Collection of judgments on invalidity of civil transactions due to sign of disposal of assets in Vietnam

1. What is the act of disposal of assets?

Dispersal of property is the act of establishing fake transactions to evade the performance of obligations towards a third party. Thus, transactions that are usually made for the purpose of disposal of assets are transactions of purchase, sale, donation or transfer.

2. What are the penalties for the act of of disposal of assets in Vietnam?

Transactions for the purpose of dispersing assets are invalid due to falsification as prescribed in Article 124 of the Civil Code 2015.

"Article 124. Invalidity of civil transactions due to falsification

1. If the parties falsely enter into a civil transaction for the purpose of concealing another transaction, the false transaction shall be invalid and the concealed transaction remains valid, unless it is also invalid under the provisions of this Code or relevant laws.

2. If the parties enter into a civil transaction falsely for the purpose of evading responsibilities to a third person, such transaction shall be invalid."

In addition, Clause 11 Article 1 of Decree 33/2020/ND-CP stipulates that

   "1. In case the property has been applied with preventive measures, temporary emergency measures, judgment enforcement security measures or judgment enforcement measures, but transactions related to the property arise, such property shall be distrained and handled for judgment enforcement. The enforcer shall request the Court in writing to declare the transaction to such property invalid or request the competent authority to cancel the papers related to the transaction with that asset.

In case there is a transaction on property where the judgment debtor does not use the entire proceeds from such transaction for judgment enforcement and has no other assets or has other assets but not enough to secure the judgment enforcement obligation, the following actions shall be taken:

a) In case there is a transaction on property but the transfer of ownership and use rights has not been completed, the enforcer shall distrain and handle the property according to regulations. If there is a dispute regarding the distraint of assets, enforcers shall comply with the provisions of Clause 1 and Article 75 of the Law on Civil Judgment Execution. If it is necessary to declare a transaction invalid or request a competent agency to destroy documents related to the transaction, the provisions of Clause 2 and Article 75 of the Law on Civil Judgment Execution shall be followed.

In case there is a transaction on property since the time the judgment or decision takes legal effect but the transfer of ownership or use rights has been completed, the enforcer shall not distrain assets but comply with the provisions of Clause 2 and Article 75 of the Law on Civil Judgment Execution and notify in writing relevant agencies, organizations, and individuals to coordinate in suspending the registration, transfer of ownership, and use of, and change of the current status of, assets.

The disposal of property shall be carried out under the authority of a court or competent authority.

b) In case there are other property-related transactions without transferring the property ownership or land use rights to another person, the enforcer shall distrain and handle the property for judgment enforcement. The lawful rights and interests of transaction participants shall comply with the provisions of the civil law and relevant provisions of law."

In case a civil transaction for the purpose of dispersing property is declared invalid by the Court, the legal consequences specified in Article 131 of the 2015 Civil Code will arise as follows:

+ An invalid civil transaction shall not give rise to, change or terminate any civil rights and obligations of the parties as from the time the transaction is entered into.

+ When a civil transaction is invalid, the parties shall restore everything to its original state and shall return to each other what they have received.

If the restitution is not able to make in kind, it may paid in money

3. Some judgments related to property dispersal in Vietnam

Judgment 133/2018/DS-PT dated August 27, 2018 on a dispute requesting to declare the contract of donation of land use rights invalid

(The contract for donating land use rights to children after receiving the notice of acceptance of the case was declared invalid due to property dispersal)

- Level of trial: Appellate

- Judicial body: People's Court of Tay Ninh province

- Quoted content: "Mr. D and his wife give land use rights to their children while there is no other property to secure the debt repayment obligation for Mr. T. The act of dispersing property in order to evade obligations to a third party should be invalidated according to the provisions of Article 129 of the Civil Code 2005. Therefore, the first-instance court declared the land use right donation contract between Mr. Thai Van D and Ms. Thai Thi P, certified on January 6, 2012, at the People's Committee of Tan Hoi commune, null and void. "

