[1] In a case where a financial institution provides a loan to female employees of an entertainment establishment under the joint guarantee of an entertainment business owner, etc., the case holding that the loan agreement is null and void since it violated Article 20 and Article 4 subparagraph 3 of the former Prevention of Prostitution, etc. Act, and the joint and several guarantee agreement on it is also null and void in accordance with the principle of non-performance of guaranteed obligation

[2] In a case where a financial institution’s loan granted to its employees under the joint and several guarantee of an entertainment business owner, etc. was invalidated in violation of the former Act on the Prevention of Prostitution, etc., the case holding that the financial institution’s illegality of a financial institution which offered a loan can not be seen as significantly less than the illegality of an entertainment business owner’s entertainment business owner, which is the actual beneficiary of the above loan, and thus, the financial institution cannot seek a return of unjust enrichment against its employees

[1] In a case where a financial institution provides a loan to the female employees of an entertainment business establishment under the joint and several guarantee of an entertainment business owner, etc., the case holding that the loan agreement is null and void in violation of Article 20 and Article 4 subparagraph 3 of the former Act on the Prevention of Prostitution, etc. (repealed by Article 2 of the Addenda to the Act on the Punishment of Acts of Arranging Sexual Traffic, Etc., Act No. 7196 of March 22, 2004), and the joint and several guarantee agreement between an entertainment business owner, etc. is also null and void in accordance with the principle of non-performance of guaranteed obligation, on the grounds that the financial institution is aware of the fact that the loan is used for the purpose of advance payment, and that the above business owner, etc., knowingly knowingly knowingly, provided a loan to the female employees with the aim of collecting high interest on the loan.

[2] In a case where a financial institution’s loan extended to the female employees of an entertainment establishment under the joint and several guarantee of an entertainment establishment owner, etc. was invalidated in violation of the former Act on the Prevention of Prostitution, etc. (repealed by Article 2 of the Addenda of the Act on the Punishment of Acts of Arranging Sexual Traffic, Etc., Act No. 7196, Mar. 22, 2004), the case holding that a financial institution’s illegality of a financial institution which provided a loan for the purpose of receiving high interest payment cannot be deemed to be significantly less than the illegality of the above loan’s business owner’s actual beneficiary, and the financial institution cannot seek a return of unjust enrichment from the said employer

[1] Article 4 subparagraph 3 (see current Article 4 subparagraph 2 of the Act on the Punishment of Acts of Arranging Sexual Traffic, Etc.), Article 20 (see current Article 10 (1) of the Act on the Punishment of Acts of Arranging Sexual Traffic), Article 4 subparagraph 3 (see current Article 4 subparagraph 2 of the Act on the Punishment of Acts of Arranging Sexual Traffic, Etc.), Article 430 of the Civil Act / [2] Article 4 subparagraph 3 (see current Article 2 subparagraph 2 of the Act on the Punishment of Acts of Arranging Sexual Traffic, etc., Act No. 7196 of March 22, 2004), Article 20 (see current Article 10 (1) of the Act on the Punishment of Acts of Arranging Sexual Traffic, Etc.), Articles 741 and 746 (1) of the Civil Act

The Liquidation Corporation (Attorney Lee Jin-jin, Counsel for defendant-appellant)

Defendant 1 and three others (Attorneys Noh Jeong-soo et al., Counsel for the defendant-appellant)

April 11, 2008

1. The plaintiff's claims against the defendants are all dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The defendants jointly and severally pay to the plaintiff 39,656,39 won and 26,00,000 won with 60% interest per annum from July 4, 2006 to the day of full payment.

1. Basic facts

A. The Ulsan Credit Union (hereinafter “Ulsan Credit Union”) on September 27, 2002 loaned KRW 26,00,000 to Defendant 1 on March 27, 2003 at the maturity of payment, the interest rate of KRW 30% per annum, and the interest rate of delayed damage rate of KRW 60 per annum. Defendant 2, 3, and 4 jointly and severally guaranteed Defendant 1’s obligations for the above loans. As of July 3, 2006, the balance of the above principal and interest amount of KRW 39,656,339 (26,00,000 + interest of KRW 13,656,339).

B. The Ulsan National University was declared bankrupt by the Ulsan District Court on May 14, 2003. On July 3, 2006, the plaintiff transferred the claims as set forth in the above A to the defendants from the Ulsan National University Bankruptcy Trustee on July 3, 2006, and completed the notification of the transfer of claims to the defendants on August 8, 2006.

[Reasons for Recognition] Each entry of Gap 1 to 3

2. The parties' assertion and judgment

A. Determination on the cause of the claim

According to the above facts, the defendants are obligated to pay 39,656,339 won in the balance of the principal and interest of the above 1. A. and damages for delay, unless there are special circumstances.

B. Determination as to the defendants' defense

(1) Summary of the defendants' defense

The defendants asserts that the loan of this case is for the payment of prepaid money related to Defendant 1's act of prostitution, and the Ulsan National Federation also concluded the loan of this case with knowledge of such circumstances. Thus, the above loan of this case is null and void in accordance with Article 20 of the former Prevention of Prostitution, etc. Act (amended by Act No. 7196 of March 22, 2004).

(2) Facts of recognition

The following facts are acknowledged in full view of the statements in Eul 1 to 3 and the results of defendant 1's personal examination of the parties concerned:

(A) On February 5, 2002, the Ulsan National University decided on February 5, 2002 to implement a high interest rate loan to the entertainment tavern business owners and female employees with limited loans, and on April 30, 2002, the Ulsan National University enacted a commercial loan implementation rule in addition to the credit regulations implemented on April 30, 202.

