Court Orders Repayment of CNY 600,000 Loan in Eastern China City
A small loan company based in Eastern China City filed a civil lawsuit against a borrower and multiple guarantors after the borrower failed to repay a 600,000 yuan loan. The court ruled in favor of the plaintiff, ordering the borrower and a co-debtor to repay the principal, interest, and legal costs, while the guarantors were held jointly liable.
The plaintiff, a licensed small loan company, entered into a loan agreement on May 20, 2011, with Mr. Zhang A as the borrower. The loan principal was 600,000 yuan, with a maturity date of November 18, 2011. The contract set a monthly interest rate of 9.5 permille, payable on the 20th of each month, and stipulated a 30 percent penalty interest rate for overdue amounts. Three companies—Eastern China City Catering Co., Ltd., Eastern China City Food Co., Ltd., and Eastern China City Packaging Co., Ltd.—provided joint guarantee liability. Ms. Yao issued a written commitment to assume joint repayment liability. Three individuals, Mr. Li, Mr. Zhang B, and Mr. Zhou, each signed guarantee letters. The loan was disbursed on the same day to Mr. Zhang A’s designated account. After receiving the funds, Mr. Zhang A paid only the interest during the loan term and defaulted on the principal. Despite repeated demands, the debt remained unpaid.
The plaintiff initiated legal proceedings and submitted five pieces of evidence during the court hearing on March 15, 2012. These included the signed guarantee loan contract, a promissory note and bank transfer receipt, Ms. Yao’s joint repayment commitment letter, six guarantee letters from the corporate and individual guarantors, and a legal service agreement along with the lawyer fee invoice. None of the eight defendants appeared in court or filed any defense, thereby waiving their rights to challenge the evidence. The court found the evidence to be lawfully sourced and materially relevant, and admitted it as valid proof of the claims.
The court found that the loan relationship between the plaintiff and Mr. Zhang A was clearly established and protected by law. The plaintiff had fulfilled its obligation by transferring the loan proceeds via bank. Mr. Zhang A, without any valid legal excuse, was required to repay the principal upon maturity. Ms. Yao, by signing the joint repayment letter, became a co-debtor under the same obligation. The agreed penalty interest rate of 12.35 permille per month (9.5 permille plus 30 percent surcharge) was within the legal range. The contract also provided that the borrower must bear lawyer fees and litigation costs incurred due to default, and the court found this claim reasonable.
The court applied the Contract Law, the Guarantee Law, and the Civil Procedure Law. The key legal analysis centered on the validity of the loan agreement and the enforceability of the guarantee commitments. The court noted that the guarantors—three companies and three individuals—had voluntarily assumed joint and several liability. Under Article 18 of the Guarantee Law, a joint guarantor is liable to satisfy the entire debt when the principal debtor defaults. The court also confirmed that Ms. Yao’s separate promise created a co-debtor relationship, making her directly responsible alongside Mr. Zhang A. The interest rate and penalty terms complied with the judicial interpretation on private lending, and the lawyer fee award was supported by the contract and the actual invoice.
This case reaffirms that well-documented loan agreements and clear guarantee undertakings are enforceable in court. The borrower, together with a co-debtor, must repay both the principal and the agreed penalty interest from the date of default. All guarantors, whether corporate or individual, are jointly liable to the full extent of the debt, including legal costs. Upon satisfying the debt, guarantors have the right to seek reimbursement from the primary debtor. The judgment also orders the defendants to bear the case acceptance fee and property preservation fee totaling 13,590 yuan, and any further delay in payment will incur double interest.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.