Plaintiff: CHINA BANK, SEOUL BRANCH

    Domicile: 20/F, YongFeng Building, Ruilingdong, Zhonglu District, Seoul, Korea  

    Representative: YUE YI, General Manager

    Entrusted Agent: KONG PENG, of Beijing Bei Dou Law Firm

    Defendant: CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP.

    Domicile: Zhongyi Building, 103, Jixiang Li, outside Chaoyang Men, Beijing

    Legal Representative: ZI ZHAN RONG, President 

    Entrusted Agent: FU RUI, Female, of 38-year-old, Deputy Director of President Office of CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP.

 

    In the dispute cases of general guarantee contract, the plaintiff, CHINA BANK, SEOUL BRANCH (hereinafter referred to as ?°SB?±), versusing the defendant, CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. (hereinafter referred to as ?°CAC?±), the entrusted agent of the plaintiff, SB, KONG PENG and the entrusted agent of the defendant, CAC, FU RUI were present in court to participate in action. This case has now finalized. 

    The plaintiff, SB, asserted that: our bank had all along offered credit service to HUA YI CO., a subsidiary company of CAC, which is guaranteed by CAC and the guarantee of CAC has been approved by State Administration of Foreign Exchange. The concrete situation is that: on December 3rd, 1998, our bank signed a contract on conferring a credit sum of $3,000,000US with HUA YI CO.; on December 2nd, 1999, our bank renewed the contract on the conferred credit sum of $3,000,000US signed with HUA YI CO.; on February 27th, 2001, our bank renewed a contract on a conferred credit sum of $1,500,000US signed with HUA YI CO.. CAC provided the guarantee of joint and several liabilities on all of the said contracts. HUA YI CO. confirmed that the debt it owned our bank was $1,162,566.14USD and 435,843,287WON after the expiration of the said contracts, February 27th, 2002. On the ground that HUA YI CO. cannot repay the debt, our bank suited to the court, asking CAC, as the guarantor of the joint and several liabilities, to bear the repaying liability of the said sums of money.       

    In order to prove its claim, SB provided following evidences and documents: 1. An agree signed on December 3rd, 1998 and an officer and written reply (Ref. 1998 151) and a registration certificate of external guarantee (Ref. GFG 0617) rendered and issued by State Administration of Foreign Exchange; 2. An agreement signed on June 2nd, 1999; 3.An agreement signed on December 3rd, 1999 and an officer and written reply (Ref. 1999 298) and a registration certificate of external guarantee (Ref. GFG 0573) rendered and issued by State Administration of Foreign Exchange; 4.An agreement signed on June 1st, 2000; 5.An agreement signed on December 1st, 2000; 6.An agreement signed on February 27th, 1998 and an officer and written reply (Ref. 2001 40) and a registration certificate of external guarantee (Ref. GFG 0573) rendered and issued by State Administration of Foreign Exchange; 7.Three copies of KUN-guarantee; 8. A bill of paying 30 Million WON on March 3rd, 1999; 9. A bill of paying 1 Billion WON on December 1st, 1998; 10.A correspondence of debt confirmation sent to HUA YI CO. on January 28th, 2002; 11. A notice asking the fulfillment of guarantee liability sent to CAC on January 28th, 2002.   

    CAC has no objection on subjective truthfulness and contents of the said evidences provided by SB.

    Defendant, SB, pleaded in the trail that: 1.The loan in WON SB provided to HUA YI CO. has exceeded the guarantee scope applied by our company and approved by State Administration of Foreign Exchange, thus our company shall not bear guarantee liability on the debt on WON owned by HUA YI CO. (1) The guarantee our company provided to SB as the guarantor of HUA YI CO. in 2001 is ?° mainly used in issuing sight credits, usance credits or back-to-back credits in bilateral trades and trilateral trades?±. However, in practice, besides the loan in USD provided by SB to HUA YI CO. under items of the credit, the loan it continually provided was 130 Million WON, which is beyond the external guarantee scope applied by our company which had been approved. (2) The loan of 130 Million WON provided by SB to HUA YI CO. had actually changed the content of the loan contract, but without getting a written agreement from our company; thus our company shall not bear guarantee liability on this non-credit loan in WON. 2. Regarding to the contract signed by SB and HUA YI CO., the type of loan confirmed by both parties is ?°the sight and /or usance LC with limitation of 130 Million WON?±; however, from details of the credit sum HUA YI CO. owned SB, which is provided by SB, it shows that the period of validity of the credits issued by SB had all exceeded 90 days, which broke the agreement in the loan contract. This change did not ask the agreement of our company; thereby our company should not bear the guarantee liability of the LC loan exceeding the period of validity of 90 days. 3. The sum of money claimed by SB exceeds 1.5 Million USD, thus our company shall not bear the guarantee liability for it. By reason of the foregoing, our company holds that the claim provided by SB has exceeded the guarantee liability scope of our company, thus our company shall not bear the guarantee liability and ask the court to dismiss the claim of SB.

