China's New Property Law--Common Ownership Dispute Surfaces

Another interesting case involving the new property law is pending in the Beijing Intermediate People’s Court for er sheng (court of second instance).

Briefly, plaintiff Ms. Ji sued her three sons to regain ownership of real property gifted to them. The property in question had been transferred by plaintiff and her late husband, but following his death, plaintiff wanted to retract the gift because her sons did not properly fulfill their filial obligations to her. The trial court held the defendants did not substantially violate the rights of the transferors, thus the gifted property stays with defendants. Plaintiff appeals the judgment, citing the new Property Law’s treatment on common ownership.

Common ownership, in the Property Law, is divided into two forms: ownership by shares and undivided common ownership. For a concise yet accurate rendition of the law, I quote in full China Law Blog’s post:

Division 8: Common Ownership

There are two forms of common ownership: ownership by shares and undivided common ownership. Absent a specific agreement, common ownership is assumed to be ownership by shares except in the case of a family relationship, where the opposite assumption is made.

1. The basic attributes of ownership by shares is:

Each common owner has a percentage ownership in the undivided property. The amount of each share is based on the amount contributed by the party to purchase the property. If this amount cannot be determined and there is no express agreement, the common owners will all have equal shares.

The common owners share in income and expenses in proportion to their share interest. However, with respect to third parties, common owners have joint liability.

Each common owner has the right to sell his share in the property, subject to the right of first refusal of the other common owners to purchase that share.
Each common owner has the right to petition for partition of the commonly owned property.
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2. The basic attributes of undivided common ownership is:

Each common owner has an undivided ownership interest in the entire property.

Each common owner has a right to the income of the property and also the obligation for the expenses of the property. The common owners have joint liability with respect to third parties.

No common owner has a right to sell any portion of the property absent the consent of all of the other common owners.

As a general rule, a common owner does not have the right to petition for partition of the property. However, partition is
permissible if a) there is a compelling reason or b) the underlying relationship is terminated. A compelling reason is not defined in the statute, but the commentaries suggest a major medical expense would be such a reason.

Termination of the relationship most commonly would be divorce.
As with ownership by shares, the default rules for undivided common ownership can be modified by agreement.
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In the present case, a presumption of undivided ownership applies to the property at bar because of ownership by a wife and her deceased husband. If plaintiff’s assertion of undivided ownership prevails, the plaintiff has the right to alienate the property with the consent of her co-owner, who is now dead. So the sticky issue is whether she has the sole authority to withdraw the gift.

Of course, the plaintiff can argue in the alternative that she owns the property by shares, presumably equal shares, thus she has the right to alienate her half of the property. But she has the burden to overcome the presumption of undivided ownership.

A fascinating case, and I will track its progress in the Court.

China’s New Property Law Put to Test

Many have either mused about or questioned the true color of China’s new Property Law. Will it provide adequate protection to private owners of real property? Will it be seriously enforced to safeguard the burgeoning private ownership of property? Will it be sophisticated enough to cover myriad legal problems that surface in a growing market economy (assuming that all agree that China has a market economy already)? Will Chinese courts be knowledgeable enough to interpret the law to protect property owners? Will the courts withstand the ultimate test of judicial independence to adjudicate property disputes between private citizens and the government? Or, will the Property Law be just another “decoy” masterminded by the Chinese government to legitimize its continuous rein of the People’s Republic? These are tough questions, and the answers to which will unfold a telling map of China’s progress to establish a systematic institution of the rule of law.

Systematic changes do not occur overnight in China. As the Chinese firmly believe that “Rome was not built in one day”, they will likely continue with the experiment with establishing their version of the rule of law at their own pace. Therefore, answers to the above-posted questions will not come in one neat package. I think the Chinese government will afford extra caution to the Property Law given the political sensitivity of currently competing views on property ownership (government ownership versus private ownership).

Nonetheless, the great test on the new Property Law has begun. No sooner did the week-long national holiday end than a slew of case got filed under the new law. Two representative cases are particularly interesting and will be discuss here.

In the case of Shen v. Beijing Zhongjiaxin Auction Ltd., the central issue is whether the Property Law is applicable to disputes predating the effective date of the new law. Briefly, the facts of the cases are as follows in the form of an outline:

1998
Plaintiff Mr. Shen purchased 6 condos for 120,000 Yuan from Mr. Yan.

06/10/1999
Plaintiff received titles to the 6 units. Plaintiff leased the units to various tenants.

2002
The Shijiazhuang Intermediate People’s Court convicted Mr. Yan for illegal business activities and bribery.

The Court also ruled that the 6 condos then in Mr. Shen’s possession were Mr. Yan’s property, and it subjected them to judicial auction. Beijing Zhongxiaxin Auction Ltd. was the court-appointed auctioneer.

09/2007
Defendant Auction company evicted the lessees of Mr. Shen’s units, and auctioned the condos.

09/2007
Plaintiff sued the defendant at the Chang Ping People’s Court (Chang Ping is a district in Beijing), claiming the defendant violated article 4 and 64 of the Property Law (governmental, collective and private ownership of property is protected by law).

The general rule is that a law is applicable to disputes following its effective date. But the plaintiff is petitioning the Court to apply the new law regardless of the general rule. What do you think the Court should do here?

--to be continued.

PROPERTY? IT IS MINE…

As it is reported, commented, and known by many by now, China’s new Property Law became effective as of October 1, 2007. Promulgated in context of growing private property ownership and changing political views regarding same, the Property Law has become a focus of academic discussions and has fused a flurry of lawsuits in China. In my 1L (first year law school) property class, Professor Tate introduced me to the Toddler’s Property Law, and it has since stuck with me. Before I introduce a few interesting cases freshly filed in China, I figure that sharing the Toddler’s Property Law could help people understand what Chinese litigants might be arguing about in terms of their views on property ownership.

Here it goes:

1. If I like it, it's mine.
2. If it's in my hand, it's mine.
3. If I can take it from you, it's mine.
4. If I had it a little while ago, it's mine.
5. If it's mine, it must never appear to be yours in any way.
6. If I'm doing or building something, all the pieces are mine.
7. If it looks like it's mine, it's mine.
8. If I saw it first, it's mine.
9. If I can see it, it's mine.
10. If I think it's mine, it's mine.
11. If I want it, it's mine.
12. If I "need it, it's mine (yes, I know the difference between "want" and "need"!).
13. If I say it's mine, it's mine.
14. If you don't stop me from playing with it, it's mine.
15. If you tell me I can play with it, it's mine.
16. If it will upset me too much when you take it away from me, it's mine.
17. If I (think I) can play with it better than you can, it's mine.
18. If I play with it long enough, it's mine.
19. If you are playing with something and you put it down, it's mine.
20. If it's broken, it's yours (no wait, all the pieces are mine).

(See May It Please the Court Weblog)

In my next post, I will blog about a few cases involving joint ownership and whether the new law is applicable to disputes predating its promulgation.

Please check back later.