Re-trial Case | Should One Be Held Liable for Repayment Simply by Signing a Loan Agreement?

Li claimed that on May 2, 2009, Wang borrowed 200,000 yuan from him and issued a promissory note for that amount. Liu Yi, Liu Jia, and Liu Bing provided guarantees for the loan. As Wang has been delaying repayment, Li filed a lawsuit in court, stating the following claims: 1. The defendant Wang should be ordered by law to repay the loan of 200,000 yuan together with interest (calculated at an annual interest rate of 13% based on the principal of 200,000 yuan, starting from May 20, 2009, until the date of actual payment); 2. The defendants Liu Yi, Liu Jia, and Liu Bing should be ordered by law to bear joint and several liability for the above-mentioned loan and interest; 3. The defendant shall bear the court fees and preservation costs incurred in this case.

The court of first instance held that, with regard to the issue of the borrower in this case, the loan agreement submitted by the plaintiff, Li, indicated that Wang was the borrower. Liu Jia acknowledged that he was the one who actually used the funds. The plaintiff, Li, stated that the funds were handed over to Wang, while Wang claimed that the funds were never actually delivered. Liu Jia testified that when he used the funds at the time, he had informed Wang about it, and Wang did not object. Although the two parties gave conflicting accounts regarding the delivery of the funds, their respective statements clearly confirm that Wang signed the loan agreement as the borrower and was aware of and consented to Liu Jia’s use of the funds. Therefore, Wang should be considered the borrower in this case. Although Liu Jia signed the document as a guarantor, he himself admitted that he was the actual borrower and agreed to assume the repayment obligation. Hence, Liu Jia should be regarded as the actual borrower and bear the corresponding responsibility.

Regarding the question of whether each defendant in this case bears liability: As for whether Wang Mou bears liability, the defendant Wang Mou argues that the plaintiff never urged him to repay the debt, and thus the statute of limitations has expired. According to Article 188 of the Civil Code of the People's Republic of China, the statute of limitations for bringing a lawsuit to the People’s Court to protect civil rights is three years. In this case, the plaintiff Li Mou requested that the witness Wang Mou appear in court to testify, intending to prove that he had indeed urged Wang Mou to repay the loan together with the plaintiff. However, the witness testified in court as follows: “I urged Wang Mou to repay the debt in 2010; I can’t recall the exact location. The last time I urged Wang Mou was four or five years ago, when I went with the plaintiff to a building on the north side of a certain residential community, but we didn’t actually meet Wang Mou.” This testimony from the witness fails to establish that the plaintiff had indeed urged Wang Mou to repay the debt within the statutory period of limitations. Moreover, the plaintiff has not submitted any other evidence demonstrating that he had made any efforts to collect the debt from the defendant Wang Mou or from the joint debtor during the statute of limitations period. Therefore, the plaintiff’s claim against Wang Mou has exceeded the statute of limitations and should not be protected by law. Consequently, this court does not support the plaintiff’s assertion that Wang Mou should bear the responsibility for repayment. As for whether Liu Jia bears liability, since Liu Jia is the actual borrower, he should bear the responsibility of repaying the loan. During the trial, Liu Jia explicitly stated that he agreed to fulfill his repayment obligation. According to Article 192 of the Civil Code of the People's Republic of China, after the expiration of the statute of limitations, if the obligor agrees to perform the obligation, he may not raise the expiration of the statute of limitations as a defense. Therefore, the defendant Liu Jia in this case should bear the responsibility of repayment.

Li某, dissatisfied with the first-instance judgment, filed an appeal, but the second-instance court upheld the original verdict.

Li applied for a retrial against the second-instance judgment, and the respondent Wang entrusted me to represent him in the retrial.

The retrial court ruled to dismiss Li’s application for retrial.

After reviewing the case, the retrial court held that Li claimed Wang was the actual borrower and that the statute of limitations had not expired in this case; therefore, Wang should bear the responsibility to repay the loan in question. In his defense, Wang argued that since he had not received the loan, he was not the actual borrower, and the statute of limitations had already expired, so he should not be held liable for repaying the loan. During the first-instance proceedings, to prove that the statute of limitations had not expired, Li applied to have witness Wang Moumou appear in court to testify. Wang Moumou testified that the last time Li had urged Wang to repay the loan was four or five years ago. However, this testimony failed to establish that Li had indeed urged Wang to repay the loan within the statute of limitations period. Moreover, both transcripts of the two court hearings during the first-instance proceedings clearly stated that after presenting evidence and requesting witness Wang Moumou to appear in court, Li explicitly declared that he had no new evidence to submit to the court. After the first-instance judgment, Li again requested witnesses Li, Wang Jia, Dai Yi, and Zhao Bing to appear in court during the second-instance proceedings. First, Li and Li are spouses and thus have a vested interest in this case. Second, Wang Jia and Dai Yi testified in court that they did not know Wang at all. Finally, the testimonies of these four witnesses lacked corroborating evidence and could not meet the high standard of probability required. Therefore, the original trial’s finding that Li’s assertion of rights against Wang had exceeded the statute of limitations was not obviously improper, and Li’s application for retrial was dismissed.