    Therefore, CAC provides to the court evidences and documents as follows: 1. Application Regarding to Extend the Time Limit of the Credit Sum, 30 Million USD, of HUA YI CO., Korea (Ref. 2001 CAF509/29) of CAC; 2. A bill showing that SB paid 300 Million WON; 3. A bill showing that SB paid 1 Billion WON; 4. A contract signed by SB and HUA YI Co. on December 3rd, 1998; 5. A contract signed by SB and HUA YI CO. on February 27th, 2001; 6. The notice SB sent on January 28th, 2002, asking CAC to fulfill the guarantee liability; 7. A confirming correspondence, regarding to the LC money advanced for others and the loan, SB sent to HUA YI Co. on January 18th, 2002; 8. A schedule of the LC money advanced for others owned by HUA YI Co.  

SB has no objection on subjective truthfulness of the said evidence provided by CAC, except the contents the said evidence proved. In evidence 1, though CAC holds that the application was written clearly that it was mainly used in opening LC, it did not exclude general loans; regarding to evidence 2 to 7, SB holds that they can support its opinion to prove that the loan in WON is within the guarantee scope of CAC; regarding to evidence 8, CAC holds that all the LCs listed in the schedule have the situation of exhibition the period and counts the interest of the exhibition, thus it shall not be regarded as exceeding the LC time limit that agreed and also shall not be regarded as beyond the guarantee item that agreed. 

When the said evidence provided by the parties has been cross-examined, both parties have no objection on the subjective truthfulness of the evidence provided by the other, thus this court confirms the said evidence.

    Based on the evidence cross-examined by both parties and the trail notes, the facts this court has found are as follows:

On December 3rd, 1998, SB and HUA YI CO. signed a contract, agreeing that: the sum of conferred credit was 300 Million USD; the type of conferred credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON; the date of conferring the LC was December 3rd, 1999.Whereafter, SB and CAC signed the contract of KUN-GUARANTEE, agreeing that in order to ensure the interest of the debtee, SB, the guarantor, CAC, expressly made the joint and several guarantees with the debtor, HUA YI CO., repaying and paying the any and all debts or owes that the debtor may owe the debtee now or henceforth within the scope of the following debts or owes. The debt scope CAC guaranteed includes any or all obligations, debts and owes, either existing now or may occur in the future, the debtor owned to the debtee rooting, referring or concerning to the following business: loan by bill, discount of bill, loan by contract, current credit related to foreign exchange and debts from other current credits, and so on; guaranteed debts include interests, interests exceeded time limit, incidental debts and any and all other obligations which the highest limitation is 3 Million USD or other currencies equal to the worth that has occurred before conferring the date of guaranteed debt, whatever the highest limitation of the guaranteed debt, the guarantor must bear liabilities on any interest, interest exceeded time limit or all other incidental debts produce or occur after the confirmation of the guaranteed debt; the guaranteed debt expired on December 3rd , 1999??CAC sealed on the blank of Guarantor of joint and several liabilities. State Administration of Foreign Exchange replied the official and written replay (Ref.1998 151) concerning providing external guarantee by CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP., agreeing CAC to provide the external guarantee, 3 Million USD with which the allotted time of the debt under the items of the guarantee was one year, the warrantee was HUA YI CO. and the beneficiary under the items of guarantee was SB. On December 28th, 1998, State Administration of Foreign Exchange provided the External Guarantee Registration (Ref. GEG 0617), expressly written: external guarantee provided by your company to SB as a guarantor of HUA YI CO. has gone through examination and is approved to register now.

