Where the president of a credit union neglects his/her duties such as approving loans exceeding the limit on loans to the same person and thereby causes losses to the union from not collecting the loans, whether or not he/she shall be liable for damages for the portion of loans within the limit on loans to the same person out of the amount of unpaid loans (negative with qualification)

Even if the president of a credit union neglected to perform his/her duties, such as lending money in excess of the lending limit and failing to secure sufficient security, and thereby causing losses to the credit union from recovering the loans, he/she shall not be held liable for damages, barring special circumstances, such as where there was no possibility of recovery in view of the borrower's credit or financial status at the time of the loan, or where the credit union violated other loan-related regulations in relation to the loan.

Articles 33 and 42 of the former Credit Unions Act (amended by Act No. 6957 of July 30, 2003); Article 393 of the Civil Act

The Bankruptcy Trustee of the Korea Deposit Insurance Corporation (Law Firm Law, Attorneys No Young-dae et al., Counsel for the bankrupt)

Defendant 1 and two others (Attorney Gyeong-chul et al., Counsel for the defendant-appellant)

Gwangju High Court Decision 2004Na7841 decided July 22, 2005

Of the part of the lower judgment against Defendant 1, the part concerning KRW 10,315,524 and delay damages therefor shall be reversed, and this part of the case shall be remanded to the Gwangju High Court. The remaining appeals by Defendant 1 and the appeals by Defendants 2 and 3 shall be dismissed, respectively. The costs of appeal between the Plaintiff, Defendant 2 and 3 shall be borne by the said Defendants.

We examine the grounds of appeal.

1. As to the embezzlement of loans

In light of the records, the court below acknowledged the facts based on the adopted evidence, and judged that the defendant 1 suffered damage equivalent to KRW 295 million in the embezzlement amount as stated in the judgment against Samdo Mutual Union by failing to prevent or clarify the embezzlement of Samdo Credit Union funds over a long period of time as stated in the above 1, and there is no violation of the rules of evidence as alleged in the grounds of appeal, such as misconception of facts against the rules of evidence.

2. As to the excess loans extended to the same person:

A. Summary of the judgment of the court below

Of the Plaintiff’s claim, the lower court determined that the Defendant 1 and the Defendant 2 were jointly and severally liable to compensate for damages corresponding to the amount of loan KRW 15 million in the name of Nonparty 1 and Nonparty 4, and that the Defendant 2 were jointly and severally liable to compensate for damages corresponding to the amount of loan KRW 84,514,158 (the sum of damages arising from loans No. 3 through 5 in the attached Table 5 of the lower judgment) and that the Defendant 1 and the Defendant 2 were jointly and severally liable to compensate for damages corresponding to the amount of loan KRW 50,00,000,000,000,000,00 KRW 1 and 40,000,000,000,000,000 KRW 1 and 5,000,000,000,000,000,000,000) were 0,000.

B. Judgment on the grounds of appeal

In light of the records, the court below is just in holding that Defendant 1 was liable to compensate Defendant 2 and Defendant 3 for damages in full for damages incurred by Samdo 26,125,136 won due to the loan No. 3 of the attached Table 5 of the judgment below as the guarantor of Defendant 1 as the guarantor of Defendant 1, and there is no error of law such as misconception of facts against the rules of evidence as alleged in the grounds of appeal, but there is no error of law such as misconception of facts against the above excess loans of the same person, and it is not acceptable in holding that Defendant 1 was liable to compensate 84,514,158 won due to Samdo 3 as a whole due to the above excess loans of the loan limit of the same person.

(1) Even if the president of a credit union neglected his/her duties, such as lending money in excess of the lending limit and failing to secure sufficient collateral, and thereby causing losses to the credit union which could not recover the loan due to failure to perform his/her duties, he/she shall not be held liable for damages, barring special circumstances, such as where there was no possibility of recovery in view of the borrower's credit or financial status at the time of the loan, or where the credit union violated other loan-related regulations in relation to the loan.

(2) In light of the record, the court below held that Defendant 1 suffered damages from Samdo Co., Ltd. as to the above part of KRW 84,514,158, which is the amount within the loan limit to the same person as to the above 2, as the damages of KRW 15,00,000,000, which is the amount within the loan limit to the same person as to the above 15,000 won, barring any special circumstances, even if Samdo Co., Ltd. suffered damages after the loan, it shall be deemed that Defendant 1 is not liable for damages to Samdo Co., Ltd., unless there are other special circumstances.

(3) Nevertheless, the court below held that Defendant 1 is liable for damages for the damages incurred by Defendant 1 on the part of the loan extended to the same person out of the amount of the above unpaid loan amount without any reasons. The court below erred by misapprehending the legal principles on liability for damages for loans extended to the same person within the loan limit of a credit union, thereby affecting the conclusion of the judgment.

(4) However, according to the attached Table 5 of the judgment of the court below, the first loan out of the excess loan limit to the same person No. 42, and the amount of losses incurred due to the loan is KRW 25,788,81. The court below recognized only KRW 10,315,524, which corresponds to 40% among the above 40% as the amount of compensation liability of Defendant 1. Thus, the part corresponding to the above amount shall be reversed due to the above illegality.

3. On limitation of liability

In light of the records, the court below acknowledged the facts based on the evidence adopted by the defendant, and it is just to limit the defendants' liability as stated in its decision, and there is no error of law by misapprehending the legal principles on the good faith principle, the fair burden of damages, the limitation of liability of the

4. Conclusion

Therefore, the part of the judgment of the court below against Defendant 1 concerning the above KRW 10,315,524 and damages for delay thereof shall be reversed, and this part of the case shall be remanded to the court below for a new trial and determination. The remaining appeals by Defendant 1 and the appeals by Defendants 2 and 3 shall be dismissed, respectively, and it is so decided as per Disposition by the assent of all participating Justices.

Justices Park Si-hwan (Presiding Justice)