After the guarantor assumes the guarantee responsibility, how to recover from the debtor or other guarantor?

Author | Hongyan Lawyer Team, Lawyer Wang Ting

In daily life, it is not uncommon to provide guarantees for others. When the debtor cannot fulfill the repayment obligation, the guarantor needs to repay the debt on behalf of the debtor. So how can the guarantor fully protect his rights and interests after fulfilling the guarantee responsibility?

First, the object of recovery

1. Recovery from the debtor

Guarantee is to ensure the realization of the creditor's right, the debtor fails to perform the debt in accordance with the contract, and after the guarantor performs the guarantee duty to repay the debt on behalf of the debtor, the creditor's right and debt relationship between the creditor and the debtor are eliminated, and a new creditor's right and debt relationship is formed between the guarantor and the debtor, which has the right to recover from the debtor according to law, thus ensuring the balance of the rights and obligations of the debtor and the guarantor.

Article 700 of the Civil Code

After the guarantor assumes the guarantee responsibility, unless otherwise agreed by the parties, he has the right to recover from the debtor within the scope of his guarantee responsibility, and enjoys the rights of the creditor against the debtor, but shall not damage the interests of the creditor.

Exception - non-recoverable circumstances

The guarantor fails to exercise the right of limitation of action defense of the main debt according to law

Due to the subordination of the guaranteed debt, if the statute of limitations of the principal debt expires, the guarantor may also obtain the debtor's right to defend against the statute of limitations and may refuse to assume the guarantee liability to the creditor.

If the guarantor does not exercise the right of limitation of action for the main debt and performs the guarantee duty, because the limitation period of the main creditor's rights has expired, the debtor has the right to defend against the creditor and the guarantor, so the guarantor's right of recovery cannot be supported by the court unless the debtor waives the limitation of action defense.

The guarantor fails to notify the debtor in time to fulfill the guarantee responsibility

The guarantor shall fulfill the necessary notice obligation to inform the debtor in a timely manner when performing the guarantee duty. If the debtor fails to notify and performs the debt to the creditor without knowing it, the guarantor is at fault, and the debtor can fight the guarantor's claim for compensation. The guarantor can only claim return to the creditor with unjust advantage.

2. Recourse from other guarantors

In general, the guarantees provided by each guarantor are independent, and there is no intentional communication between the guarantors, and there is no legal relationship. Therefore, according to the provisions of the Civil Code, if there are multiple guarantors for the main debt, a guarantor who bears the guarantee responsibility shall not recover from other guarantors in principle, but the mutual recovery between the guarantors belongs to the scope of private law autonomy. If the guarantors have the agreement of sharing, they should be respected.

Circumstances where guarantors can recover from each other:

(1) It is expressly agreed between the guarantors that they can recover from each other, including explicit or unagreed shares.

(2) The guarantors agree to undertake joint and several joint guarantees, that is, each guarantor promises to the creditor to jointly undertake the guarantee liability regardless of the share for the same debt;

(3) There is no agreement, but each guarantor signs, seals or fingerprints on the same contract. Signing on the same document inferred that the guarantors have the intention to jointly bear the guarantee responsibility.

Article 13 of the Interpretation of the Supreme People's Court on the Application of the Guarantee System to the Civil Code of the People's Republic of China

If two or more third parties provide a guarantee for the same debt, and the guarantors agree to recover and share the shares with each other, and the guarantor who bears the guarantee responsibility requests other guarantors to share the shares according to the agreement, the people's court shall support it; if the guarantors agree to bear joint and several joint guarantees, or agree to recover each other but not share the shares, each guarantor shall share the part that cannot be recovered from the debtor in proportion.

If two or more third parties guarantee the same debt, and the guarantors have not agreed on mutual recovery and have not agreed to bear joint and several joint guarantees, but each guarantor signs, seals or fingerprints the same contract, and the guarantor who bears the guarantee responsibility requests other guarantors to share the part that cannot be recovered from the debtor in proportion, the people's court shall support it.