    On June 2nd, 1999, SB and HUA YI CO. signed a contract, extending the time limit of the local currency loan, 1.3 Billion WON, of HUA YI CO. from June 3rd ,1999 to December 3rd on the interest rate of 9%.

    On December 2nd, 1999, SB signed an contract with HUA YI CO., arranging exhibition period of the credit of HUA YI CO., of which the sum of credit was 3 Million USD, the type of credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON and the date of conferring the LC was June 3rd, 2000. At the same time, SB and CAC signed the Contract of KUN-Guarantee. The sum of guarantee of CAC was 3 Million USD; the guaranteed debt expired on December 3rd, 2000, in which the content was the same with the said Contract of KUN-Guarantee. The official and written replay (Ref.1998 151) made by State Administration of Foreign Exchange on September 28th, 1999, which concerned providing external guarantee by CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP., agreeing CAC to provide the external guarantee, 3 Million USD with which the allotted time of the debt under the items of the guarantee was one year. On December 28th, 1999, State Administration of Foreign Exchange provided the External Guarantee Registration (Ref. GEG 0617): the external guarantee provided by CAC to SB as a guarantor of HUA YI CO. has gone through examination and is approved to register. On June 1st, 2000, SB signed a contract with HUA YI CO., arranging exhibition period on 6 month of the credit of HUA YI CO., of which the sum of credit was 3 Million USD, the type of credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON and the date of conferring the LC was December 2nd, 2000.

    On December 1st, 2000, SB signed a contract with HUA YI CO., extending the local currency loan, 1.3 Billion WON, which was available by HUA YI CO. at that time. The new expiration date was February 27th, 2001.  

    On February 27th, 2001, SB signed a contract with HUA YI CO., arraigning one year exhibition period of the loan which was available by HUA YI CO. at the time. The sum of credit was 1.5 Million USD, the type of credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON and the date of conferring the LC was February 27th, 2002. At the same time, SB and CAC signed the Contract of KUN-Guarantee. The highest sum of guarantee of CAC was 1.5 Million USD; the guaranteed debt expired on February 27th, 2002, in which the content was the same with the said Contract of KUN-Guarantee. The official and written replay (Ref.2001 40) made by State Administration of Foreign Exchange on February, 26th, 2001, which concerned providing external guarantee by CAC, agreeing CAC to extend one year of the external guarantee which the sum of debt under the items of guarantee was 3 Million USD. State Administration of Foreign Exchange gave clear indication on the original External Guarantee Registration (Ref. GEG 0573) that the time limit extended to February, 2002. 

    On January 28th, 2002, SB sent a correspondence of confirming the debt to HUA YI CO., stating: ?° Close to February 28th, 2002, the balance of the debt your company owned to our bank is 430,000,000WON and the relative interest is 5,843,287WON. The interest of the debt that exceeded time limit is counted from February 29th, 2002, on the interest rate of 10%.?± HUA YI CO. sealed on this correspondence to confirm. In the same day, SB sent the Notice of Submitting to fulfill the Guarantee Liability to CAC, stating: ?°Close to January 28th, 2002, the debts your company guarantees for the credit HUA YI CO. got from our bank add up to: 1. $1,148,325.36USD that issued and accepted under items of import LC, the interest, $1,258.74USD, of the money advanced by our bank for HUA YI CO., totally $435,843,287WON; 2.the loan, $430,000,000WON, and the interest of loan, $5,843,287WON, which has not paid yet, totally $ 435,843,287WON. The said debts have been confirmed to be inerrability by HUA YI CO. and please, your company fulfill the above liabilities as soon as practicable.?± Both SB and HUA YI CO have sealed this notice.   

    During the trail, CAC had no objection on the sum of SB??s claim. SB also confirmed that CAC could pay in USD, WON or RMB.

