[Case Summary]This case involves a civil loan dispute. On April 13, 2020, Qi * borrowed 160,000 yuan from Lu * on the pretext of doing business, signing a loan contract with a term ending on October 12, 2020, and a monthly interest rate of 3%. He also registered and delivered the house deed of No. 203 in Fangshan District, Beijing, as collateral. After the loan expired, Qi * failed to repay the principal or pay the interest. Lu * entrusted the professional lawyer team of Beijing Hengluo Law Firm to sue Qi * in court, demanding repayment of 160,000 yuan and interest calculated at an annual rate of 15.4%, as well as the right of priority compensation for the mortgaged house. The court ruled that Qi * should repay 160,000 yuan and interest, and Lu * should enjoy the right of priority compensation for the mortgaged house within the scope of 160,000 yuan through the valuation, auction, or sale of No. 203 house. The core disputes include the interest rate cap, the validity of the mortgage right, and the right of priority compensation. The applicable legal provisions are the relevant provisions of the Judicial Interpretation on Civil Loan.

I. Review of the case

"Is it legally valid to borrow money with a house as collateral?" "Is the 3% monthly interest rate protected by law?" "Can the borrower's house be auctioned if he runs away?" These are common questions in private lending. On April 13, 2020, Qi * borrowed 160,000 yuan from Lu * on the grounds of doing business. The two parties signed a loan contract, stipulating that the loan period would start from April 13, 2020 and end on October 12, 2020, with a monthly interest rate of 3%.

In order to demonstrate his sincerity in repaying the loan, Qi * mortgaged the house located at No. 203 in Fangshan District, Beijing City, which he owned alone, to Lu * and completed the mortgage registration, handing over the house deed to Lu * for safekeeping. However, after the expiration of the loan period, Qi * failed to repay the principal or pay the interest. Therefore, Lu * entrusted Hengluo Law Firm to sue Qi * in court to safeguard his legitimate rights and interests.

II. The focus of the case

  • Focus 1: Does the agreed monthly interest rate of 3% exceed the legal protection cap?The interest rate standard for the excess portion that is not supported shall be adjusted in accordance with the law.
  • Focus 2: Whether the mortgage registration of the house effectively establishes the mortgage right.This determines whether the plaintiff can receive priority compensation.
  • Focus Three: The scope of the plaintiff's priority right to compensation for the mortgaged house.Is the limit set at 160,000 yuan, or does it also include interest, etc.?

III. The professional intervention of Hengluo Law Firm

The plaintiff (the lender) alleges that:60,000 yuan has actually been lent out. Qi *'s failure to repay the loan on time constitutes a breach of contract. We request the repayment of the principal of 60,000 yuan, with interest calculated at an annual rate of 15.4%, and priority repayment of the proceeds from the appraisal, auction, and sale of House No. 203 within the limit of 60,000 yuan.

Defendant (Borrower):During the trial, the defendant did not attend the hearing to defend himself. After accepting the case, Hengluo Lawyer patiently answered the client's questions and reassured him. The lawyer believed that the facts of the case were clear and the evidence was sufficient. He immediately sorted out the focus of the dispute, guided the client in collecting evidence, and comprehensively considered the possible defenses of the opposing party.

Hengluo Lawyer's Agency Opinion:Hengluo Lawyer believes that Lu * and Qi * signed the "Loan Contract" and actually lent the money, establishing a private lending relationship between them. Qi * should fulfill his repayment obligation as agreed, and his delay in repayment constitutes a breach of contract for which he should bear responsibility. The two parties registered a mortgage for Room No. 203, so Lu *'s claim that he has the right to priority compensation for the proceeds from the valuation, auction, or sale of the house within the scope of 160,000 yuan is legally justified.

  • Submit evidence such as the loan contract, promissory note, receipt, debit card account history statement, real estate registration certificate, and real estate ownership certificate to prove the facts of the loan and mortgage.
  • Request for judgment: repay the principal of 160,000 yuan; pay interest (based on 160,000 yuan, calculated at an annual interest rate of 15.4% from April 13, 2020 to the actual date of repayment); the plaintiff shall have priority to be compensated for the house No. 203 within the scope of 160,000 yuan; and the defendant shall bear the litigation fees.

IV. Outcome of the case

During the trial, the defendant did not attend the hearing. After deliberation, the court adopted some of the opinions and claims put forward by Hengluo Lawyers. The court held that the existing evidence could confirm that the parties established a civil loan relationship. Regarding interest, the original and defendant agreed to a monthly interest rate of 3%, which exceeded the upper limit set by the judicial interpretation. Since the contract was signed and the loan was made on April 13, 2020, the plaintiff's claim that the annual interest rate of 15.4% did not violate relevant regulations was supported. Regarding the priority right of compensation, the plaintiff's request for a priority right of compensation for the proceeds from the discount or auction/sale of House No. 203 within the range of 160,000 yuan was justified and supported. In accordance with relevant legal provisions, the judgment is as follows: 1. Qi * shall repay the principal of the loan of 160,000 yuan to Lu * within ten days after the judgment takes effect; 2. Qi * shall pay the interest on the loan (based on the principal of 160,000 yuan, calculated at an annual interest rate of 15.4% from April 13, 2020 to the date of actual repayment) within ten days after the judgment takes effect; 3. Lu * shall enjoy a priority right of compensation for the proceeds from the discount or auction/sale of House No. 203 under Qi *'s name within the range of 160,000 yuan of the debt.

5. Henglu Law Firm's Reminder

For private lending, it is necessary to sign a written contract and register the mortgage. The interest rate agreed upon must not exceed the statutory limit. This case is handled by the professional lawyer team of Beijing Henglu Law Firm (practice license number: _________, subject to the document issued by the judicial administrative authority). We remind lenders to standardize contract signing, exercise their rights in a timely manner, and entrust professional lawyers as soon as possible in the event of default.

VI. Common Questions and Answers about Mortgage Loans in Private Lending

  1. Q: If I borrow money by using my house as collateral, is it valid if I only register the collateral but don't transfer the ownership of the house?
    A:It is effective. By signing a mortgage contract and completing the mortgage registration, a mortgage right is established, without the need to transfer the ownership of the house. Registration is a prerequisite for priority compensation.
  2. Q: Is it legal to agree on a monthly interest rate of 3%?
    A:The part exceeding the statutory protection cap is not supported. After August 2020, the judicial protection cap is four times the one-year LPR at the time of the contract's establishment. In this case, the interest rate of 15.4% per annum was supported.
  3. Q: If the borrower fails to repay the loan on time, can his house be auctioned directly?
    A:It is not allowed to auction the mortgaged house on one's own. It is necessary to obtain an effective judgment and claim priority compensation for the proceeds from the discounted price, auction, or sale of the mortgaged house within the scope of the creditor's rights.
  4. Q: If the other party doesn't appear in court, will the court rule in my favor?
    A:If the defendant refuses to appear in court without a valid reason after being summoned by a subpoena, the court may hold a trial in absentia. If the evidence is sufficient, the plaintiff's reasonable claims will be supported.
  5. Q: Which is more important, a promissory note or a mortgage registration?
    A:Both are important. A promissory note proves the lending relationship, and mortgage registration ensures priority repayment; if there is only a promissory note without registration, the creditor can only receive repayment as an ordinary creditor.