Earth Research | Interpretation of the issue of whether the guarantee responsibility should be exempted under the "borrowing new to repay old" scheme

On August 5, 2014, Bian lent 6 million yuan to Xu and Lifeng XX Company. Liu, Yi XX Furniture Company, Xie, and Hai X Petrochemical Company provided joint and several guarantees. Afterwards, Bian actually lent 3.9 million yuan. After receiving the loan, Xu immediately withdrew 1.5 million yuan and returned it to Bian, and both parties unanimously acknowledged that the 1.5 million yuan was to repay the outstanding principal and interest from a previous loan to Bian. Since Xu failed to repay the principal and interest on time, Bian then sued Xu and the guarantors together in court, demanding that the guarantors bear joint and several guarantee liability. Guarantor Xie and others claimed that they were unaware that 1.5 million yuan of the loan involved was "borrowing new to repay old" and therefore should not bear guarantee liability.

This case was like a long marathon, finally settling after going through the first instance, second instance, and retrial. The first instance court directly held that both the loan and the guarantee were voluntary, legal, and effective, and the guarantor had to repay the money. The second instance court held that although the "Interpretation of the Guarantee Law" stipulates that guarantors are not liable for the "borrowing new to repay old" portion of the debtor's obligations, this provision only applies to financial loan contract disputes, not to private lending. Furthermore, in this case, there was no evidence to show that Mr. Bian and Xu colluded to defraud others, so the guarantor still had to repay the money. The retrial court, by interpreting legal provisions, held that Article 39 of the "Interpretation of the Guarantee Law" is not limited to financial loan disputes, and can also be applied to private lending. The guarantor was completely unaware of the "borrow new to repay old" agreement between the debtor and the creditor. Therefore, the guarantor is not responsible for this portion of the "borrow new to repay old" money. This lawsuit, in essence, explored the boundaries of a guarantor's liability in "borrowing new to repay old." The retrial court's judgment not only protected legitimate debts but also curbed illegal debts, setting a benchmark for similar cases.

Note : The "Interpretation of the Guarantee Law" has been abolished. According to the provisions of the Civil Code's interpretation of guarantee systems, the guarantor in this case is also not liable for the "borrow new to repay old" portion.

A guarantee provides a safeguard for the realization of a creditor's rights, but this does not mean that after the guarantor provides a guarantee, the creditor can relax and wait for the debtor to fulfill obligations or for the guarantor to assume guarantee liability; creditors need to be aware that the guarantor's liability may be waived during this process, in which case the realization of creditor's rights would then lack a safeguard. Similarly, guarantors must also pay attention to whether there is a situation of malicious " fraudulent guarantee" among the parties. In such a situation, the guarantor would groundlessly bear guarantee liability beyond their intention, which is truly an undeserved disaster. Next, the author will sort out the circumstances under which guarantee liability is exempted, for your reference.

Regarding the guarantee period, the Civil Code stipulates that the guarantor and the creditor may agree upon it. If there is no agreement or the agreement is unclear, it is six months from the date the main debt's performance period expires. Furthermore, it is worth noting that if the agreed guarantee period is earlier than the expiration of the main debt's performance period or expires simultaneously with it, it is also considered as having no agreement.

If the creditor does not seek the guarantor to bear guarantee liability during the guarantee period, then after this period, the guar- antor will no longer bear guarantee liability. So, under what circumstances is it considered that the creditor did not, within the guarantee period, seek the guarantor to bear guarantee liability? Specifically, for a general guarantee, if the creditor did not, within the guarantee period, sue the debtor or apply for arbitration; for a joint and several guarantee, if the creditor did not, within the guarantee period, request the guarantor to bear guarantee liabi- lity.

In daily life, both creditors and guarantors should pay attention to the guarantee period. If the guarantee period has expired, For creditors Creditors cannot require guarantors to assume guarantee responsibilities, their debt recovery lacks a guarantee ； For guarantors, their burden is reduced they don't have to worry if the debtor fails to perform obligations or cannot perform, and they themselves need to bear the guarantee responsibility.

Article 696 of the Civil Code ： If a creditor assigns all or part of a claim without notifying the guarantor, the assignment is not effective against the guarantor. If the guarantor and the creditor agree to prohibit the assignment of claims, the creditor assigns the claim without the guarantor's written consent, the guarantor is no longer liable to the assignee.