After accepting the case mandate, we believe that the key issues in this case are: first, whether Wang was the borrower; and second, whether the statute of limitations has expired. Regarding the first key issue—the question of who the borrower is—in the first-instance court’s view, “the statement in the loan agreement indicating that Wang was aware of and consented to Liu Jia’s use of the funds” rests solely on Liu Jia’s personal testimony and lacks sufficient evidence to support it. As for the second key issue—that the statute of limitations has already expired—we have submitted our defense and representation arguments accordingly.

1. In this case, there is no evidence to prove that the respondent, Wang, received the cash amount of 200,000 yuan as stated in the promissory note.

The applicant for retrial relied on the loan note issued on May 15, 2009, to assert his rights against Wang. However, he failed to submit any evidence demonstrating that he had actually delivered the cash amount of 200,000 yuan to Wang. Therefore, this loan is unrelated to Wang, and Wang is not a party involved in the case. Consequently, the applicant’s claim against Wang should be dismissed.

2. In fact, there are two legal relationships in this case: the loan relationship between the applicant for retrial and Wang, and the loan relationship between the applicant for retrial and Liu Jia.

(1) In the loan relationship between the applicant for retrial and Wang, since the applicant for retrial failed to provide evidence proving that the cash amount of 200,000 yuan was actually delivered to Wang, Wang should not be held liable for repayment.

Considering the promissory note, the delivery of 200,000 yuan in cash in this case is neither reasonable nor practically feasible. At the time the loan was made, 200,000 yuan in cash already represented a substantial sum, and it would have been entirely impossible to deliver such a large amount in cash. In judicial practice, even with a simple and clear promissory note, if the transaction involves a large sum of cash, the party must submit evidence to prove that the cash was actually delivered; otherwise, they will bear adverse consequences.

(2) In the course of the trial, Liu Jia himself admitted that he had received the loan; in fact, the loan relationship existed between Liu Jia and the applicant for retrial.

Given that the loan agreement is a practical contract and in accordance with the principle of contractual relativity, the applicant for retrial delivered the funds to Liu Jia. Therefore, the loan relationship exists solely between the applicant for retrial and Liu Jia and is unrelated to Wang Mou. Consequently, the repayment obligation should be borne by Liu Jia, and the applicant’s lawsuit against Wang Mou should be dismissed in accordance with the law.

1. It is clear that there are actually two legal relationships involved in this case.

The applicant for retrial claims that Wang should bear responsibility based on the promissory note. However, since the applicant for retrial has failed to provide evidence of actually delivering the cash amount of 200,000 yuan to Wang, Wang should not be held liable for repayment. As for Liu Jia’s admission that he received the funds, this constitutes a practical contract that takes effect from the moment the loan is actually provided; therefore, the lending relationship exists solely between the applicant for retrial and Liu Jia, and it is proper that Liu Jia should bear the responsibility for repayment.

2. Liu Jia’s lack of repayment ability is not a reason for Wang to bear the responsibility for repayment.

The applicant for retrial argues: “Since Liu Jia is currently in a state of divorce and burdened with debts, he simply lacks any ability to repay the loan. His proactive assumption of debt was motivated solely by his intention to help the actual borrower, Wang, evade his debt obligations, thereby making it impossible for the applicant for retrial to ever recover the debt owed to him. The so-called judgment is nothing but a mere piece of paper, devoid of any practical significance.” The ground for the applicant’s request for retrial does not constitute a legal or factual basis for holding Wang liable; therefore, Wang cannot be ordered to bear repayment responsibility merely because he possesses the capacity to repay.

1. Provisions of the Civil Code of the People's Republic of China regarding statutes of limitations.

Article 188 of the Civil Code of the People's Republic of China [General Statute of Limitations]: The statute of limitations for bringing a lawsuit to the People's Court to protect civil rights is three years. If otherwise provided by law, the provisions of such law shall prevail.

The limitation period for litigation begins to run from the date when the rights holder knows or ought to have known that his or her rights have been infringed and from the date when the obligor became liable. The promissory note already specifies a repayment period from May 15, 2009, to May 19, 2009, which has now exceeded the limitation period for litigation.

2. The basic facts regarding the statute of limitations in this case.

In the first-instance proceedings, the applicant for retrial requested that witness Wang Moumou appear in court to testify, seeking to establish that he had previously urged Wang Mou to repay the loan together with the plaintiff. However, during the trial, the witness stated: “I tried to collect the debt from Wang Mou in 2010, but I can’t recall the exact location. Later on, I made another attempt, though I’m not sure of the specifics. Other than that, I never went there again—instead, it was always the plaintiff who called Wang Mou to demand repayment, because I had asked the plaintiff about it. The last time I tried to collect the debt from Wang Mou was four or five years ago, when I accompanied the plaintiff to a building on the north side of a certain residential community; unfortunately, we didn’t manage to meet Wang Mou.” This testimony by the witness fails to prove that the applicant for retrial had indeed urged Wang Mou to repay the debt within the statute of limitations. Moreover, according to the witness’s statement, the applicant for retrial only learned about these attempts to collect the debt through the plaintiff’s own account. As the plaintiff, the applicant for retrial has not submitted any other evidence demonstrating that he had actually urged Wang Mou to repay the debt within the statute of limitations. Clearly, the applicant for retrial’s claim has exceeded the statutory limitation period prescribed by law, and his lawsuit should therefore be dismissed in accordance with the law.

(Disclaimer: This article presents the author’s views based on personal experience and is intended for exchange and discussion only.)