Except for the circumstances stipulated in the preceding two paragraphs, if the guarantor who has assumed the guarantee responsibility requests other guarantors to share the part that cannot be recovered from the debtor, the people's court will not support it.

judicial case

(2022) Ji 02 Minzhi No. 1493

In December 2014, Company A applied to Bank B for a loan of 740 million yuan and signed the Loan Contract. On the same day, Company C, Company D, natural person Cui and his spouse Heimou signed the Guarantee Contract with Bank B respectively, agreeing to bear joint and several guarantee liabilities for the above-mentioned loans of Company A. The guarantee scope is the principal amount of the loan under the main contract and the principal amount of the loan under the main contract, interest, penalty interest, compound interest, compensation, liquidated damages, and the cost of realizing the creditor's rights; the guarantee period is two years from the expiration date of each debt performance period under the main contract.

After the above contract was signed, Bank B issued loans to Company A totaling 740 million yuan.

In November 2018, Company A failed to repay the principal and interest due on time, and Bank B sued the borrower and all the guarantors to the court. The parties reached a mediation agreement under the auspices of the court, confirming that Company A returned the principal and interest and other expenses within the agreed time limit, and each guarantor was jointly and severally responsible for the guarantee.

After the conciliation agreement took effect, Company A failed to perform, Bank B applied to the court for enforcement, and Company C fulfilled the guarantee obligation for a total of 190 million yuan. Later, Company C required Company D to undertake the repayment obligation according to a quarter of the compensation amount and caused a lawsuit dispute.

The court held that:

According to Article 13 of the "Interpretation of the Supreme People's Court on the Application of the Guarantee System of the Civil Code of the People's Republic of China", only when the guarantors have made a clear agreement on the sharing of the guarantee responsibility and its share, or if they have agreed to bear joint and several joint guarantees, or if they sign the same contract, the guarantor who has already assumed the guarantee responsibility has the right to recover from other guarantors.

In this case, Company C and Company D signed guarantee contracts with the lender and the borrower respectively. Company C and Company D did not agree on mutual recovery and sharing of shares, nor did they agree to assume joint guarantee liability. Therefore, according to the guarantee contract involved in the case, it cannot be determined that both parties have the intention to bear joint and several joint guarantee liabilities.

Regarding whether Company C can exercise the right of recourse against Company D on the grounds that the two parties signed the settlement agreement reached in another case, the second paragraph of the above judicial interpretation is from the perspective of balancing the interests of the parties, and presumes that the guarantors have mutual responsibility based on the behavior of the guarantors signing the same contract. Therefore, the concept and nature of "contract" cannot be expanded when understanding and applying this clause.

The settlement agreement involved in this case was reached during the litigation process to resolve the loan contract dispute in another case, which was obviously different from the contract with the nature of security formed during the loan process. Therefore, Company C's exercise of the right of recourse based on the settlement agreement did not comply with the above judicial interpretation provisions and could not be supported.

II. Scope of recovery

1. Debtor

After the guarantor assumes the guarantee responsibility, the debtor shall pay the compensation to the guarantor. According to the law, the right of recovery of the guarantor is within the scope of its guarantee responsibility, including the principal of the main debt actually paid by the guarantor, interest, liquidated damages, and the cost of realizing the creditor's right. If the debtor fails to pay the compensation to the guarantor in time, it will cause the guarantor to lose the use of funds, and the debtor shall also pay the interest loss to the guarantor.

2. Guarantor

The law does not clearly stipulate the scope of recovery between guarantors. Except for the debts paid by the guarantor due to the guarantee responsibility and the necessary expenses paid by the guarantor, there are different attitudes in practice as to whether the guarantor's loss of capital occupation can be recovered from other guarantors.

