CNY 600,000 Multi-Party Private Loan: Six Defendants, Joint Guarantee, and Corporate Borrowers
A lender in a coastal county advanced CNY 600,000 to two corporate entities and their principal, with two individual guarantors and one corporate guarantor backing the obligation. When the borrowers defaulted after paying interest for nine months, the lender sued all six defendants and obtained a default judgment for the full principal plus ongoing interest at the contractual monthly rate of two percent. The court held all guarantors jointly and severally liable for the entire debt, including accrued interest and litigation costs.
The loan was formalized on October 15, 2010, through a single promissory note signed by the three borrowers: Mr. Ke (an individual), a nature-based technology company of which he was the legal representative, and a county paper mill. The guarantors were Mr. Yin, Mr. Chen, and Mr. Yu, the latter being the legal representative of the paper mill who also signed a separate commitment letter. The note specified monthly interest of two percent but did not set a repayment deadline. Disbursement occurred in three tranches: CNY 60,000 in cash on the date of the note, CNY 440,000 by bank transfer the following day, and CNY 100,000 by transfer eleven days later.
The borrowers paid interest through July 8, 2011, but thereafter ceased all payments. On that date, Mr. Yu executed a written commitment to repay the full CNY 600,000 within one month, but this promise went unfulfilled. The lender filed suit in February 2012, simultaneously applying for prejudgment attachment, which the court granted by freezing Mr. Yu’s one-percent equity stake in a paper manufacturing company. The trial was held on March 2, 2012, with only the plaintiff appearing. All five defendants were properly served but failed to attend.
The court examined the original promissory note, the two bank deposit receipts, and the commitment letter and found them all admissible. Because no repayment date had been specified in the loan agreement, the lender was entitled under contract law to demand repayment at any time after providing reasonable notice. The interest rate of two percent per month, while high, was within the range that courts in that province typically enforced at the time. The guarantee arrangements were held valid, and because the mode of guarantee was not specified, joint and several liability applied by default under the Guarantee Law.
The judgment ordered the three co-borrowers to repay CNY 600,000 in principal plus interest at two percent per month from July 9, 2011 until the date of actual payment, within ten days. All three guarantors were held jointly and severally liable for the same amounts, with a right of reimbursement against the borrowers after satisfying the obligation. Court costs of CNY 5,260 (reduced from the filed amount) plus preservation fees of CNY 4,020, totaling CNY 9,280, were charged to all defendants jointly. Late payment interest would accrue at double the statutory rate on any unpaid balance beyond the judgment deadline.
This article is provided for informational purposes only and does not constitute legal advice. Multi-party loan structures and guarantee enforcement vary across jurisdictions. Consult a qualified attorney before entering into or enforcing loan arrangements.