Court Orders Repayment of CNY 40,000 in Loan Dispute
In this case, the court resolved a dispute over two personal loans totaling CNY 40,000. The plaintiff, Mr. Chen, sought repayment from the borrower, Mr. Luo, and also demanded that the guarantor, Ms. Fu, fulfill her obligation for the first loan of CNY 10,000. After reviewing the evidence and applying relevant contract and guaranty laws, the court ruled in favor of Mr. Chen, ordering Mr. Luo to repay the full principal plus overdue interest, with Ms. Fu jointly liable for the first loan amount and its interest.
The case arose from two separate loan agreements. On February 28, 2010, Mr. Luo borrowed CNY 10,000 from Mr. Chen, promising to repay by March 25, 2010. Ms. Fu provided a guarantee for this loan. Then, on March 24, 2010, Mr. Luo borrowed an additional CNY 30,000, with repayment due by April 23, 2010. Mr. Chen stated that after repeated demands, neither the principal nor any interest was paid. He therefore filed a lawsuit requesting full repayment of CNY 40,000, interest from April 24, 2010, at the central bank’s benchmark lending rate, and that Ms. Fu bear joint liability for the CNY 10,000 loan and related costs.
During the hearing, Mr. Chen appeared in person and submitted two original loan documents as evidence. The court noted that the defendants, Mr. Luo and Ms. Fu, had been properly summoned but failed to appear without justification. The court accordingly deemed that they had waived their rights to defend, present evidence, and cross-examine. After examining the loan documents, the court found them to be objective, authentic, and legally obtained, and therefore admitted them as valid evidence. The facts as stated by Mr. Chen were thus established.
The court held that the loan contracts between the parties reflected their true intentions and did not violate any mandatory legal provisions, making them valid and enforceable. Under the Contract Law, a borrower must repay the principal by the agreed date, and if late, must pay overdue interest at the applicable state-prescribed rate. Regarding the guarantee, the court found no clear agreement on the type of suretyship. According to the Guaranty Law, where no guarantee method is specified or it is ambiguous, the guarantor assumes joint and several liability. Furthermore, where the scope of guarantee is not defined, the guarantor is liable for the entire debt.
From a legal standpoint, the court reasoned that the overdue interest should be calculated from the day after the final repayment deadline, April 24, 2010, using the People’s Bank of China benchmark lending rate for the same period. For the first loan of CNY 10,000, Ms. Fu, as guarantor, was jointly and severally liable for both principal and interest, plus a proportional share of the litigation costs. The court also noted that after fulfilling her guarantee obligation, Ms. Fu would have the right to seek reimbursement from Mr. Luo. The absence of the defendants did not prevent a default judgment under the Civil Procedure Law.
This case serves as a reminder that clear loan documentation and explicit guarantee terms are crucial for enforcing repayment. The court’s decision reinforces the principle that a guarantor who fails to specify the nature of the guarantee may face joint and several liability for the entire debt. Borrowers and guarantors should be aware that non-appearance in court does not prevent a judgment from being entered. The judgment can be enforced through court execution if the losing party does not comply within the prescribed period.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.