Land Research | Supreme People's Court: Providing guarantees to others using family property without the consent of the spouse constitutes unauthorized disposal and is not legally binding on the spouse.

Authors: Chen Xia, Liang Yu

When one spouse acts as a guarantor and signs a guarantee contract, they do not need to obtain the consent of their spouse (the co-owner of the property) to provide the guarantee. The spouse's lack of signature on the guarantee contract does not affect the establishment and validity of the guarantor's personal guarantee liability. The guarantor's expression of intent to provide a guarantee using their personal property is legal and valid.

However, if the spouse, without obtaining the consent of their spouse (the co-owner of the property), promises to provide a guarantee for another party using the family's property, this constitutes unauthorized disposition. If the spouse does not ratify this promise, the promise is invalid and not legally binding on the spouse.

“Case of Feng Chunhua, the applicant for retrial, against Ma Xiaoqin, Li Ming, Zhao Yuke, and Jia Cheng concerning the invalidation of a contract”【(2018) Supreme People's Court Min Zai 210】 No.

Feng Chunhua filed a lawsuit, requesting the invalidation of the guarantee clause in a loan contract and demanding that Ma Xiaoqin, Li Ming, Zhao Yuke, and Jia Yancheng bear the litigation costs. The following is the main content of the case and the court's judgment:

Case Background:

On March 6, 2014, Jia Yancheng (lender) signed a loan contract with Ma Xiaoqin and Li Ming (borrowers) and Zhao Yuke (guarantor). The contract amount was 10 million yuan, with a loan term of 6 months and a monthly interest rate of 3%.

The contract stipulated that Zhao Yuke would assume joint and several liability for the loan using personal and family property, but without the consent of his spouse, Feng Chunhua.

Disputes arose during the performance of the contract, and Jia Yancheng applied for arbitration to the Yan'an Arbitration Commission, which ruled that Zhao Yuke should bear joint and several liability for the debts of Ma Xiaoqin and Li Ming.

Feng Chunhua filed a lawsuit, arguing that the arbitration ruling was wrong and that the guarantee clause was invalid because she had not agreed to use family property as collateral.

First Instance Court's Findings of Fact:

(1) Zhao Yuke, without the consent of his spouse Feng Chunhua, provided a guarantee for another party using family property, infringing on Feng Chunhua's legitimate rights and interests.

Court Judgment:

(1) The portion of the guarantee clause in the two loan contracts signed on March 6, 2014, by the lender Jia Yancheng and the borrower Li Ming and guarantor Zhao Yuke, in which Zhao Yuke promised to assume joint and several guarantee liability using family property, is invalid.

Dissatisfied with the first-instance judgment, Feng Chunhua appealed, requesting the court to revoke the first and second items of the first-instance judgment and to re-judge, confirming the invalidity of the guarantee clause in the loan contract signed by Ma Xiaoqin, Li Ming, Jia Yancheng, and Zhao Yuke on March 6, 2014.

The second-instance court confirmed the facts found in the first instance and held that, due to a dispute arising from the performance of the loan contract, the Yan'an Arbitration Commission had issued an arbitration award, determining that the loan contract was valid and ordering the borrower to repay the principal and interest, and the guarantor Zhao Yuke to bear joint and several repayment liability. Zhao Yuke's guarantee liability falls under the category of personal guarantee and does not involve the disposition of property rights; therefore, he did not need to obtain the consent of the co-owner of the property when providing the guarantee, and the guarantee clause he signed is legally valid. Zhao Yuke appealed the arbitration award to the Yan'an Intermediate People's Court, but the Yan'an Intermediate People's Court rejected his application. The arbitration award of the Yan'an Arbitration Commission has taken effect. Therefore, the validity of the guarantee clause has been confirmed by the effective arbitration award. The guarantee debt established by Zhao Yuke is a gratuitous guarantee and is not based on the couple's common life; it should be considered his personal debt. Feng Chunhua is not a party to the loan contract and does not have a litigation interest.

The second-instance court ultimately ruled to revoke the first-instance civil judgment and dismissed Feng Chunhua's lawsuit.

Applicant's Arguments:

Feng Chunhua applied for a retrial, claiming that the second-instance ruling was erroneous, mainly based on the following points:

The Retrial Court Held:

(1) Feng Chunhua as a Qualified Plaintiff: As Zhao Yuke's spouse, Feng Chunhua has a direct interest in the guarantee clause in the contract because it affects the couple's common property. She has a litigation interest, and the second-instance court's decision to dismiss the lawsuit is erroneous and should be corrected.

(2) Validity of the Guarantee Clause: Zhao Yuke, as the guarantor, has signed the contract, and personal provision of a guarantee does not require the consent of the co-owner of the property. Feng Chunhua's lack of signature does not affect Zhao Yuke's personal guarantee liability. Feng Chunhua's claim affects the validity of the guarantee clause in the contract, and there is no evidence to show that Jia Yancheng and Zhao Yuke colluded maliciously. The first-instance judgment is clear in its facts and correct in its application of the law. 。

Retrial Judgment Result: The second-instance ruling is revoked, and the first-instance judgment is upheld.