The meaning of “a person who administers another’s business,” who is the subject of the crime of breach of trust, / In a case where an obligor provides movable property to a creditor as a collateral for security to secure a pecuniary obligation, whether it constitutes “a person who administers another’s business,” who is the subject of the crime of breach of trust, in relation to the obligee (negative), and in such a case, whether a crime of breach of trust is established in a case where an obligor reduces or loses the value of collateral

Article 355(2) of the Criminal Act

Supreme Court en banc Decision 2019Do9756 Decided February 20, 2020 (Gong2020Sang, 723)

Defendant 1 and two others

Defendants and Prosecutor

Law Firm (LLC) LLC, Attorneys Gangnam-gu et al., Counsel for the defendant-appellant

Seoul High Court Decision 2015No484 decided May 14, 2015

The judgment of the court below (including the part on acquittal in the grounds) is reversed, and the case is remanded to the Seoul High Court.

The grounds of appeal are examined.

1. As to the Defendants’ grounds of appeal on the violation of trust against the victim Nonindicted Co. 1 Company (hereinafter “Nonindicted Co. 1”)

A. The crime of breach of trust is established when a person who administers another’s business obtains pecuniary advantage or has a third party obtain such benefit by acting in violation of his/her duty, and thereby causes damage to another person who is the subject of the business, so the subject of the crime must be in the position of administering another’s business. Here, the subject of the crime must be in the position of administering another’s business. In order to be “a person who administers another’s business,” the subject of the crime should be in the position of administering another’s business. The typical and fundamental contents of the relationship, such as where the whole or part of the business concerning the management of another’s property is performed on behalf of another person, must be in the protection or management of another person’s property based on the trust relationship between the parties going beyond the relationship of conflict of interest in the ordinary contract. In the ordinary contract relationship in the relationship of conflict of interest, the other party obtains the benefit of satisfaction of rights in the contract or the realization of claims through the performance of the other party’s duty of protecting or taking care of the other party in the performance of the

In a case where a debtor provides a movable to a creditor as a security for securing a pecuniary obligation, i.e., a debtor’s obligation to maintain and preserve the value of the security, or not to damage, reduce or destroy 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 to the creditor or his/her designated person, etc., is the debtor’s performance obligation. In addition, as the obligation to be borne by the debtor under a security contract is for the achievement of the purpose of security, i.e., the realization of a security contract or the realization of a claim through the execution of a security right, and as such, the typical and fundamental substance of the relationship between the parties is still the realization of a pecuniary claim or the repayment of a secured obligation, regardless of whether it was the conclusion of a security contract or before or after the establishment of a security right. Therefore, in this case, the debtor cannot be deemed to fall under a “person who administers another’s business,” who is the subject of the crime of breach of trust, in relation to the debtor.

B. The summary of the charge of violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) (hereinafter “Special Economic Crimes Act”) against the victim non-indicted 1 is that the Defendants, including the representative director of the non-indicted 2 Co., Ltd. (hereinafter “non-indicted 2”), should not infringe on the security right of the non-indicted 1, the mortgagee of the non-indicted 2 Co., Ltd., and the non-indicted 2’s non-indicted 3 Co., Ltd. (hereinafter “the non-indicted 3 Co., Ltd.”), although there was a business duty that should not infringe on the security right of the non-indicted 1, the mortgagee of the non-indicted 2 Co., Ltd. (hereinafter “the non-indicted 2”). However, by completing the registration of transfer of ownership in the non-indicted 3 Co., Ltd. as to the arrival of this case, the non-indicted 1 lost the security right equivalent to approximately 14.6 billion won, and let the non-indicted 3 acquire the same amount

C. However, in light of the legal principles as seen earlier, even if Nonindicted Company 1 is the creditor of Nonindicted Company 2 and the mortgagee of the instant landing place (the first landing place, which is a movable property, was not subject to registration at the time of the establishment of the security for transfer to the instant landing place, but became subject to registration by the revision of the Ship Act on December 29, 2009), it cannot be deemed that the Defendants constitute “a person who administers another’s business” in relation to Nonindicted Company 1, the mortgagee, even if the Defendants were to bear the duty of not infringing on the security interest of Nonindicted Company 1, the mortgagee.

Nevertheless, the lower court found the Defendants guilty of the crime of breach of trust, which is the reduction of the facts charged, on the premise that, in the event that a security for transfer was established on a movable property owned by an obligor to secure a monetary claim and an obligor possesses such movable property, the obligor is prohibited from unfairly disposing of, destroying, damaging, or reducing the value of the security by having the obligee be able to achieve the purpose of the security, and thus, the obligor, who is the obligor, is in a position to manage his/her business in accordance with the agreement on security for claims against the obligee. In so determining, the lower court erred by misapprehending the legal doctrine on “a person who administers another’s business”

2. As to the ground of appeal by the prosecutor on the violation of the Specific Economic Crimes Act (Misappropriation) against the victim non-indicted 2 company

Examining the reasoning of the judgment below in light of the records, it is justifiable for the court below to maintain the first instance court which acquitted the Defendants of this part of the charges on the grounds that there is no proof of the crime regarding the violation of the Specific Economic Crimes Act (Misappropriation) against the victim non-indicted 2 among the charges against the Defendants. There is no error in the misapprehension of legal principles as to the act of breach of duty and the intent of breach of trust, or exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules.

3. Scope of reversal

For the foregoing reasons, the part of the judgment of the court below concerning the victim non-indicted 1 company should be reversed. The part concerning the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) and the part concerning the non-indicted 1 company, and the part concerning the non-indicted 1 company's violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) and the part concerning the violation of the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) and the part concerning the violation of the Aggravated Punishment, etc. of Specific Economic Crimes

4. Conclusion

Therefore, without examining the remaining grounds of appeal by the Defendants and the Prosecutor, the lower judgment (including the part on acquittal in the grounds of appeal) 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.

Justices Kim Jong-hee (Presiding Justice)