(B) According to the above commercial loan implementation regulations, the credit limit limit under the existing loan regulations increased from 20,000 to 50,000 won, and the guarantor changed from 3 or more persons who have attached a certified copy of the register or a certificate of employment to 1 to 2,00 won, and the number of joint and several sureties permitted only 3 times, and the loan examination was changed to 20,000 won.

(C) On the other hand, Defendant 1 served as female employees at the 000 entertainment tavern located in Ulsan-gu, Nam-gu, U.S. and operated by Defendant 4, and was to receive advance payment from Defendant 4.

(D) Defendant 4 received a loan from the Ulsan National University and shall pay the advance payment to Defendant 1. Defendant 1 and Defendant 2 and 3, who found Kim Tae-young at the time, worked for Defendant 1 and other employees working for the Ulsan National Assembly, requested the loan to him. Kim Tae-young, in the loan consultation book, requested Defendant 1 to “○○”, “employee”, “debt repayment in the loan use”, and “employee 2’s work place”, “△△△△,” “employee 3 and 4’s work place”, and “employee 2 and 3’s position”, respectively, written in Defendant 4’s position “representative,” and written in Defendant 1, 2 and 3’s position “Defendant 4’s position,” and written in Defendant 1, 2 and 3’s position “It should be detached to the effect that Defendant 4 gave a loan, making a collateral loan, and making a guarantee loan for Defendant 4.”

(E) While running ○○○ entertainment tavern, Defendant 4 mediated the act of having a contact with customers, including Defendant 1, as the second place of business, receive money in return, etc. In this regard, Defendant 4 was sentenced to a fine of KRW 1,000,000 on January 14, 2005 as the Ulsan District Court No. 2005 high-class 98 on January 14, 2005, with respect to the act of arranging the act of prostitution to the aged-in-law, fright, and fright, etc.

(F) The Ulsan National Assembly carried out 16 loans (a total of KRW 474,00,000), including loans to Defendant 1, to employees working for the ○○ entertainment drinking club (a total of KRW 474,00,000). Despite having been pointed out that such loans were corrected for employees of entertainment drinking clubs in the audit by the National Federation, the Ulsan National Assembly suffered losses of KRW 14.258,00,000 during the period from January 5, 2002 to November 1, 2002 by 433 employees of the Ulsan-do entertainment business establishments without taking a claim preservation measure against the employees.

(3) Determination

Article 4 Subparag. 3 of the former Prevention of Prostitution, etc. Act (amended by Act No. 7196 of Mar. 22, 2004) prohibits “act of soliciting, inducing, mediating, arranging, or compelling the other party to do so, or soliciting, inducing, arranging, or compelling the other party to do so.” Article 20 of the same Act provides that “The claim against a person who commits an act under subparagraphs 3 through 5 of Article 4 of the same Act for profit-making purposes or who cooperates with him/her against a person who has a business relation with him/her shall be invalidated regardless of the form of the contract.”

In this case, the Ulsan Magsan had carried out the instant loan to Defendant 1 for the purpose of receiving high interest upon being aware that Defendant 1 had worked in an entertainment tavern and used the instant loan for the purpose of advance payment, and the fact that Defendant 4 offered a total of 16 loans only in the 000 entertainment tavern as seen earlier. Moreover, the Ulsan Magsan was well aware of the business form of the 00 entertainment tavern in the process of carrying out several loans for the employees of the 00 entertainment tavern. In light of the fact that in common, in order for Defendant 1 to repay a loan amounting to 30% per annum and 60% of delayed damage rate, the Ulsan Magsan was able to sufficiently write down the circumstances that the employees of the entertainment tavern did not engage in so-called second-lane acts in order to pay a loan amounting to 60% of delayed damage rate, and thus, the Ulsan Magsan Magsan was able to receive the interest of Defendant 4 through cooperation with Defendant 4 with the purpose of having been repaid the interest.

Therefore, the loans and the damages for delay that Ulsan Trade Union has against Defendant 1 are null and void as they violate Article 20 and Article 4 subparag. 3 of the former Act on Prevention of Prostitution, etc., and the remainder of the joint and several guarantee claims against the Defendants are null and void in accordance with the principle of subsidiary nature of the guaranteed obligation. Thus, the defendants' defense is justified.

C. Judgment on the plaintiff's conjunctive assertion against the defendant 4

The Plaintiff asserts to the effect that even if the instant loan is deemed null and void as it is in violation of the former Act on the Prevention of Prostitution, etc., Defendant 4 is the actual beneficiary of the instant loan as an entertainment drinking club business, and Defendant 4’s illegality in Defendant 1’s act of prostitution is considerably large, while Defendant 4’s consultation on illegal consideration is weak, and thus, Defendant 4 is excluded from the application of Article 746 of the Civil Act regarding illegal consideration and thus, Defendant 4 should return the amount equivalent to the principal and interest of the loan to the Plaintiff as unjust enrichment.

Therefore, even if Defendant 4 is the actual beneficiary of the instant loan, so long as the instant loan is null and void as it violates the former Act on Prevention of Prostitution, etc., according to Article 746 of the Civil Act, it is in principle impossible for the provider to seek the return of illegal consideration (Supreme Court Decisions 98Do2036 delivered on September 17, 199; 2004Da27488, 27495 delivered on September 3, 2004). However, since the illegality of the beneficiary is considerably larger than that of the provider, the Ulsan 4 was aware of the fact that Defendant 1 assisted the payment of interest for the purpose of profit-making, and thus, it cannot be seen that the payment of interest was made in advance for the purpose of promoting the payment of interest. As seen earlier, Defendant 4 actively paid to Defendant 4 for the purpose of assisting the payment of interest.

Therefore, the plaintiff's conjunctive assertion is without merit.

3. Conclusion

Therefore, all of the plaintiff's claims against the defendants are dismissed as it is without merit. It is so decided as per Disposition.

Judges Cho Jae-young