The Supreme Court has ruled that a victim of identity theft cannot be held liable for a loan contract concluded through fraudulent acts by a loan brokerage firm. Even if the theory of apparent agency cannot be completely excluded in cases where a loan contract is made under the guise of agency, the Court held that financial institutions cannot be said to have a legitimate reason to trust such contracts. The Supreme Court emphasized that, since financial institutions have divided their loan operations by utilizing loan brokerage firms, they must also bear the associated risks and disadvantages themselves.
The Supreme Court's Civil Division 2 (Presiding Justice Oh Kyungmi) on June 5 upheld the lower court's ruling against the plaintiff, Orix Capital Co., Ltd., in an appeal case (2023Da232526) regarding a claim for loan repayment filed against Mr. A.
[Facts]
The plaintiff, Orix Capital, entrusted the loan solicitation business to the loan brokerage firm Humantree. The operator and staff members of Humantree were in possession of Mr. A's certificate of seal impression and other documents due to another loan case. They submitted forged loan application and contract forms in Mr. A's name, along with other loan documents, to Orix Capital as if they had been legitimately received from Mr. A, resulting in the conclusion of the loan contract in question. Orix Capital claimed that Mr. A should bear apparent agency liability for this loan contract and demanded repayment of the principal and interest.
Civil Act Article 126 (Apparent Agency Exceeding Authority) stipulates: "If an agent performs a legal act beyond his authority, the principal is liable for such act if a third party has reasonable grounds to believe that the agent had such authority."
[Issue]
Whether the doctrine of apparent agency under Article 126 of the Civil Act can be applied in cases where a person deceives others by acting directly in the principal's name, without indicating that the act is one of agency.
[Lower Courts]
The court of first instance ruled partially in favor of the plaintiff, holding that the defendant was liable for the loan contract under the doctrine of apparent agency in Article 126 of the Civil Act. However, the appellate court found the defendant not liable.
The appellate court stated, "The theory of agency cannot be applied to this loan contract, which was concluded solely on the basis of forged documents without any involvement by the defendant. Even if the plaintiff, a financial institution, believed that the loan contract was entered into according to the defendant's intent, this was because the plaintiff failed to properly fulfill its duty to verify the principal's identity and exercise due care when using a loan brokerage firm."
[Supreme Court Ruling]
The Supreme Court held that, although the lower court was incorrect in finding that the doctrine of apparent agency could not be applied at all, it was nevertheless difficult to find that the plaintiff had a legitimate reason to trust the loan application. Therefore, the Supreme Court upheld the lower court's conclusion that the defendant was not liable under the doctrine of apparent agency and dismissed the appeal.
The Supreme Court stated, "The plaintiff, as a financial institution, entrusted to the loan brokerage firm the verification of the applicant's handwritten signatures on the loan application and contract forms, the review of required loan documents, and the investigation of lease agreements?all of which are core parts of the loan process. By doing so, the plaintiff promoted the sale of its loan products and enjoyed the benefits of division of labor, but also chose a transaction structure that limited its own opportunity to directly investigate and verify the authenticity of loan documents. Therefore, the plaintiff must, in principle, bear the resulting disadvantages and risks."
The Court further noted, "Even if the loan broker exploited its relationship with the financial institution to impersonate another person's identity in concluding the loan contract, and even if the financial institution was unaware of these circumstances, it cannot be easily recognized that there was a legitimate reason to believe the transaction was normal. As a specialized financial institution, the plaintiff should have conducted post-loan checks to ensure that there were no duplicate loans and should have managed and supervised the loan broker's activities."
The Court concluded, "Although there are some inappropriate statements in the reasoning of the lower court, its conclusion that the defendant is not liable under the doctrine of apparent agency for this loan contract is correct. There was no violation of the rules of logic and experience, nor any misunderstanding of the doctrine of apparent agency that would have affected the judgment."
An Jaemyung, Law Times Reporter
※This article is based on content supplied by Law Times.
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