Case review

From April 2018 to June 2019, Xiaolan repeatedly borrowed a total of 2 million yuan from her sister Xiaomei and brother-in-law Song, and orally agreed that the annual interest rate was 10% for the turnover of their business funds, during which Song returned Xiaolan's loan interest of 300,000 yuan, but did not return the principal.

In April 2020, Xiaomei and Song divorced. After the divorce, Song borrowed more than 650,000 yuan from Xiaolan. On June 25, 2021, Song and Xiaolan signed the Loan Contract for the settlement of the principal and interest of the previous loan, and the two parties agreed that Song would borrow a total of RMB 3 million from Xiaolan at an annual interest rate of 10%.

Later, due to Song and Xiaomei's refusal to repay the arrears and interest, Xiaolan had no choice but to sue the court, demanding that Xiaomei and Song pay the principal of the loan of 3 million yuan and the interest from April 18, 2020 to the date of actual repayment.

During the trial, Song recognized the amount of loan claimed by the plaintiff Xiaolan, but believed that the debt in this case belonged to his personal business capital turnover, and that he and Xiaomei had divorced, and Xiaomei should not be liable for repayment.

Xiaomei did not recognize the 3 million yuan claimed by Xiaolan, believing that the money was not used for the family's daily needs, and most of the money flowed into Song's account, and she should not be jointly and severally liable.

Heard by the courts

After trial, the court held that the fact that Song borrowed money from Xiaolan was evidenced by bank transfer records, loan contracts, receipts and other evidence, and Song recognized it, and Song's failure to perform the repayment obligation as agreed constituted a breach of contract, and Xiaolan had the right to require him to repay the principal and interest of the loan. In this case, there are two main points of dispute: first, the amount of the principal amount of the loan lent by Xiaolan. The second is whether Xiaomei should be jointly and severally liable for the amount owed by Song.

Focus of dispute 1: The "Loan Contract" and receipt issued by Song to Xiaolan on June 25, 2021 are the creditor's rights certificates re-issued by both parties after the settlement of the principal and interest of the previous loan, and the relevant interest rate does not exceed the legal standard. Therefore, from the date of signing the Loan Contract, it can be determined that the principal of the loan lent by Xiaolan is 3 million yuan, and the interest on the loan claimed by Xiaolan should be based on 3 million yuan, and the annual interest rate shall be calculated at 10% from June 25, 2021 to the date of actual payment.

Focus of dispute 2: The money lent by Xiaolan to Song between April 2018 and June 2019 occurred during the existence of the marital relationship between Song and Xiaomei, and the amount exceeded the daily needs of the family, and Song admitted that the loan was used for business operation, and 500,000 yuan was transferred to Xiaomei's personal account. According to the recording of the call between the three people, it can be seen that Xiaomei was aware of the fact that Song had borrowed money from Xiaolan, and Xiaolan had reason to believe that Xiaomei and Song both knew about and had an agreement to jointly borrow money to run a business, and the court also had reason to believe that the loan involved in the case was used for the joint production and operation of the husband and wife, so the money borrowed by Song and Xiaomei from Xiaolan during the existence of the marital relationship should be recognized as the joint debts of the husband and wife.

After the court's accounting, as of June 25, 2021, when Song and Xiaolan signed the "Loan Contract", Song and Xiaomei needed to repay Xiaolan's loan principal of 2 million yuan and interest of more than 280,000 yuan. When the more than 650,000 yuan that Song borrowed from Xiaolan after the divorce occurred, Song and Xiaomei had dissolved their marriage, which should be recognized as Song's personal debts and was not legally binding on Xiaomei. To sum up, Xiaomei should bear joint and several liabilities to Xiaolan within the scope of the principal and interest of the loan of more than 2.28 million yuan and the corresponding interest.

With regard to Xiaomei's defense of the statute of limitations, since the money borrowed from Xiaolan by Song and Xiaomei during the existence of their marriage did not clearly stipulate the time of repayment, when they signed the Loan Contract between Song and Xiaolan, the creditor's rights and debts between the two parties were reconfirmed, so Xiaolan's litigation claim did not exceed the statute of limitations.

In the end, the Changping Court ruled that Song should repay Xiaolan's loan principal of 3 million yuan and interest (based on 3 million yuan, calculated at an annual interest rate of 10% from June 25, 2021 to the date of actual payment), and Xiaolan's debt to Song should be jointly and severally liable for repayment within the scope of the principal and interest of the loan of more than 2.28 million yuan and interest (based on 2 million yuan, calculated at an annual interest rate of 10% from June 25, 2021 to the date of actual payment). After the verdict was announced, Song and Xiaomei appealed, and the original judgment was upheld in the second instance, and the case has now taken effect.

Relevant Laws

Civil Code of the People's Republic of China

Article 195：In any of the following circumstances, the statute of limitations is interrupted, and the statute of limitations period is to be recalculated from the time of the interruption or the conclusion of the relevant procedures: (1) the rights holder submits a request for performance to the obligor; (2) The obligor agrees to perform the obligation; (3) The right holder initiates a lawsuit or applies for arbitration; (4) Other circumstances that have the same effect as filing a lawsuit or applying for arbitration.

Article 675：The borrower shall return the loan within the agreed time limit. Where there is no agreement on the term of the loan or the agreement is not clear, and it cannot be determined in accordance with the provisions of Article 510 of this Law, the borrower may return it at any time; The lender may demand the borrower to return it within a reasonable period of time.

Article 676：Where a borrower fails to repay the loan within the agreed time limit, it shall pay overdue interest in accordance with the agreement or the relevant provisions of the State.

Article 1064：Debts incurred by both husband and wife as jointly signed by both husband and wife or by one of the husband and wife as an expression of common intent such as retrospective recognition by one of the husband and wife, as well as debts incurred by one of the husband and wife in their own name for the daily needs of the family during the existence of the marital relationship, are joint debts of the husband and wife.

Debts incurred by one of the spouses in his or her own name during the existence of the marital relationship in excess of the daily needs of the family are not joint debts of the husband and wife; However, the creditor can prove that the debt was used for the husband and wife's common life, joint production and business, or based on the common intention of the husband and wife.

Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases

Article 26：The amount of the loan indicated in the IOU, receipt, IOU and other creditor's rights vouchers shall generally be recognized as the principal. Where interest is deducted from the principal in advance, the people's court shall determine the amount actually lent as the principal.

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