Guarantor Seeks Reimbursement of CNY 50,000 from Borrower

In this case, a dispute arose over a guarantor’s right to recover funds paid on behalf of a borrower. Mr. Chen, the plaintiff, had acted as a guarantor for a loan taken by Mr. Liu, the defendant. After the borrower failed to repay the debt, the guarantor settled the amount with the lender and later sued the borrower for reimbursement plus interest. The court ruled in favor of the guarantor, ordering the borrower to repay the principal and compensate for losses.

The case background shows that on 15 November 2010, Mr. Liu borrowed CNY 50,000 from a third party, Mr. Zhou, with a repayment period of one month. Mr. Chen provided a guarantee for this loan. When the loan matured, Mr. Liu did not repay. On 25 December 2010, Mr. Chen stepped in and repaid the full amount to the lender. Afterward, Mr. Liu failed to reimburse Mr. Chen for the guaranty payment. This led Mr. Chen to file a lawsuit on 13 February 2012, seeking recovery of the principal and compensation for interest losses from the date of payment.

During the court hearing, the plaintiff presented two key pieces of evidence: the original IOU and the original receipt for repayment. These documents demonstrated that Mr. Liu had borrowed the money, that Mr. Chen was the guarantor, and that Mr. Chen had made the repayment on behalf of the borrower. The defendant, Mr. Liu, was properly summoned by the court but failed to appear without a valid reason. As a result, the court deemed that the defendant had waived his rights to cross-examination and defense. The evidence was found to be lawful, relevant, and credible.

The court held that the facts were clear: Mr. Liu borrowed CNY 50,000 from Mr. Zhou, and Mr. Chen provided a guarantee. After the guarantor fulfilled his obligation by paying the debt, he acquired the legal right to recover that amount from the borrower. The court therefore supported the plaintiff’s claim for repayment of the CNY 50,000 principal and for compensation for losses. The losses were calculated from 25 December 2010, based on the benchmark interest rate for similar loans published by the People’s Bank of China, continuing until the date the judgment is satisfied.

According to relevant law, specifically Article 31 of the Guarantee Law of the People’s Republic of China, a guarantor who has performed the guaranteed obligation is entitled to seek recourse from the debtor. The court applied this provision to the facts. In addition, the court noted that if the defendant fails to pay within the specified period, he must pay double the interest for delayed performance as required by civil procedure law. The court also ordered the defendant to bear the litigation costs, which were reduced by half due to the simplified procedure.

This case serves as a practical reminder that a guarantor who pays a borrower’s debt has a clear legal right to be reimbursed. The judgment ordered Mr. Liu to pay Mr. Chen the sum of CNY 50,000 plus interest losses. The court also set a ten-day deadline for payment from the date the judgment takes effect. If the borrower does not comply, the guarantor may apply for enforcement within two years after the deadline. This decision reinforces the principle that guarantors are not left without remedy after covering a defaulted loan.

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