Bank Recovers CNY 196,697 in Loan Dispute
A bank in Eastern China City obtained a court judgment ordering a borrower and his spouse to repay CNY 196,697 in outstanding principal and interest, and allowing foreclosure on a mortgaged property. The dispute arose from a maximum-amount loan contract of CNY 250,000 that the borrower defaulted on after drawing the full amount. The court found the contract valid and the mortgage enforceable.
The plaintiff, Eastern China City Bank Branch, entered into a maximum-amount loan contract with Mr. Lu on November 26, 2009. The contract allowed loans up to CNY 250,000 over a two-year period, secured by a residential property owned by Mr. Lu in Eastern China City. Mr. Lu’s spouse, Mr. Zhu, signed a joint repayment commitment. Between November 2009 and November 2010, Mr. Lu took three separate loans totaling the maximum amount. The loans carried monthly interest rates between 6.239 and 6.255 per thousand, with overdue penalties at 50 percent above the contract rate. The loans matured on November 17, 2011. As of February 21, 2012, Mr. Lu had repaid only part of the principal and interest, leaving a balance of CNY 192,877.47 in principal and CNY 3,819.90 in interest.
At trial, the bank presented several documents: a loan application, the maximum-amount loan contract, three loan receipts, a demand notice with an acknowledgment of debt, the joint repayment commitment and marriage certificate, and property title and mortgage registration certificates. Mr. Lu appeared and admitted borrowing the money, stating he was willing to repay but lacked the means. Mr. Zhu did not appear despite proper service, and the court treated this as a waiver of the right to challenge the evidence. The court accepted all exhibits as reliable proof of the loan and mortgage.
The court held that the maximum-amount loan contract was a valid expression of the parties’ intent and bound both sides. Mr. Lu failed to repay the principal and interest when due, constituting a breach. Mr. Zhu, as the co-signer of the joint repayment commitment, assumed joint liability for the entire debt, including principal, interest, penalty interest, and enforcement costs. The mortgage on Mr. Lu’s property had been properly registered, so the bank’s security interest was perfected and enforceable.
According to relevant law, specifically Article 60 of the Contract Law and Articles 205–207, a borrower must repay principal and interest as agreed. Article 33 of the Guarantee Law allows a mortgagee to claim priority from the mortgaged property’s proceeds. The court reasoned that the bank had met all conditions for enforcement. The joint repayment commitment made Mr. Zhu a co-debtor, not merely a guarantor. Therefore, both defendants were jointly and severally liable. The court also noted that the loan contract validly imposed a 50 percent penalty on overdue amounts and permitted compounding on unpaid interest.
The court ordered Mr. Lu and Mr. Zhu to repay CNY 196,697.37 within ten days, plus ongoing interest and penalties from February 22, 2012, at the contract rate until full payment. It further declared that the bank could enforce the mortgage by selling or auctioning the property and taking priority from the proceeds. The defendants were also ordered to bear half of the CNY 4,234 litigation fee. This case illustrates how Chinese courts uphold secured lending agreements and enforce joint liability against spouses who sign repayment commitments. Borrowers and co-signers should be aware that default can lead to foreclosure and personal liability.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.