[1] The meaning of a financing bill, the defense of the issuer of the financing bill, and whether the delivery of a financing bill requires the discount of the bill constitutes a financing bill in bad faith to the third party who received the bill (negative)

[2] Whether the holder of a bill can enjoy the benefit of personal defense cutting even in a case where the holder of the bill loses a legitimate title to possess the bill because of the lack of a causal relationship with his/her endorsement, and there is no economic benefit to seek payment of the bill (negative)

[3] In a case where Eul corporation, upon Eul's request, issued a promissory note to be used in discount of discount of bills, promised to return the promissory note to Gap corporation, and subsequently endorsed and transferred the said note at Gap corporation's request to pay the discount of bills, and Byung also endorsed and transferred the said note at Gap corporation's request to pay the discount of bills without the refund of the bill, and as Gap corporation offered payment of the above bill as the holder of the bill, Gap corporation refused to pay the bill, the case affirming the judgment of the court below that the above bill was merely a bill issued without any cause, but the court below rejected Gap's defense, and thereby rejected Gap corporation's claim for the amount of the bill

[1] A financing bill refers to a bill which is received by another person for the purpose of having a third party obtain a financing by a bill. The issuer of a financing bill shall not set up against the third party who has received the bill from the beneficiary, in good faith or bad faith, or even if the acquisition was made by endorsement after the due date, as a defense that the bill is issued without compensation, but shall not be liable to the beneficiary. Whether a certain bill constitutes a financing bill shall be determined based on specific facts, rather than on the parties' arguments. Meanwhile, if the issuer or endorser of the bill delivered the bill at the request of a discount, it shall be limited to the bill issued without any cause, and it shall not be deemed a so-called financing bill which does not recognize a defense of bad faith.

[2] In principle, a person who received a claim under a bill cannot set up against the holder defenses arising from his personal relations with the previous holder. However, the purpose of the law that limits his personal defense is to protect the interests of the purchaser of the bill for the safety of the transaction of the bill, so in a case where the holder of the bill loses a legitimate title to hold the bill, and there is no economic benefit to seek payment of the bill, it shall be deemed that the person is not in the position of enjoying the benefit of personal defense.

[3] In a case where Eul corporation, upon Eul's request, issued a promissory note to be used in discount of discount of bills, promised to return the promissory note to Gap corporation, and subsequently endorsed and transferred the said note to Byung corporation, Eul corporation also refused to return the bill, and Byung also endorsed and transferred the bill to Byung corporation upon Gap's request for refund of the bill, and Gap corporation refused to pay the bill as the holder of the bill, the case affirming the judgment of the court below that Gap corporation's original issuance of the bill was merely a promissory note issued without any relationship with the first time, although Eul corporation's original issuance of the bill was made for the purpose of getting a third party to obtain a financial transaction by receiving the discount of the bill, Eul corporation's original issuance of the bill, and Eul corporation's issuance of the bill was merely a promissory note without any cause, and as long as Byung did not have any economic interest in claiming payment of the bill, Eul corporation's refusal to pay the above bill can be viewed as Gap corporation's refusal to pay the bill.

[1] Article 17 of the Bills of Exchange and Promissory Notes Act / [2] Article 17 of the Bills of Exchange and Promissory Notes Act

[1] Supreme Court Decision 96Da3449 delivered on May 14, 1996 (Gong1996Ha, 1852), Supreme Court Decision 2001Da28176 delivered on August 24, 2001 (Gong2001Ha, 2068) / [2] Supreme Court Decision 2002Da46508 Delivered on January 10, 2003 (Gong2003Sang, 625)

Gangnam Construction Co., Ltd. (Law Firm Chungcheong, Attorneys Lee Woo-dong et al., Counsel for the defendant-appellant)

American Metal Co., Ltd. (Attorney Song-ho, Counsel for the defendant-appellant)

Seoul Southern District Court Decision 201Na6286 decided June 7, 2012

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

A financing bill means a bill which is given and received by another person for the purpose of having a third party obtain a financing from a third party by a bill. The issuer of a financing bill shall not set up against the third party who received the bill in good faith or bad faith, or even if its acquisition was made by endorsement after the due date, as a defense that the bill is issued without compensation, but shall not be held liable for the lender. Whether a bill constitutes a financing bill shall not be based solely on the parties' assertion, but shall be determined based on specific facts and facts. Meanwhile, if the issuer or endorser of the bill delivered the bill at the request of a discount, it shall be limited to the bill issued without any cause, and shall not be deemed a so-called financing bill which does not recognize a defense of bad faith (see, e.g., Supreme Court Decisions 96Da3449, May 14, 1996; 201Da28176, Aug. 24, 2001).

In addition, in principle, a person claimed by a bill cannot set up against the previous holder defenses arising from his personal relations with the previous holder. However, the purport of the law that limits his personal defense is to protect the interests of the purchaser of the bill for the safety of the transaction of the bill. Therefore, in a case where the holder of the bill loses the legitimate title to hold the bill, and there is no economic benefit to seek payment of the bill, it shall be deemed that he does not have the status of enjoying the benefit of personal defense (see Supreme Court Decision 2002Da46508 delivered on January 10, 2003).

The court below rejected the Plaintiff’s rejection of the payment of the Promissory Notes, etc. on September 4, 2007, on the ground that: (a) the General Embryptian Construction Co., Ltd. (hereinafter “Tisung Construction”) requested the Defendant to issue the Promissory Notes to be used at the discount of the Promissory Notes for the purpose of raising the funds for the New Embrypt Construction Co., Ltd. on two parcels of land (hereinafter omitted); (b) the Taesung Construction promised to return the Promissory Notes to the Defendant on September 20, 2007, when the Promissory Notes was not discounted; (c) since Taesung Construction was not at the discount of the Promissory Notes, the Plaintiff merely issued and transferred the Promissory Notes to the Plaintiff on the ground that it did not receive the Promissory Notes on September 27, 2007, on the ground that it did not constitute an independent payment of the Promissory Notes.

Examining the facts acknowledged by the court below in light of the aforementioned legal principles and records, the defendant issued the Promissory Notes in this case for the purpose of getting a financial transaction by discounting the Promissory Notes from a third party. Thus, the court below erred in finding the Promissory Notes as a financing bill. Therefore, the court below erred in holding that the Promissory Notes in this case were merely a promissory Notes issued from the beginning point of view. However, from the Taesung Construction, the Yellow Industries did not have any economic interest in getting a promissory Notes in seeking the payment of the Promissory Notes, and the plaintiff did not have any economic interest in seeking the payment of the Promissory Notes. Therefore, it is just to accept the defendant's defense and reject the plaintiff's claim for the Promissory Notes in this case. Accordingly, it is not erroneous in the misapprehension of the legal principles as to the presumption of rights granted by the Bills of Exchange and Promissory Notes Act, the presumption of the existence of rights granted by the Bills of Exchange and Promissory Notes Act, and the legal principles as to the Promissory Notes

On the other hand, the court below did not accept the plaintiff's defense and rejected the plaintiff's claim for the Promissory Notes. Thus, we cannot accept the allegation in the ground of appeal that the court below erred in the misapprehension of legal principles as to "deficient defense" under the Bill

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Yong-deok (Presiding Justice)