This court further found that regarding to the LCs exceeded the longest term-90days-provided by CAC; it should be the change of guarantee items. SB explained that on the ground that extending period of LC regularly occurs in operating LCs?? business and the item of the interest of extending would be listed in the schedule of money advanced for others through LC, it should not be the situation that proceedings of guarantee have changed. CAC has no obligation on the said explanation made by SB.  

    This court holds that:

1. Regarding to the problem of jurisdiction of this case. The plaintiff, SB, is a bank registered in Korea, thus this case is a civil case-related to foreign elements in according to regulations of CILVIL PROCEDURE LAW. Based on Article 245 of CILVIL PROCEDURE LAW, ?°If in a civil action in respect of a case involving foreign element, the defendant raises no objection to the jurisdiction of a people's court and responds to the action by making his defense, he shall be deemed to have accepted that this people's court has jurisdiction over the case?±, the defendant, CAC, has not raised objection on jurisdiction of this court, further, it responded to action and pleaded. Thereby, this court has jurisdiction to this case.    

2. Regarding to the application of law in this case. In procedure, both parties expressly showed that they choose law of People??s Republic of China to settle the contract dispute, thereby, law of People??s Republic of China is the applicable law to settle the contract dispute in this case.

3. Regarding to the facts of SB??s claim.

After signing the credit contract with HUA YI CO. SB signed three Contracts of KUN-Guarantee with CAC, each on 1998, 1999 and 2001. All the three guarantee contracts are true declaration of will of the parties, moreover, when CAC provided external guarantee, it had already been approved by State Administration of Foreign Exchange and had registered, which was in line with law; thus, the said three guarantee contracts shall be regarding as valid. CAC shall bear joint and several guarantee liabilities of the debt confirmed by HUA YI CO. in accordance with the agreement in the guarantee contract. 

Regarding to the facts of CAC??s pleading that it should not bear the guarantee liabilities. In the agreement signed by SB and HUA YI CO., it is expressly agreed: the sum of credit is 3 Million USD, the type of credit is cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term is 90 days. The sum of external guarantee CAC applied to State Administration of Foreign Exchange, which has been approved, is 3 Million USD. In practice, SB used form of USD or WON, general loan or money advanced by LC to confer the credit to HUA YI CO., which did not exceed the guaranteed sum scope bore by CAC. As to the stating of CAC that all the LCs issued in the arrearage schedule of HUA YI CO. exceed the allotted time of 90 days agreed in the agreement, on the ground that extending period occurred in the LC business and the sum of money advanced for others did not exceed the guaranteed sum of scope of CAC; thus, the said plea of CAC cannot be obtained and CAC cannot avoid the guarantee liability.       

    By reason of the forgoing, based on Article 13 and Article 18 of LAW OF THE PEOPLE??S REPUBLIC OF CHINA ON SEQURITY, this court now judges as follows:   

    CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. shall bear joint and several repaying liabilities on the debs of $1,162,566.13USD and $435,843,287WON HUA YI CO. still owes CHINA BANK, SEOUL BRANCH, within seven days after the present judgment takes effect (if repays in RMB, the repayment shall be converted according to the foreign exchange qutoeprice published by China Bank on the same day).  

Fees for accepting and hearing the case are 71,099RMB, which are paid by CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. (within seven days after the present judgment takes effect). 

    If any party takes exception to the judgment, CHINA BANK, SEOUL      BRANCH can submit an appeal within 30 days after the service day of the Judgment to this court and CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. an submit an appeal within 15 days after the service day of the Judgment to this court, in addition, any party submits the appeal shall provide the copies according to the number of people in the other party and pay the fees of accepting the appealed case, 71,099RMB (Opening Bank: Industry and Commercial Bank of China, Dong Tie Yin Small Local Branch, Account No.: 0200000409014420281, Payee: The Second Intermediate People??s Court of Beijing), the appeal goes to the High People??s Court of Beijing. Seven days after the mature appeal term, the appellant still not paying the fees of accepting the case yet shall be handled as withdraw the appeal automatically.  



                           

								                                    Chief Judge     	SHEN XIAO QI 

????????????????????????????           Deputy Judge    	ZHANG RU 

????????????????????????????           Deputy Judge    	CAO XIN


                    

                                         September 20th, 2002


                                        Court Clark    CHENG HUI PING