Bank Wins CNY 210,000 Loan Dispute Case
A bank in Eastern China City filed a lawsuit against a borrower and his guarantor after the borrower defaulted on a home loan for 13 consecutive months. The court ruled in favor of the bank, allowing it to terminate the loan contract, recover the outstanding principal and interest, and enforce the mortgage on the property. The guarantor was ordered to bear joint liability for the debt.
The case involved a loan agreement signed in January 2005 between the bank, the borrower Mr. Li, and his employer Eastern China City New Sunshine Real Estate Co., Ltd. The bank lent Mr. Li CNY 210,000 for a term of 10 years to purchase a residential property. The borrower’s spouse, Ms. Kong, signed a joint repayment commitment. Mr. Li also mortgaged the purchased property as security. The real estate company provided a guarantee of joint and several liability. From April 2010 onward, Mr. Li stopped making monthly payments. By May 2011, he owed principal of CNY 112,655.43 and interest of CNY 6,278.21, totaling CNY 118,933.64.
During the court hearing, the bank submitted six pieces of evidence, including the loan contract, the joint repayment agreement, the mortgage registration certificate, the guarantee letter, a notarized document, and a repayment record. The borrower and his spouse were properly summoned but failed to appear in court without justification. The guarantor company argued it should only be liable after the borrowers’ assets were exhausted. The court examined all evidence and found it credible, noting that the borrower had been in default for 13 consecutive months, far exceeding the three-month trigger in the contract.
The court found that the loan contract was valid and binding. Mr. Li had breached the agreement by failing to repay for over a year, which constituted a material default. Under the contract terms, the bank had the right to terminate the loan and demand immediate repayment of the remaining balance. The court also held that Ms. Kong, having signed the joint repayment commitment, was jointly obligated to repay the debt. The guarantor’s argument that it only bore secondary liability was rejected because the guarantee was explicitly stated as joint and several.
According to the Contract Law and the Guarantee Law, a guarantor who provides joint and several liability must repay the debt when the principal debtor defaults, without the need for the creditor to first pursue the debtor. The court further ruled that the mortgage on the property was validly registered, giving the bank a priority right to be repaid from the proceeds of any sale or auction of the property. The borrower was ordered to pay the outstanding principal and interest, plus interest from May 21, 2011 until full payment at the benchmark lending rate.
This case highlights the serious consequences of defaulting on a mortgage loan. Borrowers who fail to meet payment obligations risk losing their property through foreclosure and may still owe the remaining debt. Guarantors who sign joint and several liability agreements cannot avoid responsibility by claiming secondary status. The ruling reinforces the importance of strict compliance with loan contracts and the enforceability of mortgages in China. Property buyers should carefully assess their repayment ability before signing such agreements.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.