Court Orders Equipment Return and Payment in CNY 260,000 Lease Dispute
A court in Southern China City resolved a dispute over a finance lease agreement, ordering a bankrupt electronics company to return leased machinery or pay CNY 260,000 in rent, plus interest and penalties. The judgment also held three personal guarantors jointly and severally liable for the debt. The case illustrates the remedies available to lessors when lessees default on lease payments.
The plaintiff, Zhongli International Leasing Co., Ltd., entered into a lease contract with Fengpeng Electronics Co., Ltd. in March 2009. Under the agreement, the lessor purchased and leased a range of industrial equipment—including dehumidifiers, laser welders, coating machines, and battery testing devices—to the lessee for a 36-month term ending March 2012. The rent was set at CNY 68,800 per month for the first 18 months and CNY 52,000 per month thereafter. The lessee paid rent from April 2009 through October 2011 but failed to pay the November 2011 installment of CNY 52,000. Three individuals—Mr. Hu, Mr. Liu, and Mr. Lin—each signed a guarantee letter in February 2009, undertaking irrevocable joint and several liability for the lessee’s obligations.
At trial, the plaintiff produced key evidence: the lease contract, a delivery and acceptance certificate, the underlying purchase agreements, tax invoices, and the personal guarantees. All defendants acknowledged the facts and did not challenge the documents. The court admitted the evidence and accepted the plaintiff’s factual account. It further noted that the equipment remained in the lessee’s possession but was under a separate court seal in another proceeding. The lessee had since ceased operations and entered bankruptcy.
The court found that a valid finance lease existed between the parties. The lessor had acquired title to the equipment by paying the purchase price and receiving invoices, and the lessee had accepted delivery. By failing to pay the November 2011 rent and continuing to default, the lessee breached the contract. Because the lease term had already expired by the time of the hearing, the court ruled that the lessor was entitled to reclaim the equipment and also to recover the unpaid rent for the remaining period.
Under the Contract Law of China, a lessor may terminate a lease and demand return of the property when the lessee defaults. Here, the court ordered the lessee to return all 14 listed items within ten days of the judgment. If return proved impossible, the lessee must pay CNY 260,000 as the equivalent of the remaining rent, plus overdue interest of CNY 1,531 and liquidated damages of CNY 1,139 as calculated up to the filing date, with further interest and penalties accruing until full payment. The three guarantors were ordered to bear supplementary liability for the entire debt.
This judgment reinforces the principle that a finance lessor retains ownership of the leased assets and can enforce both repossession and monetary remedies upon default. It also confirms that personal guarantors remain bound by their commitments even after the lessee becomes insolvent. Companies entering similar transactions should carefully assess the guarantors’ creditworthiness and the enforceability of repossession clauses when the equipment is already subject to third-party claims.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.