A quasi-loan contract or quasi-loan contract with respect to an amount equivalent to interest paid in excess of the maximum interest rate prescribed by the former Interest Limitation Act (negative)

Article 2(1), (3), and (4) of the former Interest Limitation Act (Amended by Act No. 10925, Jul. 25, 2011); Article 2(1) of the former Interest Limitation Act; Article 2(1) of the former Interest Limitation Act (Amended by Presidential Decree No. 25376, Jun. 11, 2014); Articles 500 and 605 of the Civil Act

Supreme Court Decision 98Da17046 Decided October 13, 1998 (Gong1998Ha, 2662) Supreme Court Decision 201Da81203 Decided February 14, 2013

Plaintiff

Defendant

Seoul Central District Court Decision 2013Na56296 Decided September 2, 2014

The judgment of the court below is reversed, and the case is remanded to the Seoul Central District Court Panel Division.

The grounds of appeal are examined.

1. According to Article 2(1), (3), and (4) of the former Interest Limitation Act (amended by Act No. 10925, Jul. 25, 201; hereinafter the same) and Article 2(1) of the former Interest Limitation Act (amended by Presidential Decree No. 25376, Jun. 11, 2014; hereinafter the same), the maximum interest rate under a contract for lending and borrowing of money is 30% per annum; the portion exceeding the maximum interest rate under a contract is null and void; and where a debtor voluntarily pays interest exceeding the maximum interest rate, the amount equivalent to the excess interest paid is appropriated for the principal; even if a loan contract for consumption or a novation contract is concluded with respect to the amount equivalent to the interest paid (see, e.g., Supreme Court Decisions 98Da17046, Oct. 13, 1998; 2012Da1283, Feb. 14, 2013).

According to the reasoning of the judgment below and the records, the plaintiff remitted total of KRW 50 million to the defendant on January 21, 2008, and KRW 50 million on January 25, 2008, including KRW 36 million, and the defendant agreed to pay the plaintiff the interest calculated at the rate of KRW 4% per month for the plaintiff from March 2008 to KRW 50 million. The defendant confirmed that E&A Co., Ltd. operated by the defendant (hereinafter "E&A") shall pay the plaintiff interest at the rate of KRW 39 million from March 2, 2008 to the date of the agreement of this case. The defendant shall pay the plaintiff interest at KRW 39,960,00 in total with interest and delay damages on KRW 50 million which the defendant received from the plaintiff on several occasions from March 2, 2008 to the date of the agreement of this case, and the defendant shall pay the plaintiff interest at KRW 50 million in installments as of January 31, 2010 to the plaintiff.

Examining these facts in light of the legal principles as seen earlier, the Plaintiff agreed to receive interest calculated at the rate of 4% per month exceeding 30% per annum, which is the highest interest rate under the former Interest Limitation Act from March 2008 to January 31, 2010, and was paid KRW 39,960,000 in total as interest and delay damages for KRW 50,000 from March 2008 to January 31, 2010, and received at will exceeding the highest interest rate under the former Interest Limitation Act. Thus, the amount equivalent to the interest paid in excess should have been appropriated as principal, and even if the instant agreement was concluded on the amount equivalent to the interest paid in excess, it shall be deemed that there was no validity as to such excess portion.

Nevertheless, the court below held that the defendant is liable to pay the plaintiff 50 million won and damages for delay on the premise that the entire agreement of this case takes effect. The court below erred in the misapprehension of legal principles as to appropriation of the principal of interest paid in excess of the maximum interest rate under the former Interest Limitation Act and the validity of quasi-loan contract or quasi-loan contract for consumption or renewal contract, which affected the conclusion of the judgment. The ground of appeal assigning this error is with merit.

2. Examining the reasoning of the judgment below in light of the records, it is just and acceptable that the court below determined that the plaintiff could not be deemed to have exempted the defendant from the defendant's obligation under the agreement of this case on the grounds of the circumstances acknowledged by the adopted evidence. There is no violation of statutes, violation of the rules of evidence, or incomplete deliberation,

3. The Plaintiff’s assertion in the grounds of appeal that the market price of office fixtures transferred by E&A around June 2010 is equivalent to KRW 11 million is nothing more than disputing the selection of evidence and fact-finding belonging to the lower court’s exclusive authority, which is a fact-finding court, and it is difficult to view it as the legitimate grounds of appeal. Furthermore, even if examining the reasoning of the lower judgment in light of the record, it is not deemed that there was an error of law such as

4. Therefore, the lower judgment is reversed, and 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 on the bench.

Justices Jo Hee-de (Presiding Justice)