Court Rules on CNY 120,000 Loan Dispute – Interest and Joint Liability

In this case, the Eastern China City People’s Court adjudicated a civil dispute arising from a personal loan of CNY 120,000 made in 1996. The plaintiff, Mr. Hu, sought repayment of the principal plus interest from the borrower, Mr. Xu, and his spouse, Ms. Zhou. The court partially granted the claim, ordering Mr. Xu to repay the remaining principal of CNY 100,000 with interest at 20% per annum, but dismissed the claim against Ms. Zhou.

The background facts show that on October 22, 1996, Mr. Xu borrowed CNY 120,000 from Mr. Hu, facilitated by Mr. Huang, the plaintiff’s brother-in-law. The parties agreed on an interest rate but did not specify whether it was monthly or annual. Mr. Xu later repaid CNY 20,000 on December 7, 2009. When no further payments were made, Mr. Hu filed a lawsuit demanding the full principal of CNY 120,000 and interest of CNY 366,600. Mr. Xu admitted the loan but claimed the interest rate was 2% per annum, while Mr. Hu argued for a 20% annual rate, originally intended as 2% per month.

The court held a public hearing in March 2012. Mr. Hu presented a promissory note as evidence of the loan, and Mr. Xu produced a receipt showing the partial repayment of CNY 20,000. Ms. Zhou, although properly served with court summons, did not appear at the hearing. The court examined the evidence and identified two key issues: the correct interest rate and whether Ms. Zhou bore joint repayment liability as the borrower’s spouse.

The court found that the promissory note only contained the term “interest rate” without specifying monthly or annual. According to relevant law, when parties dispute an unspecified interest rate and cannot prove their respective claims, the rate must not exceed four times the bank benchmark rate for similar loans. Since Mr. Hu’s claimed annual rate of 20% fell below that ceiling, the court upheld that rate. Regarding Ms. Zhou, the court held that the loan was taken solely in Mr. Xu’s name and exceeded ordinary living expenses. Mr. Hu failed to present evidence that the borrowed funds were used for family living or joint business, and Ms. Zhou never ratified the debt. Therefore, the court concluded this was Mr. Xu’s personal debt, not a joint marital obligation.

The legal analysis relied on the Contract Law, the Marriage Law, and the Civil Procedure Law. The court emphasized that ambiguous interest terms should be resolved by applying the maximum lawful rate as a default rule. It also clarified that a spouse is not automatically liable for debts incurred individually unless the creditor proves the debt benefited the family. Because Mr.