Court Orders Repayment of CNY 144,000 Loan and Guarantor Liability
A court in Eastern China City has ruled in favor of a plaintiff seeking repayment of a CNY 144,000 loan from a borrower and enforcement of a guarantee for CNY 75,000 against a second defendant. The case involved five separate loans made over several months, with the guarantor agreeing to cover part of the debt. The borrower and the guarantor failed to appear at trial, leading to a default judgment. The court found the evidence sufficient to establish the loan agreements and the guarantee, ordering the borrower to repay the full amount and the guarantor to fulfill his obligation for the specified sum. This case highlights the legal protections available to lenders in China when borrowers default and guarantors are called upon.
The plaintiff, Mr. Li, sued defendants Mr. Wang and Mr. Zhang in a dispute over a private loan. Mr. Li alleged that Mr. Wang, a friend, borrowed money in five installments between October 2010 and January 2011: on October 9 (CNY 45,000), October 24 (CNY 30,000), November 12 (CNY 25,000), December 6 (CNY 24,000), and January 28 (CNY 20,000), totaling CNY 144,000. Mr. Zhang, the second defendant, agreed to act as a guarantor for the first two loans, totaling CNY 75,000, on a joint and several liability basis. Despite repeated requests, Mr. Wang did not repay any amount, and Mr. Zhang refused to honor the guarantee. Mr. Li sought a court order for Mr. Wang to repay the entire sum and for Mr. Zhang to be jointly liable for the guaranteed portion.
The court held a hearing on March 21, 2012, after the case was initially assigned to a single judge but later converted to a three-judge panel because the defendants could not be located. The court issued a public notice summoning Mr. Wang and Mr. Zhang, but they did not appear and provided no defense or evidence. Mr. Li attended the hearing and submitted five promissory notes (借条) as evidence, each detailing the loan amount, date, and signatures. Since the defendants were duly notified and failed to attend, the court deemed them to have waived their right to challenge the evidence. After reviewing the documents, the court accepted them as authentic and credible.
The court found that the loan agreements were valid and legally binding. Mr. Wang, as the borrower, had an unequivocal obligation to repay the full principal of CNY 144,000. Mr. Zhang, as a joint and several guarantor, was bound by his written commitment to cover the first two loans of CNY 45,000 and CNY 30,000, totaling CNY 75,000. The court determined that Mr. Li’s claims were proper and lawful. Because neither defendant appeared, the court entered a default judgment against both. The court also ruled that if Mr. Zhang fulfilled the guarantee, he could seek reimbursement from Mr. Wang for the amount paid.
The legal basis for the decision rested on Article 206 of the Contract Law of the People’s Republic of China, which requires borrowers to repay loans at the agreed time. The court also applied Articles 18, 21, and 31 of the Guarantee Law, which establish the scope of a guarantor’s liability and the right of recourse after payment. Under Article 18, a joint and several guarantor is directly liable to the creditor without requiring the creditor to first pursue the borrower. Article 21 limits liability to the guaranteed amount unless otherwise agreed, and Article 31 grants the guarantor a right of subrogation. The court further cited Article 130 of the Civil Procedure Law, permitting a default judgment when a defendant is properly summoned and fails to appear. The judgment also included an order for the defendants to pay double the interest for delayed payment if they failed to comply within the specified period.
This case serves as a practical reminder that lenders who document loans with written promissory notes and obtain clear guarantees can enforce repayment through the courts, even when the borrower and guarantor are absent. The court’s willingness to accept the plaintiff’s evidence as unchallenged underscores the importance of proper documentation. For guarantors, the ruling clarifies that signing a guarantee creates a binding obligation, which can lead to personal liability if the primary borrower defaults. Borrowers and guarantors should be aware that ignoring legal proceedings does not stop a default judgment. The case also illustrates the procedural steps courts take when defendants cannot be located, including public notice and conversion to a panel hearing.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.