The mutual recovery rules between the guarantors shall be implemented according to the agreement if there is an agreement; if there is no agreement, the part that cannot be recovered from the debtor shall be shared proportionally by the guarantors.

In addition, if the debtor delays the performance of the debt, the creditor should claim the rights against all the guarantors during the guarantee period, and only one of the guarantors should claim the rights, which cannot have the legal effect on the other guarantors. Therefore, the guarantor who has not received the creditor's notice can be exempted from the guarantee liability, and the guarantor who bears the guarantee liability cannot claim the right of recovery against it.

III. Procedures for recovery by the guarantor

1. After assuming the guarantee responsibility, the guarantor can directly recover from the debtor.

Article 42 of the 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: "Where the people's court decides that the guarantor bears the responsibility of guarantee or compensation, it shall make it clear in the main text of the court verdict that the guarantor enjoys the rights stipulated in Article

31of the Guarantee Law.

If the right of recovery is not clearly stated in the court verdict, the guarantor can only file a separate lawsuit according to the fact that he bears the responsibility. "According to the law, if the court decides that the guarantor bears the guarantee responsibility during the trial, it will generally make it clear in the court verdict that the guarantor has the right of recovery. At this time, the guarantor can directly apply to the court for enforcement after fulfilling the guarantee responsibility without further prosecution.

However, the Civil Code and relevant judicial interpretations do not incorporate the above provisions. By retrieving judicial legal precedents, if the guarantee fact occurs after the implementation of the Civil Code, some courts will still specify in the court verdict the right of recovery after the guarantor bears the guarantee responsibility, which can be used as the basis for the guarantor to apply for execution. For some court verdicts that do not clearly state the right of recovery, the guarantor cannot directly apply for execution, and can only file a lawsuit with the court to recover from the debtor according to the facts of responsibility.

2. Recourse from other guarantors

According to the law, the guarantors with the right of recourse cannot directly recourse each other. When the guarantor who has assumed the guarantee responsibility recourses from other guarantors, it should first recover from the debtor by applying for enforcement against the debtor or suing the debtor. Only the part that the debtor cannot pay can be claimed from other guarantors after confirmation.

Lawyers remind that if it is necessary to provide guarantees for others, they should fully understand the personal situation and repayment ability of the debtor, and reasonably evaluate the corresponding risks on the basis of verifying the nature of the debt. If they assume the responsibility of guarantee later, they should promptly exercise the right of recovery from the debtor or other guarantors to minimize economic losses.

About the Author

Lawyer Wang Ting

Practicing lawyer of

Focusing on civil and commercial legal affairs and corporate legal affairs, he is good at handling contracts, labor disputes, torts and other legal affairs, and has rich theoretical research and practical experience.

Team Profile

Hongyan lawyer team

The Hongyan lawyer team is headed by lawyer Liu Hong, and is composed of lawyer Min Na, lawyer Chen Ruitan, lawyer Wang Ting, and lawyer Zhou Gaofeng as the backbone of the business. The team members are handsome and have their own advantages; their business literacy is stable and solid, and they have profound experience in the industry. They abide by professional ethics, focus on business practice, integrate knowledge and practice, and constantly achieve far-reaching goals.

The team's business areas are mainly engaged in civil and commercial legal affairs and financial legal affairs, focusing on corporate governance and compliance management, professional handling of real estate development, operation and property management, intellectual property disputes, labor disputes and arbitration, contract disputes, tort liability disputes, marriage and family disputes and other civil and commercial legal affairs, employed as a perennial legal consultant or special project legal consultant for many domestic and foreign enterprises and institutions, engaged in equity mergers and acquisitions, restructuring, fund fundraising and withdrawal affairs and company IPO and other professional legal affairs, successfully handled a number of difficult equity, restructuring, mergers and acquisitions and financial guarantee disputes, good at handling major and complex civil and commercial litigation and arbitration cases, The business covers both domestic and overseas, and is deeply praised by customers.

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