By Iris Lei

Case Summary: 

In 2017, Zhang signed a lease agreement with Beijing Zhongtian Ren Construction Engineering Co., Ltd. (hereinafter referred to as "Zhongtian Ren"). According to the agreement, Zhongtian Ren leased steel pipes and other construction materials from Zhang. Later, due to Zhongtian Ren’s failure to pay rent, Zhang filed a lawsuit with the People's Court of Tancheng County, Shandong Province. The court issued Civil Judgment No. (2018) Lu 1322 Min Chu 4567, ordering Zhongtian Ren to pay Zhang over 380,000 yuan in rent. Zhang then applied for compulsory enforcement, but the People's Court of Tancheng County, Shandong Province terminated the enforcement on the grounds that no enforceable assets were found at that time.

Afterwards, Zhang discovered that Zhongtian Ren had a registered capital of 8 billion yuan, but the company had paid in zero capital as of 2020. As a result, Zhang filed a lawsuit requesting the court to order nine shareholders, including Lan, to bear supplementary compensation liability for the portion of Zhongtian Ren’s debts that could not be repaid, up to the extent of their unpaid capital contributions.

Upon accepting the case, the People's Court of Tancheng County, Shandong Province, received an objection to jurisdiction from five of the shareholders, who argued that the nine defendants did not reside in Tancheng County, Shandong Province, and that Zhongtian Ren’s domicile was in Miyun District, Beijing. Therefore, the case should be under the jurisdiction of the People's Court of Miyun District, Beijing. The People's Court of Tancheng County, Shandong Province, found the objection valid and transferred the case to the People's Court of Miyun District, Beijing for trial.

Views of the Courts:

The People's Court of Tancheng County, Shandong Province, considered the defendants' objection to jurisdiction valid and issued Civil Ruling No. (2022) Lu 1322 Min Chu 3341 on July 21, 2022, transferring the case to the People's Court of Miyun District, Beijing. The People's Court of Miyun District, Beijing, believed that the transfer ruling made by the People's Court of Tancheng County, Shandong Province, was inappropriate and therefore reported the matter to the Beijing High People's Court.

The Beijing High People's Court held that this case was not related to corporate organization litigation and should not fall under the jurisdiction of the court at the company’s domicile. Instead, it is a dispute concerning shareholders' liability for harming the interests of the company's creditors, which should be under the jurisdiction of the court at the place where the tort occurred or the defendant’s domicile. Since the plaintiff’s domicile is in Tancheng County, Shandong Province, and the result of the alleged infringement occurred there, it can be used as a connecting factor to determine the court with jurisdiction. The People's Court of Tancheng County, Shandong Province, thus has jurisdiction over this case. 

After failing to reach an agreement with the Shandong High People's Court, the matter was submitted to the Supreme People's Court for determination of jurisdiction.

View of the Supreme Court:

View of the Supreme Court:Disputes involving corporate organizational actions are subject to the provisions of Article 27 of the Civil Procedure Law of the People's Republic of China, which states: “Lawsuits arising from disputes concerning the establishment of a company, confirmation of shareholder qualifications, profit distribution, and dissolution shall be under the jurisdiction of the court at the company’s domicile.”

However, Zhang argues that Lan and the other eight shareholders failed to make their capital contributions, thereby harming the interests of Zhang, a creditor of Zhongtian Ren. This is not a dispute involving corporate organizational actions, but rather a dispute concerning shareholders' liability for harming the interests of the company’s creditors. According to Article 29 of the Civil Procedure Law of the People's Republic of China, “Lawsuits arising from torts shall be under the jurisdiction of the court at the place where the tort occurred or where the defendant is domiciled,” and Article 24 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China states, “The place where the tort occurred, as stipulated in Article 29 of the Civil Procedure Law, includes both the place where the tort was committed and the place where the result of the tort occurred.” Zhang's domicile can be considered the place where the result of the tort occurred. Zhang resides in Tancheng County, Linyi City, Shandong Province. Therefore, the People's Court of Tancheng County, Shandong Province, has jurisdiction over the case, its decision to transfer the case to the People's Court of Miyun District, Beijing, was inappropriate, and this Court hereby corrects it.

Ruling:

On September 7, 2023, the Supreme People's Court issued Civil Ruling No. (2023) Supreme Court Min Xia 96, which stated:

1.The Civil Ruling No. (2022) Lu 1322 Min Chu 3341 issued by the People's Court of Tancheng County, Shandong Province is hereby revoked;

2.This case shall be tried by the People's Court of Tancheng County, Shandong Province.