Bank Recovers CNY 50,000 Loan from Defaulting Borrower
In this case, a bank in Eastern China City filed a lawsuit against a borrower and three guarantors to recover an unpaid loan of CNY 50,000 plus accrued interest. The dispute arose after the borrower failed to repay the principal and interest by the agreed maturity date. The court ruled in favor of the bank, ordering the borrower to repay the full amount and holding all guarantors jointly and severally liable.
The case background involved a small agricultural loan. On August 4, 2010, the bank entered into a loan contract with Mr. Xie A, the borrower. The contract provided a revolving credit facility of CNY 50,000 for a period from August 4, 2010, to August 3, 2011. The loan was intended for breeding loaches. Interest was set at 25% above the benchmark rate published by the People’s Bank of China for the same term, with a penalty rate of 50% above the contract rate for overdue amounts. Mr. Xie A’s relatives, Ms. Yang and Mr. Xie B, signed as guarantors providing joint and several liability. Additionally, a company, referred to here as Eastern China City Mortgage Services Co., issued a recommendation letter promising to guarantee the loan on a joint and several basis.
During the court hearing, the bank presented key evidence, including the loan application, the signed contract, the recommendation letter, accounting vouchers, account statements, transaction records, and an interest calculation sheet. The borrower, Mr. Xie A, and the individual guarantors, Ms. Yang and Mr. Xie B, did not appear in court despite being properly summoned. The corporate guarantor, Eastern China City Mortgage Services Co., appeared through its representative and admitted that it had indeed issued the guarantee commitment. The court reviewed all evidence and found the facts consistent with the bank’s claims.
The court held that the loan contract and the guarantee documents were valid and legally binding. Mr. Xie A had drawn down the full CNY 50,000 via a counter withdrawal on August 4, 2010, at an annual interest rate of 6.6375% for the loan term and 12.3% for overdue amounts. The loan matured on August 3, 2011. The borrower failed to repay the principal and interest. As of January 19, 2012, the outstanding principal was CNY 50,000, with interest and overdue interest totaling CNY 6,427.98. The court found that the borrower had clearly breached the contract.
According to relevant law, the court determined that the individual guarantors, Ms. Yang and Mr. Xie B, were bound by the contract to assume joint and several liability for the borrower’s obligations. The corporate guarantor, having promised to guarantee the loan without specifying the scope of guarantee, was also liable for the entire debt. Because the three guarantors did not agree on their respective shares, they were deemed to be co-guarantors with joint and several liability. This meant each guarantor could be required to satisfy the full debt, with the right to seek reimbursement from the borrower after payment.
The court ordered Mr. Xie A to repay the principal of CNY 50,000 and pay interest and overdue interest calculated to January 19, 2012, totaling CNY 6,427.98, plus further overdue interest at 12.3% per annum from January 20, 2012, until the date of full payment. Ms. Yang, Mr. Xie B, and the corporate guarantor were ordered to bear joint and several liability for the entire sum. The court also imposed litigation costs on the defendants. This case highlights the importance of clear guarantee terms and the serious consequences of default in loan agreements. Lenders and guarantors should ensure that all contractual obligations are fully understood before signing.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.