Court Orders Repayment of CNY 300,000 Loan Plus Interest in Guarantee Dispute
A court in Eastern China City has ruled in favor of a rural credit cooperative in a dispute over a defaulted loan. The plaintiff, a credit cooperative, sued the borrower and three guarantors for repayment of a principal amount of CNY 300,000 plus accrued interest. The court found that the borrower had failed to repay the loan on time and that the guarantors were jointly liable for the outstanding balance.
The case arose from a business loan agreement signed on November 20, 2009, between the plaintiff, Eastern China City Rural Credit Cooperative, and the borrower, Mr. He. The loan amount was CNY 300,000 with a term ending on November 19, 2010. Two individuals, Mr. Yao and Ms. Lu, signed a guarantee contract providing joint and several liability for the loan. On the same day, a third guarantor, Mr. Gu, entered into a separate guarantee agreement covering the same debt. The plaintiff disbursed the loan as agreed, but Mr. He failed to make timely payments of principal and interest. The plaintiff demanded payment from all four defendants, but none complied. The plaintiff then filed a lawsuit seeking repayment of the principal, interest calculated to November 23, 2011 (amounting to CNY 90,107.27), and continued interest until full payment, plus enforcement of the guarantees.
During the court hearing, the plaintiff presented several pieces of evidence: the loan and guarantee contracts, a loan receipt, and an interest statement. All documents were verified as identical to the originals. The defendants did not attend the hearing or submit any evidence. The court noted that the borrower, Mr. He, could not be located by normal service, and the case was converted from a summary procedure to a full trial. After the default by the defendants, the plaintiff withdrew its claim against a fifth defendant, Ms. Zhu, which the court permitted. The trial proceeded in the absence of the remaining four defendants, and the court accepted the plaintiff’s evidence as unchallenged.
The court held that the loan contract between the plaintiff and Mr. He, along with the guarantee agreements signed by Mr. Yao, Ms. Lu, and Mr. Gu, were legally valid and binding. Since the plaintiff had properly disbursed the loan, Mr. He was obligated to repay the principal and interest according to the contract terms. His failure to do so constituted a breach of contract. The court further found that the three guarantors had assumed joint and several liability for the debt. According to relevant law, the plaintiff’s claims were lawful and justified, and the court therefore granted full relief.
The court applied the principles of contract law and guaranty law. It cited the provisions of the Contract Law regarding the borrower’s duty to repay principal and interest, and the consequences of default. Under the Guaranty Law, a guarantor who agrees to joint and several liability is responsible for the entire debt until it is fully satisfied. The court also referenced the Civil Procedure Law, which allows a default judgment when defendants are properly summoned but fail to appear. The reasoning emphasized that the guarantees were independent and enforceable, and that once the guarantors pay, they have the right to seek reimbursement from the borrower.
The court issued a judgment requiring Mr. He to repay the principal of CNY 300,000 plus interest calculated from January 19, 2010, at the contract rate until the date of actual payment. Mr. Yao, Ms. Lu, and Mr. Gu were ordered to bear joint and several liability for the entire amount. After fulfilling their guarantee obligations, they may pursue recourse against Mr. He. The court also imposed court costs on the defendants. This case illustrates that lenders can recover defaulted loans through legal proceedings, and that guarantors must be aware of their binding commitments. Borrowers and guarantors should understand that failure to appear in court does not prevent a judgment from being entered against them.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.