[1] Whether exemption of an obligation can be recognized by the interpretation of an obligee’s act or expression of intent (affirmative), and the method of determining such exemption

[2] In a case where the interest rate is considerably high, beyond the limit permitted by social norms, due to a difference in economic power between the parties to a monetary loan contract, the validity of an agreement on interest (negative)

[3] Whether the borrower may demand the lender to return the interest that the lender voluntarily paid on the ground of an invalid part of the interest agreement in violation of good morals and other social order (affirmative)

[1] The exemption of an obligation does not necessarily necessarily require an express expression of intent, and it should be recognized in cases where it can be seen as a exemption of an obligation through the interpretation of an obligee’s act or expression of intent. However, for such recognition, the application of an obligation must be determined by strict interpretation of an obligee’s act or expression of intent in accordance with the content of the pertinent legal relationship.

[2] In a case where an agreement is made with a monetary loan agreement, if the interest rate was set significantly high, beyond the limit permitted by social norms, due to a difference in economic power between the parties, due to the difference in economic power, in light of the economic and social conditions at the time, the agreement on interest that exceeds the permissible limit is null and void as a juristic act whose content is contrary to good customs and other social order, since the lender gains unjust profits by taking advantage of his superior position and the borrower bears an excessive and unfair burden on the borrower.

[3] [Majority Opinion] The borrower’s arbitrary payment of interest to the lender on grounds of an agreement that is null and void in violation of good morals and other social order can be deemed as a payment of property arising from an illegal cause in ordinary. However, in the case of illegal consideration, if the illegal cause exists only in the beneficiary, or if the illegality of the beneficiary is significantly larger than that of the payer, and thus, the payer does not allow the payer to claim the return, the payer’s claim for return is allowed. Thus, the lender’s payment of interest that exceeds the limits permitted by social norms is permitted. Thus, the lender’s payment of interest agreed on the interest rate that exceeds the limits permitted by social norms, taking advantage of his superior position, obtains unjust profits, and the borrower bears an excessive or other unfair burden, and the lender is only liable to the lender, who is the beneficiary, or at least the illegal cause of the lender is significantly larger than the illegality

[Dissenting Opinion by Justice Shin Hyun-chul, Justice Kim Hwang-sik, Justice Park Il-young, and Justice Ahn Dai-hee] Even though an agreement on interest exceeding the limit permitted by social norms can be deemed null and void as a juristic act in violation of Article 103 of the Civil Act under certain conditions, the limit permitted by social norms can only be flexible according to changes in economic and social conditions at the time of the agreement, and the specific scope can only be determined only if legal evaluation or value judgment is involved, so it is difficult to deem that the lender has predictability as to the criteria for invalidation and the scope thereof. Therefore, even if the lender has received interest exceeding the appropriate interest rate from the lender, it is difficult to deem that the lender clearly recognizes the illegality even if the agreement on interest exceeding the appropriate interest rate violates Article 103 of the Civil Act and is null and void, it is difficult to view that the illegal cause exists both of the lender and the borrower. In light of the fact that the lender clearly recognizes the illegality of the lender, even if the lender is more economical than the lender, it is difficult to readily conclude that the borrower has already been paid the interest.

[1] Articles 105 and 506 of the Civil Act / [2] Article 103 of the Civil Act / [3] Articles 103 and 746 of the Civil Act

[1] Supreme Court Decision 86Meu1907, 1908 delivered on March 24, 1987 (Gong1987, 720) / [3] Supreme Court Decision 93Da12947 delivered on December 10, 1993 (Gong1994Sang, 345) Supreme Court Decision 95Da49530, 49547 delivered on October 24, 1997 (Gong1997Ha, 3570) Supreme Court Decision 98Do2036 delivered on September 17, 199 (Gong199Ha, 2267)

Plaintiff (Attorney Hong Hong-han et al., Counsel for the plaintiff-appellant)

Defendant 1 and one other

Seoul Central District Court Decision 2003Na56006 Delivered on August 5, 2004

The part of the judgment below against the Defendants is reversed, and that part of the case is remanded to Seoul Central District Court Panel Division.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The exemption of an obligation does not necessarily require an explicit declaration of intent, and it should be recognized in cases where it can be seen as a exemption of an obligation by a creditor’s act or expression of intent. However, for such recognition, the application of the exemption must be determined by strict interpretation of an obligee’s act or expression of intent in accordance with the content of the pertinent legal relationship (see Supreme Court Decision 86Meu1907, 1908, Mar. 24, 1987, etc.).

