[1] Requirements to constitute “when an act of providing an existing collateral method by replacing the existing collateral method for the same debt constitutes “when an act causes loss to property” under the crime of breach of trust

[2] In a case where the representative director of a company committed a breach of trust by providing a blank Promissory Notes in the name of the company in order to secure a third party's obligation, and collected them, and endorsed and delivered a new promissory note by other means of security, the case holding that it is difficult to deem that the act of replacing the said security causes a new risk

[1] In the determination of the crime of breach of trust regarding "when property damage is inflicted on property", if the risk of property damage has already occurred due to the act of offering the collateral, even if the new collateral is replaced with another collateral, if the value of the newly provided collateral is smaller than or equal to the value of the existing collateral, it shall not be deemed that the new risk of damage has occurred to the company. This legal principle also applies to cases where the method of offering the collateral is somewhat different. Therefore, in order to substitute the existing collateral method for the same debt with a new collateral for the crime of breach of trust, there should be circumstances where the value of the new collateral is greater than that of the existing collateral, or the existing risk of damage caused by the preceding collateral ceases to exist due to the replacement of the collateral, and it should be evaluated that there has been a new risk of damage different from

[2] In a case where the representative director of a company committed a breach of trust by providing a blank Promissory Notes in the name of the company in order to secure a third party's debt, and collected and delivered a new Promissory Notes issued by another company instead of securing a clear legal effect, the case holding that, when providing a blank Promissory Notes as a prior collateral, there was a risk of causing damage equivalent to the amount of the secured debt, and from an economic point of view, the risk of damages arising from the previous and previous collateral provision is ultimately the same, and therefore, it is difficult to view that the above act of replacing a security causes a new risk of damages to the company, apart from the existing risk

[1] Article 355 (2) of the Criminal Act / [2] Articles 355 (2) and 356 of the Criminal Act

[1] Supreme Court Decision 2004Do7027 decided Nov. 9, 2006 (Gong2006Ha, 2115)

Defendant

Defendant

Law Firm Yang & Yang, Attorneys Kang Sung-sung et al.

Seoul High Court Decision 2007No1818 decided Dec. 27, 2007

The judgment below is reversed, and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

1. The lower court determined that the Defendant’s act of endorsement of the promissory note, as stated in the facts charged, is not merely a mere mere replacement of existing collateral, but also an intentional act to guarantee the Defendant’s property liability, and thus, its validity is substantially unclear in light of the circumstances indicated in its holding, such as that the letter of resolution by the board of directors or a document on the granting of supplementary rights, which is written by A.S’s guarantee company (hereinafter “former blank Promissory Notes”) did not be attached to the blank Promissory Notes issued at first to secure the obligation of loans under the credit transaction agreement amounting to a loan limit amount of KRW 7 billion which was concluded with the new KNB bank. Therefore, in order to recover the previous blank Promissory Notes, it is not clear that the Defendant committed an intentional act to guarantee the Defendant’s obligation of KRW 7 billion loans, instead of collecting the previous blank Promissory Notes, and thus, it is reasonable to deem that the Defendant committed an intentional act to guarantee the Defendant’s debt.

2. However, it is difficult to accept the above determination by the court below for the following reasons.

A. In the case of breach of trust, the term "when property damage occurs" includes not only a real damage but also a case where the risk of actual damage to property has been caused, and the existence or absence of property damage should be understood from an economic point of view without legal judgment in relation to the property condition of the principal. Therefore, even if the act of breach of trust is null and void by legal judgment, it shall be deemed that the act of breach of trust causes property damage to the principal or causes risk of actual damage to property (see Supreme Court Decisions 9Do1095 delivered on June 22, 199; 2003Do7878 delivered on March 26, 2004, etc.). Thus, if the new risk of property damage had already been caused by the act of breach of trust than the existing one of the collateral, it shall not be deemed that there had been a new risk of property damage to the company before and after the new act of breach of trust (see Supreme Court Decision 200Do3716 delivered on June 28, 2002).

B. However, according to the facts acknowledged by the court below, it is highly questionable that the defendant had the risk of causing damage equivalent to the amount of the secured debt already to the company when he provided the old blank Promissory Notes as the security of the above debt. The court below concluded that the above blank Promissory Notes had the property damage equivalent to the amount of the guaranteed debt amount by endorsement on the Promissory Notes in order to guarantee debt, the legal effect of which is clear, instead of recovering it is not clear. However, from the economic point of view, the risk of the damage incurred by the previous and previous security in the event of the reasons determined by the court below is the same, and it is difficult to judge that there is no risk of damage caused by the issuance of the old blank Promissory Notes. Further, it is difficult to judge that the value of the previous blank Promissory Notes is smaller than the method of the new security replacing the value of the previous blank Promissory Notes. Accordingly, it is difficult to deem that the replacement of the defendant caused the new risk separate from the risk of the damage caused by the existing security by the reason stated by the court below.

Therefore, even if the Defendant endorsed the Promissory Notes in this case for the purpose of securing the same obligation instead of recovering the former blank Promissory Notes offered as collateral, it cannot be readily concluded that the Defendant incurred a new property loss to A.S. merely due to the fact that the Defendant offered an additional resolution of the board of directors stated by A.S’s guarantor as at the time of issuance of the Promissory Notes. This does not change solely because the Defendant offered an additional resolution of the board of directors as at the time of

C. Therefore, the judgment of the court below on the part of the violation of the Act on the Aggravated Punishment, etc. of Specific Crimes (Misappropriation) is erroneous in the misapprehension of legal principles on the crime of breach of trust, which affected the conclusion of judgment.

3. Meanwhile, the lower court rendered a single sentence against the Defendant on the grounds that the remaining conviction part of the Defendant was concurrent crimes with the violation of the Act on the Aggravated Punishment, etc. of Specific Crimes (Misappropriation) and the former part of Article 37 of the Criminal Act. Thus, the lower court’s judgment is reversed in its entirety, insofar as there is a ground for reversal on the part

4. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Ill-sook (Presiding Justice)