On December 22, 2015, Xu Zhimou, the father of the plaintiff Xu, signed a 《Debt Settlement Agreement》 with the defendant Guangxin Real Estate Company, stipulating that Xu Zhimou agreed that Guangxin Real Estate Company would use some of the properties and parking spaces of its Baidu City development to offset the corresponding principal and interest owed. Xu, Xu Zhimou, and Guangxin Real Estate Company separately signed a written 《Commercial Housing Sales Contract (Presale)》. On June 29, 2016, the Intermediate People's Court of Weihai City, Shandong Province, ruled that Guangxin Real Estate Company should be reorganized in bankruptcy. The properties and parking spaces involved in the case were not completed when Guangxin Real Estate Company's bankruptcy application was accepted and did not meet the conditions for delivery. After Guangxin Real Estate Company entered bankruptcy proceedings, Xu declared his rights to the administrator, claiming that the property should be delivered to him. The administrator replied that the property claimed by the plaintiff was formed by offsetting debt with property, and because the contract was signed within 6 months before the defendant was ruled to be reorganized in bankruptcy, it was an individual payment and the property could not be delivered to the plaintiff, requiring him to re-declare ordinary claims. The two parties formed a dispute and sued in court.

First, regarding the legal application of determining bankruptcy property. Article 30 of the 《Enterprise Bankruptcy Law of the People's Republic of China》 stipulates: “All property belonging to the debtor at the time of acceptance of the bankruptcy application, and the property acquired by the debtor from the time of acceptance of the bankruptcy application to the termination of the bankruptcy proceedings, shall be the debtor's property.” Although the house in question has undergone pre-registration, it has not yet been registered under Xu's name, and according to law, the ownership of the house in question should be recognized as belonging to Guangxin Real Estate Company. Second, regarding the validity of pre-registration. Article 20 of the 《Property Law of the People's Republic of China》 stipulates: “When parties sign an agreement to sell houses or other real estate property rights, they may apply to the registration authority for pre-registration in accordance with the agreement in order to protect the future realization of property rights. After pre-registration, the disposal of the real estate without the consent of the pre-registered right holder shall not have the effect of property rights. After pre-registration, if the creditor's rights are extinguished or the registration is not applied for within three months from the date when real estate registration can be carried out, the pre-registration shall become invalid.” Based on this, pre-registration is a real estate registration carried out to preserve a claim, and its registration content is a claim for property rights, which can exclude subsequent changes in property rights, so its bankruptcy protection effect should be recognized in principle, but it should not be generalized. Although the house in question has undergone pre-registration, when Guangxin Real Estate Company entered the bankruptcy reorganization procedure, the house in question had not yet been completed and accepted, and did not meet the conditions for actual delivery and handling of property ownership transfer procedures. There is no evidence to prove that the pre-registered house in question has the conditions to be converted into this registration. Moreover, if allowing the delivery of the house in question will have a significant adverse impact on the implementation of the entire bankruptcy reorganization plan, and combined with the fact that the pre-registration behavior in this case occurred within six months before the people's court accepted the bankruptcy application, the original trial court's determination that the creditor's rights were extinguished after the 《Commercial Housing Sales Contract (Presale)》 on which the pre-registration was based was rescinded, causing the pre-registration to become invalid according to law, is not inappropriate.

The real estate pre-registration system is a measure in the property law to protect the pre-registration rights holder, and its purpose is to protect the expectation of the right holder's property rights claim. However, during the pre-registration period, the property rights have not undergone legal transfer, and the pre-registration rights holder does not naturally obtain the real estate property rights due to the pre-registration. In bankruptcy proceedings, the validity of real estate pre-registration is subject to the adjustment of the special law of bankruptcy law. On the date of acceptance of the bankruptcy case, although there is a pre-registration, the construction project that does not meet the delivery conditions should still be recognized as the debtor's property according to law. Since it is the debtor's property, it should be included in the bankruptcy procedure for disposal. Of course, the real estate pre-registration involving real estate development should be viewed differently for consumer home buyers and non-consumer home buyers. If it meets the recognition criteria for consumer home buyers, according to relevant laws and regulations, the pre-registration rights enjoyed by consumer home buyers should be protected by law and can be paid in priority to mortgage rights and construction project price priority rights in bankruptcy proceedings. If it does not meet the recognition criteria for consumer home buyers, such as the case of offsetting debt with a house, then once the administrator legally terminates the contract, the pre-registration formed under this circumstance will become invalid due to the loss of the contractual rights basis. In addition, in bankruptcy proceedings, it is also necessary to consider whether individual payment behavior occurred within six months before the bankruptcy case was accepted. If the individual payment behavior does not benefit the debtor's property, then not only can the individual payment behavior not be delivered, but it may also face the consequences of being legally revoked by the administrator. Even if it is not a legally revocable individual payment behavior, the effect of contract termination can also achieve the legal consequence of invalidating the pre-registration rights.

(2020) Supreme Court Min Shen No. 3794 Xu v. Guangxin Real Estate Company Ordinary Bankruptcy Claim Confirmation Dispute Retrial Review and Trial Supervision Civil Ruling