deposit card into which the fishery fuel subsidy was paid and also the passwords for deposit withdrawal. In consideration of the content of the Agreement, Wang Enhai’s identity as a fisherman and the said acts after concluding the Agreement, this Court held that the agreement reached by the parties regarding the fishery subsidy shall be interpreted as follows: fishery fuel subsidy paid after the effectiveness of the Agreement, i.e. 6 August 2012, shall belong to Fang Haifeng. The sum of RMB20,000 withdrew by Fang Haifeng was part of the fishery fuel subsidy of RMB20,353.85 paid on 28 September 2014, and such subsidy was paid after the conclusion of the Agreement and thus shall be owned by Fang Haifeng. It lacks factual and legal ground for Wang Enhai to claim that only the fishery subsidy enjoyed by the fishing boat “Qiong Le Dong 11147” after 1 January 2013 should belong to Fang Haifeng, and Fang Haifeng shall return the fishery subsidy amounting RMB20,000, hence such claims were not supported by this Court.

 

As per the facts found, fishery fuel subsidy in an amount of RMB35,773.82 for the year of 2013 enjoyed by “Qiong Le Dong 11147” has been paid on 12 February 2015. However, Wang Enhai violated the Agreement and possessed the said amount of fishery fuel subsidy which was owned by Fang Haifeng by means of reporting loss of the deposit card which had been handed to Fang Haifeng and applying for a new card and passwords for deposit withdrawal. Hence, the claims by Fang Haifeng for confirming the ownership to the sum of RMB34755 and requesting Wang Enhai to return such sum were supported by this Court. The fuel subsidy which will be paid and has not yet been paid is a derivative right enjoyed by Fang Haifeng as the owner of the fishing boat. Besides, there’s no actual dispute in this respect between the parties, and the actual payment of such subsidy is subject to the compliance with the requirements of fishery authority. Hence, the claim by Fang Haifeng for confirming that the fisher fuel subsidy which will be enjoyed by the fishing boat “Qiong Le Dong 11147” after the year of 2014 (including 2014) shall belong to Fang Haifeng was not within the trial scope by this Court in this case.

 

  1. Whether Wang Enhai should return the proceeds he earned by selling the engine, net hauler and fishing net?

 

The key for the question whether Wang Enhai should return the proceeds he earned by selling the engine, net hauler and fishing net lied in the interpretation of the “fishing boat” in “using the fishing boat to offset the debts”. This Court held that an engine is the power system of a ship and the net hauler is a necessary equipment for the operation of a fishing boat. These two are fixed on the hull of the ship, and are integrated part of a fishing boat with operational capacity. Fishing nets are tools for fishing, which are not fixed onboard and could easily be moved. Hence, in case of no specific explanation, a fishing boat shall mean a boat equipped with engine and net hauler but no fishing net. In the Agreement signed by Fang Haifeng and Wang Enhai, it’s agreed that “the fishing boat ‘Qiong Le Dong 11147’ was used to offset the debts”, hence the fishing boat “Qiong Le Dong 11147” stated here should mean a fishing boat equipped with engine and net hauler in normal understanding, but not including the fishing net equipped by Wang Enhai. Hence, the engine and net hauler fixed onboard “Qiong Le Dong 11147” had been transferred together with the boat to Fang Haifeng for debt offsetting, and Fang Haifeng holds the ownership of the said engine and net hauler. This Court did not support the argument by Wang Enhai that the engine and net hauler had not been used for debt offsetting and also the argument by Fang Haifeng that the fishing net had been used for debt offsetting. Besides, as Fang Haifeng failed to present evidence in proving the value of the engine and the fact that the engine was sold by Wang Enhai, this Court did not support Fang Haifeng’s claim for return of the proceeds for selling the engine and fishing net by Wang Enhai.

 

As per the facts found in the hearing, Wang Enhai sold at a price around three to four hundred the net hauler equipped onboard of “Qiong Le Dong 11147” after signing the agreement on offsetting his debts by the fishing boat, which violated Fang Haifeng’s ownership to such net hauler. According to Article 37 of the Property Law of the People’s Republic of China, Wang Enhai shall compensate for Fang Haifeng’s loss or assume other civil liabilities. This Court supported Fang Haifeng’s claim for return of the proceeds earned from selling of the net hauler. Since Fang Haifeng did not raise objection to the selling price of the net hauler admitted by Wang Enhai, and did not submit evidence to prove the condition and value of the net hauler at the time it was sold, this Court ascertained, as per the statement made by Wang Enhai, that Wang Enhai shall return the proceeds earned from selling the net hauler in an amount of RMB400.

 

Judgement

 

  1. Confirmed that Fang Haifeng was the owner of the fishing boat “Qiong Le Dong 11147”;
  2. Wang Enhai shall, within 10 days upon the effectiveness of this judgement, return the fishery fuel subsidy in an amount of RMB34,755 to Fang Haifeng;
  3. Wang Enhai shall, within 10 days upon the effectiveness of this judgement, pay a sum of RMB400 to Fang Haifeng as the proceeds for selling net hauler;
  4. Overruled other claims by Fang Haifeng;
  5. Overruled claims by Wang Enhai.

(The second instance court sustained this judgement.)