CNY 50,000 Loan Dispute Leads to Joint Liability Ruling
In this case, a lender sued a borrower and a guarantor for repayment of a loan of CNY 50,000. The borrower failed to appear in court. The guarantor claimed he was the actual borrower and had already repaid part of the debt. The court rejected the guarantor’s defense and ordered both defendants to repay the full amount plus interest.
The plaintiff, Mr. Li, filed a lawsuit on February 23, 2012, against Mr. Wu (the borrower) and Mr. Zhang (the guarantor). According to the complaint, on June 27, 2011, Mr. Wu borrowed CNY 50,000 from Mr. Li for business purposes. Mr. Zhang signed the promissory note as a guarantor. Despite repeated demands, Mr. Wu did not repay the loan, and Mr. Zhang did not fulfill his guarantor obligations. Mr. Li sought repayment of the principal and interest from the date of filing until full payment, with Mr. Zhang bearing joint liability. Mr. Wu did not respond. Mr. Zhang admitted the authenticity of the note but argued that he was the actual borrower, that he had used a vehicle registered under Mr. Wu’s name as collateral, and that Mr. Wu only signed the note as a formality. Mr. Zhang further claimed he had already repaid CNY 30,000 through a friend and redeemed the vehicle, leaving only CNY 20,000 outstanding.
At the hearing on March 2, 2012, Mr. Li presented the original promissory note and a receipt to prove the loan and guarantee. Mr. Zhang attended and confirmed the documents were genuine but repeated his claim that the money was his own debt and that he had repaid part of it. Mr. Wu, who was properly served with summons, did not appear. The court treated his absence as a waiver of his right to contest the evidence. After reviewing the documents, the court accepted them as valid evidence supporting Mr. Li’s claims, as Mr. Zhang did not provide any proof for his assertions.
The court held that the loan and guarantee contracts were valid because all parties willingly entered into them. The borrower, Mr. Wu, failed to repay the loan after being requested, which constituted a breach of contract entitling the lender to interest damages. The court further found that Mr. Zhang, as a guarantor with no specified scope or method of guarantee, was liable as a joint and several guarantor for the entire debt. Mr. Zhang’s defense that he was the actual borrower and had repaid CNY 30,000 was rejected because he presented no evidence to support it. The court therefore ruled in full favor of the plaintiff.
According to relevant law, when a borrower does not repay a debt upon demand, the lender may claim both principal and statutory interest for delay. Under the Guarantee Law, if the guarantee method is not specified, the guarantor is deemed to be a joint and several guarantor, meaning the creditor can demand payment from either the debtor or the guarantor directly. The court applied these principles here, emphasizing that the guarantor’s unsupported oral statements could not overcome the documentary evidence of the loan and guarantee. The court also noted that the borrower’s absence did not prevent a default judgment.
The court ordered Mr. Wu to repay the full principal of CNY 50,000 plus interest calculated from February 23, 2012, at the benchmark lending rate set by the People’s Bank of China until the date of actual payment. Mr. Zhang was ordered to bear joint and several liability for the entire amount. This case illustrates that guarantors who sign without specifying terms may face full responsibility, and that unsubstantiated claims of repayment are unlikely to succeed. Litigants should ensure all transactions and repayments are properly documented.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.