Judgment 113/2018/DS-PT dated August 31, 2018 on the dispute over the land use right transfer contract

(There are signs of a dispute over the land use right transfer contract to avoid property distraint)

- Level of trial: Appellate

- Judicial body: People's Court of Dak Lak province

- Quoted content: "The content in the Land Transfer Certificate (handwritten) shows that Ms. T1 agreed to transfer a land lot of 4170m2 to Mr. C - Mrs. T for an amount of VND 580,000,000. However, the land use right transfer contract (notarized) shows the transfer amount as VND 100,000,000, which is a contradiction that the first-instance court has not yet conducted a confrontation to clarify this matter to determine whether there are signs of property dispersal or not, which is flawed.

Judgment 190/2018/DS-PT dated October 15, 2018 on the dispute over the contract for the transfer of land use rights

(The transfer after the land has been distraint should be invalid because it is related to the rights of the lessee.)

- Level of trial: Appellate

- Judicial body: People's Court of Ca Mau province

- Quoted content: "According to the legally effective judgment No. 191/2016/DSST dated September 28, 2016 of the People's Court of District C, Mr. S and Ms. K were forced to pay Mr. They requested the district C's Civil Judgment Execution Sub-department execute the aforesaid amount. The Civil Judgment Execution Sub-department of District C carried out the procedures for distraint of all house and land assets of Mr. S, Mrs. K. However, on March 9, 2017, Mr. S and Ms. K made a contract to transfer land use rights to Mr. T and Ms. C, which was notarized by the Huynh Thang L Notary Office, which was not in accordance with the law. The transfer of land use rights between the two parties shows signs of property dispersal to evade judgment enforcement obligations. Because it directly affects the lawful rights and interests of Mr. C and Mrs. H so they asked the People's Court of District C to declare the contract of land use right transfer dated March 9, 2017 and notarized No. 002281; No. 01-TP/CC-SCC/HDGD between Mr. To Van S and Mr. Nguyen Minh T, Ms. Duong Thi C is invalid."

Judgment on dispute requesting cancellation of contract of donation of land use rights No. 137/2017/DS-PT

(Dispersing assets while waiting for the results of the appellate settlement)

- Level of trial: Appellate

- Judicial body: People's Court of Tay Ninh province

- Quoted content: "On February 6, 2012, Ms. L filed a lawsuit requesting that Ms. Th and her husband pay the debt. On January 11, 2013, the Go Dau District People's Court heard the first instance, and Ms. L appealed. On July 22, 2013, the People's Court of Tay Ninh Province heard the appellate hearing, in Judgment No. 150/2013/DS-PT, forcing Ms. Th and Mr. Tr to be obliged to pay Ms. L 100 only 24K gold (98%) and the amount of 293,348,500 VND. Mrs. Th and Mr. Tr had property; they did not repay Mrs. L, but gave their property, which is the land use right with an area of 1,095.7 m2, as a gift to their son, Mr. V. After the first-instance judgment was issued, there were signs of property dispersal, in order to not fulfill the debt repayment obligation for Ms. L, she violated Joint Circular No. 14/2010/TTLT-BTP-TANDTC-VKSNDTC dated July 26, 2010, guiding a number of issues on civil judgment enforcement procedures and inter-sectoral coordination in civil judgment enforcement."

Judgment 49/2019/DS-PT dated April 19, 2019 on a dispute over a property loan contract

(Dispersing property is a car mortgaged at the bank by handwritten paper, so the contract is void)

- Level of trial: Appellate

- Judicial body: Lam Dong Provincial People's Court

- Quoted content: "Considering that the defendant's sale of the car to Mr. Th was an act of property dispersal, Ms. H filed a request to apply an urgent measure to temporarily freeze the assets of Mr and Mrs. Ng; Therefore, the first-instance level's issuance of Decision on application of provisional emergency measures No. 01/2018/QD-ADBPKCTT dated January 18, 2018 is grounded and lawful."

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