The legal nature of issuing and selling a cover note to the person entrusting the issuance of the bill at the discount of the bill (i.e., the sale and purchase of the bill); and, in case where the bank opened, keeps and manages an account under the name of the client for convenience in preparation for the payment of the cover note, whether the issuer may seek the return of the deposit in the account separately from the face value of the bill (negative in principle)

The legal nature of a cover note constitutes a promissory note under the Bills of Exchange and Promissory Notes Act, and thus, the bank’s issuance and sale of a cover note at the discount of the bill is the sale of the bill. Therefore, even if an account opened by the bank to keep and manage the funds received in return for the issuance and sale of the cover note under the name of the issuing requester for convenience in preparation for payment of the future cover note, the issuing requester can seek payment of the cover note issued in return for the payment to the bank, barring any special circumstance, and cannot seek return of the deposit in the account separate from the face value.

Articles 28(1), 75, and 78(1) of the Bills of Exchange and Promissory Notes Act

Supreme Court Decision 2014Da13167 Decided June 26, 2014 (Gong2014Ha, 1462)

Korean Veterans Association (Law Firm Southern River, Attorneys Kim - management, Counsel for defendant-appellant)

Han Bank (Law Firm Democratic, Attorneys Yoon Jae-sik et al., Counsel for the plaintiff-appellant)

Seoul Central District Court Decision 2014Na38301 Decided April 7, 2015

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

The legal nature of a cover note constitutes a promissory note as stipulated in the Bills of Exchange and Promissory Notes Act (see Supreme Court Decision 2014Da13167, Jun. 26, 2014). The fact that a bank issues and sells a cover note in the manner of discount to the issuer is in the nature of the sale of the Promissory Notes. Therefore, even if an account opened by the bank in order for the issuer to separately keep and manage the money received from the issuer in preparation for the payment of the face value of the cover note in the future is the name of the issuer for convenience, the issuer can seek payment of the face value of the cover note issued in return for the said money from the bank, barring any special circumstance, and can not seek the return of the deposit in the said account separately from the face value of the cover note.

The court below held that the account of this case is merely opened in the form for the payment and management of the cover note, in full view of the circumstances such as the fact that the Defendant’s issuance of the cover note to Ymb Co., Ltd. should be viewed as sale and purchase of the bill, and that the deposit contract for the account was concluded or the deposit claim was not actually located. The court below rejected the Plaintiff’s claim of this case seeking partial payment of the amount of the deposit claim according to the collection order of this case on the premise that the deposit claim concerning the account of this case exists in fact.

In light of the above legal principles and records, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors by misapprehending the legal principles on the legal nature of the account in which the funds paid in return for the issuance and sale of the cover notes and the payment of the funds were deposited, thereby exceeding the bounds of the principle of free evaluation of evidence in violation of logical

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Sang-ok (Presiding Justice)