Appellate Court Upholds CNY 300,000 Private Lending Decision
The appellate court has upheld a lower court ruling requiring two borrowers to repay CNY 150,000 plus interest on a private lending debt. The case involved a series of loans and agreements among multiple parties over several years. The court rejected appeals from Ms. Cheng and Mr. Song, who argued they were not liable for the debt or the interest rate applied.
In 2003, Ms. Cheng and Mr. Cheng borrowed a total of CNY 300,000 from Mr. Han. The first loan of CNY 200,000 came from an agreement between Ms. Cheng and Mr. Han dated March 15, 2003, with a six-month term. The second loan of CNY 100,000 was made by Mr. Cheng to Mr. Han on March 24, 2003. Later that year, Mr. Han, Mr. Song, and Mr. Cheng signed a tripartite agreement transferring repayment responsibility to Mr. Song, but he failed to pay. After multiple lawsuits, the courts confirmed that a lending relationship existed between Mr. Han and the borrowers. In April 2009, a mediation agreement and a subsequent private agreement between Ms. Cheng, Mr. Song, Mr. Cheng, and Ms. Cui allocated the CNY 300,000 debt equally: each side would repay CNY 150,000 plus half the interest. Mr. Cheng and Ms. Cui later paid Mr. Han a total of CNY 339,000, covering interest from 2004 to 2009 and the principal amount.
At the trial, Mr. Han presented evidence including the original loan agreements, the 2009 allocation agreement, and bank records showing interest payments. He also submitted a document proving that Mr. Song had paid CNY 24,000 in interest for a period in 2003 through an agent, Mr. Wang. Mr. Cheng testified that the agreed monthly interest rate was 2 percent. The trial court found that Ms. Cheng and Mr. Song were jointly liable for the remaining CNY 150,000 principal and interest at 2 percent per month from January 2004 onward. It dismissed claims against Mr. Cheng and Ms. Cui because they had already satisfied their portion.
The appellate court found that the facts were consistent with the trial court’s findings. It held that the 2009 agreement clearly divided the debt, and Mr. Han had accepted that arrangement. Mr. Song’s argument that he was not an original borrower was rejected because he voluntarily assumed the debt through the 2009 agreement and had made a partial interest payment. Ms. Cheng’s claim that no interest was specified in the original loan contract was also rejected. The court noted that the 2 percent monthly interest was consistently applied by the parties, as shown by Mr. Cheng’s repayment and Mr. Song’s earlier interest payment.
From a legal standpoint, the court applied the principle that debts must be repaid. It recognized that a debtor may assume another’s obligation with the creditor’s consent. The interest rate of 2 percent per month was within the permissible range under relevant judicial interpretations, which allow interest up to four times the bank lending rate. The court also affirmed that joint and several liability applied to the remaining debtors, as the 2009 agreement created a shared obligation. The appellate decision cited the Civil Procedure Law to justify the default judgment against Ms. Cui, who failed to appear.
This case illustrates how Chinese courts handle multi-party private lending disputes with overlapping agreements and partial payments. The ruling confirms that parties who voluntarily assume debt in a restructuring can be held liable even if they were not original borrowers. It also shows that courts will enforce an agreed interest rate if supported by consistent conduct, even without a written term in the original contract. Individuals involved in such transactions should ensure all agreements are clear and documented to avoid prolonged litigation.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.