Seoul High Court Decision 201Na14146 decided May 1, 201

Audio, Inc. and one other (Law Firm Sami General Law Office, Attorneys Lee Dong-ok, Counsel for the plaintiff-appellant)

March 12, 2009

1. The Defendants jointly and severally pay to the Plaintiff 1,679,417,847 won and 23% interest per annum from October 1, 2006 to the date of full payment.

2. The costs of lawsuit are assessed against the Defendants.

3. Paragraph 1 can be provisionally executed.

The same shall apply to the order.

1. Facts of recognition;

【Evidence A1 through 4, the purport of the whole pleadings】

A. On June 30, 2005, the Korea Venture Savings Bank concluded a credit transaction agreement with the defendant company to lend 1.68 billion won as general funds to the defendant company at an annual interest rate of 12% per annum, 23% per annum, 23% per annum, and due date of payment on June 30, 2006 (hereinafter “the instant credit transaction agreement” in the following, and the loans accrued therefrom are jointly and severally guaranteed by the defendant company’s representative director at the time.

B. Accordingly, on June 30, 2005, the Korea Venture Savings Bank deposited KRW 972,043,005, which remains after deducting the aggregate of KRW 707,956,995 from stamp fees, handling fees, interest on a year-minuteed line, etc. from KRW 1.680,000,000, in the first bank account (Account Number omitted) in the name of the Defendant Company.

C. On June 30, 2006, the Grand Savings Bank extended the repayment date of the instant loan to the Defendant Company by the end of August 30, 2006.

D. The debt of the instant loan was paid with interest from KRW 582,153 to September 29, 2006 and interest from KRW 1,679,417,847 (=1680,582,153) to the principal and interest from September 30, 2006.

E. On May 25, 2007, pursuant to Article 14(2) of the former Act on the Structural Improvement of the Financial Industry (amended by Act No. 8635 of Aug. 3, 2007) and Article 48-6 of the Regulations on the Supervision of Mutual Savings Banks, the Financial Supervisory Commission made a decision to transfer a contract to the Plaintiff to the Plaintiff, including the claim for the loan to the Defendant Company, which constitutes an issue of collection and estimated loss, assets equivalent to an asset equivalent to the collection and estimated loss, and related security rights, etc., and announced the summary of the decision to transfer a contract and the fact of the transfer of a contract through a daily newspaper on May 30,

2. Determination as to the cause of action

According to the above facts, as a principal debtor, Defendant Company is jointly and severally liable for joint and several liability, Defendant 2 is jointly and severally liable to pay the Plaintiff the remainder of the loan principal of KRW 1,679,417,847, and damages for delay at the rate of 23% per annum, which is the agreement from October 1, 2006 to the date of full payment, as sought by the Plaintiff, after September 30, 2006, which is the day following the last payment of interest.

3. The defendants' defenses and judgment as to them

(a) A false representation in conspiracy;

(1) The argument

The Defendants asserted that the Defendant Company borrowed the name of the Defendant Company upon the request of Nonparty 1 and Nonparty 2, who is the controlling shareholder of the Korea Mutual Savings Bank, to lend the name under the credit transaction agreement in order to avoid the restriction on credit limit to the same person, and in fact, the Defendant Company was not the Defendant Company, and the obligor of the instant loan was well aware of such circumstances, and thus, the instant credit transaction agreement constitutes a false declaration of conspiracy.

(2) Determination

(A) In full view of the fact-finding results of the Korea Deposit Insurance Corporation, the following facts can be acknowledged in light of Gap-1, 5-1 through 4, 6 through 10, 12, and the purport of the entire arguments.

1) In the event that the LAW Co., Ltd. was required to loan 10 billion won as initial funds to run a new apartment construction project on a parcel of land outside Busan Metropolitan City, Jung-dong (number omitted), and 42, the LAW decided to obtain a loan from the LAC. However, as the LAC limit to KRW 1.68 billion, the LAC limited to KRW 1.688 billion in the name of the LAWC, the LAC was unable to obtain a loan for all the funds necessary for a new apartment construction project in the name of LAWC, and the amount exceeding the LAC borrowed amount was loaned in the name of another

2) Accordingly, the Defendants entered into the instant credit transaction agreement with the Plaintiff Mutual Savings Bank upon the request of the Plaintiff to lend the name of the loan from the Plphone S&C. At the time of the agreement, Defendant 2 signed and sealed the instant credit transaction agreement on his own position as the representative director and the joint guarantor of the Defendant Company.

3) KRW 972,045,668, which was deposited in the Japanese bank account in the name of the Daedong Mutual Savings Bank, was entirely withdrawn on July 26, 2005, and KRW 572,045,668, was transferred to the Gyeongnam Bank account in the name of the registration committee for the settlement of accounts, and the remaining KRW 400,000,000 was transferred to the new bank comprehensive financial business division. The new Korea-Japan General Financial Business division was a financial institution in charge of the payment of the subscription price for new stocks of the KNB Co., Ltd. established in relation to the said new housing construction business, and the Defendant Company acquired KRW 80,00,00 shares of the KNB Co.,

4) After the Plaintiff acquired the instant loan claim, Defendant 2 visited the Plaintiff’s office on December 27, 2007 and prepared a letter of undertaking (A7) stating that the Defendant would have to repay the entire amount of the instant loan by February 29, 2008 as the representative director and the joint guarantor of the Defendant company, and that there was no objection against the civil and criminal legal measures in the event that the Defendant could not perform the payment by February 29, 2008. In addition, on February 4, 2008, the Plaintiff did not have any asset and did not perform the instant loan obligation against the Plaintiff.

