Court Orders Repayment of CNY 7.76 Million in Loan Dispute
A bank in Eastern China City obtained a court judgment ordering a borrower and multiple guarantors to repay approximately CNY 7.76 million in outstanding loan principal, plus interest and penalty interest. The case arose from a series of commercial acceptance bills that the borrower failed to repay upon maturity. The court also upheld the bank’s priority claim over a mortgaged land use right and imposed joint liability on individual and corporate guarantors within their respective guarantee limits.
The borrower, Eastern China City Trading Co., Ltd., entered into a maximum mortgage contract with the bank in December 2010, pledging a 24,989-square-meter land use right located in Eastern China City as security for credit facilities extended between December 2010 and December 2012. On the same day, Mr. Tang and Mr. Chen signed a maximum guarantee contract, agreeing to guarantee up to CNY 16 million in principal plus interest and enforcement costs for facilities granted through December 2011. Another corporate guarantor, Eastern China City Fabric Coating Co., Ltd., signed a separate maximum guarantee contract limited to CNY 1 million in principal plus interest and costs. Between June and July 2011, the borrower applied for four six-month commercial acceptance bills totaling approximately CNY 15.53 million, each backed by partial cash deposits ranging from CNY 1.5 million to CNY 2.265 million. All four bills matured between December 2011 and January 2012, but the borrower failed to repay the remaining amounts after deducting the deposits and a small account balance. By March 2012, the outstanding principal stood at CNY 7,761,541.32, with accrued interest and penalties of CNY 415,904.27.
During the court hearing, the bank appeared through its authorized representative and submitted 12 pieces of evidence, including the maximum mortgage contract, land certificate, certificate of other rights, two maximum guarantee contracts, four acceptance agreements and corresponding drafts, a registration ledger, a list of accepted drafts, an interest calculation statement, and an attorney fee agreement with invoice. The defendants, despite being properly served with legal documents, failed to appear in court without justified reason. The court treated their absence as a waiver of the right to examine evidence. After reviewing all submissions, the court found the evidence authentic, lawful, and relevant to the case, and admitted it as valid proof.
The court held that the maximum mortgage contract, the two maximum guarantee contracts, and the four acceptance agreements were lawfully formed and binding on all parties. The borrower had defaulted on its repayment obligations after the acceptance bills matured, leaving a total principal of CNY 7,761,541.32 plus interest and penalties. The mortgage over the land use right had been properly registered, giving the bank a valid security interest. Mr. Tang and Mr. Chen were jointly and severally liable under their guarantee for the full amount, while Eastern China City Fabric Coating Co., Ltd. was liable only up to the limit of CNY 1 million in principal plus interest and costs. The bank also claimed CNY 100,000 in attorney fees, which the court found reasonable and supported by evidence, and ordered the borrower, Mr. Tang, and Mr. Chen to bear that cost.
According to relevant law, a creditor is entitled to enforce a maximum mortgage when the debtor defaults within the agreed credit period. The court noted that the mortgage covered all obligations incurred under the acceptance agreements during the specified term. Similarly, the guarantees provided by Mr. Tang, Mr. Chen, and the corporate guarantor were valid as continuing obligations, with the corporate guarantor’s liability expressly capped at the stated maximum. The court rejected any argument that the guarantors were released due to the borrower’s failure to pay, as the guarantees explicitly covered interest, penalties, and enforcement costs. The bank’s priority right over the mortgaged land was affirmed, allowing it to seek