Court Orders Repayment of CNY 50,000 Loan in Default Case
A court in Central China City has ruled on a loan dispute between a rural credit cooperative and a borrower, ordering the borrower to repay the principal and interest but rejecting the claim against the guarantor due to insufficient evidence of the guarantee. The case highlights the importance of proving the authenticity of signatures on guarantee documents.
In 2008, the plaintiff, a rural credit cooperative in Central China City, entered into a loan agreement with Mr. Du, a local villager, for CNY 50,000. The loan had a term of two years, from November 13, 2008, to November 13, 2010, with a monthly interest rate of 10.8 per thousand. The plaintiff also signed a guarantee contract with Mr. Ma, who was to provide joint and several liability for the loan. Upon maturity, Mr. Du failed to repay the principal or interest. After multiple demands, the plaintiff sued for repayment of the principal and accrued interest of CNY 22,527 as of November 30, 2011, plus further interest, and sought enforcement of the guarantee from Mr. Ma. Mr. Du admitted the debt, but Mr. Ma denied ever signing the guarantee.
The case proceeded to a public hearing on March 9, 2012. The plaintiff was represented by its legal counsel, Mr. Zhai, and another agent, Mr. Yu. Mr. Du appeared through his father as his representative. Mr. Ma, despite being served with a summons, did not attend. The court examined the loan contract, the guarantee agreement, and the loan receipt, all of which showed the signatures and seals of the parties. The plaintiff stated that the guarantee contract was signed on the same day as the loan agreement. However, Mr. Du testified that he had borrowed Mr. Ma’s identity card without telling him why, and that Mr. Ma had no knowledge of the loan or the guarantee. The plaintiff did not provide any expert testimony or other evidence to confirm that the signature and seal on the guarantee contract belonged to Mr. Ma.
The court found that the loan contract between the plaintiff and Mr. Du was valid and binding. Mr. Du, as the borrower, had the obligation to repay the principal of CNY 50,000 and the agreed interest upon the loan’s maturity. The interest calculation should follow the contract: a monthly rate of 10.8 per thousand from November 13, 2008, to November 13, 2010, and a daily penalty interest of 5.4 per ten thousand for overdue payments from November 14, 2010, until full repayment. However, regarding the guarantee, the court held that the plaintiff had not met its burden of proof. Since Mr. Ma denied signing the contract and no evidence showed that the signature and seal were his, the guarantee was unenforceable.
Under the Contract Law of the People’s Republic of China, a contract must be performed in good faith, and a guarantor’s liability arises only if the guarantee is validly established. The evidence rules require the party asserting a claim to provide proof. Here, the plaintiff failed to prove that Mr. Ma voluntarily entered into the guarantee. Consequently, the court dismissed the claim against Mr. Ma. The borrower, Mr. Du, was ordered to pay the full amount, while the case acceptance fee of CNY 1,620 was split between the plaintiff and Mr. Du. The judgment emphasized that any delayed payment would incur additional interest at twice the statutory rate.
This case serves as a practical reminder for lenders to ensure that all guarantee documents are properly executed and verifiable. Without clear proof of a guarantor’s consent, the court will not enforce the guarantee. Borrowers remain primarily liable for their debts. The court’s decision underscores the importance of maintaining accurate records to protect contractual rights.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.