N. from Phu Tho Province said, through a relationship with Ch., he learned that Ch.'s older sister, C., had a 100sqm land plot about to be allocated by the State and wished to transfer it.

The land plot is located in Binh Tuyen Commune, Phu Tho Province (formerly Binh Xuyen District, Vinh Phuc Province), which is residential resettlement land to be allocated to C. by local authorities. 

Residential resettlement land is a type of residential land allocated by the State (through auction or approval) to large households with housing difficulties or those subject to planning and clearance, aiming to reduce population pressure in central areas. 

This type of land is mainly located in suburban areas and is eligible for red book issuance.

Notably, at the time of signing the deposit contract in early February 2019, C. had not yet been allocated the land and was not legally eligible for transfer.

Under the agreement, N. paid a deposit of VND50 million (equal to the transfer price) and committed to paying taxes once notified by state authorities. When C. received the land use rights certificate (red book), she was obliged to complete the transfer procedures to N.

In November 2019, C. was granted the red book for the 100 sqm land plot. However, she did not carry out the transfer to N. despite his repeated requests.

Believing that C. breached the deposit contract, N. filed a lawsuit requesting the court to compel C. to transfer the land as agreed. In case of non-performance, she would have to refund the VND50 million deposit and pay a deposit penalty of VND950 million, totaling VND1 billion.

Meanwhile, C. argued that she was unaware of the contents of the deposit contract, claiming she merely signed the documents presented by N. without reading them and did not receive any deposit money.

According to C., the VND50 million was given by N. to her younger brother, Nguyen Van Ch., and Ch. had already returned it to N. Therefore, she did not accept the refund or the penalty as requested by the plaintiff.

Legality of deposits

As a witness, Ch. confirmed receiving VND50 million from N. and returning it around July 2019, which was before C. was granted the red book. This repayment was not recorded in writing by the parties.

In the first-instance judgment on November 30, 2020, the Binh Xuyen District People's Court (former Vinh Phuc Province) partially accepted the plaintiff's request, identifying mixed fault from both parties and compelling Nguyen Thi C. to pay N. a total of VND525 million, including the deposit and part of the penalty.

Disagreeing with this ruling, both parties appealed. In the judgment on September 21, 2021, the Vinh Phuc Provincial People's Court (former) accepted N.'s entire appeal, compelling C. to pay the full VND1 billion for the deposit and penalty; meanwhile, it rejected C.'s appeal and the Procuracy's protest.

Subsequently, C. requested a review under cassation procedures. The High People's Court in Hanoi noted that during the case resolution, especially at the first-instance trial, N. admitted to receiving back the VND50 million deposit from Ch. and was directly managing this sum. 

Both court levels still compelled C. to refund VND50 million to N. Saying it was inappropriate, as N. suffered no actual loss regarding the deposit amount.

Regarding the nature of the transaction, the High People's Court in Hanoi held that the deposit contract between N. and C. did not meet the requirements for a deposit under Clause 1, Article 328 of the Civil Code. Specifically, the deposit price and the transfer price were determined to be equal, while N. himself admitted the actual value of the land at the time of the transaction was about VND300 million.

According to the High People's Court, this showed the contract was not intended to ensure the conclusion or performance of a contract but was just for procedural formalism; thus it did not have legal effect regarding deposits and penalties.

Furthermore, by the time of signing, C. had not been allocated the land and had not been granted a red book, so she was ineligible for transfer. Meanwhile, N. had received the money back since July 2019, before C. got the red book in November 2019. Therefore, claiming that parties breached the contract to apply a deposit penalty was groundless.

Hong Khanh