Article 697 of the Civil Code ： If a creditor allows a debtor to assign all or part of a debt without the guarantor's written consent, the guarantor is no longer liable for the debt assigned without their consent, unless otherwise agreed between the creditor and the guarantor. If a third party joins the debt, the guarantor's guarantee liability is not affected.

According to the above provisions, creditors should note that when assigning claims, they must notify the guarantor. If they assign claims that both parties have agreed to prohibit assignment, they need to obtain the guarantor's written consent. In addition, if the creditor allows the debtor to assign the debt, they must also obtain the guarantor's written consent. Only in this way can the guarantee liability be avoided from being exempted. Similarly, guarantors also need to pay attention and always be prepared to be released from guarantee liability.

In fact, whether it is an assignment of claims or an assignment of debts, to a certain extent, it may increase the guarantor's burden. Therefore, the law restricts this situation to balance the rights and obligations of both parties and maintain the fairness of market transactions. 的公平。

Article 695 of the Civil Code ： If the creditor and the debtor, without the guarantor's written consent, agree to change the content of the main debt contract, reducing the debt, the guarantor is still liable for the changed debt; if the debt is increased, the guarantor is not liable for the increased portion. If the creditor and the debtor change the performance period of the main debt contract without the guarantor's written consent, the guarantee period is not affected.

According to the above provisions, creditors should note that if the creditor and the debtor agree to change the contract content ， and increase the debt, this increases the guarantor's burden to a certain extent, and the scope of the debt guaranteed by the guarantor increases. Imagine that if the debtor fails to perform the debt when it is due, the guarantor will have to repay more. If the creditor and the debtor change change the contract performance period, they must obtain the guarantor's written consent; otherwise, the guarantor is not liable for the guarantee ， because after the change of the performance period, the guarantor cannot know whether the debtor's financial situation will change in the future, and the risk of the guarantor's guarantee liability will increase.

According to Article 698 of the Civil Code, if a guarantor in a general guarantee provides the creditor with the true situation of the debtor's executable property after the due date of the principal debt, and the creditor waives or neglects to perform, the guarantor is no longer liable for the guarantee within the value of the executable property they provided. That is to say, the guarantor has done their best. They have informed the creditor of the debtor's assets that can be used to repay the debt, but the creditor does not take the initiative, then the guarantor can within the value of the assets they provided not bear the guarantee responsibility lity.

Therefore, creditors should note that if the guarantor provides them with information about the debtor's executable assets, they must take action to avoid the exemption of guarantee liability. Similarly, guarantors should also take action to urge the creditor to exercise their rights. In this way, whether or not the creditor takes action, part of the guarantor's guarantee Responsibilities may be waived.

Article 16 of the Interpretation of the Civil Code Guarantee System ： The principal contract parties agree to repay the old loan with a new loan, the creditor requests the guarantor of the old loan to assume the guarantee responsibility, the people's court will not support it; the creditor requests the guarantor of the new loan to assume the guarantee responsibility, it shall be handled according to the following circumstances:

(1) If the guarantors of the new loan and the old loan are the same, the people's court shall support it;

(2) If the guarantors of the new loan and the old loan are different, or if the old loan is unsecured and the new loan is secured, the people's court will not support it, but if the creditor has evidence to prove that the guarantor of the new loan provided the guarantee at the time of the repayment of the old loan with the new loan knew or should have known the fact.

According to the above provisions, when a new loan is used to repay an old loan, after the old loan is repaid, the corresponding principal claim is extinguished, and the subordinate guarantee claim is also extinguished, and the guarantor of the old loan does not also bear the guarantee responsibility.

The guarantee responsibility of the new loan guarantor needs to be determined on a case-by-case basis. If the guarantor of the new loan and the old loan is the same person, regardless of whether the guarantor knows about the repayment of the old loan with a new loan, if the creditor claims that the guarantor of the new loan bears the guarantee responsibility, the court will support it. The reason for this legal provision is that the repayment of the old loan with a new loan is due to the debtor of the old loan lacking the ability to repay. If the old loan is not repaid with a new loan, the guarantor will have to bear the guarantee responsibility for the old loan. Now, letting them bear the guarantee responsibility for the new loan does not increase their responsibility burden. If the guarantor is not the same, it depends on whether the guarantor knows. If the guarantor is aware of the fact of "repaying the old loan with a new loan," then the guarantor needs to bear the guarantee responsibility; otherwise, this part of the guarantee responsibility is waived.

These provisions under the Civil Code protect the legitimate rights and interests of creditors, and prevent guarantors from being maliciously exploited, truly achieving the fairness and justice of the law. 。