The court below held that on March 29, 2001, the defendants could not be deemed to have discharged all of the defendants' obligations in return for the defendants' failure to report the corporation (name omitted) to the National Tax Service as alleged by the defendants on the ground that the plaintiff, on May 14, 2001, executed a provisional attachment on the real estate owned by defendant 1 as the right to be preserved, but cancelled the provisional attachment on May 14, 2001, and that on June 8, 2001, defendant 2 received a mail from the National Tax Service that "the details of the obligations to the corporation (name omitted) for which the plaintiff is a director" were stated by the National Tax Service. The court below is just in light of the above legal principles, and there is no error of law by misapprehending the legal principles as to exemption from the obligation, which affected the conclusion of the judgment, and any assertion disputing evidence preparation and fact-finding by

2. Regarding ground of appeal No. 2

A. In a case where an agreement is made with a monetary loan agreement, if the interest rate was set significantly high, beyond the limit permitted by social norms, due to a difference in economic power between the parties, due to the difference in economic power, in light of the economic and social conditions at the time, the agreement on interest exceeding the permissible limit is null and void as a juristic act whose content is contrary to good morals and other social order, since the lender gains unjust profits by taking advantage of his superior position and the borrower bears an excessive and unfair burden on the borrower.

As can be seen, the borrower's arbitrary payment of interest to the lender on the ground of an invalid interest agreement in violation of good customs and other social order can be deemed as the payment of property arising from an illegal cause. However, in the case of illegal consideration, if the illegal cause exists only to the beneficiary, or if the illegality of the beneficiary is significantly larger than that of the payer, and thus, the payer's claim for return is contrary to the good faith and good faith principle, the payer's claim for return is allowed (see Supreme Court Decision 93Da12947 delivered on December 10, 1993, etc.). Thus, it is reasonable to view that the lender who agreed to pay interest exceeding the limit permitted by social norms is entitled to receive unfair benefit by taking advantage of his superior position and the borrower bears excessive or other unfair burden, and thus, the illegal cause is limited to the lender who is the beneficiary, or at least the illegality of the lender is significantly larger than that of the borrower, and thus, the borrower may claim for the return of such interest.

B. Nevertheless, the court below erred in the misapprehension of legal principles as to unjust enrichment due to the payment of interest agreed upon at a high rate and the return of illegal consideration as a result of misunderstanding the legal principles as to the return of unjust enrichment and the return of illegal consideration, which affected the conclusion of the judgment by failing to determine the grounds for invalidation. The grounds for appeal pointing this out are with merit, and therefore, we accept this conclusion.

3. Conclusion

Therefore, the part of the lower judgment against the Defendants is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices, except for a dissenting opinion by Justice Shin Hyun-chul, Justice Kim Hwang-sik, Justice Park Il-young, and Justice Ahn Dai-hee as to the judgment on the second ground of appeal.

4. Dissenting Opinion expressed by Justice Ko Hyun-chul, Justice Kim Hwang-sik, Justice Park Ill-sook and Justice Ahn Dai-hee is as follows.

A. The majority opinion states that, in a case where an agreement is made with a monetary loan agreement, if the interest rate was set significantly high, due to a difference in economic power between the parties, the agreement on the interest in excess of the limit is null and void as a juristic act with any content contrary to good morals and other social order, and even if the borrower paid the interest in excess of the limit at will, it shall be deemed that the illegality exists only to the lender or that at least the illegality of the lender is significantly larger than the illegality of the borrower. Thus, the borrower's claim for return should be allowed.

B. However, we cannot agree with the majority opinion that the borrower can seek the return of the interest paid at will for the following reasons.

(1) The majority opinion pointed out that an agreement on interest exceeding the limit permitted by social norms may be deemed null and void as a juristic act in violation of Article 103 of the Civil Act under certain conditions, in light of the economic and social conditions at the time of the agreement on a loan for consumption of money, or the economic status of the parties. However, the limit permitted by social norms is flexible depending on changes in economic and social conditions at the time of the agreement, and the specific scope can only be determined only when legal assessment or value judgment should be involved, so the parties cannot clearly recognize the criteria and the scope of invalidation.

