Corporate Loan Default: Dairy Company and Guarantors Liable for 700,000 Yuan Principal Plus Legal Fees

A court in eastern China has ordered a dairy company and its principals to repay 700,000 yuan in principal plus interest and 42,000 yuan in legal fees after defaulting on a short-term loan, with two guarantors held jointly liable.

On November 29, 2011, a dairy company and two individuals borrowed 700,000 yuan from Mr. Hu. The promissory note specified monthly interest at 3 percent, with repayment due by December 8, 2011. The note also stipulated that if litigation ensued, the borrowers would bear the lender’s costs including legal fees, travel expenses, and preservation fees. Two other individuals signed as guarantors.

The borrowers defaulted. Mr. Hu sued for the principal, interest at 3 percent monthly, and 42,000 yuan in legal fees.

The court upheld the principal and legal fee claims. It adjusted the interest rate to four times the benchmark bank lending rate, finding the 3 percent monthly rate exceeded statutory limits under Chinese law.

The court ordered the dairy company and the two principal borrowers to repay 700,000 yuan plus interest calculated at four times the benchmark rate from November 29, 2011 until payment, and to pay 42,000 yuan in legal fees. Both guarantors were held jointly liable. Upon fulfilling their obligations, the guarantors obtained the right to seek reimbursement from the primary debtors.

The case acceptance fee of 5,715 yuan plus preservation fee of 4,420 yuan, totaling 10,135 yuan, was assessed against the defendants.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.