Keywords: Financial Loans, Unjust Enrichment, Characterization of Support Fees and Interest Subsidies, Modification of Contract through Actual Performance, Second Instance Reversal and Remand for Retrial, Bank Sued, Turning Defeat into Victory
Zhenghan Law Firm, acting as counsel, provided litigation legal services for a series of lawsuits against a listed joint-stock bank. In this case, the firm was retained after the bank lost the first instance trial. By deeply investigating the facts and restructuring the litigation logic, the firm successfully led the second instance court to determine that the first instance facts were unclear and the procedures were illegal. The court revoked the original judgment and remanded the case for retrial. In another related case, the plaintiff voluntarily withdrew the lawsuit under pressure; subsequently, the plaintiff ultimately abandoned the lawsuit and made a written commitment. Both cases in the series were dismissed, the bank’s liability for compensation was discharged, and the subsequent systemic risks of the business involved were eliminated.
Case Background
At its inception, a branch of a commercial bank signed two “Fixed Asset Loan Contracts” with a real estate development company that was developing a project. They also signed a “Supplementary Corporate Credit Agreement,” stipulating that the borrower could enjoy a preferential interest rate of approximately 8% per annum if they maintained a certain average daily deposit; otherwise, the interest rate would be increased. During performance, the borrower found it difficult to meet the deposit requirements. Consequently, both parties performed through flexible methods such as the bank introducing deposit parties for interest subsidies and related-party trust deposits and loans. The total amount collected by the bank for the 100 million yuan financing, including various items, amounted to an annual interest rate of approximately 10%. Years later, the real estate development company claimed that the bank had collected funds in addition to loan interest under the names of “support fees” and interest subsidies, constituting unjust enrichment. They filed lawsuits in two different courts to confirm the invalidity of the loan contracts and for the return of unjust enrichment, requesting the bank to return the relevant funds and compensate for the loss of use of funds. In one of the cases, the first instance judgment determined that the “support fees” claimed by the plaintiff constituted unjust enrichment by the bank. The bank lost the first instance trial and subsequently commissioned Zhenghan Law Firm to intervene in the second instance.
Key Points and Difficulties
The difficulty of this case lay in the fact that the bank collected funds beyond the agreed loan interest through atypical methods such as “interest subsidies for introduced deposits” and “related-party trust deposits and loans.” On the surface, this could easily be identified as “disguised charges beyond interest without providing corresponding services,” thus constituting unjust enrichment. Furthermore, the transactions spanned many years, vouchers were scattered, and the flow of funds involved multiple related entities and regulatory passbooks, making the factual sorting complex. The key to reversing the first instance defeat was how to restore the legal nature of various funds as “financing interest,” demonstrate that they were the result of a consensus between the parties to modify the supplementary agreement through actual performance without exceeding the statutory interest rate cap, and supplement this with a statute of limitations defense.
Case Highlights
The legal team from Zhenghan Law Firm looked through the appearance of the transactions and reconstructed the nature of the funds. Using the loan contracts, supplementary agreements, extension documents, and the actual performance process as a chain, they argued that the “support fees” and interest subsidies were essentially interest arrangements for the 100 million yuan financing. The agreed-upon increased interest rate itself was consistent with the market level for development loans at that time. This case did not involve an increase in interest collection; rather, it was a preferential interest rate reduction agreed upon by both parties under specific conditions. Furthermore, the subsequent agreement on “average daily deposits” was modified through negotiation by way of actual performance (citing Articles 490 and 543 of the Civil Code and relevant precedents of the Supreme People’s Court). The total amount, equivalent to an annual interest rate of only about 10%, was far below the judicial protection cap of 24%, meaning there was no “unjust enrichment without legal basis.” At the same time, they argued that the other party’s claim had exceeded the three-year statute of limitations and pointed out that the first instance court’s failure to review the statute of limitations constituted a procedural violation, creating a dual breakthrough in both substance and procedure.
Key Points of the Judgment
The second instance court adopted the counsel’s opinion, ruling that the first instance judgment’s determination regarding the bank’s unjust enrichment and the amount of “support fees” was based on unclear facts. Furthermore, the failure to review the statute of limitations issue was a procedural violation. Accordingly, the court revoked the first instance judgment and remanded the case for retrial. Subsequently, the plaintiff in another related unjust enrichment case voluntarily applied to withdraw the lawsuit, which was granted. During the remand process, the two parties reached an out-of-court settlement. The real estate development company withdrew all lawsuits on the grounds of settlement, bringing the dispute to a complete end. The subsequent potential systemic risks of the bank’s business involved were also eliminated.
Case Insights
When financial institutions collect funds through atypical methods such as interest subsidies and support arrangements in addition to loan interest, they are highly susceptible to being sued for “disguised charges constituting unjust enrichment.” This case demonstrates that as long as the relevant funds can be restored to the legal nature of financing interest, represent the true consensus of both parties, modify the contract through actual performance, and the comprehensive interest rate does not exceed the judicial protection cap, they should still be protected by law. At the same time, the statute of limitations and procedural legality review are also powerful defenses that cannot be ignored in financial loan disputes. This case also provides an example for banks to properly resolve historical disputes through second instance error correction combined with out-of-court settlements.
