Should the default interest be supported and how to calculate when the financial loan contract is announced to expire in advance?

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Case index

Supreme Law and People's Court No.1286 (Editor's Note: this was published by the Judgment Document Network on June 7, 222, and the case was accepted by the Supreme Court on December 2, 221, and the case number was omitted). Guangdong Wilden Hotel Co., Ltd., China Cinda Asset Management Co., Ltd., Guangdong Branch, and other civil judgments of second instance on financial loan contract disputes

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Appellant (defendant in the original trial): Guangdong Wilden Hotel Co., Ltd.

Appellee (plaintiff in the original trial): Guangdong Branch of China Cinda Asset Management Co., Ltd.

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Basic case

Ben Wilden Company's appeal request: It is requested to cancel the judgment in the first sentence of the first-instance judgment that Ben Wilden Company repaid the penalty interest of 16,87,198 yuan to Cinda Company as of August 3, 218, and decide that Ben Wilden Company does not need to pay the penalty interest to Cinda Company. Facts and reasons:

(1) The loan purpose agreed in the Loan Contract for Fixed Assets Support Financing (hereinafter referred to as the Loan Contract) is inconsistent with the actual purpose, and the debt corresponding to the Loan Certificate shall not be bound by the relevant penalty clauses in the Loan Contract. According to the Loan Contract, the loan of 83.75 million yuan was used by Ben Wilden Company to replace the existing loan of Bank of Communications, 141.25 million yuan was used to return the loan of Hu Moumou, the actual controller, and 25 million yuan was used to return the loan of Chaohao Company. The loan actually used by Ben Wilden Company was only 83.75 million yuan, but the first-instance judgment calculated the penalty interest for all loans and was borne by Ben Wilden Company, which was unfair to Ben Wilden Company.

(2) If the loan term agreed in the Loan Contract has not expired, no penalty interest shall be calculated. As stipulated in the Loan Contract, if the borrower fails to repay the loan as agreed, the lender has the right to collect the default interest at the overdue default interest rate agreed in the contract from the overdue date. Penalty interest refers to the money that the borrower fails to repay the loan as agreed, and the lender has the right to collect at the overdue penalty interest rate agreed in the contract from the overdue date. The loan term agreed in this contract is 15 years, counting from September 2, 211, the first withdrawal date, and the expiration date is August 19, 226. Under the condition that the loan term has not expired and Ben Wilden Company has not overdue repayment, the conditions for calculating the penalty interest cannot be established.

(3) The penalty interest is calculated as of August 3, 218, and the penalty interest is 16,87,198 yuan. However, the interest rate, starting time and principal standard for calculating the penalty interest are not specified, which is inappropriate.

(4) The court of first instance allowed Cinda Company to withdraw the lawsuit against Hu Moumou, which was not conducive to finding out the facts of the case and the procedure was improper. After the death of Hu Moumou as the guarantor of joint liability for the loan involved in the case, the court of first instance should suspend the trial of this case and add an heir to Hu Moumou's property as the party.

(5) The starting date of penalty interest advocated by Cinda Company is unreasonable and should not be supported. Cinda Company claims that the penalty interest will be calculated from October 18, 217, which is not in line with the principle of fairness and reasonableness. Ben Wilden Company borrowed from China Industrial and Commercial Bank of China Guangzhou Economic and Technological Development Zone Sub-branch (hereinafter referred to as ICBC Development Zone Sub-branch) in 211. As of October 18, 217, it only owed about 9, yuan in interest, and Ben Wilden Company has provided the land use right with a value far exceeding the loan principal as a guarantee. ICBC Development Zone Sub-branch should give Ben Wilden Company a reasonable repayment grace period, and the starting time of penalty interest should be more reasonable from the date of prosecution in this case.

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Reasons for adjudication

After examination, the Supreme Court held that the focus of the dispute in the second instance of this case was whether Ben Wilden Company should pay penalty interest to Cinda Company.

Based on the facts ascertained in this case, on August 19th, 211, ICBC Development Zone Sub-branch (lender) and Ben Wilden Company (borrower) signed the Loan Contract, in which Article 8.3 of the second part "Terms of Fixed Assets-Supported Financing Loan Contract" clearly stipulates that "If the borrower fails to repay the loan as agreed upon in this contract when the loan is due (including being declared to be immediately due), the lender has the right to repay it from the overdue date. For the interest that the borrower fails to pay on time, compound interest shall be calculated at the overdue penalty interest rate. "

On October 18th, 217, due to the lawsuit of Ben Wilden Company and the seizure of its assets by the judiciary, ICBC Development Zone Sub-branch announced that all outstanding loans of Ben Wilden Company were due immediately according to the contract. Ben Wilden Company failed to repay the loan as agreed after the loan was announced to be immediately due, and Cinda Company, as the transferee of the right of ICBC Development Zone Sub-branch, has the right to claim penalty interest from Ben Wilden Company as agreed.

Ben Wilden Company appealed that the Loan Contract stipulated that the money it borrowed was used to repay the actual controller Hu Moumou's loan of 141.25 million yuan and Chaohao Company's loan of 25 million yuan, which were not used by Ben Wilden Company, so the default interest incurred should not be borne by Ben Wilden Company, which was obviously inconsistent with the above agreement in the Loan Contract. The agreement in Article 2.1 of Part I "Loan Conditions" of the Loan Contract on the purpose or use of the loan does not affect the basic determination that Ben Wilden Company, as the borrower, undertakes the responsibility of repaying all the principal and interest of the loan in accordance with the contract, and Ben Wilden Company's appeal cannot be established due to the lack of basic facts and legal basis.

whether it is wrong for the court of first instance to allow Cinda Company to withdraw the lawsuit against Hu Moumou. The first paragraph of Article 2 of the original Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Guarantee Law of the People's Republic of China stipulates: "If the debtor who is jointly and severally guaranteed fails to perform the debt at the expiration of the debt performance period stipulated in the main contract, the creditor may require the debtor to perform the debt, or may require any guarantor to bear all the guarantee responsibilities."

In this case, because Hu Moumou, as the guarantor of joint and several liability, died, Cinda Company withdrew its lawsuit against Hu Moumou, which was in line with the above-mentioned legal provisions. The court of first instance ruled that Cinda Company was allowed to withdraw its lawsuit against Hu Moumou, and the procedure was not improper. Cinda Company (Editor's Note: there is some confusion in the judgment, which seems to be Ben Wilden Company) appealed that the case should be suspended and Hu Moumou's property heir should be added as a party, which lacks legal basis and our court will not support it.