Court Orders Repayment of CNY 480,000 Loan Plus Interest
A dispute over an unpaid loan of 480,000 yuan led to a court decision in Eastern China City. The plaintiff, Mr. Li, sued the borrower, Mr. Wang, and a garment company that had acted as guarantor. The court ordered the borrower to repay the principal along with interest and overdue penalties. However, the guarantor was released from liability because the creditor failed to demand payment within the statutory six-month period after the debt fell due.
The case arose in September 2007, when Mr. Wang borrowed 200,000 yuan from Mr. Li on 18 September and an additional 280,000 yuan on 20 September. Both loans were for Mr. Wang’s garment processing business. On 20 September, Mr. Wang issued a single promissory note acknowledging the total of 480,000 yuan, promising to repay by 30 October 2007. The note specified that interest would be calculated at the one-year time deposit rate of the Bank of China. The garment company, Taiyuan Garments Co., Ltd., stamped the note as guarantor. After the repayment deadline passed, Mr. Wang made no payment, and the guarantor also failed to act. Mr. Li sent a demand letter on 17 September 2009 but received no response.
Mr. Li initiated proceedings on 16 September 2011. At the hearing, which the defendants did not attend despite proper notice, Mr. Li presented the promissory note and a copy of the demand letter with its postal receipt. The court examined these documents and accepted them as authentic and relevant. Because the defendants offered no defense or evidence, the court relied solely on the plaintiff’s submissions. The evidence showed that Mr. Wang had borrowed the money, signed the note, and that the company had affixed its guarantee stamp.
The court found that the promissory note was direct proof of a loan agreement between Mr. Li and Mr. Wang. Since the borrower did not contest the facts, the court treated the debt as established. The court held that Mr. Wang had breached his obligation to repay and must bear civil liability. Regarding interest, the note provided only for interest during the loan term but not for overdue periods. The court recalculated the in-term interest using the agreed rate of 6.84 percent per annum, adjusting the plaintiff’s arithmetic error, and awarded 3,632.80 yuan. For the overdue period, the court allowed the plaintiff to claim damages at the same contractual rate, as this did not exceed four times the benchmark bank lending rate, and granted 120,841 yuan.
On the issue of the guarantor’s liability, the court applied relevant law. Since the guarantee clause did not specify the type of guarantee, it was presumed to be a joint and several liability guarantee. However, because no guarantee period was stated, the creditor had to demand performance from the guarantor within six months after the principal debt fell due. The debt matured on 30 October 2007, so the six-month window closed at the end of April 2008. Mr. Li filed his lawsuit on 16 September 2011, more than three years later. The court therefore ruled that the guarantor company was discharged from all liability. All other claims against the company were dismissed.
This case illustrates two important points. First, a written promissory note remains strong evidence of a loan, especially when the borrower does not appear to dispute it. Second, creditors must act quickly to enforce a guarantee when no fixed term is agreed. Waiting years before suing will likely release the guarantor. The court ordered Mr. Wang to pay the principal of 480,000 yuan, interest of 3,632.80 yuan, and overdue damages of 120,841 yuan, plus court costs. The judgment also warned that late payment would attract additional interest. Mr. Wang and the company did not appeal, and the decision became final.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.