In a case where a debtor provided a movable to a creditor as a security for collateral security for a pecuniary obligation, whether it constitutes “a person who administers another’s business” in relation to the creditor (negative), and in such a case, whether a crime of breach of trust is established in a case where a debtor causes danger to the creditor’s exercise of security right or the realization of a claim by reducing or losing the value of a security

Article 355(2) of the Criminal Act

Supreme Court en banc Decision 2019Do9756 Decided February 20, 2020 (Gong2020Sang, 723) Supreme Court Decision 2015Do8332 Decided March 26, 2020 (Supreme Court Decision 2018Do14596 Decided March 27, 2020)

Defendant

Defendant

Attorney Cho Yong-han

Seoul Eastern District Court Decision 2019No264 decided August 29, 2019

The conviction part of the judgment below is reversed, and the case is remanded to the Seoul Eastern District Court.

1. Ex officio determination

Before determining the grounds of appeal, we examine ex officio the violation of trust.

A. In a case where a debtor provided a movable property as a security for the purpose of securing a pecuniary obligation to a creditor, that is, the debtor’s obligation to maintain and preserve the value of the security, or not to damage, reduce or destroy the value of the security, or to cooperate with the creditor or his/her designated person at the time of the execution of the security right, such as the obligation to deliver the security in reality to the creditor or his/her designated person, etc., is all the obligor’s performance obligation. Furthermore, the obligation to be borne by the debtor under a security contract is for the achievement of the purpose of the security, i.e., the realization of a security contract or the realization of a claim through the execution of the security right, so the parties’ typical and fundamental contents are still the realization of a monetary claim or the repayment of the secured obligation, regardless of whether it was before or after the conclusion of the security contract or the establishment of the security right. Therefore, the obligor cannot be deemed to have been entrusted to the creditor’s business based on a trust relationship with the creditor beyond an ordinary contract, and even if the obligor disposes of the security to a third person, thereby resulting in the creditor’s execution or realization of the security right.

B. The gist of this part of the facts charged is that the Defendant entered into a contract with the victim to use 34 million won from the Nonindicted Party and to use Maart, etc. (hereinafter “the instant movable property”) as a collateral for transfer. Thus, although the victim had a duty to faithfully manage the said movable property so that the purpose of the security was achieved, the Defendant violated such duty and thereby, thereby acquiring pecuniary benefits equivalent to the sales proceeds and causing property damage equivalent to the same amount to the victim. The lower court upheld the first trial judgment convicting the Defendant of the foregoing facts charged.

C. However, in light of the legal principles as seen earlier, even if the Defendant provided the instant movable property to the victim as a security for transfer, insofar as it cannot be deemed that the Defendant entrusted the victim’s business based on the fiduciary relationship with the victim beyond an ordinary contractual relationship, it cannot be deemed that the Defendant constitutes “a person who administers another’s business” in relation to the victim. Nevertheless, the lower court convicted the Defendant of this part of the facts charged on the premise that the Defendant was in the status of a person who administers another’s business. In so doing, the lower court erred by misapprehending the legal principles on “a person who administers

2. Scope of reversal

For the foregoing reasons, the part of the lower judgment in breach of trust among the judgment should be reversed. Since the lower court rendered a single sentence on the grounds that this part of the facts charged and the remainder of the facts charged are concurrent crimes under the former part of Article 37 of the Criminal Act, the part of the lower judgment’s conviction

3. Conclusion

Therefore, without further proceeding to decide on the Defendant’s grounds of appeal, the guilty part of the judgment below is reversed, and the case is remanded to the court below 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 Ahn Jae-chul (Presiding Justice)