(B) However, in order for a false agreement to be established, there should be an agreement with the other party as to the disagreement. If a third party signing and sealing as a principal debtor in the agreement for a loan for consumption, the third party is expressed as to the financial institution that it is the principal debtor in the pertinent loan for consumption, and the third party has the intention to use the loan under the name of a third party or to reimburse the principal and interest of the third party by avoiding restrictions on the loan regulations set by the financial institution, barring any special circumstance, it is merely an intention to vest the economic effect of the loan for consumption in the other party, and it cannot be deemed as an intention to vest the economic effect of the loan for consumption in the other party, and it is difficult to view that there is a disagreement between the third party's intention and its legal effect (see Supreme Court Decisions 98Da17909, Sept. 4, 1998; 2002Da38675, Apr. 8, 2003; 2003Da3757, etc., as well-founded of the name lending and its own interest in the loan.

As seen above, in light of the circumstances such as the fact that Defendant 2, the representative director of the Defendant Company, directly signed and sealed the credit transaction agreement with the Defendant Company as the principal debtor, it is insufficient to conclude that the Defendants and the Plaintiff had an intention to vest the Plaintiff Company with the legal effect other than economic effect at the time of entering into the instant credit transaction agreement, and there is no other evidence to acknowledge otherwise.

Therefore, the above assertion by the defendants is without merit.

(b) Extinguishment of the joint and several guarantee obligation due to the expiration of repayment period;

(1) Defendant 2’s assertion

The defendant 2 asserts that the credit transaction agreement of this case provides that the guarantor shall bear the guarantee liability only when the repayment date has been extended with his consent. Since there is no explicit consent to the extension of the repayment date of the credit transaction agreement of this case, the defendant 2's joint and several liability was extinguished after the lapse of June 30, 2006, which is the repayment date stipulated in the credit transaction agreement of this case.

(2) Determination

(A) According to Gap's statement, the credit transaction agreement of this case, which is a standardized contract for a financial institution's credit transaction, provides that "joint and several suretys shall be jointly and severally liable for the repayment of all obligations under this agreement against the debtor's mutual savings bank" in Article 9 (1) and that "if the repayment date of obligations under this agreement is extended with the consent of the guarantor, the guarantor shall continue to comply with the agreement under Article 1 (I think it is a clerical error in Paragraph (1)."

(B) However, as a joint and several surety guaranteed for a fixed debt with a specific obligation, the obligation for the joint and several surety is a principle regardless of whether the term of the guaranteed obligation has been extended without the consent of the principal (see Supreme Court Decisions 2002Da14853, Jun. 14, 2002; 2002Da14853, Oct. 28, 2005). However, in a case where the term of the guaranteed obligation has been extended without the consent of the joint and several surety, if there are special agreements as to the extinction of the guaranteed obligation and its scope, such agreement shall be followed. The contents of the standardized contract shall be objectively and uniformly interpreted on the basis of the average customer’s understanding potential without considering the intent or specific circumstances of the individual contractor. In a case where the contents of the standardized contract are unclear or doubtful in terms of customer protection, it shall be interpreted favorably to the customer, and it shall be interpreted unfavorably to the person who prepared the standardized contract (see, e.g., Supreme Court Decisions 2006Da72093, Feb. 28, 2005).

In light of the purport of Article 9 of the Credit Transaction Agreement, if the repayment date of the principal obligation is extended without the consent of the guarantor in the guarantee of the fixed obligation, it can be understood that the guaranteed obligation does not continue if the repayment date of the principal obligation is extended without the consent of the guarantor, and the guarantor who guaranteed the fixed obligation bears the joint and several liability regardless of whether the due date of the guaranteed obligation was extended without the consent of the guarantor, but the above contents are particularly stipulated in the terms and conditions. In light of the above, if a financial institution extends the due date of the principal obligation without the consent of the guarantor, the meaning of Article 9 of the Credit Transaction Agreement may be interpreted as a special agreement

However, as seen earlier, Defendant 2, as the representative director of the Defendant Company, was sufficiently aware of the expiry of the repayment date and extension of the repayment date as well as Defendant 2’s statement as joint guarantor of the instant loan, and in full view of the circumstances in which Defendant 2, as well as the Plaintiff, prepared and submitted a letter of undertaking on August 30, 2006, the repayment date for the instant loan repayment date extended, Defendant 2 agreed ex post facto extension of the repayment date or agreed to grant the Plaintiff’s joint and several liability obligations for the instant loan to the Plaintiff. As such, Defendant 2’s joint and several liability obligations against the Plaintiff still continue to exist despite the provision of Article 9 of the Credit Transaction Agreement and extension of the repayment date. Accordingly, Defendant 2 did not appear to have been aware of the fact that the Plaintiff did not have any other knowledge of the extension of the payment date, and thus, Defendant 2 did not appear to have been forced to enter into a legal act in violation of Article 103 of the Civil Act as well as an unfair legal act in violation of Article 104 of the Civil Act.

4. Conclusion

Therefore, the plaintiff's claim against the defendants shall be accepted for all reasons, and it is so decided as per Disposition.

Judges Min You-sook (Presiding Justice)