Court Orders Repayment of CNY 100,000 Loan and Guarantor Liability
In this case, a lender from Eastern China City obtained a court judgment requiring a borrower to repay a loan of CNY 100,000 and a guarantor to assume joint and several liability. The dispute arose after the borrower failed to return the principal amount and the guarantor refused to fulfill his guarantee obligations. The court ruled in favor of the plaintiff, also ordering the defendants to cover the costs of property preservation incurred during the proceedings.
The plaintiff, Mr. Li, claimed that on August 1, 2011, the first defendant, Ms. Liu, borrowed CNY 100,000 for business needs and issued a promissory note. The second defendant, Mr. Lu, signed the same note as a guarantor. No interest rate or repayment term was specified in the note. After the loan was made, Mr. Li repeatedly demanded repayment, but Ms. Liu refused, citing a lack of funds, and Mr. Lu declined to honor the guarantee. Mr. Li filed a lawsuit on December 15, 2011, seeking repayment of the principal and a finding that Mr. Lu should bear joint liability. He also applied for property preservation, and the court sealed a piece of real estate owned by Mr. Lu on December 16, 2011.
During the court hearing on March 29, 2012, Mr. Li appeared and presented the original promissory note as evidence. The defendants, Ms. Liu and Mr. Lu, were properly summoned but failed to appear without justification. The court examined the evidence and found it to be authentic, lawful, and relevant to the case. The court also noted that Mr. Li had paid a property preservation application fee of CNY 1,020. Based on the plaintiff’s testimony and the admitted evidence, the court established the facts as presented.
The court held that the promissory note reflected the genuine intentions of all parties and did not violate any prohibitive laws or regulations, making it legally valid and enforceable. Because the loan agreement did not specify the type of guarantee, the court applied the default rule under Chinese law: if the guarantee method is unclear, the guarantor must bear joint and several liability. The court found that Mr. Li had fully performed his obligation by delivering the loan amount. Consequently, Ms. Liu was required to repay the principal upon demand, and Mr. Lu, as guarantor, was obligated to fulfill the guarantee promptly when the borrower defaulted. The court also ordered the defendants to compensate Mr. Li for the property preservation fee, as it was a necessary expense for securing the claim.
According to relevant law, including Article 206 of the Contract Law and Article 19 of the Guarantee Law, a borrower must return a loan when the lender demands repayment within a reasonable time, and a guarantor without a specified guarantee method is deemed a joint and several surety. The court reasoned that the absence of a repayment term did not relieve the borrower of liability; rather, the lender had the right to demand repayment. The property preservation fee was a recoverable cost of enforcing the debt. The court also noted that the defendants’ failure to appear did not prevent a default judgment, as they had been lawfully summoned.
This case underscores the legal principle that a guarantor who signs a promissory note without specifying the guarantee type assumes full joint liability for the debt. Borrowers and guarantors in Eastern China City and elsewhere should be aware that silence on guarantee terms can lead to significant financial exposure. The judgment also confirms that lenders may recover reasonable costs incurred to preserve assets during litigation. The defendants were ordered to pay the principal and preservation fee within seven days, plus double the interest on delayed payments if they fail to comply. The court further assessed litigation costs of CNY 2,300 against the defendants.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.