[1] The requirements for liability for damages to the executives and employees of community credit cooperatives who participated in the loan on the ground that multiple loans different in the name of a lender fall under the excess loans extended to the same person

[2] In a case where an executive officer or employee of a financial institution causes damage to a financial institution due to his/her negligence in performing his/her duties, such as failing to secure sufficient security while lending a loan in violation of the provisions on credit business, such as exceeding the lending limit to the same person, whether the executive officer or employee is liable for damages (affirmative), and

[1] Articles 23(2) and 26-2 (see current Article 29) of the former Community Credit Cooperatives Act (wholly amended by Act No. 8485 of May 25, 2007) / [2] Article 393 of the Civil Act, Article 23(2) of the former Community Credit Cooperatives Act (wholly amended by Act No. 8485 of May 25, 2007), and Article 26-2 (see current Article 29) of the former Community Credit Cooperatives Act

[1] [2] Supreme Court Decision 2010Da75945 Decided April 12, 2012 (Gong2012Sang, 751) / [2] Supreme Court Decision 2013Da57498 Decided November 14, 2013 (Gong2015Ha, 1734) Decided October 29, 2015 (Gong2015Ha, 1734)

Sejong-ro Central Saemaul Bank (Law Firm Western, Attorneys Jeon-soo et al., Counsel for the plaintiff-appellant)

Defendant 1 and one other (Attorney Kim Jong-soo, Counsel for the defendant-appellant)

Supreme Court Decision 2009Da62608 Decided May 13, 2011

Seoul High Court Decision 2011Na42333 decided September 13, 2012

Of the judgment below against the Defendants regarding loans Nos. 1, 2, 3, 4, 5, 8, and 10 of the attached list 1, 2, 3, 4, 5, 8, and 10 of the judgment below, the part concerning the damages related to the interest and interest on loans is reversed, and this part of the case is remanded to the Seoul High Court. The remaining appeals by the Plaintiff and the Defendants

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

1. As to the Defendants’ grounds of appeal

A. The court below held that: (a) on April 17, 2002, the non-party who obtained a loan of KRW 300 million on February 7, 2002, again obtained a loan of KRW 1 (300 million to the same person) on April 17, 202 (the loan amount to the plaintiff is KRW 300 million); (b) regardless of the name of the loan, the loan amount of KRW 1,2,3,5,8 was paid to the non-party who is the actual owner; (c) the non-party provided a security; (d) the non-party performed the loan of KRW 1,2,3,5,8 under the name of another person who is the actual owner, such as personal relations between the lender and the non-party who is the actual owner; and (d) the plaintiff was not liable for the loan amount of KRW 400 million on the loan of this case within the limit of KRW 500,000,000; and (d) the plaintiff did not obtain an appraisal of the loan of this case within the limit of KRW 1.

B. Examining the relevant legal principles and records, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules or by exceeding the bounds of the principle of free evaluation of evidence, contrary to what is alleged in the grounds of appeal, or by failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment, contrary to what is alleged in the grounds of appeal.

C. However, the lower court’s determination on the instant 1 and 2 loans is difficult to accept.

In order for multiple loans different in the name of a lender to be liable for damages to the executives and employees of community credit cooperatives who participated in the said loans on the grounds that such loans fall under the excess loans extended to the same person, the fact that such multiple loans are substantially excessive loans to the same person, in light of the financial status of a debtor of loans, overall financial transactions including loans from other financial institutions and other debts, business status and prospects, use of loans, required period, etc., and the fact that there is a problem in the recovery of loans due to the lack of ability to repay debts or the lack of the economic value of the collateral provided, and the fact that the executives and employees of community credit cooperatives, who participated in the loans, knew or could have known that such loans are made in excess of the lending limit to the same person and are conducted in the state where sufficient collateral is not secured (see, e.g., Supreme Court Decision 2010Da75945, Apr. 12, 2012).

However, in the case of loans 1 and 2 of this case, the Defendants did not undergo external appraisal against the credit business rules and the board of directors resolution, but the amount of the Defendants’ self-evaluation of the relevant collateral was unfairly excessive compared to the amount of appraisal at the time of the above loan of the country’s appraisal corporation requested by the Plaintiff after the return by the Plaintiff. In particular, in the case of a security for a loan 1 of this case, since the amount of self-evaluation is less than the amount of appraisal after the ex post facto evaluation, the Defendants did not sufficiently prove that the Defendants performed the instant loans 1 and 2 of this case without securing sufficient collateral by unfairly assessing the value of collateral

Nevertheless, the lower court held that the Defendants are liable for damages for the instant loans 1 and 2 solely on the ground that the instant loans fall under the excess loans extended to the same person in substance and fall under the excess loans extended to the loan limit to the same person, and the instant loans were conducted without an appraisal by an external appraisal institution in violation of the credit business rules and the resolution by the board of directors. In so doing, the lower court erred by misapprehending the legal doctrine on the restriction on excess loans to the same person and the purport of the credit business regulations requiring an appraisal by the external appraisal institution and the causal relationship, or failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The Defendants’ ground of

2. Plaintiff’s ground of appeal

A. As to the first ground for appeal

After compiling evidence, the court below acknowledged the facts as stated in its reasoning, and determined that the loan of this case 9 was carried out within the scope of the possible amount of loan through the external appraisal procedure, the evidence submitted by the plaintiff alone is difficult to recognize that the Defendants committed any act of breach of duty in the execution of the loan of this case 9.

Examining the relevant legal principles and records, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by failing to exhaust all necessary deliberations, contrary to what is alleged in the grounds of appeal.

B. Regarding ground of appeal No. 2

1) Where an executive officer or employee of a financial institution causes damage to a financial institution due to his/her negligence in performing his/her duties, such as lending loans in excess of the lending limit to the same person and failing to secure sufficient security, etc. In such cases, the executive officer or employee shall be liable for damages incurred by the financial institution. In such cases, the ordinary damages suffered by the financial institution shall be the amount of outstanding principal and interest which could have been recovered if the executive or employee had acquired adequate security by complying with the above provisions. Such ordinary damages shall include interest on loans at an agreed rate and interest in arrears at an agreed interest rate (see Supreme Court Decisions 2010Da75945, Apr. 12, 2012; 2013Da57498, Nov. 14, 2013).

2) However, the lower court determined that as long as the Defendants’ act of breach of their duties was constituted by lending funds in excess of the lending limit or without securing sufficient collateral in violation of the provisions on credit business with respect to loans 1, 2, 3, 4, 5, 8, 10, the amount of the loan principal that has not been recovered should be deemed as damages, and the interest of the loan and interest in arrears at the agreed interest rate cannot be deemed as included in the scope of damages.

In so doing, the court below erred by misapprehending the legal principles as to the scope of compensation for bad loans that did not secure sufficient collateral in violation of the lending limit and credit business regulations to the same person, thereby adversely affecting the conclusion of the judgment. The plaintiff's ground of appeal assigning this error is with merit.

3. Conclusion

Therefore, among the judgment of the court below, the part against the defendants as to loans of this case 1, 2, 3, 4, 5, 8, and 10 among the part against the plaintiff as to loans of this case 1, 2, 3, 4, 5, 8, and 10, the part as to the interest and interest interest on loans of this case is reversed, and this part of the case is remanded to the court below for a new trial and determination. Each remaining appeal by the plaintiff and the defendants is dismissed

Justices Kim Yong-deok (Presiding Justice)