In the past, although the scope of interest agreements that are null and void by the Interest Limitation Act can be clearly recognized, the interest rate decision between the parties is no longer possible as it was repealed by the Interest Limitation Act on January 13, 1998, and the majority opinion does not present the standards and scope that are specifically null and void. The court below understand that the interest rate under the Act on the Registration of Credit Business and the Protection of Finance Users, which was enforced after the loan of this case, is null and void by taking into account the limited interest rate under the Act on the Registration of Credit Business and the Protection of Finance Users, but it cannot be an absolute standard, and furthermore, the appropriate interest rate that can be allowed by social norms (hereinafter referred to as "reasonable interest rate") is not an issue of determining solely on the basis of the interest rate, but rather on the basis of comprehensive consideration of the economic and social conditions at the time, the economic status of the parties, and the circumstances leading to the loan for consumption. Thus, it cannot be said to be reasonable to determine the appropriateness of the interest rate solely under the current situation where the Interest Limitation Act was repealed.

Ultimately, even if a high interest rate agreement can be deemed null and void in certain cases, it is difficult to view that the lender has predictability as to the extent of the standard and scope of invalidation, i.e., the interest agreement becomes null and void within a certain scope, and the interest that the lender would not receive. Therefore, even if the lender received interest exceeding the appropriate interest rate from the borrower, it is difficult to say that the lender has clearly recognized the illegality.

(2) The majority opinion states that the interest paid by the borrower in excess of the appropriate interest rate may be deemed to constitute illegal consideration, but the illegality is only limited to the lender or the illegality of the lender is considerably large compared to the illegality of the borrower, so the borrower's claim for return shall be allowed.

However, even if an agreement on interest exceeding the appropriate interest rate is in violation of Article 103 of the Civil Code and null and void, so long as the interest has been paid pursuant to the agreement between the parties, the illegal cause is deemed to exist both of the lender and the borrower. In general, even considering the fact that the borrower is in an economically poor position than the lender, it is difficult for the lender to clearly recognize the illegality of the lender as seen earlier, it is difficult to uniformly conclude that the illegality of the lender is significantly larger than that of the borrower.

In particular, in the case of this case, if the borrower or the guarantor's credit of the borrower and the guarantor are lent money as collateral without any physical collateral in making a transaction between financial institutions, it is general to demand the lender to pay high interest in return for the borrower's bankruptcy, escape, death, etc., and on the other hand, the borrower should bear high interest rate than when he receives a loan from a financial institution. However, if he does not bear such a burden, even if he does not bear any other means of financing, he would be economically favorable if he bears a certain high interest rate, it is judged that it is economically favorable. As such, it is appropriate to see that the lender has a high risk burden on the part of the lender, instead of raising high interest, and that it is possible to see that the monetary transaction takes place due to the economic needs of the borrower.

With respect to a matter in which the Interest Limitation Act was applied in the past, the Supreme Court held that if interest exceeding the interest rate set forth in the Interest Limitation Act was paid voluntarily, it constitutes illegal consideration and that the illegal cause is not a claim for the return of the interest paid to both the lender and the borrower (see, e.g., Supreme Court Decisions 4293Da617, Jul. 20, 1961; 87Da422, 423, Sept. 27, 198; 94Da20952, Aug. 26, 1994). Rather, it is difficult to interpret that emphasizing the illegality of the lender is inconsistent with the principle of balance in the present situation where the clear invalidation becomes void.

If the borrower grants the borrower's claim for return in a situation where the transaction has already been terminated by paying interest arbitrarily, it may be likely to undermine legal stability.

(3) Ultimately, if the borrower voluntarily pays interest exceeding the appropriate interest rate, it is difficult to deem that there is an illegality only to the lender, or that the illegality of the lender is significantly larger than that of the borrower, and therefore, it is reasonable to deem that the claim for the repayment of the borrower is not permissible pursuant to the main sentence of Article 746 of the Civil Act.

C. In the same purport, the court below's rejection of the defendants' assertion of offset is just and acceptable, and there is no error in the misapprehension of legal principles as to return of unjust enrichment, as otherwise alleged in the grounds of appeal, it is reasonable to dismiss the appeal.

Chief Justice Lee Yong-chul (Presiding Justice)