Guarantor Claims Coercion and Vehicle Swap in CNY 43,200 Loan Dispute

Guarantor Claims Coercion and Vehicle Swap in CNY 43,200 Loan Dispute

Case Overview
A guarantor sought to overturn a lower court judgment holding him jointly liable for a 40,000 yuan loan, arguing that the debt had been discharged through an agreement to transfer a vehicle to the lender. The Intermediate People’s Court of Eastern China reviewed the case and upheld the original decision, finding that the guarantor failed to prove coercion and that the vehicle transfer did not actually occur.

Case Background and Facts
In February 2008, a borrower identified as Mr. Song obtained a loan of 140,000 yuan from a lender, Mr. Zhang. The loan agreement stipulated that 100,000 yuan would be repaid by April 20, 2008, and the remaining 40,000 yuan by October 20, 2008. The agreement also provided that if Mr. Song defaulted, he would pay interest at three times the bank lending rate. A third party, Mr. Ma, signed the loan document as a guarantor, agreeing to assume joint and several liability.

After the loan matured, neither Mr. Song nor Mr. Ma made any payments. Mr. Zhang had already pursued the 100,000 yuan portion in a separate legal action. In the present case, he sought recovery of the remaining 40,000 yuan plus overdue interest of 3,200 yuan, totaling 43,200 yuan.

Court Proceedings and Evidence
Mr. Ma applied for retrial of the case, arguing that the loan was not a new transaction but a rewritten note for an earlier debt. He claimed he signed as guarantor under duress. Mr. Ma further asserted that on June 4, 2008, Mr. Zhang agreed to release him from the guarantee in exchange for a Mitsubishi vehicle. Mr. Ma presented a receipt signed by Mr. Zhang stating that the guarantee was canceled.

Mr. Zhang acknowledged signing the receipt but argued that Mr. Ma never delivered the vehicle. He provided evidence including a recording of a conversation, court documents showing the vehicle had been seized in another case, and a police report indicating he had reported being coerced into signing the receipt.

The court confirmed that the vehicle was registered to Mr. Song, not Mr. Ma, and had been under a court-ordered seizure since January 2008, prohibiting any transfer.

Court Findings and Judgment
The court found that Mr. Ma provided no evidence to support his claim of coercion. Regarding the alleged vehicle-for-guarantee swap, the court held that although Mr. Zhang signed the receipt, the vehicle was never physically delivered to him. The vehicle belonged to Mr. Song and was already under court seizure at the time of the alleged agreement. Therefore, the attempted discharge of the guarantee did not take effect. The court rejected Mr. Ma’s arguments and affirmed the original judgment requiring Mr. Ma to bear joint and several liability for the 43,200 yuan debt.

Key Legal Principles
A guarantor who claims coercion must provide credible evidence to support that assertion. An agreement to discharge a guarantee through the transfer of property is not effective unless the property is actually delivered. A guarantor cannot validly transfer property belonging to a third party, especially when that property is already subject to a court-ordered seizure. The principle of joint and several liability requires the guarantor to fulfill the obligation if the primary debtor defaults.

Practical Insights
This case illustrates that informal attempts to discharge a guarantee through property swaps may fail if the property is not actually transferred or if the guarantor lacks legal ownership. Guarantors should ensure that any agreement to release them from liability is properly documented and executed. Lenders should be cautious about accepting property that is not owned by the guarantor or that is encumbered by prior claims.

Legal References
General Principles of Civil Law of the People’s Republic of China, Article 106
Contract Law of the People’s Republic of China, Articles 60, 205, 207, 210
Guarantee Law of the People’s Republic of China, Articles 18, 19, 21
Civil Procedure Law of the People’s Republic of China, Articles 130, 153, 186, 229

Disclaimer
This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for specific legal matters.